As filed with the Securities and Exchange Commission on
December 2, 1999
File No. 70-9533
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 1 TO
APPLICATION-DECLARATION
ON FORM U-1
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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SCANA CORPORATION PUBLIC SERVICE COMPANY OF
SOUTH CAROLINA ELECTRIC AND NORTH CAROLINA,
GAS COMPANY INCORPORATED
SOUTH CAROLINA GENERATING SONAT PUBLIC SERVICE
COMPANY, INC. COMPANY LLC
SOUTH CAROLINA FUEL CLEAN ENERGY ENTERPRISES
COMPANY, INC. CARDINAL PIPELINE COMPANY, LLC
SOUTH CAROLINA PIPELINE PINE NEEDLE LNG COMPANY, LLC
CORPORATION PSNC BLUE RIDGE CORPORATION
SCANA ENERGY MARKETING INC. PSNC CARDINAL PIPELINE COMPANY
SCANA COMMUNICATIONS, INC. PSNC PRODUCTION CORPORATION
SERVICECARE INC. 400 Cox Road
PRIMESOUTH, INC. Gastonia, North Carolina 28054
SCANA RESOURCES, INC.
SCANA DEVELOPMENT
CORPORATION
SCANA PETROLEUM
RESOURCES, INC.
SCANA SERVICE COMPANY/1/
1426 Main Street
Columbia, South Carolina 29201
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/1/ To be formed prior to Merger.
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(Name of companies filing this statement
and addresses of principal executive offices)
SCANA Corporation/2/
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(Name of top registered holding company)
Kevin B. Marsh
H. Thomas Arthur, II
SCANA Corporation
1426 Main Street
Columbia, South Carolina 29201
Telephone: (803) 217-9000
Facsimile: (803) 217-9336
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(Names and addresses of agents for service)
The Commission is also requested to send copies
of any communication in connection with this matter to:
William S. Lamb
Sheri E. Bloomberg
Markian M.W. Melnyk
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 W. 55th Street
New York, New York 10019
Telephone: (212) 424-8000
Facsimile: (212) 424-8500
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/2/ To be registered upon approval by the Commission.
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The Applicants hereby amend and restate their application as follows:
Item 1. DESCRIPTION OF THE PROPOSED TRANSACTION
A. Introduction and General Request
1. General
SCANA Corporation, a South Carolina Corporation ("SCANA"), filed an
Application/Declaration on Form U-1 (File No. 70-9521) (the "Merger U-1") with
the Securities and Exchange Commission (the "Commission") under Section 9(a)(2)
and Section 10 under Section (3)(a)(1) pursuant to Rule 2 of the Public Utility
Holding Company Act of 1935, as amended (the "Act"), seeking approvals relating
to the proposed acquisition by SCANA of Public Service Company of North
Carolina, Incorporated, a North Carolina Corporation ("PSNC"), pursuant to which
PSNC will become a wholly owned subsidiary of SCANA (the "Merger"), and for
other related transactions. SCANA will register as a holding company under the
Act upon the consummation of the proposed acquisition contemplated in the Merger
U-1. Each of the entities that will be directly or indirectly owned subsidiaries
of SCANA upon consummation of the acquisition described in the Merger U-1 is
referred to herein individually as a "Subsidiary" and collectively as
"Subsidiaries". For purposes of sections E.3., "Non-Utility Subsidiaries",
E.4.a., "Guarantees", and E.5., "Changes in Capital Stock of Wholly Owned
Subsidiaries", the terms "Subsidiary" and "Subsidiaries" shall also include
other direct or indirect subsidiaries that SCANA may form after the Merger with
the approval of the Commission, pursuant to the Rule 58 exemption or pursuant to
Section 34 of the Act. SCANA and the Subsidiaries are sometimes hereinafter
collectively referred to as the "SCANA System" or as the "Applicants". For
purposes of section E.4.b., "Money Pool", the term "Subsidiary" or
"Subsidiaries" shall include only the companies specifically named on the cover
and on the signature page of this
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Application/Declaration. The Commission is asked to reserve jurisdiction over
the participation in the relevant money pool of future companies formed by SCANA
until a specific post-effective amendment is filed, naming the subsidiary to be
added as a participant in the relevant money pool.
2. General Request
This Application/Declaration seeks the authorization and approval of the
Commission with respect to the ongoing financing activities, the provision of
intra-system services, and other matters pertaining to SCANA and PSNC and their
subsidiaries after giving effect to the Merger and registration of SCANA as a
holding company. Specifically, this Application/Declaration seeks the following
authorizations and approvals of the Commission:
(a) In order to ensure that the SCANA System is able to meet its capital
requirements immediately following registration and plan its future financing,
SCANA and its Subsidiaries hereby request authorization for financing
transactions for the period beginning with the effective date of an order issued
pursuant to this filing and continuing for a period of five (5) years from the
date of such order (the "Authorization Period").
(b) SCANA also hereby requests that the Commission approve the designation
of SCANA Service Company (as defined below) as a subsidiary service company in
accordance with the provisions of Rule 88 of the Act and the Services Agreement
(as defined below) as a basis for SCANA Service to comply with Section 13 of the
Act and the Commission's rules thereunder.
(c) SCANA also requests that the Commission approve the issuance of 13.6
million shares of common stock under dividend reinvestment and stock-based
management incentive and employee benefit plans pursuant to Sections 6(a) and 7
of the Act, all as more specifically described below.
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(d) SCANA also requests the authorization and approval of the Commission
under other sections of the Act and applicable rules and regulations of the
Commission promulgated thereunder with respect to the related matters described
in this Application/Declaration.
B. Description of the Parties to the Transaction
Following the consummation of the Merger, SCANA will have three operating
public utility company subsidiaries (the "Utility Subsidiaries"): South Carolina
Electric & Gas Company ("SCE&G"), a public utility company engaged (i) in the
generation, transmission, distribution and sale of electricity and (ii) in the
purchase and sale of natural gas in South Carolina, having electric service
extending into 24 counties and natural gas operations encompassing all or part
of 31 counties in South Carolina; South Carolina Generating Company, Inc.
("GENCO"), which owns and operates the Williams Station generating facility in
Goose Creek, South Carolina, selling electricity solely to SCE&G; and PSNC, a
public utility company franchised to serve a 31-county area in North Carolina,
transporting, distributing and selling natural gas to approximately 340,000
residential, commercial and industrial customers in 95 cities in North Carolina.
A list of SCANA's other Subsidiaries is set forth on the cover of this filing
and in the Merger U-1 and the exhibits thereto. All of SCANA's direct and
indirect Subsidiaries, other than the Utility Subsidiaries, are herein called
the "Non-Utility Subsidiaries".
SCANA Service Company, a subsidiary service company ("SCANA Service"), will
enter into a services agreement (the "Services Agreement") with each of the
Subsidiaries in the SCANA system. (A copy of the form of the Services Agreement
as well as an appendix entitled "Service Company Policy and Procedures" are
filed as Exhibits C-1 and C-2, respectively.) SCANA Service will provide SCANA,
PSNC and the other companies of the SCANA system
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with a variety of administrative, management, environmental and support
services, either directly or through agreements with associate or non-associate
companies, as needed. Prior to the consummation of the Merger, SCANA Service
will be incorporated in the State of South Carolina to serve as the service
company for the SCANA system.
The authorized capital stock of SCANA Service will consist of 1,000 shares
of common stock, no par value per share. Upon consummation of the Merger, all
issued and outstanding shares of SCANA Service common stock will be held by
SCANA.
C. Overview of the Financing Request
The Applicants hereby request authorization to engage in the financing
transactions set forth herein during the Authorization Period. The approval by
the Commission of this Application/Declaration will give the Applicants the
flexibility that will allow them to respond quickly and efficiently to their
financing needs and to changes in market conditions, allowing them to
efficiently and effectively carry on competitive business activities designed to
provide benefits to customers and shareholders. Approval of this
Application/Declaration is consistent with existing Commission precedent, both
for newly registered holding company systems (see e.g., Ameren Corporation,
Holding Co. Act Release No. 26809 (Dec. 30, 1997); Conectiv, Inc., Holding Co.
Act Release No. 26833 (Feb. 26, 1998); New Century Energies, Inc., Holding Co.
Act Release No. 26750 (Aug. 1, 1997)) and holding company systems that have been
registered for a longer period of time (see e.g., The Columbia Gas System, Inc.,
Holding Co. Act Release No. 26634 (Dec. 23, 1996); Gulf States Utilities
Company, Holding Co. Act Release No. 26451 (Jan. 16, 1996)).
The financing authorizations requested herein relate to (i) (a) external
issuances by SCANA of common stock, long-term debt, short-term debt, and other
securities for cash and (b)
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the entering into by SCANA of transactions to manage interest rate risk
("hedging transactions"); (ii) issuances of debt securities (including
commercial paper) and the entering into of hedging transactions by the Utility
Subsidiaries to the extent not exempt pursuant to Rule 52; (iii) issuances by
Non-Utility Subsidiaries of debt securities which are not exempt pursuant to
Rule 52; (iv) the establishment of a utility money pool (the "Utility Money
Pool") and a non-utility money pool (the "Non-Utility Money Pool") and the
issuance of intra-system guarantees by SCANA and the Non-Utility Subsidiaries on
behalf of the Subsidiaries; (v) the ability of wholly owned Subsidiaries to
alter their capital stock in order to engage in financing transactions with
their parent company and to engage in a reverse stock split to reduce franchise
taxes, subject, in the case of Utility Subsidiaries, to the approval of, if
required, a state utility commission in a state where the utility is
incorporated and doing business; (vi) the ability of PSNC and its Subsidiaries
to pay dividends out of capital or unearned surplus; and (vii) the formation of
financing entities and the issuance by such entities of securities otherwise
authorized to be issued and sold pursuant to this Application/Declaration or
pursuant to applicable exemptions under the Act, including intra-system
guarantees of such securities and the retention of existing financing entities.
D. Parameters for Financing Authorization
Authorization is requested herein to engage in certain financing
transactions during the Authorization Period for which the specific terms and
conditions are not at this time known, and which may not be covered by Rule 52,
without further prior approval by the Commission. The following general terms
will be applicable where appropriate to the financing transactions requested to
be authorized hereby:
1. Effective Cost of Money on Borrowings. The effective cost of money on
long-term debt borrowings occurring pursuant to the authorizations granted under
this
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Application/Declaration will not exceed 300 basis points over the comparable
term U.S. Treasury securities and the effective cost of money on short-term debt
borrowings pursuant to authorizations granted under this Application/Declaration
will not exceed 300 basis points over the comparable term London Interbank
Offered Rate ("LIBOR").
2. Maturity of Debt. The maturity of indebtedness will not exceed 50 years.
3. Issuance Expenses. The underwriting fees, commissions or other similar
remuneration paid in connection with the non-competitive issue, sale or
distribution of a security pursuant to this Application/Declaration will not
exceed 5% of the principal or total amount of the security being issued.
4. Use of Proceeds. The proceeds from the sale of securities in external
financing transactions will be used for general corporate purposes including (i)
the financing, in part, of the capital expenditures of the SCANA system, (ii)
the financing of working capital requirements of the SCANA system, (iii) the
acquisition, retirement or redemption pursuant to Rule 42 of securities
previously issued by SCANA or its Subsidiaries without the need for prior
Commission approval, and (iv) other lawful purposes, including direct or
indirect investment in companies authorized under the Merger U-1 and in Rule 58
companies and ETCs. The Applicants represent that no such financing proceeds
will be used to acquire a new subsidiary unless such financing is consummated in
accordance with an order of the Commission or an available exemption under the
Act.
SCANA represents that, at all times during the Authorization Period, its
common equity (as reflected in its most recent 10-K or 10-Q filed with the
Commission pursuant to the 1934 Act) will be at least 30% of its consolidated
capitalization after giving effect to adjustments to reflect subsequent events
that affect capitalization.
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E. Description of Specific Types of Financing
1. SCANA External Financing
SCANA requests authorization to obtain funds externally through sales of
common stock, long-term debt and short-term debt securities. With respect to
common stock, SCANA also requests authority to issue common stock to third
parties in consideration for the acquisition by SCANA or a Non-Utility
Subsidiary of equity or debt securities of a company being acquired pursuant to
Rule 58, Section 34 of the Act or pursuant to an order issued in connection with
the Merger U-1. In addition, SCANA seeks the flexibility to enter into certain
hedging transactions to manage rate risk.
(a) Common Stock
The aggregate amount of financing obtained by SCANA during the
Authorization Period from issuance and sale of common stock, no par value (other
than for employee benefit plans or stock purchase and dividend reinvestment
plans), when combined with issuances of long-term debt, as described in this
section, shall not exceed $1.435 billion for the uses set forth in Section D
above.
i. General
Subject to the foregoing, SCANA may issue and sell common stock or, if
pursuant to employee benefit plans, issue options exercisable for common stock
and common stock upon the exercise of options. SCANA may also buy back shares of
such stock or such options during the Authorization Period in accordance with
Rule 42.
Common stock financings may be effected pursuant to underwriting agreements
of a type generally standard in the industry. Public distributions may be
pursuant to private negotiation with underwriters, dealers or agents as
discussed below or effected through
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competitive bidding among underwriters. In addition, sales may be made through
private placements or other non-public offerings to one or more persons. All
such common stock sales will be at rates or prices and under conditions
negotiated or based upon, or otherwise determined by, competitive capital
markets.
SCANA may sell common stock covered by this Application/Declaration in any
one of the following ways: (i) through underwriters or dealers; (ii) through
agents; (iii) directly to a limited number of purchasers or a single purchaser;
or (iv) directly to employees (or to trusts established for their benefit),
shareholders and others through its employee benefit plans or stock purchase and
dividend reinvestment plans. If underwriters are used in the sale of the
securities, such securities will be acquired by the underwriters for their own
account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale. The securities may be offered to
the public either through underwriting syndicates (which may be represented by a
managing underwriter or underwriters designated by SCANA) or directly by one or
more underwriters acting alone. The securities may be sold directly by SCANA or
through agents designated by SCANA from time to time. If dealers are utilized in
the sale of any of the securities, SCANA will sell such securities to the
dealers as principals. Any dealer may then resell such securities to the public
at varying prices to be determined by such dealer at the time of resale. If
common stock is being sold in an underwritten offering, SCANA may grant the
underwriters thereof a "green shoe" option permitting the purchase from SCANA at
the same price of additional shares then being offered solely for the purpose of
covering over-allotments.
ii. Acquisitions
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Under the terms of the Merger U-1, Rule 58 and Section 34 of the Act, SCANA
is authorized to acquire securities of companies engaged in energy-related
consumer services, "energy-related businesses" as described in Rule 58 and ETCs.
