File Nos. 70-7218
70-7113
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 33 (POST-EFFECTIVE) TO
FORM U-1 APPLICATION-DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
--------------------------
CSW CREDIT, INC.
1616 Woodall Rogers Freeway
P.O. Box 660164
Dallas, Texas 75202
CENTRAL AND SOUTH WEST CORPORATION
1616 Woodall Rogers Freeway
P.O. Box 660164
Dallas, Texas 75202
(Names of companies filing this application and
address of principal executive offices)
--------------------------
CENTRAL AND SOUTH WEST CORPORATION
(Name of top registered holding company parent)
--------------------------
Wendy G. Hargus
Treasurer
Central and South West Corporation
1616 Woodall Rogers Freeway
P.O. Box 660164
Dallas, Texas 75202
Joris M. Hogan
Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, New York 10005-1413
(Names and addresses of agents for service)
<PAGE>
Central and South West Corporation, a Delaware corporation
("CSW") and a registered holding company under the Public Utility Holding
Company Act of 1935, as amended (the "Act"), and CSW Credit, Inc., a Texas
corporation and a wholly-- owned non-utility subsidiary of CSW ("CSW Credit"),
hereby amend the Form U-1 Application-Declarations in File Nos. 70-7218 & 70--
7113 (the "Application-Declarations") in the following respects. In all other
respects the Application-Declarations as previously filed and amended will
remain the same. Item 1. Description of the Proposed Transaction.
CSW and CSW Credit hereby request, as more fully described in
subsection (2) below, a short-term, partial exemption from the 50% Restriction
(as defined below), which was imposed by previous orders of the Commission, to
permit CSW Credit to factor, through December 31, 2000, an amount up to (a) $450
million of accounts receivable of Houston Lighting & Power Company ("HLP"), plus
(b) $100 million of additional non- associate utility accounts receivable, at
any given time on a 12- month rolling monthly average basis.
(1) History
CSW owns all of the common stock of four domestic electric
operating subsidiaries, Central Power and Light Company ("CPL"), Public Service
Company of Oklahoma, Southwestern Electric Power Company and West Texas
Utilities Company (collectively, the "CSW Operating Companies"). CSW's other
subsidiaries include CSW Energy, Inc., CSW Credit, CSW Leasing, Inc., Central
and South West Services, Inc., CSW Communications, Inc., EnerShop Inc. and
SEEBOARD plc ("SEEBOARD").
<PAGE>
By order dated July 19, 1985, HCAR No. 23717; 70-7113 (the
"1985 Order"), the Commission authorized CSW to organize CSW Credit for the
purposes of factoring the accounts receivable of the CSW Operating Companies.
Pursuant to the 1985 Order, CSW Credit was authorized to borrow up to $320
million, and CSW was authorized to make equity investments in CSW Credit up to
$80 million.
By order dated July 31, 1986, HCAR No. 24157; 70-7218 (the
"1986 Order"), the Commission authorized the expansion of the scope of CSW
Credit's permissible activities to include the factoring of receivables of
non-associate utilities. To finance these transactions, the Commission
authorized CSW Credit to borrow up to an additional $160 million and permitted
CSW to make additional equity investments in CSW Credit of up to $40 million to
maintain CSW Credit's equity-to-debt capitalization ratio. The 1986 Order also
provided that CSW Credit would limit its acquisition of utility receivables from
non-associate utilities so that the average amount of such receivables for the
preceding 12-month period outstanding as of the end of any calendar month would
be less than the average amount of receivables acquired from associated
companies outstanding as of the end of each calendar month during the preceding
12 month period (the "50% Restriction").
The provisions of the 1985 Order and the 1986 Order were
extended to December 31, 1989, with specified authorized levels of borrowings
and related equity investments. HCAR No. 24575; 70-7218, 70-7113 (Feb. 8, 1988).
Specifically, the Commission authorized CSW Credit to factor accounts receivable
of non-associate gas or electric utility companies and borrow up to
<PAGE>
$320 million and $304 million to finance the factoring of associate and
non-associate receivables, respectively. CSW was authorized to make equity
investments in CSW Credit of up to an aggregate of $80 million and $76 million
in connection with the factoring of associate and non-associate receivables,
respectively. In all other respects, the previously granted authority was
extended through December 31, 1989.
By order dated December 27, 1989, HCAR No. 25009; 70- 7218 &
70-7113, the Commission authorized a reduction in the equity-to-debt
capitalization from approximately 20% to not less than 15%.
By order dated August 30, 1990, HCAR No. 25138; 70-7218 &
70-7113, the Commission authorized a further reduction in the equity-to-debt
capitalization to not less than 5%.
By order dated December 24, 1991, HCAR No. 25443; 70- 7218 &
70-7113, the Commission authorized CSW Credit to borrow up to an additional $200
million to finance the factoring of associate receivables. In all other
respects, the previously granted authority was extended through December 31,
1992.
On May 29, 1992, CSW and CPL entered into a settlement with
Houston Industries Incorporated and its subsidiary, HLP, to normalize business
relations between the two systems and to settle several disputes which had
existed between the two systems for some time. One such dispute involved
allegations by CPL that HLP breached its duties and obligations in its
performance as the project manager for the South Texas Project Electric
Generating Station. Other disputes included wheeling and transmission claims as
well as other Electric Reliability Council of Texas operating disputes that
existed not only between HLP and CPL but
<PAGE>
also between HLP and other CSW Operating Companies. For a discussion of CPL's
demand for arbitration and the litigation related to it, see "Item 1. Business
- -- South Texas Project -- HLP Arbitration" in the CPL 1991 Annual Report on Form
10-K, a copy of which is attached as Exhibit 5 hereto and incorporated herein by
reference.
As part of the normalization of business relations between the
parties, HLP and CSW Credit entered into a settlement agreement under which CSW
Credit would purchase electric utility receivables from HLP. The settlement
agreement, inter alia, provided for HLP to factor accounts receivable to CSW
Credit for a period of twelve and one-half years. Pursuant to the rate
settlement agreement entered into between CPL and the Public Utility Commission
of Texas, economic benefits of factoring HLP receivables inure to the benefit of
CPL's ratepayers. Proceeds from the factoring arrangement amortize CPL's Mirror
Construction Work in Progress ("Mirror CWIP") asset included in CPL's rate base.
As CPL's Mirror CWIP is amortized, the rates which its customers would otherwise
pay are reduced. Thus, the more HLP receivables CSW Credit factors, the greater
the economic benefit received by CPL's ratepayers through lower rates. By Order
dated December 29, 1992, HCAR No. 25720, File No. 70-8037 (the "1992 Order"),
the Commission authorized CSW Credit, among other things, to borrow up to an
additional $650 million during the twelve and one-half year term of the HLP
agreement; provided, that such borrowings were to be used to purchase accounts
receivable of HLP, subject to the 50% Restriction.
The initial version of the application in respect of
the 1992 Order also requested authorization for the factoring of
<PAGE>
HLP receivables without regard to the 50% Restriction. However, at the request
of the Commission's staff this request was withdrawn pending the outcome of
Administrative Proceeding File No. 3-7027, which is summarized below. To CSW and
CSW Credit's knowledge, this intervening event and the exceptional circumstances
surrounding the HLP settlement were never considered by the Commission in
rendering its decision in the Administrative Proceeding.
Administrative Proceeding File No. 3-7027. In 1987, CSW and
CSW Credit filed an application (the "1987 Application") requesting that CSW
Credit be allowed to factor the accounts receivable of non-associate utilities
without regard to the level of its factoring of accounts receivable of utilities
associated with CSW. To finance the proposed expansion of its business, CSW
Credit sought to borrow up to an additional $750 million pursuant to bank lines
of credit or commercial paper. Similarly, CSW requested authority to make equity
investments in CSW Credit by way of capital contributions or purchases of CSW
Credit common stock up to an additional $150 million in order to maintain CSW
Credit's then equity-to-debt capitalization ratio of 20%.
