File No. 70-6171
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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POST-EFFECTIVE AMENDMENT NO. 28
TO
FORM U-1
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APPLICATION OR DECLARATION
under the
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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APPALACHIAN POWER COMPANY
40 Franklin Road, Roanoke, Virginia 24011
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(Name of company filing this statement and
addresses of principal executive offices)
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AMERICAN ELECTRIC POWER COMPANY, INC.
1 Riverside Plaza, Columbus, Ohio 43215
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(Name of top registered holding company
parent of each applicant or declarant)
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A. A. Pena, Senior Vice President and Treasurer
AMERICAN ELECTRIC POWER SERVICE CORPORATION
1 Riverside Plaza, Columbus, Ohio 43215
Susan Tomasky, General Counsel
AMERICAN ELECTRIC POWER SERVICE CORPORATION
1 Riverside Plaza, Columbus, Ohio 43215
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(Names and addresses of agents for service)
<PAGE>
The undersigned Appalachian Power Company ("Appalachian"), a wholly-owned
utility subsidiary of American Electric Power Company, Inc. ("AEP"), a holding
company registered under the Public Utility Holding Company Act of 1935 ("1935
Act"), hereby amends as follows its Application or Declaration on Form U-1 in
File No. 70-6171, as heretofore amended:
By amending and restating the paragraphs at the end of Item 1 which were
added by Post-Effective Amendment No. 27 as follows:
By order dated June 30, 1978 (HCAR No. 20610), the Commission authorized
Appalachian, among other things, to enter into an agreement of sale
("Agreement") with Mason County, West Virginia ("County"), concerning the
financing of pollution control facilities ("Facilities") at Appalachian's
Mountaineer and Philip Sporn Units 1 and 3. Under the Agreement, the County may
issue and sell its pollution control revenue bonds ("Revenue Bonds") or
pollution control refunding bonds ("Refunding Bonds" and, together with Revenue
Bonds, "Bonds"), in one or more series, and deposit the proceeds with the
Trustee ("Trustee") under an indenture ("Indenture") entered into between the
County and the Trustee. The Trustee applies the proceeds to the payment of the
costs of construction of the Facilities or, in the case of proceeds from the
sale of Refunding Bonds, to the payment of principal, premium (if any) and/or
interest on Bonds to be refunded.
The same order also authorized Appalachian to convey an undivided interest
in a portion of the Facilities to the County, and to reacquire that interest
under an installment sales arrangement ("Sales Agreement") requiring Appalachian
to pay as the purchase price semi-annual installments in an amount that,
together with other funds held by the Trustee under the Indenture for that
purpose, will enable the County to pay, when due, the interest and principal on
the Bonds. To date, the County has issued and sold eight series of Bonds in an
aggregate principal amount of $350 million, of which $130 million presently are
outstanding.
It is proposed that the County will issue and sell an additional series of
Bonds in the aggregate principal amount of up to $10,000,000 (the "Series L
Refunding Bonds"), the proceeds of which will be used to provide for the
redemption on or prior to maturity of $10,000,000 principal amount of the Series
H Bonds of the County. It is contemplated that the Series L Refunding Bonds will
be issued pursuant to the Indenture as supplemented by an Eleventh Supplemental
Indenture of Trust between the County and the Trustee, the form of which is
filed as Exhibit B-13 hereto ("Supplemental Indenture"). Pursuant to the
Indenture and the Supplemental Indenture, the proceeds of the sale of the Series
L Refunding Bonds will be deposited by the County with the Trustee and applied
by the Trustee to the payment of the entire $10,000,000 principal amount of
Series H Bonds. Appalachian proposes to enter into an amended Sales Agreement in
connection with the Series L Refunding Bonds under essentially the same terms
and conditions of the original Sales Agreement.
It is contemplated that the Series L Refunding Bonds will be sold pursuant
to arrangements with a group of underwriters. While Appalachian will not be a
party to the underwriting arrangements for the Series L Refunding Bonds, the
Agreement provides that the Series L Refunding Bonds shall have such terms as
shall be specified by Appalachian. If it is deemed advisable, the final form of
the Supplemental Indenture may provide for a sinking fund pursuant to which a
portion of all the Series L Refunding Bonds issued could be retired annually. In
addition, the Series L Refunding Bonds may not, if it is deemed advisable, be
redeemable optionally in whole or in part for a period of time. Finally, if it
is deemed advisable, the Series L Refunding Bonds may be provided some form of
credit enhancement, including but not limited to a letter of credit, bond
insurance, standby purchase agreement or surety bond.
Appalachian understands that the Series L Refunding Bonds can be issued
under circumstances that the interest on such Bonds will be excludable from
gross income under the provisions of Section 103 of the Internal Revenue Code of
1986, as amended (except for interest on any such Bond during a period in which
it is held by a person who is a substantial user of the Project or a related
person), and that while it is not possible to predict precisely the interest
rate which may be obtained in connection with the issuance of bonds having such
characteristics, the annual interest rate on tax exempt obligations historically
has been, and can be expected under current circumstances to be, 1-1/2% to
2-1/2% or more lower than the rates of obligations of like tenor and comparable
quality, interest on which is fully subject to Federal income tax.
