File No. 70-______
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
__________________________________________
FORM U-1 DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
____________________________________________
Cinergy Corp.
139 East Fourth Street
Cincinnati, Ohio 45202
(Name of company filing this statement
and address of principal executive office)
Cinergy Corp.
(Name of top registered holding company parent)
William L. Sheafer
Vice President and Treasurer
Cinergy Corp.
(address above)
(Name and address of agent of service)
Applicant requests that the Commission send copies of all notices, orders
and communications in connection herewith to:
Jerome A. Vennemann James R. Lance
Associate General Counsel Manager Corporate Finance
Cinergy Corp. & Financial Risk Management
(address above) Cinergy Corp. (address above)
William T. Baker, Jr.
Reid & Priest LLP
40 West 57th Street
New York, New York 10019
Item 1. Description of Proposed Transactions
A. Introduction
Cinergy Corp. ("Cinergy"), a registered holding company under the
Public Utility Holding Company Act of 1935, as amended (the "Act"),
requests authorization to issue and sell from time to time through December
31, 2002, upon the terms and conditions described below, (1) short-term
notes and commercial paper in an aggregate principal amount not to exceed
(together with the then-outstanding principal amount of certain other
securities issued by Cinergy as described below) $2 billion at any time
outstanding, and (2) up to 30 million additional shares of Cinergy common
stock, plus the balance of remaining shares of Cinergy common stock
(867,385 shares at July 1, 1997) authorized for issuance in Release No.
35-26477, dated February 23, 1996 (in either case as such aggregate number of
shares may be adjusted for any subsequent stock split).
Cinergy proposes to apply the net proceeds from the issue and sale
of the foregoing securities to investments in other Cinergy system
companies, to exempt acquisitions of securities of energy-related companies
pursuant to rule 58, to repay, repurchase or refinance outstanding
securities of Cinergy, to make loans to participating companies in the
Cinergy system money pool, to investments in Exempt Entities (as defined
below and subject to certain restrictions noted below), and to other lawful
corporate purposes.
B. Related Matters: Prior Orders/Pending Applications
1. Short-Term Notes and Commercial Paper/Release Nos. 35-26215
and 26488
By order dated January 11, 1995 (Release No. 35-26215) supplemented
by order dated March 12, 1996 (Release No. 35-26488), the Commission
authorized Cinergy to issue and sell from time to time through December 31,
1999 short-term notes (including in connection with letter of credit
transactions) and commercial paper in an aggregate principal amount at any
time outstanding not to exceed $1 billion. The Commission authorized
Cinergy to apply the net proceeds thereof to various corporate purposes
including investments in exempt wholesale generators ("EWGs") and foreign
utility companies ("FUCOs"), together with indirect investments therein
through one or more special-purpose subsidiaries ("Project Parents" and,
together with EWGs and FUCOs, "Exempt Entities"), provided that Cinergy's
"aggregate investment" did not exceed 50% of Cinergy's "consolidated
retained earnings," each as defined in rule 53(a)(1) under the Act ("50%
Investment Limitation").
At May 31, 1997, pursuant to the authorization conferred in Release
No. 35-26488, Cinergy had issued and outstanding a total of $524 million in
short-term notes (including in connection with letter of credit
transactions) and commercial paper, consisting entirely of notes evidencing
short-term bank loans.
Cinergy proposes that the authorization sought in this proceeding
supersede the authorization conferred by Release No. 35-26488 effective
immediately upon the date of the Commission's order herein. Consequently,
on such date the authorization conferred by Release No. 35-26488 would
lapse, without prejudice, however, to transactions consummated prior to
such date in reliance upon such authorization.
2. Guarantees/Release No. 35-26723
By order dated May 30, 1997 (Release No. 35-26723), the Commission
authorized Cinergy, among other proposed transactions, to guarantee
obligations of certain subsidiary companies exclusive of affiliated Exempt
Entities./1/ Specifically, the Commission authorized Cinergy from time to
time through December 31, 2002, subject to the $1 billion debt limitation
prescribed in Release No. 35-26488 (including any adjustment to that debt
limitation authorized by subsequent Commission order), to guarantee the
debt or other obligations of various existing subsidiaries - Cinergy
Services, Inc., KO Transmission Company, Tri-State Improvement Company,
Cinergy Resources, Inc., Cinergy Capital & Trading, Inc., Cinergy
Technology, Inc. and Enertech Associates, Inc. - and companies whose
securities Cinergy or any subsidiary thereof acquires from time to time in
accordance with rule 58 under the Act.
At July 1, 1997, Cinergy had issued $5 million in guarantees
pursuant to the authorization conferred in Release No. 35-26723.
3. Common Stock /Release Nos. 35-26159 and 26477
By order dated November 18, 1994 (Release No. 35- 26159), the
Commission authorized Cinergy to issue and sell up to eight million shares
of its common stock, $.01 par value per share ("Common Stock"), from time
to time through December 31, 1995 by any of various proposed methods,
namely, (i) through solicitation of proposals from underwriters or dealers,
(ii) through underwriters or dealers on a negotiated basis, (iii) directly
to a limited number of purchasers or to a single purchaser, and (iv)
through agents on a negotiated basis. Pursuant to that authority, on
December 19, 1994 Cinergy publicly issued and sold 7,089,000 shares of
Common Stock and contributed the net proceeds thereof (approximately $160
million) to the equity capital of Cinergy's utility subsidiary, PSI Energy,
Inc.
By order dated February 23, 1996 (Release No. 35-26477), the
Commission authorized Cinergy to issue and sell the remaining shares of
Common Stock available for issuance under the terms of the 1994 order by
any of the means specified in that order. In addition, Cinergy was
authorized to issue (but not sell) some or all of the remaining shares to
Cinergy system employees, including officer employees, as awards. The 1996
order authorized Cinergy to apply the net proceeds from sales of remaining
shares to various corporate purposes including investments in EWGs and
FUCOs subject to the 50% Investment Limitation./2/
Of the eight million shares originally authorized for issuance
under the 1994 order, a balance of 867,385 shares (the "Remaining Shares")
remained available for issuance at July 1, 1997 pursuant to the
supplemental 1996 order.
