File No. 70-____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________________________
FORM U-1 APPLICATION-DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
____________________________________________
Cinergy Corp.
Cinergy Services, Inc.
139 East Fourth Street
Cincinnati, Ohio 45202
Cinergy Investments, Inc.
251 North Illinois Street, Suite 1410
Indianapolis, Indiana 46204
(Name of companies filing this statement
and addresses of principal executive offices)
Cinergy Corp.
(Name of top registered holding company parent)
William L. Sheafer
Treasurer
Cinergy Corp.
(address above)
(Name and address of agent of service)
The Commission is requested to send copies of all notices, orders and
communications in connection with this Application-Declaration to:
Stephen P. Biggerstaff Cheryl M. Foley
Manager Vice President, General Counsel
Cinergy Investments, Inc. and Corporate Secretary
(address above) Cinergy Corp.
(address above)
William T. Baker, Jr.
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
<PAGE>
Item 1. Description of Proposed Transactions.
A. Summary
Cinergy Corp. ("Cinergy"), a registered holding company under the Public Utility
Holding Company Act of 1935, as amended (the "Act"), and Cinergy Investments,
Inc., Cinergy's wholly-owned nonutility holding company subsidiary
("Investments"), request Commission authorization to establish and finance, in
an aggregate amount at any time outstanding not to exceed $100,000,000
(including all related exempt financing transactions) through December 31, 2006,
two new subsidiaries (collectively, "EnergyCos") to engage in the district
cooling (such EnergyCo, "CoolCo") and heating businesses (such EnergyCo,
"HeatCo"), respectively, in the greater metropolitan area of Cincinnati, Ohio.
In addition, to the extent, if any, not already authorized pursuant to the
Commission's October 21, 1994 memorandum opinion and order in File No. 70-8427,
Rel. No. 35-26146 (the "Merger Order"), Cinergy Services, Inc., Cinergy's
wholly-owned service company subsidiary ("Cinergy Services"), requests
authorization to provide services to the EnergyCos.
B. Background
(i) District Energy Systems
In Cincinnati as in many other American cities, most large commercial buildings
provide air conditioning from chilled water systems internal to each building.
Currently, the chilled water systems, or "chillers," in approximately 90% of
Cincinnati's downtown office buildings rely on chlorofluorocarbon, or "CFC,"
refrigerant to produce the cooling effect. Owners and managers of most large
commercial buildings in downtown Cincinnati are considering whether to retrofit
or replace their existing chillers in the next several years due to age or
environmental considerations; either option involves major capital expenditures,
ranging from hundreds of thousands to several million dollars.
Likewise, a number of the owners and managers of large commercial buildings in
downtown Cincinnati are analyzing whether to replace the heating systems in
their buildings. Many of these systems are old and approaching the end of their
useful lives, are expensive to replace, use relatively inefficient boilers,
occupy a disproportionately large amount of building space, and raise
environmental issues associated with emission of nitrogen oxides ("NOx").
The installation of "district" cooling and heating systems in downtown
Cincinnati offers a cost-effective alternative for cooling and heating large
commercial buildings. The basic concept is analogous to that of connecting to
the electrical distribution system as opposed to generating one's own
electricity on-site. Under a district cooling system, rather than each office
building supplying its own cooling needs on a "self-contained" basis, through a
chiller located within that building, the needs of dozens of office buildings
may be "outsourced" - that is, supplied by underground pipes distributing cooled
water to the buildings from a centrally-located chilled water plant operated by
a third-party provider. A district cooling system's physical infrastructure
consists principally of the central plant itself and the associated distribution
system - specifically, the network of underground pipes running from the central
plant to the client office buildings (through the supply pipes) and looping back
to the plant (through the return pipes). District cooling can provide a cost-
effective alternative for cooling not only large commercial buildings in a
central business area but also other large complexes such as hospitals and
universities.
Under a district heating system, the distribution system is very similar to that
for a district cooling system, except that the supply and return pipes are
usually smaller than their counterparts in a district cooling system. Although
the central production facilities for combined district cooling and heating
systems can (and in fact tend to be) housed in the same building, the
distribution networks must be physically separate - i.e., the pipes used to
transport and loop back to the central plant the hot water must be used
exclusively for that purpose, and vice versa (although the heating and cooling
pipes may be "joint trenched" (nested together in the same trench under the
street surface)).
District cooling and heating systems are in place in many American cities,
including Atlantic City, Akron, Baltimore, Chicago (district cooling only),
Cleveland, Indianapolis, Minneapolis, Nashville, Pittsburgh, St. Louis and
Youngstown. Many of the district heating systems have been in place for
decades. Among the major benefits of district energy systems are the following:
* Customers. District cooling and heating systems offer an economical
alternative to refurbishing or replacing (or installing in the first place)
"stand-alone" cooling or heating systems in individual buildings, enabling
customers to avoid major capital expenditures. By virtue of economies of scale,
owners and operators of district cooling and heating facilities can offer
competitive rates to customers when compared to the customers installing,
operating and maintaining their own chillers and boilers. Outsourcing cooling
and heating needs under a district energy system frees up building space
otherwise required for on-site chillers and boilers and significantly reduces
associated operation and maintenance expenses.
Synergistic benefits can be expected to accrue to customers if they purchase
both their cooling and heating needs from a single district energy system.
These benefits include further substantial reductions in capital outlays and
operation and maintenance costs, more building space available for commercial
use, and a likely reduction in air emissions.
Also, the economics of district energy systems improve when district heating is
added incrementally to a new district cooling system (and vice versa),
especially if the "backbone" pipes and central plant equipment for the district
heating can be installed at the same time as those for the district cooling
system. The installation of combined systems causes less disruption to city
streets and motorists in congested downtown central business districts. The
great majority of the district energy systems now serving American cities
feature combined cooling and heating central plant facilities.
* Communities. District cooling and heating systems are important economic
development tools for urban areas in competing against less densely developed
suburban commercial and industrial areas, where such centralized systems are
less feasible. The ability of real estate developers to access district chilled
and heated water for their commercial and industrial projects effectively
reduces the capital cost of building those projects; once built, the facilities
cost comparatively less to operate and maintain.
* Environment. District energy systems can also benefit the environment.
Chilled water systems built today shun CFCs in favor of a new, environmentally
compatible generation of refrigerants. Many of the older boilers in commercial
buildings are inefficient and do not use low NOx burners. Although there are no
regulatory mandates to reduce NOx emissions from the operation of these boilers,
there is a growing public awareness focusing on the level of emissions from
these less efficient heating systems. By contrast, many of the larger boilers
used in new district heating plants employ more efficient, low NOx burner
technology. Finally, district energy systems can be expected to reduce the
combined peak electric load on the electricity supplier.
(ii) Discussions involving Cinergy with respect to
Development of District Energy System in Cincinnati
The impetus for the development of a district energy system in downtown
Cincinnati originated with commercial customers of Cinergy's utility subsidiary,
The Cincinnati Gas & Electric Company ("CG&E"). These customers, owners and
managers of large commercial buildings in the downtown area, upon learning that
CG&E was planning to replace the chillers at its Fourth and Main Street
building, asked whether CG&E might consider installing larger chillers that
would accommodate their needs as well. Since those initial discussions, Cinergy
representatives have had a number of discussions with other downtown building
owners or managers who have expressed a strong interest in district cooling.
Several of these customers have also expressed a strong interest in district
heating.
