File No. 70-8427
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
__________________________________________
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM U-1 APPLICATION-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 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)
Applicant requests that the Commission send copies of all notices, orders
and communications in connection herewith to:
Jerome A. Vennemann William T. Baker, Jr.
Associate General Counsel Reid & Priest LLP
Cinergy Corp. 40 West 57th Street
(address above) New York, New York 10019
Item 1. Description of Proposed Transactions
A. Introduction
By order dated October 21, 1994 in this file (Release No. 35-26146)
("Merger Order"), the Commission authorized a proposed business combination
and related transactions between The Cincinnati Gas & Electric Company, an
Ohio gas and electric utility company and exempt holding company ("CG&E"),
and PSI Resources, Inc., an Indiana exempt holding company ("PSI"),
resulting in the creation of Cinergy Corp., a Delaware corporation
("Cinergy"), as a new registered holding company under the Public Utility
Holding Company Act of 1935, as amended ("Act")./1/ The Merger Order
reserved jurisdiction over Cinergy's retention of the gas utility
properties of CG&E and the nonutility interests of CG&E and PSI for a
three-year period expiring October 21, 1997.
Cinergy herein requests that the Commission issue an order (a)
extending until October 21, 1998 the pending reservation of jurisdiction
over Cinergy's ownership of the gas properties of CG&E/2/ and (b) releasing
its jurisdiction over and thereby permitting Cinergy to retain the specific
nonutility interests enumerated below./3/
B. Background: Merger Order Reservation of Jurisdiction
In urging the Commission in 1994 to reserve jurisdiction for three
years over its proposed acquisition of the gas properties of CG&E and the
nonutility interests of CG&E and PSI, Cinergy cited several possible future
developments, including potential legislative or administrative reform of
the Act, the effect of which, if realized during the reservation period,
might be to bring a practical resolution, in whole or in part, to the
underlying substantive issues./4/
The Commission concurred that it was appropriate to defer consideration
of Cinergy's ownership of these properties "because events may moot the
issues arising under the Act."/5/ Thus the Commission granted Cinergy's
request, but stipulated that Cinergy file a post-effective amendment by the
end of the three-year period "in the event that such matters are not moot,"
requesting the Commission to dispose of the matters over which jurisdiction
had been reserved./6/
Actual developments since the Merger Order have not in fact mooted the
issues under the Act arising from Cinergy's ownership of CG&E's gas
properties. In contrast, the Commission's adoption of rule 58 in
early 1997 (Release No. 35-26667), together with various sales or other
dispositions by Cinergy since the Merger Order, have partially mooted the
issues under the Act associated with Cinergy's ownership of the
nonutility interests.
C. Requested Action: Gas Properties
Cinergy requests that the Commission issue an order extending its
pending reservation of jurisdiction over Cinergy's ownership of CG&E's gas
properties for an additional year, until October 21, 1998, by which
date Cinergy will file a further post-effective amendment requesting the
Commission to dispose of this matter on the merits. The additional time is
necessary in order for Cinergy to prepare an updated and revised
divestiture study in light of and consistent with the Commission's recent
order in New Century Energies, Inc./7/
D. Requested Action: 1994 Nonutility Interests of CG&E and PSI
I. Requested Action
Events since the Merger Order have obviated in part the need for
Cinergy to obtain Commission authorization to retain the CG&E and PSI
nonutility interests covered by the Merger Order. This is because
certain of those interests have been sold or dissolved or are being
dissolved,/8/ while certain others are "energy-related companies" within
the meaning of rule 58 (each, a "rule 58 company")/9/ and Cinergy has made,
or at the appropriate time will make, the requisite Form U-9C-3 filings
indicating such status.
Concerning the remainder of such nonutility interests (the "Residual
Interests"), Cinergy now requests in each case (other than that of KO) that
the Commission release its reservation of jurisdiction and issue an
appropriate order authorizing Cinergy's retention thereof. Specifically,
Cinergy requests authorization to retain the following companies or
interests: (1) Tri-State Improvement Company, (2) Enertech Associates,
Inc. (formerly Enertech Associates International, Inc.), (3) certain CG&E
"good citizen" limited partnership investments (namely, North Rhine I
Limited Partnership, North Rhine II Limited Partnership, Franciscan
Homes II Limited Partnership, Blue Chip Capital Fund and Blue Chip
Opportunity Fund), (4) South Construction Company, Inc., (5) PSI Power
Resource Development, Inc., (6) Cinergy International, Inc. (formerly PSI
International, Inc.), (7) PSI Sunnyside, Inc., (8) Cinergy Technology, Inc.
(formerly PSI Environmental Corp.), (9) PSI T&D International, Inc., (10)
PSI Yacyreta, Inc. and (11) certain PSI Energy "good citizen" limited
partnership investments (namely, Cambridge Ventures, L.P., CID Equity
Partners - itself comprised of three funds: CID Partnership, L.P., CID
Ventures, L.P., and CID Equity Capital III, L.P. - and Circle Centre
Partners L. P.). In addition, with regard to the limited partnership
investments in the Blue Chip Opportunity Fund and CID Equity Capital III,
L.P., Cinergy requests authorization to make additional investments in
those funds totaling $620,000, in order to honor commitments made prior to
the Cinergy merger.
Cinergy represents that it will not seek recovery through higher rates
to Cinergy system utility customers to compensate Cinergy for any losses or
inadequate returns it may experience on capital invested in the Residual
Interests. Therefore, the investment risks associated with the Residual
Interests will continue to be borne exclusively by Cinergy's shareholders.
To the extent that any of the Residual Interests is presently
inactive,/10/ Cinergy will not "activate" any such company in the absence
of further express Commission authorization, except in the event Cinergy
determines to deploy any such company for any of the following purposes
(such undertaking, the "Activation Commitment"):
(a) an "exempt telecommunications company" (an "ETC") as defined in
the Act;
(b) a rule 58 company;
(c) a "Special Purpose Subsidiary" - i.e., a company dedicated,
directly or indirectly, and exclusively, to the business of acquiring and
holding the securities of, or providing services to, exempt wholesale
generators (each, an "EWG") and foreign utility companies (each, a "FUCO")
as contemplated by, and subject to the restrictions of, the Commission's
orders dated May 8, 1996 and September 21, 1995 in File No. 70-8589
(Release Nos. 35-26486 and 35-26367, respectively); or
(d) a direct or indirect subsidiary of Cinergy Solutions, Inc., a
Delaware corporation ("Solutions"), to engage in any of the activities that
the Commission in its February 7, 1997 order in File No. 70-8933
(Release No. 35-26662) authorized Solutions to engage in, either directly
or indirectly through one or more subsidiaries created from time to time.
