File No. 70-8133
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 14 (POST-EFFECTIVE) TO
FORM U-1 APPLICATION-DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
CENTRAL AND SOUTH WEST CORPORATION
1616 Woodall Rodgers Freeway
P.O. Box 660164
Dallas, Texas 75202
CSW ENERGY, INC.
1616 Woodall Rodgers Freeway
P.O. Box 660789
Dallas, Texas 75202
CSW DEVELOPMENT-I, INC.
1616 Woodall Rodgers Freeway
P.O. Box 660164
Dallas, Texas 75202
CSW ORANGE, INC.
1616 Woodall Rodgers Freeway
P.O. Box 660164
Dallas, Texas 75202
ORANGE COGENERATION LIMITED PARTNERSHIP
1616 Woodall Rodgers Freeway
P.O. Box 660164
Dallas, Texas 75202
ORANGE COGENERATION G.P., INC.
1616 Woodall Rodgers Freeway
P.O. Box 660164
Dallas, Texas 75202
ORANGE COGENERATION GP II, INC.
1616 Woodall Rodgers Freeway
P.O. Box 660164
Dallas, Texas 75202
CSW ORANGE II, INC.
1616 Woodall Rodgers Freeway
P.O. Box 660164
Dallas, Texas 75202
(Names of companies filing this statement and
addresses 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 Rodgers Freeway
P.O. Box 660164
Dallas, Texas 75202
Terry D. Dennis
President
CSW Energy, Inc.
1616 Woodall Rodgers Freeway
P.O. Box 660789
Dallas, Texas 75202
Terry D. Dennis
President
CSW Development-I, Inc.
1616 Woodall Rodgers Freeway
P.O. Box 660164
Dallas, Texas 75202
Terry D. Dennis
President
CSW Orange, Inc.
1616 Woodall Rodgers Freeway
P.O. Box 660164
Dallas, Texas 75202
Michael T. Moran
Chief Executive Officer of Orange Cogeneration G.P., Inc.,
the general partner of
Orange Cogeneration Limited Partnership
1616 Woodall Rodgers Freeway
P.O. Box 660164
Dallas, Texas 75202
Michael T. Moran
Chief Executive Officer
Orange Cogeneration G.P., Inc.
1616 Woodall Rodgers Freeway
P.O. Box 660164
Dallas, Texas 75202
Michael T. Moran
Chief Executive Officer
Orange Cogeneration GP II, Inc.
1616 Woodall Rodgers Freeway
P.O. Box 660164
Dallas, Texas 75202
Terry D. Dennis
President
CSW Orange II, Inc.
1616 Woodall Rodgers Freeway
P.O. Box 660164
Dallas, Texas 75202
Joris M. Hogan
Milbank, Tweed, Hadley & McCloy
One Chase Manhattan Plaza
New York, New York 10005
(Names and addresses of agents for services)
Respectfully request that copies be sent to:
Edwin F. Feo
Milbank, Tweed, Hadley & McCloy
601 South Figueroa Street
Los Angeles, California 90017
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"), CSW Energy, Inc., a Texas corporation and a wholly-owned
subsidiary of CSW ("Energy"), CSW Development-I, Inc., a Delaware corporation
and a wholly-owned subsidiary of Energy ("Energy Sub"), Orange Cogeneration GP
II, Inc., a Delaware corporation and a subsidiary of Energy Sub ("Orange GP
Sub"), CSW Orange II, Inc., a Delaware corporation and a wholly-owned subsidiary
of Energy Sub ("Orange LP Sub"), Orange Cogeneration G.P., Inc., a Delaware
corporation and a wholly-owned subsidiary of Orange GP Sub ("JV Sub"), CSW
Orange, Inc., a Delaware corporation and a wholly-owned subsidiary of Orange LP
Sub ("CSWO"), Orange Cogeneration Limited Partnership, a Delaware limited
partnership and a subsidiary of JV Sub and CSWO (the "Project Venture" and
collectively with CSW, Energy, Energy Sub, Orange GP Sub, Orange LP Sub, JV Sub
and CSWO, the "Applicants"), hereby file this Amendment No. 14 (post-effective)
to the Application-Declaration in File No. 70-8133 (the
"Application-Declaration") to amend the Application-Declaration as follows. In
all other respects, the Application-Declaration as previously filed and amended
will remain the same.