In 1989, the Commission's Chief Administrative Law Judge
issued an initial decision (the "Initial Decision") approving the 1987
Application. The Chief Administrative Law Judge found that, since CSW Credit's
factoring business satisfied the three-part test announced in Jersey Central
Power & Light Co., HCAR No. 24348 (March 18, 1987), the amount of receivables
that CSW Credit factors from non-associate utilities need not be limited to the
amount of receivables purchased from associate companies.
<PAGE>
The Division of Investment Management (the "Division")
petitioned the Commission for review of the Initial Decision. The Commission
granted the Division's petition, and in CSW Credit, Inc., et al., HCAR No. 25995
(March 2, 1994) (the "1994 Order"), the Commission ruled that the activities of
CSW Credit were not factually similar to Jersey Central and, as a result, a
majority of the business conducted by CSW Credit must be with associates.
However, despite its order upholding the 50% Restriction, the Commission
recognized the merit of CSW's request, stating that:
Approval arguably would permit CSW to benefit from economies
of scale in the factoring business, which in turn (assuming
profitable operations and an adequate return on capital) would
benefit CSW's consumers and investors; moreover, consumers and
investors of non-affiliates served by CSW Credit presumably
would also stand to benefit to some degree from lower
factoring costs.
Id. at 4. A close reading of the 1994 Order leaves the clear
impression that the Commission would be receptive to a request
for short-term relief from the 50% Restriction based upon
extraordinary facts and circumstances.
The present request for short-term relief is based upon
recent, extraordinary events that are factually distinct from the request
preceding the 1994 Order, even though the relief is related to the same
non-utility business. The HLP settlement, although made prior to the
Commission's decision in the Administrative Proceeding, to the knowledge of CSW,
was not entered into the record before the Commission and was never considered
by the Commission in rendering its decision. The present Application is based
upon factual predicates -- the HLP settlement, the Transok, Inc. ("Transok")
sale and the
<PAGE>
acquisition of SEEBOARD -- that are different from those considered in the
Administrative Proceeding and involves unique, equitable considerations.
As such, the Commission's decision in the Administrative
Proceeding is not inconsistent with granting the relief requested herein.
Moreover, the Commission expressed dissatisfaction with the perceived strictness
of the Act in the 1994 Order as set forth in the passage above and in its
subsequent report to Congress proposing repeal and administrative reform of the
Act. The present request seeks a temporary, limited exemption from the 50%
Restriction that would alleviate the harm otherwise attendant to strict
enforcement of the 50% Restriction based upon the facts and circumstances set
forth herein.
Recent events and statements by the SEC support an
interpretation of the Act, wherever reasonable, that does not hamstring the
efforts of registered holding companies to pursue worthwhile business
initiatives that are not contrary to the purposes of the Act. In this regard,
subsequent to the 1994 Order, the Department of Investment Management of the
Securities and Exchange Commission recommended repeal of the Act and, pending
repeal, administrative reform including adoption of a more flexible approach
toward diversification activities by registered holding companies. This approach
would entail, for example, a review of proposed diversification activities based
upon "the plain meaning of the statute" so that activities that are
"economically necessary or appropriate" and "not detrimental to the proper . . .
functioning of the integrated public holding company system" would be
appropriate under the Act.
<PAGE>
Due in part to the SEC Report, the period since the 1994 Order
has seen a shift toward making the Act less of an obstacle to beneficial
business initiatives of registered companies. Among other things, Congress has
amended the Act to allow registered holding companies to make investments in
exempt telecommunications companies without seeking Commission approval. In
addition, the Commission has enacted amendments to Rule 45 and Rule 52 to give
registered companies more flexibility in routine financing transactions and
making capital contributions and open account advances to their subsidiaries.
The Commission has also proposed a new partial safe harbor to facilitate
investments by registered holding companies in diversified energy-related
activities.
Thus, the present application presents extraordinary facts and
legal questions which make it inequitable to strictly enforce the 50%
Restriction upheld in the 1994 Order. As set forth below, the legal questions
presented are addressed by neither the Act nor the Commission's earlier
decisions, and the present application requests temporary relief that the
Commission has discretion to grant under the Act.
(2) Nature of Requests
(a) Factoring of HLP and additional non-associate
utility receivables
CSW and CSW Credit recognize that the 50% Restriction is the
basic criterion for evaluating whether non-utility businesses are "primarily"
serving a utility system's operations. However, the present circumstances
demonstrate that the 50% Restriction does not always fulfill its purpose of
determining whether non-utility businesses are "primarily" serving the
<PAGE>
utility system's operations because: (1) certain non-utility business cannot
fairly be categorized as either affiliate or non-affiliate; and (2) the strict
application of the 50% Restriction can produce results that are contrary to the
purposes of the Act in that it discourages a registered holding company from
pursuing actions that are pro-competitive, enhance its financial strength and
simplify its utility system.
The 50% Restriction should not be strictly applied when a
registered company takes action for reasons wholly related to, and which
completely serve, its utility operations and in which the non-utility business
is only a means of achieving those ends or is only coincidentally affected.
Similarly, the 50% Restriction should not be strictly applied where the measures
taken to avoid non-compliance may cause long-term harm to the affected
non-utility business and to the utility system.
Based upon the foregoing and as described more fully below,
CSW and CSW Credit request a temporary, partial exemption from the 50%
Restriction through December 31, 2000 to permit CSW Credit to factor an amount
up to $450 million of accounts receivable of Houston Lighting & Power Company,
plus $100 million of additional non-associate utility accounts receivable, at
any given time on a 12-month rolling monthly average basis. Temporary relief
with respect to the factoring of non-associate receivables is appropriate in
light of CSW's recent sale of Transok, which sale has resulted in a temporarily
decreased level of associate receivables. Temporary relief allowing CSW Credit
to engage in the HLP factoring transactions is consistent with the Act because
such transactions constitute an essential part of the normalization of the
business relationship between CPL and
<PAGE>
HLP and the overall settlement between the parties, and thus are "economically
necessary to, and not detrimental to the proper functioning of" the CSW system.
(i) CSW Credit's Proposed Activities Satisfy the Requirements of
Sections 10(c)(1) and 11 of the Act Because CSW Credit will
Continue to be Primarily Devoted to Serving the Operations of
the CSW System
Section 10(c)(1) of the Act provides, in relevant part,
that the Commission shall not approve "an acquisition of
securities or utility assets, or of any other interest, which is
. . . detrimental to the carrying out of the provisions of
Section 11." 15 U.S.C. Paragraph 79j(c)(1). Section 11(b)(1) makes it
the duty of the Commission:
To require . . . that each registered holding company, and
each subsidiary company thereof, shall take such action as the
Commission shall find necessary to limit the operations of the
holding-company system of which such company is a part to a
single integrated public- utility system, and to such other
businesses as are reasonable incidental, or economically
necessary or appropriate to the operations of such integrated
public-utility system.
<PAGE>
15 U.S.C. Paragraphdment No 33 79k(b)(1).
The Commission has interpreted Section 11(b) to allow the sale
or lease by registered holding company subsidiaries to non-affiliates of a
variety of types of excess capacity. "[W]hen a utility holding company has a
non-utility business that is functionally related to the utility operations and
that has capacity in excess of the requirements of its utility operations, the
excess capacity may be sold to non-affiliates, but the non- utility business
must be primarily devoted to serving the operations of the utility system." 1994
Order at 4 (citations omitted). Thus, in the 1986 Order the Commission
determined that "it was sufficient that CSW Credit's factoring business was
primarily devoted to furthering CSW's operations." Id. (citations omitted). In
this regard, the Commission stated:
None of the "excess capacity" cases specifically defines the
term "primarily." Their operative principle, however, appears
to be "that where the portion of the other business which is
functionally related to the utility operations exceeds the
portion which is not, the other business may be acquired or
retained.