Cinergy personnel are also involved in discussions with third parties concerning
acquisition (by ground lease or fee simple title) of the necessary realty in the
downtown area, together with any required zoning variances, for the siting and
construction of one or more combined central plant facilities.
In order to provide district cooling and heating in Cincinnati, Cinergy will
need to obtain one or more franchises from the City of Cincinnati. The City
also has jurisdiction over the rates that would be charged to district energy
customers. To that end, Cinergy representatives have had preliminary
discussions with the City's staff. Pursuant to those discussions and the
staff's recommendations to Mayor Roxanne Qualls and the City Council Members,
the City is preparing to award one or more district cooling and heating
franchises covering the downtown central business district as well as possibly
other locations within the greater metropolitan area. Current indications are
that the City will grant a franchise with respect to the downtown area in late
December 1995 or in January 1996.
C. Proposed Business Activities of EnergyCos
Applicants request authorization for the EnergyCos to engage in the businesses
of a district cooling company and a district heating company, respectively,
within the greater Cincinnati metropolitan area. These activities would
include:
* design, construction, installation, ownership, operation, management, repair
and maintenance of one or more combined or stand-alone central chilled water (in
the case of CoolCo) and heating plants (in the case of HeatCo) and associated
distribution pipes and ancillary equipment and facilities;
* acquisitions of required franchises, zoning variances, interests in realty and
any other necessary permits;
* execution of water cooling (in the case of CoolCo) and water heating (in the
case of HeatCo) contracts with customers providing for delivery of chilled or
heated water to the customers' facilities for cooling or heating purposes and
rendition of associated services/1/; and
* retention of consultants and third-party contractors with respect to the
foregoing activities.
The above listing is not intended to be exhaustive, but is for illustrative
purposes only.
Prospective customers of the EnergyCos would be comprised of nonassociates
(specifically, existing electric and gas customers of CG&E within Cincinnati) as
well as, at least as to chilled water, CG&E itself. Any sales of chilled or hot
water to CG&E, together with any incidental services, construction or goods,
would be exempt from Commission jurisdiction pursuant to Rule 81.
The City of Cincinnati has primary jurisdiction over the prices to be charged by
the EnergyCos to their customers.
As part of their business activities, CoolCo and HeatCo also request
authorization to provide financing to nonassociate customers in connection with
sales of chilled or heated water. In order to connect to the EnergyCos'
district energy systems, some prospective customers may need to replace their
cooling/heating interface equipment (i.e., such items as heat exchangers, pumps
and some internal piping on the customer's premises). Some of the building
owners and managers, to further reduce capital outlays, are interested in the
EnergyCos financing these equipment upgrades. The EnergyCos propose to provide
such financing by selling the necessary equipment to the customers on credit;
the customer would repay the respective EnergyCo for the equipment pursuant to a
separate line-item charge to its monthly bill from the EnergyCo for chilled or
hot water. The monthly charge would cover a portion of the equipment's total
sale price to the customer (reflecting a mark-up from the cost paid by the
EnergyCo to the equipment vendor) plus a finance charge. In connection with the
proposed customer financing, the EnergyCos would not acquire any promissory
notes or other securities from their customers.
As noted above, district energy systems can reasonably be expected to benefit
the customers served (by providing an economical alternative to on-site, often
technologically obsolete chillers and boilers), the host communities (in terms
of attracting new businesses) and the environment (use of new post-CFC
generation of refrigerants and low NOx burners). Cinergy believes that as the
utility industry becomes increasingly competitive, the district energy business
will benefit Cinergy by:
* Demonstrating to existing customers Cinergy's capability to meet their needs
through innovative energy-related products and services (i.e., in this instance,
district energy - not currently available in Cincinnati), thereby encouraging
customers to regard Cinergy as a resource for energy-related solutions and
serving to strengthen customer ties to Cinergy.
* Enabling Cinergy to retain the sale of energy, albeit as chilled and heated
water, to its existing customer base.
D. Organization and Financing of EnergyCos
As set forth below, Cinergy and Investments request authority (1) to organize
the EnergyCos under Ohio law as wholly-owned subsidiaries of Investments; (2) in
connection with the organization and start-up activities of the EnergyCos (to
the extent not otherwise exempted under Rules 45 and 52), to make interest-
bearing open-account advances and loans to the EnergyCos; and (3) from time to
time through December 31, 2006, to guarantee and otherwise act as surety in
respect of bank loans and (to the extent not otherwise exempted under Rule
45(b)(6)) bid bonds and performance and similar obligations incurred or
undertaken by the EnergyCos in the ordinary course of their businesses.
In addition, Cinergy and Investments expect that they (and the EnergyCos
themselves) will finance the ongoing businesses of the EnergyCos through a
variety of financing transactions exempt from Commission prior approval
requirements.
The aggregate amount of the initial capital stock purchases, open-account
advances/loans and financial/performance guarantees for which Applicants request
authorization, together with all such exempt financing transactions (pursuant to
Rules 45 and 52 or otherwise), shall not exceed $100,000,000 at any one time
outstanding through December 31, 2006./2/
(i) Organization
Investments requests authority to organize CoolCo and HeatCo as wholly-owned
subsidiaries under the laws of the State of Ohio. Investments will acquire
shares of the EnergyCos' capital stock (common and/or preferred shares), which
may be denominated as par or no par value stock.
(ii) Open-Account Advances/Loans in connection with
Organization of EnergyCos
Cinergy and Investments request authority, in connection with the initial
capitalization and start-up construction activities of the EnergyCos (to the
extent not otherwise exempted under Rules 45 and 52), to make open-account
advances and loans to the EnergyCos aggregating (together with any other
jurisdictional and exempt financing of the EnergyCos) not more than $100,000,000
in principal amount at any one time outstanding through December 31, 2006. Such
open-account advances and loans would mature not later than December 31, 2006
and would bear interest at a rate not to exceed the prime rate in effect on the
date of the open-account advance/loan at a bank designated by Cinergy.
(iii) Guarantees, Indemnifications and Other Surety
Undertakings
Cinergy and Investments request authority from time to time through December 31,
2006, in an aggregate amount at any one time outstanding (together with any
other jurisdictional and exempt financing of the EnergyCos) not to exceed
$100,000,000, to guarantee, indemnify and otherwise assume liability on and act
as surety with respect to (collectively, "Guarantees") loans from banks and
other financial institutions and (to the extent not otherwise exempted under
Rule 45(b)(6)) bid and other similar bonds, and performance and other similar
obligations incurred or undertaken by the EnergyCos in connection with their
businesses; provided that any Guarantees outstanding on December 31, 2006 would
terminate or expire in accordance with their terms.
Loans. Borrowings by the EnergyCos from banks and other financial institutions
as to which Cinergy and Investments propose to act as surety would be secured or
unsecured, would be made not later than December 31, 2006 (maturing not later
than 12 months thereafter), and would bear interest at a rate not to exceed 3%
above the prime rate then in effect at a bank designated by Cinergy.
Bid Bonds, Etc. In the ordinary course of their businesses, the EnergyCos may
be required to furnish various types of bonds, including bid bonds, performance
bonds, and material and payment bonds, and to provide commercial sureties for
their obligations under certain of such bonds. The proposed surety undertakings
by Cinergy and Investments will enable the EnergyCos to obtain such bonds when
needed and at the most favorable rates.
