File No. 70-8933
UNITED STATES
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 Investments, Inc.
Cinergy Services, Inc. 139 East Fourth Street Cincinnati, Ohio 45202
(Name of companies filing this statement
and addresses of principal executive offices)
Cinergy Corp.
(Name of top registered holding company parent)
William L. Sheafer
Treasurer
Cinergy Corp.
(address above)
(Name and address of agent of service)
Applicants request that the Commission send copies of all notices, orders
and communications in connection herewith to:
Jerome A. Vennemann William J. Grealis
Associate General Counsel President
Cinergy Corp. Cinergy Investments, Inc.
(address above) (address above)
William T. Baker, Jr.
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
1. Item 1.A of the Application-Declaration as originally filed in this
proceeding ("Description of Proposed Transactions/Requested
Authorizations") is hereby restated in its entirety to read as follows:
"Cinergy Corp. ("Cinergy"), a registered holding company under the
Public Utility Holding Company Act of 1935, as amended ("Act"), and
Cinergy's wholly-owned nonutility holding company subsidiary, Cinergy
Investments, Inc. ("Investments"), request Commission authorization to
incorporate and provide guaranties in an aggregate amount at any one time
outstanding not to exceed $250 million through December 31, 2001
in respect of a new wholly-owned nonutility subsidiary, expected to be
named Cinergy Solutions, Inc. ("Solutions"), which will market a
comprehensive array of energy-related products and services exclusively to
nonassociates, including industrial, commercial, governmental,
institutional and residential customers and utility companies. Solutions
will offer an integrated package of "value-added" energy-related
products and services to enable customers to reduce energy costs,
improve energy efficiency and increase productivity. Solutions will also
develop, acquire, own and operate certain energy-related projects.
Applicants request authorization for Solutions to conduct its proposed
business activities directly through Solutions, indirectly through one or
more wholly-owned direct or indirect subsidiaries of Solutions, and
indirectly through one or more direct or indirect subsidiaries of Solutions
jointly-owned with one or more joint venture nonassociates - in each
case solely to implement the lines of proposed business activities itemized
below. As part of Solutions' project development and
ownership activities, Applicants further request authority for Solutions to
acquire, directly or indirectly through subsidiaries, securities or assets
of nonassociate companies that derive substantially all their revenues from
the development, ownership or operation of such projects.
In connection with the formation of Solutions and its contemplated
business activities, Cinergy's wholly-owned service company subsidiary,
Cinergy Services, Inc. ("Cinergy Services"), requests authorization to
provide an expanded range of support services to Cinergy Solutions
(including any subsidiaries thereof) as well as any other system
nonutility companies, pursuant to an amendment to the existing Cinergy
system nonutility service agreement."
2. Section 4 of Item 1.C of the Application-Declaration as originally
filed in this proceeding ("Description of Proposed Transactions/ Proposed
Business Activities") is hereby restated in its entirety to read as
follows:
"4. Project Development and Ownership
Another important aspect of Solutions' business will consist of
developing, acquiring, owning and operating "Projects," i.e.: (a) QFs and
facilities necessary or incidental thereto, including thermal energy
utilization facilities purchased or constructed primarily to enable the QF
to satisfy the useful thermal output requirements under the Public Utility
Regulatory Policies Act of 1978, as amended; and (b) district thermal
energy systems and other facilities used for the production, conversion and
distribution of thermal energy products, such as steam, heat, hot water and
chilled water.
Project development activities will include Project due diligence and
design review; market studies; site inspection; preparation of bid
proposals (including posting of bid bonds, cash deposits and the like);
applications for required permits or regulatory approvals; acquisitions of
site options and options on other necessary rights; negotiation and
execution of contractual commitments with owners of existing facilities,
equipment vendors, construction firms, power purchasers, thermal "host"
users, fuel suppliers and other Project contractors; negotiation and
execution of related financing commitments and agreements; engineering and
construction of Projects; and similar activities antecedent to the
acquisition, ownership and operation of a Project.
Applicants request authorization for Solutions to conduct Project
development activities and to acquire, own and operate Projects. In
connection therewith, Applicants request authorization for Solutions, directly
or indirectly through one or more subsidiaries, to acquire securities or assets
of one or more nonassociate companies that derive substantially all their
revenues from the development, ownership or operation of Projects."
