As filed with the Securities and Exchange Commission on March 10, 1995
File No. 70-____
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________________
FORM U-1 APPLICATION-DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
_________________________________
CINergy Corp.,
CINergy Investments, Inc.,
and
CINergy Services, Inc.
139 East Fourth Street
Cincinnati, Ohio 45202
(Name of company filing this statement
and address of principal executive offices)
CINergy Corp.
(Name of top registered holding company)
William L. Sheafer
Treasurer
CINergy Corp.
139 East Fourth Street
Cincinnati, Ohio 45202
(Names and addresses of agents 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
Milbank, Tweed, Hadley & McCloy Reid & Priest
1 Chase Manhattan Plaza 40 West 57th Street
New York, New York 10005 New York, New York 10019
<PAGE>
Item 1. Description of Proposed Transaction.
CINergy Corp. ("CINergy"), a registered holding company under the
Public Utility Holding Company Act of 1935, as amended (the "Act"), and
CINergy Investments, Inc. ("CINergy Investments"), a wholly-owned
subsidiary of CINergy, hereby request approval and authorization of the
Securities and Exchange Commission (the "Commission") (i) to acquire,
directly or indirectly, in one or more transactions, the securities of one
or more companies (the "New Special Purpose Subsidiaries") organized for
the purpose of engaging, directly or indirectly, and exclusively, in the
business of acquiring, owning and holding the securities of, and/or
providing services to, one or more "foreign utility companies" ("FUCOs")
and/or "exempt wholesale generators" ("EWGs"), as defined in Sections 33(a)
and 32(a) of the Act, respectively; (ii) to make direct and indirect
investments in New Special Purpose Subsidiaries and additional direct and
indirect investments in certain existing subsidiary companies of CINergy
(the "Existing Special Purpose Subsidiaries")/1/, by the means and subject
to the limitations described below; and (iii) to retain (and for the
Commission to release jurisdiction over) certain of the Existing Special
Purpose Subsidiaries/2/ as to which the Commission reserved jurisdiction in
its October 21, 1994 Order in File No. 70-8427 (the "October 21 Order")./3/
Authorization is also requested: (iv) for the Special Purpose Subsidiaries
to issue equity and debt securities to persons other than CINergy and
CINergy Investments for the purpose of financing investments by such
Special Purpose Subsidiaries in EWGs and FUCOs; (v) for the Special Purpose
Subsidiaries to provide services to their subsidiaries, and to other
Special Purpose Subsidiaries and their subsidiaries; and (vi) to the extent
not previously authorized by the Commission, for CINergy Services, Inc.
("CINergy Services"), a Delaware corporation and a subsidiary service
company of CINergy, to provide services to the Special Purpose Subsidiaries
and their subsidiaries, all in accordance with the terms and conditions set
forth herein.
CINergy and CINergy Investments propose that the authorizations
requested in clauses (i), (ii), and (iv) remain effective until the earlier
of May 31, 1998 or the effective date of any rule of general applicability
adopted by the Commission that would exempt the acquisition of any
securities of any New Special Purpose Subsidiary from the application and
approval requirements of Sections 9 and 10 of the Act and the issuance of
securities by Special Purpose Subsidiaries from the declaration
requirements of Sections 6 and 7 of the Act. It is proposed that no time
limitation apply to the authorizations requested in clauses (iii), (v) and
(vi).
Background
CINergy system companies have from time to time invested in or
considered potential opportunities to acquire or construct electric
generation, transmission and/or distribution facilities outside the United
States. CINergy expects to investigate other such opportunities in the
future. In most cases, it is expected that such facilities will qualify as
facilities that a FUCO or EWG may own or operate./4/
The authorization sought in this Application-Declaration is
intended to facilitate investments in such FUCOs and EWGs. A number of
legal and business reasons exist for the use of special purpose
subsidiaries in connection with such investments. Among other things, the
formation and acquisition of special purpose subsidiaries is often
necessary or desirable to facilitate the acquisition and ownership of a
FUCO or EWG. For example, laws of some foreign countries may require that
the bidder in a privatization program be a domestic company in that
country. In such cases, it would be necessary for CINergy to form a
foreign subsidiary (either as a foreign corporation or as a foreign
counterpart thereto) as the entity submitting the bid or other proposal.
In addition, the interposition of one or more special purpose subsidiaries
may allow CINergy to defer the repatriation of foreign source income, or to
take full advantage of favorable tax treaties among foreign countries, or
otherwise to secure favorable U.S. income tax treatment that would not
otherwise be available.
Special purpose subsidiaries are also useful in cases in which
CINergy may bid as a part of a consortium, since each member of the
consortium will typically want to have at least one consolidated subsidiary
in the final ownership structure for tax and accounting purposes. Special
purpose subsidiaries also serve to isolate business risks and facilitate
subsequent adjustments to or sales of interests among or by the members of
the ownership group.
1. Existing Special Purpose Subsidiaries
PSI Argentina, Costanera and Energy Argentina are all Indiana
corporations established in connection with the privatization of electric
generation and distribution assets in Argentina. PSI Argentina is a
wholly-owned subsidiary of CINergy Investments and in turn has two wholly-
owned subsidiaries: Costanera, which was incorporated in Indiana in 1992,
and EDEGEL, which is described below./5/ Through PSI Argentina, Costanera,
and Energy Argentina, CINergy is a member of two consortia holding
interests in, respectively, Central Costanera S.A., an Argentine electric
generating company that owns a 1260 megawatt facility, and Distrilec
Inversora S.A. ("Distrilec"), which owns 51% of the stock of Edesur S.A.,
an electric distribution system serving the southern half of Buenos Aires.
CINergy holds a 6% interest in Central Costanera S.A., and an 8% interest
in Distrilec. In addition, a company named Argelec, S.A., was formed to
hold the consortium's 60% equity interest in Central Costanera S.A.
CINergy has a 10% interest in Argelec. Argelec does not currently own the
consortium's 60% equity interest or any other assets.