Performance Guaranties. It may also be necessary for Cinergy or Investments to
guarantee an EnergyCo's performance and other obligations under contracts and
bids with third parties in order to enable the EnergyCo to obtain the contract
and on the most favorable terms.
(iv) Source of Funds
The proposed initial capital stock purchases, initial open-account
advances/loans and Guarantees by Cinergy and Investments to the EnergyCos would
be funded (1) as to Cinergy, through sales of commercial paper and short-term
notes to banks and other financial institutions (see File No. 70-8521, Rel. No.
35-26215, January 11, 1995), through sales of Cinergy common stock (see File
Nos. 70-8477, Rel. No. 35-26411, November 17, 1995 (notice), and 70-8705, Rel.
No. 35-26422, December 1, 1995), and/or through internally generated funds; and
(2) as to Investments, through capital contributions, loans, and/or open-account
advances from Cinergy (pursuant to Rules 45(b)(4) and 52(b) and (d)) and/or
internally generated funds.
(v) Use of Proceeds
The EnergyCos would use the proceeds of the parent company financing
transactions proposed herein (as well as the proceeds of exempt financing
transactions) for general corporate purposes, including financing of the
construction, operation and maintenance of their central plant facilities and
associated distribution pipe systems and other ongoing working capital needs.
None of such proceeds will be used by the EnergyCos to invest in any exempt
wholesale generator ("EWG") or foreign utility company ("FUCO") as defined in
the Act.
E. Employee Arrangements/Services from Associates
Initially, the EnergyCos will have a relatively small staff of employees devoted
primarily to management and administrative functions.
It is anticipated that CoolCo and HeatCo will contract with Cinergy Services
(but not with any other associate company including each other) for a variety of
services (in such areas as information systems, human resources, accounting,
legal, internal audit and finance) pursuant to and in accordance with the
Cinergy system Nonutility Service Agreement and the associated accounting, cost
assignment and work order procedures authorized by the Commission in the Merger
Order (see Exhibits B-7 and B-7.1 to amended Form U-1 Application-Declaration in
File No. 70-8427). Among other things, that agreement and those procedures
contemplate that any such services rendered to the EnergyCos by Cinergy Services
would be priced at cost as determined pursuant to Rules 90 and 91. To the
extent, if any, not already authorized pursuant to the Merger Order, Cinergy
Services requests the Commission's authorization to render any such requested
services to the EnergyCos.
The EnergyCos will likely engage nonassociate contractors for various other
services, such as with respect to construction management, engineering,
mechanical, architectural and operational matters.
F. Rule 24 Notification Certificates
Applicants propose to furnish the Commission with the following information with
respect to the EnergyCos on a periodic basis. Within 60 days following the end
of each calendar quarter (commencing with the first calendar quarter following
the Commission's order in this proceeding), Cinergy Services will file with the
Commission a certificate of notification pursuant to Rule 24 comprised of the
following: (1) an unaudited balance sheet and income statement of each EnergyCo
for the preceding calendar quarter; (2) a summary of the business activities
undertaken by each EnergyCo during the preceding quarter, including any related
customer financing; (3) a summary of the financing activities with respect to
the EnergyCos during the preceding quarter, including both exempt and
jurisdictional transactions; and (4) a summary of any services received by each
EnergyCo from Cinergy Services, identifying each service by function and the
aggregate cost thereof to the EnergyCo.
The foregoing notwithstanding, to the extent that any of such information
becomes required to be reported to the Commission pursuant to Rule 58 (see Rel.
No. 35-26313, June 20, 1995), that information would no longer be reported via
certificates of notification in this proceeding.
G. Rule 54 Statement
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 or FUCOs, the Commission shall
not consider the effect of the capitalization or earnings of any subsidiary
which is an EWG or a FUCO upon the registered holding company if the conditions
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 them, see File No. 70-8589 (Rel. No. 35-26376, September 21,
1995).
Rule 53(a)(1): The average of Cinergy's consolidated retained earnings for the
four consecutive quarters ended September 30, 1995 was $908 million, and
Cinergy's aggregate investment in EWGs and FUCOs at September 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 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. In the Merger Order, the Commission authorized
Cinergy Services 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 will submit a copy of this Application-Declaration and
of any Rule 24 certificate 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 utility commissions
having jurisdiction over the retail rates of Cinergy's utility subsidiaries
promptly after 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 September 30, 1995 were $908 million , versus $937 million for the four
quarters ended September 30, 1994, a difference of approximately $29 million
(representing a decrease of 3%). Accordingly, the aggregate investment
restriction set forth in this provision of the Rule is inapplicable.
Rule 53(b)(3): For the twelve months ended September 30, 1995, Cinergy had net
income of approximately $670,000 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.
The fees, commissions and expenses to be incurred, directly or indirectly, by
the Applicants or any associate companies thereof in connection with the
proposed transaction are estimated as follows:
U-1 filing fee $2,000
Fees of Cinergy Services. $50,000
Fees of Reid & Priest LLP $7,500
Fees associated with
obtaining franchise agreements
and zoning variances $20,000
TOTAL $79,500
Item 3. Applicable Statutory Provisions.
The initial issuance and sale by CoolCo and HeatCo of shares of their capital
stock and the acquisition thereof by Investments are subject to Sections 6(a)
and 7, and 9(a) and 10 of the Act, respectively. Interest-bearing open-account
advances or loans by Cinergy or Investments to either EnergyCo in connection
with the formation thereof may be subject to Sections 6(a), 7, 9(a), 10 and/or
12(b) and Rule 45(a).
Additional purchases by Investments of shares of capital stock of CoolCo and
HeatCo would be exempt from Sections 6(a), 7, 9(a) and 10 pursuant to Rule 52(b)
and (d). Additional interest-bearing open-account advances or loans by Cinergy
or Investments to CoolCo and HeatCo would be exempt from Sections 6(a), 7, 9(a),
10 and 12 and Rule 45(a) pursuant to Rule 52(b) and (d) and Rule 45(b)(1). Non-
interest-bearing open-account advances and capital contributions from Cinergy
and Investments to either EnergyCo would be exempt from Section 12(b) and Rule
45(a) pursuant to Rule 45(b)(4).
Guarantees by Cinergy and Investments in respect of the bank borrowings,
performance and other obligations of CoolCo and HeatCo described herein are or
may be subject to Section 12(b) and Rule 45(a) to the extent not otherwise
exempted by Rule 45(b)(6).
The businesses proposed to be conducted by CoolCo and HeatCo fall within the
scope of Section 9(a) and 10, but would be conditionally exempted thereunder
pursuant to the Commission's proposed Rule 58 (Rel. No. 35-26313, June 20,
1995). Under Rule 58, CoolCo and HeatCo would be deemed "energy-related
companies" since substantially all of their revenues would be derived from
"[t]he production, conversion, and distribution of thermal energy products, such
as process steam, heat, hot water, chilled water, air conditioning, compressed
air and similar products." See proposed Rule 58(b)(1)(vi). More generally, the
EnergyCos manifestly constitute companies whose businesses are integrally
related to Cinergy's core utility business since, inter alia, (1) they would be
regulated as public utilities under Ohio law (by both the Public Utilities
Commission of Ohio ("PUCO") and, as to rates, the City of Cincinnati); (2) they
would operate within the service territory and serve the utility customers of
CG&E (and CG&E itself); and (3) their operations would foster energy
conservation and efficiency and sound environmental stewardship. In this
regard, the proposed EnergyCos are entirely consistent with recent orders of the
Commission authorizing the establishment or expanded activities of energy
management companies - see, e.g., Central and South West Corporation, Rel. No.
