As filed with the Securities and Exchange Commission on April 4, 1995
File No. 70-8587
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 TO FORM U-1 APPLICATION-DECLARATION
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
_______________________________________________
CINergy Corp.,
CINergy Services, Inc.,
The Cincinnati Gas & Electric Co.,
The Union Light, Heat and Power Co.,
The West Harrison Gas and Electric Co.,
Lawrenceburg Gas Co.,
Miami Power Corp.,
Tri-State Improvement Co.,
KO Transmission Co.,
CINergy Investments, Inc.,
CG&E Resource Marketing, Inc.,
Power International, Inc.,
Beheer- En Belegginsmaatschappij Bruwabel B.V.,
Power International s.r.o. and
Power Development s.r.o.
139 East Fourth Street
Cincinnati, Ohio 45202
PSI Energy, Inc.,
Wholesale Power Services, Inc.,
PSI Recycling, Inc. and
Power Equipment Supply Co.
1000 East Main Street
Plainfield, Indiana 46168
(Names 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.
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
One Chase Manhattan Plaza 40 West 57th Street
New York, New York 10005 New York, New York 10019
<PAGE>
The Application-Declaration of CINergy Corp. ("CINergy") and certain
of its subsidiary companies on Form U-1 and Exhibit 6 thereto are hereby
amended to respond to certain questions and comments by the Staff of the
Securities and Exchange Commission ("Commission") and, as so amended, are hereby
restated in their entirety as set forth below. In connection with this
Amendment No. 1 to the Application-Declaration, certain exhibits are being filed
under cover of Form SE as to which the Staff of the Commission has granted a
continuing hardship exemption from electronic filing requirements pursuant to
Item 202(a) of Regulation S-T, 17 C.F.R. Section 232.202(a).
Item 1. Description of Proposed Transactions.
In this Application-Declaration, CINergy Corp. ("CINergy"), a Delaware
corporation and a registered holding company under the Public Utility Holding
Company Act of 1935, as amended (the "Act"), and certain of its subsidiary
companies/1/ seek authorization through May 31, 1997 (i) to incur short-term
borrowings, (ii) to issue notes and/or commercial paper, (iii) to make capital
contributions, and (iv) to establish and utilize a system of money pools to
coordinate and provide for the short-term cash requirements of the Applicants,
all as provided herein. In addition, CINergy seeks an order of the Commission
that U.S. Energy Partners is not a "subsidiary company" of CINergy within the
meaning of Section 2(a)(8) of the Act.
By order dated January 11, 1995 in File No. 70-8521, Rel. No. 35-26215
(the "January 1995 Order"), the Commission authorized CINergy through January
31, 1997 to incur short-term indebtedness through bank borrowings, to issue
notes and commercial paper, and to obtain letters of credit, all in an aggregate
amount of up to $375 million. In this Application-Declaration, CINergy requests
authorization to use the proceeds of such borrowings and sales of commercial
paper (up to a maximum of $375 million at any one time), and any funds available
for general corporate purposes (including any funds that may be available for
general corporate purposes from the sale of heretofore unissued shares of
CINergy Common Stock authorized by the Commission's order dated November 18,
1994 in File No. 70-8477, Rel. No. 35-26159)/2/, to loan funds to the other
Applicants when required through the money pools described herein, and to make
capital contributions and loans to certain of the Applicants as described in
Item 1.B.2. In addition, in connection with bank borrowings by the other
Applicants as described in Item 1.A.3.b. and Item 1.B.4., CINergy requests
authorization herein (1) through May 31, 1997 to issue guarantees in an
aggregate amount that, when added to any then-outstanding CINergy bank
borrowings, commercial paper and letters of credit authorized by the January
1995 Order, would not exceed $375 million at any one time and (2) pursuant to
the January 1995 Order, to obtain letters of credit (such letters of credit to
be part of, and not in addition to, the letters of credit authorized in File No.
70-8521, Release No. 35-26215).
Description of the Parties
CINergy is a Delaware corporation and a holding company for CG&E, PSI
Energy and a number of other companies. CG&E and its subsidiaries ULH&P,
Lawrenceburg and West Harrison are primarily engaged in providing electric
and/or gas service in the southwestern portion of Ohio and adjacent areas in
Kentucky and Indiana. The area served with electricity, gas, or both covers
approximately 3,000 square miles, has an estimated population of approximately
1.8 million, and includes the cities of Cincinnati and Middletown in Ohio,
Covington and Newport in Kentucky, and Lawrenceburg in Indiana. Miami is an
Indiana corporation and a subsidiary of CG&E. Miami owns a 138 kV transmission
line running from the Miami Fort Power Station to a point near Madison, Indiana.
PSI Energy is engaged in the production, transmission, distribution and sale of
electric energy in north central, central, and southern Indiana. It serves a
population of approximately 1.9 million in 69 of the 92 counties in Indiana,
including the cities of Terre Haute, Kokomo, Columbus, Lafayette, Bloomington
and New Albany.
CINergy Services is a subsidiary service company for the CINergy
system, and provides CG&E, PSI Energy and the other companies of the CINergy
system with a variety of administrative, management and support services.
Tri-State is a subsidiary of CG&E and is devoted to acquiring and holding
property in Ohio, Kentucky and Indiana for substations, electric and gas rights
of way, office space and other uses in the utility operations of CG&E and its
utility subsidiaries. KO is a subsidiary of CG&E and was formed to acquire an
interest in an interstate natural gas pipeline to which CG&E is entitled as a
result of a settlement with the Columbia gas system. Subject to approval and
jurisdiction of the Federal Energy Regulatory Commission ("FERC"), KO will be
engaged in the transportation of natural gas in interstate commerce between
Kentucky and Ohio.
CINergy Investments is a subsidiary of CINergy and serves as a holding
company for certain non-utility businesses of CINergy, including Wholesale
Power, Recycling, Equipment, Resource Marketing, PII, and subsidiaries thereof.
Wholesale Power was formed to engage in the business of brokering
power, emission allowances, electricity futures, and related products and
services and to provide consulting services in the wholesale power-related
markets. Wholesale Power also has applied to the FERC for a marketing license
to provide electric merchant service. In addition, Wholesale Power, through a
division, The International Power Exchange, markets and maintains the services
of an "electronic bulletin board" for the bulk power market. Recycling recycles
paper, metal and other materials from Energy, its largest single supplier, CG&E
and other companies. Equipment was formed to sell equipment and parts from a
cancelled generating plant, the Marble Hill nuclear project. Equipment now also
buys equipment for resale, brokers equipment, and sells equipment on consignment
for others.
Resource Marketing was formed to hold a one-third general partnership
interest in Energy Partners, a gas marketing partnership with Public Service
Electric & Gas Company. Resource Marketing was formed to compete with
traditional regulated local distribution companies by offering "merchant
service" (i.e., acquiring natural gas and selling it to customers) and to broker
gas to industrial and large commercial customers, with the initial aim of
recapturing former customers of CG&E's gas utility business.
PII (formerly named Enertech Associates International, Inc.) was
formed as a vehicle for CG&E to offer utility management consulting services and
to pursue investment opportunities in energy-related areas, including
demand-side management services, consulting, energy and fuel brokering,
engineering services, and construction and/or operation of generation,
co-generation and independent power production facilities. PII and its
subsidiaries have a regional and international consulting services practice in
Ohio, Kentucky, Indiana and a number of foreign countries, including the Czech
Republic and certain countries that were formerly part of the Soviet Union,
including Kazakhstan. PII has one direct subsidiary, Bruwabel, and two indirect
subsidiaries, Power Development and Power International, which were organized to
facilitate operations in the Czech Republic and the tax-efficient treatment of
earnings from those operations. Bruwabel is organized under Dutch law, while
Power International and Power Development are organized under Czech law.
Additional information about the Applicants and their businesses is
set forth in the Form U-1 Application-Declaration, as amended, of CINergy in
File No. 70-8427, and the exhibits thereto (the "CINergy Merger U-1").
A. CINergy Utility Companies and Certain Non-Utility Companies
1. Borrowing Authority
Authorization is requested through May 31, 1997 for CG&E, PSI Energy,
ULH&P, Lawrenceburg, West Harrison, Miami, CINergy Services, KO and Tri-State
(i) to incur short-term borrowings and to issue notes in connection therewith,
and (ii) together with CINergy, to establish and utilize a money pool (the
"Utility Money Pool") to coordinate and provide for certain of their short-term
cash and working capital requirements. Authorization is also requested through
May 31, 1997 for CG&E and PSI Energy to issue commercial paper.
Under the authority requested herein (and, in the case of CINergy, the
authority granted pursuant to the January 1995 Order), the maximum principal
amount of short-term borrowings, notes and/or commercial paper outstanding at
any one time for the CINergy system as a whole, and for CINergy, CINergy
Services, CG&E, PSI Energy, ULH&P, Lawrenceburg, West Harrison, Miami, KO and
Tri-State, will not exceed the following amounts:
Company Aggregate amount
CINergy system $1,000,000,000
CINergy 375,000,000
CINergy Services 100,000,000
PSI Energy 400,000,000
CG&E 400,000,000
ULH&P 35,000,000
West Harrison 200,000
Lawrenceburg 3,000,000
Miami 100,000
KO 2,000,000
Tri-State 40,000,000
The Amended Articles of Incorporation of CG&E limit the issuance of
any unsecured indebtedness by CG&E to no more than 20% of the total principal
amount of all bonds and other securities representing secured indebtedness
issued by CG&E, plus the capital and surplus of CG&E then on its books. This
limitation is not expected to interfere with any presently anticipated
requirements for unsecured debt during the period covered by this Application.
The charters of the other Applicants do not contain limits on outstanding
amounts of unsecured debt.