Cinergy proposes that the authorization sought in this proceeding
supersede the authorization conferred by Release No. 35-26477 (except to
the extent provided in the following sentence) effective immediately upon
the date of the Commission's order herein. Consequently, on such date the
authorization conferred by Release No. 35-26477 would lapse, without
prejudice, however, to (1) transactions consummated prior to such date in
reliance upon such authorization, and (2) inclusion of the Remaining Shares
within the scope of the authorization sought herein.
4. Proposed Debentures /File No. 70-8993
Cinergy has pending a proposal (see amended declaration in File No.
70-8993; Release No. 35-26714) to issue and sell from time to time through
December 31, 2002 unsecured debt securities in one or more series bearing
maturities from two to 40 years ("Debentures") in an aggregate principal
amount not to exceed $400 million at any time outstanding, subject to the
$1 billion debt limitation prescribed in Release No. 35-26488 (including
any adjustment to that debt limitation authorized by subsequent Commission
order). Net proceeds from the issue and sale of the Debentures would be
applied to refinance short-term debt incurred by Cinergy to finance its
1996 acquisition of a 50% ownership interest in Midlands Electricity plc, a
U.K. FUCO, and to refinance Debentures outstanding from time to time.
5. Proposed Increased Authority to Invest in Exempt Entities /File No.
70-9011
Cinergy has pending a proposal (see amended application-declaration
in File No. 70-9011; Release No. 35-26698) ("100% Application") pursuant to
which Cinergy seeks to apply the net proceeds of certain financing
transactions - consisting of those authorized in Release Nos. 35-26723,
26477 and 26488 (to be superseded, as to the latter two orders, upon
issuance of the Commission's order herein) - to investments in Exempt
Entities, provided that Cinergy's "aggregate investment" will not exceed
100% of Cinergy's "consolidated retained earnings" (each as defined in rule
53(a)(1)).
C. Proposed Transactions: Short-Term Notes and Commercial Paper;
Associated Financial Derivatives
1. Short-Term Notes
Cinergy proposes to make short-term borrowings from banks or other
lending institutions from time to time through December 31, 2002, provided
that the aggregate principal amount of such borrowings, together with the
aggregate amount of any then-outstanding commercial paper, short-term notes
in connection with letter of credit transactions, guarantees pursuant to
Release No. 35-26723 and Debentures issued or sold by Cinergy, will not
exceed $2 billion at any time outstanding ("Debt Cap").
Such borrowings will be evidenced by (1) "transactional" promissory
notes to be dated the date of such borrowings and to mature not more than
two years after the date thereof or (2) "grid" promissory notes evidencing
all outstanding borrowings from the respective lender, to be dated as of
the date of the first borrowing evidenced thereby, with each such borrowing
maturing not more than two years thereafter. Any such note may or may not
be prepayable, in whole or in part, with or without a premium in the event
of prepayment. The amount of any premium payable by Cinergy would not
exceed an amount equivalent to the present value of the stated interest
payable on the note in the event the note had not been prepaid, plus
accrued interest to the date of prepayment.
Borrowings will be priced at the lender's prevailing rate offered
to corporate borrowers of similar credit quality, which will not exceed the
greater of (a) the London Interbank Offered Rate plus 200 basis points, or
(b) a negotiated rate which would not exceed the lender's prime rate plus
200 basis points.
Cinergy may pay commitment fees based upon the unused portion of a
lender's commitment; such fees would not exceed the amount determined by
multiplying the unused portion of the lender's commitment by of 1%.
In addition to the short-term notes described above, Cinergy
requests authority to issue short-term notes in connection with letter of
credit transactions providing credit support for Cinergy subsidiary
companies (other than Exempt Entities). In such a transaction, Cinergy
would anticipate being required to issue an unsecured demand promissory
note to the letter of credit bank evidencing Cinergy's reimbursement
obligation with respect to draws under the letter of credit. Each letter
of credit would have a stated expiration date not later than five years
from the date of issuance thereof. Cinergy would be required to repay
amounts drawn under the letter of credit on demand. Interest on
unreimbursed amounts would accrue at an annual rate not to exceed the prime
rate offered by the letter of credit bank plus 400 basis points. Cinergy
may also be required to pay letter of credit fees aggregating not more than
1% of the face amount of the letter of credit.
2. Commercial Paper
From time to time through December 31, 2002, Cinergy also proposes
to issue and sell commercial paper to one or more dealers (or directly to
financial institutions if the resulting cost of money is equal to or less
than that available from dealer-placed commercial paper) in an aggregate
principal amount which, together with the aggregate amount of any then-
outstanding short-term notes as contemplated by Item 1.C.1 above,
guarantees pursuant to Release No. 35-26723 and Debentures issued or sold
by Cinergy, will not exceed the Debt Cap.
Cinergy proposes to issue and sell the commercial paper at market
rates with varying maturities not to exceed 270 days. The commercial paper
will be in the form of book-entry unsecured promissory notes with varying
denominations of not less than $25,000 each. Any associated fees will not
exceed 1/10 of 1% multiplied by the principal amount of the commercial
paper. In commercial paper sales effected on a discount basis, no
commission or fee will be payable in connection therewith; however, the
purchasing dealer will re-offer the commercial paper at a rate less than
the rate to Cinergy. The discount rate to dealers will not exceed the
maximum discount rate per annum prevailing at the date of issuance for
commercial paper of comparable quality and the same maturity. The
purchasing dealer will re-offer the commercial paper in such a manner as
not to constitute a public offering within the meaning of the Securities
Act of 1933.
3. Associated Financial Derivatives
In connection with the issuance and sale of short-term notes to
banks and other lending institutions and sales of commercial paper as
provided above, Cinergy proposes to mitigate interest rate risk through the
use of various interest rate management instruments commonly used in
today's capital markets, such as interest rate swaps, caps, collars,
floors, options, forwards, futures and similar products designed to manage
and minimize interest costs. Cinergy expects to enter into these
agreements with counterparties that are highly rated financial
institutions. The transactions will be for fixed periods and stated
notional amounts.
