File No. 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
APPLICATION-DECLARATION WITH RESPECT TO
THE FORMATION OF A JOINT VENTURE
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
EUA COGENEX CORPORATION
P.O. Box 2333, BOSTON, MASSACHUSETTS 02107
(Name of companies filing this statement
and address of principal executive offices)
EASTERN UTILITIES ASSOCIATES
(Name of top registered holding company parents of
applicants or declarants)
CLIFFORD J. HEBERT, JR., TREASURER
EASTERN UTILITIES ASSOCIATES
P.O. Box 2333, BOSTON, MASSACHUSETTS 02107
(Name and address of agents for service)
The Commission is requested to mail signed copies
of all orders, notices and communications to:
ARTHUR I. ANDERSON, P.C.
McDermott, Will & Emery
75 State Street
Boston, MA 02109
ITEM 1. DESCRIPTION OF THE PROPOSED TRANSACTION.
I. Overview of Application/Declaration. EUA Cogenex Corporation
("Cogenex"), a Massachusetts corporation and a wholly-owned subsidiary of
Eastern Utilities Associates ("EUA"), a Massachusetts business trust and a
registered holding company under the Public Utility Holding Company Act of
1935 (the "Act") files this application-declaration with the Securities and
Exchange Commission (the "Commission"). The Applicant seeks Commission
approval to the extent required under the Act for Cogenex: (i) to form a
Delaware limited liability company with Westar Business Services
("Westar"), a Kansas corporation and a wholly-owned subsidiary of Western
Resources, Inc., a Kansas corporation, for the purpose of providing energy
conservation services (the "JV ESCO") and (ii) to guarantee third party
loans obtained by the JV ESCO.
Cogenex and Westar intend to enter into a long-term relationship to
provide energy conservation services through a Delaware limited liability
company in the states of Kansas, Missouri, Nebraska, Oklahoma and Arkansas
and to other Westar or Cogenex customers outside such states as
opportunities arise (the "Territory"). They have entered into a Letter
Agreement dated November 15, 1995 and filed herewith as Exhibit B-1 in
which they have agreed to perform initial marketing, sales, auditing,
bidding, job procurement and performance activities in preparation of
forming the JV ESCO and to develop a long-term business plan for the JV
ESCO. The term of the Letter Agreement is for one year (the "Interim
Period"), unless sooner terminated by the formation of the JV ESCO or by
the decision of one or both of Cogenex and Westar. The JV ESCO will only
be formed upon receipt of the Commission's authorization.
II. Description of Westar's and Cogenex's Businesses.
Cogenex is engaged in the business of investing in energy
conservation-related business activities: (i) employing energy efficiency
technology and equipment primarily through shared savings agreements; and
(ii) contracting to assist electric utilities in demand-side management
activities including but not limited to shared-savings energy conservation
projects and demand-side utility programs; (HCAR 35-24273, December 19,
1986; HCAR 35-25697, December 9, 1992).
Westar manages activities in the unregulated electric energy markets
and independent power production markets. Westar is also a full-service
marketer of natural gas.
III. Formation of the JV ESCO. Cogenex and Westar expect that the
formation of the JV ESCO will create a more attractive provider of energy
conservation services to customers within the Territory, thereby allowing
Cogenex and Westar to expand their customer bases and will provide
synergies which will enable Cogenex and Westar to provide their services in
a more cost-effective and efficient manner, enhancing their profitability.
Upon receipt of the Commission's authorization, Cogenex will form a limited
liability company in Delaware with Westar. Their relationship will be
governed by a limited liability company operating agreement, a copy of
which will be filed by amendment as Exhibit B-2 hereto. Generally, each of
Cogenex and Westar will be a 50% owner of the JV ESCO, sharing equally in
the capital contributions, allocation of profits and losses and
distributions of the JV ESCO. The JV ESCO will be governed overall by a
board of directors comprised of six directors, three of whom will be
appointed by Cogenex and three by Westar. Daily management decisions will
be made by a management committee comprised of one representative from each
of Cogenex and Westar. Cogenex and Westar will assign all contracts and
business opportunities obtained during the Interim Period within the
Territory at cost to the JV ESCO. Cogenex and Westar will also be
reimbursed by the JV ESCO for their expenses incurred during the Interim
Period but not previously reimbursed. Cogenex and Westar will make capital
contributions in an amount initially expected to be approximately $1,000
each which will be used by the JV ESCO for working capital purposes.
Cogenex and Westar will subcontract personnel to the JV ESCO at cost as
needed until such time, if any, as the JV ESCO employs its own personnel.