2. Use of Proceeds
Proceeds of any short-term borrowings by CG&E, PSI Energy, ULH&P,
Lawrenceburg, West Harrison, Miami, CINergy Services, KO and Tri-State and sales
of commercial paper by CG&E and PSI Energy may be used by each such company (i)
for the interim financing of its construction and capital expenditure programs;
(ii) for its working capital needs; (iii) for the repayment, redemption or
refinancing of its debt and preferred stock; (iv) to meet unexpected
contingencies, payment and timing differences, and cash requirements, to cover
inter-company balances, and for other lawful general corporate purposes; (v) to
loan to other participants in the Utility Money Pool described in Item 1.A.5
below (except that the proceeds, up to $200 million, of 12- to 24-month
borrowings authorized by the Indiana Utility Regulatory Commission by order
dated September 9, 1992 in Case No. 39438 (the "PSI Energy Restricted Funds"),
shall not be used to make such loans); and (vi) in the case of borrowings by
CINergy Services, for other lawful purposes in connection with the performance
by CINergy Services of its functions as a subsidiary service company under the
Act, including the purposes specified in the CINergy Merger U-1.
In addition, proceeds of borrowings, and other available funds, may be
used (i) by CG&E to make capital contributions of up to $40 million to Tri-State
and up to $2 million to KO for the purpose of settling inter-company open-
account balances and indebtedness to CG&E and to provide Tri-State and KO with
working capital for their activities in support of CG&E's operations, and
(ii) by CG&E and its utility subsidiaries (i.e., ULH&P, West Harrison,
Lawrenceburg and Miami) to make loans and open-account advances to one another
in connection with services, goods and construction provided to one another, as
set forth in Item 3.B of the CINergy Merger U-1, such loans and open account
advances not to exceed a maximum of $400 million for CG&E, $35 million for
ULH&P, $200,000 for West Harrison, $3 million for Lawrenceburg, and $100,000 for
Miami. Applicants' inter-company loan and open-account balances will be set
forth in Exhibit 13 hereto.
The Applicants' estimated construction and capital expenditures for
the years 1995-1996 are as follows:
($ Millions)
1995 1996 Total
PSI Energy 164 171 335
CG&E 127 175 302
ULH&P 15 19 34
Total 306 365 671
These estimates are subject to change due to numerous factors, including the
rate of load growth, escalation of construction costs, changes in environmental
and other regulation, delays from regulatory hearings and the adequacy of rate
relief. In addition, the borrowing levels set forth in Item 1.A.1 above include
a safety margin required because of the inherent nature of projections and such
factors as possible timing differences in the sale of long-term securities which
may be used to refund short-term debt, fluctuations in operating expenses, daily
fluctuations of short-term cash requirements and resulting borrowing levels,
changes in weather which affect income, escalation and timing of construction
expenditures and other similar unpredictable events.
3. Bank Borrowings
a. Existing bank facilities
CINergy's existing formal lines of credit are embodied in a revolving
credit agreement dated September 27, 1994 with Barclays Bank PLC, New York
branch, and other banks. The banks under such credit agreement have currently
committed to lend CINergy up to $100 million at any one time outstanding. At
December 31, 1994, $75 million in borrowings were outstanding thereunder. For
further information with respect to these borrowings, reference is made to the
January 1995 Order.
PSI Energy has formal bank facilities with commitments aggregating
$230 million, under which $120.5 million in borrowings were outstanding at
December 31, 1994. PSI Energy's formal lines of credit are embodied in 13
agreements with 12 banks (Exhibits 1.19-1.31 hereto), subject in each case to
annual one-year extensions at the request of PSI Energy and with the consent of
the respective banks. The credit lines are unsecured and provide for maturities
of one year and one day for any borrowings by PSI Energy thereunder, with
interest rate options at or below prime rate.
Currently, CG&E has lines of credit with 12 banks with commitments
aggregating $82 million (Exhibits 1.1-1.12 hereto). These lines of credit are
maintained by compensating balances and/or fees. At year-end 1994, no
borrowings were outstanding under any of these lines of credit. As of March 1,
1995, CG&E terminated a $200 million revolving credit facility with a consortium
of banks. CG&E has no outstanding borrowings under that facility.
ULH&P has formal bank lines of credit with four banks with commitments
aggregating $30 million (Exhibits 1.13-1.16 hereto), under which $14.5 million
in borrowings were outstanding as of December 31, 1994. Lawrenceburg has a
formal line of credit with one bank, with a commitment of $400,000 (Exhibit 1.17
hereto). Lawrenceburg had no borrowings outstanding under this facility at
year-end 1994. As of December 31, 1994, CINergy Services, West Harrison, Miami,
KO and Tri-State had no committed lines of credit.
Certain of the Applicants also have informal arrangements for short-
term borrowings with various banks on an "as offered" basis, also known as
uncommitted lines of credit. Since interest rates on these borrowings, when and
if such borrowings are available, generally are below the prevailing prime rate,
it is intended that these informal arrangements will continue to be utilized.
b. Additional bank borrowings
To provide flexibility to meet their cash needs, authorization is
requested through May 31, 1997 for CG&E, PSI Energy, ULH&P and Lawrenceburg to
borrow from banks pursuant to the existing formal and informal lines of credit
described above (and any increases therein that may be negotiated) and for CG&E,
PSI Energy, ULH&P, Lawrenceburg, West Harrison, Miami, CINergy Services, KO and
Tri-State to borrow from banks pursuant to new credit facilities (formal or
informal) that may be arranged from time to time, and for CINergy to issue
guarantees and provide letters of credit in connection with such borrowings.
All such borrowings and related CINergy guarantees and letters of credit would
be made on or before May 31, 1997 and would be subject to the limitations on
aggregate principal amount set forth in Item 1.A.1. In no event will the
aggregate amount of such borrowings exceed the Applicants' total borrowing
authority under applicable orders of the Commission.
Such borrowings may be evidenced by promissory notes, which are
expected to be in substantially the form filed herewith as Exhibit 2. Each of
such notes (a) would be for the principal amount to be borrowed at the time (if
a "transactional" note) or for the principal amount outstanding from time to
time (if a "grid" note) from the lending bank and be payable to the order of
such bank, (b) would be issued on or before May 31, 1997 and would mature on a
date no later than one year (or, in the case of up to $200 million in borrowings
by PSI Energy, no later than 24 months) from the date of issuance, (c) would
bear interest at a rate no higher than the effective cost of money for unsecured
prime commercial bank loans prevailing on the date of such borrowing, and (d)
would be subject to prepayment at the option of borrower, or under certain
circumstances with the consent of the lending bank, in whole at any time or in
part from time to time, without premium or penalty. Amounts outstanding under
formal lines of credit typically would become due immediately upon an event of
default, including non-payment, default under other agreements governing
indebtedness, bankruptcy, or insolvency. Short-term notes may be issued on
either a "grid" note basis or a transactional basis, under similar terms and
conditions. Ordinarily, short-term grid notes are issued to a lending
institution before the first borrowing under such note. The holder of the notes
maintains the record of borrowings and repayments without the necessity of
issuing additional notes. The actual terms of the notes may vary from the terms
described in Item 1.A.1 above to reflect customary terms or particular lending
practices and policies of different lending institutions, but otherwise are
expected to be substantially similar.
Compensation arrangements under lines of credit would be on a
compensating balance and/or fee basis. In general, fees range from 5 basis
points to 20 basis points (and will not exceed 25 basis points) per annum on the
commitment, and balance arrangements require average balances of 5% to 10% (and
will not exceed 10%) of the amount of the commitment.
For letters of credit obtained by CINergy pursuant to the Commission's
order in File No. 70-8521 in support of the bank borrowings described herein,
the maximum amount of fees and expenses to be incurred by CINergy would not
exceed 1% per year of the face amount of such letters of credit. In the case of
guarantees provided by CINergy for the benefit of its subsidiary companies, it
is proposed that CINergy have authority to charge an annual fee of up to 2% of
the face amount of such guarantee.
Subject to the limitations on aggregate outstanding principal amount
set forth in Item 1.A.1 above, authorization is also sought for CG&E, PSI
Energy, ULH&P, Lawrenceburg, West Harrison, Miami, CINergy Services, KO and Tri-
State to borrow funds managed by the trust departments of banks if such
borrowings would result in an estimated cost of money equal to or less than that
available from the sale of commercial paper or other bank borrowings. Each such
borrowing would be evidenced by notes payable on demand.
4. Commercial Paper
The short-term borrowing needs of PSI Energy and CG&E have been met in
part with the sale of commercial paper through commercial paper dealers (the
"Dealers"). At any given time, PSI Energy and CG&E may be able to issue
commercial paper at a lower cost than that applicable to short-term bank
borrowings. Accordingly, to provide financing flexibility, CG&E and PSI Energy
request authority through May 31, 1997 to issue and sell commercial paper, to
one or more Dealers, subject to the limitations on aggregate outstanding
principal amount stated in Item 1.A.1 above.
There is no affiliation between CG&E or PSI Energy, or any of their
subsidiaries, on the one hand, and any Dealer or any of its affiliates, on the
other hand. The proceeds from the sale of commercial paper will be added to the
seller's treasury funds and will be used for the purposes set forth in Item
1.A.2 above, including, without limitation, for the purpose of loans by the
seller through the Utility Money Pool in the manner described in Item 1.A.5
below.
The commercial paper which CG&E and PSI Energy propose to issue to
Dealers will be in the form of book-entry unsecured promissory notes (in
substantially the form filed herewith as Exhibit 3), with varying denominations
of no less than $25,000 each. Such notes will be issued and sold by CG&E and
PSI Energy directly to Dealers at market rates. No commission or fee will be
payable in connection with the issuance and sale of the commercial paper. The
purchasing Dealer, however, will reoffer such notes at a rate less than the rate
to the issuer and, as principal, will reoffer such notes in such a manner as not
to constitute a public offering under the Securities Act of 1933. CG&E and PSI
Energy will issue and sell the proposed commercial paper to Dealers at a
discount rate not in excess of the maximum discount rate per annum prevailing at
the date of issuance for commercial paper of comparable quality of the
particular maturity sold by public utility issuers thereof to Dealers.
CG&E and PSI Energy also request authorization to sell commercial
paper directly to certain financial institutions. Sales of commercial paper
directly to such institutions will be undertaken only if the resulting cost of
money is equal to or less than that available from Dealer-placed notes. The
terms of any such notes would be similar to those of Dealer-placed notes.
Maturities: The commercial paper issued by CG&E and PSI Energy will
have varying maturities of no more than 270 days from date of issue and will be
issued and sold by CG&E and PSI Energy from time to time through May 31, 1997.