By order dated April 15, 1993 (HCAR No. 25796) in this File No. 70-8133,
the Commission authorized, among other things, the then existing Applicants to
form CSWO, JV Sub and the Project Venture and to purchase the Project (as
defined in the Application-Declaration) from certain third parties. The
Commission also authorized the then existing Applicants to incur certain
development expenses not to exceed $7 million in connection with the Project.
By supplemental order dated February 9, 1994 (HCAR No. 25988) in this File
No. 70-8133, the Commission authorized, among other things, the then existing
Applicants to obtain a credit facility (the "Credit Facility") for the
construction and operation of the Project in an amount up to $140 million. The
Commission also authorized an investment in the Project Venture by a third party
(the "New Limited Partner") in lieu of term financing for the Project. The then
existing Applicants were authorized to advance certain funds (the "Advances"),
in the event the Project Venture was unable to obtain third party Project
financing prior to the start of Project construction, in the form of loans, open
account advances or additional equity contributions to the Project Venture from
Energy in an aggregate amount not to exceed $125 million. In addition, the
Commission authorized the issuance of corporate guaranties by the then existing
Applicants or stand-by letters of credit with the then existing Applicants as
account party in an amount not to exceed $50 million, such guaranties or letters
of credit to support payment obligations of the Project Venture required by the
provider of third party financing for the Project or fuel suppliers, fuel
transportation or other third parties under various project agreements.
By supplemental order dated September 12, 1994 (HCAR No. 26122) in this
File No. 70-8133, the Commission authorized, among other things, the then
existing Applicants to organize Orange GP Sub and Orange LP Sub and for Orange
LP Sub to be assigned the stock of CSWO held by Energy Sub and Orange GP Sub to
be assigned the stock of JV Sub held by Energy Sub.
In summary, pursuant to this Amendment No. 14 (post-effective), the
Applicants seek a supplemental order of the Commission under Sections 6(a), 7,
9(a), 10 and 12(b) of the Act, and Rules 43, 45 and 51 thereunder, additionally
authorizing the following actions by the Applicants: (i) the organization of a
wholly-owned subsidiary of the Project Venture ("OCLP Sub"), including the sale
of the securities of OCLP Sub by it to the Project Venture and the acquisition
of such securities by the Project Venture; (ii) the issuance by OCLP Sub of
certain debt securities (the "Orange Securities") to third parties in reliance
on exemptions to the registration of the Orange Securities under the Securities
Act of 1933, as amended, including such exemptions available under Rule 144A
thereunder, which third parties will have no recourse under the Orange
Securities to CSW or any of its domestic public utility subsidiaries; (iii) the
loan by OCLP Sub to the Project Venture of the proceeds of the Orange Securities
received by OCLP Sub; (iv) the guarantee by the Project Venture, JV Sub, CSWO,
Orange GP Sub and Orange LP Sub of OCLP Sub's obligations under the Orange
Securities; and (v) the pledge by each of the Project Venture, JV Sub, CSWO,
Orange GP Sub and Orange LP Sub of substantially all of its respective assets,
including the partnership interests in the Project Venture held by JV Sub and
CSWO, the securities of JV Sub held by Orange GP Sub and the securities of CSWO
held by Orange LP Sub.
Item 1. Description of Proposed Transaction
Item 1 is hereby amended to add the following paragraphs immediately at the
end of Section 2: It is proposed that the Project Venture form a special purpose
wholly-owned subsidiary ("OCLP Sub"), which the Applicants anticipate will be
incorporated under the laws of the State of Delaware with an authorized capital
of up to 1,000 shares of common stock without par value. The Project Venture
would subscribe to all of OCLP Sub's common stock, upon approval of the
Commission of such investment pursuant hereto. The organization of OCLP Sub upon
the terms described above will comply with Sections 9(a) and 10 of the Act, and
the Project Venture hereby seeks authority from the Commission to undertake such
transactions.