35-26367, September 1, 1995 (authorizing formation of new nonutility subsidiary,
EnerShop Inc., to provide energy and demand-side management services, including
with respect to chillers); Eastern Utilities Associates, et al., Rel. No. 35-
26232, February, 15, 1995 (authorizing expanded activities of energy management
subsidiary, citing strong national interest in promoting energy conservation and
efficiency) - as well as with the general approach to diversification by
registered companies propounded by the staff in its June 1995 Report on The
Regulation of Public-Utility Holding Companies, id. at 86-92.
Any sale of chilled or heated water, together with incidental services,
construction and goods, by the EnergyCos to CG&E would be exempt from Section 13
pursuant to Rule 81.
Cinergy Services' provision of support services to nonutility associate
companies such as the EnergyCos was authorized by the Commission in the Merger
Order. Accordingly, the rendition of services by Cinergy Services to the
EnergyCos falls within the scope of Rule 87(a)(2) and is otherwise subject to
Section 13(b) and Rules 90 and 91.
Rule 54 is also applicable to the proposed transactions.
Item 4. Regulatory Approval.
The EnergyCos will be subject to regulation as public utilities by both the PUCO
and, as to rates, the City of Cincinnati.
Specifically, under Ohio law, CoolCo and HeatCo would be deemed a "cooling
company" and "heating company," respectively, and therefore in each case a
"public utility." See Ohio Rev. Code Ann. ("ORCA") Sections 4905.02,
4905.03(A)(9). Accordingly, HeatCo and CoolCo would be subject to the
jurisdiction of the PUCO. See ORCA Section 4905.05. In addition, by virtue of
their proposed operations within Cincinnati, CoolCo and HeatCo must each receive
a franchise from the City of Cincinnati. Under "home rule" provisions of Ohio
law, the City also has primary jurisdiction over the rates to be charged to the
EnergyCos' customers for the provision of chilled or heated water within the
City of Cincinnati. See ORCA Section 4909.34.
No other city, state or federal regulatory agency (other than the Commission
under the Act) has jurisdiction over the proposed transactions.
Item 5. Procedure.
Potential customers of CoolCo and HeatCo are counting upon a district energy
system having been constructed and ready to commence commercial operation by not
later than March 1, 1997. Construction of the central plant facilities and
distribution piping systems will span an estimated 13 months; consequently,
construction must begin by early February 1996. Timely action by the Commission
on this application is therefore essential.
Accordingly, Applicants request that the Commission issue and publish in the
Federal Register not later than January15, 1996 the requisite notice under Rule
23 with respect to the filing of this Application-Declaration and the
transactions proposed herein. Applicants further request that the notice specify
a date not later than February 9, 1996 as the date after which the Commission
may issue an order granting this Application-Declaration, and that the
Commission issue such order on February 10, 1996.
Applicants waive a recommended decision by a hearing officer or other
responsible officer of the Commission; consent that the Staff of the Division of
Investment Management may assist in the preparation of the Commission's order;
and request that there be no waiting period between the issuance of the
Commission's order and its effectiveness.
Item 6. Exhibits and Financial Statements.
(a) Exhibits:
A-1 Form of articles of incorporation of CoolCo (to be filed by amendment)
A-2 Form of by-laws of CoolCo (to be filed by amendment)
A-3 Form of capital stock certificate(s) of CoolCo (to be filed by
amendment)
A-4 Form of articles of incorporation of HeatCo (to be filed by amendment)
A-5 Form of by-laws of HeatCo (to be filed by amendment)
A-6 Form of capital stock certificate(s) of HeatCo (to be filed by
amendment)
B Not applicable
C Not applicable
D-1 Franchise Agreement(s) with City of Cincinnati
E Not applicable
F-1 Preliminary opinion of counsel (to be filed by amendment)
G Suggested form of Federal Register public notice
(b) Financial Statements:
FS-1 Cinergy Consolidated Financial Statements, dated September 30, 1995
FS-2 Cinergy Financial Statements, dated September 30, 1995
FS-3 Investments Consolidated Financial Statements, dated September 30,
1995
FS-4 Cinergy Services Financial Statements, dated September 30, 1995
FS-5 Cinergy Consolidated Financial Data Schedule (included as part of
electronic submission only)
FS-6 Cinergy Financial Data Schedule (included as part of electronic
submission only)
FS-7 Investments Financial Data Schedule (included as part of electronic
submission only)
FS-8 Cinergy Services Financial Data Schedule (included as part of
electronic submission only)
Item 7. Information as to Environmental Effects.
(a) The Commission's action in this matter will not constitute major federal
action significantly affecting the quality of the human environment.
(b) No other federal agency has prepared or is preparing an environmental
impact statement with regard to the proposed transactions.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the undersigned companies have duly
caused this document to be signed on their behalf by the undersigned thereunto
duly authorized.
Dated: December 20, 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/ Several prospective customers have expressed an interest in being supplied
with both district hot water and steam. Such potential steam sales would
comprise no more than a small portion of HeatCo's business. Accordingly,
Cinergy requests authorization for HeatCo to market both hot water and steam.
/2/ For purposes of this limitation, Guarantees will not be "double-counted"
with the underlying obligation. Thus, a Cinergy guarantee of the entire amount
of an exempt $10 million bank borrowing by an EnergyCo would, together with the
bank borrowing itself, count as $10 million (not $20 million) against the
aggregate limitation.
EXHIBIT G
PROPOSED FORM OF NOTICE
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35-________)
Filings Under the Public Utility Holding Company Act of 1935 ("Act")
January 15, 1996
Notice is hereby given that the following filing(s) has/have been made with the
Commission pursuant to provisions of the Act and rules promulgated thereunder.
All interested persons are referred to the Application-Declaration(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 February 9, 1996
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 amended, may be granted
and/or permitted to become effective.
Cinergy Corp., et al. 70-
Notice of Proposal to Form Nonutility Subsidiaries To Engage In District Energy
Business; Related Financing And Service Arrangements
Cinergy Corp., a registered holding company ("Cinergy"), Cinergy Services, Inc.,
Cinergy's wholly-owned service company subsidiary ("Cinergy Services"), both 139
East Fourth Street, Cincinnati, Ohio 45202, and Cinergy Investments, Inc.,
Cinergy's wholly-owned nonutility holding company subsidiary ("Investments"),
251 North Illinois Street, Suite 1410, Indianapolis, Indiana 46204, have filed
an Application-Declaration under Sections 6(a), 7, 9(a), 10, 12(b) and 13 of the
Act and Rules 45, 54, 81, 87, 90 and 91 thereunder.
