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File No. 70-____
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1 APPLICATION-DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
_______________________________________________
PUBLIC SERVICE COMPANY OF OKLAHOMA
212 East 6th Street
Tulsa, Oklahoma 74119-1212
(Names of company filing this statement and
address of principal executive office)
___________________________________________________
CENTRAL AND SOUTH WEST CORPORATION
(Name of top registered holding company parent)
___________________________________________________
William R. McKamey
General Manager
Public Service Company of Oklahoma
212 East 6th Street
Tulsa, Oklahoma 74119-1212
Wendy G. Hargus, Treasurer
Central and South West Corporation
1616 Woodall Rodgers Freeway
Dallas, Texas 75202
Joris M. Hogan, Esq.
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, New York 10005
(Name and addresses of agents for service)
Public Service Company of Oklahoma, an Oklahoma
corporation ("PSO"), is a wholly-owned electric utility
subsidiary of Central and South West Corporation ("CSW"), a
Delaware corporation and a registered holding company under the
Public Utility Holding Company Act of 1935, as amended (the
"Act").
Item 1. Description of Proposed Transaction
The Company hereby requests authority to make equity
investments in Nuvest, L.L.C., an Oklahoma limited liability
company ("Nuvest"), and Numanco, L.L.C., an Oklahoma limited
liability company ("Numanco LLC"), and to enter into the related
transactions described in this Application.
Business of the Numanco Companies
NSS Numanco, Inc., a Pennsylvania corporation and a
wholly-owned subsidiary of Nuvest ("Numanco Inc.", and together
with Nuvest and Numanco LLC, collectively, the "Numanco
Companies", and each individually a "Numanco Company") provides
temporary staff augmentation services to public utility companies
throughout the United States. These services are principally
required in the areas of (1) maintenance and repair, (2)
monitoring, (3) major clean-up, and (4) decontamination, either
on a periodically scheduled basis or on a non-scheduled basis
during an outage at a power plant or substation, when the
utility's own complement of specialized personnel is inadequate
to staff the added requirements and to meet accelerated
timetables. At present, the Numanco Companies provide manpower
services primarily to nuclear electric generating plants and
associated substations. The Numanco Companies maintain a small
staff of highly trained personnel and, through an extensive
network of specially trained individuals prepared to accept
temporary assignments, augments this staff with the personnel
required for each assignment. All temporary personnel are
employees of a Numanco company. The Numanco Companies are
subject to rigorous audits by the Nuclear Regulatory Commission
as to the credentials of their personnel and their hiring and
security practices.
Background of the Proposed Transactions
Until February 26, 1996, Numanco Inc. was a subsidiary
of Nuclear Support Services, Inc., a Virginia corporation
("NSSI"). NSSI, Numanco Inc. and other subsidiaries of NSSI were
debtors-in-possession in proceedings for reorganization under the
provisions of Chapter 11 of the United States Bankruptcy Code
pending in the United States Bankruptcy Court, Middle District of
Pennsylvania, Harrisburg Division (the "Bankruptcy Court"). By
order dated February 23, 1996, the Bankruptcy Court approved the
sale by NSSI of all of the outstanding shares of capital stock of
Numanco Inc. (the "Numanco Stock") to Nuvest. In connection with
the sale, certain assets and liabilities of Numanco Inc. were
transferred or otherwise removed from Numanco Inc. The purchase
price for the Numanco Stock was $2,300,000 in cash, subject to
certain adjustments.
The funding of the purchase price of the Numanco Stock
was provided by PSO to Nuvest pursuant to a Pre-interim Agreement
Funding among Nuvest, Numanco LLC and PSO, dated February 21,
1996 (the "Pre-interim Agreement"). Under the Pre-interim
Agreement, PSO advanced $3,700,000 to Canton, L.L.C., an Oklahoma
limited liability company ("Canton"), which is owned 50% each by
Richard Smith and Monika Smith. Canton loaned that amount to
Nuvest. Initially, Nuvest was owned 99% by Charles G. Bates and
1% by Pat R. Bucklin; as a result of certain financing described
below, however, Nuvest is now owned 99% by Monika Smith and 1% by
Pat R. Bucklin. Nuvest, in turn, used $2,300,000 of the proceeds
of the loan from Canton to purchase the Numanco Stock and loaned
the balance of $1,400,000 of the proceeds of such loan to Numanco
Inc. Numanco Inc. on-loaned the proceeds of the $1,400,000 loan
to Numanco LLC, which is owned 90% by Nuvest and 10% by Numanco
Inc. Numanco Inc. also transferred to Numanco LLC its rights and
obligations under all transferrable contracts to provide services
to customers. All new contracts to provide services to customers
will be entered into with Numanco LLC, which will thus eventually
succeed to all of the business of Numanco Inc. Canton, Nuvest
and Numanco LLC are all managed by Richard Smith. Mr. Smith is
also a consultant to Numanco Inc.
