File No. 70-8933
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________________________
AMENDMENT NO. 4
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
The Application-Declaration in this proceeding, as previously amended,
is hereby further amended solely to the extent of amending and restating
Item 1 ("Description of Proposed Transactions/Requested Authorizations") in
its entirety, as follows:
Item 1. Description of Proposed Transactions
A. Requested Authorizations
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 non-associates,
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 non-associates - 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 non-associate
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.
B. Background
In order to retain existing and attract new customers as the U. S.
energy markets transform into an increasingly integrated and competitive
national market, Cinergy must compete with other players in the industry
(traditional vertically integrated utilities and new entrants such as power
marketers, energy services companies and owners/operators of independent
power production facilities) in terms of both price/quality of the basic
energy commodity and value-added energy services and products. For much of
1996 Cinergy's efforts in the latter regard have focused on meeting with or
conducting surveys of its existing commercial, industrial and residential
retail and wholesale customers to gain a detailed understanding of the
types of energy-related services and products those customers have been
requesting or would value to advance their business objectives. At the
same time, as part of this systematic assessment, Cinergy has been mindful
of efforts by competitors to deploy so-called "one-stop retail energy
shops."
Solutions is the culmination of these extensive preliminary
investigations. Solutions will meet the demands of the marketplace for
customized, innovative and wide-ranging energy services and products, while
affording Cinergy and its investors an important new source of revenues and
opportunity for growth and profits. Solutions is a keystone in Cinergy's
strategy to compete successfully in the changing energy industry.
C. Proposed Business Activities
Applicants propose that Solutions engage initially in the business
activities described below. Such services/products will be marketed
exclusively to non-associates - commercial/industrial customers (including
governmental, institutional and utility companies) and residential
customers - on a local, regional, nationwide and, as opportunities develop
(but subject to the requested reservation of jurisdiction set forth in the
next paragraph), international basis. The services would be priced based
on competitive market rates.
Applicants request that the Commission reserve jurisdiction over the
provision, outside the United States of America, of the following proposed
business activities of Solutions (each as defined below), pending receipt
of one or more supplemental orders releasing said jurisdiction in whole or
in part: Asset Management Services, Project Development and Ownership
and Consumer Services.
Without limitation of the foregoing, if the Commission ultimately
adopts proposed Rule 58 (see Rel. No. 35-26313, June 20, 1995), Solutions
may also engage in additional types of business activities of an "energy
related company" to the extent encompassed by and subject to the
limitations of that potential rule.
1. Energy Management Services
As one of its principal business activities, Solutions will 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.
Specifically, Energy Management Services will include the following
activities: (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,
ventillating, 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.
2. Asset Management Services
Another principal business activity of Solutions will involve the
provision of 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) 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 (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./1/
Specifically, 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.
3. Consulting Services
Applicants also contemplate that Solutions will 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.
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.
5. Consumer Services
Solutions would also market a panoply of energy-related services and
products ("Consumer Services") exclusively to residential and small
commercial customers. Consumer Services will include (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.
6. Customer Financing
Solutions also would furnish its own or broker non-associate third
party financing to (1) commercial/industrial and residential customers
to support sales to such customers of goods and services included within
Energy Management Services, Asset Management Services and Consumer Services,
and (2) exclusively to Cinergy's electric or gas utility customers in
connection with sales of energy-related equipment where that customer is
not otherwise purchasing goods and services promoted by Solutions. For
example, with respect to the first type of customer financing, as an
integral part of its Asset Management Services, Solutions may assist a
large industrial customer in upgrading that customer's existing electric
substation located on its premises by, among other things, helping the
customer obtain necessary financing, either through Solutions directly or
through a bank, leasing company or other financial institution arranged by
Solutions. As an example of the second type of customer financing,
Solutions may help to arrange purchase financing (with Solutions' own funds
or, as a broker, in collaboration with a bank or other financial institution)
for a residential customer to enable that customer to purchase a new or
replacement heat pump from an HVAC dealer, and thereby realize the energy
efficiencies associated with that equipment.
Customer financing (whether of the first or second type) 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.
To the extent that Cinergy or Investments finances any such loans made
by Solutions (including any subsidiaries thereof), by providing Solutions
with the funds to make such loans, such internal funding would be included
within the contemplated aggregate investment of $100 million described
below (see Item 1.D).
7. Wholly-Owned Subsidiaries; Third-Party Alliances; Acquisitions of
Non-Associate 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 subsidiaries, to acquire securities of or other
interests in nonassociate companies that derive substantially all their
revenues from the development, ownership or operation of Projects.