Cinergy and Investments propose to establish two new subsidiaries (collectively,
"EnergyCos") to engage in the district cooling (such EnergyCo, "CoolCo") and
heating businesses (such EnergyCo, "HeatCo") in the greater metropolitan area of
Cincinnati, Ohio. The EnergyCos will construct, own and operate one or more
combined or stand-alone central chilled water (in the case of CoolCo) and
heating plants (in the case of HeatCo) and associated distribution pipes and
ancillary equipment and facilities within Cincinnati, and will enter into
contracts with commercial and industrial customers of Cinergy's electric and gas
utility subsidiary, The Cincinnati Gas & Electric Company ("CG&E"), as well as
with CG&E, providing for the delivery to the customers' facilities of chilled
and/or heated water (and possibly to a minor extent steam) for cooling and
heating purposes and the rendition of associated services. The EnergyCos may
provide financing to customers (exclusive of CG&E) in connection with the
replacement of certain equipment on the customer's premises needed to connect to
the EnergyCos' distribution pipe systems. Specifically, the EnergyCos will sell
the necessary equipment to the customers on credit; the customer would repay the
respective EnergyCo for the equipment pursuant to a separate line-item charge to
its monthly bill from the EnergyCo for chilled or hot water. The monthly charge
would cover a portion of the equipment's total sale price to the customer
(reflecting a mark-up from the cost paid by the EnergyCo to the equipment
vendor) plus a finance charge. The EnergyCos will not acquire any promissory
notes or other securities from the customers.
Investments proposes to organize CoolCo and HeatCo as wholly-owned subsidiaries
under Ohio law. Cinergy and Investments also propose (to the extent not
otherwise exempted under Rules 45 and 52) to make interest-bearing open-account
advances and loans to the EnergyCos in connection with their initial
capitalization and start-up activities. Such open-account advances and loans
would mature not later than December 31, 2006 and would bear interest at a rate
not to exceed the prime rate then in effect at a bank designated by Cinergy.
Cinergy and Investments further propose to guarantee and otherwise act as surety
in respect of bank borrowings and (to the extent not otherwise exempted under
Rule 45(b)(6)) performance and similar obligations of the EnergyCos. Such
guarantees may be made from time to time through December 31, 2006, provided
that any guarantees outstanding on such date will terminate in accordance with
their terms. Bank borrowings as to which Cinergy and Investments propose to act
as surety would be secured or unsecured, would be made not later than December
31, 2006 (maturing not later than 12 months thereafter), and would bear interest
at a rate not to exceed 3% above the prime rate then in effect at a bank
designated by Cinergy. The total amount of the initial capital stock purchases,
open-account advances/loans and financial/performance guarantees for which
authorization is sought, together with all other purchases by Investments of
EnergyCos capital stock and capital contributions and loans by Cinergy and
Investments to the EnergyCos that are exempt from Commission approval
requirements, will not exceed $100,000,000 at any time outstanding through
December 31, 2006.
The EnergyCos will commence operations with a relatively small staff devoted
primarily to management and administrative functions. CoolCo and HeatCo propose
to contract with Cinergy Services (but not with any other associate company
including each other) for a variety of services (in such areas as information
systems, human resources, accounting, legal, internal audit and finance), priced
at cost, pursuant to a service agreement and associated accounting, cost
assignment and work order procedures previously authorized by the Commission
(Rel. No. 35-26146, Oct. 21, 1994). The EnergyCos may engage nonassociate
contractors for various other services, including construction management,
engineering, mechanical, architectural and operational services.
For the Commission, by the Division of Investment Management, pursuant to
delegated authority.
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<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> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> OCT-01-94 OCT-01-94
<PERIOD-END> SEP-30-1995 SEP-30-1995
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 6,225,211 6,225,211
<OTHER-PROPERTY-AND-INVEST> 0 0
<TOTAL-CURRENT-ASSETS> 862,440 858,376
<TOTAL-DEFERRED-CHARGES> 1,007,195 1,007,195
<OTHER-ASSETS> 149,085 249,087
<TOTAL-ASSETS> 8,243,931 8,339,869
<COMMON> 1,572 1,572
<CAPITAL-SURPLUS-PAID-IN> 1,585,470 1,585,470
<RETAINED-EARNINGS> 941,652 937,590
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,528,694 2,524,632
160,000 160,000
227,913 227,913
<LONG-TERM-DEBT-NET> 2,694,676 2,694,676
<SHORT-TERM-NOTES> 284,000 384,000
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 134,400 134,400
0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,214,248 2,214,248
<TOT-CAPITALIZATION-AND-LIAB> 8,243,931 8,339,869
<GROSS-OPERATING-REVENUE> 2,938,160 2,938,160
<INCOME-TAX-EXPENSE> 190,207 190,207
<OTHER-OPERATING-EXPENSES> 2,237,803 2,237,803
<TOTAL-OPERATING-EXPENSES> 2,428,010 2,428,010
<OPERATING-INCOME-LOSS> 510,150 510,150
<OTHER-INCOME-NET> 7,924 10,112
<INCOME-BEFORE-INTEREST-EXPEN> 518,074 520,262
<TOTAL-INTEREST-EXPENSE> 229,443 235,693
<NET-INCOME> 288,631 284,569
32,742 32,742
<EARNINGS-AVAILABLE-FOR-COMM> 255,889 251,827
<COMMON-STOCK-DIVIDENDS> 0 0
<TOTAL-INTEREST-ON-BONDS> 215,645 215,645
<CASH-FLOW-OPERATIONS> 0 0
<EPS-PRIMARY> 1.62 1.62
<EPS-DILUTED> 1.62 1.62
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<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> 1
<NAME> CINERGY CORP.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> NOV-01-1994 NOV-01-1994
<PERIOD-END> SEP-30-1995 SEP-30-1995
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 0 0
<OTHER-PROPERTY-AND-INVEST> 2,541,641 2,541,641
<TOTAL-CURRENT-ASSETS> 8,053 108,053
<TOTAL-DEFERRED-CHARGES> 0 0
<OTHER-ASSETS> 118 118
<TOTAL-ASSETS> 2,549,812 2,649,812
<COMMON> 1,572 1,572
<CAPITAL-SURPLUS-PAID-IN> 1,585,470 1,585,470
<RETAINED-EARNINGS> 941,652 941,652
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,528,694 2,528,694
0 0
0 0
<LONG-TERM-DEBT-NET> 0 0
<SHORT-TERM-NOTES> 21,000 121,000
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 0 0
0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 118 118
<TOT-CAPITALIZATION-AND-LIAB> 2,549,812 2,649,812
<GROSS-OPERATING-REVENUE> 0 0
<INCOME-TAX-EXPENSE> 47 47
<OTHER-OPERATING-EXPENSES> 923 923
<TOTAL-OPERATING-EXPENSES> 970 970
<OPERATING-INCOME-LOSS> (970) (970)
<OTHER-INCOME-NET> 259,393 265,643
<INCOME-BEFORE-INTEREST-EXPEN> 258,423 264,673
<TOTAL-INTEREST-EXPENSE> 2,534 8,784
<NET-INCOME> 255,889 255,889
0 0
<EARNINGS-AVAILABLE-FOR-COMM> 255,889 255,889
<COMMON-STOCK-DIVIDENDS> 0 0
<TOTAL-INTEREST-ON-BONDS> 0 0
<CASH-FLOW-OPERATIONS> 0 0
<EPS-PRIMARY> 0.00 0.00
<EPS-DILUTED> 0.00 0.00
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<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> 2
<NAME> CINERGY SERVICES, INC.
