As filed with the Securities and Exchange Commission on August 14, 1995
File No. 70-8589
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________________________
AMENDMENT NO. 2 TO
FORM U-1 APPLICATION-DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
____________________________________________
CINergy Corp.,
CINergy Investments, Inc.
and
CINergy Services, Inc.
139 East Fourth Street
Cincinnati, Ohio 45202
(Name of companies filing this statement
and addresses of principal executive offices)
CINergy Corp.
(Name of top registered holding company)
William L. Sheafer
Treasurer
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 Application-Declaration to:
Cheryl M. Foley
Vice President, General Counsel and Corporate Secretary
CINergy Corp.
139 East Fourth Street
Cincinnati, Ohio 45202
M. Douglas Dunn William T. Baker, Jr.
Milbank, Tweed, Hadley & McCloy Reid & Priest LLP
One Chase Manhattan Plaza 40 West 57th Street
New York, New York 10005 New York, New York 10019
1. Item 1 of the Application-Declaration in this file, as previously
amended (as so amended, the "Application"), is hereby amended and restated
in its entirety to read as follows:
Item 1. Description of Proposed Transactions.
A. Summary of Requested Authorizations
CINergy Corp. ("CINergy"), a registered holding company under the
Public Utility Holding Company Act of 1935 (the "Act"), and CINergy
Investments, Inc., a wholly-owned subsidiary of CINergy ("CINergy
Investments"), hereby request the Commission's authorization (1) to
acquire, directly or indirectly, in one or more transactions, the
securities of one or more companies ( the "New Special Purpose
Subsidiaries") organized for the purpose of engaging, directly or
indirectly, and exclusively, in the business of acquiring, owning and
holding the securities of, and/or providing services to, one or more
foreign utility companies ("FUCOs") and/or exempt wholesale generators
("EWGs"), as defined in Sections 33(a) and 32(a) of the Act, respectively;
(2) to make nonexempt direct and indirect investments in New Special
Purpose Subsidiaries and additional nonexempt direct and indirect
investments in certain existing special purpose subsidiaries of CINergy
(the "Existing Special Purpose Subsidiaries"),/1/ by means of equity and
debt investments and guarantees and other forms of credit support in
respect of debt securities of Special Purpose Subsidiaries, in an aggregate
amount at any one time outstanding not to exceed $115 million; and (3) to
retain (and for the Commission to release jurisdiction over) certain of the
Existing Special Purpose Subsidiaries/2/ as to which the Commission
reserved jurisdiction in its October 21, 1994 order in File No. 70-8427,
Rel. No. 35-26146 (the "Merger Order")./3/ Authorization is also sought
(4) for the Special Purpose Subsidiaries to issue to nonassociates
nonexempt equity securities for the purpose of financing investments by
such Special Purpose Subsidiaries in EWGs and FUCOs; (5) for the Special
Purpose Subsidiaries to provide services to their subsidiaries and to other
Special Purpose Subsidiaries and their subsidiaries; and (6) to the extent,
if any, not previously authorized by the Commission in the Merger Order,
for CINergy Services, Inc., CINergy's service company subsidiary ("CINergy
Services"), to provide services to the Special Purpose Subsidiaries and
their subsidiaries. Finally, CINergy requests authority to apply proceeds
from securities issued or to be issued by it pursuant to outstanding
Commission orders in File Nos. 70-8477 and 70-8521 for purposes of the
proposed investments described herein.
CINergy and CINergy Investments propose that the authorizations
requested in clauses (1), (2) and (4) above remain effective until the
earlier of May 31, 1998 or the effective date of any rule(s) adopted by the
Commission exempting any such transactions from the approval requirements
of the Act. Applicants propose that no time limitation apply to the
authorizations requested in clauses (3), (5) and (6).
B. Background
CINergy system companies have from time to time invested in or
considered potential opportunities to acquire or construct electric
generation, transmission and/or distribution facilities outside the United
States. CINergy expects to investigate other such opportunities in the
future. In most cases, it is expected that such facilities will qualify as
facilities that a FUCO or EWG may own or operate./4/
The authorization sought herein is intended to facilitate investments
in such FUCOs and EWGs. A number of legal and business reasons exist for
the use of special purpose subsidiaries in connection with such
investments. Among other things, the formation and acquisition of special
purpose subsidiaries is often necessary or desirable to facilitate the
acquisition and ownership of a FUCO or EWG. For example, laws of some
foreign countries may require that the bidder in a privatization program be
a domestic company in that country. In such cases, it would be necessary
for CINergy to form a foreign subsidiary (either as a foreign corporation
or foreign counterpart thereto) as the entity submitting the bid or other
proposal. In addition, the interposition of one or more special purpose
subsidiaries may allow CINergy to defer the repatriation of foreign source
income, or otherwise to secure favorable U.S. income tax treatment that
would not otherwise be available.
Special purpose subsidiaries are also useful in cases in which CINergy
may bid as part of a consortium, since each member of the consortium will
typically want to have at least one consolidated subsidiary in the final
ownership structure for tax and accounting purposes. Special purpose
subsidiaries also serve to isolate business risks and facilitate subsequent
adjustments to or sales of interests among or by members of the ownership
group.
C. Existing Special Purpose Subsidiaries
PSI Argentina, Costasnera and Energy Argentina are all Indiana
corporations established in connection with the privatization of electric
generation and distribution assets in Argentina. PSI Argentina is a
wholly-owned subsidiary of CINergy Investments and in turn has two
wholly-owned subsidiaries: Costanera, incorporated in Indiana in 1992; and
EDEGEL, incorporated in Delaware in 1994. The latter was formed to
acquire, own and hold, directly or indirectly, interests in foreign EWGs,
but has not made any such investments to date./5/ Through PSI Argentina,
Costanera and Energy Argentina, CINergy is a member of two consortia
holding interests in, respectively, Central Costanera S.A., an Argentine
electric generating company that owns a 1260 megawatt facility, and
Distrilec Inversora S.A., which owns 51% of the stock of Edesur S.A., an
electric distribution system serving the southern half of Buenos Aires. As
noted above, PSI Argentina, Costanera and EDEGEL have been certified by the
FERC as EWGs, and Energy Argentina is a FUCO.
T&D, a wholly-owned subsidiary of CINergy Investments, and its
wholly-owned subsidiary, Yacyreta, were incorporated in Indiana in 1994 to
acquire, own and hold, directly or indirectly, interests in FUCOs. Neither
T&D nor Yacyreta has made any investments to date in FUCOs.
CGE ECK, a subsidiary of CINergy Investments, was incorporated in
Delaware in 1994 and holds a 3% interest in ECK s.r.o., a Czech limited
liability company which operates and owns a generating facility in the
Czech Republic.