No such note will have a maturity date more than 270 days after May 31, 1997.
Subject to such limitations, sales of commercial paper (and the bank borrowings
described in Item 1.A.3) ordinarily will be structured to mature at such time as
excess funds are expected to become available for loans through the money pool
described in Item 1.A.5 below. Upon the availability of any such excess funds,
external borrowings would be retired and loans refinanced to the extent such
funds became available.
5. Utility Money Pool
To coordinate and provide for their short-term cash and working
capital requirements, CINergy, CG&E, PSI Energy, ULH&P, Lawrenceburg, Miami,
West Harrison, CINergy Services, KO and Tri-State propose to establish and
utilize a money pool (the "Utility Money Pool") and to issue and acquire
promissory notes in connection therewith. The proposed terms of the Utility
Money Pool are summarized below and will be memorialized in a definitive form of
agreement to be filed as Exhibit 5.
Under the proposed terms of the Utility Money Pool, short-term funds
would be available from the following sources for short-term loans to CG&E, PSI
Energy, ULH&P, Lawrenceburg, Miami, West Harrison, CINergy Services, KO and Tri-
State from time to time: (1) surplus funds in the treasuries of Utility Money
Pool participants other than CINergy, (2) surplus funds in the treasury of
CINergy, and (3) proceeds from bank borrowings by Utility Money Pool
participants (other than PSI Energy Restricted Funds) or the sale of commercial
paper by CINergy, CG&E and PSI Energy for loan to the Utility Money Pool
("External Funds"). Funds would be made available from such sources in such
order as CINergy Services, as administrator of the Utility Money Pool, may
determine would result in a lower cost of borrowing, consistent with the
individual borrowing needs and financial standing of the companies providing
funds to the pool. The determination of whether a Utility Money Pool
participant at any time has surplus funds to lend to the Utility Money Pool or
shall lend funds to the Utility Money Pool would be made by such participant's
chief financial officer or treasurer, or by a designee thereof, on the basis of
cash flow projections and other relevant factors, in such participant's sole
discretion. Funds made available by CINergy for loans through the money pools
will be made available first for loans through the Utility Money Pool and
thereafter for loans through the Non-Utility Money Pool.
Companies that borrow would borrow pro rata from each company that
lends, in the proportion that the total amount loaned by each such lending
company bears to the total amount then loaned through the Utility Money Pool.
On any day when more than one fund source (e.g., surplus treasury funds of
CINergy and other Utility Money Pool participants ("Internal Funds") and
External Funds), with different rates of interest, is used to fund loans through
the Utility Money Pool, each borrower would borrow pro rata from each such fund
source in the Utility Money Pool in the same proportion that the amount of funds
provided by that fund source bears to the total amount of short-term funds
available to the Utility Money Pool.
Borrowings from the Utility Money Pool would require authorization by
the borrower's chief financial officer or treasurer, or by a designee thereof.
No party would be required to effect a borrowing through the Utility Money Pool
if it is determined that it could (and had authority to) effect a borrowing at
lower cost directly from banks or through the sale of its own commercial paper.
No loans through the Utility Money Pool would be made to, and no borrowings
through the Utility Money Pool would be made by, CINergy.
Certain Costs: The cost of compensating balances and fees paid to
banks to maintain credit lines by Utility Money Pool participants lending
External Funds to the Utility Money Pool would initially be paid by the
participant maintaining such line. A portion of such costs would be
retroactively allocated every month to the companies borrowing such External
Funds through the Utility Money Pool in proportion to their respective daily
outstanding borrowings of such External Funds./3/
Interest Rate on Loans: If only Internal Funds comprise the funds
available in the Utility Money Pool, the interest rate applicable to loans of
such Internal Funds would be the CD yield equivalent of the 30-day Federal
Reserve "AA" Industrial Commercial Paper Composite Rate (or if no such Composite
Rate is established for that day, then the applicable rate would be the
Composite Rate for the next preceding day for which such Composite Rate was
established).
If only External Funds comprise the funds available in the Utility
Money Pool, the interest rate applicable to loans of such External Funds would
be equal to the lending company's cost for such External Funds (or, if more than
one Utility Money Pool participant had made available External Funds on such
day, the applicable interest rate would be a composite rate equal to the
weighted average of the cost incurred by the respective Utility Money Pool
participants for such External Funds).
In cases where both Internal Funds and External Funds are concurrently
borrowed through the Utility Money Pool, the rate applicable to all loans
comprised of such "blended" funds would be a composite rate equal to the
weighted average of (a) the cost of all Internal Funds contributed by Utility
Money Pool participants (as determined pursuant to the second preceding
paragraph above) and (b) the cost of all such External Funds (as determined
pursuant to the immediately preceding paragraph above). In circumstances where
Internal Funds and External Funds are available for loans through the Utility
Money Pool, loans may be made exclusively from Internal Funds or External Funds,
rather than from a "blend" of such funds, to the extent it is expected that such
loans would result in a lower cost of borrowing.
Investment of Surplus Funds: Funds not required by the Utility Money
Pool to make loans (with the exception of funds required to satisfy the Utility
Money Pool's liquidity requirements) would ordinarily be invested in one or more
short-term investments, including: (i) interest-bearing accounts with banks;
(ii) obligations issued or guaranteed by the U.S. government and/or its agencies
and instrumentalities, including obligations under repurchase agreements; (iii)
obligations issued or guaranteed by any state or political subdivision thereof,
provided that such obligations are rated not less than A by a nationally
recognized rating agency; (iv) commercial paper rated not less than A-1 or P-1
or their equivalent by a nationally recognized rating agency; (v) money market
funds; (vi) bank certificates of deposit, (vii) Eurodollar funds; and (viii)
such other investments as are permitted by Section 9(c) of the Act and Rule 40
thereunder.
Allocation of Interest Income and Investment Earnings: The interest
income and investment income earned on loans and investments of surplus funds
would be allocated among the participants in the Utility Money Pool in
accordance with the proportion each participant's contribution of funds bears to
the total amount of funds in the Utility Money Pool and the cost of funds
provided to the Utility Money Pool by such participant.
Repayment. Each Applicant receiving a loan through the Utility Money
Pool would be required to repay the principal amount of such loan, together with
all interest accrued thereon, on demand and in any event not later than one year
after the date of such loan. All loans made through the Utility Money Pool
could be prepaid by the borrower without premium or penalty.
Form of Loans to Applicants: Loans through the Utility Money Pool
would ordinarily be made pursuant to open-account advances, repayable upon
demand and in any event not later than one year from the date of such advance.
Under the authorization requested herein, all loans through the Utility Money
Pool would be made on or before May 31, 1997. Each lender would at all times be
entitled to receive upon demand one or more promissory notes evidencing any and
all loans by such lender. Such notes would be substantially in the form filed
as Exhibit 4, would be dated as of the date of the initial borrowing (and in any
event not later than May 31, 1997), would mature on demand, or on a date agreed
by the parties (but in any case not later than one year after the date of the
applicable borrowing), and would be prepayable in whole at any time or in part
from time to time, without premium or penalty. Interest would be accrued by
each borrower monthly.
B. Certain Other Non-Utility Companies
1. Borrowing Authority
Authorization is requested through May 31, 1997 for PII, Bruwabel,
Power International, Power Development, Recycling, Equipment and Wholesale Power
(the "Designated Non-Utility Companies"), Resource Marketing, and CINergy
Investments (i) to incur short-term borrowings (any or all of which borrowings
may be guaranteed or supported by letters of credit arranged by CINergy) and to
issue notes in connection therewith, and (ii) together with CINergy, to
establish and utilize a money pool (the "Non-Utility Money Pool"), to be
administered by CINergy Services, to coordinate and provide for certain short-
term cash and working capital requirements of CINergy Investments, the
Designated Non-Utility Companies and Resource Marketing. Under the authority
requested herein, the aggregate principal amount of short-term borrowings and
notes outstanding at any one time for the Designated Non-Utility Companies,
CINergy Investments and Resource Marketing will not exceed the amounts set forth
below, plus such additional amounts as may be authorized from time to time by
the Commission.
Company Aggregate amount
CINergy Investments $ 22,000,000
PII 6,750,000
Bruwabel, Power
International &
Power Development (collectively) 4,000,000
Recycling 4,400,000
Equipment 1,100,000
Wholesale Power 1,200,000
Resource Marketing 2,000,000
Pursuant to the authority requested hereby, borrowings will not exceed those
levels permitted from time to time by the borrowing company's charter. At
present, the charters of the above companies do not contain limits on
outstanding amounts of unsecured debt.
2. Use of Proceeds.
Consistent with the Commission's Order dated October 21, 1994 in File
No. 70-8427, in which the Commission reserved jurisdiction over the
retainability of the non-utility businesses of the CINergy system, borrowings by
CINergy Investments, Resource Marketing and the Designated Non-Utility Companies
will be used (a) to provide working capital to continue to operate such
companies' businesses as described in the CINergy Merger U-1 and to fund
commitments existing as of the registration of CINergy as a holding company
under the Act on October 25, 1994, (b) to repay and refinance indebtedness, (c)
to loan to other participants in the Non-Utility Money Pool described in Item
1.B.3 below, and (d) for the additional purposes of making loans and capital
contributions as more fully described below.
Because certain of the Designated Non-Utility Companies and Resource
Marketing have heretofore been net borrowers from their corporate parents, it
has been the practice of such corporate parents to advance funds to such
companies in the form of inter-company loans and open-account advances and
periodically to forgive such indebtedness, thereby making capital contributions
in the amount forgiven. Applicants' inter-company loan and open-account
balances as of December 31, 1994, together with cash-flow projections and a
summary of projected funding needs for CINergy Investments, Resource Marketing,
and the Designated Non-Utility Companies for the period through May 31, 1997,
will be included in Exhibit 13 hereto.