PSO entered into the Pre-Interim Agreement as a
preliminary step to formulating plans for an investment in the
Numanco Companies and financing their operations, subject to
obtaining authorization of the Commission therefor. PSO found it
necessary to take such a preliminary step due to the
extraordinary time pressure for the sale of Numanco Inc. imposed
as a consequence of the bankruptcy proceedings. The advance by
PSO was made with no obligation on its part other than "to make a
good faith effort to develop an interim financing strategy and
final investment agreement subject to the approval of the . . .
Commission." Nuvest and Numanco LLC agreed to return the advance
to PSO should Nuvest be unsuccessful in its acquisition of the
Numanco Stock or should PSO not obtain authorization from the
Commission to invest in and make loans to the Numanco Companies.
Nuvest and Numanco LLC also agreed to limit the use of the
proceeds of the advance to paying for the Numanco Stock and
funding the working capital needs of the Numanco Companies,
consistent with budgeted amounts. The Manager's Agreements for
Nuvest and Numanco LLC provide for operations consistent with the
initial business plans approved by PSO. The advance made by PSO
did not bear interest, was not accompanied by a security interest
in any assets of Canton or any of the Numanco Companies and was
not represented or evidenced by any securities. No option or
stand-by fees were paid or received by PSO in respect of the
advance.
On April 24, 1996 additional working capital funding
for Numanco Inc. and Numanco LLC was obtained by means of a
revolving loan facility (the "BOK Facility") from Bank of
Oklahoma, N.A. (the "Bank"). Under the BOK Facility, borrowings
may be made by Numanco Inc. and Numanco LLC, as joint and several
debtors, in an aggregate amount equal to 80% of the amount owing
(subject to certain adjustments) under the accounts receivable of
Numanco Inc. and Numanco LLC, but not to exceed $2,000,000
outstanding at any one time. As security for loans made under
the BOK Facility, Numanco Inc. and Numanco LLC have granted a
security interest to the Bank in all of their accounts receivable
and certain other intangible assets. Payment of the principal of
and interest on the loans made pursuant to the BOK Facility have
been guaranteed by Richard Smith, Monika Smith and R.H. Smith and
Associates, Inc. In connection with the establishment of the BOK
Facility, PSO subordinated its right to repayment of its advance
to Nuvest and Numanco Inc. (made through Canton) to the right of
prior repayment of all amounts owing under the BOK Facility. In
addition, as a result of the BOK Facility guarantee by Richard
Smith, Monika Smith and R.H. Smith and Associates, Inc., Charles
G. Bates transferred his interest in Nuvest to Monika Smith.
Proposed Investments in the Numanco Companies
PSO now proposes to invest in the Numanco Companies as
follows:
(i) Nuvest will borrow $3,000,000 from a third party
lender (the "New Loan"). The obligations of
Nuvest under the New Loan will be guaranteed by
PSO (the "PSO Guaranty").
(ii) Nuvest will use the proceeds of the New Loan to
repay $3,000,000 of the $3,700,000 principal
amount of the loan made by Canton to Nuvest, and
Canton in turn will use the proceeds of such loan
repayment to repay $3,000,000 of the $3,700,000
advance made to it by PSO.
(iii) PSO, Canton, Nuvest and Numanco LLC will effect
the following simultaneous transactions (the "PSO
Acquisitions of Capital Contribution and Voting
Membership Interests"): (a) PSO will cancel the
obligation of Canton to repay the remaining unpaid
$700,000 of the $3,700,000 advance made to it by
PSO; (b) Canton will cancel the obligation of
Nuvest to repay the remaining unpaid $700,000 of
the $3,700,000 principal amount of the loan made
by Canton to Nuvest; (c) Nuvest shall repurchase
the 1% capital contribution interest of Pat R.
Bucklin in Nuvest for $5,500; (d) Nuvest shall
convert the cancelled $700,000 loan obligation
into a capital contribution interest of PSO in
Nuvest, giving PSO a 70% interest in the total
capital contributions, profits and losses of
Nuvest and a 4.9% membership voting interest in
Nuvest, and giving Monika Smith a 30% interest in
the total capital contributions, profits and
losses of Nuvest and a 95.1% membership voting
interest in Nuvest; (e) Nuvest will cancel the
obligation of Numanco Inc. to repay the $1,400,000
principal amount of the loan made by Nuvest to
Numanco Inc.;
(iv) Numanco Inc. and Numanco LLC will obtain a
$9,000,000 line of credit from a third party
lender (the "Credit Line"). The Credit Line will
be secured by short term accounts receivable and
will be guaranteed by PSO.