Id. at 5 (quoting Jersey Central). We submit that the fact that "primarily" is
not defined is a testament to the Commission's refusal to make the 50%
Restriction an absolute sine qua non in the excess capacity context, leaving the
50% Restriction as an operative principle or guideline. Instead, the Commission
has left itself interpretive latitude to prescribe other criteria for the
satisfaction of the "primarily" clause, which criteria may either be different
tests, or additions to or exemptions from the 50% Restriction. Thus, the Act, as
interpreted by the Commission in its earlier decisions, does not address the
present request,
<PAGE>
which involves undecided issues within the Commission's interpretive authority
under the Act. CSW requests the Commission to exercise its interpretive
authority to grant CSW Credit temporary, limited exemptions from the 50%
Restriction, which exemptions will prevent inequitable harm that it would suffer
if the 50% Restriction were strictly applied in this case.
Transok. The impetus for excluding from the calculation of the
50% Restriction non-associate receivables equivalent to the amount of
receivables CSW would have factored for Transok is fundamental fairness. The Act
should not force non-utility subsidiaries of registered holding companies to
alienate a segment of their non-associate customer base whenever the volume of
associate business is temporarily reduced by divestitures or other extraordinary
events that are non-routine in nature. Put differently, a registered company
should not be discouraged from effecting divestitures that make good business
sense and are favored by the Act due to the threat of a formalistic application
of the 50% Restriction in other parts of its business.
On June 6, 1996, CSW sold Transok and used a portion of the
proceeds from the sale to repay completely the remaining recourse debt CSW had
incurred in its acquisition of SEEBOARD. Over the twelve months prior to
Transok's sale, CSW Credit factored a rolling monthly average of $87.4 million
of Transok accounts receivable. It is likely that this amount would have grown
along with Transok's business, such that the rolling monthly average of Transok
receivables factored by CSW Credit over the period of the requested relief might
well have exceeded
<PAGE>
$100 million. The sale of Transok contributed to the financial
strength of CSW and was in the spirit of sound financial
management.
Yet, due to the sale of Transok, CSW will have almost $100
million less associate receivables in the short-term and, absent the relief
requested herein, will be forced to factor $100 million less non-associate
receivables per month under the 50% Restriction. This will reduce the volume of
receivables factored by CSW Credit by twice the amount of Transok receivables
because CSW Credit will lose the Transok receivables and must turn away an equal
amount of non-associate receivables. Thus, CSW Credit will be, in effect,
punished for its sale of Transok -- a transaction supported by the underlying
purposes of the Act -- by being forced to reduce its non-associate receivables
balance to satisfy the 50% Restriction.
To avoid this unjust result, CSW Credit should be allowed to
temporarily factor non-associate utility receivables on the same basis as if it
had not sold Transok: CSW Credit should be able to factor an amount of
non-associate utility receivables equal to a reasonable estimate of Transok
receivables in addition to the non-associate receivables permitted under the 50%
Restriction. A contrary result would require a non-utility subsidiary to
temporarily refuse to factor or to sell off receivables of established
non-associate customers whenever the registered holding company makes any
significant divestiture, which could damage customer relations to such an extent
as to cause a diminution in the rest of its non-associate factoring business.
<PAGE>
Recently, CSW acquired SEEBOARD, which has the equivalent in
sterling of approximately $240 million in receivables. CSW anticipates that, in
time, CSW Credit may factor SEEBOARD receivables. However, it would not be
prudent for CSW Credit to factor SEEBOARD receivables at the present time
because it has not adequately addressed the manner in which it can insure
against currency and other risks presented by factoring the receivables of a
U.K. corporation. Thus, by failing to grant temporary relief from the 50%
Restriction, the Commission will leave CSW Credit in a position where it must
either begin factoring the SEEBOARD receivables before it would be prudent to do
so or sell off existing receivables.
For these reasons, CSW believes it is essential to obtain
short-term, temporary relief from the 50% Restriction related to a 12-month
rolling monthly average of $100 million of non-associate receivables.
HLP. The reasons for excluding the HLP receivables from the
calculation of the 50% Restriction become clear when seen in the context of the
HLP settlement with CPL. The timing of the settlement cannot be overemphasized:
the settlement was reached on May 29, 1992, while the February 23, 1989 decision
of the Administrative Law Judge in the Administrative Proceeding, stating that
the 50% Restriction did not apply to CSW Credit, was still effective. Even
though this decision had been appealed and was ultimately overturned by the
Commission, CPL and HLP reasonably believed that the form of consideration
agreed upon under the settlement agreement, namely, the factoring of HLP
receivables by CSW Credit, would not be reduced by application of
<PAGE>
the 50% Restriction. In good faith, CPL agreed to settlement arrangements
entitling CSW Credit to factor all of the HLP receivables. These settlement
arrangements were approved by the Public Utility Commission of Texas. Absent the
relief requested, the application of the 50% Restriction under the 1994 Order
will diminish the value to be received by CPL from the settlement.
The HLP settlement is, in effect, an asset of CPL. The
HLP factoring arrangement is simply an alternative method by
which HLP delivers a given level of economic benefit to CPL. CPL
receives more than $4.5 million per year from the factoring of
HLP receivables for the calculation of the amortization of the
Mirror CWIP asset for the benefit of its ratepayers. This
economic benefit of the HLP settlement is therefore functionally
equivalent to an asset that derived from the operations of CPL,
which asset was received in exchange for another asset of CPL,
its claims against HLP.
The 50% Restriction, which requires that non-utility business
be neatly separated into associate and non-associate categories, cannot be
easily applied to the HLP receivables, which do not fit into either category
because they "belong" to CPL pursuant to the HLP settlement even through they
are generated by HLP. The factoring of HLP receivables is, essentially, an asset
that springs from the operations of the CSW utility system (which, after all,
pursued the legal claims that were exchanged for the HLP receivables in the
settlement). By maximizing the value of the HLP receivables to CPL, much like it
maximizes the value of CPL receivables by processing them more efficiently, CSW
Credit is "primarily" serving the operations of
<PAGE>
the CSW utility system, and the HLP factoring transactions thus satisfy the
rationale that underlies the 50% Restriction. As the 50% Restriction does not
serve the purposes of Section 11(b)(1) in the present circumstances and as CSW
Credit's factoring of HLP receivables stems from the operations of the CSW
system and thus will not cause CSW Credit to violate the "primarily" test,
Section 11(b)(1) should permit the HLP receivables to be temporarily removed
from the calculation of the 50% Restriction so that CPL can receive the benefit
of its settlement with HLP.
In 1995, the balance of HLP receivables purchased by CSW
Credit averaged approximately $327.1 million, the balance of receivables
purchased from other non-associate utilities averaged approximately $27.7
million and the balance of receivables purchased from associate companies
averaged approximately $363.9 million. As set forth on Confidential Exhibit 6,
it is anticipated that the balance of HLP receivables to be purchased by CSW
Credit will average approximately $ ["P1"] million in 1996 and will not exceed
$450 million through December 31, 2000. CSW anticipates that the balance of
associate receivables to be purchased by CSW Credit will average approximately $
["P2"] million in 1996, dip to approximately $ ["P3"] million in 1997 due to the
loss of Transok receivables and will not exceed $ ["P4"] million through
December 31, 2000 (exclusive of any SEEBOARD receivables that CSW Credit may
factor during this period). Non-associate receivables purchased by CSW Credit
are expected to average approximately $ ["P5"] million in 1996, and it is
anticipated that the receivables from these sources will not exceed $100 million
through December 31, 2000. No additional
<PAGE>
personnel or other facilities will be required for CSW Credit to factor the HLP
receivables.
For these reasons, CSW believes it is essential to obtain
short-term, temporary relief from the 50% Restriction related to a 12-month
rolling monthly average of up to $450 million of HLP receivables.