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> NOV-01-1994 NOV-01-1994
<PERIOD-END> SEP-30-1995 SEP-30-1995
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 1,225 1,225
<OTHER-PROPERTY-AND-INVEST> 0 0
<TOTAL-CURRENT-ASSETS> 6,739 6,739
<TOTAL-DEFERRED-CHARGES> 0 0
<OTHER-ASSETS> 344 344
<TOTAL-ASSETS> 8,308 8,308
<COMMON> 0 0
<CAPITAL-SURPLUS-PAID-IN> 0 0
<RETAINED-EARNINGS> (77) (77)
<TOTAL-COMMON-STOCKHOLDERS-EQ> (77) (77)
0 0
0 0
<LONG-TERM-DEBT-NET> 0 0
<SHORT-TERM-NOTES> 0 0
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 0 0
0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 8,385 8,385
<TOT-CAPITALIZATION-AND-LIAB> 8,308 8,308
<GROSS-OPERATING-REVENUE> 97,322 97,322
<INCOME-TAX-EXPENSE> 0 0
<OTHER-OPERATING-EXPENSES> 97,394 97,394
<TOTAL-OPERATING-EXPENSES> 97,394 97,394
<OPERATING-INCOME-LOSS> (72) (72)
<OTHER-INCOME-NET> (1) (1)
<INCOME-BEFORE-INTEREST-EXPEN> (73) (73)
<TOTAL-INTEREST-EXPENSE> 4 4
<NET-INCOME> (77) (77)
0 0
<EARNINGS-AVAILABLE-FOR-COMM> (77) (77)
<COMMON-STOCK-DIVIDENDS> 0 0
<TOTAL-INTEREST-ON-BONDS> 0 0
<CASH-FLOW-OPERATIONS> 0 0
<EPS-PRIMARY> 0.00 0.00
<EPS-DILUTED> 0.00 0.00
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<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
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</LEGEND>
<CIK> 0000899652
<NAME> CINERGY CORP.
<SUBSIDIARY>
<NUMBER> 13
<NAME> CINERGY INVESTMENTS, INC. (CONSOLIDATED)
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-START> NOV-01-1994 NOV-01-1994
<PERIOD-END> SEP-30-1995 SEP-30-1995
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 0 0
<OTHER-PROPERTY-AND-INVEST> 0 0
<TOTAL-CURRENT-ASSETS> 19,754 15,690
<TOTAL-DEFERRED-CHARGES> 0 0
<OTHER-ASSETS> 8,652 108,654
<TOTAL-ASSETS> 28,406 124,344
<COMMON> 0 0
<CAPITAL-SURPLUS-PAID-IN> 24,418 24,418
<RETAINED-EARNINGS> (15,810) (19,872)
<TOTAL-COMMON-STOCKHOLDERS-EQ> 8,608 4,546
0 0
0 0
<LONG-TERM-DEBT-NET> 0 0
<SHORT-TERM-NOTES> 0 0
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0 0
<LONG-TERM-DEBT-CURRENT-PORT> 0 0
0 0
<CAPITAL-LEASE-OBLIGATIONS> 0 0
<LEASES-CURRENT> 0 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 19,798 119,798
<TOT-CAPITALIZATION-AND-LIAB> 28,406 124,344
<GROSS-OPERATING-REVENUE> 11,257 11,257
<INCOME-TAX-EXPENSE> (365) (365)
<OTHER-OPERATING-EXPENSES> 13,378 13,378
<TOTAL-OPERATING-EXPENSES> 13,013 13,013
<OPERATING-INCOME-LOSS> (1,756) (1,756)
<OTHER-INCOME-NET> (5,433) (3,245)
<INCOME-BEFORE-INTEREST-EXPEN> (7,189) (5,001)
<TOTAL-INTEREST-EXPENSE> 1,227 7,477
<NET-INCOME> (8,416) (12,478)
0 0
<EARNINGS-AVAILABLE-FOR-COMM> (8,416) (12,478)
<COMMON-STOCK-DIVIDENDS> 0 0
<TOTAL-INTEREST-ON-BONDS> 0 0
<CASH-FLOW-OPERATIONS> 0 0
<EPS-PRIMARY> 0.00 0.00
<EPS-DILUTED> 0.00 0.00
FINANCIAL STATEMENTS
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM U-1
CINERGY CORP.
CONSOLIDATED
AS OF SEPTEMBER 30, 1995
(Unaudited)
Pages 1 through 6
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
TWELVE MONTHS ENDED SEPTEMBER 30, 1995
Pro Forma
Actual Adjustments Pro Forma
(in thousands, except per share amounts)
<S> <C> <C> <C>
OPERATING REVENUES
Electric $2,561,182 - $2,561,182
Gas 376,978 - 376,978
2,938,160 - 2,938,160
OPERATING EXPENSES
Fuel used in electric production 718,907 - 718,907
Gas purchased 189,469 - 189,469
Purchased and exchanged power 39,346 - 39,346
Other operation 565,032 - 565,032
Maintenance 184,931 - 184,931
Depreciation 286,304 - 286,304
Amortization of phase-in deferrals 5,682 - 5,682
Post-in-service deferred operating
expenses -- net (3,500) - (3,500)
Taxes
Income 190,207 - 190,207
Taxes other than income taxes 251,632 - 251,632
2,428,010 - 2,428,010
OPERATING INCOME 510,150 - 510,150
OTHER INCOME AND EXPENSES - NET
Allowance for equity funds used during
construction 153 - 153
Post-in-service carrying costs 6,205 - 6,205
Phase-in deferred return 8,349 - 8,349
Income taxes 9,408 2,188 11,596
Other - net (16,191) - (16,191)
7,924 2,188 10,112
INCOME BEFORE INTEREST AND OTHER CHARGES 518,074 2,188 520,262
INTEREST AND OTHER CHARGES
Interest on long-term debt 215,645 - 215,645
Other interest 22,989 6,250 29,239
Allowance for borrowed funds used
during construction (9,191) - (9,191)
Preferred dividend requirements of
subsidiaries 32,742 - 32,742
262,185 6,250 268,435
NET INCOME $255,889 ($4,062) $251,827
AVERAGE COMMON SHARES OUTSTANDING 154,797 154,797
EARNINGS PER COMMON SHARE $1.62 $1.62
DIVIDENDS DECLARED PER COMMON SHARE $1.65
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
PRO FORMA CONSOLIDATED BALANCE SHEET
AT SEPTEMBER 30, 1995
ASSETS
Pro Forma
Actual Adjustments Pro Forma
(in thousands)
<S> <C> <C> <C>
UTILITY PLANT - ORIGINAL COST
In service
Electric $8,469,669 - $8,469,669
Gas 672,755 - 672,755
Common 185,886 - 185,886
9,328,310 - 9,328,310
Accumulated depreciation 3,317,021 - 3,317,021
6,011,289 - 6,011,289
Construction work in progress 213,922 - 213,922
Total utility plant 6,225,211 - 6,225,211
CURRENT ASSETS
Cash and temporary cash investments 87,443 (4,064) 83,379
Restricted deposits 86,596 - 86,596
Accounts receivable less accumulated
provision of $10,636,000 267,475 - 267,475
Materials, supplies and fuel
- at average cost
Fuel for use in electric production 133,787 - 133,787
Gas stored for current use 29,484 - 29,484
Other materials and supplies 90,704 - 90,704
Property taxes applicable to subsequent year 136,773 - 136,773
Prepayments and other 30,178 - 30,178
862,440 (4,064) 858,376
OTHER ASSETS
Regulatory Assets
Post-in-service carrying costs and
deferred operating expenses 187,780 - 187,780
Phase-in deferred return and depreciation 101,663 - 101,663
Deferred demand-side management costs 121,483 - 121,483
Amounts due from customers - income taxes 390,602 - 390,602
Deferred merger costs 54,900 - 54,900
Unamortized costs of reacquiring debt 73,766 - 73,766
Other 77,001 - 77,001
Other 149,085 100,002 249,087
1,156,280 100,002 1,256,282
$8,243,931 $95,938 $8,339,869