As noted above, PSI Argentina and Costanera have been determined
by the FERC to be EWGs under Section 32(a) of the Act, while Energy
Argentina, a wholly-owned subsidiary of PSI Energy, is a FUCO under Section
33(a) of the Act. PSI Resources, Inc., which was merged into CINergy on
October 24, 1994, had previously received approvals from the Commission
under Section 9(a)(2) of the Act to own and operate the foregoing Argentine
investments as well as exemptions under Section 3(b) of the Act. See PSI
Resources, et al., Rel. No. 35-25570, 51 SEC Docket 1374 (July 2, 1992);
PSI Resources, Inc., et al., Rel. No. 35-25674, 52 SEC Docket 2533 (Nov.
13, 1992). The activities of PSI Argentina, Costanera and Energy Argentina
will be limited to those contemplated herein and by the Commission's past
orders.
T&D, a wholly-owned subsidiary of CINergy Investments, and its
wholly-owned subsidiary, Yacyreta, were incorporated in Indiana in 1994 to
acquire, own and hold, directly or indirectly, interests in FUCOs. EDEGEL,
a subsidiary of PSI Argentina, was incorporated in Delaware in 1994 to
acquire, own and hold, directly or indirectly, interests in foreign EWGs.
None of T&D, Yacyreta or EDEGEL has made any investments to date in FUCOs
or EWGs.
CGE ECK, a subsidiary of CINergy Investments, was incorporated in
Delaware in 1994 and holds a 3% interest in ECK s.r.o., a Czech limited
liability company which operates and owns a generating facility in the
Czech Republic.
Power Development, Power Operations, PSI International and
Sunnyside are all Indiana corporations and direct subsidiaries of CINergy
Investments, and were organized to invest in power projects. Power
Development and Power Operations were incorporated in 1990 and 1989,
respectively, to develop, operate and maintain independent power
producer/cogeneration projects. PSI International and PSI Sunnyside were
incorporated in 1991 and 1990, respectively, to develop, construct,
operate, and own cogenerating or power production facilities. At present,
none of the four companies holds any assets or is engaged in any business.
All four companies will be used hereafter solely for purposes of engaging,
directly or indirectly, and exclusively, in the businesses or acquiring,
owning and holding the securities of one or more FUCOs and/or EWGs and such
other businesses as the Commission may authorize.
Although a number of the Existing Special Purpose Subsidiaries
are currently inactive, such Existing Special Purpose Subsidiaries may be
used for FUCO and EWG investments in the future.
2. New Special Purpose Subsidiaries.
A New Special Purpose Subsidiary may be organized at the time of,
and in order to facilitate, the making of bids or proposals to acquire an
interest in any EWG or FUCO; after the award of a bid proposal, in order to
facilitate closing on the purchase or financing of any such EWG or FUCO; or
at any time subsequent to the consummation of an acquisition of an interest
in an EWG or FUCO in order, among other things, to effect an adjustment in
the respective ownership interests in any EWG or FUCO held by CINergy and
unaffiliated co-investors, to facilitate a partial sale of an interest in
any such EWG or FUCO, to comply with applicable laws of foreign
jurisdictions limiting or otherwise relating to the ownership of domestic
companies by foreign nationals; as a part of tax planning in order to limit
CINergy's exposure to U.S. and foreign taxes; or for other lawful business
purposes.
3. Investment in Special Purpose Subsidiaries.
As of December 31, 1994, CINergy's aggregate outstanding
investment in FUCOs and EWGs through Existing Special Purpose Subsidiaries,
net of amounts written off or received from dispositions of such
investments, was approximately $20 million. Under the authority requested
herein, the aggregate net investment of CINergy and CINergy Investments
outstanding at any one time in New Special Purpose Subsidiaries and
Existing Special Purpose Subsidiaries will not exceed $115 million. In
addition, (i) any direct or indirect investment by CINergy and CINergy
Investments in any Special Purpose Subsidiary would be consummated only if,
at the time thereof, and giving effect thereto, CINergy's "aggregate
investment," determined in accordance with Rule 53(a)(1)(i), in all FUCOs,
EWGs and Special Purpose Subsidiaries, shall not exceed 50% of CINergy's
"consolidated retained earnings," as defined in Rule 53(a)(1)(ii), and
(ii) CINergy and CINergy Investments will limit their direct and indirect
investment in any particular New Special Purpose Subsidiary to an amount
which is no greater than the amount reasonably required in connection with
making the underlying investment in any EWG or FUCO with respect to which
such New Special Purpose Subsidiary was organized or formed, taking into
account development expenditures, working capital needs, cash reserves
required to be maintained in accordance with financing documents and other
relevant factors. CINergy and its subsidiaries will also comply with all
other applicable rules under the Act, including, without limitation, such
additional rules as may be promulgated pursuant to Sections 32 and 33.
Investments by CINergy and CINergy Investments in the Special
Purpose Subsidiaries may take the form of any combination of the following:
(i) purchases of capital shares, partnership interests, trust certificates,
or the equivalent of any of the foregoing under the laws of foreign
jurisdictions, if applicable; (ii) cash capital contributions; (iii) open
account advances or loans evidenced by promissory notes; and (iv)
guaranties, letters of credit or other credit support (collectively,
"Guaranties") issued or arranged by CINergy and/or CINergy Investments in
respect of the securities or other obligations of the Special Purpose
Subsidiaries. The form of the promissory note to be issued to CINergy or
CINergy Investments is set forth in Exhibit 1 hereto.
Any investment in the capital shares or other equity securities
of a Special Purpose Subsidiary that have a stated par value will be in an
amount equal to or greater than such par value, and any open account
advance made by CINergy or CINergy Investments to a Special Purpose
Subsidiary may be non-interest bearing and will be repayable within one
year of the date of the advance.