Summary. CSW and CSW Credit therefore respectfully request
temporary relief from the 50% Restriction set forth in the Commission's previous
orders described in subsection (1) above, such as would allow CSW Credit to
factor an aggregate amount up to (a) $450 million of accounts receivable of
Houston Lighting & Power Company ("HLP"), plus (b) $100 million of additional
non-associate utility accounts receivable, at any given time, on a 12-month
rolling monthly average basis, by excluding such amount of HLP and other
non-associate utility receivables as is necessary from time to time to satisfy
the 50% Restriction.
To illustrate the range of potential impacts the requested
relief may have upon the 50% Restriction, provided herewith is Confidential
Exhibit 6. Confidential Exhibit 6 sets forth two sets of projections for
associate, HLP and non- associate receivables for the years 1996 through 2000.
One set of projections assumes that CSW Credit will not factor SEEBOARD
receivables during the period of the requested relief and the other set assumes
that CSW Credit will factor SEEBOARD receivables. However, as noted above, at
present, significant obstacles prevent CSW Credit from factoring SEEBOARD
receivables. CSW cannot reliably predict if these obstacles can be overcome
<PAGE>
and, if they can, when it would be likely to begin factoring SEEBOARD
receivables. In addition, please note that the projections contained in
Confidential Exhibit 6 consist of forward-looking information and, accordingly,
actual results may differ materially from such projections based upon changes in
the underlying assumptions, including assumptions that are neither expressed nor
implied herein.
Each set of projections includes base case, worst case and
best case scenarios. The worst case scenario sets forth projected amounts of
receivables business based upon assumptions that will lead to the greatest use
of the requested exemption. Thus, the worst case scenario assumes that HLP and
non-associate receivables increase to the greatest amount allowed under the
requested exemption, while associate receivables remain at the present level
(factoring out the residual effect of Transok on the average associate
receivables). In contrast, the best case scenario sets forth projected amounts
of receivables based on assumptions that will lead to the lowest use of the
requested exemption. Thus, the best case scenario assumes that HLP and
non-associate receivables remain at their 1996 levels, while associate
receivables grow in the manner projected in the base case.
Assuming that CSW Credit does not factor SEEBOARD receivables
during the period of the requested relief, under the base case, the amount of
the exemption used would range from a low of $ ["P6"] in 1996 to a high of $
["P7"] in 2000. The ratio of non-associate receivables to total receivables
would not exceed ["P8"] % under the base case. Under the best case, the
<PAGE>
amount of the exemption used would peak at $ ["P9"] in 1997 and then decrease
steadily to $ ["P10"] in 2000. The ratio of non- associate receivables to total
receivables would peak at ["P11"] % in 1997 and then decrease to ["P12"] % in
2000 under the best case. Only under the worst case, in which associate
receivables do not grow and HLP and non-associate increase dramatically to the
full amount allowed under this request, does CSW Credit use the entire exemption
amount. Under the worst case, the amount of the exemption used would be $
["P13"] and the ratio of non-associate receivables to total receivables would be
["P14"] %. CSW Credit believes that the worst case scenario, although possible,
is rather unlikely. The service areas of HLP and the CSW operating companies are
in the same region and thus are affected by the same business, economic and
weather-related determinants of utility revenue, which in turn determines the
amount of receivables to be factored. As such, there may be a high correlation
between the growth rates of HLP and associate receivables.
If CSW Credit begins to factor SEEBOARD receivables during the
period of the requested relief, the use of the exemption decreases dramatically
and, in most circumstances, the exemption will no longer be used at all. As
Confidential Exhibit 6 shows, under the base case and best case, as soon as
SEEBOARD receivables become fully factored into the twelve month rolling
average, the exemption will no longer be used. Even under the worst case, only $
["P15"] of the exemption is used and the ratio of non-associate receivables to
total receivables would be ["P16"] %.
<PAGE>
CSW Credit will continue to purchase receivables from HLP in
accordance with CSW Credit's customary business practice and at prices
consistent with the authorization previously conferred upon CSW Credit by the
Commission pursuant to the orders summarized above. CSW recognizes that, upon
expiration of authority that is granted pursuant to this application, it may be
required, absent further relief from the Commission, to divest certain
non-associate or HLP receivables, from time to time, in order to be in
compliance with the 50% Restriction.
CSW Credit will file 45 days after the end of each calendar
quarter reports pursuant to Rule 24 under the Act containing the following
information and statements: (1) a balance sheet for CSW Credit as of the end of
the quarter, a statement of income for the three months ended period and twelve
months period plus notes to the financial statements; (2) a listing of CSW
Credit's principal amount of borrowings outstanding at the end of each quarter,
which contains the term of each obligation, the name of lending institution and
the effective cost of borrowing; (3) the amount of each month's accounts
receivable purchased by CSW Credit per operating company and a detailed
calculation of the quarterly discount; (4) a calculation by month of the
earnings coverage for CSW Credit's indebtedness; (5) an analysis of the
respective average returns on common equity, which includes any decision of a
state regulatory commission dealing with a change to an authorized return on
common equity calculation; (6) a capital structure calculation as of the end of
each quarter; (7) copies of any state regulatory commission decisions or
analyses of the effect
<PAGE>
of the factoring of CSW System accounts receivable on rates; (8) copies of end
of year audited financial statements of CSW Credit; and (9) a copy of the
accounting system procedures and chart of accounts of CSW Credit as maintained
by Central and South West Services, Inc.
Further, CSW Credit will adapt its quarterly Rule 24 reports
in the following respects to provide additional information regarding its
accounts receivable factoring business. First, CSW Credit will include a
footnote to Exhibit 4 to its Rule 24 reports in which it will identify each
non-affiliate company for which it factors accounts receivable. Second, CSW
Credit will include an expanded Bad Debt Write-Off table, which will distinguish
between HLP and other non-affiliates. Third, CSW Credit will report, with
appropriate calculation methodology, the amount received by CPL from CSW
Credit's factoring of HLP accounts receivable. Fourth, CSW Credit will include
an expanded Exhibit 5 to its Rule 24 reports, which identifies the dollar amount
of discount between retail and wholesale cost of capital for each associate
public utility. Fifth, if any new associate public utility, EWG or FUCO is added
to CSW Credit's accounts receivable factoring program, CSW Credit will identify
the corporation and incorporate it in Exhibit 4 to CSW Credit's quarterly
reports. Item 2. Fees, Commissions and Expenses.
The estimate of the approximate amount of fees and expenses
payable in connection with the transactions is as follows:
Holding Company Act filing fee $ 2,000*
<PAGE>
Counsel fees
Milbank, Tweed, Hadley & McCloy $ 25,000
Miscellaneous and incidental
expenses including travel,
telephone and postage $ 1,000
TOTAL $ 28,000
- ---------------
* Actual Amount
No transactional fees or commissions will be paid to
any associate or affiliate company of CSW in connection with the
proposed activities.
Item 3. Applicable Statutory Provisions.
Sections 6, 7, 9, 10 and 12 and Rule 45 under the Act are or
may be applicable with respect to the proposed activities.
Item 4. Regulatory Approval.
No approvals from any other governmental agency are necessary
for the proposed activities described herein.
Item 5. Procedure.
The Commission issued and published on November 8, 1996 the
requisite notice under Rule 23 with respect to the filing of this
Application-Declaration. Such notice specified December 2, 1996 as the date
after which an order granting and permitting this Application-Declaration to
become effective may be entered by the Commission. The Applicants respectfully
request that the Commission enter as soon as possible an appropriate order
granting and permitting this Application-Declaration to become effective.
No recommended decision by a hearing officer or other
responsible officer of the Commission is necessary or required in
this matter. The Division of Investment Management of the
<PAGE>
Commission may assist in the preparation of the Commission's decision in this
matter. There should be no thirty day waiting period between the issuance and
the effective date of any order issued by the Commission in this matter, and it
is respectfully requested that any such order be made effective immediately upon
the entry thereof. Item 6. Exhibits and Financial Statements.