IV. Activity During the Interim Period. During the Interim Period,
Cogenex and Westar are performing initial marketing, sales, auditing,
bidding, job procurement and performance activities for energy conservation
services in the Territory. All business opportunities and contracts
derived from such activity, except for those independent, pre-existing
relationships of Cogenex and its affiliates and Westar and its affiliates,
shall be subject to assignment to the JV ESCO.
Cogenex and Westar have each committed to providing employees and
other resources as set forth in the Interim Business Plan which is attached
to the Letter Agreement. During the Interim Period, Cogenex and Westar
will share the cost of their employees and support provided as set forth in
the Letter Agreement.
V. Cogenex hereby requests authorization to the extent required under the
Act (i) to form the JV ESCO and (ii) if it becomes necessary in order to
obtain third party loans or to obtain more favorable terms from third
parties, to guarantee the loans of the JV ESCO for up to an aggregate of
$15,000,000, such guarantees to be made within five years of the formation
of the JV ESCO. The capital contributions by Cogenex will be exempt from
the requirement of Commission authorization pursuant to Rule 45(b)(4), and
any amount borrowed by the JV ESCO from third party lenders will be through
loans exempt from the requirement of Commission authorization by Rule
52(b). Cogenex requests that any goods or services furnished by Cogenex or
any of its associate companies (other than an associate company which is a
public utility company) to the JV ESCO be furnished at prices not to exceed
market prices pursuant to an exception from the requirements of 13(b) and
Rules 90 and 91 thereunder. The JV ESCO will not be providing goods or
services to Cogenex or its associate companies.
ITEM 2. FEES, COMMISSIONS, AND EXPENSES.
The fees, commissions and expenses of the Applicants expected to be
paid or incurred, directly or indirectly, in connection with the
transactions described will be filed by amendment.
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
The sections of the Act and rules or exemptions thereunder that the
applicants believe are or may be applicable to the transactions proposed
are set forth below:
Acquisition of interest in JV ESCO Sections 9(a) and 10.
by Cogenex.
Provision of services Sections 12(f), 13; Rules
by Cogenex and its associate
companies to JV ESCO.
Guaranty of obligations of JV ESCO Section 12(b); Rule 45(a).
by Cogenex.
ITEM 4. REGULATORY APPROVALS.
No state commission and no Federal commission, other than the
Commission, has jurisdiction over the proposed transactions.
ITEM 5. PROCEDURE.
(a) In order to be in a position to carry out the proposed
transactions at the most advantageous time, the Applicant requests that the
Commission issue its order hereon on the earliest practical date.
(b) It is not considered necessary that there be a recommended
decision by a hearing officer or by any other responsible officer of the
Commission. The Office of Public Utility Regulation may assist in the
preparation of the decision of the Commission, and it is believed that a
thirty (30) day waiting period between the issuance of the order of the
Commission and the day on which the order is to become effective would not
be appropriate.
(c) Cogenex proposes that the JV ESCO file reports with the
Commission pursuant to Rule 24 on a quarterly basis, beginning the first
calendar quarter after this application-declaration is granted and
permitted to become effective, on the following schedule: The quarterly
report for the first calendar quarter of each year will be filed on or
before August 15 of such year; the quarterly report for the second calendar
quarter of each year will be filed on or before November 15 of such year;
the quarterly report for the third calendar quarter of each year will be
filed on or before February 15 of the immediately succeeding calendar year;
and the quarterly report for the final calendar quarter of each year will
be filed on or before May 1 of the immediately succeeding calendar year.
Each such quarterly report will include the JV ESCO's consolidated balance
sheets, statements of income and statements of cash flows. In addition,
the JV ESCO shall file annual reports with the Commission along with the
final quarter report. Such report will be filed on the modified form U-13-
60 and shall include:
(1) A statement of estimated kilowatts saved during the past year and
cumulatively through demand-side management projects and according to the
utility sponsor (utilities which sponsor programs on behalf of their
customers).
(2) A list of new generation facilities acquired, if any, and the
applicable Federal Energy Regulatory Commission certification date and
number.
(3) A schedule of terminated and/or cancelled contracts, their value,
the amount of loss to the JV ESCO, and the reasons for the termination.
(4) A schedule of actual accounts receivable written off the books of
the JV ESCO (i.e., bad debt expense).
(5) An aging of accounts receivable for account 143 - Accounts
Receivable and account 146 - Accounts Receivable from Associate Companies.
(6) A schedule of any projects over $100,000 broken down by demand-
side management, energy management services and cogeneration, including the
investment and, based on the contract, the estimated future total project
value (net realizable value).
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS (* filed herewith)
(**confidential treatment requested)
(a) Exhibits.