In the event OCLP Sub is formed pursuant to the authority sought hereby,
CSW, Energy, Energy Sub, Orange GP Sub, Orange LP Sub, JV Sub, CSWO and the
Project Venture hereby request authority to include OCLP Sub in the flow of
funds for equity contributions, open account advances and intercompany loans on
the terms and in the manner authorized by the prior orders of the Commission in
this File No. 70-8133.
The Applicants seek to organize OCLP Sub to facilitate the procurement of
permanent financing for the Project. It is desirable that the issuer of the debt
securities (as more particularly described below), the proceeds of which will
provide such permanent financing for the Project, be an entity for which the
possibility of bankruptcy is remote, and the ownership structure proposed in
this Application-Declaration is the method presently used in the securities
market to finance a privately-owned nonutility project, such as the Project.
Item 1 is hereby further amended to restate the first paragraph of Section 4(B)
in its entirety as follows:
It is anticipated that the Project Venture will obtain a credit facility
(the "Credit Facility") provided by one or more third parties to be determined
(each, collectively, the "Project Lender") that will purchase certain debt
securities to be issued by the Project Venture or OCLP Sub (each as more
particularly described below) in an amount not to exceed $140 million for the
construction and operation of the Project, which would include (a) a
construction loan in an amount not to exceed $130 million, to be later converted
to, or refinanced by, a term loan or repaid by additional equity capital
provided by a new limited partner in the Project Venture, which new limited
partner would have a right to distributions from the Project Venture on a
preferred basis, and (b) letters of credit and a revolving working capital
credit line, each to be provided by the Project Lender, in an aggregate amount
not to exceed $10 million to issue any letters of credit or guaranties that may
be required by any fuel suppliers, fuel transporters or other third parties
under the Project documents and to fund working capital for the Project. It is
anticipated that any unreimbursed drawings under any such letters of credit
issued as part of the Credit Facility will be treated as loans thereunder. It is
further anticipated that the stock of JV Sub held by Orange GP Sub, the stock of
CSWO held by Orange LP Sub, the Project assets owned by the Project Venture and
the partnership interests of the Project Venture held by each of JV Sub and CSWO
may be required to be pledged as collateral to the Project Lender as a condition
to obtaining the Credit Facility.
Item 1 is hereby further amended to add the following new Subsection
4(B)(iii) immediately at the end of Section 4(B) as follows:
(iii) Orange Securities. In lieu of the term loan financing described
above, the Credit Facility may be obtained by the Applicants through the
issuance by OCLP Sub of certain debt securities (the "Orange Securities") to
third parties in reliance on exemptions to the registration of the Orange
Securities under the Securities Act of 1933, as amended, including such
exemptions available under Rule 144A thereunder, which third party Project
Lenders will have no recourse under the Orange Securities to CSW or any of its
domestic public utility subsidiaries (the "Operating Companies"). It is
anticipated that OCLP Sub would loan to the Project Venture the proceeds of the
Orange Securities received by OCLP Sub (the "OCLP Sub Loan"). The OCLP Sub Loan
would be on substantially the same terms as the Orange Securities, which terms
would be established by OCLP Sub and the Project Lenders in an "arm's-length"
transaction in accordance with market expectations and requirements, to ensure
that OCLP Sub will be able to make the debt payments required with respect to
the Orange Securities. The Project Venture would distribute the proceeds of the
OCLP Sub Loan to its partners, including JV Sub and CSWO, to reimburse such
partners for costs and risks incurred by such partners in connection with the
development and construction of the Project.
It is anticipated that the Project Venture, JV Sub, CSWO, Orange GP Sub and
Orange LP Sub may be required by the Project Lenders to guarantee OCLP Sub's
obligations under the Orange Securities. In connection with such guarantee, each
of the Project Venture, JV Sub, CSWO, Orange GP Sub and Orange LP Sub may be
required to pledge or assign as collateral substantially all of its respective
assets, including the partnership interests in the Project Venture held by JV
Sub and CSWO, the securities of JV Sub held by Orange GP Sub and the securities
of CSWO held by Orange LP Sub. The Applicants believe that the Project Lenders
may require each such guarantee, pledge and collateral assignment described
above, and that such requirement is consistent with ordinary market practices
for financings of privately-held nonutility projects such as the Project. No
fees or interest will be payable to the Project Venture, JV Sub, CSWO, Orange GP
Sub or Orange LP Sub in respect of such guarantees, pledges or collateral
assignments.
