File No. 70-08717
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM U-1 DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
---------------------------------------------
Cinergy Corp. The Cincinnati Gas &
139 East Fourth Street Electric Company
Cincinnati, Ohio 45202 139 East Fourth Street
Cincinnati, Ohio 45202
(Name of company or companies filing this statement and
address of principal executive offices)
--------------------------------------------------------
Cinergy Corp.
(Name of top registered holding company parent)
-----------------------------------------------
William L. Sheafer
Cinergy Corp.
139 East Fourth Street
Cincinnati, Ohio 45202
(Name and address of agent for service)
The Commission is requested to send copies of all notices, orders and
communications in connection with this Declaration to:
Ms. Cheryl M. Foley James R. Lance
Vice President, General Counsel Manager - Corporate Finance
and Corporate Secretary Cinergy Corp.
Cinergy Corp. 139 East Fourth Street
139 East Fourth Street Cincinnati, Ohio 45202
Cincinnati, Ohio 45202
<PAGE>
The Form U-1 Declaration in this file as previously submitted to
this Commission is amended and restated in its entirety.
Item 1. Description of Proposed Transactions.
-------------------------------------
Transaction Overview
- --------------------
Cinergy Corp. (Cinergy), a Delaware corporation and a registered
holding company under the Public Utility Holding Company Act of 1935,
as amended (the Act), and its wholly-owned subsidiary utility company
The Cincinnati Gas & Electric Company (CG&E) (collectively, the
Applicants) seek authorization for CG&E to enter into a transaction
prior to June 30, 1996 involving a sale of equipment not to exceed $40
million, depending on the aggregate appraised value. The equipment
shall include gas combustion turbines and related equipment such as,
but not limited to, transformers, boilers and water pumps, of Unit Nos.
1 and 7 at CG&E's Woodsdale Generating Station (Woodsdale)
(collectively, Equipment).
Woodsdale is a gas combustion turbine electric generating station
located in southwestern Ohio and is wholly owned by CG&E. Woodsdale
Unit Nos. 1 through 6 are in operation. Woodsdale Unit No. 7 is under
construction and is expected to be in service in 1998 based on current
estimates. Woodsdale Unit No. 1 has a net generating capability of 82
megawatts and Woodsdale Unit No. 7 is expected to have 109 megawatts of
net generating capability when completed.
The sale by CG&E will be limited to equipment that constitutes
moveable property and will exclude certain property retained by CG&E,
such as land, buildings, pollution control facilities, and other non-
moveable property. The Equipment shall include equipment in service
and equipment under construction at the time of sale.
Sale Terms
- ----------
CG&E proposes the Equipment be sold to a non-affiliated third
party finance lessor who will concurrently enter into a leaseback of
the Equipment. CG&E is filing for approval of the leaseback of the
Equipment with the Public Utilities Commission of Ohio (PUCO), CG&E's
state commission. Accordingly, authorization for the leaseback of
Equipment is not being sought in this Application due to the PUCO
having jurisdiction over such transaction pursuant to Section 9(b)(1).
Depending on the appraised value (an independent appraiser to be
selected by the buyer) and the specific items of equipment sold, the
sale of the Equipment is not expected to be in excess of $40 million
and not less than its net book value (estimated to be not less than $20
million). All sale proceeds will be due and payable at the time of
closing. Based upon the above information, the sale proceeds will be
reflective of an arm's length transaction that is fair and reasonable
to the Applicants.
After approval of the sale terms by CG&E's Board of Directors or
by Company officers authorized by CG&E's Board of Directors, it is
anticipated that an agreement setting forth the terms of the sale would
be executed in substantially the form of Exhibit B as filed herewith.