Any promissory note issued by a New Special Purpose Subsidiary to
CINergy or CINergy Investments, and any promissory note or similar evidence
of indebtedness issued by a Special Purpose Subsidiary to a lender other
than CINergy or CINergy Investments with respect to which CINergy or
CINergy Investments may issue a Guaranty, will mature not later than 30
years after the date of issuance thereof, and will bear interest at a rate
(x) in the case of any note issued to CINergy or CINergy Investments, not
to exceed the prime rate at a bank to be designated by CINergy, and (y) in
the case of any note, bond or other evidence of indebtedness guaranteed by
CINergy or CINergy Investments, not to exceed the following: (i) if such
note, bond or other indebtedness is denominated in U.S. dollars, at a fixed
rate not to exceed 6.5% (or 650 basis points) over the yield to maturity on
an actively traded, non-callable, U.S. Treasury obligation having a
maturity approximating the average life of such note, bond or other
indebtedness (the "Applicable Treasury Rate"), or at a floating rate not to
exceed 6.5% (or 650 basis points) over the then applicable prime rate at a
U.S. money center bank to be designated by CINergy (the "Applicable Prime
Rate"); and (ii) if such note, bond or other indebtedness is denominated in
the currency of a country other than the United States, at a fixed or
floating rate which, when adjusted for the prevailing rate of inflation in
such country, as reported in official indices published by such country,
would be equivalent to a rate on a U.S. dollar-denominated borrowing of the
same approximate average life that does not exceed ten percentage points
over the Applicable Treasury Rate (interpolated, if necessary) or
Applicable Prime Rate, as the case may be.
Any promissory note issued to CINergy or CINergy Investments by
any Special Purpose Subsidiary, and any open-account advance by CINergy or
CINergy Investments to any Special Purpose Subsidiary, may, at the option
of CINergy or CINergy Investments, be converted to a capital contribution
to such Special Purpose Subsidiary through the forgiveness of the
indebtedness evidenced by such note or such open-account advance by CINergy
or CINergy Investments.
Funds for any direct or indirect investment by CINergy or CINergy
Investments in any Special Purpose Subsidiary (including the Guaranty of
any securities of any Special Purpose Subsidiary) will be derived from (a)
the sale of common stock (within the limitations prescribed in the
Commission's order dated November 18, 1994 in File No. 70-8477, Rel. No.
35-26159 (the "November 1994 Order"), and any future authorization obtained
from the Commission), (b) bank borrowings, letters of credit and/or
commercial paper sales (within the limitations prescribed in the
Commission's order dated January 11, 1995 in File No. 70-8521, Rel. No. 35-
26215 (the "January 1995 Order"), and any future authorization obtained
from the Commission), and (c) available cash. CINergy hereby requests the
Commission's authorization to apply proceeds of bank borrowings and
commercial paper sales authorized by the Commission in the January 1995
Order, together with otherwise available cash (including proceeds available
for general corporate purposes pursuant to the November 1994 Order), to
direct or indirect investments by CINergy in Special Purpose Subsidiaries,
FUCOs and EWGs (including the Guaranty of any securities thereof) as
described herein. CINergy also requests the Commission's authorization to
utilize letters of credit arranged by CINergy pursuant to the January 1995
Order in connection with Guaranties of securities of Special Purpose
Subsidiaries, FUCOs and EWGs as described herein. Except as set forth
herein and in the other files referred to herein, CINergy is not presently
requesting authority herein to issue any additional securities for the
purpose of financing investments in any New Special Purpose Subsidiaries.
If CINergy ultimately determines that any Special Purpose
Subsidiary is no longer useable for EWG or FUCO investment purposes
(whether due to termination of a proposed project acquisition, loss of a
bid, change in law, or otherwise), CINergy will (to the extent that it is
possible to do so at reasonable cost) liquidate, dissolve or sell such
Special Purpose Subsidiary within 180 days, unless, within that time,
CINergy determines that such Special Purpose Subsidiary could be used to
acquire an interest in a different FUCO or EWG or other investment
authorized by the Commission. To the extent needed, CINergy requests
authority to liquidate, dissolve or sell any Special Purpose Subsidiary
under such circumstances.
4. External Financing By Special Purpose Subsidiaries.
Approval is also requested for each Special Purpose Subsidiary to
issue equity securities and non-recourse debt securities to persons other
than CINergy or CINergy Investments (without Guaranty or other payment
obligation on the part of CINergy or CINergy Investments), including banks,
insurance companies, and other financial institutions, exclusively for the
purpose of financing (including any refinancing of) investments in EWGs and
FUCOs. Such securities may be issued in one or more transactions from time
to time through the earlier to occur of (i) May 31, 1998 and (ii) the
effective date of any rule of general applicability adopted by the
Commission exempting such transactions from the application requirements
under the Act. It is proposed that the aggregate principal amount of non-
recourse debt securities issued by each Special Purpose Subsidiary to
persons other than CINergy or CINergy Investments will not exceed 90% of
total debt and equity of such Special Purpose Subsidiary.
Equity securities issued by any New Special Purpose Subsidiary to
a person other than CINergy or CINergy Investments may include capital
shares, partnership interests, trust certificates, or the equivalent of any
of the foregoing under applicable foreign law. Non-recourse debt
securities issued to persons other than CINergy or CINergy Investments may
include secured and unsecured promissory notes, subordinated notes, bonds,
or other evidence of indebtedness. Securities issued by Special Purpose
Subsidiaries may be denominated in either U.S. dollars or foreign
currencies.
The amount and type of such securities, and the terms thereof,
including (in the case of any indebtedness) interest rate, maturity,
prepayment or redemption privileges, and the terms of any collateral
security granted with respect thereto, would be negotiated on a case by
case basis, taking into account differences from project to project in
optimum debt-equity ratios, projections of earnings and cash flow,
depreciable lives, and other similar financial and performance
characteristics of each project. Accordingly, CINergy and CINergy
Investments propose that they have the flexibility to negotiate the terms
and conditions of such securities without further approval by the
Commission.