Exhibit 1 - Preliminary Opinion of Milbank, Tweed,
Hadley & McCloy, counsel to the Company.
Exhibit 2 - Final or "Past Tense" Opinion of
Milbank, Tweed, Hadley & McCloy, counsel
to the Company (to be filed with
Certificate of Notification.)
Exhibit 3 - Proposed Notice of Proceeding
(previously filed).
Exhibit 4 - Financial Statements of Central and
South West Corporation and its
subsidiaries per books and pro forma as
of September 30, 1996.
Exhibit 5 - CPL 1991 Annual Report on Form 10-K, as
of December 31, 1991.
Exhibit 6 - CSW Credit, Inc. Sensitivity Analysis
(Confidential) (previously filed).
Exhibit 7 - Agency and Purchase Agreements between
CSW Credit, Inc. and Houston Lighting
& Power Company, dated May 29, 1992;
Stipulation and Agreement between
Central Power and Light Company and the
Public Utility Commission of Texas,
dated May 16, 1992; Final Order of the
Public Utility Commission of Texas,
dated October 4, 1995 (Confidential).
Item 7. Information as to Environmental Effects.
The proposed transactions do not constitute a major federal
action having a significant effect on the quality of the human environment.
<PAGE>
S I G N A T U R E
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, as amended, the undersigned company has duly caused this
document to be signed on its behalf by the undersigned thereunto duly
authorized.
Dated: December 19, 1996
CENTRAL AND SOUTH WEST CORPORATION
By:/s/WENDY G. HARGUS
Wendy G. Hargus
Treasurer
<PAGE>
S I G N A T U R E
Pursuant to the requirements of the Public Utility Holding
Company Act of 1935, as amended, the undersigned company has duly caused this
document to be signed on its behalf by the undersigned thereunto duly
authorized.
Dated: December 19, 1996
CSW CREDIT, INC.
By:/s/STEPHEN D. WISE
Stephen D. Wise
Treasurer
<PAGE>
EXHIBIT INDEX
Exhibit Exhibit Transmission
Number Method
1 Preliminary Opinion of Milbank, Tweed, Electronic
Hadley & McCloy, counsel to the Company.
2 Final or "Past Tense" Opinion of ---
Milbank, Tweed, Hadley & McCloy,
counsel to the Company (to be filed
with Certificate of Notification.)
3 Proposed Notice of Proceeding ---
(previously filed).
4 Financial Statements of Central and South Electronic
West Corporation and its subsidiaries per
books and pro forma, as of September 30,
1996.
5 CPL 1991 Annual Report on Form 10-K, Incorporated
as of December 31, 1991 (incorporated by Reference
by reference).
6 CSW Credit, Inc. Sensitivity Analysis ---
(Confidential) (previously filed).
7 Agency and Purchase Agreements between Paper
CSW Credit, Inc. and Houston Lighting
& Power Company, dated May 29, 1992;
Stipulation and Agreement between Central
Power and Light Company and the Public
Utility Commission of Texas, dated May 16,
1992; Final Order of the Public Utility
Commission of Texas, dated October 4, 1995
(Confidential).
<PAGE> 1
INDEX EXHIBIT 4
TO
FINANCIAL STATEMENTS Page
Number
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES
Consolidated Balance Sheets - Per Books and Pro Forma
as of September 30, 1996 2 - 3
Consolidated Statement of Income for the Twelve Months Ended
September 30, 1996 4
Consolidated Statement of Retained Earnings for the Twelve Months
Ended September 30, 1996 5
Statements of Long-Term Debt Outstanding as of September 30, 1996 6 - 9
Statements of Preferred Stock Outstanding as of September 30, 1996 10
CENTRAL AND SOUTH WEST CORPORATION (CORPORATE)
Balance Sheets - Per Books and Pro Forma as of September 30, 1996 11
Statement of Income for the Twelve Months Ended September 30, 1996 12
CSW CREDIT, INC.
Balance Sheets - Per Books and Pro Forma as of September 30, 1996 13
Statement of Income for the Twelve Months Ended September 30, 1996 14
Statement of Retained Earnings for the Twelve Months Ended
September 30, 1996 15
PRO FORMA ADJUSTMENTS TO BALANCE SHEETS 16
STATEMENT OF CHANGES 17
CAPITALIZATION RATIOS - Per books and Pro forma 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 19
<PAGE> 2
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
PER BOOKS AND PRO FORMA
AS OF SEPTEMBER 30, 1996
UNAUDITED
(Millions)
Per Pro Forma Pro
Books Adjustments Forma
-------- ----------- --------
ASSETS
FIXED ASSETS
Electric utility plant
Production $5,833 $5,833
Transmission 1,521 1,521
Distribution 4,040 4,040
General 1,297 1,297
Construction work in progress 203 203
Nuclear fuel 175 175
Other Diversified 57 57
-------- -------- --------
13,126 13,126
Less - Accumulated depreciation 4,820 4,820
-------- -------- --------
8,306 8,306
-------- -------- --------
CURRENT ASSETS
Cash and temporary cash investments 422 422
Special Deposits 60 60
Accounts receivable 1,216 1,216
Materials and supplies, at average cost 179 179
Electric fuel inventory, substantially at
average cost 111 111
Prepayments and other 164 164
-------- -------- --------
2,152 2,152
-------- -------- --------
DEFERRED CHARGES AND OTHER ASSETS
Deferred plant costs 505 505
Mirror CWIP asset - net 302 302
Other non-utility investments 292 292
Income tax related regulatory assets, net 239 239
Goodwill 1,374 1,374
Other 422 422
-------- -------- --------
3,134 3,134
-------- -------- --------
$13,592 $0 $13,592
======== ======== ========
<PAGE> 3
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
PER BOOKS AND PRO FORMA
AS OF SEPTEMBER 30, 1996
UNAUDITED
(Millions)
Per Pro Forma Pro
Books Adjustments Forma
-------- ----------- --------
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common Stock Equity -
Common stock, $3.50 par value,
authorized 350,000,000 shares;
issued and outstanding 210,800,000 shares $737 $737
Paid-in capital 999 999
Retained earnings 1,996 1,996
Foreign currency translation adjustment (3) (3)
-------- -------- --------
Total Common Stock Equity 3,729 3,729
Preferred stock
Not subject to mandatory redemption 293 293
Subject to mandatory redemption 32 32
Long-term debt 4,315 4,315
-------- -------- --------
Total Capitalization 8,369 8,369
-------- -------- --------
CURRENT LIABILITIES
Long-term debt/preferred stock
due within twelve months 65 65