Fees, commissions and annual margins in connection with any
interest rate management agreements will not exceed 100 basis points in
respect of the principal or notional amount of the related short-term
notes/commercial paper or interest rate management agreement. In addition,
with respect to options (such as caps and collars), Cinergy may pay an
option fee which would not exceed 10% of the principal amount of the short-term
note or commercial paper covered by the option.
D. Proposed Transactions: Common Stock
Cinergy further proposes to issue and sell from time to time
through December 31, 2002 (i) up to 30 million additional shares of Common
Stock and (ii) the Remaining Shares (collectively, including any
adjustments pursuant to subsequent stock splits, the "Additional Shares").
At May 31, 1997, Cinergy had a total of 600 million shares of
Common Stock authorized for issuance, of which 157,679,129 were issued and
outstanding.
Cinergy proposes to issue and sell the Additional Shares from time
to time employing any one or more of the following modes: (i) through
solicitations of proposals from underwriters or dealers, (ii) through
negotiated transactions with underwriters or dealers, (iii) directly to a
limited number of purchasers or to a single purchaser, and (iv) through
agents.
The price applicable to Additional Shares sold in any such
transaction will be based on several factors, including in particular the
current market price of the Common Stock and capital market conditions in
general at the time. Total fees and expenses incurred by Cinergy in
connection with the issuance and sale of the Additional Shares will not
exceed 5% of the total proceeds from the sale of the Additional Shares.
In addition, Cinergy requests authority to issue (but not sell) up
to 250,000 of the Additional Shares to Cinergy system employees, including
officers, in gift or award transactions from time to time through December
31, 2002. At May 31, 1997, Cinergy and its subsidiaries (not including
Midlands Electricity plc) had a total of 7,483 employees (7,361 full-time
and 122 part-time).
E. Proposed Transactions: Use of Proceeds/Source of Funds
Cinergy proposes to apply net proceeds from the issue and sale of
the short-term notes, commercial paper and Additional Shares (1) to
investments in other Cinergy system companies, (2) to exempt acquisitions
of securities of energy-related companies pursuant to rule 58, (3) to
repay, repurchase or refinance outstanding securities of Cinergy, (4) to
make loans to participating companies in the Cinergy system money pool, (5)
to investments in Exempt Entities, subject to the 50% Investment Limitation
pending receipt of the authorization requested in the 100% Application, and
(6) to other lawful corporate purposes.
Cinergy anticipates that all or a significant portion of the
interest due on the short-term notes/ commercial paper and the cash
dividends declared on the Additional Shares would be paid from internally
generated funds, including dividends from subsidiaries. Cinergy expects
that the principal of and premium, if any, on the short-term notes and
commercial paper would be paid from proceeds of additional securities
issued and sold by Cinergy to nonaffiliates, including additional short-term
notes or commercial paper, and/or from internally generated funds.
F. Capitalization Ratios
At May 31, 1997, Cinergy's consolidated capitalization ratios were
as follows: Debt (including short-term debt) - 54.8%; Equity (common and
preferred) - 45.2%.
The reported closing price of the Common Stock on the New York
Stock Exchange Composite Tape on May 31, 1997 was $35 per share. Assuming
for purposes of illustration that Cinergy sold all of the Additional Shares
at that price, and at the same time issued additional authorized debt
securities up to the full amount of the Debt Cap, Cinergy's consolidated
capitalization ratios at May 31, 1997 would have been approximately as
follows: Debt (including short-term debt) - 55.8%; Equity (common and
preferred) - 44.2%.
G. Rule 24 Reporting
Within 45 days after the end of each calendar quarterly period
(beginning with the first calendar quarter after the quarter in which the
Commission enters its order herein), Cinergy proposes to supply the
Commission with the following information for such calendar quarter (or in
the case of the first such certificate, for such calendar quarter and the
additional period, if any, from the date of the Commission's order herein)
via a certificate filed pursuant to rule 24 under the Act:
1. With respect to any short-term notes or commercial paper issued
and sold pursuant to Item 1.C, (a) the aggregate amount of any short-term
notes issued and outstanding at the end of such quarter, including a
separate identification of any such notes issued and outstanding pursuant
to letter of credit transactions, (b) the aggregate amount of any
commercial paper issued and outstanding at the end of such quarter, and (c)
a calculation of the total amount of Cinergy securities issued and
outstanding at the end of such quarter subject to the Debt Cap (i.e.,
guarantees pursuant to Release No. 35-26723, Debentures (if authorized by
the Commission), and short-term notes/commercial paper pursuant to the
authorization requested herein).
2. With respect to any sales of Additional Shares, (a) the number
of Additional Shares sold, (b) the date of sale, (c) the sale price per
share, (d) the most recent closing price of the Common Stock as reported on
the New York Stock Exchange Composite Tape, and (e) the total fees and
expenses paid in connection with the sale. With respect to any Additional
Shares issued as gifts or awards to Cinergy system employees, (a) the
number of Additional Shares issued, (b) the date of issue, (c) the number
of employees to whom the Additional Shares were issued, and (d) the purpose
of the gift or award.
H. Rule 53 Analysis
Rule 53(a) provides that 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 certain conditions are met.
Inasmuch as Cinergy proposes to apply the net proceeds of the
security sales proposed herein to, inter alia, investments in EWGs such
that Cinergy's "aggregate investment" would exceed 50% of Cinergy's
"consolidated retained earnings," rule 53(a) is inapplicable and Cinergy
must make the showing required by rule 53(c). Assuming rule 53(a) were
applicable, Cinergy has included an analysis thereunder, based upon March
1997 data, in its amended declaration in File No. 70-8993. Cinergy's rule
53(c) analysis is contained in the 100% Application. Both of such analyses
are hereby incorporated by reference herein.