Appalachian will not agree, without further Order of this Commission, to
the issuance of any Series L Bond if (i) the stated maturity of any such Bond
shall be more than forty (40) years; (ii) if the fixed rate of interest to be
borne by any Series L Bond shall exceed 8% per annum or the initial rate of
interest to be borne by any fluctuating rate Series L Bond shall exceed 8%;
(iii) if the discount from the initial public offering price of any such Bond
shall exceed 5% of the principal amount thereof; or (iv) if the initial public
offering price of any such Bond shall be less than 95% of the principal amount
thereof.
Since Appalachian believes that every effort should be made to minimize,
to the extent possible, carrying costs of facilities employed by Appalachian in
the rendition of utility services and the County will apply the funds derived
from the issuance of Series L Refunding Bonds to the payment of up to
$10,000,000 aggregate principal amount of Series H Bonds, Appalachian believes
that the public interest will be served by the issuance of the Series L
Refunding Bonds.
Appalachian believes that the consummation of the transactions herein
proposed will be in the best interests of Appalachian's consumers and investors
and consistent with sound and prudent financial policy. Moreover, because the
proceeds from the sale of the Series L Refunding Bonds will be deposited by the
County with the Trustee and will be applied to the payment of up to $10,000,000
aggregate principal amount of Series H Bonds, none of the proceeds of the sale
of the Series L Refunding Bonds will be received by Appalachian.
Compliance with Rule 54
Rule 54 provides that in determining whether to approve certain
transactions other than those involving an exempt wholesale generator ("EWG") or
a foreign utility company ("FUCO"), as defined in the 1935 Act, the Commission
will not consider the effect of the capitalization or earnings of any subsidiary
which is an EWG or FUCO if Rule 53(a), (b) and (c) are satisfied. All applicable
conditions of Rule 53(a) are currently satisfied except for clause (1). As of
June 30, 2000, AEP, through its subsidiaries, had an aggregate investment in
EWGs and FUCOs of $1,920,829,000. This investment represents approximately 54.2%
of $3,544,649,000, the average of the consolidated retained earnings of AEP
reported on Forms 10-Q and 10-K for the four consecutive quarters ended June 30,
2000. However, AEP was authorized to invest up to 100% of its consolidated
retained earnings in EWGs and FUCOs (HCAR No. 26864, April 27, 1998) (the "100%
Order") in File No. 70-9021. Although AEP's aggregate investment exceeds the 50%
'safe harbor' limitation contained in Rule 53, AEP's aggregate investment is
below the 100% limitation authorized under the 100% Order.
As of September 30, 1997, the most recent period for which financial
statement information was evaluated in the 100% Order, AEP's consolidated
capitalization consisted of 47.4% common and preferred equity and 52.6% debt. As
of June 30, 2000, AEP's consolidated capitalization consisted of 36.2% common
and preferred equity and 63.8% debt. The requested authorization will have no
impact on AEP's consolidated capitalization ratios on a pro forma basis. AEP
believes this ratio remains within acceptable ranges and limits. Further, AEP's
interests in EWGs and FUCOs have contributed positively to its consolidated
earnings.
AEP will continue to maintain in conformity with United States generally
accepted accounting principles and make available the books and records required
by Rule 53(a)(2). AEP does, and will continue to, comply with the requirement
that no more than 2% of the employees of AEP's electric utility operating
subsidiaries shall, at any one time, directly or indirectly, render services to
an EWG or FUCO in which AEP directly or indirectly owns an interest, satisfying
Rule 53(a)(3). And lastly, AEP will continue to submit a copy of Item 9 and
Exhibits G and H of AEP's Form U5S to each of the public service commissions
having jurisdiction over the retail rates of AEP's electric utility operating
subsidiaries, satisfying Rule 53(a)(4). Rule 53(c) is inapplicable by its terms
because the proposals contained herein do not involve the issue and sale of
securities (including any guarantees) to finance an acquisition of an EWG or
FUCO.
Rule 53(b). (i) Neither AEP nor any subsidiary of AEP is the subject of
any pending bankruptcy or similar proceeding; (ii) AEP's average consolidated
retained earnings for the four most recent quarterly periods ($3,544,649,000)
represented an increase of approximately $40,644,000 (or 1.2%) in the average
consolidated retained earnings from the previous four quarterly periods
($1,693,698,000); and (iii) for the fiscal year ended December 31, 1999, AEP did
not report operating losses attributable to AEP's direct or indirect investments
in EWGs and FUCOs.
As noted, AEP was authorized to invest up to 100% of its consolidated
retained earnings in EWGs and FUCOs. In connection with its consideration of
AEP's application for the 100% Order, the Commission reviewed AEP's procedures
for evaluating EWG or FUCO investments. Based on projected financial ratios and
on procedures and conditions established to limit the risks to AEP involved with
investments in EWGs and FUCOs, the Commission determined that permitting AEP to
invest up to 100% of its consolidated retained earnings in EWGs and FUCOs would
not have a substantial adverse impact upon the financial integrity of the AEP,
nor would it have an adverse impact on any of its electric utility operating
subsidiaries or their customers, or on the ability of state commissions to
protect the electric utility operating subsidiaries or their customers.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, the undersigned company has duly caused this Post-Effective Amendment No.
28 to be signed on its behalf by the undersigned thereunto duly authorized.
APPALACHIAN POWER COMPANY
By_/s/ A. A. Pena________
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Vice President
Dated: October 18, 2000