Finally, as to CG&E's gas pipeline subsidiary, KO, Cinergy requests
Commission authorization to extend the pending reservation of jurisdiction
over the retain ability of this company for an additional year, until
October 21, 1998, consistent with Cinergy's request regarding CG&E's gas
properties.
ii. Background: Merger Order /Nonutility Interests of CG&E and
PSI
The Merger Order reserved jurisdiction over the then-existing
nonutility interests held directly or indirectly by CG&E, specifically:/11/
(1) Tri-State Improvement Company ("Tri-State"), an Ohio corporation
devoted to acquiring and holding property in Ohio, Kentucky and Indiana for
substations, electric and gas rights of way, office space, and other uses
in connection with the utility business of CG&E and its utility
subsidiaries/12/; (2) KO, a Kentucky corporation formed to acquire an
interest in an interstate natural gas pipeline system to which CG&E was
entitled under the terms of a settlement with Columbia Gas Transmission
Corporation; (3) Enertech Associates International, Inc. ("Enertech"), an
Ohio corporation formed as a vehicle for CG&E to offer utility management
consulting services and to pursue investment opportunities in
energy-related areas, including demand-side management services,
consulting, energy and fuel brokering, engineering services, construction
and/or operation of generation, cogeneration, independent power production
("IPP") facilities, and project development; prior to the Cinergy merger,
Enertech had acquired Bruwabel and its two Czech subsidiaries, Power
Development s.r.o. and Power International s.r.o., to pursue design,
engineering, and development work involving energy privatization projects,
primarily in the Czech Republic; (4) CG&E Resource Marketing, Inc. ("CG&E
Resource Marketing"), a Delaware corporation formed to hold CG&E's
one-third general partnership interest in U.S. Energy Partners, a gas
marketing partnership; (5) CGE ECK, Inc. ("CGE ECK"), a Delaware
corporation organized to hold CG&E's one-third interest in a Czech company,
ECK s.r.o., that owned and operated a Czech electric generating facility;
and (6) CGE Corp., a Delaware corporation formed to serve as a holding
company for certain of CG&E's nonutility investments. In addition, CG&E
had small minority interests in five limited partnerships - North Rhine I
Limited Partnership, North Rhine II Limited Partnership, Franciscan Homes
II Limited Partnership, Blue Chip Capital Fund and Blue Chip Opportunity
Fund - "that make good citizen' investments in the service territory of
CG&E and its subsidiaries."/13/ At and for the year ended December 31,
1993, CG&E's nonutility subsidiaries constituted less than 1% of CG&E's
consolidated assets and revenues.
The Commission also reserved jurisdiction over the nonutility interests
then held directly or indirectly by PSI (other than certain subsidiaries
established to facilitate investments in certain privatized Argentine
electric utility companies and as to which, prior to the Cinergy
merger, PSI had received unqualified exemption orders from the Commission
under section 3(b) of the Act/14/). The PSI nonutility interests over
which the Commission reserved jurisdiction were:/15/ (1) PSI Recycling,
Inc. ("Recycling"), an Indiana corporation dedicated to recycling paper,
metal and other materials from PSI Energy, its biggest single supplier,
and other sources; (2) Power Equipment Supply Company ("PESCO"), an Indiana
corporation that sold equipment and parts from a canceled PSI Energy
generating plant, the Marble Hill nuclear project; PESCO also
purchased equipment for resale, brokered equipment, and sold equipment on
consignment for others; (3) Wholesale Power Services, Inc. ("Wholesale
Power Services"), an Indiana corporation formed to broker power,
emissions allowances, electricity futures and related products and services
and to provide consulting services in the wholesale power-related markets;
through its "IPEX" (International Power Exchange) division, Wholesale
Power Services also created, marketed and maintained an electronic bulletin
board for the bulk power market; (4) South Construction Company, Inc.
("South Construction"), an Indiana corporation devoted to holding legal
title to interests in real estate not used and useful in the conduct of PSI
Energy's business or having some defect in title unacceptable to PSI
Energy; and (5) PSI Investments, Inc. ("PSI Investments"), an Indiana
corporation formed to hold certain nonutility interests of PSI, including a
number of then-inactive companies formed under Indiana law - specifically,
("PSI Power Resource Development"), PSI Power Resource Operations, Inc.
("PSI Power Resource Operations"), PSI International, Inc. ("PSI
International") and ("PSI Sunnyside"), each of which was formed to develop,
operate and maintain IPP or cogeneration projects; PSI Environmental Corp.
("PSI Environmental"), formed to provide energy-related environmental
services; and PSI T&D International, Inc. ("PSI T&D International") and PSI
Yacyreta, Inc. ("PSI Yacyreta"), each of which was formed to acquire,
directly or indirectly, interests in FUCOs. In connection with its
Argentine utility investments (see above), PSI also had established Energy
Services Inc. of Buenos Aires ("Energy Services of Buenos Aires"), a then
inactive Indiana corporation, to provide operating and consulting services
to foreign utilities, initially in Argentina. Like CG&E, PSI Energy held a
number of small "good citizen" limited partnership interests - in Cambridge
Ventures, L.P. and CID Equity Partners (and its constituent partnerships),
both formed to raise capital for investments in small or start-up Indiana
and other midwestern companies; and in Circle Centre Partners L. P., a
Delaware limited partnership formed to invest in Circle Centre, a retail
shopping mall under construction in downtown Indianapolis. At and for the
year ended December 31, 1993, PSI's nonutility subsidiaries constituted
about 1% of PSI's consolidated assets and operating revenues.
iii. Current Status of 1994 Nonutility Interests
The following provides current information on each of the nonutility
interests over which the Commission reserved jurisdiction in the Merger
Order. At and for the year ended December 31, 1996, the
balance of these nonutility companies that are still under Cinergy
ownership comprised less than 1% of Cinergy's consolidated assets and
revenues./16/ Exhibit H is a corporate chart listing Cinergy and all of
its current subsidiaries.
a. CG&E Nonutility Interests: Tri-State
Tri-State is a direct subsidiary of CG&E and its business remains the
acquisition and holding of property in Ohio, Kentucky and Indiana for
substations, electric and gas rights of way, office space, and other uses
in connection with the utility business of CG&E and its utility
subsidiaries. At June 30, 1997 and for the 12 months then ended, Tri-State
had total assets of approximately $35.6 million and net income of
approximately $129,000./17/
b. CG&E Nonutility Interests: KO
KO is a direct subsidiary of CG&E and was formed to acquire an interest
in an interstate gas pipeline system to which CG&E was entitled by
settlement with Columbia Gas Transmission Corp. ("Columbia Gas").