Power Development, Power Operations, PSI International and Sunnyside,
all Indiana corporations and direct subsidiaries of CINergy Investments,
were organized to invest in power projects. Power Development and Power
Operations were incorporated in 1990 and 1989, respectively, to develop,
operate and maintain independent power production/cogeneration projects.
PSI International and Sunnyside were incorporated in 1991 and 1990,
respectively, to develop, construct, operate and own cogenerating or power
production facilities. At present, none of the four companies holds any
assets or is engaged in any business. All four companies will be used
hereafter solely for purposes of engaging, directly or indirectly, and
exclusively, in the businesses of acquiring, owning and holding the
securities of one or more FUCOs and EWGs and such other businesses as the
Commission may authorize.
D. New Special Purpose Subsidiaries
A New Special Purpose Subsidiary may be organized at the time of, and
in order to facilitate, the making of bids or proposals to acquire an
interest in any EWG or FUCO; after the award of a bid proposal, in order to
facilitate closing on the purchase or financing of any such EWG or FUCO; or
at any time subsequent to the consummation of an acquisition of an interest
in an EWG or FUCO in order, among other things, to effect an adjustment in
the respective ownership interests in any EWG or FUCO held by CINergy and
unaffiliated co-investors, to facilitate a partial sale of an interest in
any such EWG or FUCO, to comply with applicable laws of foreign
jurisdictions limiting or otherwise relating to the ownership of domestic
companies by foreign nationals; as a part of tax planning in order to limit
CINergy's exposure to U.S. and foreign taxes; or for other lawful purposes.
E. Investments in Special Purpose Subsidiaries
As of December 31, 1994, CINergy's aggregate outstanding investment in
FUCOs and EWGs through Existing Special Purpose Subsidiaries, net of
amounts written off or received from dispositions of such investments, was
approximately $20 million. Under the authority requested herein, the
aggregate net investment of CINergy and CINergy Investments outstanding at
any one time in New Special Purpose Subsidiaries and Existing Special
Purpose Subsidiaries will not exceed $115 million. In addition, (1) any
direct or indirect investment by CINergy or CINergy Investments in any
Special Purpose Subsidiary would be consummated only if, at the time
thereof, and after giving effect thereto, CINergy's "aggregate investment,"
determined in accordance with Rule 53(a)(1)(i), in all FUCOs, EWGs and
Special Purpose Subsidiaries shall not exceed 50% of CINergy's
"consolidated retained earnings," as defined in Rule 53(a)(1)(ii); and (2)
CINergy and CINergy Investments will limit their direct and indirect
investment in any particular New Special Purpose Subsidiary to an amount
which is no greater than the amount reasonably required in connection with
making the underlying investment in any EWG or FUCO with respect to which
such New Special Purpose Subsidiary was organized or formed, taking into
account development expenditures, working capital needs, cash reserves
required to be maintained in accordance with financing documents and other
relevant factors. CINergy and its subsidiaries will also comply with all
other applicable rules under the Act, including such additional rules as
may be promulgated pursuant to Sections 32 and 33.
Investments by CINergy and CINergy Investments in Special Purpose
Subsidiaries pursuant to the authorization herein requested will consist of
the following: (1) purchases of common or preferred stock or debt
securities in connection with the formation of New Special Purpose
Subsidiaries; (2) purchases of partnership interests, trust certificates
and other nonexempt equity securities; (3) open-account advances or loans
evidenced by promissory notes (the proposed form of which is included as
Exhibit 1); and (4) guaranties, letters of credit or other credit support
(collectively, "Guaranties") issued or arranged by CINergy and/or CINergy
Investments in respect of debt securities of Special Purpose Subsidiaries
issued to nonassociates.
Any such investment in the capital stock or other equity securities of
a Special Purpose Subsidiary having a stated par value will be in an amount
equal to or greater than such par value.
Any such open-account advance will bear interest at a rate per annum
not to exceed the prime rate at a bank to be designated by CINergy and will
be repayable within one year.
Any promissory note issued by a Special Purpose Subsidiary to CINergy
or CINergy Investments pursuant to the authorization herein requested, and
any promissory note, bond or other evidence of indebtedness issued by a
Special Purpose Subsidiary to a nonassociate with respect to which CINergy
or CINergy Investments may issue a Guaranty pursuant to the authorization
herein requested (each such debt security issued to a nonassociate, a
"Recourse Debt Security"), will mature not later than 30 years after the
date of issuance thereof, and will bear interest at a rate (x) in the case
of any note issued to CINergy or CINergy Investments, not to exceed the
prime rate at a bank to be designated by CINergy; and (y) in the case of
any Recourse Debt Security, not to exceed the following: (i) if such
Recourse Debt Security is denominated in U.S. dollars, at a fixed rate not
to exceed 6.5% over the yield to maturity on an actively-traded,
noncallable U.S.Treasury obligation having a maturity approximating the
average life of such Recourse Debt Security (the "Applicable Treasury
Rate"), or at a floating rate not to exceed 6.5% over the then- applicable
prime rate at a U.S. money center bank to be designated by CINergy (the
"Applicable Prime Rate"); and (ii) if such Recourse Debt Security is
denominated in a currency of a country other than the United States, at a
fixed or floating rate which, when adjusted for the prevailing rate of
inflation in such country, as reported in official indices published by
such country, would be equivalent to a rate on a U.S. dollar-denominated
borrowing of the same approximate average life that does not exceed 10%
over the Applicable Treasury Rate (interpolated, if necessary) or
Applicable Prime Rate, as the case may be.
F. Financing of Investments in Special Purpose Subsidiaries
CINergy hereby requests the Commission's authorization to apply
available proceeds from (1) sales of CINergy common stock authorized by the
Commission in its November 18, 1994 order in File No. 70-8477 (Rel. No.
35-26159),and (2) CINergy bank borrowings and commercial paper sales
authorized by the Commission in its January 11, 1995 order in File No.
70-8521 (Rel. No. 35-26215) to direct and indirect investments by CINergy
and CINergy Investments in Special Purpose Subsidiaries, EWGs and FUCOs as
described herein. In connection with investments consisting of Guaranties,
CINergy further requests authorization to utilize letters of credit
obtained by it pursuant to the January 1995 order. Except as set forth
herein and in the other files referred to above, CINergy is not requesting
authority to issue any additional securities for the purpose of financing
investments in any Special Purpose Subsidiaries.