Historically, similar acquisitions have occasionally involved the exchange of
parent company stock for securities of the company being acquired in order to
provide the seller with certain tax advantages. These transactions are
individually negotiated. The SCANA common stock to be exchanged may be purchased
on the open market pursuant to Rule 42, or may be original issue. Original issue
stock may be registered under the Securities Act of 1933, as amended (the "1933
Act"), but at present it is expected that the common stock would not be
registered and the common stock acquired by the third parties would be subject
to resale restrictions pursuant to Rule 144 under the 1933 Act. Such
transactions would not occur while a public offering is being made.
The ability to offer stock as consideration makes a transaction more
economical for SCANA as well as for the seller of the business. Therefore, SCANA
requests authorization to issue common stock in consideration for an acquisition
by SCANA or a Non-Utility Subsidiary of securities of a business, the
acquisition of which is exempt under Rule 58 or Section 34 of the Act, or has
been authorized in the Merger U-1. The SCANA common stock would be valued at
market value based upon the closing price on the day before closing of the sale
or based upon average high and low prices for a period prior to the closing of
the sale as negotiated by the parties. From the perspective of the Commission,
the use of stock as consideration valued at market value is no different than a
sale of common stock on the open market and use of the proceeds to acquire
securities, the acquisition of which is otherwise authorized.
(b) Long-Term Debt
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SCANA requests Commission authorization during the Authorization Period to
issue long-term debt securities in an amount, when combined with issuances of
common stock (other than for benefit plans or stock purchase and dividend
reinvestment plans) under this Application/Declaration, not to exceed $1.435
billion. This amount includes financing for the cash portion of the Merger
consideration of approximately $700 million. Such long-term debt securities
would be comprised of medium-term notes under an indenture (the "SCANA
Indenture") or bank debt. Any long-term debt security would have such
designation, aggregate principal amount, maturity, interest rate(s) or methods
of determining the same, terms of payment of interest, redemption provisions,
sinking fund terms and other terms and conditions as SCANA may determine at the
time of issuance. The request for authorization for SCANA to issue long-term
debt securities is consistent with authorization that the Commission has granted
to other combination gas and electric holding companies. See Cinergy Corp.,
Holding Co. Act Release No. 26909 (Aug. 21, 1998) (authorizing the issuance of
up to $400 million of unsecured debt securities); Conectiv, Inc., Holding Co.
Act Release No. 26921 (Sept. 28, 1998) (authorizing issuance of up to $250
million of debentures).
i. Terms of SCANA Indenture
The SCANA Indenture permits the issuance of a wide variety of unsecured
debt securities in one or more series. Securities issuable (which may be issued
with original issue discount) can include securities as to which payments of
interest or principal are based on a formula or index, and securities on which
payment of interest or principal are denominated in a foreign currency or
currencies. The terms of a specific issue of securities, including any
applicable negative covenants, are set under the SCANA Indenture by (i) a
supplemental indenture or (ii) an officer's certificate and company order, as
applicable.
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The SCANA Indenture permits variable terms, such as the principal amount,
interest rate, redemption terms, denominations, events of default, etc., to be
included or excluded in or made applicable to a particular series of securities.
These terms will be set forth either in (i) a supplemental indenture or (ii) an
officer's certificate and company order, as applicable. In theory, any
combination of the variable terms could be included in a single series of
securities which, under current practice, would be called "notes", "debentures"
or "medium-term notes". The SCANA Indenture also permits any series of
securities to be issued either in certificated form or in "global" form (i.e.,
transferable only by book-entry on the records of a securities depository such
as The Depository Trust Company).
Other than certain provisions relating to restrictions on liens, the SCANA
Indenture contains no negative covenants or restrictions. Any additional
covenants or restrictions negotiated at the time of issuance will be included in
either (i) a supplemental indenture or (ii) an officer's certificate and company
order, as applicable, establishing a particular security. The SCANA Indenture
contains the following event of default provisions: (i) defaults in payment of
the SCANA Indenture securities; (ii) defaults under covenants under the SCANA
Indenture, (iii) failures to comply with instruments governing other
indebtedness and certain other agreements; and (iv) certain events of insolvency
with respect to SCANA subject, as applicable, to customary grace periods.
The SCANA Indenture has been qualified under the Trust Indenture Act of
1939, as amended. As of December 1, 1999, the following medium-term notes were
issued and outstanding under the SCANA Indenture:
Amount Interest Rate Maturity Date
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$ 20.0 million 6.15% 7/3/2000
$ 20.0 million 6.51% 7/1/2003
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$ 60.0 million 6.05% 1/13/2003
$ 75.0 million 6.25% 7/8/2003
$ 115.0 million 5.81% 10/23/2008
$ 25.0 million 6.90% 2/15/2007
$ 150.0 million 5.5175% 7/14/2000
$ 50.0 million 7.44% 10/19/2004
A copy of any new supplemental indenture under the SCANA Indenture or an
officer's certificate and company order executed and delivered pursuant to this
Authorization will be filed under cover of the first quarterly report under Rule
24 filed after such execution and delivery.
ii. Terms of Borrowings from Banks and Other Financial
Institutions.
Borrowings from the banks and other financial institutions will be
unsecured and will rank pari passu with debt securities issued under the SCANA
Indenture and the short-term credit facilities (as described below). Specific
terms of any borrowings will be determined by SCANA at the time of issuance and
will comply in all regards with the parameters on financing authorization set
forth in Section D above. A copy of any additional note or agreement executed
and delivered pursuant to this Authorization will be filed under cover of the
first quarterly report under Rule 24 filed after such execution and delivery.
(c) Short-Term Debt
To refund pre-Merger short-term debt, to provide for the reissuance of
pre-Merger letters of credit and to provide financing for general corporate
purposes, working capital requirements and Subsidiary capital expenditures until
long-term financing can be obtained, SCANA requests authorization to have
outstanding at any one time during the Authorization Period, up to $950 million
of short-term debt, including up to $500 million of Merger financing (most of
which SCANA intends to refinance as long-term debt within 1 year of
effectiveness of
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the Merger), with the balance consisting of bank borrowings, commercial paper or
bid notes (all as described below) and short-term debt issued under the SCANA
Indenture.
SCANA currently has the following short-term debt facilities in place,
which will remain in place following the Merger: (1) SCANA maintains uncommitted
bank lines of credit in the current amount of $128 million (these uncommitted
lines have no expiration date); (2) SCANA also maintains committed lines of bank
credit for $100 million (evenly divided between Wachovia Bank, N.A. and Bank of
America, N.A.) which expire on June 29, 2000; (3) SCANA maintains committed
lines of credit with other banks in the amount of $2.3 million; and (4) SCANA
expects to obtain a $50 million letter of credit in connection with its
guarantee of SCE&G's decommissioning costs (disclosed in Item 4.a below). These
amounts are included within the overall authorization amount requested above.
SCANA may also sell commercial paper, from time to time, in established
domestic or European commercial paper markets. Such commercial paper would be
sold to dealers at the discount rate or the coupon rate per annum prevailing at
the date of issuance for commercial paper of comparable quality and maturities
sold to commercial paper dealers generally. It is expected that the dealers
acquiring commercial paper from SCANA will reoofer such paper at a discount to
corporate, institutional an, with respect to European commercial paper,
individual investors. Institutional investors are expected to include commercial
banks, insurance companies, pension funds, investment trusts, foundations,
colleges and universities and finance companies.
(d) Other Securities
In addition to the specific securities for which authorization is sought
herein, SCANA may also find it necessary or desirable to minimize financing
costs or to obtain new
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capital under then-existing market conditions to issue and sell other types of
securities from time to time during the Authorization Period. The issuance of
any such securities would be subject to the aggregate $1.435 billion limit on
equity and long-term debt or the aggregate $950 million limit on short-term debt
discussed in Section E.1(b) and Section E.1(c), and to the parameters on
financing authorization set forth in Section D above. SCANA requests that the
Commission reserve jurisdiction over the issuance of additional types of
securities. SCANA also will undertake to file a post-effective amendment in this
proceeding which will describe the general terms of each such security and the
amount to be issued and to request a supplemental order of the Commission
authorizing the issuance thereof by SCANA.
(e) Interest Rate Risk Management Devices
SCANA requests authority to enter into, perform, purchase and sell
financial instruments intended to manage the volatility of interest rates,
including but not limited to interest rate swaps, caps, floors, collars and
forward agreements or any other similar agreements. SCANA would employ interest
rate swaps as a means of prudently managing the risk associated with any of its
outstanding debt issued pursuant to this authorization or an applicable
exemption by, in effect, synthetically (i) converting variable rate debt to
fixed rate debt, (ii) converting fixed rate debt to variable rate debt, (iii)
limiting the impact of changes in interest rates resulting from variable rate
debt and (iv) providing an option to enter into interest rate swap transactions
in future periods for planned issuances of debt securities. In no case will the
notional principal amount of any interest rate swap exceed that of the
underlying debt instrument and related interest rate exposure. Thus, SCANA will
not engage in "leveraged" or "speculative" transactions. The underlying interest
rate indices of such interest rate swaps will closely correspond to the
underlying interest rate indices of SCANA's debt to which such interest rate
swap relates.
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SCANA will only enter into interest rate swap agreements with counterparties
whose senior debt ratings, as published by Standard & Poor's, A Division of The
McGraw-Hill Companies, are greater than or equal to "BBB+", or an equivalent
rating from Moody's Investors Service, Inc., Fitch IBCA, Inc. or Duff & Phelps
Credit Rating Co.
2. Utility Subsidiary Financing
As indicated on Exhibit I-1 hereto, the Utility Subsidiaries have financing
arrangements in place. These arrangements will remain in place following the
Merger and are described in more detail in Exhibit I-1 hereto.
Rule 52 provides an exemption from the prior authorization requirements of
the Act for most of the issuances and sales of securities by the Utility
Subsidiaries because they must be approved by the relevant state public utility
commission, which, depending on the particular subsidiary involved, may mean
either the South Carolina Public Service Commission (the "SCPSC") or the North
Carolina Utilities Commission (the "NCUC"). However, certain external financings
by the Utility Subsidiaries for which authorization is requested herein may be
outside the Rule 52 exemption. The authority herein sought excludes financings
exempt under Rule 52. Financings obtained under this authorization will be used
for general corporate purposes and working capital requirements, including
contributions to the Utility Money Pool.
(a) Short-Term Debt
Authority is requested for SCE&G to issue commercial paper and establish
credit lines in the aggregate amount of $300 million to be outstanding at any
one time during the Authorization Period. Authority is requested for PSNC to
issue commercial paper and establish credit lines in the aggregate amount of
$125 million to be outstanding at any one time during the Authorization Period.
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The above-named Utility Subsidiaries request authority to sell commercial
paper, from time to time, in established domestic commercial paper markets in a
manner similar to SCANA as discussed above. Such Utility Subsidiaries may
further maintain back up lines of credit in an aggregate amount not to exceed
the amount of authorized commercial paper.
Credit lines may be set up for use by the Utility Subsidiaries for general
corporate purposes in addition to credit lines to support commercial paper as
described in this subsection. These Utility Subsidiaries will borrow and repay
under such lines of credit, from time to time, as it is deemed appropriate or
necessary. Subject to the limitations described herein, each such Utility
Subsidiary may engage in other types of short-term financings as it may deem
appropriate in light of its needs and market conditions at the time of issuance.
(b) Interest Rate Swaps
The Utility Subsidiaries request authority to enter into, perform, purchase
and sell financial instruments intended to manage the volatility of interest
rates, including but not limited to interest rate swaps, caps, floors, collars
and forward agreements or any other similar agreements to the extent the same
are not exempt under Rule 52. Each Utility Subsidiary may employ interest rate
swaps as a means of managing risk associated with any of its outstanding debt
issued pursuant to this authorization or an applicable exemption. The Utility
Subsidiaries request authority to make and continue use of financial hedging
instruments in connection with Utility operations. The Utility Subsidiaries will
not engage in speculative transactions.
To the extent not exempt under Rule 52, the Utility Subsidiaries also
request authority to enter into interest rate risk management transactions of
the same type and under the same conditions as are requested above by SCANA.
3. Non-Utility Subsidiary Financings
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As noted on Exhibit I-2 hereto, certain Non-Utility Subsidiaries have
financing arrangements in place. These arrangements are expected to remain in
place following consummation of the Mergers. Certain guarantees in favor of a
direct or indirect Non-Utility Subsidiary issued by another Subsidiary may be
replaced by SCANA guarantees as described below. In addition, the Merger U-1
contemplates, and the order permitting the Merger U-1 to become effective will
authorize, the formation or retention of other Non-Utility Subsidiaries named
herein which do not currently have outstanding debt. It is expected that future
financing by all such Non-Utility Subsidiaries will be made pursuant to the
terms of Rule 52.
The Non-Utility Subsidiaries are engaged in and expect to continue to be
active in the development and expansion of their existing energy-related or
otherwise functionally-related, non-utility business. They will be competing
with large, well-capitalized companies in different sectors of the energy
industry and other industries. In order to quickly and effectively invest in
such competitive arenas, it will be necessary for the Non-Utility Subsidiaries
to have the ability to engage in financing transactions which are commonly
accepted for such types of investments. The majority of such financings will be
exempt from prior Commission authorization pursuant to Rule 52(b). The
Non-Utility Subsidiaries, however, may engage, from time to time, in types of
security financing with non-affiliates that are not exempt from prior Commission
approval. The Non-Utility Subsidiaries, therefore, request that the Commission
(i) reserve jurisdiction over the issuance of such additional types of
securities and the amounts thereof and (ii) undertake to cause a post-effective
amendment to be filed in this proceeding which will request a supplemental order
of the Commission authorizing the issuance thereof by the subject Non-Utility
Subsidiary.
4. Guarantees and Intra-System Money Pool
(a) Guarantees
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SCANA requests authorization to enter into guarantees, obtain letters of
credit, enter into expense agreements or otherwise provide credit support with
respect to the obligations of its Subsidiaries as may be appropriate or
necessary to enable such Subsidiaries to carry on in the ordinary course of
their respective businesses in an aggregate principal amount not to exceed $305
million outstanding at any one time (not taking into account obligations exempt
pursuant to Rule 45). Included in this amount are guarantees and other credit
support mechanisms of SCANA's Subsidiaries, as well as those of PSNC which were
previously issued in favor of its subsidiaries which will be assumed by SCANA
upon consummation of the Merger.