D. Incorporation of Solutions; Guaranties by Cinergy and Investments
In connection with its formation 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).
Thereafter, from time to time through December 31, 2001, in order to
assist in the financing of Solutions' proposed business activities (see
Item 1.C), Cinergy and Investments expect to invest not more than $100
million in Solutions (including any subsidiaries of Solutions), either by
acquiring securities of Solutions or making cash capital contributions to
Solutions, in exempt transactions pursuant to Rules 52 and 45(b)(4)./2/
As detailed below, 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) 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
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 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.
E. Employee Arrangements; Expanded Range of Services under Existing
Nonutility Service Agreement
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 system nonutility companies. Pursuant to the Cinergy system
Nonutility Service Agreement ("NUSA") authorized by the Commission in its
1994 order approving the merger that created Cinergy and certain ancillary
transactions including the formation of Cinergy Services,/3/ 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,/4/ 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/5/ 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.
By contrast, 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,/6/ 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./7/
Applicants request Commission 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. 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. They 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./8/ Reference is made to
Exhibit B for a more detailed description of the Additional NUSA Services.
As set forth therein, 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, 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 hereby 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 nonutility 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.
F. Reporting Obligations
Applicants propose that Solutions be subject to the periodic reporting
requirements set forth below:
*Solutions will file an annual report under Rule 24 of the Act setting
forth the following information for the preceding calendar year: (1) a
narrative report of business activities undertaken by Solutions, including
the formation of any subsidiaries thereof and any joint ventures with third
parties; and (2) a description of any services received by Solutions or its
subsidiaries from Cinergy Services and the aggregate dollar value thereof.
*Solutions will file the following unaudited and other information
within 45 days after the end of each calendar quarter for the preceding
calendar quarter: (1) a statement of income; (2) a balance sheet; (3) a
cash flow statement; and (4) a summary of any Cinergy or Investments'
guarantees of Solutions' or its subsidiaries' then-outstanding debt or
other obligations, including the aggregate amount thereof.
G. Rule 54 Statement
Under Rule 54, in determining whether to approve the issue or sale of
a security by a registered holding company for purposes other than the
acquisition of an EWG or a FUCO other transactions by such registered
holding company or its subsidiaries other than with respect to EWGs and
FUCOs, the Commission shall not consider the effect of the capitalization
or earnings of any subsidiary which is an EWG or a FUCO if the conditions
in Rule 53(a), (b) and (c) are satisfied.
As set forth below, all applicable conditions of Rule 53(a) are and,
upon consummation of the proposed transactions, will be satisfied, and none
of the conditions specified in Rule 53(b) exists or, as a result of the
proposed transactions, will exist.
Rule 53(a)(1): At June 30, 1996, Cinergy had invested, directly or
indirectly, an aggregate of approximately $467 million in EWGs and FUCOs
(inclusive of indirect investments through Special Purpose Subsidiaries).
The average of the consolidated retained earnings of Cinergy reported on
Form 10-K or Form 10-Q, as applicable, for the four consecutive quarters
ended June 30, 1996 was $966 million. Accordingly, based on Cinergy's
"consolidated retained earnings" at June 30, 1996, and taking into account
investments as of said date, the current Rule 53 aggregate investment
limitation is approximately $16 million (i.e., 50% of "consolidated
retained earnings" - $483 million - minus "aggregate investment" at June
30, 1996 - $467 million).
Rule 53(a)(2): Cinergy maintains books and records enabling it to
identify investments in and earnings from each EWG and FUCO in which it
directly or indirectly holds an interest. At present, Cinergy does not
hold any interest in a domestic EWG; Rule 53(a)(2)(i) is therefore
inapplicable.
In accordance with Rule 53(a)(2)(ii), the books and records and
financial statements of each foreign EWG and FUCO which is a "majorityowned
subsidiary company" of Cinergy are kept in conformity with and prepared
according to U.S. generally accepted accounting principles ("GAAP").
Cinergy will provide the Commission access to such books and records and
financial statements, or copies thereof, in English, as the Commission may
request.