Item 2. Fees, Commissions and Expenses
The fees, commissions and expenses paid or incurred, or to be paid or
incurred, directly or indirectly, in connection with the proposed
transactions by Cinergy or any associate company, in addition to those
described in Item 1, are estimated not to exceed $15,000, including
expenses of Cinergy Services of $7500 and fees and expenses of Reid &
Priest LLP of $4500.
Item 3. Applicable Statutory Provisions
The proposed transactions are or may be subject to sections 6(a),
7, 12(b), 32 and 33 of the Act and rules 45 and 53 thereunder.
Item 4. Regulatory Approval
No state or federal regulatory agency other than the Commission
under the Act has jurisdiction over the proposed transactions.
Item 5. Procedure
Cinergy requests that the Commission issue a public notice of and
order authorizing the proposed transactions as soon as possible. Cinergy
requests that there be no waiting period between the issuance of the
Commission's order and its effective date. Cinergy waives a recommended
decision by a hearing officer or other responsible officer of the
Commission and consents that the Staff of the Division of Investment
Management assist in the preparation of the Commission's order.
Item 6. Exhibits and Financial Statements
(a) Exhibits:
A-1 Certificate of incorporation of Cinergy (Exhibit to Cinergy's
1993 Form 10-K in File No. 1-11377 and hereby incorporated by reference)
A-2 By-laws of Cinergy as amended January 25, 1996 (Exhibit to
Cinergy's Form U-1 Declaration in File No. 70-8807 and hereby incorporated
by reference)
A-3 Specimen Cinergy common stock certificate (Exhibit to
Cinergy's Declaration in File No. 70-8477 and hereby incorporated by
reference)
A-4 Form of note for bank borrowings (to be filed by amendment)
A-5 Form of commercial paper note (to be filed by amendment)
B Form of underwriting agreement relating to the Additional
Shares (to be filed by amendment)
C Registration Statement on Form S-3 under the Securities Act of
1933 relating to the Additional Shares and all amendments and exhibits
thereto (to be filed by amendment by incorporation by reference to
applicable SEC registration number)
D Not applicable
E Not applicable
F-1 Preliminary opinion of counsel (to be filed by amendment)
G Form of notice of proposed transactions for publication in
Federal Register
(b) Financial Statements:
FS-1 Cinergy Pro Forma Consolidated Financial Statements dated
March 31, 1997
FS-2 Cinergy Pro Forma Financial Statements dated March 31, 1997
FS-3 Cinergy Consolidated Financial Data Schedule (included as
part of electronic submission only)
FS-4 Cinergy Financial Data Schedule (included as part of
electronic submission only)
Item 7. Information as to Environmental Effects
(a) The Commission's action in this matter will not constitute
major federal action significantly affecting the quality of the human
environment.
(b) No other federal agency has prepared or is preparing an
environmental impact statement with regard to the proposed transactions.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the undersigned company
has duly caused this statement to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: July 11, 1997
CINERGY CORP.
By: /s/ William L. Sheafer
Vice President and Treasurer
<PAGE>
ENDNOTES
/1/ Cinergy has separate guarantee authority through December 31, 1999
(Release No. 35-26486, March 8, 1996), capped at the 50% Investment
Limitation, in respect of guarantees of obligations of affiliated Exempt
Entities.
/2/ Cinergy has also been granted authority to issue and sell Common Stock
in connection with various Cinergy stock-based employee benefit plans. See
Release Nos. 35-26505 (April 17, 1996) and 26422 (December 1, 1995).
Exhibit G
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- _____________)
Cinergy Corp., a registered holding company ("Cinergy"), 139 East
Fourth Street, Cincinnati Ohio 45202, has filed a declaration under
sections 6(a), 7, 12(b), 32 and 33 of the Act and rules 45 and 53
thereunder.
By order dated January 11, 1995 (Release No. 35-26215) supplemented
by order dated March 12, 1996 (Release No. 35-26488), the Commission
authorized Cinergy to issue and sell from time to time through December 31,
1999 short-term notes (including in connection with letter of credit
transactions) and commercial paper in an aggregate principal amount at any
time outstanding not to exceed $1 billion. The Commission authorized
Cinergy to apply the net proceeds thereof to various corporate purposes
including investments in exempt wholesale generators ("EWGs") and foreign
utility companies ("FUCOs"), together with indirect investments therein
through one or more special-purpose subsidiaries ("Project Parents" and,
together with EWGs and FUCOs, "Exempt Entities"), provided that Cinergy's
"aggregate investment" did not exceed 50% of Cinergy's "consolidated
retained earnings," each as defined in rule 53(a)(1) under the Act ("50%
Investment Limitation"). At May 31, 1997, pursuant to the authorization
conferred in Release No. 35-26488, Cinergy had issued and outstanding a
total of $524 million in short-term notes (including in connection with
letter of credit transactions) and commercial paper, consisting entirely of
notes evidencing short-term bank loans. Cinergy proposes that the
authorization it now seeks supersede the authorization conferred by Release
No. 35-26488 effective immediately upon the date of the Commission's order.
By order dated May 30, 1997 (Release No. 35-26723), the Commission
authorized Cinergy from time to time through December 31, 2002, subject to
the $1 billion debt limitation prescribed in Release No. 35-26488
(including any adjustment to that debt limitation authorized by subsequent
Commission order), to guarantee the debt or other obligations of various
existing subsidiaries and of companies whose securities Cinergy or any
subsidiary thereof acquires from time to time in accordance with rule 58
under the Act. At July 1, 1997, Cinergy had issued $5 million in
guarantees pursuant to the authorization conferred in Release No. 35-26723.
By order dated November 18, 1994 (Release No. 35- 26159), the
Commission authorized Cinergy to issue and sell up to eight million shares
of its common stock, $.01 par value per share ("Common Stock"), from time
to time through December 31, 1995, (i) through solicitation of proposals
from underwriters or dealers, (ii) through underwriters or dealers on a
negotiated basis, (iii) directly to a limited number of purchasers or to a
single purchaser, and/or (iv) through agents on a negotiated basis.