Notwithstanding the foregoing, no equity security having a stated
par value will be issued or sold by a Special Purpose Subsidiary for a
consideration that is less than such par value, and no note, bond or other
evidence of indebtedness will be issued or sold by any Special Purpose
Subsidiary with a maturity date later than 30 years from the date of
issuance thereof, or an interest rate exceeding the following: (i) if such
note, bond or other indebtedness is U.S. dollar denominated, a fixed rate
exceeding 6.5% over the Applicable Treasury Rate or at a floating rate not
to exceed 6.5% over the Applicable Prime Rate; and (ii) if such note, bond
or other indebtedness is denominated in the currency of a country other
than the United States, a fixed or floating rate which, when reduced for
the prevailing rate of inflation in such country, as reported in official
indices for such country, would be equivalent to a rate on a U.S. dollar-
denominated borrowing of the same approximate average life exceeding 10%
over the Applicable Treasury Rate (interpolated, if necessary) or the
Applicable Prime Rate, as the case may be.
In connection with the issuance of any non-recourse debt
securities by any Special Purpose Subsidiary, it is anticipated that such
Special Purpose Subsidiary may grant a security interest in its assets.
Such security interest may take the form of a pledge of the shares or other
equity securities of an EWG or FUCO that it owns, including a security
interest in any distributions from any such EWG or FUCO, and/or a
collateral assignment of its rights under and interests in other property,
including rights under contracts. In connection with the issuance of any
such non-recourse debt securities, placement, commitment fees, or other
similar fees may be paid to lenders, placement agents, or others, on terms
and in amounts to be established at arm's length and in conformity with
market practice, and authorization therefor is sought hereby.
In connection with investments in EWGs and FUCOs, a portion of
the capital requirements of any such EWG or FUCO may be obtained through
non-recourse financing involving borrowings from banks and other financial
institutions. In some cases, however, it may be necessary or desirable to
structure an investment in an EWG or FUCO so that the obligations created
are not those of the EWG or FUCO, but instead those of its parent
companies. For example, in a consortium of non-affiliated companies
bidding to purchase the securities or assets of an EWG or FUCO, each of the
consortium members would be obligated to fund its respective share of the
proposed purchase price. If external sources of funds are needed for this
purpose, a consortium participant may choose to engage in non-recourse
financing through one or more single-purpose subsidiaries that would then
utilize the proceeds of the financing to acquire an ownership interest in
the EWG or FUCO./6/
CINergy believes that external financing by Special Purpose
Subsidiary involves the same issues that are involved when the financing is
carried out by an EWG or FUCO in terms of the potential impact on the
financial position of a registered holding company system. Accordingly,
where the proceeds of any such financing (including any refinancing) are
utilized to make an investment in any EWG or FUCO, and there is no recourse
directly or indirectly to CINergy with respect to the securities issued or
sold, there is no basis for any adverse findings under Section 6, 7 and 12
of the Act, provided that, at the time of the issuance thereof, CINergy is
in compliance with Rule 53.
5. Services
Pursuant to the Commission's Order dated October 21, 1994
granting the Application-Declaration of CINergy (as amended) in File No.
70-8427, CINergy Services is authorized to provide administrative,
management and support services to utility and non-utility associate
companies, including those that are EWGs or FUCOs. Under that order,
CINergy Services is authorized to provide services to the domestic non-
utility subsidiaries of CINergy at cost, determined in accordance with Rule
90 under the Act, and at fair market value for services rendered to certain
foreign non-utility subsidiaries of CINergy, pursuant to Rule 83 under the
Act. To the extent (if any) further authorization is required, CINergy
Services hereby requests such authorization to provide to the Special
Purpose Subsidiaries and their subsidiaries such services as may be
necessary or desirable for the development, acquisition, establishment and
operation of the Special Purpose Subsidiaries and the investments and
properties held, directly or indirectly, by such companies.
To provide further operational flexibility, it is also proposed
that the Special Purpose Subsidiaries have authority to provide their
subsidiaries, and other Special Purpose Subsidiaries and their
subsidiaries, with all services necessary or desirable for their
operations, including, without limitation, management, administrative,
employment, tax, accounting, engineering, consulting, utility performance,
and electronic data processing services, and software development and
support services in connection therewith. The Special Purpose Subsidiaries
will not provide services to any subsidiary company of CINergy other than
their subsidiaries and/or other Special Purpose Subsidiaries and their
subsidiaries. It is anticipated that such Special Purpose Subsidiaries and
their subsidiaries will meet (or, in the case of the Existing Special
Purpose Subsidiaries and their subsidiaries, will continue to meet) the
requirements of Rule 83(a) under the Act; accordingly, it is proposed that
services provided to the Special Purpose Subsidiaries and their
subsidiaries be exempt from the standards of Section 13(b) of the Act and
the rules and regulations promulgated thereunder.
6. Statement Pursuant to Rule 53
Under Rule 53, in determining whether to approve the issue or
sale of a security by a registered holding company for purposes of
financing the acquisition of an EWG or the guarantee of a security of an
EWG by a registered holding company, the Commission shall not make a
finding that such security is not reasonably adapted to the earning power
of such company or to the security structure of such company or companies
in the same holding company system, or that the circumstances are such as
to constitute the making of such guarantee an improper risk for such
company, if, as here, the conditions set forth in Rule 53 are met.
All applicable conditions set forth in Rule 53(a) are and,
assuming consummation of the transactions proposed herein, will be
satisfied, and none of the conditions set forth in Rule 53(b) exists or, as
a result thereof, will exist. The following discussion assumes the CINergy
system's existence for the dates and periods in question.
Three CINergy system companies are EWGs or FUCOs: PSI Argentina
and Costanera, which are EWGs, and Energy Argentina, which is a FUCO.
Rule 53(a)(1): The average of CINergy's pro forma consolidated
retained earnings for the four consecutive quarters ended December 31, 1994
was $929 million, and CINergy's aggregate investment in EWGs and FUCOs at
December 31, 1994 was approximately $20 million, or approximately 2% of
consolidated retained earnings.