The existing intra-system guarantees and support provided by SCANA, which
are expected to remain in place following the Merger, are as follows: (1) SCANA
guarantees the obligations of its marketing subsidiary (SCANA Energy) to Atlanta
Gas Light Company (estimated amount $40 million); (2) SCANA guarantees GENCO's
$52.6 million 7.78% Senior Secured Notes due December 31, 2011 and GENCO's
$35.85 million 6.5% Pollution Control Facilities Revenue Bonds; (3) SCANA
provides a $5 million letter of credit to Primesouth to support Primesouth's
ability to bid on contracts; and (4) it is expected that SCANA will obtain a
letter of credit prior to December 31, 1999 in the approximate amount of $50
million to satisfy Nuclear Regulatory Commission requirements on cash available
to fund SCE&G's decommission ing costs. SCANA will guarantee $50 million of
SCE&G's decommissioning costs and support such guarantee through the letter of
credit. These amounts are included within the overall authorization amount
requested above.
SCANA requests that this guarantee authority include the ability to
guarantee debt. The debt guaranteed will comply with the parameters for
financing set forth above.
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(b) Authorization and Operation of the Money Pools
SCANA and the Utility Subsidiaries hereby request authorization to
establish the Utility Money Pool, and the Utility Subsidiaries, to the extent
not exempted by Rule 52, also request authorization to make unsecured short-term
borrowings from the Utility Money Pool and to contribute surplus funds to the
Utility Money Pool and to lend and extend credit to (and acquire promissory
notes from) one another through the Utility Money Pool. In addition, SCANA and
the remaining Subsidiaries, all of which are Non-Utility Subsidiaries, hereby
request authorization to establish the Non-Utility Money Pool. The Non-Utility
Money Pool activities of all of the Non-Utility Subsidiaries are exempt from the
prior approval requirements of the Act under Rule 52. SCANA is requesting
authorization to contribute surplus funds and to lend and extend credit to (a)
the Utility Subsidiaries through the Utility Money Pool and (b) the Non- Utility
Subsidiaries through the Non-Utility Money Pool.
The Applicants believe that the cost of the proposed borrowings through the
two Money Pools will generally be more favorable to the borrowing participants
than the comparable cost of external short-term borrowings, and the yield to the
participants contributing available funds to the two Money Pools will generally
be higher than the typical yield on short-term investments.
i. Utility Money Pool
Under the proposed terms of the Utility Money Pool, short-term funds would
be available from the following sources for short-term loans to the Utility
Subsidiaries from time to time: (1) surplus funds in the treasuries of Utility
Money Pool participants other than SCANA, (2) surplus funds in the treasury of
SCANA, and (3) proceeds from bank borrowings by Utility Money Pool participants
or the sale of commercial paper by SCANA or the Utility Subsidiaries
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for loan to the Utility Money Pool ("External Funds"). Funds would be made
available from such sources in such order as SCANA Service, as administrator of
the Utility Money Pool, may determine would result in a lower cost of borrowing,
consistent with the individual borrowing needs and financial standing of the
companies providing funds to the pool. The determination of whether a Utility
Money Pool participant at any time has surplus funds to lend to the Utility
Money Pool or shall lend funds to the Utility Money Pool would be made by such
participant's chief financial officer or treasurer, or by a designee thereof, on
the basis of cash flow projections and other relevant factors, in such
participant's sole discretion. See Exhibit J-1 for a copy of the Form of Utility
Money Pool Agreement.
As discussed in more detail below, a separate Non-Utility Money Pool will
be established by SCANA with certain Non-Utility Subsidiary companies of
SCANA./3/ Funds made available by SCANA for loans through the money pools will
be made available first for loans through the Utility Money Pool and thereafter
for loans through the Non-Utility Money Pool.
Utility Money Pool participants that borrow would borrow pro rata from each
company that lends, in the proportion that the total amount loaned by each such
lending company bears to the total amount then loaned through the Utility Money
Pool. On any day when more than one fund source (e.g., surplus treasury funds of
SCANA and other Utility Money Pool participants ("Internal Funds") and External
Funds), with different rates of interest, is used to fund loans through the
Utility Money Pool, each borrower would borrow pro rata from each such fund
source in the Utility Money Pool in the same proportion that the amount of funds
provided by that fund source bears to the total amount of short-term funds
available to the Utility Money Pool.
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/3/ Such other subsidiaries consist of each of the Non-Utility Subsidiaries
including SCANA Service.
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Borrowings from the Utility Money Pool would require authorization by the
borrower's chief financial officer or treasurer, or by a designee thereof. No
party would be required to effect a borrowing through the Utility Money Pool if
it is determined that it could (and had authority to) effect a borrowing at
lower cost directly from banks or through the sale of its own commercial paper.
No loans through the Utility Money Pool would be made to, and no borrowings
through the Utility Money Pool would be made by, SCANA.
The cost of compensating balances, if any, and fees paid to banks to
maintain credit lines and accounts by Utility Money Pool participants lending
External Funds to the Utility Money Pool would initially be paid by the
participant maintaining such line. A portion of such costs -- or all of such
costs in the event a Utility Money Pool participant establishes a line of credit
solely for purposes of lending any External Funds obtained thereby into the
Utility Money Pool -- would be retroactively allocated every month to the
companies borrowing such External Funds through the Utility Money Pool in
proportion to their respective daily outstanding borrowings of such External
Funds.
If only Internal Funds make up the funds available in the Utility Money
Pool, the interest rate applicable and payable to or by Subsidiaries for all
loans of such Internal Funds will be the rates for high-grade unsecured 30-day
commercial paper sold through dealers by major corporations as quoted in The
Wall Street Journal.
If only External Funds comprise the funds available in the Utility Money
Pool, the interest rate applicable to loans of such External Funds would be
equal to the lending company's cost for such External Funds (or, if more than
one Utility Money Pool participant had made available External Funds on such
day, the applicable interest rate would be a composite rate equal
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to the weighted average of the cost incurred by the respective Utility Money
Pool participants for such External Funds).
In cases where both Internal Funds and External Funds are concurrently
borrowed through the Utility Money Pool, the rate applicable to all loans
comprised of such "blended" funds would be a composite rate equal to the
weighted average of (a) the cost of all Internal Funds contributed by Utility
Money Pool participants (as determined pursuant to the second-preceding
paragraph above) and (b) the cost of all such External Funds (as determined
pursuant to the immediately preceding paragraph above). In circumstances where
Internal Funds and External Funds are available for loans through the Utility
Money Pool, loans may be made exclusively from Internal Funds or External Funds,
rather than from a "blend" of such funds, to the extent it is expected that such
loans would result in a lower cost of borrowings.
Funds not required by the Utility Money Pool to make loans (with the
exception of funds required to satisfy the Utility Money Pool's liquidity
requirements) would ordinarily be invested in one or more short-term
investments, including: (i) interest-bearing accounts with banks; (ii)
obligations issued or guaranteed by the U.S. government and/or its agencies and
instrumentalities, including obligations under repurchase agreements; (iii)
obligations issued or guaranteed by any state or political subdivision thereof,
provided that such obligations are rated not less than "A" by a nationally
recognized rating agency; (iv) commercial paper rated not less than "A-1" or
"P-1" or their equivalent by a nationally recognized rating agency; (v) money
market funds; (vi) bank certificates of deposit, (vii) Eurodollar funds; and
(viii) such other investments as are permitted by Section 9(c) of the Act and
Rule 40 thereunder.
The interest income and investment income earned on loans and investments
of surplus funds would be allocated among the participants in the Utility Money
Pool in accordance
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with the proportion each participant's contribution of funds bears to the total
amount of funds in the Utility Money Pool and the cost of funds provided to the
Utility Money Pool by such participant.
Each Applicant receiving a loan through the Utility Money Pool would be
required to repay the principal amount of such loan, together with all interest
accrued thereon, on demand and in any event not later than one year after the
date of such loan. All loans made through the Utility Money Pool may be prepaid
by the borrower without premium or penalty.
ii. Non-Utility Money Pool
The Non-Utility Money Pool will be operated on the same terms and
conditions as the Utility Money Pool, except that SCANA funds made available to
the Money Pools will be made available to the Utility Money Pool first and
thereafter to the Non-Utility Money Pool. See Exhibit J-2 for a copy of the form
of Non-Utility Money Pool Agreement. All contributions to, and borrowings from,
the Non-Utility Money Pool are exempt pursuant to the terms of Rule 52 under the
Act, except contributions and extensions of credit by SCANA, authorization for
which is hereby requested.
iii. Other Contributions to Money Pool
SCANA and the Utility Subsidiaries may contribute funds from the issuance
of short term debt as authorized above to the Utility Money Pool. SCANA may
contribute funds from the issuance of short term debt to the Non-Utility Money
Pool and the Non-Utility Subsidiaries may contribute funds from the issuance of
short term debt to the Non-Utility Money Pool.
iv. Operation of the Money Pools and Administrative Matters
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Operation of the Utility and Non-Utility Money Pools, including record
keeping and coordination of loans, will be handled by SCANA Service under the
authority of the appropriate officers of the participating companies. SCANA
Service will administer the Utility and Non-Utility Money Pools on an "at cost"
basis and will maintain separate records for each money pool. Surplus funds of
the Utility Money Pool and the Non-Utility Money Pool may be combined in common
short-term investments, but separate records of such funds shall be maintained
by SCANA Service as administrator of the pools, and interest thereon shall be
separately allocated, on a daily basis, to each money pool in accordance with
the proportion that the amount of each money pool's surplus funds bears to the
total amount of surplus funds available for investment from both money pools.
v. Use of Proceeds
Proceeds of any short term borrowings by the Applicants may be used by each
such Applicant (i) for the interim financing of its construction and capital
expenditure programs; (ii) for its working capital needs; (iii) for the
repayment, redemption or refinancing of its debt and preferred stock; (iv) to
meet unexpected contingencies, payment and timing differences, and cash
requirements; and (v) to otherwise finance its own business and for other lawful
general corporate purposes. SCE&G may borrow up to $30 million at any one time
outstanding from the Utility Money Pool, PSNC may borrow up to $15 million at
any one time outstanding, and GENCO may borrow up to $25 million at any one time
outstanding. The use of proceeds from the financings would be limited to use in
the operations of the respective businesses in which such Subsidiaries are
already authorized to engage. The authorization sought herein is substantially
the same as that given to New Century Energies, Inc., Holding Co. Act Release
No. 26750 (Aug. 1, 1997) and Conectiv, Holding Co. Act Release No. 26833 (Feb.
26, 1998).
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5. Changes in Capital Stock of Wholly Owned Subsidiaries
The portion of an individual Subsidiary's aggregate financing to be
effected through the sale of stock to SCANA or other immediate parent company
during the Authorization Period pursuant to Rule 52 and/or pursuant to an order
issued pursuant to this file cannot be ascertained at this time. It may happen
that the proposed sale of capital securities may in some cases exceed the then
authorized capital stock of such Subsidiary. In addition, the Subsidiary may
choose to use capital stock with no par value. Also, a wholly-owned Subsidiary
may wish to engage in a reverse stock split to reduce franchise taxes. As needed
to accommodate such proposed transactions and to provide for future issues,
request is made for authority to change the terms of any such wholly owned
Subsidiary's authorized capital stock capitalization by an amount deemed
appropriate by SCANA or other intermediate parent company in the instant case. A
Subsidiary would be able to change the par value, or change between par value
and no-par stock, without additional Commission approval. Any such action by a
Utility Subsidiary would be subject to and would only be taken upon the receipt
of any necessary approvals by the state commission in the state or states where
the Utility Subsidiary is incorporated and doing business. See Conectiv, Inc.,
Holding Co. Act Release No. 26833 (Feb. 26, 1998), New Century Energies, Inc.,
Holding Co. Act Release No. 26750 (Aug. 1, 1997).
6. Payment of Dividends out of Capital or Unearned Surplus by PSNC
As a result of the application of the purchase method of accounting to the
Merger, the current retained earnings of PSNC will be recharacterized as
additional paid-in-capital. In addition, the Merger will give rise to a
substantial level of goodwill, the difference between the aggregate fair values
of all identifiable tangible and intangible (non-goodwill) assets on the one
hand, and the total consideration to be paid for PSNC and the fair value of the
liabilities assumed,
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on the other. In accordance with the Commission's Staff Accounting Bulletin No.
54, Topic 5J ("Staff Accounting Bulletin"), the goodwill will be "pushed down"
to PSNC and reflected as additional paid-in-capital in its financial statements.
The effect of these accounting practices would be to leave PSNC with no retained
earnings, the traditional source of dividend payment, but, nevertheless, a
strong balance sheet showing a significant equity level. The Applicants request
authorization to pay dividends out of the additional paid-in-capital account up
to the amount of PSNC's aggregate retained earnings immediately prior to the
Merger and out of earnings before the amortization of the goodwill thereafter.
In purchase accounting, the total value of the acquisition, which must be
assigned to PSNC's assets, is the total consideration to be paid for PSNC, plus
the fair value of all liabilities assumed in the acquisition. Generally,
goodwill is the residual balance of the total value remaining after fair values
have been assigned to all of PSNC's identifiable assets (both tangible and
non-goodwill intangible assets). Accordingly, the excess of the purchase
consideration over the fair market value of the acquired assets of PSNC will be
assigned to goodwill for generally accepted accounting purposes.
As indicated in the Staff Accounting Bulletin, registrants that have
substantially all (generally defined as in excess of 95%) of their common stock
acquired by a third party, in a business combination accounted for under the
purchase method, should reflect the push-down of goodwill in the registrant's
post-acquisition financial statements. For any post-acquisition reporting of the
consolidated PSNC financial statements, push down accounting will be reflected
in those statements and the full amount of goodwill associated with the PSNC
acquisition will be reflected.
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The application of "push down" accounting represents a change in the manner
of accounting. For FERC and state commission reporting purposes, goodwill will
be recorded in PSNC's books. The original historical basis of PSNC's books will
not be disturbed.