Pursuant to that authority, on December 19, 1994 Cinergy publicly issued
and sold 7,089,000 shares of Common Stock and contributed the net proceeds
thereof (approximately $160 million) to the equity capital of Cinergy's
utility subsidiary, PSI Energy, Inc. By order dated February 23, 1996
(Release No. 35-26477), the Commission authorized Cinergy to issue and sell
the remaining shares of Common Stock available for issuance under the terms
of the 1994 order by any of the means specified in that order. In
addition, Cinergy was authorized to issue (but not sell) some or all of the
remaining shares to Cinergy system employees, including officer employees,
as awards. The 1996 order authorized Cinergy to apply the net proceeds
from sales of remaining shares to various corporate purposes including
investments in EWGs and FUCOs subject to the 50% Investment Limitation. Of
the eight million shares originally authorized for issuance under the 1994
order, a balance of 867,385 shares (the "Remaining Shares") remained
available for issuance at July 1, 1997 pursuant to the supplemental 1996
order. Cinergy proposes that the authorization it now seeks supersede the
authorization conferred by Release No. 35-26477 (except that the Remaining
Shares would be covered by the authority Cinergy now seeks) effective
immediately upon the date of the Commission's order.
Cinergy has pending a proposal docketed in File No. 70-8993;
Release No. 35-26714 to issue and sell from time to time through December
31, 2002 unsecured debt securities in one or more series bearing maturities
from two to 40 years ("Debentures") in an aggregate principal amount not to
exceed $400 million at any time outstanding, subject to the $1 billion debt
limitation prescribed in Release No. 35-26488 (including any adjustment to
that debt limitation authorized by subsequent Commission order). Net
proceeds from the issue and sale of the Debentures would be applied to
refinance short-term debt incurred by Cinergy to finance its 1996
acquisition of a 50% ownership interest in Midlands Electricity plc, a U.K.
FUCO, and to refinance Debentures outstanding from time to time.
Cinergy has also pending a proposal docketed in File No. 70-9011;
Release No. 35-26698 (the "100% Application") pursuant to which Cinergy
seeks to apply the net proceeds of certain financing transactions -
consisting of those authorized in Release Nos. 35-26723, 26477 and 26488
(to be superseded, as to the latter two orders, upon issuance of the
Commission's order in the instant proceeding) - to investments in Exempt
Entities, provided that Cinergy's "aggregate investment" will not exceed
100% of Cinergy's "consolidated retained earnings" (each as defined in rule
53(a)(1)).
Cinergy now proposes to issue and sell from time to time through
December 31, 2002, upon the terms and conditions described below, (1)
short-term notes and commercial paper in an aggregate principal amount not
to exceed (together with the then-outstanding principal amount of certain
other securities issued by Cinergy as described below) $2 billion at any
time outstanding, and (2) up to 30 million additional shares of Cinergy
common stock, plus the balance of remaining shares of Cinergy common stock
(867,385 shares at July 1, 1997) authorized for issuance in Release No.
35-26477, dated February 23, 1996 (in either case as such aggregate number of
shares may be adjusted for any subsequent stock split).
With respect to the proposed short-term notes specifically, Cinergy
proposes to make short-term borrowings from banks or other lending
institutions from time to time through December 31, 2002, provided that the
aggregate principal amount of such borrowings, together with the aggregate
amount of any then-outstanding commercial paper, short-term notes in
connection with letter of credit transactions, guarantees pursuant to
Release No. 35-26723 and Debentures issued or sold by Cinergy, will not
exceed $2 billion at any time outstanding ("Debt Cap").
Such borrowings will be evidenced by (1) "transactional" promissory
notes to be dated the date of such borrowings and to mature not more than
two years after the date thereof or (2) "grid" promissory notes evidencing
all outstanding borrowings from the respective lender, to be dated as of
the date of the first borrowing evidenced thereby, with each such borrowing
maturing not more than two years thereafter. Any such note may or may not
be prepayable, in whole or in part, with or without a premium in the event
of prepayment. The amount of any premium payable by Cinergy would not
exceed an amount equivalent to the present value of the stated interest
payable on the note in the event the note had not been prepaid, plus
accrued interest to the date of prepayment. Borrowings will be priced at
the lender's prevailing rate offered to corporate borrowers of similar
credit quality, which will not exceed the greater of (a) the London
Interbank Offered Rate plus 200 basis points, or (b) a negotiated rate
which would not exceed the lender's prime rate plus 200 basis points.
Cinergy may pay commitment fees based upon the unused portion of a lender's
commitment; such fees would not exceed the amount determined by multiplying
the unused portion of the lender's commitment by of 1%.
In addition to the short-term notes just described, Cinergy
requests authority to issue short-term notes in connection with letter of
credit transactions providing credit support for Cinergy subsidiary
companies (other than Exempt Entities). In such a transaction, Cinergy
would anticipate being required to issue an unsecured demand promissory
note to the letter of credit bank evidencing Cinergy's reimbursement
obligation with respect to draws under the letter of credit. Each letter
of credit would have a stated expiration date not later than five years
from the date of issuance thereof. Cinergy would be required to repay
amounts drawn under the letter of credit on demand. Interest on
unreimbursed amounts would accrue at an annual rate not to exceed the prime
rate offered by the letter of credit bank plus 400 basis points. Cinergy
may also be required to pay letter of credit fees aggregating not more than
1% of the face amount of the letter of credit.
As to the requested commercial paper authority, Cinergy proposes
from time to time through December 31, 2002 to issue and sell commercial
paper to one or more dealers (or directly to financial institutions if the
resulting cost of money is equal to or less than that available from
dealer-placed commercial paper) in an aggregate principal amount which,
together with the aggregate amount of any then-outstanding short-term
notes, guarantees pursuant to Release No. 35-26723 and Debentures issued or
sold by Cinergy, will not exceed the Debt Cap.