Item 3. Applicable Statutory Provisions.
Item 3 is hereby amended to be restated in its entirety as follows:
Sections 6, 7, 9(a), 10, 12(b) and 12(c) of the Act and Rules 42, 43, 45 and 51
thereunder are or may be applicable to the proposed transactions as described
more particularly above. Specifically, Sections 9(a) and 10 of the Act and Rules
43, 45(a), 45(b)(1) and 51 thereunder are or may be applicable to the formation
of Project entities, the equity investments of Energy Sub in the Project and the
Project Venture, of Energy Sub in Orange LP Sub, of Energy Sub in Orange GP Sub,
of Orange LP Sub in CSWO, of Orange GP Sub in JV Sub, of JV Sub and CSWO in the
Project Venture and of the Project Venture in OCLP Sub, and the issuance of debt
by CSW, Energy, Energy Sub, Orange LP Sub, Orange GP Sub, JV Sub, CSWO, the
Project Venture or OCLP Sub. Section 12(b) of the Act and Rules 45(a) and 45(b)
thereunder are or may be applicable to any extensions of credit or open account
advances between associated companies in connection with the proposed
transaction. Section 12(c) of the Act and Rule 42 thereunder are or may be
applicable to any retiring or redemption of securities, including any New
Limited Partner interest or debt, in connection with the proposed transaction.
Sections 6 and 7 of the Act are or may be applicable to the third party
financing of the transaction, including the pledge of the stock of JV Sub and
CSWO by Orange GP Sub and Orange LP Sub, respectively, and the collateral
assignment of the partnership interests of the Project Venture by JV Sub and
CSWO. Sections 6(a), 7 and 12(b) of the Act, and Rule 45 thereunder, are or may
be applicable to the guarantee by the Project Venture, JV Sub, CSWO, Orange GP
Sub and Orange LP Sub of OCLP Sub's obligations under the Orange Securities. To
the extent any other sections of the Act or rules of the Commission promulgated
thereunder may be applicable to the proposed transaction, CSW, Energy, Energy
Sub, Orange GP Sub, Orange LP Sub, JV Sub, CSWO, the Project Venture and OCLP
Sub hereby request appropriate authority thereunder.
The Applicants are not seeking authority in this Application-Declaration
with respect to the financing of an exempt wholesale generator (as defined in
Section 32(a) of the Act) (each, an "EWG") or a foreign utility company (as
defined in Section 33(e) of the Act) (each, a "FUCO").
Rule 54 under the Act is satisfied because Rules 53(a), (b) and (c) are
satisfied. As of August 15, 1996, CSW has invested approximately $850 million in
the aggregate in EWGs and FUCOs or approximately 45% of $1,883 million, the
average of CSW's consolidated retained earnings for the four consecutive
quarters ended June 30, 1996, thus satisfying Rule 53(a)(1). CSW maintains in
conformity with United States generally accepted accounting principles and makes
available the books and records and financial statements required by Rule
53(a)(2). No more than 2% of the employees of the Operating Companies presently
render services to any EWG or FUCO in which CSW owns an interest, satisfying
Rule 53(a)(3). CSW submitted those documents required by Rule 53(a)(4) to be
submitted. None of the conditions described in Rule 53(b) exist with respect to
CSW or any of its subsidiaries, thereby satisfying such rule and making Rule
53(c) inapplicable.
Item 5. Procedure
Item 5 is hereby restated in its entirety to read as follows: It is
requested that the Commission issue and publish no later than September 27,
1996, the requisite notice under Rule 23 with respect to the filing of this
Application-Declaration, such notice to specify a date not later than October
22, 1996, as the date after which an order granting and permitting this
Application-Declaration to become effective may be entered by the Commission and
the Commission enter not later than October 23, 1996, an appropriate order
granting and permitting this Application-Declaration to become effective.
The Applicants respectfully request that appropriate and timely action be
taken by the Commission in this matter in order that OCLP Sub may be organized
and the Orange Securities may be issued in the time period contemplated hereby.
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 Commission may assist in the preparation of the
Commission's decision in this matter. There should be no 30-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 such order be
made effective immediately upon the entry thereof.