In particular, pursuant to a 1989 FERC-approved "global" offer of
settlement, and the FERC's February 1996 order/18/ granting KO a
certificate of public convenience and necessity under the Natural Gas Act
together with a blanket certificate to offer firm and interruptible
transportation service, KO acquired from Columbia Gas (1) an undivided
approximate one-third interest (equivalent to 221,000 Dekatherms per day
("Dth/d")) in certain natural gas facilities of Columbia Gas known as the
"Kentucky System," consisting of various pipeline, looping and related
equipment, which extends northward about 90 miles from an interconnection
with Columbia Gulf Transmission Company in Menifee County, Kentucky to a
terminus at the Cold Spring Station interconnection with ULH&P in northern
Kentucky; and (2) a 100% interest in another, much shorter interstate gas
pipeline facility of Columbia Gas, Line AM-4, which extends northwesterly
about 3 miles from the Cold Spring Station interconnection to an
interconnection with CG&E's natural gas facilities at the Kentucky-Ohio
border on the Ohio River.
On June 1, 1996, KO commenced its business of transporting natural gas
in interstate commerce over the facilities acquired from Columbia Gas. To
date, all of KO's entitlement to capacity on the Kentucky System
has been contracted to CG&E and ULH&P on a firm basis to help meet their
gas supply obligations. At June 30, 1997 and for the 12 months then ended,
KO had total assets of approximately $1.7 million and net income
of approximately $130,000./19/
c. CG&E Nonutility Interests: Enertech
On October 25, 1995, a suit was filed in the Federal District Court for
the Southern District of Ohio by three former employees of Enertech, naming
as defendants Enertech, Cinergy, Cinergy Investments, Inc. ("Cinergy
Investments"), a Delaware corporation that is a direct subsidiary of
Cinergy and the immediate parent company of Enertech (and numerous other
nonutility subsidiaries in the Cinergy system, see exhibit H), and
certain senior officers of those companies. The lawsuit, which stems from
the termination of employment of the three former employees, alleges that
they entered into employment contracts with Enertech based on the
opportunity to participate in potential profits from future investments in
energy projects in central and eastern Europe. The suit alleges causes of
action based on, among other theories, breach of contract related to the
events surrounding the termination of their employment and fraud and
misrepresentation related to the level of financial support for future
projects. The suit alleges compensatory and punitive damages. The
defendants are vigorously defending the suit. The matter is pending.
In June 1996, Cinergy Investments sold what remained of Enertech's
investment in Bruwabel and its subsidiaries to a non-affiliated buyer.
In 1997, Enertech changed its name to "Enertech Associates, Inc."
Except in connection with the Enertech lawsuit, Enertech is inactive.
At June 30, 1997 and for the 12 months then ended, Enertech had total
assets of approximately $5.2 million and a net operating loss of
approximately $3.9 million.
d. CG&E Nonutility Interests: Cinergy Resources, Inc. (formerly
CG&E Resource Marketing)
In the summer of 1995, CG&E Resource Marketing withdrew from its gas
marketing partnership with Public Service Electric & Gas Company, conducted
under the name U.S. Energy Partners, in which CG&E held a one-third
interest. Renamed Cinergy Resources, Inc. ("Cinergy Resources"), this
company continued in the gas marketing business on a stand-alone basis.
More specifically, Cinergy Resources engages in the retail marketing of
natural gas on a non-regulated basis to industrial and large commercial
customers, primarily in the states of Ohio, Indiana and Kentucky. In
connection with its retail gas marketing business, Cinergy Resources
acquires gas supplies and related transportation capacity to support such
sales. Cinergy Resources is a rule 58 company and direct subsidiary of
Cinergy Investments. For further information on Cinergy Resources, see
Cinergy's Quarterly Report on Form U-9C-3 for the quarter ended June 30,
1997.
e. CG&E Nonutility Interests: CGE ECK
As noted above, CGE ECK was created to hold CG&E's one-third interest
in a Czech company, ECK s.r.o., that owned and operated a Czech electric
generating facility. In 1997, CGE ECK sold what remained of its interest
in ECK s.r.o., its only asset. Cinergy Investments is in the process of
dissolving CGE ECK.
f. CG&E Nonutility Interests: CGE Corp.
As contemplated in the Merger Order, CGE Corp. was merged with and into
Cinergy Investments on October 24, 1995, with the separate corporate
existence of CGE Corp. ceasing on the effective date of its merger
with Cinergy Investments, which thereupon succeeded to direct and indirect
ownership of the nonutility interests formerly held by CGE Corp./20/
g. CG&E Nonutility Interests: "Good Citizen" Limited
Partnership Investments
As noted above, the Merger Order reserved jurisdiction over five small
"good citizen" limited partnership investments of CG&E: three investments
in limited partnerships dedicated to investing in, owning, rehabilitating
and maintaining apartment buildings for low-income people within the CG&E
service territory: North Rhine I Limited Partnership ("North Rhine I");
North Rhine II Limited Partnership ("North Rhine II"); and Franciscan Homes
II Limited Partnership ("Franciscan Homes"). In addition, CG&E held small
minority interests in two limited partnerships formed to invest in small
and minority- or female-owned businesses in the service territories of CG&E
and its subsidiaries: Blue Chip Capital Fund ("Blue Chip Capital") and
Blue Chip Opportunity Fund ("Blue Chip Opportunity").
As of June 30, 1997, CG&E's aggregate investments and corresponding
limited partnership interests in these funds (figures are rounded) was as
follows: North Rhine I - $9,000 investment; 2% interest; North Rhine
II - $86,000 investment; 6% interest; Franciscan Homes - $2,000 investment;
2% interest; Blue Chip Capital - $721,000 investment; 2% interest; and Blue
Chip Opportunity - $447,000 investment; 4% interest.
Cinergy requests authority for CG&E to fund the balance of its
remaining commitment - $100,000 - to the Blue Chip Opportunity fund; this
commitment was made in connection with CG&E's initial investment in
the fund prior to the Cinergy merger. Any further investments by CG&E or
any of its associate companies in these funds would only be made pursuant
to a separate order from the Commission or as permitted by rule
40(a)(5).
h. PSI Nonutility Interests: Recycling
In August 1996, Cinergy Investments sold substantially all the assets
of Recycling to a non-associate company in August 1996. Cinergy
Investments is in the process of dissolving Recycling.
i. PSI Nonutility Interests: PESCO
In late 1995, PESCO sold the assets of its North American Machinery
Division to a nonaffiliated buyer. In 1996 PESCO discontinued operations.
Cinergy Investments is in the process of dissolving PESCO.
j. PSI Nonutility Interests: Cinergy Capital & Trading, Inc.