Because certain of the Designated Non-Utility Companies and Resource
Marketing may remain net borrowers during the period covered by this
Application-Declaration, authorization is requested for CINergy from time to
time through May 31, 1997 to make capital contributions and loans (in the form
of open-account advances, repayable on demand, or otherwise through the Non-
Utility Money Pool described in Item 1.B.3 below) to CINergy Investments and the
Designated Non-Utility Companies, and for CINergy Investments and the Designated
Non-Utility Companies to make capital contributions and loans (in the form of
open-account advances, repayable on demand, or otherwise through the Non-Utility
Money Pool) to their subsidiary companies; provided, that the aggregate amount
of all then-outstanding borrowings by, and capital contributions to, a company
shall not exceed its aggregate borrowing limit set forth in Item 1.B.1 above.
Authority is also requested through May 31, 1997 (i) for CINergy and
CINergy Investments from time to time to make capital contributions and loans
(in the form of open-account advances, repayable on demand, or otherwise through
the Non-Utility Money Pool) to Resource Marketing, and (ii) for Resource
Marketing from time to time to make capital contributions and loans (in the form
of open-account advances, repayable on demand) to Energy Partners, to provide
for working capital needs, repayment or refinancing of debt, unexpected
contingencies, payment and timing differences, cash requirements and other
general business purposes of Energy Partners./4/ Energy Partners would not
participate directly in any money pool hereunder, but would be able to borrow
and receive capital contributions from Resource Marketing, subject to the limit
set forth in Item 1.B.1 above with respect to Resource Marketing.
The maximum dollar amounts of capital contributions and then-
outstanding loans that would be made by CINergy to its subsidiary companies
under the authority requested herein are as follows: to CINergy Investments, up
to $22,000,000; to PII, up to $6,750,000; to Bruwabel, Power International &
Power Development, up to $4,000,000 in the aggregate; to Recycling, up to
$4,400,000; to Equipment, up to $1,100,000; to Wholesale Power, up to
$1,200,000; to Resource Marketing, up to $2,000,000; and to U.S. Energy
Partners, up to $2,000,000. The CINergy system's percentage interest in U.S.
Energy Partners would not increase as a result of such contributions.
3. Terms of Non-Utility Money Pool
To coordinate and provide for short-term cash and working capital
requirements of Resource Marketing, CINergy Investments and the Designated Non-
Utility Companies, CINergy, CINergy Services, CINergy Investments, Resource
Marketing and the Designated Non-Utility Companies propose to establish a Non-
Utility Money Pool, with terms similar to those governing the Utility Money
Pool. Under the proposed arrangements governing the Non-Utility Money Pool,
short-term funds will be available from the following sources for use by the
respective participants from time to time: (1) surplus funds in the treasuries
of CINergy Investments, Resource Marketing and the Designated Non-Utility
Companies, (2) surplus funds in the treasury of CINergy, and (3) proceeds from
the sale by CINergy of commercial paper and bank borrowings by CINergy, CINergy
Investments, Resource Marketing and the Designated Non-Utility Companies
("External Sources"). Funds will be made available from such sources in such
order as CINergy Services, as administrator of the Non-Utility Money Pool, may
determine would result in a lower cost of borrowing from the Non-Utility Money
Pool, consistent with the borrowing needs and financial standing of the
companies providing funds to the pool. The determination of whether a Non-
Utility Money Pool participant at any time has surplus funds to lend to the Non-
Utility Money Pool or shall lend funds to the Non-Utility Money Pool will be
made by an appropriate officer of such participant, or by a designee thereof, on
the basis of cash flow projections and other relevant factors, in such
participant's sole discretion. Companies that borrow will borrow pro rata from
each company that lends, in the proportion that the total amount loaned by each
such lending company bears to the total amount then loaned through the Non-
Utility Money Pool. On any day when more than one fund source (e.g., surplus
treasury funds of CINergy and other Non-Utility Money Pool participants
("Internal Sources") and External Sources), with different rates of interest, is
used to fund loans through the Non-Utility Money Pool, each borrower will borrow
pro rata from each such fund source in the Non-Utility Money Pool in the same
proportion that the amount of funds provided by that fund source bears to the
total amount of short-term funds available to the Non-Utility Money Pool.
Loans through the Non-Utility Money Pool will be made only from funds
provided by CINergy (but only after such funds have been made available for
loans through the Utility Money Pool), CINergy Investments, Resource Marketing
or other Designated Non-Utility Companies, and no loan will be made to CINergy,
CINergy Investments, Resource Marketing, Energy Partners or any Designated Non-
Utility Company by the Utility Money Pool or by any public utility company in
the CINergy system. In addition, no loans through the Non-Utility Money Pool
will be made to, and no borrowings through the Non-Utility Money Pool will be
made by, CINergy.
Borrowings from the Non-Utility Money Pool will be authorized by an
appropriate officer of the borrower or by a designee thereof. No party shall be
required to effect a borrowing through the Non-Utility Money Pool if it
determines that it can (and is authorized to) effect a borrowing at lower cost
directly from a bank.
Certain Costs: The cost of compensating balances and fees paid to
banks to maintain credit lines by Non-Utility Money Pool participants lending
funds from External Sources to the Non-Utility Money Pool would initially be
paid by the participant maintaining such line. A portion of such costs would be
retroactively allocated every month to the companies borrowing funds from such
External Sources through the Non-Utility Money Pool in proportion to their
respective daily outstanding borrowings of funds from such External Sources./5/
Interest Rate on Loans: If only funds from Internal Sources comprise
the funds available in the Non-Utility Money Pool, the interest rate applicable
to loans of such funds from Internal Sources would be the CD yield equivalent of
the 30-day Federal Reserve "AA" Industrial Commercial Paper Composite Rate (or
if no such Composite Rate were established for that day, then the applicable
rate would be the Composite Rate for the next preceding day for which such
Composite Rate was established).
If only funds from External Sources comprise the funds available in
the Utility Money Pool, the interest rate applicable to loans of such funds from
External Sources would be equal to the lending company's cost for such funds
from External Sources (or, if more than one Non-Utility Money Pool participant
had made available funds from External Sources on such day, the applicable
interest rate would be a composite rate equal to the weighted average of the
cost incurred by the respective Non-Utility Money Pool participants for funds
from such External Sources).
In cases where both funds from Internal Sources and External Sources
are concurrently borrowed through the Non-Utility Money Pool, the rate
applicable to all loans comprised of such "blended" funds would be a composite
rate equal to the weighted average of (a) the cost of all funds contributed by
Non-Utility Money Pool participants from Internal Sources (as determined
pursuant to the second preceding paragraph above) and (b) the cost of all funds
from External Sources (as determined pursuant to the immediately preceding
paragraph above). In circumstances where funds from both Internal Sources and
External Sources are available for loans through the Non-Utility Money Pool,
loans may be made exclusively with funds from Internal Sources or External
Sources, rather than from a "blend" of such funds, to the extent it is expected
that such loans would result in a lower cost of borrowing.
Investment of Surplus Funds: As in the case of the Utility Money
Pool, funds not required by the Non-Utility Money Pool to make loans (with the
exception of funds required to satisfy the Non-Utility Money Pool's liquidity
requirements) will ordinarily be invested in one or more short-term investments,
including: (i) interest-bearing accounts with banks; (ii) obligations issued or
guaranteed by the U.S. government and/or its agencies and instrumentalities,
including obligations under repurchase agreements; (iii) obligations issued or
guaranteed by any state or political subdivision thereof, provided that such
obligations are rated not less than A by a nationally recognized rating agency;
(iv) commercial paper rated not less than A-1 or P-1 or their equivalent by a
nationally recognized rating agency; (v) money market funds; (vi) bank
certificates of deposit, (vii) Eurodollar funds, and (viii) such other
investments as are permitted by Section 9(c) of the Act and Rule 40 thereunder.
Surplus funds of the Utility Money Pool and the Non-Utility Money Pool
may be combined in common short-term investments, but separate records of such
funds shall be maintained by CINergy Services as administrator of the pools, and
interest thereon shall be separately allocated, on a daily basis, to each money
pool in accordance with the proportion that the amount of each money pool's
surplus funds bears to the total amount of surplus funds available for
investment from both money pools.
Allocation of Interest Income and Investment Earnings: The interest
income and other investment income earned on loans and investment of surplus
funds will be allocated among the participants in the Non-Utility Money Pool in
accordance with the proportion each participant's contribution of funds bears to
the total amount of funds in the Non-Utility Money Pool and the cost of any
funds provided to the Non-Utility Money Pool by such participant from External
Sources.
Repayment. Each Applicant receiving a loan through the Non-Utility
Money Pool will be required to repay the principal amount of such loan, together
with all interest accrued thereon, on demand and in any event not later than one
year after the date of such loan. All loans made through the Non-Utility Money
Pool may be prepaid by the borrower without premium or penalty.
Form of Loans to Applicants: As with the Utility Money Pool, loans
through the Non-Utility Money Pool will ordinarily be made pursuant to open-
account advances, repayable on demand but in any event not more than one year
after the date of the advance. Under the authorization requested herein, all
loans through the Non-Utility Money Pool will be made on or before May 31, 1997.
Each lender will at all times be entitled to receive upon demand one or more
promissory notes evidencing any and all loans by such lender. Such notes will
be substantially in the form filed as Exhibit 4, will be dated as of the date of
the initial borrowing (and in any event not later than May 31, 1997), will
mature on demand, or on a date agreed to by the parties to the transaction (but
in any case not later than one year after the date of the applicable borrowing),
and will be prepayable in whole at any time or in part from time to time,
without premium or penalty. Interest will be accrued monthly.
The foregoing terms will be reflected in an agreement to be signed by
the participants in the Non-Utility Money Pool, the form of which is filed as
Exhibit 6.1 hereto.
4. Bank Borrowings
PII has a $1,000,000 bank line of credit, which is embodied in an
agreement to be filed as Exhibit 1.18 hereto. As of December 31, 1994, PII had
no borrowings outstanding under the line of credit. PII proposes to maintain
such line of credit to provide financing flexibility and an independent source
of funds, outside the money pool system.
To provide additional flexibility, it is proposed that CINergy
Investments, Resource Marketing, and the Designated Non-Utility Companies also
have authority to borrow under bank facilities, and for CINergy to provide
guaranties and obtain letters of credit in connection therewith. Borrowings
under such facilities would be evidenced by promissory notes with terms
substantially similar to those described in Item 1.A.3.b above (but could bear
interest at a rate of up to prime plus 2%) and would be subject to compensation
arrangements similar to those described therein. Fees associated with
guarantees and letters of credit issued or obtained by CINergy would be as
described above in Section A.3.b. of this Item 1.