As a result of the push down of the goodwill, the common equity balances of
PSNC and PSNC's subsidiaries are effectively reset as if they were new
companies, because a new basis of accounting has been pushed down to the
entities. Accordingly, retained earnings are eliminated. Immediately following
this accounting treatment, the only components with a recorded value would be:
o Common stock - which would continue to reflect the par value of the
common stock issued.
o Paid-in-capital - which would reflect a value consistent with total
common shareholders' equity minus the par value recorded in the common
stock line.
In other words, the resulting common shareholders' equity will equal the total
consideration paid for the entity.
Based on 1998 financial information, the application of these accounting
principles to the Merger will result in following adjustments to PSNC's books:
- --------------------------------------------------------------------------------
$'000 1998 Adjustments Restated
- --------------------------------------------------------------------------------
Common Stock 20,378 --- 20,378
Paid-in-capital 134,742 539,827 674,569
Retained earnings 68,654 (68,654) ---
Accumulated comprehensive --- --- ---
income, net
Total equity 223,774 471,173 694,947
- --------------------------------------------------------------------------------
Adjustments -- Re-establish net assets at fair market value.
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The push down of the net assets at fair market value also has an impact on
the net income of PSNC. The net assets include an acquisition adjustment that
will be amortized over 35 years. PSNC's net income will be reduced by the amount
of the amortization. For example, net income of $24.8 million in 1998 would be
reduced by a goodwill amortization of $13.5 million. The resulting net income
after amortization would be $11.3 million.
Section 12 of the 1935 Act, and Rule 46 thereunder, generally prohibit the
payment of dividends out of "capital or unearned surplus" except pursuant to an
order of the Commission. The legislative history explains that this provision
was intended to "prevent the milking of operating companies in the interest of
the controlling holding company groups." S. Rep. No. 621, 74th Cong., 1st Sess.
34 (1935)./4/ In determining whether to permit a registered holding company to
pay dividends out of capital surplus, the Commission considers various factors,
including: (i) the asset value of the company in relation to its capitalization,
(ii) the company's prior earnings, (iii) the company's current earnings in
relation to the proposed dividend, and (iv) the company's projected cash
position after payment of a dividend. See Eastern Utilities Associates, Holding
Co. Act Release No. 25330 (June 13, 1991) ("EUA"), and cases cited therein.
Further, the payment of the dividend must be "appropriate in the public
interest." Id., citing Commonwealth & Southern Corporation, 13 S.E.C. 489, 492
(1943).
The Applicants request authority for PSNC to pay dividends out of
additional paid-in-capital up to the amount of PSNC's consolidated retained
earnings prior to the Merger and out of earnings before the amortization of
goodwill thereafter. In no case would dividends be paid if the equity of PSNC as
a percentage of total capital was below 30% on a consolidated basis. This
restriction is intended to protect both investors and consumers.
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/4/ Compare Section 305(a) of the Federal Power Act.
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<PAGE>
In support of their request, Applicants assert that each of the standards
of Section 12(c) of the 1935 Act enunciated in the EUA case are satisfied:
(i) After the Merger, and giving effect to the push down of goodwill,
PSNC's equity as a percentage of total capitalization will be 61.6%,
substantially in excess of the traditional levels of equity
capitalization that the Commission has authorized for other registered
holding company systems. The Applicants' commitment to maintain the
capitalization of PSNC at or above 30% equity on a consolidated basis
should result in a capital structure consistent with industry norms.
(ii) PSNC has a favorable history of prior earnings and it has a long
record of consistent dividend payments./5/
(iii) Applicants anticipate that PSNC's cash flow after the Merger will not
differ significantly from its pre-Merger cash flow and that earnings
before the amortization of goodwill ("Gross Earnings"), therefore,
should remain stable post- Merger. The Applicants believe that
dividends paid out of future earnings will continue to reflect a
dividend payout ratio of between 65% and 75% of Gross Earnings, based
on a rolling 5-year average.
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/5/ In recent years, PSNC's net income and dividends have been:
Year Net Income ($ millions) Dividends Paid ($ millions)
---- ----------------------- ---------------------------
1994 20.0 14.3
1995 21.4 14.2
1996 23.9 16.2
1997 26.3 17.3
1998 24.8 18.6
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(iv) The projected cash position of PSNC after the Merger will be adequate
to meet the obligations of each company. As of September 30, 1999,
PSNC had cash balances of $7.2 million on a consolidated basis. The
amortization of goodwill is a non-cash expense that will not affect
the cash flow of PSNC. PSNC is forecast to have sufficient cash to pay
dividends in the amounts contemplated.
(v) The proposed dividend payments are in the public interest. PSNC is in
sound financial condition as indicated by its credit ratings. Indeed,
PSNC's senior unsecured debentures were rated A2 by Moody's Investor
Services prior to announcement of the Merger and, following
announcement, were put under review for possible upgrade. The positive
implications for PSNC are a result of its association with SCANA,
including the higher-rated SCE&G. The expectations of continued strong
credit ratings by PSNC should allow it to continue to access the
capital markets to finance its operations and growth.
In addition, the dividend payments are consistent with investor interests
because they allow the capital structure of PSNC to be adjusted to more
appropriate levels of debt and equity. Lastly, a prohibition on dividend
payments out of additional paid-in-capital would impair the ability of SCANA to
service the acquisition debt incurred in connection with the Merger.
7. Financing Entities
Authority is sought for the Subsidiaries to organize new corporations,
trusts, partnerships or other entities created for the purpose of facilitating
financings through their issuance to third parties of income preferred
securities or other securities authorized hereby or
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issued pursuant to an applicable exemption./6/ Request is also made for these
financing entities to issue such securities to third parties in the event such
issuances are not exempt pursuant to Rule 52. Additionally, request is made for
authorization with respect to (i) the issuance of debentures or other evidences
of indebtedness by any of the Subsidiaries to a financing entity in return for
the proceeds of the financing, (ii) the acquisition by any of the Subsidiaries
of voting interests or equity securities issued by the financing entity to
establish any such Subsidiary's ownership of the financing entity (the equity
portion of the entity generally being created through a capital contribution or
the purchase of equity securities, ranging from 1 to 3 percent of the
capitalization of the financing entity) and (iii) the guarantee by the
Applicants of such financing entity's obligations in connection therewith. Each
of the Subsidiaries also requests authorization to enter into an expense
agreement with its respective financing entity, pursuant to which it would agree
to pay all expenses of such entity. Any amounts issued by such financing
entities to third parties pursuant to this authorization will be included in the
overall external financing limitation authorized herein for the immediate parent
of such financing entity. However, the underlying intra-system mirror debt and
parent guarantee shall not be so included. The authorization sought herein with
respect to financing entities is substantially the same as that given to New
Century Energies, Inc., Holding Co. Act Release No. 26750 (Aug. 1, 1997) and
Conectiv, Holding Co. Act Release No. 26833 (Feb. 26, 1998).
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/6/ SCE&G has an existing subsidiary trust that has issued $50 million in trust
preferred securities to the public and holds $50 million principal amount
of debentures of SCE&G. Authorization is requested to retain this financing
arrangement.
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F. Intra-system Provision of Services
1. Service Company
In order to ensure adequate oversight and realize economies of scale,
certain administrative and service functions for the SCANA System will be
consolidated and provided through SCANA Service. As a general rule, the
individual system companies will maintain services that can benefit from
individualized application at the company level, with SCANA Service offering
system-wide coordination and strategy services, oversight services and other
services where economies can be captured by centralization of services. In
particular, it is anticipated that the following services will be offered by
SCANA Service to system companies:
a. Corporate Compliance.
The compliance group oversees compliance with all laws, regulations and
policies applicable to all of SCANA's businesses and directs compliance
training.
b. Internal Auditing.
This service involves reviewing internal controls, and compliance
therewith, and preparing reports regarding both compliance and how to improve
methods of internal control.
c. Strategic Planning.
This group will advise and assist system companies with the preparation of
strategic business plans for system companies, including budgets, economic
forecasts and planning for special projects.
d. Government Affairs and Economic Development.
The government affairs group will monitor and participate in developments
on the federal and state government level that affect system companies. The
economic development
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group in particular will be active in local government programs, including those
designed to encourage economic growth within system companies' service
territory.
e. Gas Supply/Capacity Management (Regulated Subsidiaries).
Through SCANA Service, the Utility Subsidiaries will be able to coordinate
the management of their gas supply and capacity in order to ensure the most
efficient use and capture economies of scale as a larger purchaser in the
market, although individual Utility Subsidiaries may remain as the contract
party under a supply agreement. The non-regulated marketing subsidiaries such as
SCANA Energy Marketing will not use SCANA Service for gas supply and capacity
management, but will instead maintain a separate gas supply group.
f. Environmental.
SCANA Service will offer environmental reporting, monitoring and compliance
services to system companies.
g. Legal Services Bureau.
SCANA Service will offer advice and assistance with respect to legal and
regulatory issues and compliance and other matters under Federal and State law.
In addition, the claims group will process small tort claims for system
companies.
h. Marketing/Sales/Branding.
SCANA Service will offer to assist system companies in developing marketing
strategies to promote their products and their brand names. Individual system
companies may maintain independent marketing personnel to handle the day-to-day
detail with respect to their marketing campaigns.
i. Financial Services.
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The services offered include corporate tax, treasury services, insurance
and risk management services, corporate accounting and reporting, hedging policy
and oversight, financial planning and rates (for regulated Subsidiaries and
other Subsidiaries that interact with regulators or regulated companies). Again,
it is expected that the individual companies will maintain their own corporate
and accounting group with SCANA Service providing advice and assistance on
accounting matters, including the development of accounting practices,
procedures and controls, the preparation and analysis of financial reports and
the filing of financial reports with regulatory bodies, on a system-wide basis.
j. Information System Services.
SCANA Service will offer to provide the system with organization and
resources for the operation of centralized information services, including the
operation of centralized data processing facilities and the management of a
telecommunications network. These services include the mainframe service bureau,
which will operate and maintain the centralized mainframe for the system; the
DMIS (distributed management information system) service bureau which supports
the system's internal accounting and work management software; the PC service
bureau and telecommunications. While the system's mainframe will be transferred
to SCANA Service, the individual software applications developed at the
utilities will remain property of the utility, and, as discussed in more detail
below, will be licensed for use by other system companies and supported by SCANA
Service personnel.
k. Executive Staff.
The members of SCANA's executive staff will work through SCANA Service to
assist system companies in the formulation and execution of general plans and
policies, including operations, issuances of securities, appointment of
executive personnel, budgets and financing
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plans, expansion of services, acquisitions and dispositions of property, public
relationships and other related matters.
l. Corporate Services.
SCANA Service will offer system companies corporate services that can most
efficiently be provided or coordinated on a system-wide basis, including
shareholders' services, security, mail services, corporate secretary functions,
communications, public affairs, purchasing and customer services, remittance
processing, billing, facilities management for the offices owned by system
companies and aviation services for efficient transportation of company
personnel. In this capacity, SCANA Service will offer customer call center
operations services to system companies. Individual system companies may
maintain separate public relations operations with SCANA Service providing them
with overall strategic advice and coordination assistance.
m. Human Resources.
SCANA Service will offer to assist system companies in developing employee
relations policies and programs and to provide personnel training in a
coordinated manner across the SCANA system. Each individual system company may
maintain a human resources group to handle the individualized application of the
policies and programs. SCE&G intends to transfer ownership in the employee
service center located in Georgetown, South Carolina to SCANA Service to further
its human resources function.
In accordance with the Services Agreement, services provided by SCANA
Service will be directly assigned if possible or allocated as necessary by
activity, project, program, work order or other appropriate basis. To accomplish
this, employees of SCANA Service will record transactions utilizing the DMIS
data capture and accounting system currently in place at SCANA. Costs of SCANA
Service will be accumulated in accounts and directly assigned if possible or
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allocated as necessary to the appropriate system company in accordance with the
guidelines set forth in the Services Agreement (Exhibit C-1). It is anticipated
that SCANA Service will be staffed primarily by transferring personnel from
SCANA, SCE&G and PSNC. SCANA Service's accounting and cost allocation methods
and procedures are structured so as to comply with the Commission's standards
for service companies in registered holding company systems. SCANA Service's
billing system will use the "Uniform System of Accounts for Mutual Service
Companies" established by the Commission for holding-company systems, as may be
adjusted to use the FERC uniform system of accounts. Exhibit C-2 discusses the
system and procedures that will be used to implement the Services Agreement.
As compensation for services, the Services Agreement will provide for the
client companies to "pay to SCANA Service the cost of such services, computed in
accordance with the applicable rules and regulations (including, but not limited
to Rules 90 and 91) under the Act and appropriate accounting standards." Where
more than one company is involved in or has received benefits from a service
performed, the Services Agreement will provide that client companies will pay
their fairly allocated pro rata share in accordance with the methods set out in
a schedule to the Services Agreement. Thus, charges for all services provided by
SCANA Service to affiliated utility companies and non-utility companies will be
on an "at cost" basis as determined under Rules 90 and 91 of the Act.
No change in the organization of SCANA Service, the type and character of
the companies to be serviced, the methods of allocating cost to associate
companies, or in the scope or character of the services to be rendered subject
to Section 13 of the Act, or any rule, regulation or order thereunder, shall be
made unless and until SCANA Service shall first have given the commission
written notice of the proposed change not less than 60 days prior to the
proposed
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effectiveness of any such change. If, upon the receipt of any such notice, the
Commission shall notify SCANA Service within the 60-day period that a question
exists as to whether the proposed change is consistent with the provisions of
Section 13 of the Act, or of any rule, regulation or order thereunder, then the
proposed change shall not become effective unless and until SCANA Service shall
have filed with the Commission an appropriate declaration regarding such
proposed change and the Commission shall have permitted such declaration to
become effective.
SCANA will structure the Services Agreement so as to comply with Section 13
of the Act and the Commission's rules and regulations thereunder.
Rule 88 (b) provides that "(a) finding by the commission that a subsidiary
company of a registered holding company . . . is so organized and conducted, or
is to be so conducted, as to meet the requirements of Section 13(b) of the Act
with respect to reasonable assurance of efficient and economical performance of
services or construction or sale of goods for the benefit of associate
companies, at cost fairly and equitably allocated among them (or as permitted by
(Rule 90), will be made only pursuant to a declaration filed with the Commission
on Form U-13-1, as specified in the instructions for that form, by such company
or the persons proposing to organize it." Notwithstanding the foregoing
language, the Commission has on at least two recent occasions made findings
under Section 13(b) based on information set forth in an application on Form
U-1, without requiring the formal filing on a Form U-13-1. See Unitil Corp., 51
SEC Docket 562 (Apr. 24, 1992); CINergy Corp., 57 SEC Docket 2353 (Oct. 21,
1994). In this Application, SCANA has submitted substantially the same
application information as would have been submitted in a Form U-13-1.