3. Section 7 of Item 1.C of the Application-Declaration as originally
filed in this proceeding is hereby restated in its entirety to read as
follows:
"7. Wholly-Owned Subsidiaries; Third-Party Alliances;
Acquisitions of Nonassociate Project Companies
Solutions may undertake certain of the proposed business activities on
its own, either directly or through one or more wholly-owned direct or
indirect subsidiaries of Solutions, formed as corporations, partnerships,
limited liability companies or other legal entities. The decision in
particular cases whether to conduct specific business activities directly
through Solutions or indirectly through one or more wholly-owned
subsidiaries of Solutions will hinge on applicable business, legal, tax,
accounting and strategic considerations.
In addition, to mitigate risk or access skills and relationships that
Solutions may require, Applicants expect that Solutions will pursue
proposed business activities in certain instances through alliances with
non-associates. Certain of these alliances may be relatively informal, not
involving the formation of any new entities. Others may encompass
formal joint ventures, possibly involving the formation of one or more
wholly- or partly-owned subsidiaries of Solutions.
As previously noted, in connection with its Project development and
ownership activities (see Item 1.C.4), Solutions proposes to acquire,
directly or indirectly through subsidiaries, securities or assets of
nonassociate companies that derive substantially all their revenues from
the development, ownership or operation of Projects.
Accordingly, Applicants request authorization (1) for Solutions to
form any such wholly-or partly-owned subsidiaries for the exclusive purpose
of implementing any of its proposed business activities as previously
described, and (2) in connection with Solutions' proposed Project
development and ownership activities, for Solutions directly or indirectly,
through one or more such subsidiaries, to acquire securities of or other
interests in one or more nonassociate companies that derive substantially all
their revenues from the development, ownership or operation of Projects."
4. The following exhibits are filed herewith:
G-1 Revised form of Federal Register notice
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the undersigned companies
have duly caused this statement to be signed on their behalf by the
undersigned thereunto duly authorized.
Dated: October 29, 1996
CINERGY CORP.
By: /s/ William J. Grealis
Vice President
CINERGY INVESTMENTS, INC.
By: /s/ William J. Grealis
President
CINERGY SERVICES, INC.
By: /s/ William J. Grealis
Vice President
Exhibit G-1
Cinergy Corp. et al.
Notice of Proposal to Establish, Finance and Engage in Service Transactions
with respect to New Nonutility Energy Services Subsidiary
Cinergy Corp. ("Cinergy"), a registered holding company, its wholly
owned nonutility holding company subsidiary, Cinergy Investments, Inc.
("Investments"), and Cinergy's wholly-owned service company subsidiary,
Cinergy Services, Inc. ("Cinergy Services"), each of 139 East Fourth
Street, Cincinnati, Ohio 45202, have filed an application-declaration under
Sections 6(a), 7, 9(a), 10, 12(b) and 13(b) of the Act and Rules 40(a)(4),
45, 52, 54, 90 and 91 thereunder.
1. Introduction
Cinergy and Investments request authorization to incorporate and
provide guaranties in respect of a new wholly-owned nonutility subsidiary,
expected to be named Cinergy Solutions, Inc. ("Solutions"), which will
market a wide variety of energy-related products and services exclusively
to non-associate commercial/industrial customers (including governmental,
institutional and utility companies) and residential customers. Applicants
state that Solutions will offer an integrated package of "value-added"
energy-related products and services to enable customers to reduce energy
costs, improve energy efficiency and increase productivity. Solutions will
also develop, acquire, own and operate certain energy-related projects.
Applicants request authorization for Solutions to conduct its proposed
business activities directly through Solutions, through wholly-owned
subsidiaries of Solutions, and through subsidiaries of Solutions jointly
owned with joint venture non-associates. As part of Solutions' project
development and ownership activities, Applicants further request authority
for Solutions to acquire, directly or indirectly through subsidiaries,
securities or assets of nonassociate companies that derive substantially
all their revenues from the development, ownership or operation of such
projects. Finally, in connection with the formation of Solutions and its
contemplated business activities, Cinergy Services requests authorization
to provide an expanded range of support services to Cinergy Solutions
(including any subsidiary thereof) and other system nonutility companies
pursuant to an amendment to the existing Cinergy system nonutility service
agreement ("NUSA").