Item 6. Exhibits and Financial Statements
Item 6 is hereby amended to file the following exhibits:
Amended
Exhibit 1 - Proposed Notice of Proceeding.
Amended
Exhibit 3 - Preliminary Opinion of Milbank, Tweed, Hadley & McCloy,
counsel for CSW, Energy, Energy Sub, Orange GP Sub, Orange
LP Sub, JV Sub, CSWO, the Project Venture and OCLP Sub (to
be filed by amendment).
Amended
Exhibit 3 - Final or "past-tense" Opinion of Milbank, Tweed, Hadley &
McCloy, counsel for CSW, Energy, Energy Sub, Orange GP Sub,
Orange LP Sub, JV Sub, CSWO, the Project Venture and OCLP
Sub (to be filed with Certificate of Notification).
Amended
Exhibit 5C- Financial Statements per books and pro forma as of June 30,
1996 for CSW and Energy - Orange Securities Option (to be
filed by amendment).
S I G N A T U R E
Pursuant to the requirements of the Public Utility Holding Company 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: September 20, 1996
CENTRAL AND SOUTH WEST CORPORATION
By: /s/WENDY G. HARGUS
Wendy G. Hargus
Treasurer
S I G N A T U R E
Pursuant to the requirements of the Public Utility Holding Company 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: September 20, 1996
CSW ENERGY, INC.
By: /s/TERRY D. DENNIS
Terry D. Dennis, President and
Chief Executive Officer
S I G N A T U R E
Pursuant to the requirements of the Public Utility Holding Company 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: September 20, 1996
CSW DEVELOPMENT-I, INC.
By: /s/TERRY D. DENNIS
Terry D. Dennis, President and
Chief Executive Officer
S I G N A T U R E
Pursuant to the requirements of the Public Utility Holding Company 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: September 20, 1996
ORANGE COGENERATION GP II, INC.
By: /s/MICHAEL T. MORAN
Michael T. Moran, Chief
Executive Officer
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: September 20, 1996
CSW ORANGE II, INC.
By: /s/TERRY D. DENNIS
Terry D. Dennis, President
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 partnership has duly caused this document to
be signed on its behalf by the undersigned thereunto duly authorized.
Dated: September 20, 1996
ORANGE COGENERATION LIMITED PARTNERSHIP
By: ORANGE COGENERATION G.P., INC.,
its general partner
By: /s/MICHAEL T. MORAN
Michael T. Moran, Chief
Executive Officer
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: September 20, 1996
CSW ORANGE, INC.
By: /s/TERRY D. DENNIS
Terry D. Dennis, President
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: September 20, 1996
ORANGE COGENERATION G.P., INC.
By: /s/MICHAEL T. MORAN
Michael T. Moran, Chief
Executive Officer
INDEX OF EXHIBITS
EXHIBIT TRANSMISSION
NUMBER EXHIBITS METHOD
- -----------------------------------------------------------------
1 Proposed Notice of Proceeding Electronic
(amended exhibit).
3 Preliminary Opinion of Milbank, ---
Tweed, Hadley & McCloy, counsel
for CSW, Energy, Energy Sub,
Orange GP Sub, Orange LP Sub, JV
Sub, CSWO, the Project Venture
and OCLP Sub (to be filed by
amendment).
4 Final "past-tense" Opinion of ---
Milbank, Tweed, Hadley & McCloy,
counsel for CSW, Energy, Energy Sub,
Orange GP Sub, Orange LP Sub, JV
Sub, CSWO, the Project Venture
and OCLP Sub (to be filed with the
Certificate of Notification).
5C Financial Statements per books ---
and pro forma as of June 30,
1996 for CSW and Energy - Orange
Securities Option (to be filed by
amendment).