Accordingly, it is submitted that it is appropriate to find that SCANA
Service will be so organized and shall be so conducted as to meet the
requirements of Section 13(b), and that
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the filing of a Form U-13-1 is unnecessary, or, alternatively, that this
Application should be deemed to constitute a filing on Form U-13-1 for purposes
of Rule 88.
2. Other Services
SCE&G, PSNC and other associate companies of SCANA request authorization to
enter, from time to time, into leases of office or other space with other
associate companies. Any such lease will comply with the requirements of Rules
87, 90 and 91. See Central Power & Light Company, Holding Co. Act Release No.
26408 (Nov. 13, 1995).
SCE&G, GENCO and PSNC may also provide to one another services incidental
to their utility businesses such as maintenance and emergency repairs and the
services of personnel with specialized expertise. These services will be
provided at cost in accordance with the standards of the Act and Rules 87, 90
and 91 thereunder.
As indicated above, because the Utility Subsidiaries will retain ownership
of software they have developed or that involve some form of license agreement
with third parties, other system companies will enter into license agreements to
use this software. These license agreements will be structured in accordance
with the requirements of Rules 87, 90 and 91.
In addition, it is expected that SCE&G will transfer title to the system
mainframe computer and the employee training center in Georgetown, South
Carolina to SCANA Service to facilitate the provision of efficient coordinated
services.
Finally, SCANA Fuel Company, Inc. ("SCANA Fuel") acquires, owns and
provides financing to SCE&G's nuclear fuel, fossil fuel and sulfur dioxide
emission allowance requirements. SCANA Fuel enters into contracts with SCE&G to
provide these fuel-related services to SCE&G. These services are provided "at
cost" as determined under Rules 90 and 91 of the Act.
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G. Direct Stock Purchase and Dividend Reinvestment Plan, Incentive
Compensation Plans and other Employee Benefit Plans
SCANA proposes, from time to time during a period of five years from the
date of an Order issued by the Commission, to issue and/or acquire in open
market transactions or by some other method which complies with applicable law
and Commission interpretations then in effect up to 13.6 million shares of SCANA
common stock under SCANA's direct stock purchase and dividend reinvestment plan,
certain incentive compensation plans and certain other employee benefit plans
described below.
1. Direct Investment and Dividend Reinvestment Plan
SCANA maintains a dividend reinvestment plan with a direct stock purchase
feature called the SCANA Investor Plus Plan ("SCANA Investor Plus"). SCANA
Investor Plus will remain in effect following consummation of the Merger. Upon
consummation of the Merger, PSNC will terminate its dividend reinvestment plan
and participants in the PSNC plan will be eligible to become participants in
SCANA Investor Plus.
Set forth below is a description of the principal terms of SCANA Investor
Plus:
SCANA Investor Plus offers shareholders the opportunity to buy, hold and
sell shares of SCANA Corporation common stock. Any United States resident may
purchase shares through this plan. Residents of some states will receive SCANA's
information from a registered broker-dealer. The minimum initial investment is
$250 for the purchase of shares by a person who is not currently a SCANA or
SCE&G shareholder. Additional cash payments may be sent to SCANA. SCANA's
minimum cash investment amount is $25 and the maximum is $100,000 in a calendar
year. On February 1, 1997, SCANA began purchasing shares for this plan on the
open market. The current commission charge for purchasing shares is $.06 per
share. The Plan purchases shares twice a month - usually on the 1st and 15th.
All cash must be received at least
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two business days prior to a purchase date. Cash received and reinvested
dividends are sent to the Plan's custodian (currently Merrill Lynch) on the
purchase date. Plan shares are sold through the custodian weekly at a current
commission charge of $.18 per share. A statement is sent each time there is
activity in a shareholder's account.
SCANA Investor Plus currently acquires shares in the open market. All cash
received for this Plan is used to buy shares for Plan participants.
The total number of shares issued under this plan in 1998 was 720,154.
A full statement of the current provisions of SCANA Investor Plus is
included in SCANA's Registration Statement on Form S-3 (Exhibit E-1 hereto).
2. Employee Stock-Based Plans
(a) SCANA currently maintains the following employee stock-based plans:
SCANA Stock Purchase Savings Plan, SCANA Non-Employee Directors Plan and SCANA
Performance Share Plan (the "SCANA Plans"). PSNC currently maintains several
employee stock-based plans including the 1997 Nonqualified Stock Option Plan and
Employee Stock Purchase Plan (collectively, the "PSNC Plans"). The SCANA Plans
will remain in effect following consummation of the Merger. At the election of
SCANA, one of the following things will happen with respect to the PSNC Plans
immediately following consummation of the Merger:
o SCANA and PSNC will take such action as may be necessary so that the
PSNC Plans will provide for the issuance only of SCANA common stock
and, with respect to outstanding options and/or awards, provide that
the holder thereof shall be entitled to a number of shares of SCANA
common stock, equal to the number such holder would have received if
such option
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or award has been exercised prior to consummation of the Merger, with
appropriate adjustments to the exercise price; or
o PSNC shall use its best efforts to take all actions necessary and
appropriate to provide that each outstanding option to purchase shares
of PSNC Common Stock or other similar interest (collectively, the
"PSNC Options") granted under any of the PSNC Plans, whether or not
then exercisable or vested, shall be cancelled and, in exchange
therefor, each holder of such PSNC Option shall receive an amount in
cash in respect thereof as set forth in the Merger Agreement.
Set forth below is a summary of certain features of each of the SCANA
Plans, which summary is qualified by reference to each such plan (Exhibits E-2,
E-3 and E-4 hereto):
(b) SCANA Stock Savings Plan. Employees 18 years of age or more may
participate in this plan and save up to 15% of their base salary on a pre-tax
(401(K)) or after-tax basis. Employee investment choices currently include SCANA
common stock or money market funds. Employees are fully vested in the amounts
they contribute to the plan. SCANA will match up to 6% of the employee's
contribution, with the SCANA contribution being shares of SCANA common stock.
The SCANA contribution may not be withdrawn for two years following the year of
contribution if the employee has less than five years of service with SCANA.
Employees can make contribution rate changes once every 120 days and can change
from pre-tax to after-tax (and vice versa) annually.
(c) SCANA Non-Employee Directors Plan. The purpose of this plan is to
promote the achievement of long-term objectives of SCANA by linking the personal
interest of eligible directors, non-employee individuals who are members of
SCANA's Board of Directors, to
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those of SCANA's shareholders and to attract and retain eligible directors of
outstanding competence by mandating that each quarter 41% of the retainer fees
of each participant be paid in SCANA common stock. This plan is a compensation
plan pertaining only to said 41% of each participant's retainer fee and is not a
pension or welfare benefit plan and is not a deferred compensation plan. SCANA
common stock is purchased for this plan on the first day of each quarter as the
quarterly retainer fees are paid. Shares are currently purchased through open
market transactions. The total number of shares issued from this plan in 1998
was 2,940. The average number of shares issued annually in 1997 and 1998 was
2,784.
(d) SCANA Performance Share Plan. SCANA's Performance Share Plan pays
bonuses to executives based on SCANA's Total Shareholder Return ("TSR") relative
to a group of peer companies over a three-year period. The peer group includes
84 electric and gas utilities, none of which has annual revenues of less than
$100 million.
TSR is the stock price increase over the three-year period plus cash
dividends paid during the period, divided by stock price as of the beginning of
the period. Comparing SCANA's TSR to the TSR of a large group of other utilities
reflects SCANA's recognition that investors could have invested their funds in
other utility companies and measures how well SCANA did when compared to others
operating in similar interest, tax, economic and regulatory environments.
Executives selected to participate in the Performance Share Plan are
assigned target awards at the beginning of each three-year period based
primarily on salary level, level of responsibilities and competitive practices.
Awards under this plan represent a significant portion of executives' "at-risk"
compensation. To provide additional incentive for executives, and to ensure that
executives are only rewarded when shareholders gain, actual payouts may exceed
the
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median of the market only when performance is above the 50th percentile of the
peer group. For lesser performance, awards will be at or below the market
median.
Payouts occur when SCANA's TSR is in the top two-thirds of the peer group
and vary based on SCANA's ranking against the peer group. Executives earn
threshold payouts of 0.4 times target at the 33rd percentile of three-year
performance. Target payouts will be made at the 50th percentile of three-year
performance. Maximum payouts will be made at 1.5 times target when SCANA's TSR
is at or above the 75th percentile of the peer group. No payouts will be earned
if performance is at less than the 33rd percentile. Awards may be paid in stock
or cash or a combination of stock and cash.
The total number of shares issued from the plan in 1998 was 20,021. The
average number of shares issued annually in 1997 and 1998 was 26,285.
H. Tax Allocation Agreement
The Applicants ask the Commission to approve an agreement for the
allocation of consolidated tax among SCANA and the Subsidiaries (the "Tax
Allocation Agreement"). Approval is necessary because the Tax Allocation
Agreement provides for the retention by SCANA of certain payments for tax losses
that it has incurred, rather than the allocation of such losses to Subsidiaries
without payment as would otherwise be required by Rule 45(c)(5). Exhibit K-1 is
a copy of the proposed Tax Allocation Agreement.
Provisions in a tax allocation agreement between a registered holding
company and its subsidiaries must comply with Section 12 of the Act and Rule 45
thereunder. Rule 45(a) of the Act generally prohibits any registered holding
company or subsidiary company from, directly or indirectly, lending or in any
manner extending its credit to or indemnifying, or making any donation or
capital contribution to, any company in the same holding company system, except
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pursuant to a Commission order. Rule 45(c) provides that no approval is required
for a tax allocation agreement between eligible associate companies in a
registered holding company system, that "provides for allocation among such
associate companies of the liabilities and benefits arising from such
consolidated tax return for each tax year in a manner not inconsistent with" the
conditions of the rule. Of interest here, Rule 45(c)(5) provides that:
The agreement may, instead of excluding members as provided in
paragraph (c)(4), include all members of the group in the tax
allocation, recognizing negative corporate taxable income or a
negative corporate tax, according to the allocation method chosen. An
agreement under this paragraph shall provide that those associate
companies with a positive allocation will pay the amount allocated and
those subsidiary companies with a negative allocation will receive
current payment of their corporate tax credits. The agreement shall
provide a method for apportioning such payments, and for carrying over
uncompensated benefits, if the consolidated loss is too large to be
used in full. Such method may assign priorities to specified kinds of
benefits. (Emphasis added.)
Under the rule, only "subsidiary companies," as opposed to "associate companies"
(which includes the holding company in a holding company system), are entitled
to be paid for corporate tax credits. However, if a tax allocation agreement
does not fully comply with the provisions of Rule 45(c), it may nonetheless be
approved by the Commission under Section 12(b) and Rule 45(a).
In connection with the 1981 amendments to Rule 45, the Commission explained
that the distinction between associate companies, on the one hand, and
subsidiary companies, on the other, represented a policy decision to preclude
the holding company from sharing in consolidated return savings. The Commission
noted that exploitation of utility companies by
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holding companies through the misallocation of consolidated tax return benefits
was among the abuses examined in the investigations underlying the enactment of
the 1935 Act. Holding Co. Act Release No. 21968 (March 25, 1981), citing Sen.
Doc. 92, Part 72A, 70th Congress, 1st Sess. at 477-482. It must be noted,
however, that the result in Rule 45(c)(5) is not dictated by the statute and, as
the Commission has recognized, there is discretion on the part of the agency to
approve tax allocation agreements that do not, by their terms, comply with Rule
45(c) -- so long as the policies and provisions of the Act are otherwise
satisfied. In this matter, where the holding company is seeking only to receive
payment for tax losses that have been generated by it, the proposed arrangement
will not give rise to the types of problems (e.g., upstream loans) that the Act
was intended to address. Compare Section 12(a) of the Act.
As a result of the Merger, SCANA will be creating tax credits that are
non-recourse to the Subsidiaries. As a result, SCANA should retain the benefits
of those tax credits. Accordingly, the Applicants request that the Commission
approve the Tax Allocation Agreement.
I. Filing of Certificates of Notification
It is proposed that, with respect to SCANA, the reporting systems of the
Securities Exchange Act of 1934, as amended (the "1934 Act") and the 1933 Act be
integrated with the reporting system under the Act. This would eliminate
duplication of filings with the Commission that cover essentially the same
subject matters, resulting in a reduction of expense for both the Commission and
SCANA. To effect such integration, the portion of the 1933 Act and 1934 Act
reports containing or reflecting disclosures of transactions occurring pursuant
to the authorization granted in this proceeding would be incorporated by
reference into this proceeding through Rule 24 certificates of notification. The
certificates would also contain all other information required by Rule 24,
including the certification that each transaction being reported on had been
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carried out in accordance with the terms and conditions of and for the purposes
represented in this Application/Declaration. Such certificates of notification
would be filed within 60 days after the end of the last calendar quarter, in
which transactions occur.
The Rule 24 certificates will contain the following information:
a. If sales of common stock or debt by SCANA are reported, the purchase
price per share and the market price per share at the date of the
agreement of sale;
b. The total number of shares of SCANA common stock issued or issuable
pursuant to options granted during the quarter under employee benefit
plans and dividend reinvestment plans including any employee benefit
plans or dividend reinvestment plans hereinafter adopted;
c. If SCANA common stock has been transferred to a seller of securities
of a company being acquired, the number of shares so issued, the value
per share and whether the shares are restricted in the hands of the
acquiror;
d. If a guarantee is issued during the quarter, the name of the
guarantor, the name of the beneficiary of the guarantee and the
amount, terms and purpose of the guarantee;
e. The amount and terms of any short-term debt issued by any Utility
Subsidiary during the quarter;
f. The amount and terms of any financings consummated by any Utility
Subsidiary that are not exempt under Rule 52;
g. The amount and terms of any financings consummated by any Non-Utility
Subsidiary during the quarter that are not exempt under Rule 52;
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h. A list of U-6B-2 forms filed with the Commission during the quarter,
including the name of the filing entity and the date of filing;
i. Consolidated balance sheets as of the end of the quarter and separate
balance sheets as of the end of the quarter for each company,
including SCANA, that has engaged in jurisdictional financing
transactions during the quarter; and
j. Future registration statements filed under the 1933 Act with respect
to securities that are subject of the Application/Declaration will be
filed or incorporated by reference as exhibits to the next certificate
filed pursuant to Rule 24.