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
PRO FORMA CONSOLIDATED BALANCE SHEET
AT SEPTEMBER 30, 1995
CAPITALIZATION AND LIABILITIES
Pro Forma
Actual Adjustments Pro Forma
(dollars in thousands)
<S> <C> <C> <C>
COMMON STOCK EQUITY
Common stock - $.01 par value;
Authorized shares - 600,000,000
Outstanding shares - 156,139,786 Actual $1,572 - 1,572
Paid-in capital 1,585,470 - 1,585,470
Retained earnings 941,652 (4,062) 937,590
Total common stock equity 2,528,694 (4,062) 2,524,632
CUMULATIVE PREFERRED STOCK OF SUBSIDIARIES
Not subject to mandatory redemption 227,913 - 227,913
Subject to mandatory redemption 160,000 - 160,000
LONG-TERM DEBT 2,694,676 - 2,694,676
Total capitalization 5,611,283 (4,062) 5,607,221
CURRENT LIABILITIES
Long-term debt due within one year 134,400 - 134,400
Notes payable 284,000 100,000 384,000
Accounts payable 173,054 - 173,054
Refund due to customers 12,878 - 12,878
Litigation settlement 80,000 - 80,000
Accrued taxes 292,677 - 292,677
Accrued interest 52,091 - 52,091
Other 43,156 - 43,156
1,072,256 100,000 1,172,256
OTHER LIABILITIES
Deferred income taxes 1,085,703 - 1,085,703
Unamortized investment tax credits 188,222 - 188,222
Accrued pension and other postretirement
benefit costs 161,675 - 161,675
Other 124,792 - 124,792
1,560,392 - 1,560,392
$8,243,931 $95,938 $8,339,869
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
PRO FORMA CONSOLIDATED STATEMENT OF CHANGES IN RETAINED EARNINGS
TWELVE MONTHS ENDED SEPTEMBER 30, 1995
Pro Forma
Actual Adjustments Pro Forma
(in thousands)
<S> <C> <C> <C>
BALANCE OCTOBER 1, 1994 $945,679 - $945,679
Net income 255,889 (4,062) 251,827
Dividends on common stock (255,637) - (255,637)
Other (4,279) - (4,279)
BALANCE SEPTEMBER 30, 1995 $941,652 ($4,062) $937,590
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
Pro Forma Consolidated Journal Entries to Give Effect to the
proposed $100,000,0000 aggregrate investment in Energy Cos.
<S> <C> <C>
Entry No. 1
Investment in EnergyCos $2,000
Cash $2,000
To record the initial purchase of capital shares of EnergyCos.
Entry No. 2
Cash $100,000,000
Notes payable $100,000,000
To record issuance of notes payable.
Entry No. 3
Other interest expense $6,250,000
Cash $6,250,000
To record interest on $100,000,000 of notes payable at 6.25%.
Entry No. 4
Plant in service $100,000,000
Cash $100,000,000
To record construction costs for central plant facilities and distribution pipe systems
and other working capital needs.
Entry No. 5
Cash $2,187,500
Other income and expenses income taxes $2,187,500
To record the reduction in income taxes due to increased other interest expense
($6,250,000 at an assumed rate of 35%).
</TABLE>
FINANCIAL STATEMENTS
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM U-1
CINERGY CORP.
AS OF SEPTEMBER 30, 1995
(Unaudited)
Pages 1 through 6
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
PRO FORMA STATEMENT OF INCOME
TWELVE MONTHS ENDED SEPTEMBER 30, 1995
Pro Forma
Actual Adjustments Pro Forma
(in thousands, except per share amounts)
<S> <C> <C> <C>
OPERATING EXPENSES
Other operation 869 - 869
Taxes
Income taxes 47 - 47
Taxes other than income taxes 54 - 54
970 - 970
OPERATING INCOME (970) - (970)
OTHER INCOME AND EXPENSES - NET
Equity in earnings of subsidiaries 258,646 - 258,646
Income taxes 1,667 - 1,667
Other - net (920) 6,250 5,330
259,393 6,250 265,643
INCOME BEFORE INTEREST AND OTHER CHARGES 258,423 6,250 264,673
INTEREST 2,534 6,250 8,784
NET INCOME $255,889 - $255,889
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
PRO FORMA BALANCE SHEET
AT SEPTEMBER 30, 1995
ASSETS
Pro Forma
Actual Adjustments Pro Forma
(in thousands)
<S> <C> <C> <C>
CURRENT ASSETS
Cash and temporary cash investments 7,886 - 7,886
Accounts receivable 167 - 167
Notes receivable from associated
companies - 100,000 100,000
8,053 100,000 108,053
OTHER ASSETS
Investment in subsidiaries 2,541,641 - 2,541,641
Other 118 - 118
2,541,759 - 2,541,759
$2,549,812 $100,000 $2,649,812
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
PRO FORMA BALANCE SHEET
AT SEPTEMBER 30, 1995
CAPITALIZATION AND LIABILITIES
Pro Forma
Actual Adjustments Pro Forma
(dollars in thousands)
<S> <C> <C> <C>
COMMON STOCK EQUITY
Common stock - $.01 par value;
Authorized shares - 600,000,000
Outstanding shares - 157,139,786 Actual $1,572 - 1,572
Paid-in capital 1,585,470 - 1,585,470
Retained deficit 941,652 - 941,652
Total common stock equity 2,528,694 - 2,528,694
CURRENT LIABILITIES
Notes payable 21,000 100,000 121,000
Accounts payable 530 - 530
Accrued taxes (309) - (309)
Accrued interest 154 - 154
21,375 100,000 121,375
OTHER LIABILITIES
Deferred income taxes (258) (258)
Other 1 1
(257) - (257)
$2,549,812 $100,000 $2,649,812
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
PRO FORMA STATEMENT OF CHANGES IN RETAINED EARNINGS
TWELVE MONTHS ENDED SEPTEMBER 30, 1995
Pro Forma
Actual Adjustments Pro Forma
(in thousands)
<S> <C> <C> <C>
BALANCE OCTOBER 1, 1994 $945,679 - $945,679
Net income 255,889 - 255,889
Dividends on common stock (255,637) - (255,637)
Other (4,279) - (4,279)
BALANCE SEPTEMBER 30, 1995 $941,652 - $941,652
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
Pro Forma Journal Entries to Give Effect to the
proposed $100,000,000 aggregrate investment in EnergyCos.
<S> <C> <C>
Entry No. 1
Cash $100,000,000
Notes payable $100,000,000
To record issuance of notes payable.
Entry No. 2
Other interest expense $6,250,000
Cash $6,250,000
To record interest on $100,000,000 of notes payable at 6.25%.
Entry No. 3
Notes receivable from Cinergy Investments $100,000,000
Cash $100,000,000
To record loan of $100,000,000 to Cinergy Investments.
Entry No. 4
Cash $6,250,000
Interest Income from Cinergy Investments $6,250,000
To record interest received on $100,000,000 of notes receivable at 6.25%.
</TABLE>
FINANCIAL STATEMENTS
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM U-1
CINERGY INVESTMENTS, INC.