5. Continued Reservation of Jurisdiction
CINergy requests that the Commission continue to reserve jurisdiction
over the retention of certain non-utility businesses of the Applicants herein,
in accordance with the Commission's October 21, 1994 Order in File No. 70-8427.
C. Administration of Money Pools
Operation of the Utility and Non-Utility Money Pools, including record
keeping and coordination of loans, will be handled by CINergy Services under the
authority of the appropriate officers of the Applicants. CINergy Services will
administer the Utility and Non-Utility Money Pools on an "at cost" basis and
will maintain separate records for each money pool.
D. Reporting
CINergy Services, on behalf of the Applicants, will file periodic
reports with the Commission pursuant to Rule 24 under the Act setting forth (i)
each Applicant's maximum principal amount of short-term borrowings outstanding,
(ii) the average rate for each money pool over the period, and (iii) the maximum
amount outstanding during the period for each source of outside borrowings.
E. Statement Pursuant to Rule 54
Applicants do not intend at present to use the borrowings proposed
herein to finance the acquisition of an exempt wholesale generator ("EWG") or a
foreign utility company ("FUCO"). If the Applicants' intention changes, an
amended Application-Declaration will be filed requesting authorization for such
use.
Under Rule 54, in determining whether to approve the issuance or sale
of a security by a registered holding company for purposes other than the
acquisition of an EWG or 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 FUCO upon the registered holding company
system, if the conditions set forth in Rule 53(a), (b) and (c) are satisfied.
As set forth below, all applicable conditions set forth in Rule 53(a) are and,
assuming the consummation of the transactions proposed herein, will be
satisfied, and none of the conditions set forth in Rule 53(b) 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 system companies are EWGs or FUCOs. PSI Argentina, Inc.
("PSI Argentina") and its subsidiary, Costanera Power Corp. ("Costanera"), were
determined to be EWGs by the Federal Energy Regulatory Commission ("FERC") in
Costanera Power Corp., 61 FERC Paragraph 61,335 (1992), and PSI Argentina, Inc.,
68 FERC Paragraph 61,286 (1994). PSI Energy Argentina ("Energy Argentina") is a
FUCO and has filed a Notification of FUCO status on Form U-57. In addition to
these investments, CINergy owns a number of other companies formed to hold
investments in FUCOs and/or EWGs (CGE ECK, Inc., PSI T&D International, Inc.,
PSI Yacyreta, Inc., and E P EDEGEL, Inc.), and is seeking authorization to
retain certain other companies (including PSI Power Resource Development, Inc.,
PSI Power Resource Operations, Inc., PSI International, Inc., and PSI Sunnyside,
Inc.) and to form additional companies to facilitate FUCO and EWG investments.
Because none of these other companies presently owns any EWG or FUCO, they are
not included in the calculations below.
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 will maintain 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, 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 PSI Argentina, Costanera 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 in accordance with the Commission's order in PSI
Resources, Inc. et al., Holding Co. Act 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 formation of the CINergy system and the
registration of CINergy as a holding company under the Act. Pursuant to the
Commission's October 21, 1994 Order granting the CINergy Merger U-1, CINergy
Services is authorized to provide services to utility and non-utility associate
companies, including those that are EWGs or FUCOs.
Rule 53(a)(4): CINergy is simultaneously 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 of CINergy 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 total capital invested in utility operations. Together with
the $95 million in additional investment authority CINergy currently expects to
request in a separate application, CINergy's aggregate investment authority for
EWGs and FUCOs ($115,000,000) would represent less than 2% of CINergy's total
capital invested in utility operations. Average consolidated retained 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 12 months ended December 31, 1994, CINergy had
net income of approximately $175,000 attributable to its direct or 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 Rules 53(a) and (b), it is inapplicable
here.
Item 2. Fees, Commissions and Expenses.
An estimate of the fees and expenses to be paid or incurred by the
Applicants in connection with the proposed transactions is set forth below:
Amount
Holding Company Act filing fee. . . . . . $ 2,000*
Rating agency fees for commercial
paper (annual). . . . . . . . . . . . . . **
Counsel fees. . . . . . . . . . . . . . . 50,000
Miscellaneous and incidental expenses
including travel, telephone and
postage . . . . . . . . . . . . . . . . . 3,000
Total . . . . . . . . . . . . . . . . . . $ **
_______________
*Actual amount.
**To be added by amendment.
Fees with respect to bank borrowings are set forth in Item 1. In
addition to the foregoing fees, CINergy Services will provide certain services
in connection with the application, consisting primarily of treasury and legal
services.
Item 3. Applicable Statutory Provisions.
Sections 6, 7, 9(a), 10, 12(b), 12(f) and 13 of the Act and Rules 40,
43, 45, 53, 54 and 80-95 thereunder are or may be applicable to one or more of
the proposed transactions. To the extent any other sections of the Act and the
Commission's rules thereunder may be applicable to the proposed transactions,
the Applicants hereby request appropriate orders thereunder.
Item 4. Regulatory Approval.
Ohio: Pursuant to Ohio Code Section 4905.401, approval of the Public
Utilities Commission of Ohio ("PUCO") is not required for "[t]he issue, renewal,
or assumption of liability on . . . notes, or other evidences of indebtedness
[payable at periods of not more than twelve months] which have been, or are the
subject of an order of the [Commission] under the [Act]." Accordingly, PUCO
approval is not statutorily required for the CG&E borrowings or commercial paper
issuances proposed herein. Notwithstanding the foregoing, CG&E has committed to
the PUCO in the context of this filing that it will not incur short-term debt in
the future without PUCO authorization.
With respect to CG&E's existing borrowing arrangements, all requisite
approvals of the PUCO have been obtained. By order of the PUCO dated June 9,
1994 in Case No. 94-811-GE-AIS (Exhibit 7 hereto), CG&E is authorized to incur
short-term indebtedness and issue promissory notes and/or commercial paper in an
aggregate amount of up to $200,000,000 through June 30, 1995. Because the
current $200 million short-term authorization expires on June 30, 1995, CG&E
plans to file an application with the PUCO in the near future, pursuant to the
commitment noted above, to extend that authorization and to increase its maximum
authorized short-term borrowing limit to $400 million.
Indiana: Under Indiana Code Section 8-1-2-78, an Indiana public
utility may not, without the approval of the Indiana Utility Regulatory
Commission ("IURC"), issue bonds, notes or other evidences of indebtedness
payable at periods of "more than twelve (12) months after the date thereof." By
order of the IURC dated September 9, 1992 in Case No. 39438 (Exhibit 8 hereto),
PSI Energy is authorized to effect borrowings of not less than 12 months nor
more than 24 months in an aggregate amount of up to $200,000,000 at any one time
outstanding. The IURC order has no stated expiration date. The IURC order and
applicable provisions of the Indiana Code do not allow the use of such
borrowings by PSI Energy for purposes of making loans to the Utility Money Pool.
Under the Indiana Code, IURC authorization is not required for borrowings of 12
months or less and is therefore not required for the other borrowings by PSI
Energy (including the issuance of commercial paper by PSI Energy) proposed
herein, or any of the borrowings by West Harrison, Lawrenceburg and Miami
proposed herein. The Indiana Code does not limit the use of such 12-month-or-
less borrowings or preclude the use of the proceeds of such borrowings for
purposes of making loans through the Utility Money Pool, and IURC authorization
is not required for PSI Energy to lend the proceeds of such 12-month-or-less
borrowings through the Utility Money Pool as proposed herein. The $200 million
in 12- to 24-month borrowings authorized by the IURC are included within the
$400 million in PSI Energy short-term borrowing authority proposed in this
Application-Declaration, but, as noted, the proceeds of such 12- to 24-month
bank borrowings may not be used to make money pool loans, and PSI Energy does
not intend to seek authorization to invest the proceeds of such borrowings in
the Utility Money Pool.
KPSC: Pursuant to an Order issued on October 25, 1994 in FERC Docket
No. ES94-43-000 (Exhibit 9 hereto), ULH&P presently has all necessary authority
from the FERC to issue up to $35,000,000 of unsecured promissory notes through
December 31, 1996. No additional authorization from the Kentucky Public Service
Commission ("KPSC") is required under Kentucky law for the ULH&P borrowings
proposed herein.
Additional approvals: Pursuant to the terms of certain settlement
agreements, commitments and orders relating to the mergers that resulted in the
formation of the CINergy system, CINergy is required to submit certain proposed
inter-affiliate agreements subject to the Commission's jurisdiction (including
the proposed Utility Money Pool Agreement) to the IURC and the PUCO for their
review (over a period of up to 60 days) before filing such agreements with the
Commission. During such review period, the applicable state commission may
(among other things) reject, disapprove or find unreasonable the proposed inter-
affiliate agreement, as more fully described in Item 3.B of the CINergy Merger
U-1.
Except as described above, no state or federal regulatory authority,
other than the Commission under the Act, has jurisdiction over any of the
proposed transactions, and no other state or federal authorizations are required
for the transactions described herein.
Item 5. Procedure.
It is requested that the Commission issue and publish no later than
March 17, 1995, the requisite notice under Rule 23 with respect to the filing of
this Application-Declaration, such notice to specify a date not later than April
11, 1995 as the date after which an order granting and permitting this
Application-Declaration to become effective may be entered by the Commission and
that the Commission enter not later than April 12, 1995, an appropriate order
granting and permitting this Application-Declaration to become effective.
No recommended decision by a hearing officer or other responsible
officer of the Commission is necessary or required in this matter. The Division
of Investment Management of the Commission may assist in the preparation of the
Commission's decision in this matter. There should be no thirty-day waiting
period between the issuance and the effective date of any order issued by the
Commission in this matter, and it is respectfully requested that any such order
be made effective immediately upon the entry thereof.
Item 6. Exhibits and Financial Statements.
Exhibit 1.1 - Letter agreement between CG&E and Star Bank and Grid
Note ($5,000,000) (filed herewith).
Exhibit 1.2 - Letter agreement between CG&E and The Fifth Third Bank
and Promissory Note ($15,000,000) (filed herewith).