(formerly Wholesale Power Services)
In 1995, Wholesale Power Services received authorization from the FERC
to sell electricity to non-associates at market-based rates but otherwise
was inactive./21/ In 1996, Wholesale Power Services discontinued
its IPEX Division, established to operate an electronic bulletin board for
the bulk power market. In January 1997, Wholesale Power Services was
renamed "Cinergy Capital & Trading, Inc." ("Cinergy Capital & Trading").
In June 1997, Cinergy Capital & Trading acquired the assets of Greenwich
Energy Partners, a limited partnership based in Connecticut and engaged in
the business of trading and marketing natural gas and oil and
derivative commodity instruments. With the acquisition of Greenwich
Energy, Cinergy Capital & Trading commenced the process, not yet completed,
of becoming fully "activated" or operational; to date only limited
trading has taken place under Cinergy Capital & Trading's FERC-approved
rate tariff. Cinergy Capital & Trading will market and trade electricity
and natural gas and other energy commodities as well as derivative
commodity instruments on a nationwide basis. Cinergy Capital & Trading is
a rule 58 company and direct subsidiary of Cinergy Investments. For
further information on Cinergy Capital & Trading, see Cinergy's
Quarterly Report on Form U-9C-3 for the quarter ended June 30, 1997.
k. PSI Nonutility Interests: South Construction
South Construction is a direct subsidiary of PSI Energy and
functionally similar to Tri-State, CG&E's real estate subsidiary. Like
Tri-State, South Construction is devoted to holding title to interests in
real estate in connection with the utility business of PSI Energy.
However, in its case, it holds title to interests in real estate
either not used and useful in the conduct of PSI Energy's business or
having some defect in title unacceptable to PSI Energy. At June 30, 1997
and for the 12 months then ended, South Construction had no assets and no
net income or loss.
l. PSI Nonutility Interests: PSI Investments
In connection with the formation of Cinergy Investments, this former
nonutility subholding company of PSI was merged out of existence, with
Cinergy Investments succeeding to its nonutility interests. See
discussion above of CGE Corp., also merged out of existence in connection
with the formation of Cinergy Investments.
m. PSI Nonutility Interests: PSI Power Resource Development
This company remains inactive. It is a direct subsidiary of Cinergy
Investments.
n. PSI Nonutility Interests: Cinergy-Cadence, Inc. (formerly
PSI Power Resource Operations)
This formerly inactive subsidiary was recently activated and renamed
Cinergy-Cadence, Inc. ("Cinergy Cadence") to hold Cinergy's one-third
equity interest in Cadence Network LLC ("Cadence Network"), a joint
venture company formed on September 9, 1997 among Cinergy, New Century
Energies and Florida Progress to market a variety of energy-related
products and services - including billing, information and pricing
services, energy management services, and commodity procurement - to retail
commercial customers that operate in multiple locations across the country.
The sole purpose and activity of Cinergy Cadence, which is a direct
subsidiary of Cinergy Investments, is to hold Cinergy's interest in Cadence
Network. Given that function, and the fact that Cadence Network itself is
a rule 58 company, it follows that Cinergy Cadence is also a rule 58
company. Cinergy will provide further information regarding Cinergy
Cadence and Cadence Network in its Quarterly Report on Form U-9C-3 for the
quarter ended September 30, 1997.
o. PSI Nonutility Interests: Cinergy International, Inc.
(formerly PSI International)
This company, a direct subsidiary of Cinergy Investments, remains
inactive. In 1997 its name was changed to Cinergy International, Inc.
("Cinergy International").
p. PSI Nonutility Interests: PSI Sunnyside
This company, a direct subsidiary of Cinergy Investments, remains
inactive.
q. PSI Nonutility Interests: Cinergy Technology (formerly PSI
Environmental)
This company, a direct subsidiary of Cinergy Investments, was activated
in 1995 to pursue business opportunities in the United States relating
primarily to the commercialization of electrotechnologies - activities
among those that formerly Enertech would have pursued.
To that end, Cinergy Technology is a party to a marketing arrangement
with a manufacturer pursuant to which Cinergy Technology receives royalty
payments from the manufacturer's sale of certain portable electronic meters
(whose technology Cinergy Technology personnel helped to develop)
that record a variety of energy-related measurements which can be
downloaded to a personal computer for analysis. In the third quarter of
1997, Cinergy Technology made a minor investment in a small, privately held
company established to patent and commercially develop non-polluting energy
production technologies, including those involving the generation of
electricity from low energy induced reactions in solids. Cinergy
Technology has also been working with outside parties to develop and
commercialize stationary electric power generation systems employing fuel
cell technology, as well as a silicon transfer switch capable of
transferring a customer's normal electric service to an alternate circuit
in a small number of milliseconds. In the last year Cinergy
Technology also investigated the possibility of investing in another small,
privately held company that holds a patented technology relating to power
conversion and control.
Cinergy Technology is also a party to several contracts, all of which
pre-date the Telecommunications Act of 1996, relating to the provision of
telecommunications services and products in the Cincinnati area.
These contracts are in the process of being assigned to an affiliate,
Cinergy Communications, Inc., which was certified in 1996 by the Federal
Communications Commission as an ETC.
In 1996 Cinergy Technology made an investment pursuant to rule 40(a)(5)
under the Act in the Cincinnati Equity Fund, a private fund established to
assist in efforts to rejuvenate and promote the downtown Cincinnati area
through real estate development.
At June 30, 1997 and for the 12 months then ended, Cinergy Technology
had total assets of approximately $1.3 million and net income of
approximately $109,000.
r. PSI Nonutility Interests: PSI T&D International/PSI Yacyreta
Both of these companies, originally formed to acquire, directly or
indirectly, interests in FUCOs, remain inactive. PSI Yacyreta is a direct
subsidiary of PSI T&D International, which is a direct subsidiary of
Cinergy Investments.
s. PSI Nonutility Interests: Energy Services of Buenos Aires
This inactive company was dissolved in January 1995.
t. PSI Nonutility Interests: "Good Citizen" Limited Partnership
Investments
As previously noted, PSI Energy, like CG&E, held a number of small
"good citizen" limited partnership investments over which the Commission
reserved jurisdiction in the Merger Order.
In particular, PSI Energy had invested in Cambridge Ventures, L.P.
("Cambridge Ventures") a private fund licensed by the U.S. Small Business
Administration as a small business investment company, dedicated to
making investments in start-up Indiana companies. PSI Energy also had
invested in CID Equity Partners, which in turn consists of CID Partnership,
L.P. ("CID Partnership"), CID Ventures, L.P. ("CID Ventures") and CID
Equity Capital III, L.P. ("CID Equity Capital"). CID Equity Partners
(including its constituent partnerships) is a private venture capital
partnership dedicated to building successful companies through long-term
investments in growing Indiana and other midwestern companies. The initial
investments by CID Equity Partners were made under the auspices of a 1981
Indiana legislative act that encouraged such investments through the
granting of a one-time tax credit.
Finally, the Commission reserved jurisdiction over PSI Energy's limited
partnership investment in Circle Centre Partners L. P. ("CCP"), a Delaware
limited partnership formed to invest in Circle Centre, a retail
shopping mall in downtown Indianapolis, Indiana, then under construction.
The 19 limited partners of CCP collectively have a 63% equity interest in
CCP; the remaining 37% equity interest is held by Circentre Incorporated,
as general partner. The CCP limited partners include some of the largest
businesses in Indiana: in addition to PSI Energy, such companies as
Ameritech Indiana, Banc One Indiana Corporation, Bankers National Life
Insurance Company (a subsidiary of Conseco, Inc.), LRP Master Trust (a
retirement plan trust for Eli Lily and Company), MPP Development Company
(an affiliate of Marsh Supermarkets, Inc. Retirement Plan Trust)and IPALCO
Enterprises, Inc. CCP has an 85% interest in Circle Centre
Development Company ("CCDC"), an Indiana general partnership that is the
official developer and operator of Circle Centre and leases the realty and
buildings from the City of Indianapolis. Simon Property Group, L.P. has
the remaining 15% interest in CCDC and acts as the managing general partner
of CCDC.
Opened in September 1995, Circle Center is an 800,000 square foot
retail shopping mall located one block south of Monument Circle, the heart
of downtown Indianapolis. It has two anchor department stores, 85
smaller shops, and an entertainment component that includes a multi-screen
cinema, nightclubs and restaurants. The mall incorporates and preserves
nine historic facades and parts of two other historic structures.
Circle Centre represents a public/private partnership between the City
of Indianapolis and the Indianapolis business community. Conceived in the
1980s as an answer to declining retail sales in downtown
Indianapolis, the center was more than ten years in the making. The site,
assembled by the City and including a number of existing historic
structures, sat vacant for much of that time while various financing
alternatives were explored and potential tenants sought. Ultimately, the
City provided over half the project's financing through "tax-increment"
bonds, the Indianapolis business community supplied one-quarter of the
financing, and a construction loan furnished the balance of the needed
funds. Specifically, the City provided approximately 60%
($187 million) of the $307.5 million cost of the project through the sale
of tax-increment bonds; almost a quarter of the overall financing cost ($75
million) was furnished through equity raised by CCDC ($40 million of
which was supplied by the 19 limited partners of CCP); and the remainder of
the project cost (approximately $45 million) was raised with the proceeds
of a bank construction loan.
Since its opening, Circle Centre has been a commercial success for the
developer and the City of Indianapolis (in the first year, retail sales
exceeded $400 per square foot). Circle Centre has buoyed existing downtown
development and stimulated new development; downtown hotel occupancy has
improved and convention center bookings have increased./22/
As of June 30, 1997, PSI Energy's aggregate investments and
corresponding limited partnership interests in Circle Centre and the other
partnerships described above was as follows (figures are rounded):
Cambridge Ventures - $525,000 investment; 9% interest; CID Partnership -
$314,000 investment; 3% interest; CID Ventures - $846,000 investment; 3%
interest; CID Equity Capital - $2.8 million; 8% interest; and Circle
Centre Partners - $3,015,000 investment; 5% interest.
Cinergy requests authority for PSI Energy to fund the balance of its
remaining commitment - $520,000 - to CID Equity Capital; this commitment
was made in connection with PSI Energy's initial investment in the
fund prior to the Cinergy merger. Any further investments by PSI Energy or
any of its associate companies in these funds would only be made pursuant
to a separate order from the Commission or as permitted by rule
40(a)(5).
E. Rule 54 Analysis
Rule 54 provides that 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, or other transactions by such
registered holding company or its subsidiaries other than with respect to
EWGs or FUCOs, the Commission shall not consider the effect of the
capitalization or earnings of any subsidiary which is an EWG or FUCO upon
the registered holding company system if paragraphs (a), (b) and (c) of
rule 53 are satisfied. As set forth below,
Cinergy satisfies all of those conditions.
Rule 53(a)(1): At June 30, 1997, Cinergy had invested, directly or
indirectly, an aggregate of approximately $500 million in EWGs and FUCOs.
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, 1997 was approximately $1.01 billion. Accordingly, based on
Cinergy's "consolidated retained earnings" at June 30, 1997, and taking
into account Cinergy's "aggregate investment" as of that date, Cinergy had
available investment capacity under rule 53 of approximately $5 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
"majority-owned subsidiary company" of Cinergy are kept in conformity with
and prepared according to U.S. generally accepted accounting principles
("GAAP"). Cinergy will provide the Commission access to such books and
records and financial statements, or copies thereof, in English, as the
Commission may request.
In accordance with Rule 53(a)(2)(iii), for each foreign EWG and FUCO in
which Cinergy directly or indirectly owns 50% or less of the voting
securities, Cinergy will proceed in good faith, to the extent reasonable
under the circumstances, to cause each such entity's books and records to
be kept in conformity with, and the financial statements of each such
entity to be prepared according to, GAAP. If such books and records are
maintained, or such financial statements are prepared, according to a
comprehensive body of accounting principles other than GAAP, Cinergy will,
upon request of the Commission, describe and quantify each material
variation from GAAP in the accounting principles, practices and methods
used to maintain such books and records and each material variation from
GAAP in the balance sheet line items and net income reported in such
financial statements, as the case may be. In addition, Cinergy will
proceed in good faith, to the extent reasonable under the circumstances, to
provide access to 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, at any one time, directly or indirectly, render
services to EWGs and FUCOs.
Rule 53(a)(4): Cinergy will promptly 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). Specifically:
Rule 53(b)(1): Neither Cinergy nor any 10% subsidiary thereof (within
the meaning of rule 53(b)(1)) 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 30,1997 were approximately $1.01 billion, as
compared to approximately $1 billion for the four quarters ended
March 31, 1997, a net increase of $10 million.
Rule 53(b)(3): For the year ended December 31, 1996, Cinergy did not
report operating losses attributable to its direct and indirect investments
in EWGs and FUCOs in an amount greater than 5% of consolidated retained
earnings.
Item 2. Fees, Commissions and Expenses
The fees, commissions and expenses payable by Cinergy or any associate
company in connection with Cinergy's proposed acquisition and retention of
the Residual Interests above are estimated not to exceed $5,000.
Item 3. Applicable Statutory Provisions
A. Applicable Standards
Cinergy's proposed acquisition and retention of the Residual Interests
is or may be subject to sections 9(a)(1), 9(c)(3), 10(c)(1) and 11(b)(1) of
the Act and rules 40(a)(5), 54 and 58 thereunder.
Section 9(a)(1) requires prior Commission approval under the standards
of section 10 for a direct or indirect acquisition by a registered holding
company of "any interest in any other [i.e., nonutility] business."
Section 10(c)(1) precludes approval of an acquisition that would be
"detrimental to the carrying out of the provisions of section 11." Section
11(b)(1) in turn directs the Commission to limit the nonutility interests
of a registered holding company to those that are "reasonably incidental,
or economically necessary or appropriate" to the company's utility
operations, including interests the Commission finds "necessary or
appropriate in the public interest or for the protection of investors or
consumers and not detrimental to the proper functioning of
such [integrated public utility] system." The Commission has construed
these standards to require a "functional" relationship between the
operations of the utility and the nonutility business./23/
Rule 58 provides an exemption from the requirement of prior Commission
approval under sections 9(a)(1) and 10 for direct or indirect acquisitions
by registered holding companies or their subsidiaries of interests in
"energy-related companies," subject to certain investment limitations and
reporting requirements.
Likewise, section 9(c)(3) exempts from sections 9(a)(1) and 10
acquisitions of "such commercial paper and other securities, within such
limitations as the Commission may by rules and regulations or order
prescribe as appropriate in the ordinary course of business of a registered
holding company or subsidiary company thereof and as not detrimental to the
public interest or the interest of investors or consumers." Previous
Commission orders under section 9(c)(3) have approved, among other things,
acquisitions of small amounts of securities of local industrial development
corporations, affordable housing projects, and venture capital
concerns./24/
Pursuant to section 9(c)(3) the Commission has adopted rule 40(a)(5) to
exempt small investments in local economic development or other nonutility
enterprises where no affiliate relationship results. Under the
rule, in any calendar year a registered holding company or its subsidiary
may acquire (i) up to $5 million of the securities of local economic
development corporations created under specific state laws promoting
economic development, and (ii) up to $1 million of the securities of local
industrial or nonutility enterprises.
Cinergy's acquisition and retention of the Residual Interests -
including for these purposes any thereof that are rule 58 companies -
satisfies the foregoing standards. In each case retention is supported
either by the plain language of rule 58 or rule 40(a)(5) or by previous
orders of the Commission approving similar nonutility activities or
investments.
B. Legal Analysis: Retention of CG&E Residual Interests
1. Tri-State
Tri-State's function is to acquire and hold real estate to support the
utility business of CG&E and its subsidiaries. Tri-State is therefore
"functionally" related to CG&E's utility business and retainable. The
Commission recently authorized New Century Energies to retain a
functionally similar nonutility company
called "1480 Welton, Inc." /25/
2. KO
In the event the Commission authorizes Cinergy to retain CG&E's gas
business, Cinergy should also be permitted to retain KO - a CG&E gas
pipeline subsidiary whose facilities physically interconnect with those of
both CG&E and ULH&P, and which transports natural gas for both of those
companies in connection with their gas supply businesses. The Commission
recently authorized New Century Energies to retain a functionally
similar subsidiary, West Gas Interstate, Inc./26/
However, since Cinergy is not now asking the Commission to address the
retainability of CG&E's gas business, but rather is requesting a further
deferral of one-year, Cinergy also requests that the Commission
likewise defer resolution of the ancillary question of the retainability of
KO for that same period.
3. Enertech
Enertech is a named defendant in the pending lawsuit described above
and is otherwise inactive. Cinergy requests authorization to retain
Enertech, subject to the Activation Commitment.
4. Cinergy Resources
Cinergy Resources derives substantially all of its revenues from the
retail marketing of natural gas on a non-regulated basis to industrial and
large commercial customers, primarily in the states of Ohio, Indiana and
Kentucky, and the acquisition of gas supplies and related transportation
capacity to support such sales. Accordingly, as provided in Cinergy's
Quarterly Report on Form U-9C-3 for the quarter ended June 30, 1997,
Cinergy Resources is a rule 58 company./27/
5. CG&E "Good Citizen" Limited Partnership Investments
The Commission retained jurisdiction over five small "good citizen"
limited partnership investments of CG&E: North Rhine I, North Rhine II and
Franciscan Homes (dedicated to owning, rehabilitating and maintaining
apartment buildings for low-income people within the CG&E service
territory) and the two "Blue Chip" partnerships (investments in small and
minority- or female-owned businesses in the service territories of
CG&E and its subsidiaries). CG&E is a small (often very small) investor in
these partnerships: North Rhine I - $9,000; 2% limited partnership
interest; North Rhine II - $86,000 investment; 6% interest; Franciscan
Homes - $2,000 investment; 2% interest; Blue Chip Capital - $721,000
investment; 2% interest; and Blue Chip Opportunity - $447,000 investment;
4% interest. Moreover, as is customary for such "good citizen"
investments, CG&E is merely a passive investor, with day-to-day management
and control being vested exclusively in the general partner. Any approval
rights held by CG&E, by virtue of its status as limited partner,
concern only those extraordinary, fundamental matters affecting the
partnership (such as changes in investment policy or replacement of the
general partner) as to which limited partners customarily retain voting
rights.
In short, the foregoing investments - intended to boost economic
development in the communities CG&E serves; small in amount; and not
involving the creation of any affiliate relationship - are classic "good
citizen" investments of the type previously approved by order under section
9(c)(3) and, depending on the aggregate amount of annual investments,
eligible for the exemption afforded by rule 40(a)(5).
C. Legal Analysis: Retention of PSI Residual Interests
1. Cinergy Capital & Trading
Cinergy Capital & Trading derives or will derive substantially all of
its revenues from bulk marketing and trading of energy commodities and
associated derivatives throughout the United States. Accordingly, it is a
rule 58 company/29/ and Cinergy has so reported that status to the
Commission./30/
2. South Construction
South Construction is retainable on the same basis as Tri-State: the
primary purpose of each is to acquire and hold realty in connection with
the utility businesses of their operating company affiliates.
3. PSI Power Resource Development
PSI Power Resource Development is presently inactive. Cinergy requests
authorization to retain PSI Power Resource Development, subject to the
Activation Commitment.
4. Cinergy-Cadence, Inc.
The sole activity of Cinergy Cadence (formerly an inactive subsidiary,
PSI power Resource Operations)is to hold Cinergy's one-third equity
interest in the Cadence Network joint venture with New Century Energies
and Florida Progress. As discussed, Cadence Network will market a variety
of energy-related products and services - including billing, information
and pricing services, energy management services, and commodity
procurement - to retail commercial customers that operate in multiple
locations across the country. Given that Cadence Network is a rule 58
company,/31/ it follows that Cinergy Cadence, whose role is to hold
Cinergy's interest in Cadence Network, is also a rule 58 company./32/
5. Cinergy International
Cinergy International is presently inactive. Cinergy requests
authorization to retain Cinergy International, subject to the Activation
Commitment.
6. PSI Sunnyside
PSI Sunnyside is presently inactive. Cinergy requests authorization to
retain PSI Sunnyside, subject to the Activation Commitment.
7. Cinergy Technology
The primary focus of this company is to commercialize and market
electrotechnologies. For example, as previously discussed, Cinergy
Technology receives royalty payments from a third party manufacturer for
sales of certain portable electronic meters that can be used to record a
variety of energy-related measurements, and has been working with certain
other outside parties on commercializing certain stationary or
"distributed" electric generation systems based on fuel cell technology.
Upon completion of the pending transfer to Cinergy Communications,
Cinergy's ETC, of the telecomm contracts to which Cinergy Technology is now
a party, Cinergy Technology will likely qualify as a rule 58 company./33/
In any event, Commission precedent confirms that companies such as Cinergy
Technology are functionally related to the utility business and therefore
retainable./34/
8. PSI T&D International/PSI Yacyreta
These companies are presently inactive. Cinergy proposes to retain
each of them, subject to the Activation Commitment.
9. PSI Energy "Good Citizen" Limited Partnership Investments
As with the CG&E "good citizen" investments, these corresponding
investments of PSI Energy are small and intended to benefit the local
community: Cambridge Ventures and CID Equity Partners were both
established to provide "seed capital" for growing Indiana and midwestern
companies; Circle Centre Partners was formed to help finance the
construction of Circle Centre mall in downtown Indianapolis. PSI Energy is
solely a passive investor in these funds, with day-to-day operations and
control exercised exclusively by the general partner for each fund.
With respect to PSI Energy's investments in Cambridge Ventures and CID
Equity Partners, quite apart from the potential availability of rule
40(a)(5), the Commission has issued a series of orders under section
9(c)(3) authorizing similar passive investments in local venture capital
funds./35/
Regarding Circle Centre, the overriding purpose of that project - a
public/private partnership in which officials of the City of Indianapolis
appealed to the local business community for assistance - is to stimulate
economic development in the downtown core of Indianapolis. Inasmuch as its
service territory surrounds the city, PSI Energy has an important stake in
an economically healthy Indianapolis. The Commission has authorized
investments under section 9(c)(3) in local economic development
corporations akin to Circle Centre./36/
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 practicable. 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 The constituent instruments of the Residual Interests
(including for these purposes any rule 58 companies) either have already
been or will be filed as exhibits to Cinergy's Registration Statement
on Form U5B and Cinergy's Annual Reports on Form U5S for the years ended
December 31, 1995, 1996 and 1997, respectively, and are hereby incorporated
by reference.
B Not applicable
C Not applicable
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
H Cinergy system corporate chart
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.
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: October 17, 1997
CINERGY CORP.
By: /s/ William L. Sheafer
Vice President and Treasurer
ENDNOTES
/1/ As an integral step in the business combination, PSI was merged out of
existence and Cinergy became the direct owner of all the outstanding common
stock of PSI Energy, Inc. ("PSI Energy"), PSI's Indiana electric
utility subsidiary, and succeeded to indirect ownership of the various
nonutility interests held by PSI. For more information with respect to the
structure of the Cinergy merger and the current structure of the Cinergy
system, see Merger Order at 5 and Exhibit H, respectively.
/2/ Cinergy also requests a concurrent extension of the pending
reservation of jurisdiction over the nonutility interests - i.e., until
October 21, 1998 - solely in respect of CG&E's subsidiary, KO Transmission
Company ("KO"), which is engaged in the business of owning an interest in
certain natural gas pipeline and appurtenant facilities in Kentucky and
transporting natural gas in interstate commerce over those facilities,
pursuant to rate schedules filed with the Federal Energy Regulatory
Commission ("FERC") under the Natural Gas Act.
/3/ With respect to two of those interests, Cinergy also requests
authority, as discussed below, to make further limited partnership
investments totaling $620,000.
/4/ Amendment 4 to Application-Declaration in File No. 70-8427 ("Merger
U-1"), concluding text under Item 3.A.2.a.i & ii.
/5/ Merger Order at 9.
/6/ Id. at 11.
/7/ Release No. 35-26748, August 1, 1997 ("New Centuries").
/8/ Specifically, (1) the subsidiary companies of Enertech Associates,
Inc. (formerly Enertech Associates International, Inc.) namely, Beheer-En
Beleggingsmaatschappij Bruwabel B.V., a Dutch company ("Bruwabel"), and its
two Czech subsidiaries, Power Development s.r.o. and Power International
s.r.o., (2) CGE ECK, Inc. and its Czech subsidiary, ECK s.r.o., (3) CGE
Corp., (4) PSI Recycling, Inc., (5) Power Equipment Supply Company, (6) PSI
Investments, Inc. and (7) Energy Services Inc. of Buenos Aires.
/9/ Specifically, (1) Cinergy Resources, Inc. (formerly CG&E Resource
Marketing, Inc.), (2) Cinergy Capital & Trading, Inc. (formerly Wholesale
Power Services, Inc.) and (3) Cinergy-Cadence, Inc. (formerly PSI Power
Resource Operations, Inc.).
/10/ Specifically, (1) Enertech Associates, Inc., (2) PSI Power Resource
Development, Inc., (3) Cinergy International, Inc., (4) PSI Sunnyside,
Inc., (5) PSI T&D International, Inc. and (6) PSI Yacyreta, Inc.
/11/ See Merger Order at n.6 and Item 1.B.3.a. of Amendment 4 to the
Merger U-1.
/12/ CG&E and its four wholly-owned utility subsidiaries - The Union Light,
Heat and Power Company, a Kentucky corporation ("ULH&P"), Lawrenceburg Gas
Company, The West Harrison Gas and Electric Company and Miami Power
Corporation, each of the latter three companies having been formed under
Indiana law - provide retail gas and electric service in the southwestern
portion of Ohio and adjacent areas of Indiana and Kentucky. The most
significant of CG&E's subsidiaries, in terms of size and relative
contribution to CG&E's consolidated assets and revenues (see, e.g.,
Cinergy's Annual Report on Form U5S for the year ended December 31, 1996,
Item 10), is ULH&P, which provides retail electric and natural gas service
in an area of northern Kentucky covering approximately 500 square miles
with an estimated population of 299,000, and including the cities of
Covington and Newport.
/13/ Merger Order at n. 6.