Exhibit A-1 Form of Certificate of Formation of JV ESCO
(to be filed by amendment).
**Exhibit B-1 Letter Agreement between EUA Cogenex
Corporation and Westar Business Services
dated November 15, 1995.
Exhibit B-2 Form of limited liability company operating
agreement.
Exhibit F-1 Opinion of McDermott, Will & Emery (to be
filed by amendment).
*Exhibit H Proposed Form of Notice.
(b) Financial Statements.
To be filed by amendment.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned Applicants have duly caused this statement to be
signed on their behalf by the undersigned duly authorized individuals.
EUA COGENEX CORPORATION
By: /s/ Edward T. Liston
Edward T. Liston
President
Dated December 8, 1995
EXHIBIT B-1, LETTER AGREEMENT BETWEEN EUA COGENEX CORPORATION AND WESTAR
BUSINESS SERVICES DATED NOVEMBER 15, 1995.
** FILED WITH CONFIDENTIAL TREATMENT REQUESTED **
Exhibit H
(PROPOSED FORM OF NOTICE)
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- , 70- )
EUA Cogenex Corporation ("Cogenex"), a wholly-owned
subsidiary of Eastern Utilities Associates, a registered holding
company, has filed a declaration with this Commission pursuant to
Sections 9(a), 10, 12(b), 12(f) and 13 of the Public Utility
Holding Company Act of 1935 (the "Act") and Rule 45(a)
promulgated thereunder.
Cogenex has requested Commission approval to the extent
required under the Act for Cogenex: (i) to form a Delaware
limited liability company with Westar Business Services
("Westar"), a Kansas corporation and a wholly-owned subsidiary of
Western Resources, Inc., a Kansas corporation, for the purpose of
providing energy conservation services (the "JV ESCO") and (ii)
to guarantee third party loans obtained by the JV ESCO for up to
an aggregate of $15,000,000, such guarantees to be made within
five years of the formation of the JV ESCO. The capital
contributions by Cogenex will be exempt from the requirement of
Commission authorization pursuant to Rule 45(b)(4), and any
amount borrowed by the JV ESCO from third party lenders will be
through loans exempt from the requirement of Commission
authorization by Rule 52(b).
Cogenex and Westar intend to enter into a long-term
relationship to provide energy conservation services through a
Delaware limited liability company in the states of Kansas,
Missouri, Nebraska, Oklahoma and Arkansas and to other Westar or
Cogenex customers outside such states as opportunities arise (the
"Territory"). They have entered into a Letter Agreement in which
they have agreed to perform initial marketing, sales, auditing,
bidding, job procurement and performance activities in
preparation of forming the JV ESCO and to develop a long-term
business plan for the JV ESCO.
Cogenex and Westar expect that the formation of the JV ESCO
will create a more attractive provider of energy conservation
services to customers within the Territory, thereby allowing
Cogenex and Westar to expand their customer bases and will
provide synergies which will enable Cogenex and Westar to provide
their services in a more cost-effective and efficient manner,
enhancing their profitability.
Upon receipt of the Commission's authorization, Cogenex will
form a limited liability company in Delaware with Westar. Their
relationship will be governed by a limited liability company
operating agreement. Generally, each of Cogenex and Westar will
be a 50% owner of the JV ESCO, sharing equally in the capital
contributions, allocation of profits and losses and distributions
of the JV ESCO.
NOTICE IS FURTHER GIVEN that any interested person may, not
later than _________, 1995, request in writing that a hearing be
held on such matter, stating the nature of his interest, the
reasons for such request, and the issues of fact or law raised by
said application/declaration which he desires to controvert; or
he may request that he be notified if the Commission should order
a hearing thereon. Any such request should be addressed:
Secretary, Securities and Exchange Commission, 450 5th Street,
N.W., Judiciary Plaza, Washington, D.C. 20549. A copy of such
request should be served personally or by mail upon the
applicant/declarant at the above-stated address and proof of
service (by affidavit or, in case of an attorney at law, by
certificate) should be filed with the request. At any time after
said date the application/declaration, as filed or as it may be
amended, may be granted and permitted to become effective as
provided in Rule 23 of the General Rules and Regulations
promulgated under the Act, or the Commission may grant exemption
from such rules as provided in Rules 20(a) and 100 thereof or
take such other action as it may deem appropriate. Persons who
request a hearing or advice as to whether a hearing is ordered
will receive any notices and orders issued in this matter,
including the date of the hearing (if ordered) and any
postponements thereof.
For the Commission, by the Division of Corporate Regulation,
pursuant to delegated authority.
Secretary