2. Proposed Business Activities
Applicants request authorization for Solutions to engage in the
initial business activities summarized below. Such services/products will
be marketed to non-associates on a local, regional, nationwide and, as
opportunities develop, international basis. The services would be priced
based on competitive market rates.
In the first place, Solutions intends to offer a complete menu of
energy management and efficiency services and related consulting services,
often on a turnkey basis. These activities (collectively, "Energy
Management Services") may also entail the marketing, installation,
operation and maintenance of various products and services designed to
implement the solutions recommended in the course of providing these
services. Solutions will market Energy Management Services primarily to
commercial/industrial customers, but also on a smaller scale to residential
customers. Energy Management Services will include (1) identification
(through energy audits or otherwise) of energy and other resource (water,
labor, maintenance, materials, etc.) cost reduction or efficiency
opportunities; (2) design of facility and process modifications or
enhancements to realize such opportunities; (3) management, or direct
construction and installation, of energy conservation or efficiency
equipment; (4) training of client personnel in the operation of equipment;
(5) maintenance of energy systems; (6) design, management or direct
construction and installation of new and retrofit heating, ventilating, and
air conditioning ("HVAC"), electrical and power systems, motors, pumps,
lighting, water and plumbing systems, and related structures, to realize
energy and other resource efficiency goals or to otherwise meet a
customer's energy-related needs; (7) system commissioning (i.e.,
monitoring the operation of an installed system to ensure that it meets
design specifications); (8) reporting of system results; (9) design of
energy conservation programs; (10) implementation of energy conservation
programs; (11) provision of conditioned power services (i.e., services
designed to prevent, control or mitigate adverse effects of power
disturbances on a customer's electrical system to ensure the level of power
quality required by the customer, particularly with respect to sensitive
electronic equipment); and (12) other similar or related activities.
Second, Solutions will market comprehensive asset management
services ("Asset Management Services"), on a turnkey basis or otherwise, in
respect of energy-related systems, facilities and equipment (e.g., electric
utility systems and assets, including distribution systems and substations;
transmission facilities; electric generation facilities, including standby
generation facilities and self-generation facilities; boilers; chillers,
i.e., refrigeration and coolant equipment; HVAC; and lighting systems)
located on or adjacent to premises of commercial/ industrial customers and
used by such customers in connection with their business activities.
Likewise, these services would be marketed to other owners of utility
assets or systems such as municipalities and electric cooperatives.
Additionally, these services would be marketed to developers, owners and
operators of non-associate independent power production facilities
("IPPs"), including both qualifying and non-qualifying cogeneration or
small power production facilities within the meaning of the Public Utility
Regulatory Policies Act of 1978, as amended (such qualifying facilities,
"QFs") and exempt wholesale generators ("EWGs") and foreign utility
companies ("FUCOs") within the meaning of the Act, as well as to
developers, owners and operators of non-associate district thermal energy
systems, i.e., energy systems consisting of central production plants that
distribute steam, hot water and/or chilled water through underground pipes
to customer buildings. In particular, Asset Management Services will
include development; engineering; design; construction and construction
management; pre-operational start-up testing and commissioning; long-term
operations and maintenance, including system overhaul; load control and
network control; fuel procurement, transportation and storage; fly-ash and
other waste disposal; management and supervision; technical, training and
administrative support; and any other managerial or technical services
required to operate, maintain and manage energy-related assets physically
associated with customer premises or to operate, maintain and manage
municipality- or electric cooperative-owned utility systems, IPPs and
district thermal energy systems. Without obtaining the prior approval of
the Commission in a separate filing, Solutions will not undertake any Asset
Management Service if, as a result thereof, Solutions would become a
"public utility company" within the meaning of the Act.