Rule 53(a)(2): CINergy 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 Costanera, PSI Argentina
and Energy Argentina. Based on current staffing levels, this represents
less than 0.3% of the approximately 8,650 full-time employees of CINergy's
domestic operating utility subsidiaries. Such services have heretofore
been rendered, in part, by employees of PSI Energy 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 merger
of CG&E and PSI Energy into the CINergy system and the registration of
CINergy as a holding company under the Act. As noted above, pursuant to
the Commission's Order dated October 21, 1994 in File No. 70-8427, CINergy
Services is authorized to provide administrative, management and support
services to utility and non-utility associate companies, including those
that are EWGs or FUCOs. In addition, under the authorizations requested
herein, employees of CINergy Services may provide services to New Special
Purpose Subsidiaries and their subsidiaries, and Special Purpose
Subsidiaries may provide services to their subsidiaries, and to other
Special Purpose Subsidiaries and their subsidiaries.
Rule 53(a)(4): CINergy is 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 authorization 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 $95,000,000 in additional investment
authority proposed herein, CINergy's aggregate investment in EWGs and FUCOs
($115,000,000) will 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.
The estimated fees and expenses to be incurred in connection with
this Application-Declaration are as follows:
Commission filing fee $ 2,000
Counsel fees 25,000
Other 500
Total $27,500
Item 3. Applicable Statutory Provisions.
Sections 6, 7, 9, 10, 11, 12, 13, 32 and 33 and Rules 43, 45, 51,
53 and 83 are or may be applicable to the transactions proposed herein.
Sections 32 and 33 are applicable to the acquisition and
retention of interests in FUCOs and EWGs. Rule 53 thereunder is applicable
to Guaranties of securities of FUCOs and EWGs and would be applicable to
sales of securities by CINergy in connection with the acquisition of an
EWG.
The issuance of securities by the proposed Special Purpose
Subsidiaries and the direct or indirect acquisition thereof by CINergy
and/or CINergy Investments is or may be subject to Sections 6(a), 7, 9(a)
and 10 of the Act and Rules 43, 45 and 51 thereunder. Sections 6(a) and 7
may also be applicable to the liquidation or dissolution of any Special
Purpose Subsidiary.
Section 11 is applicable to the retention of certain of the
Existing Special Purpose Subsidiaries to the extent not authorized by
Sections 32 and 33 or by the Commission's orders in PSI Resources, et al.,
Holding Co. Act Rel. No. 35-25570, 51 SEC Docket 1374 (July 2, 1992), and
PSI Resources, Inc., et al., Holding Co. Act Rel. No. 35-25674, 52 SEC
Docket 2533 (Nov. 13, 1992).
Section 12(b) and Rule 45 thereunder would apply to any direct or
indirect cash capital contribution, loan or open account advance by CINergy
and/or CINergy Investments to any Special Purpose Subsidiary and to the
Guaranty by CINergy and/or CINergy Investments of any security of any
Special Purpose Subsidiary.
Assuming compliance with the limitations and conditions specified
in Item 1, the retention by CINergy and CINergy Investments of the Existing
Special Purpose Subsidiaries will satisfy the standards of Section 11, and
the acquisition by CINergy and/or CINergy Investments of the securities of
any New Special Purpose Subsidiary and the issuance of securities by any
New Special Purpose Subsidiary will satisfy the standards of Section 7, 10
and 12(b), as applicable. Such securities will be issued solely for the
purpose of financing (including any refinancing of) the acquisition and
ownership of interests in FUCOs and EWGs i'n transactions that are
permitted under Section 32(g) or Section 33(c), as applicable. In
addition, the amounts invested or to be invested by CINergy and/or CINergy
Investments in any such Special Purpose Subsidiaries (including Guarantees
by CINergy of securities issued by Special Purpose Subsidiaries to third
parties) will, when added to amounts invested by CINergy in Special Purpose
Subsidiaries, be within the limitations of Rule 53(a). Finally, the
issuance and acquisition of such securities will not otherwise be
detrimental to the interests of investors or consumers.
Pursuant to Rule 83, the provision of services as proposed herein
to foreign Special Purpose Subsidiaries and their subsidiaries may be
exempted from the standards of Section 13(b) of the Act and the rules and
regulations promulgated thereunder.
The transactions proposed herein will be carried out in
accordance with the procedures specified in Rule 23. CINergy proposes to
comply with the procedures specified in Rule 24 by filing certificates
notifying the Commission periodically of each investment made by CINergy,
directly or indirectly, in any Special Purpose Subsidiary, indicating the
amount and type of such investment and generally identifying the facility
with respect to which such subsidiary was organized or formed. Such
certificate will also describe in reasonable detail the amount, type, and
terms (including interest rate and maturity, and the basis for inflation
adjustment in the case of non-recourse indebtedness denominated in any
currency other than U.S. dollars) of securities issued by any such
subsidiary to third persons.
To the extent any other sections of the Act or rules thereunder
are or may be applicable to the proposed transactions, CINergy hereby
requests appropriate orders thereunder.
Item 4. Regulatory Approval.
The direct or indirect acquisition by CINergy of Special Purpose
Subsidiary securities and the issuance of securities by any such subsidiary
are not subject to the jurisdiction of any state commission or any federal
commission other than the Commission.
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 30-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.
1. Form of Promissory Note to be issued by Special Purpose
Subsidiaries to CINergy and/or CINergy Investments.
2. Proposed form of notice.
3. Financial statements per books and pro forma (to be filed by
amendment).
4. Preliminary opinion of counsel.
Item 7. Information as to Environmental Effects.
The proposed transactions do not involve any major federal action
having a significant effect on the human environment. To the best
knowledge of CINergy, CINergy Investments and CINergy Services, no federal
agency has prepared or is preparing an environmental impact statement with
regard to the proposed transactions.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the undersigned
companies have duly caused this statement to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: March 10, 1995 CINergy Corp.
By /s/ William L. Sheafer
William L. Sheafer
Treasurer
CINergy Investments, Inc.