If CINergy ultimately determines that any Special Purpose Subsidiary
is no longer useable for EWG or FUCO investment purposes (whether due to
termination of a proposed project acquisition, loss of a bid, change in
law, or otherwise), CINergy will (to the extent it is possible to do so at
reasonable cost) liquidate, dissolve or sell such Special Purpose
Subsidiary within 180 days, unless, within that time, CINergy determines
that such Special Purpose Subsidiary could be used to acquire an interest
in a different FUCO or EWG or other investment authorized by the
Commission. To the extent necessary, CINergy requests authority to
liquidate, dissolve or sell any Special Purpose Subsidiary under such
circumstances.
G. External Financing by Special Purpose Subsidiaries
Approval is also requested for each Special Purpose Subsidiary to
issue to nonassociates, including banks, insurance companies and other
financial institutions, nonexempt equity securities exclusively for the
purpose of financing (including any refinncing of) investments in EWGs and
FUCOs.
Nonexempt equity securities issued to nonassociates will consist of
partnership interests, trust certificates and other forms of equity
securities. No such equity security having a stated par value will be
issued or sold for a consideration less than such par value. Additional
specific terms of such equity securities would be negotiated on a
case-by-case basis, taking into account differences from project to project
in optimum debt-equity ratios, projections of earnings and cash flows,
depreciable lives, and other similar financial and performance
characteristics of each project. Applicants propose that they be granted
the flexibility to negotiate such additional specific terms and conditions
without further authorization from the Commission.
H. Services
Pursuant to the Merger Order, CINergy Services is authorized to
provide administrative, management and support services to utility and
nonutility associate companies, including those that are EWGs or FUCOs.
Under that order, CINergy Services is authorized to provide services to the
domestic nonutility subsidiaries of CINergy at cost, determined in
accordance with Rule 90 under the Act, and at fair market value for
services rendered to certain foreign nonutility subsidiaries of CINergy,
pursuant to Rule 83 under the Act. To the extent (if any) further
authorization is required, CINergy Services hereby requests such
authorization to provide to the Special Purpose Subsidiaries and their
subsidiaries such services as may be necessary or desirable for the
development, acquisition, establishment and operation of the Special
Purpose Subsidiaries and the investments and properties held, directly or
indirectly, by such companies.
To provide further operational flexibility, it is also proposed that
the Special Purpose Subsidiaries have authority to provide their
subsidiaries, and other Special Purpose Subsidiaries and their
subsidiaries, with all services necessary or desirable for their
operations, including, without limitation, management, administrative,
employment, tax, accounting, engineering, consulting, utility performance,
and electronic data processing services, and software development and
support services in connection therewith. The Special Purpose Subsidiaries
will not provide services to any subsidiary company of CINergy other than
their subsidiaries and/or other Special Purpose Subsidiaries and their
subsidiaries. It is anticipated that such Special Purpose Subsidiaries and
their subsidiaries will meet (or, in the case of the Existing Special
Purpose Subsidiaries and their subsidiaries, will continue to meet) the
requirements of Rule 83(a) under the Act; accordingly, it is proposed that
services provided to the Special Purpose Subsidiaries and their
subsidiaries be exempt from the standards of Section 13(b) of the Act and
the rules and regulations promulgated thereunder.
I. Statement Pursuant to Rule 53
Under Rule 53, in determining whether to approve the issue and sale of
a security by a registered holding company for purposes of financing the
acquisition of an EWG or the guarantee of a security of an EWG by a
registered holding company, the Commission shall not make a finding that
such security is not reasonably adapted to the earning power of such
company or to the security structure of such company or companies in the
same holding company system, or that the circumstances are such as to
constitute the making of such guarantee an improper risk for such company
if, as here, the conditions set forth in Rule 53 are met.
All applicable conditions set forth in Rule 53(a) are and, assuming
consummation of the transactions proposed herein, will be satisfied, and
none of the conditions set forth 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.
Four CINergy companies are EWGs or FUCOs: PSI Argentina, Costanera
and EDEGEL, which are EWGs, and Energy Argentina, which is a FUCO.
Rule 53(a)(1): The average of CINergy's pro forma consolidated
retained earnings for the four consecutive quarters ended December 31, 1994
was $929 million, and CINergy's aggregate investment in EWGs and FUCOs at
December 31, 1994 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): At any one time, a maximum of approximately 25 CINergy
system employees have rendered services to Costanera, PSI Argentina and
Energy Argentina. Based on current staffing levels, this represents less
than 0.3% of the approximately 8,650 full-time employees of CINergy's
domestic operating utility subsidiaries. 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 The
Cincinnati Gas & Electric Company ("CG&E") in accordance with business
practices established prior to the merger of CG&E and PSI Energy into the
CINergy system and the registration of CINergy as a holding company under
the Act. As noted above, pursuant to the Merger Order, CINergy Services is
authorized to provide administrative, management and other support services
to utility and nonutility associate companies, including those that are
EWGs or FUCOs. In addition, under the authorizations herein requested,
employees of CINergy Services may provide services to New Special Purpose
Subsidiaries and their subsidiaries, and Special Purpose Subsidiaries may
provide services to their subsidiaries, and to other Special Purpose
Subsidiaries and their subsidiaries.
Rule 53(a)(4): CINergy is concurrently submitting a copy of this
Application-Declaration, and will submit copies of any Rule 24 certificates
required 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): CINergy's total capital invested in utility operations
as of December 31, 1994 totaled approximately $5.9 billion, consisting of
approximately $2.8 billion in long-term and $208 million in short-term debt
of CG&E, PSI Energy and the utility subsidiaries of CG&E, $478 million in
preferred stock of CG&E and PSI Energy, and $2.4 billion in common equity
of CG&E, PSI Energy and the utility subsidiaries of CG&E. CINergy's
aggregate present investment in EWGs and FUCOs (approximately $20 million)
represents less than 0.4% of CINergy's capital invested in utility
operations. Based on the investment authority proposed herein, CINergy's
aggregate investment in EWGs and FUCOs ($115 million) will represent less
than 2% of CINergy's total capital invested in utility operations. Average
consolidated earnings for the four quarters ended December 31, 1994 equaled
$929 million, versus $1,053 million for the four quarters ended December
31, 1993, a difference of approximately $124 million or 12%.
Rule 53(b)(3): For the twelve months ended December 31, 1994, CINergy
had net income of approximately $175,000 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.
2. Item 3 of the Application ("Applicable Statutory Provisions") is
hereby amended by restating the penultimate paragraph thereof to read in
its entirety as follows:
The transactions proposed herein will be carried out in accordance
with the procedures specified in Rule 23. CINergy proposes to comply with
the procedures specified in Rule 24 by filing certificates with the
Commission, within 45 days after the end of each calendar quarter,
notifying the Commission of each investment made by CINergy, directly or
indirectly, in any Special Purpose Subsidiary, indicating the amount and
type of each such investment, and generally identifying the facility with
respect to which such subsidiary was organized. Such certificate will also
describe in reasonable detail the amount, type and terms of any equity
securities or Recourse Debt Securities issued by any such subsidiary to
nonassociates.