Third, Solutions proposes to market to non-associates, primarily
commercial/industrial customers, general technical consulting services with
respect to energy-related matters ("Consulting Services"). Specifically,
the Consulting Services will include technical and consulting services
involving technology assessments, power factor correction and harmonics
mitigation analysis, commercialization of electro-technologies, meter
reading and repair, rate schedule analysis and design, environmental
services, engineering services, billing services including conjunctive
billing, summary billing for customers with multiple locations and bill
auditing, risk management services, communications systems, information
systems/data processing, system planning, strategic planning, finance,
feasibility studies, and other similar or related services.
Fourth, applicants request authority for Solutions to develop,
acquire, own and operate "Projects," i.e.: (a) QFs and facilities
necessary or incidental thereto, including thermal energy utilization
facilities purchased or constructed primarily to enable the QF to satisfy
the useful thermal output requirements under the Public Utility Regulatory
Policies Act of 1978, as amended; and (b) district thermal energy systems
and other facilities used for the production, conversion and distribution
of thermal energy products, such as steam, heat, hot water and chilled
water. Project development activities will include Project due diligence
and design review; market studies; site inspection; preparation of bid
proposals (including posting of bid bonds, cash deposits and the like);
applications for required permits or regulatory approvals; acquisitions of
site options and options on other necessary rights; negotiation and
execution of contractual commitments with owners of existing facilities,
equipment vendors, construction firms, power purchasers, thermal "host"
users, fuel suppliers and other Project contractors; negotiation and
execution of related financing commitments and agreements; engineering and
construction of Projects; and similar activities antecedent to the
acquisition, ownership and operation of a Project. In connection with its
Project development and ownership activities, Applicants request
authorization for Solutions to acquire securities or assets of nonassociate
companies that derive substantially all their revenues from the
development, ownership or operation of Projects.
Fifth, Solutions would market energy-related services and products
("Consumer Services") exclusively to residential and small commercial
customers: (1) Service lines repair/extended warranties - repair of
underground utility service lines owned by and located on the customer's
property and extended service warranties covering the cost of such repairs;
(2) Surge protection - meter-based and plug-in equipment to protect
customer household appliances and electronic equipment from power
surges, including due to lightning; (3) Appliances
merchandising/repair/extended warranties - marketing of HVAC and other
energy-related household appliances and, in connection therewith or
separately, marketing of appliance inspection and repair services and
extended service warranties covering the cost of repairing customers'
appliances; (4) Utility bill insurance - utility bill payment protection,
for a monthly fee for a specified number of months, in the event the
customer becomes unemployed, disabled or dies; (5) Gas pilot lighting
lighting of pilot lights for customers; and (6) other similar or related
services.
Sixth, Applicants propose that Solutions furnish its own or broker non-
associate third-party financing to commercial/industrial and residential
customers, both to support sales to customers of goods and
services included within Energy Management Services, Asset Management
Services and Consumer Services and in connection with sales of energy
related equipment where the customer is not otherwise purchasing goods and
services promoted by Solutions. Customer financing will take the form of
direct loans, installment purchases, operating or finance lease
arrangements (including sublease arrangements) and loan guarantees.
Interest on loans and imputed interest on lease payments will be based on
prevailing market rates. The obligations will have terms of one to thirty
years and will be secured or unsecured. Solutions also may assign
obligations acquired from customers to banks, leasing companies or other
financial institutions, with or without recourse.
Applicants request authorization for Solutions to undertake the
proposed business activities on its own, either directly or through one or
more wholly-owned direct or indirect subsidiaries of Solutions, formed as
corporations, partnerships, limited liability companies or other legal
entities. Applicants state that the decision in particular cases whether
to conduct specific business activities directly through Solutions or
indirectly through one or more wholly-owned subsidiaries of Solutions will
hinge on applicable business, legal, tax, accounting and strategic
considerations. In addition, to mitigate risk or access skills and
relationships that Solutions may require, Applicants expect that Solutions
will pursue proposed business activities in certain instances through
alliances with non-associates. Certain of these alliances may be
relatively informal, not involving the formation of any new entities.
Others may encompass formal joint ventures, possibly involving the
formation of one or more wholly- or partly-owned subsidiaries of Solutions.