Exhibit 1.3 - Letter agreement between CG&E and PNC Bank, Ohio, N.A.,
and Amended and Restated Grid Note ($10,000,000) (filed
herewith).
Exhibit 1.4 - Letter agreement between CG&E and The Provident Bank
($5,000,000) (filed herewith).
Exhibit 1.5 - Letter agreement between CG&E and The First National
Bank of Southwestern Ohio ($1,000,000) (filed
herewith).
Exhibit 1.6 - Letter agreement between CG&E and National City Bank,
Kentucky, and Master Promissory Note in favor of First
National Bank of Louisville ($5,000,000) (filed
herewith).
Exhibit 1.7 - Letter agreement between CG&E and NBD Bank, N.A.
($5,000,000) (filed herewith).
Exhibit 1.8 - Letter agreement between CG&E and Society National Bank
and Master Promissory Note ($6,000,000) (filed
herewith).
Exhibit 1.9 - Letter agreement between CG&E and The Bank of New York
($10,000,000) (filed herewith).
Exhibit 1.10 - Letter agreement between CG&E and Citibank
($10,000,000) (filed herewith).
Exhibit 1.11 - Letter agreement between CG&E and The Toronto-Dominion
Bank and Note in favor of TD (Texas), Inc. ($5,000,000)
(filed herewith).
Exhibit 1.12 - Letter agreement between CG&E and Union Bank of
Switzerland, Chicago Branch, and Promissory Note
($5,000,000) (filed herewith).
Exhibit 1.13 - Letter agreement between ULH&P and Star Bank and Grid
Note ($7,500,000) (filed herewith).
Exhibit 1.14 - Letter agreement between ULH&P and The Fifth Third Bank
and Promissory Note ($7,500,000) (filed herewith).
Exhibit 1.15 - Letter agreement between ULH&P and Central Trust
Company and Amended and Restated Grid Note in favor of
PNC Bank, Ohio, National Association ($7,500,000)
(filed herewith).
Exhibit 1.16 - Letter agreement between ULH&P and National City Bank,
Kentucky, and Master Promissory Note in favor of First
National Bank of Louisville ($7,500,000) (filed
herewith).
Exhibit 1.17 - Letter agreement between The Lawrenceburg Gas Company
and Star Bank N.A., Indiana ($400,000) (filed
herewith).
Exhibit 1.18 - Revolving Note between Enertech Associates
International Inc. and The Fifth Third Bank
($1,000,000) (filed herewith).
Exhibit 1.19 - Letter agreement between PSI Energy and Bank One,
Indianapolis, N.A. and Master Note ($5,000,000) (filed
herewith).
Exhibit 1.20 - Committed Line of Credit Agreement between PSI Energy
and Barclays Bank PLC and Grid Note of same date
($15,000,000) (filed herewith).
Exhibit 1.21 - Letter agreement between PSI Energy and Canadian
Imperial Bank of Commerce and Master Note ($30,000,000)
(filed herewith).
Exhibit 1.22 - Letter agreement between PSI Energy and The Chase
Manhattan Bank, N.A., Promissory Note, and amendment
letters ($30,000,000) (filed herewith).
Exhibit 1.23 - Letter agreement between PSI Energy and Citibank, N.A.
and Master Note ($15,000,000) (filed herewith).
Exhibit 1.24 - Amended and Restated Revolving Note by PSI Energy in
favor of The Fifth Third Bank ($15,000,000) (filed
herewith).
Exhibit 1.25 - Letter agreement dated between PSI Energy and The First
National Bank of Chicago and Master Note ($15,000,000)
(filed herewith).
Exhibit 1.26 - Letter agreement between PSI Energy and Bank of
Montreal and Unsecured Note ($27,000,000) (filed
herewith).
Exhibit 1.27 - Letter agreement between PSI Energy and NBD Bank, N.A.,
and Renewal Master Note ($5,000,000) (filed herewith).
Exhibit 1.28 - Letter agreement between PSI Energy and National City
Bank, Indiana, and Commercial Time Note ($3,000,000)
(filed herewith).
Exhibit 1.29 - Letter agreement between PSI Energy and The Mitsubishi
Bank, Ltd., Chicago Branch, and Master Note
($40,000,000) (filed herewith).
Exhibit 1.30 - Revolving Credit Agreement between PSI Energy and Swiss
Bank Corporation, New York Branch, Promissory Note, and
Amendment No. 2 ($15,000,000) (filed herewith).
Exhibit 1.31 - Letter Agreement between PSI Energy and The Chase
Manhattan Bank, N.A., and Master Note ($15,000,000)
(filed herewith).
Exhibit 2 - Form of note to evidence borrowings from banks.
Exhibit 3 - Form of commercial paper note.
Exhibit 4 - Form of note to be executed by borrowing Applicants to
lending Applicants.
Exhibit 5 - Form of Utility Money Pool Agreement (to be filed by
amendment).
Exhibit 6.1 - Revised Form of Non-Utility Money Pool Agreement.
Exhibit 7 - PUCO Order dated June 9, 1994 (Case No. 94-811-GE-AIS)
(filed herewith).
Exhibit 8 - IURC Order dated September 9, 1992 (Case No. 39438)
(filed herewith).
Exhibit 9 - FERC Order issued October 25, 1994 (Docket No. ES94-43-
000) (filed herewith).
Exhibit 10 - Preliminary opinion of counsel.
Exhibit 11 - Final or "past tense" opinion of counsel (to be filed
with certificate of notification).
Exhibit 12 - Proposed notice of proceeding.
Exhibit 13 - Cash-flow projections and inter-company loans and open
account balances (to be filed by amendment).
Exhibit 14 - Financial statements of Applicants (to be filed by
amendment).
Item 7. Information as to Environmental Effects.
The proposed transactions do not involve major federal action having a
significant effect on the human environment. To the best of the Applicants'
knowledge no federal agency has prepared or is preparing an environmental impact
statement with respect to the proposed transactions.
Item 8. Power of Attorney.
KNOW ALL MEN BY THESE PRESENTS, that each person signing below
constitutes J. Wayne Leonard, Jackson H. Randolph and William L. Sheafer, and
each of them, with full power to act without the others, his lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him and
in his name, in any capacity, to sign any further amendment to this Application-
Declaration, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Commission granting unto the
attorneys-in-fact and agents, and each of them, full authority to do each act
necessary to be done, as fully to all purposes as he might do in person, hereby
ratifying all that the attorneys-in-fact and agents or any of them, or their or
his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
<PAGE>
S I G N A T U R E
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, as amended, the undersigned companies have duly caused this document to
be signed on their behalf by the undersigned thereunto duly authorized.
Dated: April 4, 1995
CINergy CORP.
By /s/ WILLIAM L. SHEAFER
William L. Sheafer
Treasurer
PSI ENERGY, INC.
By /s/ WILLIAM L. SHEAFER
William L. Sheafer
Treasurer
THE CINCINNATI GAS & ELECTRIC
COMPANY
By /s/ WILLIAM L. SHEAFER
William L. Sheafer
Treasurer
THE UNION LIGHT, HEAT AND POWER CO.
By /s/ WILLIAM L. SHEAFER
William L. Sheafer
Treasurer
THE WEST HARRISON GAS AND ELECTRIC CO.
By /s/ WILLIAM L. SHEAFER
William L. Sheafer
Treasurer
LAWRENCEBURG GAS CO.
By /s/ WILLIAM L. SHEAFER
William L. Sheafer
Treasurer
MIAMI POWER CORPORATION
By /s/ WILLIAM L. SHEAFER
William L. Sheafer
Treasurer
CINergy SERVICES, INC.
By /s/ J. WAYNE LEONARD
J. Wayne Leonard
Group Vice President and
Chief Financial Officer
CINergy INVESTMENTS, INC.
By /s/ WILLIAM J. GREALIS
William J. Grealis
President
KO TRANSMISSION CO.
By /s/ WILLIAM L. SHEAFER
William L. Sheafer
Treasurer
TRI-STATE IMPROVEMENT CO.
By /s/ WILLIAM L. SHEAFER
William L. Sheafer
Treasurer
PSI RECYCLING, INC.
By /s/ M. STEPHEN HARKNESS
M. Stephen Harkness
Treasurer
CG&E RESOURCE MARKETING, INC.
By /s/ WILLIAM L. SHEAFER
William L. Sheafer
Treasurer
WHOLESALE POWER SERVICES, INC.
By /s/ M. STEPHEN HARKNESS
M. Stephen Harkness
Treasurer
POWER EQUIPMENT SUPPLY CO.
By /s/ M. STEPHEN HARKNESS
M. Stephen Harkness
Treasurer
BEHEER- EN BELEGGINSMAATSCHAPPIJ
BRUWABEL, B.V.
By /s/ ROBERT VAN BEEMAN
Robert van Beeman
Managing Director
By /s/ JOHAN LONT
Johan Lont
Managing Director
POWER INTERNATIONAL, INC.
By /s/ WILLIAM L. SHEAFER
William L. Sheafer
Treasurer
POWER INTERNATIONAL, s.r.o.
By /s/ ROBERT CHELBERG
Robert Chelberg
Director, Central and Eastern
European Operations
POWER DEVELOPMENT, s.r.o.
By /s/ ROBERT CHELBERG
Robert Chelberg
Director, Central and Eastern
European Operations
<PAGE>
ENDNOTES
/1/ CINergy Services, Inc. ("CINergy Services"); PSI Energy, Inc. ("PSI
Energy"); The Cincinnati Gas & Electric Company ("CG&E"); The Union Light,
Heat and Power Co. ("ULH&P"); The West Harrison Gas and Electric Co. ("West
Harrison"); Lawrenceburg Gas Co. ("Lawrenceburg"); Miami Power Corp.
("Miami"); Tri-State Improvement Co. ("Tri-State"); KO Transmission Co.