Short-term debt 378 378
Short-term debt - CSW Credit 809 809
Loan Notes 97 97
Accounts payable 457 457
Accrued taxes 451 451
Accrued interest 74 74
Other 175 175
-------- -------- --------
2,506 2,506
-------- -------- --------
DEFERRED CREDITS
Accumulated deferred income taxes 2,229 2,229
Investment tax credits 295 295
Other 193 193
-------- -------- --------
2,717 2,717
-------- -------- --------
$13,592 $0 $13,592
======== ======== ========
<PAGE> 4
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1996
UNAUDITED
(Millions)
OPERATING REVENUES $4,806
--------
OPERATING EXPENSES AND TAXES
Fuel and purchased power 1,193
United Kingdom Cost of Sales 1,118
Other operating 719
Maintenance 154
Depreciation and amortization 454
Taxes, other than income 177
Income taxes 233
--------
4,048
--------
OPERATING INCOME 758
--------
OTHER INCOME AND DEDUCTIONS (45)
--------
(45)
INCOME BEFORE INTEREST CHARGES 713
--------
INTEREST CHARGES
Interest on long-term debt 300
Interest on short-term debt and other 99
--------
399
--------
INCOME FROM CONTINUING OPERATIONS 314
DISCONTINUED OPERATIONS
Income from discontinued operations, net
of tax 23
Gain on the sale of discontinued
operations, net of tax 113
--------
136
--------
NET INCOME 450
Preferred stock dividends 18
--------
NET INCOME FOR COMMON STOCK $432
========
<PAGE> 5
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1996
UNAUDITED
(Millions)
RETAINED EARNINGS AT SEPTEMBER 30, 1995 $1,914
Add: Net income for common stock 432
--------
2,346
Deduct: Common stock dividends 348
Retained earnings adjustment 2
--------
RETAINED EARNINGS AT SEPTEMBER 30, 1996 $1,996
========
<PAGE> 6
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
STATEMENT OF LONG-TERM DEBT OUTSTANDING
AS OF SEPTEMBER 30, 1996
UNAUDITED
(Millions)
CENTRAL POWER AND LIGHT COMPANY
First mortgage bonds -
Series J, 6-5/8%, due January 1, 1998 $28
Series L, 7%, due February 1, 2001 36
Series T, 7-1/2%, due December 15, 2014 112
Series AA, 7-1/2%, due March 1, 2020 50
Series BB, 6%, due October 1, 1997 200
Series CC, 7-1/4%, due October 1, 2004 100
Series DD, 7-1/8%, due December 1, 1999 25
Series EE, 7-1/2%, due December 1, 2002 115
Series FF, 6-7/8%, due February 1, 2003 50
Series GG, 7-1/8%, due February 1, 2008 75
Series HH, 6%, due April 1, 2000 100
Series II, 7-1/2%, due April 1, 2023 100
Series JJ, 7-1/2%, due May 1, 1999 100
Series KK, 6-5/8%, due July 1, 2005 200
Installment sales agreements -
Pollution control bonds
Series 1984, 7-7/8%, due September 15, 2014 6
Series 1986, 7-7/8%, due December 1, 2016 60
Series 1993, 6%, due July 1, 2028 120
Series 1995, 6-1/10%, due July 1, 2028 101
Series 1995, variable, due November 1, 2015 41
Unamortized discount (6)
Unamortized costs of reacquired debt (91)
--------
$1,522
--------
<PAGE> 7
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
STATEMENT OF LONG-TERM DEBT OUTSTANDING (Continued)
AS OF SEPTEMBER 30, 1996
UNAUDITED
(Millions)
PUBLIC SERVICE COMPANY OF OKLAHOMA
First mortgage bonds -
Series K, 7-1/4%, due January 1, 1999 $25
Series L, 7-3/8%, due March 1, 2002 30
Series S, 7-1/4%, due July 1, 2003 65
Series T, 7-3/8%, due December 1, 2004 50
Series U, 6-1/4%, due April 1, 2003 35
Series V, 7-3/8%, due April 1, 2023 100
Series W, 6-1/2%, due June 1, 2005 50
Long-term note
Series A-1, 5.89%, due December 15, 2000 10
Series A-2, 5.91%, due March 1, 2001 6
Series A-3, 6.02%, due March 1, 2001 5
Series A-4, 6.02%, due March 1, 2001 9
Series A-5, 6.43%, due March 30, 2000 10
Installment sales agreements -
Pollution control bonds
Series A, 5.9%, due December 1, 2007 35
Series 1984 7-7/8, due September 15, 2014 12 *
Unamortized discount (4)
Unamortized costs of reacquired debt (18)
--------
* Rounded down from 12,660,000 $420
--------
<PAGE> 8
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
STATEMENT OF LONG-TERM DEBT OUTSTANDING (Continued)
AS OF SEPTEMBER 30, 1996
UNAUDITED
(Millions)
SOUTHWESTERN ELECTRIC POWER COMPANY
First mortgage bonds -
Series V, 7-3/4%, due June 1, 2004 $40
Series W, 6-1/8%, due September 1, 1999 40
Series X, 7%, due September 1, 2007 90
Series Y, 6-5/8%, due February 1, 2003 55
Series Z, 7-1/4%, due July 1, 2023 45
Series AA, 5-1/4%, due April 1, 2000 45
Series BB, 6-7/8%, due October 1, 2025 80
1976 Series A, 6.2%, due November 1, 2006 7
1976 Series B, 6.2%, due November 1, 2006 1
Installment sales agreements -
Pollution control bonds
1978 Series A, 6%, due January 1, 2008 14
Series 1986, 8.2%, due July 1, 2014 82
1991 Series A, 8.2%, due August 1, 2011 17
1991 Series B, 6.9%, due November 1, 2004 12
Series 1992, 7.6%, due January 1, 2019 54
Bank loan, variable rate, due June 15, 2000 50
Railcar lease obligations 11
Unamortized premium 1
Unamortized costs of reacquired debt (44)
Amount to be redeemed within one year (4)
--------
$596
--------
WEST TEXAS UTILITIES COMPANY
First mortgage bonds -
Series P, 7-3/4%, due July 1, 2007 25
Series Q, 6-7/8%, due October 1, 2002 35
Series R, 7%, due October 1, 2004 40
Series S, 6-1/8%, due February 1, 2004 40
Series T, 7-1/2%, due April 1, 2000 40
Series U, 6-3/8%, due October 1, 2005 80
Installment sales agreement -
Pollution control bonds
Series 1984, 7-7/8%, due September 15, 2014 44
Unamortized discount and premium (1)
Unamortized costs of reacquired debt (29)
--------
$274
--------
<PAGE> 9
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
STATEMENT OF LONG-TERM DEBT OUTSTANDING (Continued)
AS OF SEPTEMBER 30, 1996
UNAUDITED
(millions)
CSW U.K. GROUP
Long-term debt facility, floating rate, due 2001 $729
Eurobond, 8-1/2%, due October 3, 2005 156
Eurobond, 8-7/8%, due September 27, 2006 156
Notes, 6.95%, due August 1, 2001 * 202
Notes, 7.45%, due August 1, 2006 * 202
Unamortized discount and premium (2)
--------
$1,443
--------
* The $202 million amounts result from a
U.S. dollar to British pound cross currency
swap and the subsequent translation of those
pounds back into U.S. dollars for U.S.
reporting purposes.
CENTRAL AND SOUTH WEST SERVICES, INC.