EXHIBIT 1
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35 - ______)
Filings Under the Public Utility Holding Company Act of 1935 ("Act")
__________, 1996
Notice is hereby given that the following filing(s) has/have been made with
the Commission pursuant to provisions of the Act and rules promulgated
thereunder. All interested persons are referred to the application(s) and/or
declaration(s) for complete statements of the proposed transaction(s) summarized
below. The application(s) and/or declarations(s) and any amendment(s) thereto
is/are available for public inspection through the Commission's Office of Public
Reference. Interested persons wishing to comment or request a hearing on the
application(s) and/or declaration(s) should submit their views in writing by
__________, 1996 to the Secretary, Securities and Exchange Commission,
Washington, D.C. 20549, and serve a copy on the relevant applicant(s) and/or
declarant(s) at the address(es) specified below. Proof of service (by affidavit
or, in case of an attorney at law, by certificate) should be filed with the
request. Any request for hearing shall identify specifically the issues of fact
or law that are disputed. A person who so requests will be notified of any
hearing, if ordered, and will receive a copy of any notice or order issued in
the matter. After said date, the application(s) and/or declaration(s), as filed
or as amended, may be granted and/or permitted to become effective.
Central and South West Corporation, et al. (70-8133)
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"), CSW Energy, Inc., a Texas corporation and a wholly-owned
subsidiary of CSW ("Energy"), CSW Development-I, Inc., a Delaware corporation
and a wholly-owned subsidiary of Energy ("Energy Sub"), Orange Cogeneration GP
II, Inc., a Delaware corporation and a subsidiary of Energy Sub ("Orange GP
Sub"), CSW Orange II, Inc., a Delaware corporation and a wholly-owned subsidiary
of Energy Sub ("Orange LP Sub"), Orange Cogeneration G.P., Inc., a Delaware
corporation and a wholly-owned subsidiary of Orange GP Sub ("JV Sub"), CSW
Orange, Inc., a Delaware corporation and a wholly-owned subsidiary of Orange LP
Sub ("CSWO"), Orange Cogeneration Limited Partnership, a Delaware limited
partnership and a subsidiary of JV Sub and CSWO (the "Project Venture" and
collectively with CSW, Energy, Energy Sub, Orange GP Sub, Orange LP Sub, JV Sub
and CSWO, the "Applicants"), have filed a post-effective amendment to the
Application-Declaration in File No. 70-8133 (the "Application-Declaration") to
amend the Application-Declaration as follows.
By order dated April 15, 1993 (HCAR No. 25796), the Commission authorized
the then existing Applicants to form CSWO, JV Sub and the Project Venture and to
purchase the Orange Cogeneration Project (the "Project") from certain third
parties. The Commission also authorized the then existing Applicants to incur
certain development expenses not to exceed $7 million in connection with the
Project. By order dated February 9, 1994 (HCAR No. 25988), the Commission
authorized the then existing Applicants to obtain a credit facility (the "Credit
Facility") for the construction and operation of the Project in an amount up to
$140 million. The Commission also authorized an investment in the Project
Venture by a third party (the "New Limited Partner") in lieu of term financing
for the Project. The then existing Applicants were authorized to advance certain
funds, in the event the Project Venture was unable to obtain third party Project
financing prior to the start of Project construction, in the form of loans, open
account advances or additional equity contributions to the Project Venture from
Energy in an aggregate amount not to exceed $125 million. In addition, the
Commission authorized the issuance of corporate guaranties by the then existing
Applicants or stand-by letters of credit with the then existing Applicants as
account party in an amount not to exceed $50 million, such guaranties or letters
of credit to support payment obligations of the Project Venture required by the
provider of third party financing for the Project or fuel suppliers, fuel
transportation or other third parties under various project agreements.
By order dated September 12, 1994 (HCAR No. 26122), the Commission
authorized the then existing Applicants to organize Orange GP Sub and Orange LP
Sub and for Orange LP Sub to be assigned the stock of CSWO held by Energy Sub
and Orange GP Sub to be assigned the stock of JV Sub held by Energy Sub. The
Applicants now seek a supplemental order of the Commission under Sections 6(a),
7, 9(a), 10 and 12(b) of the Act, and Rules 43, 45 and 51 thereunder,
additionally authorizing the following actions by the Applicants: (i) the
organization of a wholly-owned subsidiary of the Project Venture ("OCLP Sub"),
including the sale of the securities of OCLP Sub by it to the Project Venture
and the acquisition of such securities by the Project Venture; (ii) the issuance
by OCLP Sub of certain debt securities (the "Orange Securities") to third
parties in reliance on exemptions to the registration of the Orange Securities
under the Securities Act of 1933, as amended, including such exemptions
available under Rule 144A thereunder, which third parties will have no recourse
under the Orange Securities to CSW or any of its domestic public utility
subsidiaries; (iii) the loan by OCLP Sub to the Project Venture of the proceeds
of the Orange Securities received by OCLP Sub; (iv) the guarantee by the Project
Venture, JV Sub, CSWO, Orange GP Sub and Orange LP Sub of OCLP Sub's obligations
under the Orange Securities; and (v) the pledge by each of the Project Venture,
JV Sub, CSWO, Orange GP Sub and Orange LP Sub of substantially all of its
respective assets, including the partnership interests in the Project Venture
held by JV Sub and CSWO, the securities of JV Sub held by Orange GP Sub and the
securities of CSWO held by Orange LP Sub.