Use of Sale Proceeds
- --------------------
CG&E proposes to use the net proceeds from the sale of the
Equipment either for (a) the redemption, in whole or in part, prior to
maturity, of one or more series of CG&E's outstanding first mortgage
bonds, pursuant to the provisions of CG&E's First Mortgage dated as of
August 1, 1936, with The Bank of New York, as trustee, as supplemented
and amended and (b) repayment of short-term debt incurred in connection
with such redemption \1\. The balance, if any, of such net proceeds
will be used for other general corporate purposes.
CG&E is currently considering the redemption, in whole or in part,
of its First Mortgage Bonds, 10.20% Series due December 1, 2020,(the Bonds).
At September 30, 1995, the Bonds had an aggregate principal amount of
$150 million outstanding and are callable beginning December 1, 1995 at
a redemption price of 107.44% plus accrued interest to the redemption date.
The proposed redemption of high cost first mortgage bonds using
the equipment sale proceeds is anticipated to result in greater cost
savings than might otherwise be achieved were CG&E to issue and sell
other securities to fund the redemption. Since the proposed lease cost
will be based on the London Interbank Offered Rate for 30-day dollar
deposits (30-day LIBOR) plus a spread of no more than 50 basis points,
the sale and leaseback transaction is the most cost effective
alternative available to CG&E since it offers the advantages of: (a)
replacing long-term bonds with intermediate term financing at the
lower-cost short-term rate; and (b) incurring an obligation at a cost
which is currently lower than issuing intermediate or long-term
securities, especially when considering the avoidance of other costs
connected therewith, such as underwriting, legal, printing and
ancillary fees.
Statement Pursuant to Rule 54
- -----------------------------
CG&E does not intend at present to use the sale proceeds proposed
herein to finance the acquisition of an EWG or a FUCO. If CG&E's
intention changes, an amended Declaration or separate filing under the
Act will be submitted requesting authorization for such use.
Under Rule 54, in determining whether to approve the issue and
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 and 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 the conditions set forth
in Rule 53(a), (b) and (c) are satisfied. As set forth below, all
applicable conditions of Rule 53(a) are and, upon consummation of the
proposed transactions, will be satisfied, and none of the conditions
specified in Rule 53(b) exists or, as a result thereof, will exist.
The following discussion assumes the Cinergy system's existence for the
dates and periods in question.
Three Cinergy companies are EWGs or FUCOs: PSI Argentina, Inc.
("PSI Argentina") and Costanera Power Corporation ("Costanera") are
EWGs, and PSI Energy Argentina, Inc. ("Energy Argentina") is a FUCO.
For further information with respect to such entities, reference is
made to the Application-Declaration, as amended in File No. 70-8589.
Rule 53(a)(1): The average of Cinergy's consolidated retained
earnings for the four consecutive quarters ended June 30, 1995 was $909
million, and Cinergy's aggregate investment in EWGs and FUCOs at June
30, 1995 was approximately $20 million, or approximately 2% of
consolidated retained earnings.
Rule 53(a)(2): Cinergy maintains books and records enabling it to
identify investments in and earnings from each EWG and FUCO in which it
directly or indirectly holds an interest. At present, Cinergy does not
hold any interest in a domestic EWG; Rule 53(a)(2)(i) is therefore
inapplicable.
In accordance with Rule 53(a)(2)(ii), the books and records and
financial statements of each foreign EWG and FUCO which is a majority-
owned subsidiary company of Cinergy are kept in conformity with and
prepared according to U.S. generally accepted accounting principles
("GAAP"). Cinergy will provide the Commission access to such books and
records and financial statements, or copies thereof, in English, as the
Commission may request.
In accordance with Rule 53(a)(2)(iii), for each foreign EWG and
FUCO in which Cinergy directly or indirectly owns 50% or less of the
voting securities, Cinergy will proceed in good faith, to the extent
reasonable under the circumstances, to cause each such entity's books
and records to be kept in conformity with, and the financial statements
of each such entity to be prepared according to, GAAP. If such books
and records are maintained, or such financial statements are prepared,
according to a comprehensive body of accounting principles other than
GAAP, Cinergy will, upon request of the Commission, describe and
quantify each material variation from GAAP in the accounting
principles, practices and methods used to maintain such books and
records and each material variation from GAAP in the balance sheet line
items and net income reported in such financial statements, as the case
may be. In addition, Cinergy will proceed in good faith, to the extent
reasonable under the circumstances, to cause access by the Commission
to such books and records and financial statements, or copies thereof,
in English, as the Commission may request, and in any event will make
available to the Commission any such books and records that are
available to Cinergy.
Rule 53(a)(3): Less than two percent of the total number of
employees of Cinergy's utility subsidiaries render services, at any one
time, to Costanera, PSI Argentina and Energy Argentina. Such services
have heretofore been rendered, in part, by employees of PSI Energy,
Inc., in accordance with the Commission's order in PSI Resources, Inc.,
et al., Rel. No. 35-25674, 52 SEC Docket 2533, 2534-35 (Nov. 13, 1992),
and by employees of CG&E in accordance with business practices
established prior to the Cinergy merger and the registration of Cinergy
as a holding company under the Act. Pursuant to the Commission's order
dated October 21, 1994 in File No. 70-8427, Cinergy Services, Inc., is
authorized to provide administrative, management and other support
services to utility and nonutility associate companies, including those
that are EWGs or FUCOs.
Rule 53(a)(4): Cinergy is concurrently submitting a copy of this
Declaration, and will submit copies of any Rule 24 certificates
hereunder, as well as a copy of Item 9 of Cinergy's Form U5S and
Exhibits H and I thereto, to each of the public service commissions
having jurisdiction over the retail rates of Cinergy's operating
utility subsidiaries at the time such documents are filed with the
Commission.
Rule 53(b): The provisions of Rule 53(a) are not made
inapplicable to the authorizations herein requested by reason of the
provisions of Rule 53(b).
Rule 53(b)(1): Neither Cinergy nor any subsidiary thereof is the
subject of any pending bankruptcy or similar proceeding.
Rule 53(b)(2): Average consolidated retained earnings for the four
quarters ended June 30, 1995 equaled $909 million, versus $979 million
for the four quarters ended June 30, 1994, a difference of
approximately $70 million or 7%. Accordingly, the investment
restriction set forth in this provision of the Rule is inapplicable.
Rule 53(b)(3): For the twelve months ended June 30, 1995, Cinergy
had net income of approximately $910,000 attributable to its direct and
indirect investments in EWGs and FUCOs.
Rule 53(c): Inasmuch as Rule 53(c) applies only if an applicant
is unable to satisfy the requirements of Rule 53(a) and (b), it is
inapplicable here.
Item 2. Fees, Commissions and Expenses.
-------------------------------
Expenses of CG&E in connection with the proposed sale are expected
to be minimal, being limited to the Form U-1 filing fee of $2,000 and
miscellaneous out of pocket expenses to transact the sale, currently
estimated to not exceed $10,000. No other fees, commissions or
expenses, other than expenses billed at cost by Cinergy Services, Inc.,
not to exceed $20,000, are to be paid or incurred by CG&E or any
associate company in connection with the proposed transaction.
Item 3. Applicable Statutory Provisions
-------------------------------
CG&E believes that the proposed sale of the Equipment is subject
to Section 12(d) of the Act and Rules 42 and 44 thereunder.
Item 4. Regulatory Approval.
--------------------
No state or federal regulatory agency other than the Commission
under the Act has jurisdiction over the proposed sale of Equipment and
redemption of securities. Approval of the leaseback is being sought
with the PUCO. A copy of the PUCO order will be filed by amendment
hereto.
Item 5. Procedure.
----------
CG&E hereby respectfully requests that the Commission issue and
publish not later than November 16, 1995, the requisite notice under
Rule 23 with respect to the filing of this Declaration, and that the
Commission enter not later than December 7, 1995, an appropriate order
permitting this Declaration to become effective.
CG&E hereby waives a recommended decision by a hearing officer or
any other responsible officer of the Commission; agrees that the Staff
of the Division of Investment Management may assist in the preparation
of the Commission's decision; and requests that there be no waiting
period between the issuance of the Commission's order and the date on
which it is to become effective.
Item 6. Exhibits and Financial Statements.
----------------------------------
(a) Exhibits:
A Not Applicable.
B Form of Bill of Sale (previously filed with initial
Form U-1 Declaration filing).
C Not Applicable.
D Copy of Order of The Public Utilities Commission of
Ohio (to be filed by amendment).
E Not Applicable.
F Opinion of counsel (to be filed by amendment).
G Form of Notice of Proposed Transactions for
publication in Federal Register.
(b) Financial Statements:
FS-1 CG&E Unaudited Pro Forma Consolidated Balance Sheet
at June 30, 1995 (previously filed with initial
Form U-1 Declaration filing).
FS-2 CG&E Unaudited Pro Forma Consolidated Statement of
Income for the Twelve Months Ended June 30, 1995
(previously filed with initial Form U-1 Declaration
filing).
FS-3 CG&E Unaudited Pro Forma Consolidated Statement of
Changes in Retained Earnings for the Twelve Months
Ended June 30, 1995 (previously filed with initial
Form U-1 Declaration filing).
FS-4 CG&E Pro Forma Consolidated Journal Entries to give
effect to the sale of equipment and redemption of
outstanding debt securities (previously filed with
initial Form U-1 Declaration filing).
FS-5 Cinergy Unaudited Pro Forma Consolidated Balance
Sheet at June 30, 1995 (previously filed with
initial Form U-1 Declaration filing).
FS-6 Cinergy Unaudited Pro Forma Consolidated Statement
of Income for the Twelve Months Ended June 30, 1995
(previously filed with initial Form U-1 Declaration
filing).
FS-7 Cinergy Unaudited Pro Forma Consolidated Statement
of Changes in Retained Earnings for the Twelve
Months Ended June 30, 1995 (previously filed with
initial Form U-1 Declaration filing).
FS-8 Cinergy Pro Forma Consolidated Journal Entries to
give effect to the sale of equipment and redemption
of outstanding debt securities (previously filed
with initial Form U-1 Declaration filing).
FS-9 Financial Data Schedule for CG&E (included in
electronic transmission only) (previously filed
with initial Form U-1 Declaration filing).
FS-10 Financial Data Schedule for Cinergy (included in
electronic transmission only) (previously filed
with initial Form U-1 Declaration filing).
Item 7. Information as to Environmental Effects.
----------------------------------------
In light of the transactions proposed in this Declaration, the
Commission's action in this matter will not constitute any major
federal action significantly affecting the quality of the human
environment.
No other federal agency has prepared or is preparing an
environmental impact statement with regard to the proposed
transactions.
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 companies have duly caused
this document to be signed on their behalf by the undersigned thereunto
duly authorized.
CINERGY CORP.
By: /s/ William L. Sheafer
----------------------
William L. Sheafer
Treasurer
THE CINCINNATI GAS
& ELECTRIC COMPANY
By: /s/ William L. Sheafer
----------------------
William L. Sheafer
Treasurer
Dated: November 17, 1995
<PAGE>
FOOTNOTES
\1\ If short-term debt is used to redeem bonds prior to receiving
regulatory authority for the sale of the Equipment, CG&E will use net
Equipment sale proceeds to repay all or a portion of such short-term
debt.
EXHIBIT G
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- )
Filings Under the Public Utility Holding Company Act of 1935 ("Act")
October __, 1995
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 December 6, 1995, to the Secretary, Securities and Exchange
Commission, Washington, D.C. 20549, and serve a copy on the relevant
applicant and/or declarant at the address 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.
Cinergy Corp. et al. (File No. 70- )
Cinergy Corp. (Cinergy), a Delaware corporation and a
registered holding company under the Public Utility Holding Company Act
of 1935, as amended (the Act), and its wholly-owned subsidiary utility
company The Cincinnati Gas & Electric Company (CG&E) (collectively, the
Applicants) seek authorization for CG&E to enter into a transaction
prior to June 30, 1996 involving a sale of equipment not to exceed $40
million, depending on the aggregate appraised value. The equipment
shall include gas combustion turbines and related equipment such as,
but not limited to, transformers, boilers and water pumps, of Unit Nos.
1 and 7 at CG&E's Woodsdale Generating Station (Woodsdale)
(collectively, Equipment).
Woodsdale is a gas combustion turbine electric generating station
located in southwestern Ohio and is wholly owned by CG&E. Woodsdale
Unit Nos. 1 through 6 are in operation. Woodsdale Unit No. 7 is under
construction and is expected to be in service in 1998 based on current
estimates. Woodsdale Unit No. 1 has a net generating capability of 82
megawatts and Woodsdale Unit No. 7 is expected to have 109 megawatts of
net generating capability when completed.
The sale by CG&E will be limited to equipment that constitutes
moveable property and will exclude certain property retained by CG&E,
such as land, buildings, pollution control facilities, and other non-
moveable property. The Equipment shall include equipment in service
and equipment under construction at the time of sale.
CG&E proposes the Equipment be sold to a non-affiliated third
party finance lessor who will concurrently enter into a leaseback of
the Equipment. CG&E is filing for approval of the leaseback of the
Equipment with the Public Utilities Commission of Ohio (PUCO), CG&E's
state commission. Accordingly, authorization for the leaseback of
Equipment is not being sought in this Application due to the PUCO
having jurisdiction over such transaction pursuant to Section 9(b)(1).
Depending on the appraised value (an independent appraiser to be
selected by the buyer) and the specific items of equipment sold, the
sale of the Equipment is not expected to be in excess of $40 million
and not less than its net book value (estimated to be not less than $20
million). All sale proceeds will be due and payable at the time of
closing. Based upon the above information, the sale proceeds will be
reflective of an arm's length transaction that is fair and reasonable
to the Applicants.
CG&E proposes to use the net proceeds from the sale of the
Equipment either for (a) the redemption, in whole or in part, prior to
maturity, of one or more series of CG&E's outstanding first mortgage
bonds, pursuant to the provisions of CG&E's First Mortgage dated as of
August 1, 1936, with The Bank of New York, as trustee, as supplemented
and amended and (b) repayment of short-term debt incurred in connection
with such redemption. The balance, if any, of such net proceeds will
be used for other general corporate purposes. If short-term debt is
used to redeem bonds prior to receiving regulatory authority for the
sale of the Equipment, CG&E will use net Equipment sale proceeds to
repay all or a portion of such short-term debt.
CG&E is currently considering the redemption, in whole or in part,
of its First Mortgage Bonds, 10.20% Series due December 1, 2020, (the
Bonds). At September 30, 1995, the Bonds had an aggregate principal
amount of $150 million outstanding and are callable beginning December
1, 1995 at a redemption price of 107.44% plus accrued interest to the
redemption date..
The proposed redemption of high cost first mortgage bonds using
the equipment sale proceeds is anticipated to result in greater cost
savings than might otherwise be achieved were CG&E to issue and sell
other securities to fund the redemption. Since the proposed lease cost
will be based on the London Interbank Offered Rate for 30-day dollar
deposits (30-day LIBOR) plus a spread of no more than 50 basis points,
the sale and leaseback transaction is the most cost effective
alternative available to CG&E since it offers the advantages of: (a)
replacing long-term bonds with intermediate term financing at the
lower-cost short-term rate; and (b) incurring an obligation at a cost
which is currently lower than issuing intermediate or long-term
securities, especially when considering the avoidance of other costs
connected therewith, such as underwriting, legal, printing and
ancillary fees.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Jonathan G. Katz, Secretary