J. Statement Pursuant to Rule 54
Rule 54 promulgated under the Act states that in determining whether to
approve the issue or sale of a security by a registered holding company for
purposes other than the acquisition of an exempt wholesale generator ("EWG") or
foreign utility company ("FUCO"), or other transactions by such registered
holding company or its subsidiaries other than with respect to EWGs or FUCOs,
the Commission shall not consider the effect of the capitalization or earnings
of any subsidiary which is an EWG or FUCO upon the registered holding company
system if Rules 53(a), (b) and (c) are satisfied. SCANA does not, and after the
Merger will not, retain any EWGs or FUCOs. Therefore, Rules 53(a), (b) and (c)
are satisfied.
Item 2. Fees, Commissions and Expenses
Estimated Legal Fees and Expenses $ 35,000
Estimated Miscellaneous Expenses 5,000
--------
Total $ 40,000
Item 3. Applicable Statutory Provisions
Sections 6(a), 7, 9(a), 10, 12 and 13 of the Act and Rules 42, 43, 45, 52,
54 and 88 are considered applicable to the proposed transactions.
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To the extent that the proposed transactions are considered by the
Commission to required authorization, exemption or approval under any section of
the Act or the rules and regulations other than those set forth above, request
for such authorization, exemption or approval is hereby made.
Item 4. Regulatory Approvals
The SCPSC has jurisdiction over issuances of securities by SCE&G and GENCO,
other than securities payable within one year of the date of issuance or the
renewal of short-term obligations for a two-year or shorter period. The NCUC has
jurisdiction over issuances of securities by PSNC, other than the issuance of
notes with a maturity of two years or less or renewals thereof for a six-year or
shorter period.
Except as stated above, no state or federal regulatory agency other than
the Commission under the Act has jurisdiction over the proposed transactions.
Item 5. Procedure
The Applicants hereby request that there be no hearing on this
Application/Declaration and that the Commission issue its order as soon as
practicable after the filing hereof. On August 31, 1999, the Commission issued
and published the requisite notice under Rule 23 with respect to this
Application/Declaration; such notice specifying September 27, 1999 as the date
by which comments may be entered and the date on which an order of the
Commission granting and permitting the Application/Declaration to become
effective may be entered by the Commission. On September 24, 1999, an
intervention was filed with the Commission by Paul S. Davis. The Applicants
response thereto is filed herewith as Exhibit L-1.
The Applicants hereby (i) waive a recommended decision by a hearing
officer, (ii) waive a recommended decision by any other responsible officer or
the Commission, (iii) consent
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that the Division of Investment Management may assist in the preparation of the
Commission's decision and (iv) waive a 30-day waiting period between the
issuance of the Commission's order and the date on which it is to become
effective.
Item 6. Exhibits and Financial Statements
Exhibits
A-1 Restated Articles of Incorporation of SCANA as adopted on April 26,
1989 (Filed with the Commission as Exhibit 3-A to Registration
Statement No. 33-49145 and incorporated by reference herein).
A-2 Articles of Amendment of SCANA, dated April 27, 1995 (Filed with the
Commission as Exhibit 4-B to Registration Statement No. 33-62421 and
incorporated by reference herein).
A-3 By-Laws of SCANA as revised and amended on December 17, 1997 (Filed
with the Commission as Exhibit 3-C to Form 10-K for the year ended
December 31, 1997 and incorporated by reference herein).
B-1 Amended and Restated Agreement and Plan of Merger, dated as of
February 16, 1999 and amended and restated as of May 10, 1999, by and
among PSNC, SCANA, New Sub I, Inc. and New Sub II, Inc. (Filed with
the Commission as Exhibit 10 to Form 8-K filed on May 14, 1999 and
incorporated by reference herein).
C-1 Form of Services Agreement between SCANA Service and each Subsidiary
(Previously filed).
C-2 Service Company Policy and Procedures (To be filed by amendment).
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D-1 SCANA Indenture (Filed with the Commission as Exhibit 4A to SCANA's
Registration Statement No. 33-32107 and incorporated by reference
herein).
E-1 SCANA Investor Plus Plan (Filed with the Commission by Registration
Statement No. 333-86803 and incorporated by reference herein).
E-2 SCANA Stock Purchase Savings Plan (Filed with the Commission as
Exhibit 4.3 to SCANA's Registration Statement No. 333-44885 and
incorporated by reference herein).
E-3 SCANA Non-Employee Directors Plan (Filed with the Commission as
Exhibit 4.3 to SCANA's Registration Statement No. 333-18973 and
incorporated by reference herein).
E-4 SCANA Performance Share Plan (Filed with the Commission as Exhibit
10.01(e) to Registration Statement No. 333-86803 and incorporated by
reference herein).
F-1 Opinion of counsel.
G-1 Annual Report of SCANA on Form 10-K for the year ended December 31,
1998 (Filed with the Commission on March 18, 1999 and amended on April
27, 1999 and incorporated by reference herein).
G-2 Quarterly Report of SCANA on Form 10-Q for the period ended March 31,
1999 (Filed with the Commission on May 17, 1999 and incorporated by
reference herein).
G-3 Quarterly Report of SCANA on Form 10-Q for the period ended June 30,
1999 (Filed with the Commission on August 13, 1999 and incorporated by
reference herein).
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G-4 Quarterly Report of SCANA on Form 10-Q for the period ended September
30, 1999 (Filed with the Commission on November 15, 1999 and
incorporated by reference herein).
G-5 Annual Report of PSNC on Form 10-K for the fiscal year ended September
30, 1998 (Filed with the Commission on December 21, 1998 and
incorporated by reference herein).
G-6 Quarterly Report of PSNC on Form 10-Q for the period ended December
31, 1998 (Filed with the Commission on February 12, 1999 and
incorporated by reference herein).
G-7 Quarterly Report of PSNC on Form 10-Q for the period ended March 31,
1999 (Filed with the Commission on May 14, 1999 and incorporated by
reference herein).
G-8 Quarterly Report of PSNC on Form 10-Q for the period ended June 30,
1999 (Filed with the Commission on August 13, 1999 and incorporated by
reference herein).
H-1 Proposed Form of Notice (Previously filed).
I-1 Description of Existing Financing Arrangements and Orders - Utility
Subsidiaries (Previously filed).
I-2 Description of Existing Financing Arrangements - Non-Utility
Subsidiaries (Previously filed).
J-1 Form of Utility Money Pool Agreement.
J-2 Form of Non-Utility Money Pool Agreement.
J-3 Form of Utility Money Pool Promissory Note.
J-4 Form of Non-Utility Money Pool Promissory Note.
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K-1 Form of Tax Allocation Agreement (Previously filed).
L-1 Applicants Response to Intervention of Paul S. Davis (Filed with the
Commission as Exhibit J-2 to SCANA's U-1 File No. 70-9521 and
incorporated by reference herein).
Financial Statements
FS-1 SCANA Unaudited Pro Forma Condensed Consolidated Balance Sheet
(Previously filed).
FS-2 SCANA Unaudited Pro Forma Condensed Consolidated Statement of Income
and Cash Flow (Previously filed).
FS-3 Notes to SCANA Unaudited Pro Forma Condensed Consolidated Financial
Statements (Previously filed).
FS-4 SCANA Consolidated Balance Sheet as of March 31, 1999 (included in
Exhibit G-2).
FS-5 SCANA Consolidated Statement of Income as of March 31, 1999 (included
in Exhibit G-2).
FS-6 SCANA Consolidated Balance Sheet as of June 30, 1999 (included in
Exhibit G-3).
FS-7 SCANA Consolidated Statement of Income as of June 30, 1999 (included
in Exhibit G-3).
FS-8 SCANA Consolidated Balance Sheet as of September 30, 1999 (included in
Exhibit G-4).
FS-9 SCANA Consolidated Statement of Income as of September 30, 1999
(included in Exhibit G-4).
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FS-10 PSNC Consolidated Balance Sheet as of December 31, 1999 (included in
Exhibit G-6).
FS-11 PSNC Consolidated Statement of Income as of December 31, 1998
(included in Exhibit G-6).
FS-12 PSNC Consolidated Balance Sheet as of March 31, 1999 (included in
Exhibit G-7).
FS-13 PSNC Consolidated Statement of Income as of March 31, 1999 (included
in Exhibit G-7).
FS-14 PSNC Consolidated Balance Sheet as of June 30, 1999 (included in
Exhibit G-8).
FS-15 PSNC Consolidated Statement of Income as of June 30, 1999 (included
in Exhibit G-8).
Item 7. Information as to Environmental Effects
The proposed transaction involves neither a "major federal action" nor
"significantly affects the quality of the human environment" as those terms are
used in Section 102(2)(C) of the National Environmental Policy Act, 42 U.S.C.
Sec. 4321 et seq. No federal agency is preparing an environmental impact
statement with respect to this matter.
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SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, the Applicants have duly caused this Pre-effective Amendment No. 1 to the
Application/ Declaration to be signed on its behalf by the undersigned thereunto
duly authorized.
Date: December 2, 1999 SCANA CORPORATION
/s/ H. Thomas Arthur, II
----------------------------
Name: H. Thomas Arthur, II
Title: Senior Vice-President
and General Counsel
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EXHIBIT F-1
SCANA Corporation
1426 Main Street
Columbia, South Carolina 29201
December 1, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: SCANA Corporation
SEC File Number File No. 70-9533
Ladies and Gentlemen:
I refer to the Application/Declaration on Form U-1 (File No. 70-9533), as
amended (the "Application/Declaration"), under the Public Utility Holding
Company Act of 1935, as amended (the "Act"), filed jointly by SCANA Corporation
("SCANA") and its subsidiary companies, South Carolina Electric and Gas Company
("SCE&G"), South Carolina Generating Company, Inc. ("GENCO"), Public Service
Company of North Carolina, Incorporated ("PSNC" and together with SCE&G and
GENCO, the "Utility Subsidiaries"), South Carolina Fuel Company, Inc., South
Carolina Pipeline Corporation, SCANA Energy Marketing Inc., SCANA
Communications, Inc., Servicecare Inc., Primesouth, Inc., SCANA Resources
Development Corporation, SCANA Petroleum Resources, Inc. and SCANA Service
Company ("SCANA Service"), Sonat Public Service Company LLC, Clean Energy
Enterprises, Cardinal Pipeline Company, LLC, Pine Needle LNG Company, LLC, PSNC
Blue Ridge Corporation, PSNC Cardinal Pipeline Company and PSNC Production
Corporation (the "Non-Utility Subsidiaries" and together with the Utility
Subsidiaries, the "Subsidiaries"), with the Securities and Exchange Commission
(the "Commission") with respect to the proposed transactions described therein
(the "Proposed Transactions"). The authorization requested in the
Application/Declaration relates to (i) (a) external issuances by SCANA of common
stock, long-term debt, short-term debt, and other securities for cash, (b) the
entering into by SCANA of transactions to manage interest rate risk ("hedging
transactions"); (ii) issuances of debt securities (including commercial paper)
and the entering into of hedging transactions by the Utility Subsidiaries to the
extent not exempt pursuant to Rule 52; (iii) issuances by Non-Utility
Subsidiaries of debt securities which are not exempt pursuant to Rule 52; (iv)
the establishment of a utility money pool (the "Utility Money Pool") and a
non-utility money pool (the "Non- Utility Money Pool") and the operation of the
Utility Money Pool; (v) the issuance of intra-
<PAGE>
system guarantees by SCANA on behalf of the Subsidiaries; (vi) the ability of
wholly owned Subsidiaries to alter their capital stock, subject, in the case of
Utility Subsidiaries, to the approval of a state utility commission in a state
where the utility is incorporated and doing business; (vii) the ability of PSNC
and its Subsidiaries to pay dividends out of capital or unearned surplus; and
(viii) the formation of financing entities and the issuance by such entities of
securities otherwise authorized to be issued and sold pursuant to the
Application/Declaration or pursuant to applicable exemptions under the Act,
including intra-system guarantees of such securities and the retention of
existing financing entities, (c) (i) the designation of SCANA Service as a
subsidiary service company in accordance with the provisions of Rule 88 of the
Act and (ii) the Service Agreement as a basis for SCANA Service to comply with
Section 13 of the Act and the Commission's rules thereunder, and (d) the
approval of an agreement for the allocation of consolidated tax among SCANA and
the Subsidiaries.
I am General Counsel of SCANA and, as such, I am familiar with the
corporate proceedings taken by SCANA in connection with the Proposed
Transactions. I have examined originals or copies, certified or otherwise
identified to my satisfaction, of such records of SCANA and its Subsidiaries and
such other documents, certificates and corporate or other records as I have
deemed necessary or appropriate as a basis for the opinions set forth herein. In
my examination, I have assumed the genuineness of all signatures, the legal
capacity of all persons, the authenticity of all documents submitted to me as
originals, the conformity to original documents of documents submitted to me as
copies and the authenticity of the originals of such latter documents.
The opinions expressed below with respect of the Proposed Transactions are
subject to the following additional assumptions and conditions:
(a) Any regulatory approvals required with respect to the Proposed
Transactions shall have been obtained and remain in full force and effect.
(b) The Proposed Transactions shall have been duly authorized and approved,
to the extent required by the applicable governing corporate documents and
applicable state laws and by the Board of Directors of SCANA or of the
appropriate Subsidiary, as the case may be.
(c) The Commission shall have duly entered an appropriate order or orders
with respect to the Proposed Transactions as described in the
Application/Declaration granting and permitting the Application/Declaration to
become effective under the Act and the rules and regulations thereunder, and the
Proposed Transactions shall have been consummated in accordance with the
Application/Declaration.
(d) Registration statements with respect to the shares of SCANA common
stock to be issued in connection with the Proposed Transactions shall have
become effective pursuant to the Securities Act of 1933, as amended; no stop
order shall have been entered with respect
2
<PAGE>
thereon; and the issuance of shares of SCANA common stock in connection with the
Proposed Transactions shall have been consummated in compliance with the
Securities Act of 1933, as amended, and the rules and regulations thereunder.