Term loan facility, Variable rate, due
December 1, 2001 60
--------
$60
--------
TOTAL CONSOLIDATED $4,315
========
<PAGE> 10
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
STATEMENT OF PREFERRED STOCK OUTSTANDING
AS OF SEPTEMBER 30, 1996
UNAUDITED
(Millions)
NOT SUBJECT TO MANDATORY REDEMPTION
CENTRAL POWER AND LIGHT COMPANY
4.00% Series, 100,000 shares $10
4.20% Series, 75,000 shares 7
7.12% Series, 260,000 shares 26
8.72% Series, 500,000 shares 50
Auction Money Market, 750,000 shares 75
Auction Series A, 425,000 shares 43
Auction Series B, 425,000 shares 43
Issuance expense (3)
--------
$251
--------
PUBLIC SERVICE COMPANY OF OKLAHOMA
4.00% Series, 97,900 shares $10
4.24% Series, 100,000 shares 10
--------
$20
--------
SOUTHWESTERN ELECTRIC POWER COMPANY
5.00% Series, 75,000 shares $8
4.65% Series, 25,000 shares 2
4.28% Series, 60,000 shares 6
--------
$16
--------
WEST TEXAS UTILITIES COMPANY
4.40% Series, 60,000 shares 6
--------
Total Consolidated $293
========
SUBJECT TO MANDATORY REDEMPTION
SOUTHWESTERN ELECTRIC POWER COMPANY
6.95% Series, 352,000 shares $34
Amount to be redeemed within one year (2)
--------
Total Consolidated $32
========
<PAGE> 11
CENTRAL AND SOUTH WEST CORPORATION
BALANCE SHEETS
PER BOOKS AND PRO FORMA
AS OF SEPTEMBER 30, 1996
UNAUDITED
(Millions)
Per Pro Forma Pro
Books Adjustments Forma
-------- ----------- --------
ASSETS
FIXED ASSETS
Electric utility plant
General $4 $4
Less - Accumulated depreciation (1) (1)
-------- -------- --------
NET PLANT 3 3
INVESTMENTS IN COMMON STOCK
OF SUBSIDIARY COMPANIES (at equity) 3,914 3,914
-------- -------- --------
CURRENT ASSETS
Cash and temporary cash investments 5 5
Advances to affiliates 208 208
Accounts receivable - Affiliated 162 162
Prepayments and other 8 8
-------- -------- --------
383 383
-------- -------- --------
DEFERRED CHARGES AND OTHER ASSETS 58 58
-------- -------- --------
$4,358 $0 $4,358
======== ======== ========
CAPITALIZATION
Common Stock Equity -
Common stock, $3.50 par value;
authorized 350,000,000 shares;
issued and outstanding 210,800,000 shares $737 $737
Paid-in capital 999 999
Retained earnings 1,996 1,996
-------- -------- --------
Total Common Stock Equity 3,732 3,732
-------- -------- --------
Long-term debt 0 0
-------- -------- --------
Total Capitalization 3,732 3,732
-------- -------- --------
CURRENT LIABILITIES
Short-term debt 378 378
Accounts payable and other 214 214
-------- -------- --------
592 592
-------- -------- --------
DEFERRED CREDITS 34 34
-------- -------- --------
$4,358 $0 $4,358
======== ======== ========
<PAGE> 12
CENTRAL AND SOUTH WEST CORPORATION
STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1996
UNAUDITED
(Millions)
INCOME
Equity in earnings of subsidiaries
Central Power and Light Company $152
Public Service Company of Oklahoma 35
Southwestern Electric Power Company 73
West Texas Utilities Company 17
SEEBOARD plc 62
Transok, Inc. 22
CSW Credit, Inc. 8
CSW Energy, Inc. (9)
CSW Leasing, Inc. 1
CSW International, Inc. (4)
CSW Communications, Inc. (3)
Enershop Inc. (1)
Central and South West Services, Inc. 0
Other Income 53
--------
$406
--------
EXPENSES AND TAXES
General and administrative expenses 32
Interest expense 59
Federal income taxes (4)
--------
87
--------
DISCONTINUED OPERATIONS
Gain on sale of discontinued operations, net of tax 113
--------
NET INCOME $432
========
<PAGE> 13
CSW CREDIT, INC.
BALANCE SHEETS
PER BOOKS AND PRO FORMA
AS OF SEPTEMBER 30, 1996
UNAUDITED
(Millions)
Per Pro Forma Pro
Books Adjustments Forma
-------- ----------- --------
ASSETS
CURRENT ASSETS
Cash and temporary cash investments 6 6
Accounts receivable - affiliated 397 397
Accounts receivable - nonaffiliated 486 486
Prepayments and other 3 3
-------- -------- --------
892 892
-------- -------- --------
$892 $0 $892
======== ======== ========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock, no par;
authorized 1,000 shares;
issued and outstanding 255 shares $0 $0
Paid-in capital 61 61
Retained earnings 0 0
-------- -------- --------
Total common stock equity 61 61
-------- -------- --------
Total capitalization 61 61
-------- -------- --------
CURRENT LIABILITIES
Short-term debt 809 809
Accounts payable - affiliated 3 3
Accrued taxes 2 2
Other 21 21
-------- -------- --------
835 835
-------- -------- --------
-------- -------- --------
DEFERRED CREDITS (4) (4)
-------- -------- --------
$892 $0 $892
======== ======== ========
<PAGE> 14
CSW CREDIT, INC.
STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1996
UNAUDITED
(Millions)
TOTAL REVENUE $72
--------
OPERATING EXPENSES AND TAXES
Operating 20
Income taxes 4
--------
24
--------
OPERATING INCOME 48
--------
OTHER INCOME AND DEDUCTIONS
Other (1)
--------
(1)
--------
INCOME BEFORE INTEREST CHARGES 47
--------
INTEREST CHARGES
Interest on short-term debt and other 39
--------
39
--------
NET INCOME 8
PREFERRED STOCK DIVIDENDS 0
--------
NET INCOME FOR COMMON STOCK $8
========
<PAGE> 15
CSW CREDIT, INC.
STATEMENT OF RETAINED EARNINGS
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1996
UNAUDITED
(Millions)
RETAINED EARNINGS AT SEPTEMBER 30, 1995 $0
Add: Net income (loss) for common stock 8
--------
8
Deduct: Common stock dividends 8
--------
RETAINED EARNINGS AT SEPTEMBER 30, 1996 $0
========
<PAGE> 16
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
PRO FORMA ADJUSTMENTS TO BALANCE SHEETS
SEPTEMBER 30, 1996
UNAUDITED
(Millions)
DR CR
-------- --------
CENTRAL AND SOUTH WEST CORPORATION AND SUBSIDIARY COMPANIES
None
CENTRAL AND SOUTH WEST CORPORATION (CORPORATE)
None
CSW CREDIT, INC.
None
<PAGE> 17
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
STATEMENT OF CHANGES
There have been no significant changes in the financial statements of
Central and South West Corporation and subsidiary companies subsequent to
September 30, 1996, other than in the ordinary course of business. See CSW
Combined Quarterly Report on Form 10-Q for the quarter ended September 30,
1996.
<PAGE> 18
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
CAPITALIZATION RATIOS
PER BOOKS AND PRO FORMA
AS OF SEPTEMBER 30, 1996
Common
Stock Preferred Long-term
Equity Stock Debt
-------- -------- --------
Central and South West Corporation
and Subsidiary Companies
(Consolidated) Per books 44.6% 3.9% 51.6%
Central and South West Corporation
and Subsidiary Companies
(Consolidated) Pro forma 44.6% 3.9% 51.6%
Central and South West Corporation (Corporate)
Per books 100.0% 0.0% 0.0%
Central and South West Corporation (Corporate)
Pro forma 100.0% 0.0% 0.0%
CSW Credit, Inc.
Per books 100.0% 0.0% 0.0%
CSW Credit, Inc.
Pro forma 100.0% 0.0% 0.0%
<PAGE> 19
CENTRAL AND SOUTH WEST CORPORATION
AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The notes to consolidated financial statements included in Central and
South West Corporation's 1995 Annual Report on Form 10-K are hereby
incorporated by reference and made a part of this report.
Page
Reference
1995 Annual Report on Form 10-K pages 2-32 through 2-67
EXHIBIT 1
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
December 19, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Central and South West Corporation, et al.
Form U-1 Application-Declaration
Dear Sirs:
We refer to the Form U-1 Application-Declaration (the
"Application") under the Public Utility Holding Company Act of 1935, as amended
(the "1935 Act"), filed by Central and South West Corporation ("CSW"), a
Delaware corporation and a registered holding company, and CSW Credit, Inc.
("Credit" and, collectively with CSW, the "Companies"), a Texas corporation and
a wholly-owned subsidiary of CSW. The Application relates to the Companies'
request for certain partial, short-term exemptions from the restriction that
limits the amount of accounts receivable Credit factors for non-associate
companies to the amount of its associate accounts receivable business, as more
fully described in the Application. The authority requested in the Application
would allow Credit, within certain parameters, to engage in accounts receivable
factoring for non-associate companies in amounts that exceed the amount of
associate accounts receivable it factors (the "Additional Factoring Activity").
We have acted as special counsel for the Companies in connection with the filing
of the Application.