("KO"); CINergy Investments, Inc. ("CINergy Investments"); CG&E Resource
Marketing, Inc. ("Resource Marketing"); Power International, Inc., formerly
named Enertech Associates International, Inc. ("PII"); Beheer- En
Belegginsmaatschappij Bruwabel B.V. ("Bruwabel"); Power International
s.r.o. ("Power International"); Power Development s.r.o. ("Power
Development"); Wholesale Power Services, Inc. ("Wholesale Power"); PSI
Recycling, Inc. ("Recycling"); and Power Equipment Supply Co. ("Equipment")
(collectively with CINergy, the "Applicants").
/2/ Pursuant to the Commission's order dated November 18, 1994 in File No. 70-
8477, Release No. 35-26159, CINergy was authorized to issue and sell up to
8 million shares of CINergy Common Stock. CINergy heretofore has issued
7,132,675 such shares and retains authority to issue and sell up to 867,375
additional shares. The dollar amount of proceeds from the issuance of such
stock would depend on the price at which such shares are sold. Based on
the closing price of $24.50 per share on March 20, 1995, the sale of such
additional shares would yield gross proceeds of approximately $21,250,000
that (after deductions for underwriting discounts, fees, and expenses)
could be used to make loans through the money pools.
/3/ For example, if a company borrowed $1 million in External Funds for ten
days during a monthly period, and such funds were derived from a $10
million line of credit bearing a 1% annual fee, the borrowing company's
share of such fee (assuming a 360-day year) would equal (1% X $10,000,000)
X ($1,000,000 / $10,000,000) X (10 / 360), or approximately $277.78.
/4/ CINergy's interest in Energy Partners is a minority interest, with the
remaining majority interest held by one partner unaffiliated with CINergy.
For this and other reasons to be detailed in an amendment to this
Application-Declaration, CINergy does not "control" Energy Partners or
possess a "controlling influence" over its management or policies, and
hereby requests an order by the Commission that Energy Partners is not a
"subsidiary company" of CINergy within the meaning of Section 2(a)(8) of
the Act. CINergy therefore does not believe that Commission authorization
will be required for Energy Partners to issue notes.
/5/ For example, if a company borrowed $1 million in funds from External
Sources for ten days during a monthly period, and such funds were derived
from a $10 million line of credit bearing a 1% annual fee, the borrowing
company's share of such fee (assuming a 360-day year) would equal (1% X
$10,000,000) X ($1,000,000 / $10,000,000) X (10 / 360), or approximately
$277.78.
<PAGE>
EXHIBIT INDEX
The number in parentheses after each exhibit description refers to the number of
the amendment to this Application-Declaration with which that exhibit was filed.
Exhibits marked "(0)" were filed with the initial Application-Declaration.
Exhibit Transmission
Number Exhibit Method
1.1 Letter agreement between CG&E Form SE
and Star Bank and Grid Note
($5,000,000) (1).
1.2 Letter agreement between CG&E Form SE
and The Fifth Third Bank and
Promissory Note ($15,000,000)
(1).
1.3 Letter agreement between CG&E Form SE
and PNC Bank, Ohio, N.A., and
Amended and Restated Grid Note
($10,000,000) (1).
1.4 Letter agreement between CG&E Form SE
and The Provident Bank
($5,000,000) (1).
1.5 Letter agreement between CG&E Form SE
and The First National Bank of
Southwestern Ohio ($1,000,000)
(1).
1.6 Letter agreement between CG&E Form SE
and National City Bank,
Kentucky, and Master Promissory
Note in favor of First National
Bank of Louisville ($5,000,000)
(1).
1.7 Letter agreement between CG&E Form SE
and NBD Bank, N.A. ($5,000,000)
(1).
1.8 Letter agreement between CG&E Form SE
and Society National Bank and
Master Promissory Note
($6,000,000) (1).
1.9 Letter agreement between CG&E Form SE
and The Bank of New York
($10,000,000) (1).
1.10 Letter agreement between CG&E Form SE
and Citibank ($10,000,000) (1).
1.11 Letter agreement between CG&E Form SE
and The Toronto-Dominion Bank
and Note in favor of TD
(Texas), Inc. ($5,000,000) (1).
1.12 Letter agreement between CG&E Form SE
and Union Bank of Switzerland,
Chicago Branch, and Promissory
Note ($5,000,000) (1).
1.13 Letter agreement between ULH&P Form SE
and Star Bank and Grid Note
($7,500,000) (1).
1.14 Letter agreement between ULH&P Form SE
and The Fifth Third Bank and
Promissory Note ($7,500,000)
(1).
1.15 Letter agreement between ULH&P Form SE
and Central Trust Company and
Amended and Restated Grid Note
in favor of PNC Bank, Ohio,
National Association
($7,500,000) (1).
1.16 Letter agreement between ULH&P Form SE
and National City Bank,
Kentucky, and Master Promissory
Note in favor of First National
Bank of Louisville ($7,500,000)
(1).
1.17 Letter agreement between The Form SE
Lawrenceburg Gas Company and
Star Bank N.A., Indiana
($400,000) (1).
1.18 Revolving Note between Enertech Form SE
Associates International Inc.
and The Fifth Third Bank
($1,000,000) (1).
1.19 Letter agreement between PSI Form SE
Energy and Bank One,
Indianapolis, N.A. and Master
Note ($5,000,000) (1).
1.20 Committed Line of Credit Form SE
Agreement between PSI Energy
and Barclays Bank PLC and Grid
Note ($15,000,000) (1).
1.21 Letter agreement between PSI Form SE
Energy and Canadian Imperial
Bank of Commerce and Master
Note ($30,000,000) (1).
1.22 Letter agreement between PSI Form SE
Energy and The Chase Manhattan
Bank, N.A., Promissory Note,
and amendment letters
($30,000,000) (1).
1.23 Letter agreement between PSI Form SE
Energy and Citibank, N.A. and
Master Note ($15,000,000) (1).
1.24 Amended and Restated Revolving Form SE
Note by PSI Energy in favor of
The Fifth Third Bank
($15,000,000) (1).
1.25 Letter agreement between PSI Form SE
Energy and The First National
Bank of Chicago and Master Note
($15,000,000) (1).
1.26 Letter agreement between PSI Form SE
Energy and Bank of Montreal and
Unsecured Note ($27,000,000)
(1).
1.27 Letter agreement between PSI Form SE
Energy and NBD Bank, N.A., and
Renewal Master Note
($5,000,000) (1).
1.28 Letter agreement between PSI Form SE
Energy and National City Bank,
Indiana, and Commercial Time
Note ($3,000,000) (1).
1.29 Letter agreement between PSI Form SE
Energy and The Mitsubishi
Bank, Ltd., Chicago Branch, and
Master Note ($40,000,000) (1).
1.30 Revolving Credit Agreement Form SE
between PSI Energy and
Swiss Bank Corporation, New
York Branch, Promissory Note,
and Amendment No. 2
($15,000,000) (1).
1.31 Letter Agreement between PSI Form SE
Energy and The Chase Manhattan
Bank, N.A., and Master Note
($15,000,000) (1).
2 Form of note to evidence Electronic
borrowings from banks (0).
3 Form of commercial paper note Electronic
(0).
4 Form of note to be executed by Electronic
borrowing Applicants to lending
Applicants (0).
5 Form of Utility Money Pool --
Agreement (to be filed by
amendment).
6.1 Revised Form of Non-Utility Electronic
Money Pool Agreement (1).
7 PUCO Order dated June 9, 1994 Form SE
(Case No. 94-811-GE-AIS) (1).
8 IURC Order dated September 9, Form SE
1992 (Case No. 39438) (1).
9 FERC Order issued October 26, Form SE
1994 (Docket No. ES94-43-000)
(1).
10 Preliminary opinion of counsel Electronic
(0).
11 Final or "past tense" opinion --
of counsel (to be filed with
certificate of notification).
12 Proposed notice of proceeding Electronic
(0).
13 Cash-flow projections and --
inter-company loans and open
account balances (to be filed
by amendment).
14 Financial statements of --
Applicants (to be filed by
amendment).
<PAGE>
EXHIBIT 6.1
Non-Utility Money Pool Agreement
This NON-UTILITY MONEY POOL AGREEMENT is made and entered into this
___ day of _________, 1995 by and among CINergy Corp. ("CINergy"), a Delaware
corporation and a registered holding company under the Public Utility Holding
Company Act of 1935, as amended (the "Act"); CINergy Services, Inc. ("CINergy
Services"), a Delaware corporation and a subsidiary service company of CINergy;
CINergy Investments, Inc. ("CINergy Investments"), a Delaware corporation and a
subsidiary of CINergy; Wholesale Power Services, Inc. ("PSI Wholesale"), an
Indiana corporation and a subsidiary of CINergy Investments; Power
International, Inc., formerly named Enertech Associates International, Inc.
("PII"), an Ohio corporation and a subsidiary of CINergy Investments; Beheer- En
Belegginsmaatschappij Bruwabel B.V. ("Bruwabel"), a Netherlands corporation and
a subsidiary of PII; Power International s.r.o., a Czech limited liability
company and a subsidiary of Bruwabel; Power Development s.r.o., a Czech limited
liability company and a subsidiary of Bruwabel; PSI Recycling, Inc.
("Recycling"), an Indiana corporation and a subsidiary of CINergy Investments;
Power Equipment Supply Co. ("Equipment"), an Indiana corporation and a
subsidiary of CINergy Investments; and CG&E Resource Marketing, Inc. ("Resource
Marketing"), a Delaware corporation and a subsidiary of CINergy Investments
(each a "party" and collectively, the "parties").
Recitals
The parties from time to time have need to borrow funds on a short-
term basis. Some of the parties from time to time have funds available to loan
on a short-term basis. The parties desire to establish a pool (the "Non-Utility
Money Pool") to coordinate and provide for certain of their short-term cash and
working capital requirements.
NOW THEREFORE, in consideration of the premises, and the mutual
promises set forth herein, the parties hereto agree as follows:
ARTICLE I
CONTRIBUTIONS AND BORROWINGS
Section 1.1 Contributions to Non-Utility Money Pool. Each party will
determine each day, on the basis of cash flow projections and other relevant
factors, in such party's sole discretion, the amount of funds it has available
for contribution to the Non-Utility Money Pool, and will contribute such funds
to the Non-Utility Money Pool. The determination of whether a party at any time
has surplus funds to lend to the Non-Utility Money Pool or shall lend funds to
the Non-Utility Money Pool will be made by an appropriate officer of such party,
or by a designee thereof, on the basis of cash flow projections and other
relevant factors, in such party's sole discretion. Each party may withdraw any
of its funds at any time upon notice to CINergy Services as administrative agent
of the Non-Utility Money Pool.