Applicants also request authorization for Solutions to form any such joint
venture subsidiaries, as in the preceding case solely for the purpose of
implementing Solutions' proposed business activities. As noted above, as
part of Solutions' proposed Project development and ownership activities,
applicants request authority for Solutions to acquire securities or assets
of nonassociate companies deriving substantially all their revenues from
the development, ownership or operation of Projects.
3. Incorporation; Guaranties
In connection with its incorporation and initial capitalization under
Delaware law, Solutions is expected to issue and sell up to 100 shares of
no par value common stock to Investments for nominal cash consideration
(not to exceed $1,000). Cinergy and Investments do not expect to invest
more than $100 million in Solutions (including any subsidiaries of
Solutions) through December 31, 2001, either by acquiring securities of
Solutions or making cash capital contributions to Solutions, in exempt
transactions pursuant to Rules 52 and 45(b)(4).
Cinergy and Investments request authority through December 31,
2001 to guarantee debt and other obligations of Solutions (including any
subsidiaries of Solutions) incurred in the ordinary course of business in a
maximum principal amount at any one time outstanding not to exceed $250
million. Debt financing of Solutions proposed to be guaranteed by Cinergy
or Investments (a) will not exceed a term of 15 years, and (b) will bear
interest (1) at a floating rate not in excess of 200 basis points over the
prime rate, London Interbank Offered Rate or other appropriate index in
effect from time to time, or (2) t at a fixed rate not in excess of 250
basis points above the yield at the time of issuance of U.S. Treasury
obligations of a comparable maturity. Any commitment and other fees on the
debt will not exceed 75 basis points per annum on the total amount of debt
financing. Other obligations incurred by Solutions in the ordinary course
of its business as to which Cinergy and Investments propose to guarantee or
otherwise act as indemnitor or surety are expected often to involve
Solutions' obligation to perform under contracts with customers to which it
is a party. "Guarantees" issued by Cinergy or Investments in these
circumstances may take the form of procuring bid bonds and the like or
guaranteeing Solutions' performance or other similar direct or indirect
guarantees of Solutions' contractual or other obligations. Applicants
anticipate that these parent company "backstops" will be required to
establish Solutions' financial credibility to certain customers as a
prerequisite to obtaining the customer's business and/or on the most
favorable terms.
Cinergy states that it will not seek recovery through higher rates to
customers of Cinergy's utility subsidiaries in order to compensate it or
Investments for any potential losses they may sustain, or inadequate
returns they may realize, resulting from investments in Solutions or
guarantees of Solutions' debt or other obligations.
4. Staffing; Service Arrangements
Initially, Solutions is expected to have limited full-time staff,
primarily executive, management, and administrative personnel. Applicants
expect that Solutions will make extensive use of outside contractors and
consultants in performing its proposed business activities.
Applicants propose that Cinergy Services render an expanded range
of support services to Solutions (including any subsidiaries thereof) and
the other Cinergy system nonutility companies. Pursuant to the NUSA, which
was authorized by the Commission in its 1994 order approving the merger
that created Cinergy and certain ancillary transactions including the
formation of Cinergy Services,/1/ Cinergy Services may provide certain
services, primarily administrative and management-type services, to
Cinergy's nonutility subsidiaries, priced at cost for the domestic
nonutility subsidiaries, as determined pursuant to Rule 90 under the Act,
and at fair market value for certain foreign subsidiaries of Cinergy
pursuant to Section 13(b)(1) and Rule 83, and otherwise in accordance with
applicable rules and regulations promulgated by the Commission pursuant to
Section 13(b) of the Act. Specifically, the services that Cinergy Services
may currently render to its nonutility associates/2/ are as follows: (1)
information systems, (2) transportation, (3) human resources, (4)
facilities, (5) accounting, (6) public affairs, (7) legal, (8) finance, (9)
internal audit, (10) investor relations, (11) planning and (12) executive.