(e) The parties shall have obtained all consents, waivers and releases, if
any, required for the Proposed Transactions under all applicable governing
corporate documents, contracts, agreements, debt instruments, indentures,
franchises, licenses and permits.
(f) No act or event other than as described herein shall have occurred
subsequent to the date hereof which would change the opinions expressed above.
Based on the foregoing I am of the opinion that, in the event the Proposed
Transactions are consummated in accordance with the Application/Declaration:
1. All state laws applicable to the Proposed Transactions will have
been complied with; however, we express no opinion as to the need to comply
with state blue sky laws;
2. SCANA and each of the Subsidiaries will be validly existing as
corporations under the laws of their respective states of incorporation;
3. The equity securities to be issued by SCANA in the Proposed
Transactions will be validly issued, fully paid and nonassessable, and the
holders thereof will be entitled to the rights and privileges appertaining
thereto set forth in the applicable articles of incorporation and related
documents which define such rights and privileges;
4. The various debt instruments and guarantees to be issued by SCANA
and certain of the Subsidiaries as part of the Proposed Transactions
indicated above will be valid and binding obligations of SCANA and such
Subsidiaries in accordance with the terms of such instruments and
guarantees, subject to applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or similar laws from time to time in
effect affecting the enforceability of creditors' rights generally and to
general principles of equity (including, without limitation, concepts of
materiality, reasonableness, good faith and fair dealing) regardless of
whether considered in a proceeding in equity or at law; and
3
<PAGE>
5. The consummation of the Proposed Transactions will not violate the legal
rights of the holders of any securities issued by SCANA, the Subsidiaries or any
associate company thereof.
I hereby consent to the use of this opinion in connection with the
Application/Declaration.
Very truly yours,
/s/ H. Thomas Arthur, II, Esq.
4
EXHIBIT J-1
FORM OF
UTILITY MONEY POOL AGREEMENT
This Utility Money Pool Agreement (the "Agreement"), dated as of ______, is
made and entered into by and among SCANA Corporation ("SCANA"), a South Carolina
corporation and a registered holding company under the Public Utility Holding
Company Act of 1935, as amended (the "Act"), SCANA Service Company ("SCANA
Service"), a South Carolina corporation and a non-utility subsidiary of SCANA
(in its role as administrator of the money pool and as a participant in the
money pool), and each of the utility subsidiaries whose name appears on the
signature pages hereof (each a "Party" and collectively, the "Parties").
WITNESSETH:
WHEREAS, the Parties desire to establish a Money Pool (the "Utility Money
Pool") to coordinate and provide for certain of their short-term cash and
working capital requirements; and
WHEREAS, the utility subsidiaries that will participate in the Utility
Money Pool (each a "Subsidiary" and collectively, the "Subsidiaries") will from
time to time have need to borrow funds on a short-term basis, and certain of the
Parties will from time to time have funds available to loan on a short-term
basis;
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
covenants and provisions contained herein, the Parties hereto agree as follows:
ARTICLE I
CONTRIBUTIONS AND BORROWINGS
Section 1.01 Contributions to Utility Money Pool.
Each Party will determine each day, on the basis of cash flow projections
and other relevant factors, in such Party's sole discretion, the amount of funds
it has available for contribution to the Utility Money Pool, and will contribute
such funds to the Utility Money Pool. The determination of whether a Party at
any time has surplus funds to lend to the Utility Money Pool or shall lend funds
to the Utility Money Pool will be made by such Party's chief financial officer
or treasurer, or by a designee thereof, on the basis of cash flow projections
and other relevant factors, in such Party's sole discretion. Each Party may
withdraw any of its funds at any time upon notice to SCANA Service as
administrative agent of the Utility Money Pool.
<PAGE>
Section 1.02 Rights to Borrow.
Subject to the provisions of Section 1.04(c) of this Agreement, short-term
borrowing needs of the Parties, with the exception of SCANA, will be met by
funds in the Utility Money Pool to the extent such funds are available. Each
Party (other than SCANA) shall have the right to make short-term borrowings from
the Utility Money Pool from time to time, subject to the availability of funds
and the limitations and conditions set forth herein and in the applicable orders
of the Securities and Exchange Commission ("SEC"). Each Party (other than SCANA)
may request loans from the Utility Money Pool from time to time during the
period from the date hereof until this Agreement is terminated by written
agreement of the Parties; provided, however, that the aggregate amount of all
loans requested by any Party hereunder shall not exceed the applicable borrowing
limits set forth in applicable orders of the SEC and other regulatory
authorities, resolutions of such Party's Board of Directors, such Party's
governing corporate documents, and agreements binding upon such Party. No loans
through the Utility Money Pool will be made to, and no borrowings through the
Utility Money Pool will be made by, SCANA.
Section 1.03 Source of Funds.
(a) Funds will be available through the Utility Money Pool from the
following sources for use by the Parties from time to time: (1) surplus funds in
the treasuries of Parties other than SCANA, (2) surplus funds in the treasury of
SCANA, and (3) proceeds from bank borrowings by Parties and the sale of
commercial paper by SCANA and each other Party ("External Funds"), in each case
to the extent permitted by applicable laws and regulatory orders. Funds will be
made available from such sources in such other order as SCANA Service, as
administrator of the Utility Money Pool, may determine will result in a lower
cost of borrowing to companies borrowing from the Utility Money Pool, consistent
with the individual borrowing needs and financial standing of the Parties
providing funds to the Utility Money Pool.
(b) Borrowing Parties will borrow pro rata from each lending Party in the
proportion that the total amount loaned by such lending Party bears to the total
amount then loaned through the Utility Money Pool. On any day when more than one
fund source (e.g., surplus treasury funds of SCANA and other Utility Money Pool
participants ("Internal Funds") and External Funds), with different rates of
interest, is used to fund loans through the Utility Money Pool, each borrowing
Party will borrow pro rata from each fund source in the same proportion that the
amount of funds provided by that fund source bears to the total amount of
short-term funds available to the Utility Money Pool.
Section 1.04 Authorization.
(a) Each loan shall be authorized by the lending Party's chief financial
officer or treasurer, or by a designee thereof.
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<PAGE>
(b) SCANA Service, as administrator of the Utility Money Pool, will provide
each Party with periodic activity and cash accounting reports that include,
among other things, reports of cash activity, the daily balance of loans
outstanding and the calculation of interest charged.
(c) All borrowings from the Utility Money Pool shall be authorized by the
borrowing Party's chief financial officer or treasurer, or by a designee
thereof. No Party shall be required to effect a borrowing through the Utility
Money Pool if such Party determines that it can (and is authorized to) effect
such borrowing at lower cost directly from banks or through the sale of its own
commercial paper.
Section 1.05 Interest.
The daily outstanding balance of all loans to any Subsidiary shall accrue
interest as follows:
(a) If only Internal Funds comprise the daily outstanding balance of all
loans outstanding during a calendar month, the interest rate applicable to such
daily balances shall be the rates for high-grade unsecured 30-day commercial
paper of major corporations sold through dealers as quoted in The Wall Street
Journal (the "Average Composite").
(b) If only External Funds comprise the daily outstanding balance of all
loans outstanding during a calendar month, the interest rate applicable to such
daily outstanding balance shall be the lender's cost for such External Funds or,
if more than one Party had made available External Funds at any time during the
month, the applicable interest rate shall be a composite rate, equal to the
weighted average of the costs incurred by the respective Parties for such
External Funds.
(c) In cases where the daily outstanding balances of all loans outstanding
at any time during the month include both Internal Funds and External Funds, the
interest rate applicable to the daily outstanding balances for the month shall
be equal to the weighted average of the (i) cost of all Internal Funds
contributed by Parties, as determined pursuant to Section 1.05(a) of this
Agreement, and (ii) the cost of all such External Funds, as determined pursuant
to Section 1.05(b) of this Agreement.
(d) The interest rate applicable to Loans made by a Subsidiary to the
Utility Money Pool under Section 1.01 of this Agreement shall be the Average
Composite as determined pursuant to Section 1.05(a) of this Agreement.
Section 1.06 Certain Costs.
The cost of compensating balances and fees paid to banks to maintain credit
lines by Parties lending External Funds to the Utility Money Pool shall
initially be paid by the Party maintaining such line. A portion of such costs
shall be retroactively allocated every
-3-
<PAGE>
month to the Subsidiaries borrowing such External Funds through the Utility
Money Pool in proportion to their respective daily outstanding borrowings of
such External Funds.
Section 1.07 Repayment.
Each Subsidiary receiving a loan from the Utility Money Pool hereunder
shall repay the principal amount of such loan, together with all interest
accrued thereon, on demand and in any event within 365 days of the date on which
such loan was made. All loans made through the Utility Money Pool may be prepaid
by the borrower without premium or penalty.
Section 1.08 Form of Loans to Subsidiaries.
Loans to the Subsidiaries from the Utility Money Pool shall be made as
open-account advances, pursuant to the terms of this agreement. A separate
promissory note will not be required for each individual transaction. Instead, a
promissory note evidencing the terms of the transactions shall be signed by the
Parties to the transaction. Any such note shall: (a) be in substantially the
form filed as Exhibit J-3 to the Form U-1 Application-Declaration in File No.
70-9533 of the Commission; (b) be dated as of the date of the initial borrowing;
(c) mature on demand or on a date agreed by the Parties to the transaction, but
in any event not later than one year after the date of the applicable borrowing;
and (d) be repayable in whole at any time or in part from time to time, without
premium or penalty.
ARTICLE II
OPERATION OF UTILITY MONEY POOL
Section 2.01 Operation.
Operation of the Utility Money Pool, including record keeping and
coordination of loans, will be handled by SCANA Service under the authority of
the appropriate officers of the Parties. SCANA Service shall be responsible for
the determination of all applicable interest rates and charges to be applied to
advances outstanding at any time hereunder, shall maintain records of all
advances, interest charges and accruals and interest and principal payments for
purposes hereof, and shall prepare periodic reports thereof for the Parties.
SCANA Service will administer the Utility Money Pool on an "at cost" basis.
Separate records shall be kept by SCANA Service for the Utility Money Pool
established by this Agreement and any other money pool administered by SCANA
Service.
Section 2.02 Investment of Surplus Funds in the Utility Money Pool.
Funds not required for the Utility Money Pool loans (with the exception of
funds required to satisfy the Utility Money Pool's liquidity requirements) will
ordinarily be invested in one or more short-term investments, including (i)
interest-bearing accounts with banks; (ii) obligations issued or guaranteed by
the U.S. government and/or its agencies and instrumentalities, including
obligations under repurchase agreements; (iii) obligations issued or guaranteed
by any state or political subdivision thereof, provided that such obligations
are
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<PAGE>
rated not less than A by a nationally recognized rating agency; (iv) commercial
paper rated not less than A-1 by S&P or P-1 by Moody's, or their equivalent by a
nationally recognized rating agency; (v) money market funds; (vi) bank
certificates of deposit; (vii) Eurodollar funds; and (viii) such other
investments as are permitted by Section 9(c) of the Act and Rule 40 thereunder.
Section 2.03 Allocation of Interest Income and Investment Earnings.
The interest income and other investment income earned by the Utility Money
Pool on loans and investment of surplus funds will be allocated among the
Parties in accordance with the proportion each Party's contribution of funds in
the Utility Money Pool bears to the total amount of funds in the Utility Money
Pool and the cost of any External Funds provided to the Utility Money Pool by
such Party. Interest and other investment earnings will be computed on a daily
basis and settled once per month.
Section 2.04 Event of Default.
If any Subsidiary shall generally not pay its debts as such debts become
due, or shall admit in writing its inability to pay its debts generally, or
shall make a general assignment for the benefit of creditors, or any proceeding
shall be instituted by or against any Party seeking to adjudicate it bankrupt or
insolvent, then SCANA Service, on behalf of the Utility Money Pool, may, by
notice to the Subsidiary, terminate the Utility Money Pool's commitment to the
Subsidiary and/or declare the principal amount then outstanding of, and the
accrued interest on, the loans and all other amounts payable to the Utility
Money Pool by the Subsidiary hereunder to be forthwith due and payable,
whereupon such amounts shall be immediately due and payable without presentment,
demand, protest or other formalities of any kind, all of which are hereby
expressly waived by each Subsidiary.
ARTICLE III
MISCELLANEOUS
Section 3.01 Amendments.
Any such amendment to this Agreement shall be adopted except in a writing
executed by Parties and subject to all applicable approvals by the SEC and the
applicable state utility regulatory commission.
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<PAGE>
Section 3.02 Legal Responsibility.
Nothing herein contained shall render any Party liable for the obligations
of any other Party hereunder and the rights, obligations and liabilities of the
Parties are several in accordance with their respective obligations, and not
joint.
Section 3.03 Rules for Implementation.
The Parties may develop a set of guidelines for implementing the provisions
of this Agreement, provided that the guidelines are consistent with all of the
provisions of this Agreement.
Section 3.04 Governing Law.
This Agreement shall be governed by and construed in accordance with, the
laws of the State of South Carolina.
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officer of each Party hereto as of the date first above
written.
SCANA CORPORATION
By:
-----------------------------------
Name:
Title:
SCANA SERVICE COMPANY
By:
-----------------------------------
Name:
Title:
SOUTH CAROLINA ELECTRIC AND GAS COMPANY
By:
-----------------------------------
Name:
Title:
SOUTH CAROLINA GENERATING COMPANY, INC.
By:
-----------------------------------
Name:
Title:
PUBLIC SERVICE COMPANY OF NORTH CAROLINA
By:
-----------------------------------
Name:
Title:
Date: ________, 199__
-7-
EXHIBIT J-2
FORM OF
NON-UTILITY MONEY POOL AGREEMENT
This Non-Utility Money Pool Agreement (the "Agreement"), dated as of
________________, is made and entered into by and among SCANA Corporation
("SCANA"), a South Carolina corporation and a registered holding company under
the Public Utility Holding Company Act of 1935, as amended (the "Act"), SCANA
Service Company ("SCANA Service") (solely in the role as administrator of the
money pool), a subsidiary service company of SCANA, and each of the non-utility
subsidiaries of SCANA whose name appears on the signature pages hereof (each a
"Party" and collectively, the "Parties").