Governing Instruments of the Numanco Companies
Contemporaneously with and subject to the issuance of
an order by the Commission granting the authorization requested
in this Application, PSO, the Numanco Companies and Monika Smith
will enter into a Member Agreement which will provide for the
obtaining by Nuvest of the New Loan, the issuance by PSO of the
PSO Guaranty, and the consummation by the parties of the
transactions effecting the PSO Acquisitions of Capital
Contribution and Voting Membership Interests (the "Member
Agreement"). The Member Agreement will also provide for the
respective rights and obligations of the parties with respect to
the operation and management of the Numanco Companies. Included
in the Member Agreement are provisions which define "Events of
Default" and which provide for the increase to 51% of PSO's
membership voting interest in Nuvest and Numanco LLC, and the
reduction to 49% of the aggregate membership voting interest of
the other members in Nuvest and Numanco LLC, upon the occurrence
of an Event of Default. Events of Default include failure to
achieve specified percentages of certain financial goals set
forth in the business plan for the Numanco Companies and the
failure to make timely payments of principal and interest on
indebtedness or otherwise to comply with contractual obligations,
as more fully described in subparagraph (iv) below.
In addition, Amended and Restated Articles of
Organization for Nuvest and Numanco LLC will be filed with the
Oklahoma Secretary of State, and Amended and Restated Operating
Agreements for Nuvest and Numanco LLC will also be executed (the
"Operating Agreements"). Finally, Nuvest and Numanco LLC each
entered into a Manager's Agreement with Richard H. Smith on
February 21, 1996 (the "Manager's Agreements"). Such documents
contain or will contain the following provisions:
(i) Duration of Corporate Existence
Nuvest and Numanco LLC were formed upon the filing for
record of their respective Articles of Organization with the
Oklahoma Secretary of State on February 20, 1996, and each shall
continue its existence until 12:00 midnight, December 31, 2015,
unless sooner terminated as provided in its Amended and Restated
Operating Agreement.
(ii) Authorization and Issuance of Units
Nuvest and Numanco LLC shall each have authority to
issue an aggregate of 1,000 Units. The various rights of the
Members and the Manager in respect of profits and losses, voting
and management of Nuvest and Numanco LLC are described in
subparagraphs (iii)-(v) below.
(iii) Allocations and Distributions
Assets available for distribution from Nuvest or
Numanco LLC will be determined by its Manager. Any distribution
of property shall be treated as a distribution of cash in the
amount of the fair market value of such property. Distributions
will be made to Members pro rata, according to the number of
Units held by each Member, with all outstanding Units being
treated equally. All items of income, loss, deduction or credit
will be allocated to all Members or their assignees in accordance
with such Members' ownership of Units, all Units being treated
equally.
(iv) Management and Operation of Business
Under the Member Agreement, the Operating Agreements
and the Manager's Agreements, Management of Nuvest and Numanco
LLC will be vested in a manager (the "Manager"). Unless and
until there has occurred an Event of Default under the Member
Agreement, the Manager will be Richard H. Smith. Upon the
occurrence of an Event of Default, the holders of a majority of
the membership voting interests in each of Nuvest and Numanco LLC
shall be entitled to designate a new Manager for such company at
any annual or special meeting called for that purpose. Any
person serving as manager will be able to exercise all the powers
of such company, whether derived from law, such company's
Articles of Organization or its Operating Agreement, except such
powers as are vested solely in the Members.
Unless and until there shall have occurred an Event of
Default, no manager shall have the authority to cause either
Nuvest or Numanco LLC to do or commit to do any of the following
acts without the prior unanimous written consent from all its
respective Members: (a) borrow money in excess of $100,000, (b)
sell any assets having a fair market value over $500,000,
(c) enter into any contract involving an anticipated total
expenditure of over $100,000, (d) do any act which would make it
impossible to carry on the ordinary business of Nuvest or Numanco
LLC, as the case may be, (e) compromise any claim over $50,000,
(f) admit a person or entity as a Member, (g) knowingly perform
any act that would subject a Member to personal liability,
(h) amend the Articles of Organization, or (i) approve any
business plan. Upon the occurrence of an Event of Default, the
Manager shall have the authority to cause Nuvest or Numanco LLC,
as the case may be, to do or commit to do the foregoing acts upon
a majority vote of its respective Members. An Event of Default
will occur if (i) the Numanco Companies fail to meet at least 75%
of the goal of their collective business plan for earnings before
income tax, depreciation and amortization, (ii) the Numanco
Companies exceed 110% of the budgeted administrative and general
expense for any quarter, as set forth in their collective
business plan, (iii) Nuvest or Numanco LLC default in the
performance of any material term, covenant or agreement in any
material contract, document or instrument to which it is a party,
and such default remains uncured beyond any applicable grace
periods, (iv) any false representation or warranty in the Member
Agreement or in connection with the transactions contemplated
therein results in a material adverse effect on Nuvest or Numanco
LLC, (v) any Numanco Company shall make an assignment for the
benefit of creditors, or shall become insolvent or bankrupt, or
shall take any action toward dissolution or liquidation, or (vi)
any event occurs that would result in the dissolution of a
Numanco Company under the laws of the State of Oklahoma.