Section 1.2 Rights to Borrow. Subject to the provisions of Section
1.4(b) of this Agreement, all short-term borrowing needs of the parties, with
the exception of CINergy, will be met by funds in the Non-Utility Money Pool to
the extent such funds are available. Each party (other than CINergy) shall have
the right to make short-term borrowings from the Non-Utility Money Pool from
time to time, subject to the availability of funds and the limitations and
conditions set forth herein and in the applicable orders of the Securities and
Exchange Commission. Each party (other than CINergy) may request loans from the
Non-Utility Money Pool from time to time during the period from the date hereof
until this Agreement is terminated by written agreement of the parties;
provided, however, that the aggregate amount of all loans requested by any party
hereunder shall not exceed the applicable borrowing limits set forth in
applicable orders of the Securities and Exchange Commission and other regulatory
authorities, resolutions of such party's shareholders and Board of Directors or
similar governing body, such party's governing corporate documents, and
agreements binding upon such party. No loans through the Non-Utility Money Pool
will be made to, and no borrowings through the Non-Utility Money Pool will be
made by, CINergy.
Section 1.3 Source of Funds. (a) Funds will be available through the
Non-Utility Money Pool from the following sources for use by the parties from
time to time: (i) surplus funds in the treasuries of parties other than
CINergy, (ii) surplus funds in the treasury of CINergy, and (iii) proceeds from
bank borrowings by parties and the sale by CINergy of commercial paper
("External Sources"). Funds will be made available from such sources in such
order as CINergy Services, as administrator of the Non-Utility Money Pool, may
determine will result in a lower cost of borrowing to companies borrowing from
the Non-Utility Money Pool, consistent with the individual borrowing needs and
financial standing of the parties providing funds to the Non-Utility Money Pool.
(b) Borrowing parties will borrow pro rata from each lending party in
the proportion that the total amount loaned by such lending party bears to the
total amount then loaned through the Non-Utility Money Pool. On any day when
more than one fund source (e.g., surplus treasury funds of CINergy and other
Non-Utility Money Pool participants ("Internal Sources") and funds from External
Sources), with different rates of interest, is used to fund loans through the
Non-Utility Money Pool, each borrowing party will borrow pro rata from each such
fund source in the Non-Utility Money Pool in the same proportion that the amount
of funds provided by that fund source bears to the total amount of short-term
funds available to the Non-Utility Money Pool.
Section 1.4 Authorization. (a) Each loan shall be authorized by the
lending party's chief financial officer or treasurer, or by a designee thereof.
(b) All borrowings from the Non-Utility Money Pool shall be
authorized by the borrowing party's chief financial officer or treasurer, or by
a designee thereof. No party shall be required to effect a borrowing through
the Non-Utility Money Pool if such party determines that it can (and is
authorized to) effect such borrowing at lower cost directly from banks or
through the sale of its own commercial paper.
Section 1.5 Interest. Each party receiving a loan shall accrue
interest monthly on the unpaid principal amount of such loan to the Non-Utility
Money Pool from the date of such loan until such principal amount shall be paid
in full.
(a) If only funds from Internal Sources comprise the funds available
in the Non-Utility Money Pool, the interest rate applicable to loans of such
funds from Internal Sources shall be the CD yield equivalent of the 30-day
Federal Reserve "AA" Industrial Commercial Paper Composite Rate (or, if no such
Composite Rate is established for that day, then the applicable rate shall be
the Composite Rate for the next preceding day for which such Composite Rate was
established).
(b) If only funds from External Sources comprise the funds available
in the Non-Utility Money Pool, the interest rate applicable to loans of such
funds from External Sources shall be equal to the lending party's cost for such
funds from External Sources (or, if more than one party had made available funds
from External Sources on such day, the applicable interest rate shall be a
composite rate, equal to the weighted average of the cost incurred by the
respective parties for such funds from External Sources).
(c) In cases where funds from both Internal Sources and External
Sources are concurrently borrowed through the Non-Utility Money Pool, the rate
applicable to all loans comprised of such "blended" funds shall be a composite
rate, equal to the weighted average of the (i) cost of all funds contributed by
parties from Internal Sources (as determined pursuant to Section 1.5(a) above)
and (ii) the cost of all such funds from External Sources (as determined
pursuant to Section 1.5(b) above); provided, that in circumstances where funds
from Internal Sources and External Sources are available for loans through the
Non-Utility Money Pool, loans may be made exclusively with funds from Internal
Sources or External Sources, rather than from a "blend" of such funds, to the
extent it is expected that such loans would result in a lower cost of borrowing.
Section 1.6 Certain Costs. The cost of compensating balances and
fees paid to banks to maintain credit lines by parties lending funds from
External Sources to the Non-Utility Money Pool shall initially be paid by the
party maintaining such line. A portion of such costs shall be retroactively
allocated every month to the parties borrowing funds from such External Sources
through the Non-Utility Money Pool in proportion to their respective daily
outstanding borrowings of funds from such External Sources.
Section 1.7 Repayment. Each party receiving a loan hereunder shall
repay the principal amount of such loan, together with all interest accrued
thereon, on demand and in any event within 365 days of the date on which such
loan was made. All loans made through the Non-Utility Money Pool may be prepaid
by the borrower without premium or penalty.
Section 1.8 Form of Loans to Parties. Loans to the parties through
the Non-Utility Money Pool will be made pursuant to open-account advances,
repayable upon demand and in any event not later than one year after the date of
the advance; provided, that each lending party shall at all times be entitled to
receive upon demand one or more promissory notes evidencing any and all loans by
such lender. Any such note shall: (a) be substantially in the form to be filed
as Exhibit 4 to the Form U-1 Application-Declaration in File No. 70-8587, (b) be
dated as of the date of the initial borrowing, (c) mature on demand or on a date
agreed to by the parties to the transaction, but in any event not later than one
year after the date of the applicable borrowing, and (d) be prepayable in whole
at any time or in part from time to time, without premium or penalty.
ARTICLE II
OPERATION OF NON-UTILITY MONEY POOL
Section 2.1 Operation. Operation of the Non-Utility Money Pool,
including record keeping and coordination of loans, will be handled by CINergy
Services under the authority of the appropriate officers of the parties.
CINergy Services shall be responsible for the determination of all applicable
interest rates and charges to be applied to advances outstanding at any time
hereunder, shall maintain records of all advances, interest charges and accruals
and interest and principal payments for purposes hereof, and shall prepare
periodic reports thereof for the parties. CINergy Services will administer the
Non-Utility Money Pool on an "at cost" basis. Separate records shall be kept by
CINergy Services for the money pool established by this agreement and any other
money pool administered by CINergy Services.
Section 2.2 Investment of Surplus Funds in the Non-Utility Money
Pool. Funds not required to meet Non-Utility Money Pool loans (with the
exception of funds required to satisfy the Non-Utility Money Pool's liquidity
requirements) will ordinarily be invested in one or more short-term investments,
including: (i) interest-bearing accounts with banks; (ii) obligations issued or
guaranteed by the U.S. government and/or its agencies and instrumentalities,
including obligations under repurchase agreements; (iii) obligations issued or
guaranteed by any state or political subdivision thereof, provided that such
obligations are rated not less than A by a nationally recognized rating agency;
(iv) commercial paper rated not less than A-1 or P-1 or their equivalent by a
nationally recognized rating agency; (v) money market funds; (vi) bank
certificates of deposit; (vii) Eurodollar funds; and (viii) such other
investments as are permitted by Section 9(c) of the Act and Rule 40 thereunder.
Section 2.3 Allocation of Interest Income and Investment Earnings.
The interest income and other investment income earned by the Non-Utility Money
Pool on loans and on investment of surplus funds will be allocated among the
parties in accordance with the proportion each party's contribution of funds in
the Non-Utility Money Pool bears to the total amount of funds in the Non-Utility
Money Pool and the cost of any External Sources provided to the Non-Utility
Money Pool by such party. Interest and other investment earnings will be
computed on a daily basis and settled once per month.
Section 2.4 Event of Default. If any party shall generally not pay
its debts as such debts become due, or shall admit in writing its inability to
pay its debts generally, or shall make a general assignment for the benefit of
creditors, or any proceeding shall be instituted by or against any party seeking
to adjudicate it a bankrupt or insolvent, then the other parties may declare the
unpaid principal amount of any loans to such party, and all interest thereon, to
be forthwith due and payable and all such amounts shall forthwith become due and
payable.
ARTICLE III
MISCELLANEOUS
Section 3.1 Amendments. No amendment to this Agreement shall be
adopted except in a writing executed by the parties.
Section 3.2 Legal Responsibility. Nothing herein contained shall
render any party liable for the obligations of any other party hereunder and the
rights, obligations and liabilities of the parties are several in accordance
with their respective obligations, and not joint.
Section 3.3 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Ohio.
<PAGE>
IN WITNESS WHEREOF, the undersigned companies have duly caused this
document to be signed on their behalf on the date first written above by the
undersigned thereunto duly authorized.
CINergy CORP.
By________________________________
Name:
Title:
CINergy SERVICES, INC.
By_________________________________
Name:
Title:
CINergy INVESTMENTS, INC.
By________________________________
Name:
Title:
WHOLESALE POWER SERVICES, INC.
By________________________________
Name:
Title:
POWER INTERNATIONAL, INC.
By________________________________
Name:
Title:
BEHEER- EN BELEGGINSMAATSCHAPPIJ
BRUWABEL, B.V.
By________________________________
Name:
Title:
By________________________________
Name:
Title:
POWER INTERNATIONAL, s.r.o.
By________________________________
Name:
Title:
POWER DEVELOPMENT, s.r.o.
By________________________________
Name:
Title:
PSI RECYCLING, INC.
By________________________________
Name:
Title:
POWER EQUIPMENT SUPPLY CO.
By________________________________
Name:
Title:
CG&E RESOURCE MARKETING, INC.
By________________________________
Name:
Title:
