File No. 70-9011
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.
139 East Fourth Street
Cincinnati, Ohio 45202
(Name of companies filing this statement
and address of principal executive offices)
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)
Applicants request that the Commission send copies of all notices, orders and
communications in connection herewith to:
Cheryl M. Foley William T. Baker, Jr.
Vice President, General Counsel Reid & Priest LLP
and Corporate Secretary 40 West 57th Street
Cinergy Corp. New York, New York
(address above) 10019
The application-declaration as previously amended is further amended as
follows:
1. Footnote 10, qualifying the text located at the second paragraph of Item
1.D ("Exempt Projects: Opportunities and Risks"), is replaced by the
following text:
"On May 1, 1997, general elections were held in Great Britain which
resulted in the Labor Party gaining control of the government. On July 2,
1997, the Labor Government announced a windfall profits tax to be levied
against a limited number of British companies, including Midlands, which had
previously been owned and operated by the government. The tax, which was
enacted into law during the third quarter of 1997, is intended to effect a
recovery of funds by the government due to the undervaluing of the companies
subject to the tax when they were privatized by the government via public
stock offerings several years ago.
Cinergy's share of the tax to be paid by Midlands is approximately
$109 million (or $0.69 per share), to be paid in two equal installments due
December 1, 1997 and 1998. As Cinergy's management believes this charge to
be unusual in nature, and does not expect such a charge to recur, the tax has
been recorded as an extraordinary item in Cinergy's consolidated statements
of income included in Cinergy's Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1997. No related tax benefit has been
recorded for the charge, since the windfall profits tax is not deductible for
corporate income tax purposes in the UK and Cinergy expects that benefits, if
any, derived for U.S. Federal income tax will not be significant."
2. The first paragraph of Item 1.B ("Proposed Modifications to Prior Orders")
is replaced by the following text:
"At September 30, 1997 Cinergy's aggregate investment and consolidated
retained earnings were approximately $475 million and approximately $992
million, respectively."
3. The first paragraph of Item 3.B.1.a ("Key Financial Ratios/Benchmarks") is
replaced by the following text:
"An aggregate investment equal to 100% of Cinergy's consolidated
retained earnings would represent a relatively small commitment of capital
based on various key financial ratios at September 30, 1997. A total
investment in this amount (assumed to be $992 million) would be equal to 16%
of Cinergy's consolidated capitalization ($6.1 billion), 16% of consolidated
net utility plant ($6.3 billion), 11% of total consolidated assets ($8.8
billion), and 19% of the market value of Cinergy's outstanding common stock
($5.3 billion)."
4. The third paragraph of Item 3.B.1.a ("Key Financial Ratios/ Benchmarks")
is revised by adding the following sentence to the end of the existing text:
"For the twelve months ended September 30, 1997, Cinergy's dividend payout
ratio was 88% (excluding the effects of Cinergy's share of the windfall
profits tax)."
5. The following sentence is added to the end of the first paragraph of Item
3.B.1.b ("Market Expectations"):
"For the twelve months ended September 30, 1997, Cinergy's market-to-book
ratio of 211% ranked second among the 25 largest electric utilities, and
Cinergy's price/earnings ratio of 16.4 ranked sixth."
6. The following new paragraph is added to the end of Item 3.B.1.b ("Market
Expectations"):
"At September 30, 1997 Cinergy's price/earnings and market-to-book
ratios were 16.4 and 211%, respectively. The 16.4 P/E ratio excludes the
effects of Cinergy's share of the windfall profit tax, which if included
would result in a P/E ratio at September 30, 1997 of 24.8."
7. The last paragraph of Item 3.B.2.b ("Operating Company Financial
Integrity") is replaced by the following text:
"Finally, Cinergy's investment in Exempt Projects has not had an adverse
effect on the financial ratings of the Operating Companies. For example, all
four rating agencies affirmed their ratings for Operating Company debt and
preferred stock following announcement of the Midlands acquisition, and as of
December 15, 1997 none of such agencies had reduced any of such ratings or
had announced that any of such ratings were under review for possible
reduction./34/"
8. The following exhibit is filed herewith:
Exhibit I-A Cinergy Pro-Forma Capitalization (revised)
<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: December 17, 1997
CINERGY CORP.
By: /s/ William L. Sheafer
Vice President & Treasurer
CINERGY INVESTMENTS, INC.
By: /s/ William L. Sheafer
Treasurer
ENDNOTES
/34/ In addition to Operating Company ratings, (1) all the major agencies
have assigned investment grade ratings to Cinergy debt (for further
information on such ratings, see Cinergy's amended application in File No.
70-8993) and (2) on May 5, 1997 S&P assigned an A- long-term credit rating to
each of Midlands, Avon Energy and Avon Holdings. Further, following the
July 2, 1997 announcement by the Labor Government of the proposed windfall
profits tax, an S&P report listed 13 British utilities, but not Midlands, on
"CreditWatch with negative implications." Midlands' rating remained
unchanged "...because of [its] relative strength within the rating category."
As of December 15, 1997, S&P continues to assign an A- long-term credit
rating to each of Midlands, Avon Energy and Avon Holdings. Moreover, in
connection with a recent refinancing by Avon Energy of certain of its
outstanding debt, S&P assigned an A- rating to both $350 million principal
amount of Avon Energy 5-year senior notes due 2002 and $250 million of Avon
Energy 10-year notes due 2007. S&P noted that despite the windfall tax and
the increase in financial leverage at Midlands following its acquisition by
Cinergy and GPU through Avon Energy, the fundamental credit strengths of
Midlands remain unchanged.
EXHIBIT I-A
CINERGY CORP. CAPITALIZATION
Actual
September 30, 1997
$ Millions Percentage
Debt:
First Mortgage Bonds $ 1,184
Other Long-term Debt 950
Short-term Debt 1,245
3,379 55.9%
Preferred Stock 178 2.9%
Common Equity:
Common Stock 2
Paid-in Capital 1,571
Retained Earnings 921
2,494 41.2%
Total Capitalization $ 6,051 100.0%
The following table sets forth Cinergy's proforma capitalization, assuming
that the entire amount of non-recourse debt applicable to Exempt Entities
which is attributable to Cinergy's ownership interest ($800 million) is
consolidated. It should be noted that such consolidation is inconsistent
with the requirements of GAAP, and is being provided to the staff of the
Securities and Exchange Commission solely at its request.
Pro Forma
September 30, 1997
$ Millions Percentage
Debt:
First Mortgage Bonds $ 1,184
Other Long-term Debt 1,750
Short-term Debt 1,245
4,179 61.0%
Preferred Stock 178 2.6%
Common Equity:
Common Stock 2
Paid-in Capital 1,571
Retained Earnings 921
2,494 36.4%
Total Capitalization $ 6,851 100.0%