We have examined originals, or copies certified to our
satisfaction, of such corporate records of the Companies, certificates of public
officials, certificates of officers and representatives of the Companies and
other documents as we have deemed it necessary to require as a basis for the
opinions hereinafter expressed. In such examination we have assumed the
genuineness of all signatures and the authenticity of all documents submitted to
us as originals and the conformity with the originals of all documents submitted
to us as copies. As to various questions of fact material to such opinions we
have, when relevant facts were not independently established, relied upon
certificates by officers of the Companies and other appropriate persons and
statements contained in the Application.
<PAGE>
Based upon the foregoing, and having regard to legal
considerations which we deem relevant, we are of the opinion that, in the event
that the proposed Additional Factoring Activity is conducted in accordance with
the Application, as it may be amended, and subject to the assumptions and
conditions set forth below:
1. All state laws applicable to the proposed Additional
Factoring Activity as described in the Application will have been
complied with.
2. The conduct of the proposed Additional Factoring Activity
as described in the Application will not violate the legal rights of
the lawful holders of any securities issued by the Companies or any
associate company of the Companies.
The opinions expressed above in respect of the proposed
Additional Factoring Activity as described in the Application are subject to the
following assumptions or conditions:
a. The Additional Factoring Activity shall have been
duly authorized and approved to the extent
required by state law by the Board of Directors of
the Companies.
b. The Securities and Exchange Commission shall have
duly entered an appropriate order or orders granting
and permitting the Application to become effective
with respect to the Additional Factoring Activity
described therein.
c. The Additional Factoring Activity shall have been
accomplished in accordance with required
approvals, authorizations, consents, certificates
and orders of any state commission or regulatory
authority with respect thereto, and all such
required approvals, authorizations, consents,
certificates and orders shall have been obtained
and remain in effect at the closing thereof.
d. No act or event other than as described herein shall
have occurred subsequent to the date hereof which
would change the opinions expressed above.
We hereby consent to the use of this opinion as an exhibit to
the Application.
Very truly yours,
MILBANK, TWEED, HADLEY & McCLOY
JMH/GWG
<TABLE> <S> <C>
<ARTICLE> OPUR1
<SUBSIDIARY>
<NUMBER> 001
<NAME> CENTRAL AND SOUTH WEST CORPORATION & SUBS
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-END> Sep-30-1996 Sep-30-1996
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 8,250 8,250
<OTHER-PROPERTY-AND-INVEST> 56 56
<TOTAL-CURRENT-ASSETS> 2,152 2,152
<TOTAL-DEFERRED-CHARGES> 505 505
<OTHER-ASSETS> 2,629 2,629
<TOTAL-ASSETS> 13,592 13,592
<COMMON> 737 737
<CAPITAL-SURPLUS-PAID-IN> 999 999
<RETAINED-EARNINGS> 1,993 1,993
<TOTAL-COMMON-STOCKHOLDERS-EQ> 3,729 3,729
32 32
293 293
<LONG-TERM-DEBT-NET> 3,025 3,025
<SHORT-TERM-NOTES> 0 0
<LONG-TERM-NOTES-PAYABLE> 1,283 1,283
<COMMERCIAL-PAPER-OBLIGATIONS> 1,187 1,187
<LONG-TERM-DEBT-CURRENT-PORT> 60 60
1 1
<CAPITAL-LEASE-OBLIGATIONS> 7 7
<LEASES-CURRENT> 4 4
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,971 3,971
<TOT-CAPITALIZATION-AND-LIAB> 13,592 13,592
<GROSS-OPERATING-REVENUE> 4,806 4,806
<INCOME-TAX-EXPENSE> 233 233
<OTHER-OPERATING-EXPENSES> 3,815 3,815
<TOTAL-OPERATING-EXPENSES> 4,048 4,048
<OPERATING-INCOME-LOSS> 758 758
<OTHER-INCOME-NET> (45) (45)
<INCOME-BEFORE-INTEREST-EXPEN> 713 713
<TOTAL-INTEREST-EXPENSE> 399 399
<NET-INCOME> 450 450
18 18
<EARNINGS-AVAILABLE-FOR-COMM> 432 432
<COMMON-STOCK-DIVIDENDS> 348 348
<TOTAL-INTEREST-ON-BONDS> 216 216
<CASH-FLOW-OPERATIONS> 684 684
<EPS-PRIMARY> 2.13 2.13
<EPS-DILUTED> 2.13 2.13
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<SUBSIDIARY>
<NUMBER> 002
<NAME> CENTRAL AND SOUTH WEST CORP.
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-END> Sep-30-1996 Sep-30-1996
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 3 3
<OTHER-PROPERTY-AND-INVEST> 3,914 3,914
<TOTAL-CURRENT-ASSETS> 383 383
<TOTAL-DEFERRED-CHARGES> 0 0
<OTHER-ASSETS> 58 58
<TOTAL-ASSETS> 4,358 4,358
<COMMON> 737 737
<CAPITAL-SURPLUS-PAID-IN> 999 999
<RETAINED-EARNINGS> 1,996 1,996
<TOTAL-COMMON-STOCKHOLDERS-EQ> 3,732 3,732
0 0
0 0
<LONG-TERM-DEBT-NET> 0 0
<SHORT-TERM-NOTES> 0 0
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 378 378
<LONG-TERM-DEBT-CURRENT-PORT> 0 0
0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 248 248
<TOT-CAPITALIZATION-AND-LIAB> 4,358 4,358
<GROSS-OPERATING-REVENUE> 0 0
<INCOME-TAX-EXPENSE> (4) (4)
<OTHER-OPERATING-EXPENSES> 32 32
<TOTAL-OPERATING-EXPENSES> 28 28
<OPERATING-INCOME-LOSS> (28) (28)
<OTHER-INCOME-NET> 406 406
<INCOME-BEFORE-INTEREST-EXPEN> 378 378
<TOTAL-INTEREST-EXPENSE> 59 59
<NET-INCOME> 432 432
0 0
<EARNINGS-AVAILABLE-FOR-COMM> 432 432
<COMMON-STOCK-DIVIDENDS> 349 349
<TOTAL-INTEREST-ON-BONDS> 0 0
<CASH-FLOW-OPERATIONS> 339 339
<EPS-PRIMARY> 2.13 2.13
<EPS-DILUTED> 2.13 2.13
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<CIK> 0000788407
<NAME> CSW CREDIT
<MULTIPLIER> 1,000,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-END> Sep-30-1996 Sep-30-1996
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 0 0
<OTHER-PROPERTY-AND-INVEST> 0 0
<TOTAL-CURRENT-ASSETS> 892 892
<TOTAL-DEFERRED-CHARGES> 0 0
<OTHER-ASSETS> 0 0
<TOTAL-ASSETS> 892 892
<COMMON> 0 0
<CAPITAL-SURPLUS-PAID-IN> 61 61
<RETAINED-EARNINGS> 0 0
<TOTAL-COMMON-STOCKHOLDERS-EQ> 61 61
0 0
0 0
<LONG-TERM-DEBT-NET> 0 0
<SHORT-TERM-NOTES> 0 0
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 0 0
0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 831 831
<TOT-CAPITALIZATION-AND-LIAB> 892 892
<GROSS-OPERATING-REVENUE> 72 72
<INCOME-TAX-EXPENSE> 4 4
<OTHER-OPERATING-EXPENSES> 20 20
<TOTAL-OPERATING-EXPENSES> 24 24
<OPERATING-INCOME-LOSS> 48 48
<OTHER-INCOME-NET> (1) (1)
<INCOME-BEFORE-INTEREST-EXPEN> 47 47
<TOTAL-INTEREST-EXPENSE> 39 39
<NET-INCOME> 8 8
0 0
<EARNINGS-AVAILABLE-FOR-COMM> 8 8
<COMMON-STOCK-DIVIDENDS> 8 8
<TOTAL-INTEREST-ON-BONDS> 0 0
<CASH-FLOW-OPERATIONS> (100) (100)
<EPS-PRIMARY> 0.04 0.04
<EPS-DILUTED> 0.04 0.04
</TABLE>