By /s/ William J. Grealis
William J. Grealis
President
CINergy Services, Inc.
By /s/ J. Wayne Leonard
J. Wayne Leonard
Group Vice President and
Chief Financial Officer
<PAGE>
FOOTNOTES
/1/ Costanera Power Corp. ("Costanera"), PSI Argentina, Inc. ("PSI
Argentina"), PSI Energy Argentina, Inc. ("Energy Argentina"), E P
EDEGEL, Inc. ("EDEGEL"), PSI T&D International, Inc. ("T&D"), PSI
Yacyreta, Inc. ("Yacyreta"), CGE ECK, Inc. ("CGE ECK"), PSI Power
Resource Development, Inc. ("Power Development"), PSI Power Resource
Operations, Inc. ("Power Operations"), PSI International, Inc. ("PSI
International"), and PSI Sunnyside, Inc. ("Sunnyside"). The Existing
Special Purpose Subsidiaries and the New Special Purpose Subsidiaries
are sometimes referred to collectively as the "Special Purpose
Subsidiaries". ,
/2/ Specifically, EDEGEL, T&D, Yacyreta, CGE ECK, Power Development, Power
Operations, PSI International and Sunnyside.
/3/ Two other Existing Special Purpose Subsidiaries -- Costanera and PSI
Argentina -- have been determined by the Federal Energy Regulatory
Commission ("FERC") to be EWGs. See Costanera Power Corporation, 61
FERC Par. 61,335 (1992); PSI Argentina, Inc., 68 FERC Par. 61,286
(1994). Another Existing Special Purpose Subsidiary -- Energy
Argentina -- is a FUCO and has filed a Notification on Form U-57 with
the Commission. Accordingly, under Sections 32 and 33 of the Act,
Costanera, PSI Argentina and Energy Argentina are retainable without
further action by the Commission. In addition, all three companies --
Costanera, PSI Argentina, and Energy Argentina -- have been exempted
from the Act pursuant to Section 3(b) by orders of the Commission.
PSI Resources, et al., Rel. No. 35-25570, 51 SEC Docket 1374 (July 2,
1992); PSI Resources, Inc., et al., Rel. No. 35-25674, 52 SEC Docket
2533 (Nov. 13, 1992).
/4/ A foreign utility facility may also qualify as an "eligible facility"
as defined in Section 32(a)(2) of the Act. In the event that such an
investment opportunity is pursued as an EWG rather than as a FUCO,
appropriate filings will be made with the FERC.
/5/ A third wholly-owned subsidiary of PSI Argentina, Energy Services Inc.
of Buenos Aires, was dissolved in January 1995.
/6/ Typically, the capital shares or other equity interests in the EWG or
FUCO would be pledged to secure the securities issued by the parent.
<PAGE>
EXHIBIT INDEX
Exhibit Transmission
Number Exhibit Method
1 Form of Promissory Note to be issued Electronic
by Special Purpose Subsidiaries to
CINergy and/or CINergy Investments
2 Proposed form of notice Electronic
3 Financial statements per books and By Amendment
pro forma (to be filed by amendment)
4 Preliminary opinion of counsel Electronic
EXHIBIT 1
FORM OF NOTE TO BE EXECUTED
BY SPECIAL PURPOSE SUBSIDIARY
TO CINERGY OR CINERGY INVESTMENTS
__________________, 19__
FOR VALUE RECEIVED, the undersigned, [Special Purpose Subsidiary]
(the "Borrower"), hereby promises to pay to the order of [CINergy Corp.]
[CINergy Investments, Inc.] (the "Lender") at its principal office in
Cincinnati, Ohio, on demand but in any event not later than May 31, 1998,
the principal sum set forth on the grid on the reverse side hereof as
"Principal Amount Outstanding". This note may be prepaid in full at any
time, or in part from time to time, without premium or penalty. The
Principal Amount Outstanding shall bear interest, calculated daily, at a
rate equal to [not to exceed the prime rate of a bank to be designated by
CINergy]. Interest will be calculated on the daily Principal Amount
Outstanding as indicated on the grid on the reverse side hereof or attached
hereto.
______________________________
(Name of Borrower)
By:___________________________
<PAGE>
Principal
Loan Amount
Date (Repayment) Outstanding Rate Interest
________ _______________ _______________ ______ ________
________ _______________ _______________ ______ ________
________ _______________ _______________ ______ ________
________ _______________ _______________ ______ ________
________ _______________ _______________ ______ ________
________ _______________ _______________ ______ ________
________ _______________ _______________ ______ ________
________ _______________ _______________ ______ ________
EXHIBIT 2
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- )
Filings Under the Public Utility Holding Company Act of 1935 ("Act")
March __, 1995
Notice is hereby given that the following filing(s) has/have been
made with the Commission pursuant to provisions of the Act and rules
promulgated thereunder. All interested persons are referred to the
application(s) and/or declaration(s) for complete statements of the
proposed transaction(s) summarized below. The application(s) and/or
declaration(s) and any amendment(s) thereto is/are available for public
inspection through the Commission's Office of Public Reference.
Interested persons wishing to comment or request a hearing on the
application(s) and/or declaration(s) should submit their views in writing
by April 11, 1995, to the Secretary, Securities and Exchange Commission,
Washington, D.C. 20549, and serve a copy on the relevant applicant(s)
and/or declarant(s) at the address(es) specified below. Proof of service
(by affidavit, or, in case of an attorney at law, by certificate) should be
filed with the request. Any request for hearing shall identify
specifically the issues of fact or law that are disputed. A person who so
requests will be notified of any hearing, if ordered, and will receive a
copy of any notice or order issued in the matter. After said date, the
application(s) and/or declaration(s), as filed or as amended, may be
granted and/or permitted to become effective.