3. Item 4 of the Application is hereby amended and restated in its
entirety to read as follows:
Item 4. Regulatory Approval.
The direct or indirect acquisition by CINergy of Special Purpose
Subsidiary securities and the issuance of such securities by any such
subsidiary are not subject to the jurisdiction of any state commission or
any federal commission other than the Commission.
As set forth in the Stipulation and Recommendation approved by the
Public Utilities Commission of Ohio ("PUCO") in Case No. 91-410-EL-AIR (the
"Stipulation"), "[t]he financial policies and guidelines of CG&E and its
Affiliates shall reflect the following cross-subsidization principles:
a. CG&E's utility customers shall not subsidize the activities of
CG&E's Non-Utility Affiliates or CG&E's Utility Affiliates.
b. Neither CG&E's Non-Utility Affiliates nor CG&E's Utility
Affiliates shall subsidize the public utility activities of CG&E.
c. CG&E's costs for jurisdictional rate purposes shall reflect only
those costs attributable to its jurisdictional customers.
d. These cross-subsidization principles and such financial policies
and guidelines shall be applied in such a manner as to avoid
unreasonable utility costs being left unallocated or stranded
between various regulatory jurisdictions, resulting in the
failure of timely recovery of such costs by CG&E and/or its
Utility Affiliates; provided, however, that no more than one
hundred percent (100%) of such costs shall be allocated on an
aggregate basis to the various regulatory jurisdictions.
e. These cross-subsidization principles and such financial policies
and guidelines are not intended to, and shall not be interpreted
to, alter, modify or change in any way the law in the State of
Ohio with respect to the affect of the filing of a consolidated
income tax return on CG&E's income tax expense allocable to
jurisdictional customers.
f. CG&E shall maintain and utilize accounting systems and records
which are sufficient to identify and appropriately allocate costs
between CG&E and its Affiliates, consistent with these
cross-subsidization principles and such financial policies and
guidelines."
The Stipulation further provides that "[i]n any pending proceeding
before the PUCO:
CG&E and its prospective holding company, CINergy agree to make
available to the PUCO and the [Office of Consumers' Counsel, State of
Ohio ("OCC")], at reasonable times and places, all books and records
and employees of CINergy, CG&E and any Affiliate or Subsidiary of
CINergy or CG&E, as determined relevant by the PUCO under [Ohio
Revised Code] Section 4903.082 and the administrative rules of the
PUCO; provided, however, CG&E and CINergy shall have the right to seek
a protective order or to require by the OCC (and request of the PUCO)
the execution of a confidentiality agreement to protect and safeguard
confidential and/or proprietary information. For purposes of this
Paragraph F, 'Affiliate' or 'Subsidiary' means any corporation 50% or
more of whose voting capital stock is controlled by another entity.
'Affiliate or Subsidiary of CINergy or CG&E' means those corporations
in which CINergy or CG&E owns directly or indirectly (or in
combination with their other 'Affiliates' or 'Subsidiaries') 50% or
more of such corporation s voting capital stock."
Item 6. Exhibits and Financial Statements.
1. Form of promissory note to be issued by Special Purpose
Subsidiaries to CINergy and/or CINergy Investments. (Previously
filed.)
2. Proposed form of notice. (Previously filed.)
3. Financial statements per books and pro forma of CINergy, CINergy
nvestments and CINergy Services. (Filed herewith.)
4.1 Revised preliminary opinion of counsel. (Filed herewith.)
27 Financial data schedules (included with electronic submission
only)
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the undersigned companies
have duly caused this statement to be signed on their behalf by the
undersigned thereunto duly authorized.
Dated: August 14, 1995
CINERGY CORP.
By: /s/ William L. Sheafer
Treasurer
CINERGY INVESTMENTS, INC.
By: /s/ William L. Sheafer
Treasurer
CINERGY SERVICES INC.
By: /s/ William L. Sheafer
Treasurer
<PAGE>
ENDNOTES
/1/ Costanera Power Corp. ("Costanera"), PSI Argentina, Inc. ("PSI
Argentina"), PSI Energy Argentina, Inc. ("Energy Argentina"), E P
EDEGEL, Inc. ("EDEGEL"), PSI T&D International, Inc. ("T&D"), PSI
Yacyreta, Inc. ("Yacyreta"), CGE ECK, Inc. ("CGE ECK"), PSI Power
Resource Development, Inc. ("Power Development"), PSI Power
Operations, Inc. ("Power Operations"), PSI International, Inc. ("PSI
International"), and PSI Sunnyside, Inc. ("Sunnyside"). The Existing
Special Purpose Subsidiaries and the New Special Purpose Subsidiaries
are sometimes referred to collectively as the "Special Purpose
Subsidiaries".
/2/ Specifically, T&D, Yacyreta, CGE ECK, Power Development, Power
Operations, PSI International and Sunnyside.
/3/ Three other Existing Special Purpose Subsidiaries -- Costanera, PSI
Argentina and EDEGEL -- have been determined by the Federal Energy
Regulatory Commission ("FERC") to be EWGs. See Costanera Power
Corporation, 61 FERC Para. 61,335 (1992); PSI Argentina, Inc., 68 FERC
Para. 61,286 (1994); E P EDEGEL, Inc., 68 FERC Para. 61,265 (1994).
Another Existing Special Purpose Subsidiary -- Energy Argentina -- is
a FUCO and has filed a Notification on Form U-57 with the Commission.
Accordingly, under Sections 32 and 33 of the Act, Costanera, PSI
Argentina, EDEGEL and Energy Argentina are retainable without further
action by the Commission.
/4/ A foreign utility facility may also qualify as an "eligible facility"
as defined in Section 32(a)(2) of the Act. In the event that such an
investment opportunity is pursued as an EWG rather than a FUCO,
appropriate filings will be made with the FERC.
/5/ A third wholly-owned subsidiary of PSI Argentina -- Energy Services
Inc. of Buenos Aires -- was dissolved in January, 1995.
Exhibit 3
FINANCIAL STATEMENTS
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM U-1
FILE NO. 70-8589
CINERGY CORP.