Cinergy proposes to issue and sell the commercial paper at market
rates with varying maturities not to exceed 270 days. The commercial paper
will be in the form of book-entry unsecured promissory notes with varying
denominations of not less than $25,000 each. Any associated fees will not
exceed 1/10 of 1% multiplied by the principal amount of the commercial
paper. In commercial paper sales effected on a discount basis, no
commission or fee will be payable in connection therewith; however, the
purchasing dealer will re-offer the commercial paper at a rate less than
the rate to Cinergy. The discount rate to dealers will not exceed the
maximum discount rate per annum prevailing at the date of issuance for
commercial paper of comparable quality and the same maturity. The
purchasing dealer will re-offer the commercial paper in such a manner as
not to constitute a public offering within the meaning of the Securities
Act of 1933.
In connection with the proposed issuance and sale of short-term
notes to banks and other lending institutions and sales of commercial
paper, Cinergy proposes to mitigate interest rate risk through the use of
various interest rate management instruments commonly used in today's
capital markets, such as interest rate swaps, caps, collars, floors,
options, forwards, futures and similar products designed to manage and
minimize interest costs. Cinergy expects to enter into these agreements
with counterparties that are highly rated financial institutions. The
transactions will be for fixed periods and stated notional amounts. Fees,
commissions and annual margins in connection with any interest rate
management agreements will not exceed 100 basis points in respect of the
principal or notional amount of the related short-term notes/commercial
paper or interest rate management agreement. In addition, with respect to
options (such as caps and collars), Cinergy may pay an option fee which
would not exceed 10% of the principal amount of the short-term note or
commercial paper covered by the option.
As to the requested common stock authority, Cinergy proposes to
issue and sell from time to time through December 31, 2002 (i) up to 30
million additional shares of Common Stock and (ii) the Remaining Shares
(collectively, including any adjustments pursuant to subsequent stock
splits, the "Additional Shares"). At May 31, 1997, Cinergy had a total of
600 million shares of Common Stock authorized for issuance, of which
157,679,129 were issued and outstanding. Cinergy proposes to issue and
sell the Additional Shares from time to time employing any one or more of
the following modes: (i) through solicitations of proposals from
underwriters or dealers, (ii) through negotiated transactions with
underwriters or dealers, (iii) directly to a limited number of purchasers
or to a single purchaser, and (iv) through agents. The price applicable to
Additional Shares sold in any such transaction will be based on several
factors, including in particular the current market price of the Common
Stock and capital market conditions in general at the time. Total fees and
expenses incurred by Cinergy in connection with the issuance and sale of
the Additional Shares will not exceed 5% of the total proceeds from the
sale of the Additional Shares. In addition, Cinergy requests authority to
issue (but not sell) up to 250,000 of the Additional Shares to Cinergy
system employees, including officers, in gift or award transactions from
time to time through December 31, 2002.
Cinergy proposes to apply net proceeds from the issue and sale of
the short-term notes, commercial paper and Additional Shares to investments
in other Cinergy system companies, to exempt acquisitions of securities of
energy-related companies pursuant to rule 58, to repay, repurchase or
refinance outstanding securities of Cinergy, to make loans to participating
companies in the Cinergy system money pool, to investments in Exempt
Entities, subject to the 50% Investment Limitation pending receipt of the
authorization requested in the 100% Application, and to other lawful
corporate purposes.
Cinergy anticipates that all or a significant portion of the
interest due on the short-term notes/ commercial paper and the cash
dividends declared on the Additional Shares would be paid from internally
generated funds, including dividends from subsidiaries. Cinergy expects
that the principal of and premium, if any, on the short-term notes and
commercial paper would be paid from proceeds of additional securities
issued and sold by Cinergy to nonaffiliates, including additional short-term
notes or commercial paper, and/or from internally generated funds.
In addition to the fees and expenses previously described, Cinergy
estimates total fees, expenses and commissions of approximately $15,000 in
connection with the proposed transactions.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
FINANCIAL STATEMENTS
WASHINGTON, D.C.
FORM U-1
CINERGY CORP.
AS OF MARCH 31, 1997
(Unaudited)
Pages 1 through 6
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
PRO FORMA STATEMENT OF INCOME
YEAR ENDED MARCH 31, 1997
Pro Forma
Actual Adjustments Pro Forma
(in thousands, except per share amounts)
<S> <C> <C> <C>
OTHER INCOME AND EXPENSES - NET
Equity in earnings of consolidated subsidiaries $ 356,651 $ -- $ 356,651
Income taxes .................................. 9,603 30,786 40,389
Other - net ................................... (1,761) -- (1,761)
--------- --------- ---------
364,493 30,786 395,279
INCOME BEFORE INTEREST ........................ 364,493 30,786 395,279
INTEREST ...................................... 25,720 87,960 113,680
NET INCOME .................................... $ 338,773 $ (57,174) $ 281,599
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
PRO FORMA BALANCE SHEET
AT MARCH 31, 1997
ASSETS
Pro Forma
Actual Adjustments Pro Forma
(dollars in thousands)
<S> <C> <C> <C>
CURRENT ASSETS
Cash and temporary cash investments ... $ 7,542 $2,519,350 $2,526,892
Notes receivable from affiliated
companies ............................. 42 -- 42
Accounts receivable - net ............. 309 -- 309
Accounts receivable from affiliated
companies ............................. 35,160 -- 35,160
Prepayments ........................... 700 -- 700
---------- ---------- ----------
43,753 2,519,350 2,563,103
OTHER ASSETS
Investment in consolidated subsidiaries 3,125,014 -- 3,125,014
Other ................................. 2,616 -- 2,616
---------- ---------- ----------
3,127,630 -- 3,127,630
$3,171,383 $2,519,350 $5,690,733
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
PRO FORMA BALANCE SHEET
AT MARCH 31, 1997
CAPITALIZATION AND LIABILITIES
Pro Forma
Actual Adjustments Pro Forma
(dollars in thousands)
<S> <C> <C> <C>
COMMON STOCK EQUITY
Common stock - $.01 par value;
Authorized shares - 600,000,000
Outstanding shares - 157,679,129 Actual $ 1,577 $ 309 $ 1,886
Paid-in capital ....................... 1,579,935 1,053,041 2,632,976
Retained earnings ..................... 1,035,390 (57,174) 978,216
Cumulative foreign currency translation
adjustment ............................ (1,166) -- (1,166)
----------- ----------- -----------
Total common stock equity ............. 2,615,736 996,176 3,611,912
CURRENT LIABILITIES
Notes payable ......................... 534,000 1,466,000 2,000,000
Notes payable to affiliated
companies ............................. 7 -- 7
Accounts payable ...................... 5,439 -- 5,439
Accounts payable to affiliated
companies ............................. 3,521 -- 3,521
Accrued taxes ......................... (1,846) (30,786) (32,632)
Accrued interest ...................... 745 87,960 88,705
----------- ----------- -----------
541,866 1,523,174 2,065,040
OTHER LIABILITIES
Deferred income taxes ................. 13,287 -- 13,287
Other ................................. 494 -- 494
----------- ----------- -----------
13,781 -- 13,781
$ 3,171,383 $ 2,519,350 $ 5,690,733
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
PRO FORMA STATEMENT OF CHANGES IN RETAINED EARNINGS
YEAR ENDED MARCH 31, 1997
Pro Forma
Actual Adjustments Pro Forma
(dollars in thousands)
<S> <C> <C> <C>
BALANCE MARCH 31, 1996 .................. $ 992,558 $ -- $ 992,558
Net income .............................. 338,773 (57,174) 281,599
Dividends on common stock ............... (277,559) -- (277,559)
Costs of reacquisition of preferred stock
of subsidiary ........................... (18,391) -- (18,391)
Other ................................... 9 -- 9
----------- -------- ---------
BALANCE MARCH 31, 1997 .................. $ 1,035,390 $(57,174) $ 978,216
</TABLE>
<PAGE>
CINERGY CORP.