WITNESSETH:
WHEREAS, the Parties desire to establish a Money Pool (the "Non-Utility
Money Pool") to coordinate and provide for certain of their short-term cash and
working capital requirements; and
WHEREAS, the non-utility subsidiaries that will participate in the
Non-Utility Money Pool (each a "Subsidiary" and collectively, the
"Subsidiaries") will from time to time have need to borrow funds on a short-term
basis, and certain of the Parties will from time to time have funds available to
loan on a short-term basis;
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
covenants and provisions contained herein, the Parties hereto agree as follows:
ARTICLE I
CONTRIBUTIONS AND BORROWINGS
Section 1.01 Contributions to Non-Utility Money Pool.
Each Party will determine each day, on the basis of cash flow projections
and other relevant factors, in such Party's sole discretion, the amount of funds
it has available for contribution to the Non-Utility Money Pool, and will
contribute such funds to the Non-Utility Money Pool. The determination of
whether a Party at any time has surplus funds to lend to the Non-Utility Money
Pool or shall lend funds to the Non-Utility Money Pool will be made by an
appropriate officer of such Party, or by a designee thereof, on the basis of
cash flow projections and other relevant factors, in such Party's sole
discretion. Each Party may withdraw any of its funds at any time upon notice to
SCANA Service as administrative agent of the Non-Utility Money Pool.
<PAGE>
Section 1.02 Rights to Borrow.
Subject to the provisions of Section 1.04(c) of this Agreement, all
short-term borrowing needs of the Parties, with the exception of SCANA, will be
met by funds in the Non-Utility Money Pool to the extent such funds are
available. Each Party (other than SCANA) shall have the right to make short-term
borrowings from the Non-Utility Money Pool from time to time, subject to the
availability of funds and the limitations and conditions set forth herein and in
the applicable orders of the Securities and Exchange Commission. Each Party
(other than SCANA) may request loans from the Non-Utility Money Pool from time
to time during the period from the date hereof until this Agreement is
terminated by written agreement of the Parties; provided, however, that the
aggregate amount of all loans requested by any Party hereunder shall not exceed
the applicable borrowing limits set forth in applicable orders of the Securities
and Exchange Commission and other regulatory authorities, resolutions of such
Party's Board of Directors or similar governing body, such Party's governing
corporate documents, and agreements binding upon such Party. No loans through
the Non- Utility Money Pool will be made to, and no borrowings through the
Non-Utility Money Pool will be made by, SCANA.
Section 1.03 Source of Funds.
(a) Funds will be available through the Non-Utility Money Pool from the
following sources for use by the Parties from time to time: (i) surplus funds in
the treasuries of Parties other than SCANA, (ii) surplus funds in the treasury
of SCANA, and (iii) proceeds from bank borrowings by Parties and the sale by
SCANA of commercial paper ("External Sources"). Funds will be made available
from such sources in such order as SCANA Service, as administrator of the
Non-Utility Money Pool, may determine will result in a lower cost of borrowing
to companies borrowing from the Non-Utility Money Pool, consistent with the
individual borrowing needs and financial standing of the Parties providing funds
to the Non- Utility Money Pool.
(b) Borrowing Parties will borrow pro rata from each lending Party in the
proportion that the total amount loaned by such lending Party bears to the total
amount then loaned through the Non-Utility Money Pool. On any day when more than
one fund source (e.g., surplus treasury funds of SCANA and other Non-Utility
Money Pool participants ("Internal Sources") and funds from External Sources),
with different rates of interest, is used to fund loans through the Non-Utility
Money Pool, each borrowing Party will borrow pro rata from each such fund source
in the Non-Utility Money Pool in the same proportion that the amount of funds
provided by that fund source bears to the total amount of short-term funds
available to the Non-Utility Money Pool.
Section 1.04 Authorization.
(a) Each loan shall be authorized by the lending Party's chief financial
officer or treasurer, or by a designee thereof.
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<PAGE>
(b) SCANA Service, as administrator of the Non-Utility Money Pool, will
provide each Party with periodic activity and cash accounting reports that
include, among other things, reports of cash activity, the daily balance of
loans outstanding and the calculation of interest charged.
(c) All borrowings from the Non-Utility Money Pool shall be authorized by
the borrowing Party's chief financial officer or treasurer, or by a designee
thereof. No Party shall be required to effect a borrowing-through the
Non-Utility Money Pool if such Party determines that it can (and is authorized
to) effect such borrowing at lower cost directly from banks or through the sale
of its own commercial paper.
Section 1.05 Interest.
The daily outstanding balance of all loans to any Subsidiary shall accrue
interest as follows:
(a) If only Internal Funds comprise the daily outstanding balance of all
loans outstanding during a calendar month, the interest rate applicable to such
daily balances shall be the rates for high-grade unsecured 30-day commercial
paper of major corporations sold through dealers as quoted in The Wall Street
Journal (the "Average Composite").
(b) If only External Funds comprise the daily outstanding balance of all
loans outstanding during a calendar month, the interest rate applicable to such
daily outstanding balances shall be the lender's cost for such External Funds
or, if more than one Party had made available External Funds at any time during
the month, the applicable interest rate shall be a composite rate, equal to the
weighted average of the costs incurred by the respective Parties for such
External Funds.
(c) In cases where the daily outstanding balances of all loans outstanding
at any time during the month include both Internal Funds and External Funds, the
interest rate applicable to the daily outstanding balances for the month shall
be equal to the weighted average of (i) the cost of all Internal Funds
contributed by Parties, as determined pursuant to Section 1.05(a) of this
Agreement, and (ii) the cost of all such External Funds, as determined pursuant
to Section 1.05(b) of this Agreement.
(d) The interest rate applicable to Loans made by a Subsidiary to the
Non-Utility Money Pool under Section 1.01 of this Agreement shall be the Average
Composite as determined pursuant to Section 1.05(a) of this Agreement.
Section 1.06 Certain Costs.
The cost of compensating balances and fees paid to banks to maintain credit
lines by Parties lending External Funds to the Non-Utility Money Pool shall
initially be paid by the Party maintaining such line. A portion of such costs
shall be retroactively allocated every month to the Subsidiaries borrowing such
External Funds through the Non-Utility
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<PAGE>
Money Pool in proportion to their respective daily outstanding borrowings of
such External Funds.
Section 1.07 Repayment.
Each Subsidiary receiving a loan from the Non-Utility Money Pool hereunder
shall repay the principal amount of such loan, together with all interest
accrued thereon, on demand and in any event within 365 days of the date on which
such loan was made. All loans made through the Non-Utility Money Pool may be
prepaid by the borrower without premium or penalty.
Section 1.08 Form of Loans to Subsidiaries.
Loans to the Subsidiaries from the Non-Utility Money Pool shall be made as
open-account advances, pursuant to the terms of this Agreement. A separate
promissory note will not be required for each individual transaction. Instead, a
promissory grid note evidencing the terms of the transactions shall be signed by
the Parties to the transaction. Any such note shall: (a) be in substantially the
form filed as Exhibit J-4 to the Form U-1 Application-Declaration in File No.
70-9533 of the Commission; (b) be dated as of the date of the initial borrowing;
(c) mature on demand or on a date agreed by the Parties to the transaction, but
in any event not later than one year after the date of the applicable borrowing;
and (d) be repayable in whole at any time or in part from time to time, without
premium or penalty.
ARTICLE II
OPERATION OF NON-UTILITY MONEY POOL
Section 2.01 Operation.
Operation of the Non-Utility Money Pool, including record keeping and
coordination of loans, will be handled by SCANA Service under the authority of
the appropriate officers of the Parties. SCANA Service shall be responsible for
the determination of all applicable interest rates and charges to be applied to
advances outstanding at any time hereunder, shall maintain records of all
advances, interest charges and accruals and interest and principal payments for
purposes hereof, and shall prepare periodic reports thereof for the Parties.
SCANA Service will administer the Non-Utility Money Pool on either an "at cost"
basis or, in its sole discretion, on a different basis. Separate records shall
be kept by SCANA Service for the Non-Utility Money Pool established by this
Agreement and any other money pool administered by SCANA Service.
Section 2.02 Investment of Surplus Funds in the Non-Utility Money Pool.
Funds not required for the Non-Utility Money Pool loans (with the exception
of funds required to satisfy the Non-Utility Money Pool's liquidity
requirements) will ordinarily be invested in one or more short-term investments,
including (i) interest-bearing accounts with
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<PAGE>
banks; (ii) obligations issued or guaranteed by the U.S. government and/or its
agencies and instrumentalities, including obligations under repurchase
agreements; (iii) obligations issued or guaranteed by any state or political
subdivision thereof, provided that such obligations are rated not less than A by
a nationally recognized rating agency; (iv) commercial paper rated not less than
A-1 by S&P or P-1 by Moody's, or their equivalent by a nationally recognized
rating agency; (v) money market funds; (vi) bank certificates of deposit; (vii)
Eurodollar funds; and (viii) such other investments as are permitted by Section
9(c) of the Act and Rule 40 thereunder.
Section 2.03 Allocation of Investment Earnings.
The interest income and other investment income earned by the Non-Utility
Money Pool on loans and on investment of surplus funds will be allocated among
the Parties in accordance with the proportion each Party's contribution of funds
in the Non-Utility Money Pool bears to the total amount of funds in the
Non-Utility Money Pool and the cost of any External Sources provided to the
Non-Utility Money Pool by such Party. Interest and other investment earnings
will be computed on a daily basis and settled once per month.
Section 2.04 Event of Default.
If any Subsidiary shall generally not pay its debts as such debts become
due, or shall admit in writing its inability to pay its debts generally, or
shall make a general assignment for the benefit of creditors, or any proceeding
shall be instituted by or against any Party seeking to adjudicate it bankrupt or
insolvent, then SCANA Service, on behalf of the Non-Utility Money Pool, may, by
notice to the Subsidiary, terminate the Non-Utility Money Pool's commitment to
the Subsidiary and/or declare the principal amount then outstanding of, and the
accrued interest on, the loans and all other amounts payable to the Non-Utility
Money Pool by the Subsidiary hereunder to be forthwith due and payable,
whereupon such amounts shall be immediately due and payable without presentment,
demand, protest or other formalities of any kind, all of which are hereby
expressly waived by each Subsidiary.
ARTICLE III
MISCELLANEOUS
Section 3.01 Amendments.
No amendment to this Agreement shall be adopted except in a writing
executed by a duly authorized officer of each Party.
Section 3.02 Legal Responsibility.
Nothing herein contained shall render any Party liable for the obligations
of any other Party hereunder and the rights, obligations and liabilities of the
Parties are several in accordance with their respective obligations, and not
joint.
-5-
<PAGE>
Section 3.03 Rules for Implementation.
The Parties may develop a set of guidelines for implementing the provisions
of this Agreement, provided that the guidelines are consistent with all of the
provisions of this Agreement.
Section 3.04 Governing Law.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of South Carolina.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officer of each Party hereto as of the date first above
written.
SCANA CORPORATION
By:
-----------------------------------
Name:
Title:
SCANA SERVICE COMPANY
By:
-----------------------------------
Name:
Title:
SOUTH CAROLINA FUEL COMPANY, INC.
By:
-----------------------------------
Name:
Title:
-6-
<PAGE>
SOUTH CAROLINA PIPELINE CORPORATION
By:
-----------------------------------
Name:
Title:
SCANA ENERGY MARKETING INC.
By:
-----------------------------------
Name:
Title:
SCANA COMMUNICATIONS, INC.
By:
-----------------------------------
Name:
Title:
SERVICECARE INC.
By:
-----------------------------------
Name:
Title:
PRIMESOUTH, INC.
By:
-----------------------------------
Name:
Title:
SCANA RESOURCES, INC.
By:
-----------------------------------
Name:
Title:
-7-
<PAGE>
SCANA DEVELOPMENT CORPORATION
By:
-----------------------------------
Name:
Title:
SCANA PETROLEUM RESOURCES, INC.
By:
-----------------------------------
Name:
Title:
SONAT PUBLIC SERVICE COMPANY LLC
By:
-----------------------------------
Name:
Title:
CLEAN ENERGY ENTERPRISES
By:
-----------------------------------
Name:
Title:
CARDINAL PIPELINE COMPANY, LLC
By:
-----------------------------------
Name:
Title:
PINE NEEDLE LNG COMPANY, LLC
By:
-----------------------------------
Name:
Title:
-8-
<PAGE>
PSNC BLUE RIDGE CORPORATION
By:
-----------------------------------
Name:
Title:
PSNC CARDINAL PIPELINE COMPANY
By:
-----------------------------------
Name:
Title:
PSNC PRODUCTION CORPORATION
By:
-----------------------------------
Name:
Title:
Date: __________
-9-
Exhibit J-3
FORM OF NOTE TO BE EXECUTED BY
BORROWING APPLICANT TO SCANA CORPORATION
FOR VALUE RECEIVED, the undersigned, __________________ (the "Borrower"),
hereby promises to pay to the order of SCANA Corporation (the "Lender") at its
principal office in Columbia, South Carolina, on demand but in any event not
later than one year after the date of such loan, the principal sum set forth on
the grid on the reverse side hereof or attached hereto as "Principal Amount
Outstanding." This note may be prepaid in full at any time or in part from time
to time without premium or penalty. The Principal Amount Outstanding shall bear
interest, calculated daily, at a rate equal to [fill in rate]. Interest will be
calculated on the daily Principal Amount Outstanding as indicated on the grid on
the reverse side hereof or attached hereto.
--------------------
(Name of Borrower)
By:_________________
Title:______________
Date:_______________
<PAGE>
- --------------------------------------------------------------------------------
Date Loan Principal Rate Interest
(Repayment) Amount
Outstanding
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Exhibit J-4
FORM OF NOTE TO BE EXECUTED BY
BORROWING APPLICANT TO SCANA CORPORATION
FOR VALUE RECEIVED, the undersigned, __________________ (the "Borrower"),
hereby promises to pay to the order of SCANA Corporation (the "Lender") at its
principal office in Columbia, South Carolina, on demand but in any event not
later than one year after the date of such loan, the principal sum set forth on
the grid on the reverse side hereof or attached hereto as "Principal Amount
Outstanding." This note may be prepaid in full at any time or in part from time
to time without premium or penalty. The Principal Amount Outstanding shall bear
interest, calculated daily, at a rate equal to [fill in rate]. Interest will be
calculated on the daily Principal Amount Outstanding as indicated on the grid on
the reverse side hereof or attached hereto.
--------------------
(Name of Borrower)
By:_________________
Title:______________
Date:_______________
<PAGE>
- --------------------------------------------------------------------------------
Date Loan Principal Rate Interest
(Repayment) Amount
Outstanding
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