CONSOLIDATED
AS OF DECEMBER 31, 1994
(Unaudited)
Pages 1 through 6
<PAGE>
CINERGY CORP.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
TWELVE MONTHS ENDED DECEMBER 31, 1994
Pro Forma
Actual Adjustments Pro Forma
(in thousands, except per share amounts)
OPERATING REVENUES
Electric $2 481 779 $ $2 481 779
Gas 442 398 442 398
2 924 177 2 924 177
OPERATING EXPENSES
Fuel used in electric production 725 985 725 985
Gas purchased 248 293 248 293
Purchased and exchanged power 62 332 62 332
Other operation 563 650 563 650
Maintenance 200 959 200 959
Depreciation 294 395 294 395
Post-in-service deferred operating
expenses - net (5 998) (5 998)
Phase-in deferred depreciation (2 161) (2 161)
Income taxes 152 181 ( 3 325) 148 856
Taxes other than income taxes 244 051 244 051
2 483 687 ( 3 325) 2 480 362
OPERATING INCOME 440 490 3 325 443 815
OTHER INCOME AND EXPENSES - NET
Allowance for equity funds used
during construction 6 201 6 201
Post-in-service carrying costs 9 780 9 780
Phase-in deferred return 15 351 15 351
Income taxes 10 609 10 609
Other - net (28 444) (28 444)
13 497 13 497
INCOME BEFORE INTEREST AND
OTHER CHARGES 453 987 3 325 457 312
INTEREST AND OTHER CHARGES
Interest on long-term debt 219 248 9 500 228 748
Other interest 20 370 20 370
Allowance for borrowed funds used
during construction (12 332) (12 332)
Preferred dividend requirements
of subsidiaries 35 559 35 559
262 845 9 500 272 345
NET INCOME $ 191 142 $( 6 175) $ 184 967
AVERAGE COMMON SHARES
OUTSTANDING 147 426 147 426
EARNINGS PER COMMON SHARE $1.30 $1.25
DIVIDENDS DECLARED PER COMMON SHARE $1.50
<PAGE>
CINERGY CORP.
PRO FORMA CONSOLIDATED BALANCE SHEET
AT DECEMBER 31, 1994
ASSETS
Pro Forma
Actual Adjustments Pro Forma
(in thousands)
UTILITY PLANT - ORIGINAL COST
In service
Electric $8 292 625 $ $8 292 625
Gas 645 602 645 602
Common 185 718 185 718
9 123 945 9 123 945
Accumulated depreciation 3 163 802 3 163 802
5 960 143 5 960 143
Construction work in progress 238 750 238 750
Total utility plant 6 198 893 6 198 893
CURRENT ASSETS
Cash and temporary cash investments 71 880 88 825 160 705
Restricted deposits 11 288 11 288
Accounts receivable less accumulated
provision of $9,716,000 for doubtful
accounts 299 509 299 509
Materials, supplies, and fuel -
at average cost
Fuel for use in electric production 156 028 156 028
Gas stored for current use 31 284 31 284
Other materials and supplies 92 880 92 880
Property taxes applicable to
subsequent year 112 420 112 420
Prepayments and other 36 416 36 416
811 705 88 825 900 530
OTHER ASSETS
Regulatory assets
Post-in-service carrying costs and
deferred operating expenses 185 280 185 280
Phase-in deferred return and
depreciation 100 943 100 943
Deferred demand-side management costs 104 127 104 127
Amounts due from customers -
income taxes 408 514 408 514
Deferred merger costs 49 658 49 658
Unamortized costs of reacquiring debt 70 424 70 424
Other 86 017 86 017
Other 134 281 134 281
1 139 244 1 139 244
$8 149 842 $ 88 825 $8 238 667
<PAGE>
CINERGY CORP.
PRO FORMA CONSOLIDATED BALANCE SHEET
AT DECEMBER 31, 1994
CAPITALIZATION AND LIABILITIES
Pro Forma
Actual Adjustments Pro Forma
(in thousands)
COMMON STOCK EQUITY
Common stock - $.01 par value;
authorized shares - 600,000,000;
outstanding shares - 155,198,038 $ 1 552 $ $ 1 552
Paid-in capital 1 535 658 1 535 658
Retained earnings 877 061 ( 6 175) 870 886
Total common stock equity 2 414 271 ( 6 175) 2 408 096
CUMULATIVE PREFERRED STOCK OF SUBSIDIARIES
Not subject to mandatory redemption 267 929 267 929
Subject to mandatory redemption 210 000 210 000
LONG-TERM DEBT 2 715 269 95 000 2 810 269
Total capitalization 5 607 469 88 825 5 696 294
CURRENT LIABILITIES
Long-term debt due within one year 60 400 60 400
Notes payable 228 900 228 900
Accounts payable 266 467 266 467
Refund due to customers 15 482 15 482
Litigation settlement 80 000 80 000
Accrued taxes 258 041 258 041
Accrued interest 58 504 58 504
Other 36 610 36 610
1 004 404 1 004 404
OTHER LIABILITIES
Deferred income taxes 1 071 104 1 071 104
Unamortized investment tax credits 195 878 195 878
Accrued pension and other postretirement
benefit costs 133 578 133 578
Other 137 409 137 409
1 537 969 1 537 969
$8 149 842 $ 88 825 $8 238 667
<PAGE>
CINERGY CORP.
PRO FORMA CONSOLIDATED STATEMENT OF CHANGES IN RETAINED EARNINGS
TWELVE MONTHS ENDED DECEMBER 31, 1994
Pro Forma
Actual Adjustments Pro Forma
(in thousands)
BALANCE DECEMBER 31, 1993 . . $ 907 802 $ $ 907 802
Net income . . . . . . . . 191 142 ( 6 175) 184 967
Dividends on common stock . (221 362) (221 362)
Other . . . . . . . . . . . (521) (521)
BALANCE DECEMBER 31, 1994 $ 877 061 $ ( 6 175) $ 870 886
<PAGE>
CINERGY CORP.
Pro Forma Consolidated Journal Entries to Give Effect to the
Issuance of $95 million of Long-term Debt
Entry No. 1
Cash and temporary cash investments. . . $95,000,000
Long-term debt. . . . . . . . . . . . . . . . . . . $95,000,000
To record the issuance of $95,000,000 of long-term debt.
Entry No. 2
Interest on long-term debt . . . . . . . $9,500,000
Cash and temporary cash investments . . . . . . . . $9,500,000
To record interest on $95,000,000 of long-term debt payable at 10%.
Entry No. 3
Cash and temporary cash investments . . $3,325,000
Income taxes . . . . . . . . . . . . . . . . . . . $3,325,000
To record the reduction in income taxes due to increased interest
on long-term debt ($9,500,000 at an assumed tax rate of 35%).
<PAGE>
FINANCIAL STATEMENTS
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM U-1
FILE NO. 70-8589
CINERGY CORP.