CONSOLIDATED
AS OF SEPTEMBER 30, 1995
(Unaudited)
Page 1 of 6
<PAGE>
<TABLE>
<CAPTION>
CINERGY INVESTMENTS, INC.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
TWELVE MONTHS ENDED SEPTEMBER 30, 1995
Pro Forma
Actual Adjustments Pro Forma
(in thousands)
<S> <C> <C> <C>
OPERATING REVENUES $11,257 - $11,257
OPERATING EXPENSES
Other operation 13,077 - 13,077
Taxes
Income taxes (365) - (365)
Taxes other than income taxes 301 - 301
13,013 - 13,013
OPERATING INCOME (1,756) - (1,756)
OTHER INCOME AND EXPENSES - NET
Income taxes 4,064 2,188 6,252
Other - net (9,497) - (9,497)
(5,433) 2,188 (3,245)
INCOME BEFORE INTEREST AND OTHER CHARGES (7,189) 2,188 (5,001)
INTEREST 1,227 6,250 7,477
NET INCOME (8,416) (4,062) ($12,478)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY INVESTMENTS, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
AT SEPTEMBER 30, 1995
ASSETS
Pro Forma
Actual Adjustments Pro Forma
(in thousands)
<S> <C> <C> <C>
CURRENT ASSETS
Cash and temporary cash investments 9,405 (4,064) 5,341
Restricted deposits 5 - 5
Accounts receivable less accumulated
provision of $151,798 4,736 - 4,736
Other materials and supplies 5,245 - 5,245
Prepayments and other 363 - 363
19,754 (4,064) 15,690
OTHER ASSETS 8,652 100,002 108,654
8,652 100,002 108,654
$28,406 $95,938 $124,344
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY INVESTMENTS, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
AT SEPTEMBER 30, 1995
CAPITALIZATION AND LIABILITIES
Pro Forma
Actual Adjustments Pro Forma
(dollars in thousands)
<S> <C> <C> <C>
COMMON STOCK EQUITY
Common stock - $.01 par value;
Authorized shares - 100;
Outstanding shares - 100 - - -
Paid-in capital 24,418 - 24,418
Retained deficit (15,810) (4,062) (19,872)
Total common stock equity 8,608 (4,062) 4,546
CURRENT LIABILITIES
Accounts payable 1,396 - 1,396
Notes payable to associated
companies - net - 100,000 100,000
Accounts payable to associated
companies - net 20,523 - 20,523
Accrued taxes (703) - (703)
Other 824 - 824
22,040 100,000 122,040
OTHER LIABILITIES
Deferred income taxes (2,862) - (2,862)
Other 620 - 620
(2,242) - (2,242)
$28,406 $95,938 $124,344
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY INVESTMENTS, INC.
PRO FORMA CONSOLIDATED STATEMENT OF CHANGES IN RETAINED EARNINGS
TWELVE MONTHS ENDED SEPTEMBER 30, 1995
Pro Forma
Actual Adjustments Pro Forma
(in thousands)
<S> <C> <C> <C>
BALANCE OCTOBER 1, 1994 ($7,394) - ($7,394)
Net loss (8,416) (4,062) (12,478)
BALANCE SEPTEMBER 30, 1995 ($15,810) ($4,062) ($19,872)
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY INVESTMENTS, INC.
Pro Forma Consolidated Journal Entries to Give Effect to the
proposed $100,000,0000 aggregrate investment in EnergyCos.
<S> <C> <C>
Entry No. 1
Investment in EnergyCos $2,000
Cash $2,000
To record the initial purchase of capital shares of EnergyCos.
Entry No. 2
Cash $100,000,000
Notes Payable to Cinergy Corp. $100,000,000
To record issuance of notes payable to Cinergy Corp.
Entry No. 3
Other interest expense to Cinergy Corp. $6,250,000
Cash $6,250,000
To record interest on $100,000,000 of notes payable at 6.25%.
Entry No. 4
Plant in service $100,000,000
Cash $100,000,000
To record construction costs for central plant facilities and distribution pipe systems
and other working capital needs.
Entry No. 5
Cash $2,187,500
Other income and expenses - income taxes $2,187,500
To record the reduction in income taxes due to increased other interest expense
($6,250,000 at an assumed tax rate of 35%).
</TABLE>
FINANCIAL STATEMENTS
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM U-1
CINERGY SERVICES
AS OF SEPTEMBER 30, 1995
(Unaudited)
Pages 1 through 5
<PAGE>
<TABLE>
<CAPTION>
CINERGY SERVICES
PRO FORMA STATEMENT OF INCOME
TWELVE MONTHS ENDED SEPTEMBER 30, 1995
Pro Forma
Actual Adjustments Pro Forma
(in thousands, except per share amounts)
<S> <C> <C> <C>
OPERATING REVENUES $97,322 - $97,322
OPERATING EXPENSES
Other operation 94,241 - 94,241
Taxes other than income taxes 3,153 - 3,153
97,394 - 97,394
OPERATING INCOME (72) - (72)
OTHER INCOME AND EXPENSES - NET (1) - (1)
(1) - (1)
INCOME BEFORE INTEREST AND OTHER CHARGES (73) - (73)
INTEREST 4 - 4
NET INCOME ($77) - ($77)
<FN>
Note:
Cinergy Services has no pro forma journal entries relating to this proposed transaction.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY SERVICES
PRO FORMA BALANCE SHEET
AT SEPTEMBER 30, 1995
ASSETS
Pro Forma
Actual Adjustments Pro Forma
(in thousands)
<S> <C> <C> <C>
UTILITY PLANT - ORIGINAL COST
In service
Common 1,225 - 1,225
CURRENT ASSETS
Accounts receivable from associated
companies 6,739 - 6,739
6,739 - 6,739
OTHER ASSETS 344 - 344
$8,308 - $8,308
<FN>
Note:
Cinergy Services has no pro forma journal entries relating to this proposed transaction.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY SERVICES
PRO FORMA BALANCE SHEET
AT SEPTEMBER 30, 1995
CAPITALIZATION AND LIABILITIES
Pro Forma
Actual Adjustments Pro Forma
(dollars in thousands)
<S> <C> <C> <C>
COMMON STOCK EQUITY
Common stock - $.05 par value;
Authorized shares - 50
Outstanding shares - 50 - - -
Retained earnings (77) - (77)
Total common stock equity (77) - (77)
Accounts payable 1,161 - 1,161
Accounts payable to associated
companies 7,062 - 7,062
8,223 - 8,223
OTHER LIABILITIES
Other 162 - 162
162 - 162
$8,308 - $8,308
<FN>
Note:
Cinergy Services has no pro forma journal entries relating to this proposed transaction.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY SERVICES
PRO FORMA STATEMENT OF CHANGES IN RETAINED EARNINGS
TWELVE MONTHS ENDED SEPTEMBER 30, 1995
Pro Forma
Actual Adjustments Pro Forma
(in thousands)
<S> <C> <C> <C>
BALANCE OCTOBER 1, 1994 - - -
Net income (77) - (77)
BALANCE SEPTEMBER 30, 1995 ($77) - ($77)
<FN>
Note:
Cinergy Services has no pro forma journal entries relating to this proposed transaction.
</TABLE>
<PAGE>
CINERGY SERVICES
Pro Forma Journal Entries to Give Effect to the
proposed $100,000,000 aggregrate investment in Energycos.
No pro forma journal entries.