It is proposed that the Project Venture form OCLP Sub, which the Applicants
anticipate will be incorporated under the laws of the State of Delaware with an
authorized capital of up to 1,000 shares of common stock without par value. The
Project Venture would subscribe to all of OCLP Sub's common stock, upon approval
of the Commission of such investment. The organization of OCLP Sub upon the
terms described above will comply with Sections 9(a) and 10 of the Act, and the
Project Venture seeks authority from the Commission to undertake such
transactions.
In the event OCLP Sub is formed, CSW, Energy, Energy Sub, Orange GP Sub,
Orange LP Sub, JV Sub, CSWO and the Project Venture hereby request authority to
include OCLP Sub in the flow of funds for equity contributions, open account
advances and intercompany loans on the terms and in the manner authorized by the
prior orders of the Commission in this File No. 70-8133.
The Applicants seek to organize OCLP Sub to facilitate the procurement of
permanent financing for the Project. It is desirable that the issuer of the debt
securities (as more particularly described below), the proceeds of which will
provide such permanent financing for the Project, be an entity for which the
possibility of bankruptcy is remote, and the ownership structure proposed in the
Application-Declaration is the method presently used in the securities market to
finance a privately-owned nonutility project, such as the Project.
In lieu of the term loan financing previously authorized in this file, the
permanent financing of the Project may be obtained by the Applicants through the
issuance by OCLP Sub of the Orange Securities to third parties in reliance on
exemptions to the registration of the Orange Securities under the Securities Act
of 1933, as amended, including such exemptions available under Rule 144A
thereunder. It is anticipated that OCLP Sub would loan to the Project Venture
the proceeds of the Orange Securities received by OCLP Sub (the "OCLP Sub
Loan"). The OCLP Sub Loan would be on substantially the same terms as the Orange
Securities, which terms would be established by OCLP Sub and the purchasers of
the Orange Securities in an "arm's-length" transaction in accordance with market
expectations and requirements, to ensure that OCLP Sub will be able to make the
debt payments required with respect to the Orange Securities. The Project
Venture would distribute the proceeds of the OCLP Sub Loan to its partners,
including JV Sub and CSWO, to reimburse such partners for costs and risks
incurred by such partners in connection with the development and construction of
the Project.
It is anticipated that the Project Venture, JV Sub, CSWO, Orange GP Sub and
Orange LP Sub may be required by the third party providers of the Credit
Facility or the purchasers of the Orange Securities (collectively, the "Project
Lenders") to guarantee OCLP Sub's obligations under the Orange Securities. In
connection with such guarantee, each of the Project Venture, JV Sub, CSWO,
Orange GP Sub and Orange LP Sub may be required to pledge or assign as
collateral substantially all of its respective assets, including the partnership
interests in the Project Venture held by JV Sub and CSWO, the securities of JV
Sub held by Orange GP Sub and the securities of CSWO held by Orange LP Sub. The
Applicants believe that the Project Lenders may require each such guarantee,
pledge and collateral assignment described above, and that such requirement is
consistent with ordinary market practices for financings of privately-held
nonutility projects such as the Project. No fees or interest will be payable to
the Project Venture, JV Sub, CSWO, Orange GP Sub or Orange LP Sub in respect of
such guarantees, pledges or collateral assignments. For the Commission, by the
Division of Investment Management, pursuant to delegated authority.
Jonathan G. Katz
Secretary