Under the Cinergy system Utility Service Agreement ("USA"), also approved
in the Commission's 1994 merger order and pursuant to which Cinergy
Services renders services at cost to Cinergy's utility subsidiaries,/3/ a
much broader range of services are made available. In addition to the same
12 services made available to the client companies under the NUSA, the
following additional services may be provided by Cinergy Services to the
utility subsidiaries: (1) electric system maintenance, (2) marketing and
customer relations, (3) electric transmission and distribution engineering
and construction, (4) power engineering and construction, (5) materials
management, (6) power planning, (7) rates, (8) rights of way, (9)
environmental affairs and (10) fuels./4/
Applicants request authorization for Cinergy Services to provide
certain additional services under the NUSA, priced in accordance with the
Commission's 1994 merger order and otherwise rendered in conformance
with Section 13(b) of the Act and the applicable rules and regulations
thereunder. Applicants state that the proposed additional services are in
general very similar to those additional services under the USA (enumerated
above) that are not currently available under the NUSA and that the
proposed additional services are intended to accommodate the scope of
Solutions' proposed business activities as well as that of the Cinergy
system's other nonutility subsidiaries. Specifically, the proposed
additional services (collectively, "Additional NUSA Services") are as
follows: (1) energy-related facility maintenance, (2) engineering and
construction, (3) marketing and customer relations, (4) materials
management, (5) fuels, (6) environmental affairs, (7) rates, (8) rights of
way and (9) energy-related system operations. Applicants state that the
Additional NUSA Services would be implemented by means of a restatement of
existing Appendix A to the NUSA (which lists and describes the currently
available services under the NUSA). Applicants do not otherwise in any
respect propose to amend the NUSA.
As noted, applicants state that the Additional NUSA Services are
roughly parallel to the additional functions already made available to
Cinergy's utility subsidiaries under the USA. Consequently, applicants do
not anticipate a need to add any new employees to Cinergy Services solely
to implement the Additional NUSA Services. Applicants represent that the
provision of the Additional NUSA Services will not impair Cinergy Services'
ability to provide the full range of services that it currently provides to
the system utility companies under the USA. All costs associated with
Cinergy Services personnel rendering any Additional NUSA Services
(including compensation, benefits and overhead) will be fully reimbursed by
Solutions and other system companies that request and receive such services
in accordance with Section 13(b) of the Act and the applicable rules and
regulations thereunder, including Rules 90 and 91.
For the Commission, by the Division of Investment Management, pursuant to
delegated authority.
<PAGE>
Endnotes
/1/ Rel. No. 35-26146, October 21, 1994.
/2/ Cinergy states that it has relatively few active nonutility
subsidiaries. In 1995 and in the first nine months of 1996, Cinergy states
that it has disposed of a number of nonutility subsidiaries in existence at
the time of the 1994 merger through asset or stock sales to non-associates.
Cinergy's currently active domestic nonutility subsidiaries are (1)
TriState Improvement Company, which is engaged in the business of acquiring
and holding real property for substations, electric and gas rights of way
and other functions connected to the utility business of The Cincinnati Gas
& Electric Company ("CG&E") and its utility subsidiaries, The Union Light,
Heat and Power Company, Lawrenceburg Gas Company, Miami Power Corporation
and The West Harrison Gas and Electric Company; (2) KO Transmission
Company, which holds an interest in an interstate natural gas pipeline,
acquired in the summer of 1996 pursuant to a settlement agreement between
CG&E and the Columbia Gas System; (3) Cinergy Resources, Inc. (formerly
CG&E Resource Marketing, Inc.), which is engaged in the gas marketing
business; (4) Cinergy Technology, Inc. (formerly PSI Environmental Corp.),
which pursues investment opportunities in technology and other energy
related areas and engages in fuel brokering; and (5) Cinergy Cooling Corp.,
a company engaged in the preliminary stages of a district thermal energy
business in downtown Cincinnati (see Rel. No. 35-26474, February 20,
1996). Cinergy has interests in two active foreign subsidiaries, each a
FUCO: Midlands Electricity plc and PSI Energy Argentina, Inc.
/3/ Cinergy's utility subsidiaries are CG&E and its utility subsidiaries,
which among other things provide retail gas and electric service to
customers in portions of Ohio, Kentucky and Indiana, and PSI Energy, Inc.,
which among other things provides retail electric service to portions of
Indiana.
/4/ In addition, the USA expands the transportation function (which is
also in the NUSA) to include utility meter work.
/5/ In addition, the existing transportation function in the NUSA would be
broadened to include meter work.