(v) Rights and Obligations of Members
Actions requiring a vote of the Members may be taken
upon a majority vote of such Members. Unless and until there
shall have occurred an Event of Default, PSO shall hold 4.9% of
all membership voting interests of Nuvest.
As PSO will not hold "voting securities" within the
meaning of the Act in excess of 5% of the issued and outstanding
membership voting interests of either Nuvest or Numanco LLC after
the consummation of the contemplated transactions, it is the
position of PSO that neither Nuvest nor Numanco LLC will be a
subsidiary company of the Company within the meaning of
Section 2(a)(8)(A) of the Act, nor will it be an affiliate of the
Company within the meaning of Section 2(a)(11)(A) of the Act. In
addition, except possibly in certain situations after an Event of
Default, the amount and type of securities of any Numanco Company
held by PSO would not provide PSO with the means to direct the
management and affairs of such Numanco Company. If an Event of
Default should occur, PSO would limit its control over the
Numanco Companies to one or more of the following: (i) electing
a new Manager for either or both of Nuvest or Numanco LLC, (ii)
electing new officers for Numanco Inc., (iii) overseeing the
development of a restructured operating plan, and/or (iv)
liquidating and dissolving the Numanco Companies.
(vi) Transfer of Units
No transfer of Units by any Member shall be made if the
transfer (a) would violate applicable federal and state
securities laws or rules and regulations of the Commission, any
state securities commission or any other governmental authority
with jurisdiction over the transfer, (b) would materially
adversely affect the classification of either Nuvest or Numanco
LLC as a partnership for federal or (as applicable) state income
tax purposes, or (c) would affect either Nuvest's or Numanco
LLC's qualification as a limited liability company under the
Oklahoma Limited Liability Company Act, as amended. No Units may
be transferred by a Member unless a majority vote of the Members
approving such transfer has been obtained, provided, however,
that no such approval shall be required with respect to any
transfer of Units by PSO to CSW or any direct or indirect
subsidiary of CSW. Any transfer of Units not made in accordance
with the applicable Operating Agreement shall be null and void.
(vii) Dissolution and Liquidation
The Numanco Companies shall be dissolved and their
affairs shall be wound up upon the occurrence of any of the
following: (a) not later than December 31, 2015, (b) all Members
of any Numanco Company vote to dissolve, or (c) if, upon the
occurrence of an Event of Dissociation (as defined below), the
remaining Members fail to continue the existence of the Numanco
Companies pursuant to the terms of Nuvest's or Numanco LLC's
Operating Agreement. Upon dissolution, the Numanco Companies
shall immediately commence to liquidate and wind up their
affairs. The Members shall continue to share profits and losses
during the period of liquidation and winding up in the same
proportion as before commencement of winding up and dissolution.
Upon the death, incapacity, resignation, expulsion,
bankruptcy or dissolution of a Member, or the occurrence of any
other event which terminates the continued membership of a Member
(any of such events being defined herein as an "Event of
Dissociation"), the Numanco Companies shall dissolve and their
affairs shall be wound up unless there is at least one remaining
Member and within sixty days after the occurrence of an Event of
Dissociation, all the remaining Members unanimously agree to
continue operations. No Member may voluntarily resign from a
Numanco Company until after the fifth anniversary of the date of
the applicable Operating Agreement.
PSO has not established a divestment strategy with
respect to its proposed investment in the Numanco Companies. PSO
views its proposed investment in the Numanco Companies as a
natural extension of its core business of operating and
maintaining electric generation plants and substations. PSO
expects the Numanco Companies to be the catalyst for other
services to be developed in the future, and for the expansion of
services rendered to operators of fossil fueled electric
generation plants and substations, which will benefit PSO and its
customers.