Pro Forma Journal Entries to Give Effect to Issuance
of Up to $2,000,000,000 of Short-term Notes
and Up to 30,867,385 Additional Shares of Common Stock
Entry No. 1
Cash and temporary cash investments $1,466,000,000
Notes payable $1,466,000,000
To record the issuance of short-term notes payable and/or commercial paper net
of $534,000,000 of notes payable outstanding as of March 31, 1997.
Entry No. 2
Other interest $ 87,960,000
Accrued interest $ 87,960,000
To record interest on $1,466,000,000 of notes payable at 6% per annum.
Entry No. 3
Accrued taxes $ 30,786,000
Income taxes $ 30,786,000
To record the reduction in income taxes due to increased interest expense on
notes payable.
($87,960,000 at an assumed tax rate of 35%).
Entry No. 4
Cash and temporary investments $1,053,349,513
Common stock $ 308,674
Paid-in capital $1,053,040,839
To record the issuance of 30,000,000 shares of common stock together with the
remaining balance of common stock of 867,385 authorized for issuance in Release
No. 35-26477 at the March 31, 1997 close price of $34.125.
FINANCIAL STATEMENTS
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM U-1
CINERGY CORP.
CONSOLIDATED
AS OF MARCH 31, 1997
(Unaudited)
Pages 1 through 6
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED MARCH 31, 1997
Pro Forma
Actual Adjustments Pro Forma
(in thousands, except per share amounts)
<S> <C> <C> <C>
OPERATING REVENUES
Electric ...................................... $ 2,901,780 $ -- $ 2,901,780
Gas ........................................... 487,145 -- 487,145
----------- ----------- -----------
3,388,925 -- 3,388,925
OPERATING EXPENSES
Fuel used in electric production .............. 697,544 -- 697,544
Gas purchased ................................. 279,859 -- 279,859
Purchased and exchanged power ................. 291,809 -- 291,809
Other operation ............................... 615,712 -- 615,712
Maintenance ................................... 196,120 -- 196,120
Depreciation .................................. 284,124 -- 284,124
Amortization of phase-in deferrals ............ 13,569 -- 13,569
Post-in-service deferred operating
expenses - net ................................ 425 -- 425
Income taxes .................................. 208,205 -- 208,205
Taxes other than income taxes ................. 260,450 -- 260,450
----------- ----------- -----------
2,847,817 -- 2,847,817
OPERATING INCOME .............................. 541,108 -- 541,108
OTHER INCOME AND EXPENSES - NET
Allowance for equity funds used during
construction .................................. 1,065 -- 1,065
Post-in-service carrying costs ................ 880 -- 880
Phase-in deferred return ...................... 8,281 -- 8,281
Equity in earnings of unconsolidated subsidiary 51,930 -- 51,930
Income taxes .................................. 17,109 30,786 47,895
Other - net ................................... (35,415) -- (35,415)
----------- ----------- -----------
43,850 30,786 74,636
INCOME BEFORE INTEREST AND OTHER CHARGES ...... 584,958 30,786 615,744
INTEREST AND OTHER CHARGES
Interest on long-term debt .................... 190,757 -- 190,757
Other interest ................................ 42,165 87,960 130,125
Allowance for borrowed funds used
during construction ........................... (6,387) -- (6,387)
Preferred dividend requirements of
subsidiaries .................................. 19,650 -- 19,650
----------- ----------- -----------
246,185 87,960 334,145
NET INCOME .................................... $ 338,773 $ (57,174) $ 281,599
COSTS OF REACQUISITION OF PREFERRED
STOCK OF SUBSIDIARY ........................... (18,391) -- (18,391)
----------- ----------- -----------
NET INCOME APPLICABLE TO COMMON STOCK ......... $ 320,382 $ (57,174) $ 263,208
AVERAGE COMMON SHARES OUTSTANDING ............. 157,679 30,867 188,546
EARNINGS PER COMMON SHARE
Net income .................................... $ 2.14 $ 1.49
Costs of reacquisition of preferred stock of
subsidiary .................................... (0.12) (0.10)
----------- -----------
Net income applicable to common stock ......... $ 2.02 $ 1.40
DIVIDENDS DECLARED PER COMMON SHARE ........... $ 1.76
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
PRO FORMA CONSOLIDATED BALANCE SHEET
AT MARCH 31, 1997
ASSETS
Pro Forma
Actual Adjustments Pro Forma
(dollars in thousands)
<S> <C> <C> <C>
UTILITY PLANT - ORIGINAL COST
In service
Electric ................................... $8,858,361 $ -- $ 8,858,361
Gas ........................................ 720,227 -- 720,227
Common ..................................... 185,302 -- 185,302
---------- ----------- -----------
9,763,890 -- 9,763,890
Accumulated depreciation ................... 3,650,395 -- 3,650,395
---------- ----------- -----------
6,113,495 -- 6,113,495
Construction work in progress .............. 160,687 -- 160,687
---------- ----------- -----------
Total utility plant ........................ 6,274,182 -- 6,274,182
CURRENT ASSETS
Cash and temporary cash investments ........ 15,294 2,519,350 2,534,644
Restricted deposits ........................ 1,723 -- 1,723
Accounts receivable less accumulated
provision for doubtful accounts of $11,315 . 206,113 -- 206,113
Materials, supplies and fuel
- - at average cost
Fuel for use in electric production ........ 66,666 -- 66,666
Gas stored for current use ................. 11,030 -- 11,030
Other materials and supplies ............... 76,578 -- 76,578
Property taxes applicable to subsequent year 92,685 -- 92,685
Prepayments and other ...................... 41,730 -- 41,730
---------- ----------- -----------
511,819 2,519,350 3,031,169
OTHER ASSETS
Regulatory Assets
Amounts due from customers - income taxes .. 375,914 -- 375,914
Post-in-service carrying costs and
deferred operating expenses ................ 184,423 -- 184,423
Coal contract buyout costs ................. 134,378 -- 134,378
Deferred demand-side management costs ...... 127,860 -- 127,860
Phase-in deferred return and depreciation .. 93,794 -- 93,794
Deferred merger costs ...................... 92,444 -- 92,444
Unamortized costs of reacquiring debt ...... 69,474 -- 69,474
Other ...................................... 63,315 -- 63,315
Investment in unconsolidated subsidiary .... 593,099 -- 593,099
Other ...................................... 240,406 -- 240,406
---------- ----------- -----------
1,975,107 -- 1,975,107
$8,761,108 $2,519,350 $11,280,458
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
PRO FORMA CONSOLIDATED BALANCE SHEET
AT MARCH 31, 1997
CAPITALIZATION AND LIABILITIES
Pro Forma
Actual Adjustments Pro Forma
(dollars in thousands)
<S> <C> <C> <C>
COMMON STOCK EQUITY
Common stock - $.01 par value;
Authorized shares - 600,000,000
Outstanding shares - 157,679,129 Actual .. $ 1,577 $ 309 $ 1,886
Paid-in capital .......................... 1,579,934 1,053,041 2,632,975
Retained earnings ........................ 1,035,390 (57,174) 978,216
Cumulative foreign currency translation
adjustment ............................... (1,166) -- (1,166)
----------- ------------ ------------
Total common stock equity ................ 2,615,735 996,176 3,611,911
CUMULATIVE PREFERRED STOCK OF SUBSIDIARIES
Not subject to mandatory redemption ...... 194,195 -- 194,195
LONG-TERM DEBT ........................... 2,375,694 -- 2,375,694
----------- ------------ ------------
Total capitalization ..................... 5,185,624 996,176 6,181,800
CURRENT LIABILITIES
Long-term debt due within one year ....... 274,000 -- 274,000
Notes payable ............................ 705,177 1,466,000 2,171,177
Accounts payable ......................... 244,686 -- 244,686
Accrued taxes ............................ 341,339 (30,786) 310,553
Accrued interest ......................... 58,827 87,960 146,787
Other .................................... 85,880 -- 85,880
----------- ------------ ------------
1,709,909 1,523,174 3,233,083
OTHER LIABILITIES
Deferred income taxes .................... 1,139,112 -- 1,139,112
Unamortized investment tax credits ....... 173,517 -- 173,517
Accrued pension and other postretirement
benefit costs ............................ 271,882 -- 271,882
Other .................................... 281,064 -- 281,064
----------- ------------ ------------
1,865,575 -- 1,865,575
$ 8,761,108 $ 2,519,350 $ 11,280,458
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
PRO FORMA CONSOLIDATED STATEMENT OF CHANGES IN RETAINED EARNINGS
YEAR ENDED MARCH 31, 1997
Pro Forma
Actual Adjustments Pro Forma
(dollars in thousands)
<S> <C> <C> <C>
BALANCE MARCH 31, 1996 .................. $ 992,558 $ -- $ 992,558
Net income .............................. 338,773 (57,174) 281,599
Dividends on common stock ............... (277,559) -- (277,559)
Costs of reacquisition of preferred stock
of subsidiary ........................... (18,391) -- (18,391)
Other ................................... 9 -- 9
----------- -------- ---------
BALANCE MARCH 31, 1997 .................. $ 1,035,390 $(57,174) $ 978,216
</TABLE>
<PAGE>
CINERGY CORP.
Pro Forma Consolidated Journal Entries to Give Effect to Issuance
of Up to $2,000,000,000 of Short-term Notes
and Up to 30,867,385 Additional Shares of Common Stock
Entry No. 1
Cash and temporary cash investments $1,466,000,000
Notes payable $1,466,000,000
To record the issuance of short-term notes payable and/or commercial paper net
of $534,000,000 of notes payable outstanding as of March 31, 1997.
Entry No. 2
Other interest $ 87,960,000
Accrued interest $ 87,960,000
To record interest on $1,466,000,000 of notes payable at 6% per annum.
Entry No. 3
Accrued taxes $ 30,786,000
Income taxes $ 30,786,000
To record the reduction in income taxes due to increased interest expense on
notes payable.
($87,960,000 at an assumed tax rate of 35%).
Entry No. 4
Cash and temporary investments $1,053,349,513
Common stock $ 308,674
Paid-in capital $1,053,040,839
To record the issuance of 30,000,000 shares of common stock together with the
remaining balance of common stock of 867,385 authorized for issuance in Release
No. 35-26477 at the March 31, 1997 close price of $34.125.