In accordance with Rule 53(a)(2)(iii), for each foreign EWG and FUCO
in which Cinergy directly or indirectly owns 50% or less of the voting
securities, Cinergy will proceed in good faith, to the extent reasonable
under the circumstances, to cause each such entity's books and records to
be kept in conformity with, and the financial statements of each such
entity to be prepared according to, GAAP. If such books and records are
maintained, or such financial statements are prepared, according to a
comprehensive body of accounting principles other than GAAP, Cinergy will,
upon request of the Commission, describe and quantify each material
variation from GAAP in the accounting principles, practices and methods
used to maintain such books and records and each material variation from
GAAP in the balance sheet line items and net income reported in such
financial statements, as the case may be. In addition, Cinergy will
proceed in good faith, to the extent reasonable under the circumstances, to
cause access by the Commission to such books and records and financial
statements, or copies thereof, in English, as the Commission may request,
and in any event will make available to the Commission any such books and
records that are available to Cinergy.
Rule 53(a)(3): No more than 2% of the employees of Cinergy's
operating utility subsidiaries will, at any one time, directly or
indirectly, render services to EWGs and FUCOs.
Rule 53(a)(4): Cinergy will simultaneously submit a copy of this
statement and of any Rule 24 certificate hereunder, as well as a copy of
Cinergy's Form U5S and Exhibits H and I thereto, to each public utility
commission having jurisdiction over the retail rates of any Cinergy utility
subsidiary.
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 thereof is the
subject of any pending bankruptcy or similar proceeding.
Rule 53(b)(2): Cinergy's average consolidated retained earnings for
the four quarters ended June 30, 1996 are $966 million, versus $909 million
for the four quarters ended June 30, 1995, a difference of approximately
$57 million (representing an increase of 6.3%).
Rule 53(b)(3): For the twelve months ended June 30, 1996, Cinergy did
not report operating losses attributable to its direct and indirect
investments in EWGs and FUCOs aggregating in excess of 5% of consolidated
retained earnings.
<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: January 27, 1997
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
President
<PAGE>
ENDNOTES
/1/ In February 1996, Cinergy formed a nonutility subsidiary, Cinergy
Cooling Corp., to engage in the district thermal energy business in
Cincinnati. Cinergy Cooling Corp. will construct, own and operate a
district thermal energy plant and a network of underground distribution
pipes in downtown Cincinnati that will provide chilled and possibly heated
water to large commercial/governmental buildings in the downtown area for
their space cooling/heating needs. As of the fall of 1996, Cinergy Cooling
Corp. was in the preliminary stages of its business operations, having
begun construction of its district energy system. For more information
with respect to Cinergy Cooling Corp. and district thermal energy systems
generally, reference is made to Rel. No. 35-26474, February 20, 1996, and
to the Application-Declaration as amended and Rule 24 certificates in File
No. 70-8767.
/2/ Under Rule 52, Solutions' (and its subsidiaries') issuances of
additional securities (common and preferred stock and any debt securities)
to non-associates, as well as any issuances thereof to and acquisitions by
associate companies, for the purpose of financing Solutions' existing
business are exempt from prior Commission approval under the Act (provided
that, with respect to any debt security issued by Solutions to any
associate company, the interest rate and maturity date thereof are designed
to parallel the effective cost of capital of the lending associate
company). Rule 45(b)(4) exempts from prior Commission approval capital
contributions (and non-interest bearing open-account advances) by any
associate company to Solutions. Additional investments by Cinergy and
Investments in Solutions and any subsidiary thereof would be funded (1) as
to Cinergy, through sales of commercial paper and short-term notes to banks
and other financial institutions (see File No. 70-8521, Rel. No. 35-26488,
March 12, 1996) and/or through internally generated funds; and (2) as to
Investments, through capital contributions, loans, and/or open-account
advances from Cinergy (pursuant to Rules 45(b)(4) and 52) and/or internally
generated funds.
/3/ See Rel. No. 35-26146, October 21, 1994. A conformed copy of the NUSA
was filed with the Commission on January 10, 1995 as an exhibit to the Rule
24 certificate in File No. 70-8427.
/4/ I.e., subsidiaries that do not derive any material part of their income
from sources within the United States and are not public-utility companies
operating within the United States. See Section 13(b)(1) of the Act and
Rule 83 thereunder.
/5/ Currently, Cinergy has relatively few active nonutility subsidiaries.
In 1995 and in the first nine months of 1996, Cinergy 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. Cinergy has
interests in two active foreign subsidiaries, each a FUCO: Midlands
Electricity plc and PSI Energy Argentina, Inc.
/6/ 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.
/7/ In addition, the USA expands the transportation function (which is also
in the NUSA) to include utility meter work.
/8/ In addition, the existing transportation function would be broadened to
include meter work.