CINergy Corp. et al. (File No. 70-____)
CINergy Corp. ("CINergy"), a registered holding company under the
Act, CINergy Investments, Inc. ("CINergy Investments"), a wholly-owned
subsidiary of CINergy, and CINergy Services, Inc., a wholly-owned
subsidiary service company of CINergy, have filed an Application-
Declaration requesting approval and authorization for certain transactions
intended to facilitate investments in foreign utility companies ("FUCOs")
and foreign exempt wholesale generators ("EWGs"). Specifically, CINergy
and CINergy Investments seek approval and authorization (i) to acquire, in
one or more transactions, the securities of one or more New Special Purpose
Subsidiaries to be organized for the purpose of engaging, directly or
indirectly, and exclusively, in the business of acquiring, owning and
holding the securities of, and/or providing services to, one or more FUCOs
and/or EWGs; (ii) to make direct and indirect debt and equity investments
in New Special Purpose Subsidiaries and additional direct and indirect debt
and equity investments in certain Existing Special Purpose Subsidiaries;
(iii) to provide guaranties in connection with the activities of the
Special Purpose Subsidiaries; and (iv) for the Special Purpose Subsidiaries
to engage in external equity and non-recourse debt financing transactions
with unaffiliated third parties (without guarantee or other payment
obligation on the part of CINergy or CINergy Investments). For the purpose
of financing and refinancing investments by such Special Purpose
Subsidiaries in EWGs and FUCOs. The terms of such debt and equity
securities and guaranties would be determined in light of the circumstances
then prevailing and through later negotiations with third parties, within
certain parameters as to maximum rates of interest, maturity dates, minimum
consideration for par value shares, and other matters set forth in the
Application-Declaration. As of December 31, 1994, CINergy's aggregate net
outstanding investment in FUCOs and EWGs through Existing Special Purpose
Subsidiaries was approximately $20 million. Under the authority requested
in the Application-Declaration, the aggregate net investment of CINergy and
CINergy Investments outstanding at any one time in New Special Purpose
Subsidiaries and Existing Special Purpose Subsidiaries would not exceed
$115 million. CINergy and CINergy Investments request that the requested
authority remain effective until the earlier of May 31, 1998 or the
effective date of any rule of general applicability adopted by the
Commission that would exempt the acquisition of Special Purpose Subsidiary
securities from the application and approval requirements of Sections 9 and
10 of the Act or the issuance of Special Purpose Subsidiary securities from
the declaration requirements of Sections 6 and 7 of the Act.
In addition, CINergy and CINergy Investments request approval and
authorization to retain certain Existing Special Purpose Subsidiaries as to
which the Commission reserved jurisdiction in its October 21, 1994 Order in
File No. 70-8427. The Application-Declaration also requests authority for
the Special Purpose Subsidiaries to provide services to their subsidiaries,
and to other Special Purpose Subsidiaries and their subsidiaries, and
supplemental authority for CINergy Services to provide such additional
services as may be necessary or desirable for the development, acquisition,
establishment and operation of the Special Purpose Subsidiaries and their
investments and properties. It is anticipated that the Special Purpose
Subsidiaries and their subsidiaries will meet (and, in the case of the
Existing Special Purpose Subsidiaries and their subsidiaries, will continue
to meet) the requirements of Rule 83(a) under the Act. Accordingly, the
Application-Declaration requests that services provided to the Special
Purpose Subsidiaries and their subsidiaries be exempt from the standards of
Section 13(b) of the Act and the rules and regulations promulgated
thereunder.
The Application-Declaration states that CINergy system companies
have from time to time invested in or considered potential opportunities to
acquire or construct electric generation, transmission and/or distribution
facilities outside the United States, that CINergy expects to investigate
other such opportunities in the future, and that special purpose
subsidiaries facilitate FUCO and EWG investments in a number of respects.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Jonathan G. Katz, Secretary
EXHIBIT 4
Milbank, Tweed, Hadley & McCloy
1 Chase Manhattan Plaza
New York, NY 10005
March 10, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Form U-1 Application-Declaration of
CINergy Corp., CINergy Investments, Inc.,
and CINergy Services, Inc.
Dear Sirs:
We refer to the Form U-1 Application-Declaration (the
"Application-Declaration"), filed by CINergy Corp. ("CINergy"), a Delaware
corporation and a registered public utility holding company under the
Public Utility Holding Company Act of 1935, as amended (the "Act"), CINergy
Investments, Inc. ("CINergy Investments"), a Delaware corporation and a
wholly-owned subsidiary of CINergy, and CINergy Services, Inc. ("CINergy
Services"), a Delaware corporation and a wholly-owned subsidiary service
company of CINergy. Capitalized terms not defined herein shall have the
meanings ascribed to such terms in the Application-Declaration.
In the Application-Declaration, CINergy and CINergy Investments
request approval and authorization, among other things: (i) to acquire,
in one or more transactions, the securities of one or more New Special
Purpose Subsidiaries to be organized for the purpose of engaging, directly
or indirectly, and exclusively, in the business of acquiring, owning and
holding the securities of, and/or providing services to, one or more FUCOs
and/or EWGs; (ii) to make direct and indirect debt and equity investments
in New Special Purpose Subsidiaries and additional direct and indirect debt
and equity investments in certain Existing Special Purpose Subsidiaries;
(iii) to provide guarantees in connection with the activities of the
Special Purpose Subsidiaries; and (iv) for the Special Purpose Subsidiaries
to engage in external equity and non-recourse debt financing transactions
with unaffiliated third parties, all as described in the Application-
Declaration (collectively, the "Transactions"). In addition, authorization
is requested for CINergy Services to provide services to the Special
Purpose Subsidiaries and their subsidiaries, and for the Special Purpose
Subsidiaries to provide services to their subsidiaries, and to other
Special Purpose Subsidiaries and their subsidiaries. We have acted as
special counsel for CINergy, CINergy Investments and CINergy Services in
connection with the Transactions and, as such counsel, we are familiar with
certain corporate proceedings taken and to be taken by CINergy, CINergy
Investments and CINergy Services in connection with the Transactions as
described in the Application-Declaration.