AS OF DECEMBER 31, 1994
(Unaudited)
Pages 1 through 5
<PAGE>
CINERGY CORP.
PRO FORMA STATEMENT OF INCOME
TWELVE MONTHS ENDED DECEMBER 31, 1994
Pro Forma
Actual Adjustments Pro Forma
(in thousands)
OPERATING EXPENSES
Other operation $ 643 $ $ 643
Income taxes (925) (925)
Taxes other than income taxes (10) (10)
(292) (292)
OPERATING INCOME 292 292
OTHER INCOME AND EXPENSES - NET
Equity in earnings of subsidiaries 196 300 196 300
Income taxes 2 219 2 219
Other - net (5 100) 9 500 4 400
193 419 9 500 202 919
INCOME BEFORE INTEREST 193 711 9 500 203 211
INTEREST 2 569 9 500 12 069
NET INCOME $191 142 $ $191 142
<PAGE>
CINERGY CORP.
PRO FORMA BALANCE SHEET
AT DECEMBER 31, 1994
ASSETS
Pro Forma
Actual Adjustments Pro Forma
(dollars in thousands)
CURRENT ASSETS
Cash and temporary cash investments $ 11 430 $(9 500) $ 1 930
Accounts receivable 55 145 55 145
66 575 (9 500) 57 075
OTHER ASSETS
Investment in subsidiaries 2 424 196 2 424 196
Intercompany notes receivable 104 500 104 500
Other 160 160
2 424 356 104 500 2 528 856
$2 490 931 $ 95 000 $2 585 931
CAPITALIZATION AND LIABILITIES
COMMON STOCK EQUITY
Common stock - $.01 par value;
authorized shares - 600,000,000;
outstanding shares - 155,198,038 $ 1 552 $ $ 1 552
Paid-in capital 1 535 658 1 535 658
Retained earnings 877 061 877 061
Total common stock equity 2 414 271 2 414 271
LONG-TERM DEBT 95 000 95 000
Total Capitalization 2 414 271 95 000 2 509 271
CURRENT LIABILITIES
Notes payable 75 000 75 000
Accounts payable 1 000 1 000
Accrued interest 917 917
76 917 76 917
OTHER LIABILITIES
Deferred income taxes (258) (258)
Other 1 1
(257) (257)
$2 490 931 $95 000 $2 585 931
<PAGE>
CINERGY CORP.
PRO FORMA STATEMENT OF CHANGES IN RETAINED EARNINGS
TWELVE MONTHS ENDED DECEMBER 31, 1994
Pro Forma
Actual Adjustments Pro Forma
(in thousands)
BALANCE DECEMBER 31, 1993 $ 907 802 $ $ 907 802
Net income 191 142 191 142
Dividends on common stock (221 362) (221 362)
Other (521) (521)
BALANCE DECEMBER 31, 1994 $ 877 061 $ $ 877 061
<PAGE>
CINERGY CORP.
Pro Forma Journal Entries to Give Effect to the
Issuance of $95 Million of Long-term Debt
Entry No. 1
Cash and temporary cash investments. . . $95,000,000
Long-term debt. . . . . . . . . . . . . . . . . . . $95,000,000
To record the issuance of $95,000,000 of long-term debt.
Entry No. 2
Interest on long-term debt . . . . . . . $9,500,000
Cash and temporary cash investments . . . . . . . . $9,500,000
To record interest on $95,000,000 of long-term debt payable at 10%.
Entry No. 3
Intercompany notes receivable . . . . . $95,000,000
Cash and temporary cash investments . . . . . . . . $95,000,000
To record a $95,000,000 loan to CINergy Investments.
Entry No. 4
Intercompany notes receivable . . . . . . $9,500,000
Interest income . . . . . . . . . . . . . . . . . . $9,500,000
To record interest at 10% per annum on intercompany loan to CINergy Investments.
<PAGE>
FINANCIAL STATEMENTS
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM U-1
FILE NO. 70-8589
CINERGY INVESTMENTS, INC.
CONSOLIDATED
AS OF DECEMBER 31, 1994
(Unaudited)
Pages 1 through 5
<PAGE>
CINERGY INVESTMENTS, INC.
PRO FORMA CONSOLIDATED STATEMENT OF LOSS
TWELVE MONTHS ENDED DECEMBER 31, 1994
Pro Forma
Actual Adjustments Pro Forma
(in thousands)
OPERATING REVENUES $ 8 221 $ $ 8 221
OPERATING EXPENSES
Other operation 12 396 12 396
Income taxes (1 388) (1 388)
Taxes other than income taxes 309 309
11 317 11 317
OPERATING LOSS (3 096) (3 096)
OTHER INCOME AND EXPENSES - NET
Income taxes 3 083 3 325 6 408
Other - net (7 514) (7 514)
(4 431) 3 325 (1 106)
INCOME (LOSS) BEFORE INTEREST (7 527) 3 325 (4 202)
INTEREST 889 9 500 10 389
NET LOSS $(8 416) $(6 175) $(14 591)
<PAGE>
CINERGY INVESTMENTS, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
AT DECEMBER 31, 1994
Pro Forma
Actual Adjustments Pro Forma
(dollars in thousands)
ASSETS
CURRENT ASSETS
Cash $ 1 593 $98 325 $ 99 918
Accounts receivable less accumulated
provision of $276,798 for doubtful
accounts 1 923 1 923
Other materials and supplies 5 653 5 653
Prepayments 331 331
9 500 98 325 107 825
OTHER ASSETS 12 091 12 091
$ 21 591 $98 325 $119 916
CAPITALIZATION AND LIABILITIES
COMMON STOCK EQUITY
Common stock - $.01 par value;
authorized shares - 100;
outstanding shares - 100 $ $ $
Paid-in capital 24 418 24 418
Retained deficit (13 108) (6 175) (19 283)
Total common stock equity 11 310 (6 175) 5 135
CURRENT LIABILITIES
Notes payable 104 500 104 500
Accounts payable 679 679
Accounts payable to associated
companies - net 8 564 8 564
Accrued taxes (394) (394)
Other 750 750
9 599 104 500 114 099
OTHER LIABILITIES
Deferred income taxes 59 59
Other 623 623
682 682
$ 21 591 $ 98 325 $119 916
<PAGE>
CINERGY INVESTMENTS, INC.
PRO FORMA CONSOLIDATED STATEMENT OF CHANGES IN RETAINED DEFICIT
TWELVE MONTHS ENDED DECEMBER 31, 1994
Pro Forma
Actual Adjustments Pro Forma
(in thousands)
BALANCE DECEMBER 31, 1993 $ (4 692) $ $ (4 692)
Net loss (8 416) (6 175) (14 591)
BALANCE DECEMBER 31, 1994 $(13 108) $(6 175) $(19 283)
<PAGE>
CINERGY INVESTMENTS, INC.
Pro Forma Consolidated Journal Entries to Give Effect to the
Borrowing of Up to $95 Million from CINergy Corp.
Entry No. 1
Cash . . . . . . . . . . . . . . . . . . $95,000,000
Intercompany Notes Payable . . . . . . . . . . . . $95,000,000
To record the issuance of intercompany notes payable of $95,000,000.
Entry No. 2
Interest expense . . . . . . . . . . . . $9,500,000
Intercompany notes payable . . . . . . . . . . . . $9,500,000
To record interest on $95,000,000 of intercompany notes payable at 10%.
Entry No. 3
Cash . . . . . . . . . . . . . . . . . . $3,325,000
Income taxes . . . . . . . . . . . . . . . . . . . $3,325,000
To record the reduction in income taxes due to increased interest costs
($9,500,000 at an assumed tax rate of 35%).
<PAGE>
FINANCIAL STATEMENTS
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM U-1
FILE NO. 70-8589
CINERGY SERVICES, INC.
AS OF DECEMBER 31, 1994
Pro forma adjustments are not applicable
for this company in this filing.
Pages 1 through 3
<PAGE>
CINERGY SERVICES, INC.
STATEMENT OF INCOME
TWELVE MONTHS ENDED DECEMBER 31, 1994
(in thousands)
OPERATING REVENUES $1 724
OPERATING EXPENSES
Other operation 1 688
Taxes other than income taxes 36
1 724
OPERATING INCOME 0
NET INCOME $ 0
<PAGE>
CINERGY SERVICES, INC.
BALANCE SHEET
AT DECEMBER 31, 1994
(in thousands)
ASSETS
CURRENT ASSETS
Accounts receivable from associated
companies $749
OTHER ASSETS 1
$750
CAPITALIZATION AND LIABILITIES
CURRENT LIABILITIES
Accounts payable 131
Accounts payable to associated
companies 619
750
$750
Exhibit 4.1
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, NY 10005
August 14, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Form U-1 Application-Declaration of CINergy Corp.,
CINergy Investments, Inc. and CINergy Services, Inc.
-- File No. 70-8589
Dear Sirs:
We refer to the Form U-1 Application-Declaration in
File No. 70-8589 and amendments Nos. 1 and 2 thereto (as so
amended, the "Application-Declaration"), filed by CINergy Corp.
("CINergy"), a Delaware corporation and a registered public
utility holding company under the Public Utility Holding Company
Act of 1935, as amended (the "Act"), CINergy Investments, Inc.
("CINergy Investments"), a Delaware corporation and a wholly-
owned subsidiary of CINergy, and CINergy Services, Inc.
("CINergy Services"), a Delaware corporation and a wholly owned
subsidiary service company of CINergy. Capitalized terms not
defined herein shall have the meanings ascribed to such terms in
the Application-Declaration.
In the Application-Declaration, approval and
authorization are requested: (1) for CINergy and CINergy
Investments to acquire, directly or indirectly, in one or more
transactions, common or preferred stock or debt securities in
connection with the formation of one or more companies (the "New
Special Purpose Subsidiaries") to be organized for the purpose
of engaging, directly or indirectly, and exclusively, in the
business of acquiring, owning and holding the securities of,
and/or providing services to, one or more foreign utility
companies ("FUCOs") and/or exempt wholesale generators ("EWGs"),
as defined in Sections 33(a) and 32(a) of the Act; (2) for
CINergy and CINergy Investments to make non-exempt direct and
indirect investments in certain existing special purpose
subsidiaries of CINergy (the "Existing Special Purpose
Subsidiaries"), by means of non-exempt equity investments (in
the form of partnership interests, trust certificates and other
non-exempt equity securities), non-exempt debt investments (in
the form of open-account advances or loans evidenced by
promissory notes), and guarantees, letters of credit and other
credit support issued or arranged by CINergy and/or CINergy
Investments in respect of debt securities of Special Purpose
Subsidiaries; (3) for CINergy and CINergy Investments to retain
(and for the Commission to release jurisdiction over) certain of
the Existing Special Purpose Subsidiaries as to which the
Commission reserved jurisdiction in its October 21, 1994 order
in File No. 70-8427, Release No. 35-26146 (the "Merger Order");
(4) for the Special Purpose Subsidiaries to issue to
nonassociate companies non-exempt equity securities (in the form
of partnership interests, trust certificates and other forms of
equity securities) for the purpose of financing investments by
such Special Purpose Subsidiaries in EWGs and FUCOs; (5) for the
Special Purpose Subsidiaries to provide services to their
subsidiaries and to other Special Purpose Subsidiaries and their
subsidiaries; (6) to the extent, if any, not previously
authorized by the Commission in the Merger Order, for CINergy
Services to provide services to the Special Purpose Subsidiaries
and their subsidiaries; and (7) for CINergy to apply proceeds
from securities issued or to be issued by it pursuant to
outstanding Commission orders in File Nos. 70-8477 and 70-8521
for purposes of the proposed investments described in the
Application-Declaration, all as more fully described in the
Application-Declaration (collectively, the "Transactions").
We have acted as special counsel for CINergy, CINergy
Investments and CINergy Services in connection with the
Transactions and, as such counsel, we are familiar with the
corporate proceedings taken and to be taken by CINergy, CINergy
Investments and CINergy Services in connection with the
Transactions as described in the Application-Declaration. We
have examined originals, or copies certified to our
satisfaction, of such corporate records of CINergy, CINergy
Investments, CINergy Services and the Existing Special Purpose
Subsidiaries, certificates of public officials, certificates of
officers and representatives of CINergy, CINergy Investments,
CINergy Services and the Existing Special Purpose Subsidiaries
and other documents as we have deemed it necessary to require as
a basis for the opinions hereinafter expressed. In such
examination we have assumed the genuineness of all signatures
and the authenticity of all documents submitted to us as
originals and the conformity with the originals of all documents
submitted to us as copies. As to various questions of fact
material to such opinions we have, when relevant facts were not
independently established, relied upon certificates by officers
of CINergy, CINergy Investments, CINergy Services and the
Existing Special Purpose Subsidiaries and other appropriate
persons and statements contained in the Application-Declaration.