Request For Authority
PSO hereby requests authority to (i) issue the PSO
Guaranty and (ii) to consummate the PSO Acquisitions of Capital
Contribution and Voting Membership Interests. To the extent that
any other aspects of the proposed transactions require authority
from the Commission, PSO hereby requests the same.
PSO agrees to file semi-annual certificates of
notification, no later than sixty (60) days after the end of each
semi-annual period, concerning the business activities carried
out pursuant to any order approving this Application, which
certificates of notification shall contain, inter alia, the
following information: (i) a description of all services
performed by the Numanco Companies during the period; (ii) a
description of any services provided to PSO by the Numanco
Companies during the period; (iii) a statement of any dividends
or interest paid to PSO, both for the period and cumulatively, as
a result of its equity interests in the Numanco Companies; and
(iv) a statement regarding the nature and consequences of any
Event of Default under the Member Agreement occurring during the
period, including any resulting change in the membership voting
interests held by PSO in the Numanco Companies and any exercise
of control by PSO over the management and affairs of the Numanco
Companies.
Item 2. Fees, Commissions and Expenses
The estimate of the approximate amount of fees and expenses
payable in connection with the transactions described herein is
as follows:
Holding Company Act filing fee.......... $ 2,000*
Legal Fees and Expenses
Milbank, Tweed, Hadley & McCloy
New York, New York................... $ 15,000
Doerner, Saunders, Daniel
& Anderson
Tulsa, Oklahoma...................... $ 16,000
Miscellaneous and incidental
expenses including travel,
telephone and postage................ 500
--------
$ 33,500
========
_______________
* Actual Amount.
Item 3. Applicable Statutory Provisions
General
Sections 6, 7, 9, 10 and 11 of the Act and Rule 23 under
the Act are or may be applicable to the proposed transactions
described herein. Sections 6 and 7 are applicable to the
proposed issuance of the PSO Guaranty. Sections 9(a)(1) and 10
are applicable to the PSO Acquisitions of Capital Contribution
and Voting Membership Interests. Section 6 of the Act makes
unlawful the issuance of any security by a subsidiary of a
registered holding company without the prior approval of the
Commission under Section 7. Section 2(a)(16) of the Act defines
the term "security" as including any guaranty of a note.
Section 9(a) of the Act makes unlawful the acquisition by a
subsidiary of a registered holding company of "any securities . .
. or any other interest in any business" without the prior
approval of the Commission under Section 10. Under Section
10(c)(1), the Commission may not approve an acquisition of
securities or any other interest in any business if the proposed
acquisition is "detrimental to the carrying out of the provisions
of Section 11". Under Section 11(b)(1), the Commission must
limit the operations of public utility holding companies and
their subsidiaries to such other businesses as are reasonably
incidental, or economically necessary or appropriate, to the
operations of such integrated public-utility system. The
Commission may permit as reasonably incidental, or economically
necessary or appropriate to the operations of one or more
integrated public-utility systems the retention of an interest in
any business (other than the business of a public-utility company
as such) which the Commission shall find necessary or appropriate
in the public interest or for the protection of investors or
consumers and not detrimental to the proper functioning of such
system or systems.
The proposed investment by PSO in the Numanco Companies
satisfies the requirements of Sections 9(a)(1) and 10 in that it
is incidental, and economically necessary or appropriate to,
PSO's core business of generating, transmitting and distributing
electric energy and in that such investment will primarily
benefit the Company and its customers. The proposed investment
is also appropriate in the public interest and is not detrimental
to the proper functioning of PSO or the CSW system. The services
to be provided by the Numanco Companies, as described above, will
result in significant benefits to PSO's customers through the
ability of PSO to staff and plan for its non-scheduled and
periodically scheduled clean-up and maintenance requirements in a
more efficient and economical way. These advantages should
increase as the Numanco Companies become more active in rendering
services to operators of fossil-fueled plants and as the scope of
services rendered expands. PSO's investment in the Numanco
Companies will be small relative to PSO's total financial
resources. Risks to the financial position of PSO also will be
limited because PSO will not be obligated to make further capital
contributions beyond its initial equity investment. PSO will not
seek recovery through higher rates from utility customers to
compensate for possible future losses or inadequate returns on
capital invested in the Numanco Companies, so that PSO's
shareholders will bear all risks associated with the proposed
transactions.
Likewise, the proposed transactions are fully consistent
with proposed Rule 58 under the Act. Paragraph (b)(1)(vii) of
proposed Rule 58 would permit PSO to acquire the securities of a
company primarily involved in the "sale of technical,
operational, management, and other similar kinds of services and
expertise, developed in the course of utility operations in such
areas as power plant and transmission system engineering,
development, design and rehabilitation; construction; maintenance
and operation; ... environmental licensing, testing and
remediation; and other similar areas".