We have examined originals, or copies certified to our
satisfaction, of such corporate records of CINergy, CINergy Investments,
CINergy Services and the Existing Special Purpose Subsidiaries,
certificates of public officials, certificates of officers and
representatives of CINergy, CINergy Investments, CINergy Services and the
Existing Special Purpose Subsidiaries and other documents as we have deemed
it necessary to require as a basis for the opinions hereinafter expressed.
In such examination we have assumed the genuineness of all signatures and
the authenticity of all documents submitted to us as originals and the
conformity with the originals of all documents submitted to us as copies.
As to various questions of fact material to such opinions we have, when
relevant facts were not independently established, relied upon certificates
by officers of CINergy, CINergy Investments, CINergy Services and the
Existing Special Purpose Subsidiaries and other appropriate persons and
statements contained in the Application-Declaration.
The opinions expressed below in respect of the Transactions
described in the Application-Declaration are subject to the following
assumptions or conditions:
a. The Transactions shall have been duly authorized and approved
to the extent required by applicable state and foreign law by the
Boards of Directors and shareholders of CINergy, CINergy Investments,
CINergy Services and the Special Purpose Subsidiaries.
b. All required approvals, authorizations, consents, certifi-
cates, and orders of, and all filings and registrations with, all
applicable federal, state and foreign commissions and regulatory
authorities with respect to the Transactions (including the approval
and authorization of the Commission under the Act) shall have been
obtained or made, as the case may be, and remain in effect; the
Commission shall have duly entered an appropriate order or orders
granting and permitting the Application-Declaration to become effective
with respect to the Transactions as described in the Application-
Declaration; and the Transactions shall have been accomplished in
accordance with all such approvals, authorizations, consents, certifi-
cates, orders, filings and registrations. In addition, the
Transactions shall comply with any and all applicable rules or
regulations hereafter adopted by the Commission regarding the scope or
interpretation of Section 33 of the Act.
c. For each New Special Purpose Subsidiary, all required
organizational documents, in proper form, shall have been duly and
validly adopted and shall have been filed with (and the filing thereof
accepted by) the Secretary of State or other appropriate official of
such New Special Purpose Subsidiary's jurisdiction of organization, and
all other corporate and other formalities as are required by the laws
of such jurisdiction for the valid organization and due existence of
such New Special Purpose Subsidiary shall have been taken. As to each
company referred to in opining paragraph 2 below, no action or
proceeding for the dissolution or liquidation of such company or
threatening the existence of such company shall have been taken or
commenced.
d. The notes proposed to be issued by the Special Purpose
Subsidiaries to CINergy and CINergy Investments shall be substantially
in the form set forth in Exhibit 1 to the Application-Declaration and
shall have been properly completed and executed and, where required,
countersigned, and the rate of interest on such notes shall not exceed
the interest rate permitted by applicable law.
e. Borrowings by any Special Purpose Subsidiary will not exceed
those levels permitted from time to time by the borrowing Special
Purpose Subsidiary's articles or certificate of incorporation or other
governing documents, debt instruments and agreements to which the
borrowing Special Purpose Subsidiary is a party or by which its
property is bound, and applicable laws and orders of governmental and
regulatory authorities with jurisdiction over such Special Purpose
Subsidiary.
f. The purchase or subscription price or other consideration to
be paid or given for the shares of stock issued by any Special Purpose
Subsidiary shall have been paid and shall be not less than the par
value of such shares or such other amount as may be required by
applicable law, resolutions and governing corporate documents in order
for such shares to be fully paid and non-assessable; certificates
representing such shares (or the equivalent thereof under applicable
foreign law) shall have been duly executed, countersigned and
registered by the applicable transfer agent and registrar (if any); and
all other acts and formalities required by the laws of such Special
Purpose Subsidiary's jurisdiction of organization for such shares to be
validly issued shall have been taken.
g. No act or event other than as described herein shall have
occurred subsequent to the date hereof which would change the opinions
expressed above.
h. The consummation of the Transactions shall be conducted under
our supervision, and all legal matters incident thereto shall be
satisfactory to us, including the receipt in satisfactory form of such
opinions of other counsel, qualified to practice in jurisdictions
pertaining to such transactions in which we are not admitted to
practice, as we may deem appropriate.
Based on the foregoing, and having regard to legal considerations
which we deem relevant, we are of the opinion that, in the event that the
proposed Transactions are consummated in accordance with the Application-
Declaration, and subject to the assumptions and conditions set forth above:
1. All state laws applicable to the proposed Transactions will
have been complied with.
2. CINergy, CINergy Investments, and CINergy Services will be
validly organized and duly existing under the laws of the State of
Delaware; each Existing Special Purpose Subsidiary will be validly
organized and duly existing under the laws of its jurisdiction of
organization; and each New Special Purpose Subsidiary will be validly
organized and duly existing under the laws of its jurisdiction of
organization.
3. The shares of stock issued by the Special Purpose
Subsidiaries will be validly issued, fully paid and non-assessable, and
the holders thereof will be entitled to the rights and privileges
appertaining thereto set forth in the charter or other organizational
documents of the issuing Special Purpose Subsidiary; and the debt
securities issued by the Special Purpose Subsidiaries will be valid and
binding obligations of the issuing Special Purpose Subsidiary,
enforceable in accordance with their terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights
generally and the application of general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
4. Each of CINergy and CINergy Investments will legally acquire
any securities issued to it by the Special Purpose Subsidiaries in
connection with the Transactions.
5. The consummation of the proposed Transactions will not
violate the legal rights of the holders of any securities issued by
CINergy, CINergy Investments or CINergy Services or any associate
company thereof.
We hereby consent to the use of this opinion as an exhibit to the
Application-Declaration. The opinions set forth herein are issued and
expressed as of the date hereof. We do not assume or undertake any
responsibility to advise you of changes in either fact or law which may
come to our attention after the date hereof.
Very truly yours,
Milbank, Tweed, Hadley & McCloy
MDD/RBW