The opinions expressed below in respect of the
Transactions described in the Application-Declaration are
subject to the following assumptions or conditions:
a. The Transactions shall have been duly authorized
and approved to the extent required by applicable state and
foreign law by the Boards of Directors and shareholders of
CINergy, CINergy Investments, the Special Purpose
Subsidiaries and CINergy Services.
b. All required approvals, authorizations, consents,
certificates, and orders of, and all filings and
registrations with, all applicable federal, state and
foreign commissions and regulatory authorities with respect
to the Transactions (including the approval and
authorization of the Commission under the Act) shall have
been obtained or made, as the case may be, and remain in
effect; the Commission shall have duly entered an
appropriate order or orders granting and permitting the
Application-Declaration to become effective with respect to
the Transactions as described in the Application-
Declaration; and the Transactions shall have been
accomplished in accordance with all such approvals,
authorizations, consents, certificates, orders, filings and
registrations. In addition, the Transactions shall comply
with any and all applicable rules or regulations hereafter
adopted by the Commission regarding the scope or
interpretation of Section 33 of the Act.
c. For each New Special Purpose Subsidiary, all
required organizational documents, in proper form, shall
have been duly and validly adopted and shall have been
filed with (and the filing thereof accepted by) the
Secretary of State or other appropriate official of such
New Special Purpose Subsidiary's jurisdiction of
organization, and all other corporate and other formalities
as are required by the laws of such jurisdiction for the
valid organization and due existence of such New Special
Purpose Subsidiary shall have been taken. As to each
company referred to in opining paragraph 2 below, no action
or proceeding for the dissolution or liquidation of such
company or threatening the existence of such company shall
have been taken or commenced.
d. The notes proposed to be issued by the Special
Purpose Subsidiaries to CINergy and CINergy Investments
shall be substantially in the form set forth in Exhibit 1
to the Application-Declaration and shall have been properly
completed and executed and, where required, countersigned,
and the rate of interest on such notes shall not exceed the
interest rate permitted by applicable law.
e. Borrowings by any Special Purpose Subsidiary will
not exceed those levels permitted from time to time by the
borrowing Special Purpose Subsidiary's articles or
certificate of incorporation or other governing documents,
debt instruments and agreements to which the borrowing
Special Purpose Subsidiary is a party or by which its
property is bound, and applicable laws and orders of
governmental and regulatory authorities with jurisdiction
over such Special Purpose Subsidiary.
f. The purchase or subscription price or other
consideration to be paid or given for the shares of stock
issued by any Special Purpose Subsidiary shall have been
paid and shall be not less than the par value of such
shares or such other amount as may be required by
applicable law, resolutions and governing corporate
documents in order for such shares to be fully paid and
non-assessable; certificates representing such shares (or
the functional equivalent thereof under applicable foreign
law) shall have been duly executed, countersigned and
registered by the applicable transfer agent and registrar
(if any); and all other acts and formalities required by
the laws of such Special Purpose Subsidiary's jurisdiction
of organization for such shares to be validly issued shall
have been taken.
g. No act or event other than as described herein
shall have occurred subsequent to the date hereof which
would change the opinions expressed above.
h. The consummation of the Transactions shall be
conducted under our supervision, and all legal matters
incident thereto shall be satisfactory to us, including the
receipt in satisfactory form of such opinions of other
counsel, qualified to practice in jurisdictions pertaining
to such transactions in which we are not admitted to
practice, as we may deem appropriate.
Based on the foregoing, and having regard to legal
considerations which we deem relevant, we are of the opinion
that, in the event that the proposed Transactions are
consummated in accordance with the Application-Declaration, and
subject to the assumptions and conditions set forth above:
1. All state laws applicable to the proposed
Transactions will have been complied with.
2. CINergy and CINergy Investments are validly
organized and duly existing under the laws of the State of
Delaware; each Existing Special Purpose Subsidiary is
validly organized and duly existing under the laws of its
jurisdiction of organization; and each New Special Purpose
Subsidiary will be validly organized and duly existing
under the laws of its jurisdiction of organization.
3. The shares of New Special Purpose Subsidiary stock
issued in the Transactions will be validly issued, fully
paid and non-assessable, and the holders thereof will be
entitled to the rights and privileges appertaining thereto
set forth in the charter or other organizational documents
of such New Special Purpose Subsidiary. The Special
Purpose Subsidiary debt securities issued in the
Transactions will be valid and binding obligations of such
Special Purpose Subsidiary, and the Special Purpose
Subsidiary debt securities guaranteed by CINergy or CINergy
Investments will be valid and binding obligations of the
issuer thereof and of CINergy or CINergy Investments, as
the case may be, in each case enforceable in accordance
with the terms of such securities or guarantee, except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting
the enforcement of creditors' rights generally and the
application of general principles of equity (regardless of
whether such enforceability is considered in a proceeding
in equity or at law).
4. Each of CINergy and CINergy Investments will
legally acquire the Special Purpose Subsidiary equity and
debt securities issued to it in the Transactions.
5. The consummation of the proposed Transactions will
not violate the legal rights of the holders of any
securities issued by CINergy or CINergy Investments or any
associate company thereof.
We hereby consent to the use of this opinion as an
exhibit to the Application-Declaration. The opinions set forth
herein are issued and expressed as of the date hereof. We do
not assume or undertake any responsibility to advise you of
changes in either fact or law which may come to our attention
after the date hereof.
Very truly yours,
/s/ Milbank, Tweed, Hadley & McCloy
MDD/RBW/RJH
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEETS AND STATEMENTS OF INCOME AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000899652
<NAME> CINERGY CORP.
<SUBSIDIARY>
<NUMBER> 0
<NAME> CINERGY CORP. (CONSOLIDATED)
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 12-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1994
<PERIOD-START> JAN-01-1994 JAN-01-1994
<PERIOD-END> DEC-31-1994 DEC-31-1994
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 6,198,893 6,198,893
<OTHER-PROPERTY-AND-INVEST> 0 0
<TOTAL-CURRENT-ASSETS> 811,705 900,530
<TOTAL-DEFERRED-CHARGES> 1,004,963 1,004,963
<OTHER-ASSETS> 134,281 134,281
<TOTAL-ASSETS> 8,149,842 8,238,667
<COMMON> 1,552 1,552
<CAPITAL-SURPLUS-PAID-IN> 1,535,658 1,535,658
<RETAINED-EARNINGS> 877,061 870,886
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,414,271 2,408,096
210,000 210,000
267,929 267,929
<LONG-TERM-DEBT-NET> 2,715,269 2,810,269
<SHORT-TERM-NOTES> 228,900 228,900
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
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35,559 35,559
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
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<CIK> 0000899652
<NAME> CINERGY CORP.
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
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<CIK> 0000899652
<NAME> CINERGY CORP.
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<NAME> CINERGY SERVICES, INC.
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THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
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<CIK> 0000899652
<NAME> CINERGY CORP.
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<NAME> CINERGY INVESTMENTS, INC. (CONSOLIDATED)
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