The proposed investment also satisfies the two-pronged
"functional relationship" test established by the United States
Court of Appeals for the District of Columbia Circuit in Michigan
Consolidated Gas Co. v. SEC, 444 F.2d 913 (D.C. Cir. 1971), which
traditionally has been used by the Commission in applying Section
11(b)(1) of the Act. Under the "functional relationship" test,
an integrated public-utility system may retain an interest in
another business if (i) the additional business is "reasonably
incidental or economically necessary or appropriate" to the
integrated system, and (ii) the retention of the additional
business is in the public interest. Michigan Consolidated at
916. As discussed in the preceding paragraphs, the proposed
investment satisfies the first prong of the "functional
relationship" test in that it is reasonably incidental and
economically necessary and appropriate to PSO's core business.
The proposed investment is also consistent with the orders cited
in the footnote to the Commission's discussion of
paragraph (b)(1)(vii) of proposed Rule 58. (Holding Company Act
Release No. 35-26313 at note 27 (June 20, 1995).) These orders
authorize a variety of services to be rendered by new
subsidiaries of the applicants to non-affiliated electric utility
companies and others: Southern Company, Holding Company Act
Release No. 22132 (July 17, 1981), authorizing the sale of
"management, technical and training services to non-affiliates";
American Electric Power Company, Inc., Holding Company Act
Release No. 22468 (April 28, 1982), authorizing the sale of
"management, technical, and training expertise in the open,
competitive market to non-affiliated entities including domestic
and foreign governmental agencies, public utilities and other
business concerns"; Middle South Utilities, Inc., Holding Company
Act Release No. 22818 (January 11, 1983), as supplemented by
Holding Company Act Release No. 23152 (December 5, 1983),
authorizing the operation of "a consulting business for profit,
marketing to nonaffiliates management, technical, and training
expertise developed by System companies"; and New England
Electric System, Holding Company Act Release No. 22719 (November
19, 1982), authorizing the offering of "energy management
services on the open, competitive market exclusively to non-
affiliates, primarily the operators of large institutional,
commercial, residential or industrial buildings ... including the
installation of meters and controls on equipment, the
modification or replacement of inefficient equipment, and the
monitoring of energy consumption".
Although the aforementioned orders are referred to as
authorizing "consulting activities", they in fact authorize the
provision of a wide variety of services related to core electric
utility operations to public utilities and other customers
without restriction by a so-called "50% limitation" discussed in
In the Matter of CSW Credit, Inc., Holding Company Act Release
No. 25995 (March 2, 1995).
See, also, Eastern Utilities Associates, Holding Co.
Act Release No. 26232 (February 15, 1995), in which the
Commission recognized that the plain language of Section 11 of
the Act is a sufficient basis on which to grant authorization for
the sale of services to non-affiliates, without a 50% limitation,
when those services constitute a close complement to the
applicant's core business. The services authorized by prior
orders in the same matter included demand-side management and
energy management services (and the sale of related products) and
consulting services. The order also recognized that changes in
the utility industry (in that case the substitution of
efficiencies in energy use for the construction of additional
generating capacity) could result in expanded views of what
constitutes a part of, or is closely related to, the core
business of a public utility company or system. Finally, PSO
believes that its maintenance of equity interests in the Numanco
Companies will be consistent with GPU Nuclear Corporation,
Holding Co. Act Release No. 26139 (October 7, 1994). In that
order, GPU Nuclear Corporation was authorized to offer to non-
affiliates a wide range of services to nuclear power plant
operators similar to the services offered by the Numanco
Companies and based on expertise, resources and facilities
developed in the course of GPU's core business operations.
To the extent any other sections of the Act may be
applicable to the proposed transactions, PSO hereby requests
appropriate orders thereunder.
Rule 54
No proceeds from the proposed transactions will be used
by CSW or any subsidiary thereof for the direct or indirect
acquisition of an interest in an exempt wholesale generator, as
defined in Section 32 of the Act ("EWG"), or a foreign utility
company, as defined in Section 33 of the Act ("FUCO"). Rule 54
promulgated under the Act states that in determining whether to
approve the issue or sale of a security by a registered holding
company for purposes other than the acquisition of an EWG or a
FUCO, or other transactions by such registered holding company or
its subsidiaries other than with respect to EWGs or FUCOs, the
Commission shall not consider the effect of the capitalization or
earnings of any subsidiary which is an EWG or a FUCO upon the
registered holding company system if Rule 53(a), (b) and (c) are
satisfied. As set forth below, all applicable conditions set
forth in Rule 53(a) are, and, assuming the consummation of the
transactions proposed herein, will be, satisfied and none of the
conditions set forth in Rule 53(b) exist or will exist as a
result of the transactions proposed herein.
CSW's "aggregate investment" (as defined under Rule
53(a) of the Act) in EWGs and FUCOs as of June 25, 1996 was
approximately $848 million, or about 46% of CSW's "consolidated
retained earnings" as of March 31, 1996. CSW thus satisfies Rule
53(a)(1). CSW will maintain and make available the books and
records required by Rule 53(a)(2). No more than 2% of the
employees of CSW's operating subsidiaries will, at any one time,
directly or indirectly, render services to an EWG or FUCO in
which CSW directly or indirectly owns an interest, satisfying
Rule 53(a)(3). And lastly, CSW will submit a copy of Item 9 and
Exhibits G and H of CSW's Form U5S to each of the public service
commissions having jurisdiction over the retail rates of CSW's
operating utility subsidiaries, satisfying Rule 53(a)(4).
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 4. Regulatory Approval
No state regulatory authority and no federal regulatory
authority, other than the Commission under the Act, have
jurisdiction over the proposed transactions.
Item 5. Procedure
It is requested that the Commission issue and publish no
later than July 19, 1996, the requisite notice under Rule 23 with
respect to the filing of this Application, such notice to specify
a date not later than August 12, 1996, as the date after which an
order granting and permitting this Application to become
effective may be entered by the Commission and the Commission
enter not later than August 13, 1996, an appropriate order
granting and permitting this Application 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
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 (to be filed by amendment).
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.
Exhibit 4 -
Financial Statements of Public Service Company of
Oklahoma, as of March 31, 1996 (to be filed by
amendment).
Exhibit 5 -
Form of Member Agreement by and between Public Service
Company of Oklahoma, Monika Smith, Nuvest, L.L.C.,
Numanco, L.L.C. and NSS Numanco, Inc. (to be filed by
amendment).
Exhibit 6 -
Form of Amended and Restated Articles of Organization of
Numanco, L.L.C. (to be filed by amendment).
Exhibit 7 -
Form of Amended and Restated Operating Agreement of
Numanco, L.L.C. (to be filed by amendment).
Exhibit 8 -
Form of Amended and Restated Articles of Organization of
Nuvest, L.L.C. (to be filed by amendment).
Exhibit 9 -
Form of Amended and Restated Operating Agreement of
Nuvest, L.L.C. (to be filed by amendment).
Exhibit 10 -
Pre-interim Agreement Funding, dated February 21, 1996,
among Nuvest, L.L.C., Numanco, L.L.C. and Public Service
Company of Oklahoma.
Exhibit 11 -
Manager's Agreement, dated February 21, 1996, between
Nuvest, L.L.C. and Richard H. Smith (to be filed by
amendment).
Exhibit 12 -
Manager's Agreement, dated April 25, 1996, between
Numanco, L.L.C. and Richard H. Smith (to be filed by
amendment).
Item 7. Environmental Effects
The proposed transaction does not involve major federal
action having a significant effect on the human environment. To
the best of the Company's knowledge no federal agency has
prepared or is preparing an environmental impact statement with
respect to the proposed transaction.
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: July 16, 1996
PUBLIC SERVICE COMPANY
OF OKLAHOMA
By: /s/SHIRLEY S. BRIONES
Shirley S. Briones
Treasurer
INDEX OF EXHIBITS
EXHIBIT TRANSMISSION
NUMBER EXHIBITS METHOD
1 Preliminary Opinion of Milbank, ---
Tweed, Hadley & McCloy, counsel
to the Company (to be filed by
amendment).
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. Electronic
4 Financial Statements of Public ---
Service Company of Oklahoma, as of
March 31, 1996 (to be filed by
amendment).
5 Form of Member Agreement by and ---
between the Company, Monika Smith,
Nuvest, L.L.C., Numanco, L.L.C.
and NSS Numanco, Inc. (to be
filed by amendment).
6 Form of Amended and Restated ---
Articles of Organization of
Numanco L.L.C. (to be filed by
amendment).
7 Form of Amended and Restated ---
Operating Agreement of
Numanco L.L.C. (to be filed by
amendment).
8 Form of Amended and Restated ---
Articles of Organization of
Nuvest L.L.C. (to be filed by
amendment).
9 Form of Amended and Restated ---
Operating Agreement of
Nuvest L.L.C. (to be filed by
amendment).
10 Pre-interim Agreement Funding, Electronic
dated February 21, 1996, among
Nuvest, L.L.C., Numanco, L.L.C.
and Public Service Company of
Oklahoma.
11 Manager's Agreement, dated ---
February 21, 1996, between Nuvest,
L.L.C. and Richard H. Smith (to be
filed by amendment).
12 Manager's Agreement, dated ---
April 25, 1996, between Numanco,
L.L.C. and Richard H. Smith (to be
filed by amendment).
<PAGE>
EXHIBIT 3
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 declaration(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 manner. After said date, the application(s) and/or
declaration(s), as filed or as amended, may be granted and/or
permitted to become effective.
Public Service Company of Oklahoma (70-____)
Public Service Company of Oklahoma ("PSO"), an Oklahoma
corporation and a wholly-owned electric utility subsidiary of
Central and South West Corporation ("CSW"), a Delaware
corporation and a registered holding company under the Public
Utility Holding Company Act of 1935, as amended (the "Act"),
located at 212 East 6th Street, Tulsa, Oklahoma 74119, has filed
an application pursuant to Sections 6, 7, 9, 10, and 11 of the
Act and Rule 23 thereunder.
PSO is seeking authority to make equity investments in
Nuvest, L.L.C. and Numanco, L.L.C., both Oklahoma limited
liability companies (collectively, the "Numanco Companies"). The
Numanco Companies provide temporary staff augmentation services
to public utility companies throughout the United States. These
services are principally required in the areas of (1) maintenance
and repair, (2) monitoring, (3) major clean-up, and (4)
decontamination, either on a periodically scheduled basis or on a
non-scheduled basis during an outage at a power plant or
substation, when the utility's own complement of specialized
personnel is inadequate to staff the added requirements and to
meet accelerated timetables. At present, the Numanco Companies
provide manpower services primarily for nuclear electric
generating plants and associated substations. The Numanco
Companies maintain a small core staff of highly trained personnel
and, through an extensive network of specially trained
individuals prepared to accept temporary assignments, augments
this core staff with the personnel required for each assignment.
For the Commission, by the Division of Investment
Management, pursuant to delegated authority.
Jonathan G. Katz
Secretary
<PAGE>
EXHIBIT 10
Pre-interim Agreement Funding
Between
Nuvest L.L.C., Numanco L.L.C. and
Public Service Company Of Oklahoma
2/21/96
Rationale For Interim Agreement
Because of the short time frame in which Nuvest LLC and Numanco,
LLC has had to move in order to purchase NSS Numanco, Inc., PSO
has not been able to seek approval with the investment at the
SEC. PSO has also not been able to develop an interim financing
strategy and agreement for the project. While PSO intends to be
a participant in this venture, it must first meet PUHCA
requirements for the investment. In order for Numanco to meet
its obligations, PSO will provide interim financing for the deal
under the terms discussed below.
Amount Of The Transaction
PSO will provide $3,700,000 for a period not to exceed 60 days
with no obligation other than it will make a good faith effort to
develop an interim financing strategy and final investment
agreement subject to the approval of the Securities Exchange
Commission.
Terms Of The Agreement
I. The proceeds must be used exclusively for the purchase of
the company ($2,300,000), transition of the company to
Oklahoma, and necessary working capital needed to
administer and add additional contract manpower business.
Spending will be as defined in the attached
financial/budgetary projections.
II The advance will bind both parties to the final agreement
subject to SEC approval.
III PSO is under no obligation should the SEC not approve
the transaction. However, PSO will provide a reasonable
support period for the company to seek other independent
funding.
IV PSO will pay no stand-by fee for the right of this
agreement; PSO will in no way indemnify Numanco or any of
its members as a result of this commitment.
V PSO will receive no remuneration for this advance, this
advance in intended simply to provide PSO the option to
consummate the final deal subject to SEC approval.
VI PSO will make all diligent efforts to seek approval for
the final contract at the SEC.
VII PSO will have the option to extend this, interim
financing for a additional 90 days if needed for the SEC
approval process.
VIII Management authority will be as defined in the articles
of organization and operating agreement for Numanco LLC
and Nuvest LLC. Management must inform PSO should it
deviate from these spending limits.
IX Numanco LLC and Nuvest LLC will return the entire amount
within 120 days if approval is denied by the SEC unless
other arrangement have been made and mutually agreed
upon.
X PSO will pursue a definitive interim strategy and
agreement to be in-place prior to the expiration of this
interim agreement.
XI The total funding will be returned to PSO should Nuvest
LLC be unsuccessful in its bid to acquire NSS Numanco
from Nuclear Support Services.
XII Both Parties will negotiate and approve the final terms
and conditions of this agreement.
Approved By Manager of Nuvest LLC .