/14/ See PSI Resources, et al., Release No. 35-25570, July 2, 1992
(granting section 3(b) exemptions to, inter alia, PSI Energy Argentina,
Inc., an Indiana corporation and wholly-owned subsidiary of PSI, in
connection with proposed investment in Edesur, S.A., an Argentine electric
transmission and distribution company); PSI Resources, Inc., et al.,
Release No. 35-25674, November 13, 1992 (granting section 3(b) exemptions
to, inter alia, PSI Argentina, Inc. and Costanera Power Corporation, each
Indiana corporations and direct or indirect wholly-owned subsidiaries of
PSI, in connection with proposed investment in Central Costanera, S.A., an
Argentine electric generating company).
/15/ See Merger Order at n. 7 and Item 1.B.3.b of Amendment 4 to the
Merger U-1.
/16/ See Cinergy's Annual Report on Form U5S for the year ended December
31, 1996, Item 10.
/17/ For financial information covering 1996 and 1995 for Tri-State (and
any other nonutility interest still retained by Cinergy over which the
Commission reserved jurisdiction in the Merger Order), see Item 10 of
Cinergy's Annual Reports on Form U5S for the years ended December 31, 1996
and 1995.
/18/ KO Transmission Co., 74 FERC P61,101 (1996).
/19/ In August 1997, pursuant to a separate 1995 rate settlement with
Columbia Gas approved by the FERC in early 1997, KO applied to the FERC for
a certificate of public convenience to acquire and operate certain
additional undivided interests in discrete portions of Columbia Gas's
Kentucky gas pipeline system. The application is pending. See FERC
Docket No. CP97-720-000.
/20/ See Merger Order at n. 13 and accompanying text. For more
information with respect to Cinergy Investments and its formation, see
Amendment 4 to the Merger U-1 at Item 1.B.1.c.iv ("New Cinergy Non-Utility
Subholding Company") and Cinergy's certificate of notification filed with
the Commission in File No. 70-8427 on January 10, 1996.
/21/ Wholesale Power Services, Inc., 72 FERC P61,284 (1995).
/22/ For further information regarding Circle Centre, see The Urban Land
Institute, Project Reference File, Vol. 26, No. 12 (July-September 1996).
/23/ Michigan Consolidated Gas Co., 44 SEC 361 (1970), aff'd, 444 F.2d 913
(D.C. Cir. 1971); CSW Credit, Inc., Release No. 35-25995 (March 2, 1994).
/24/ See, e.g., cases cited infra.
/25/ New Century, supra, Appendix A.
/26/ Ibid.
/27/ See rule 58(b)(1)(v).
/28/ See Georgia Power Co., Release No. 35-26220 (January 24, 1995) and
East Ohio Gas Co., Release No. 35-25046 (February 27, 1990) (securities of
affordable housing partnerships); see also Georgia Power Co., Release No.
35-25949 (December 15, 1993) and Hope Gas, Inc., Release No. 35-25739
(January 26, 1993) (securities of local venture capital companies).
/29/ See rule 58(b)(1)(v).
/30/ See Cinergy's Quarterly Report on Form U-9C-3 for the quarter ended
June 30, 1997.
/31/ See rule 58(b)(1)(i), (v), (vii).
/32/ See rule 58(b)(1)("the term energy-related company' shall mean any
company that, directly or indirectly, through one or more affiliates,
derives or will derive substantially all of its revenues from one or more
of the following activities within the United States ")(emphasis added);
see also Release No. 35-26667, February 14, 1997 (adopting rule 58) at
section II.A.1.a (definition of "energy-related company"):
One commenter suggests that the definition of energy-related company
be expanded to include companies that derive substantially all of their
revenues from the listed activities, either directly or indirectly. The
requested revision would permit a registered holding company system to use
one or more intermediate subsidiaries (i.e., "project parents") to invest
in energy-related companies, yet retain the benefit of the exemption
afforded by the rule. The Commission believes that this suggestion is
consistent with the intent of the rule as proposed. Use of an intermediate
subsidiary could further insulate the holding company and its other
subsidiaries, including utility subsidiaries, from any direct losses that
could occur with respect to rule 58 investments. At the same time, this
measure would offer greater flexibility in the structuring of these
investments. Accordingly, the rule, as adopted, is modified to incorporate
the concept of indirect investment in energy-related companies through
project parents. (footnotes omitted)
/33/ See rule 58(b)(1)(ii) (development and commercialization of
electrotechnologies related to energy conservation, storage and
conservation, energy efficiency, waste treatment, greenhouse gas reduction,
and similar innovations).
/34/ See, e.g., GPU International, Inc., Release No. 35-26631 (December
17, 1996)(investment in alliance to develop, manufacture and market
stationary electric power systems employing fuel cell technology); Cinergy
Corp., Release No. 35-26562 (August 28, 1996)(acquisition of limited
partnership interest in fund formed to invest in companies engaged in
developing and commercializing electric and gas technologies relating to
electricity generation and storage; electric power quality; energy-related
communications, control and information technologies; energy-saving end-use
products; and transmission and distribution).
/35/ See Georgia Power Co., Release No. 35-25949 (December 15, 1993) and
Hope Gas, Inc., Release No. 35-25739 (January 26, 1993) (securities of
local venture capital companies).
/36/ In addition to the venture capital cases cited above, see Potomac
Edison Co., Release No. 35-25312 (May 14, 1991) (investment in for-profit
economic development corporation).
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 post-effective
amendment under sections 9(a)(1), 9(c)(3), 10(c)(1) and 11(b)(1) of the Act
and rules 40(a)(5), 54 and 58 thereunder to its application-declaration in
File No. 70-8427.
By order dated October 21, 1994 in said file (Release No.
35-26146)("Merger Order"), the Commission authorized a proposed business
combination and related transactions between The Cincinnati Gas & Electric
Company, an Ohio gas and electric utility company and exempt holding
company ("CG&E"), and PSI Resources, Inc., an Indiana exempt holding
company ("PSI"), resulting in Cinergy's creation as a new registered
holding company. The Merger Order reserved jurisdiction over Cinergy's
retention of the gas utility properties of CG&E and the nonutility
interests of CG&E and PSI for a three-year period expiring October 21,
1997.
Cinergy now requests, first, an order extending until October 21,
1998 the pending reservation of jurisdiction over Cinergy's ownership of
the gas properties of CG&E, by which date Cinergy will file a further
post-effective amendment addressing that matter on the merits. The
extension in the pending reservation of jurisdiction would also apply to
the ultimate retainability of KO Transmission Company, a gas pipeline
subsidiary of CG&E.
Second, with regard to the pending reservation of jurisdiction
over the 1994 CG&E and PSI nonutility interests, Cinergy notes as a
preliminary matter that events since the Merger Order - in particular,
adoption of rule 58 under the Act/1/ and various sales or dispositions by
Cinergy of nonutility companies/2/ - have partially resolved this question,
obviating the need for Commission authorization to retain certain of the
interests.
Concerning the remainder of the nonutility interests (the
"Residual Interests"), Cinergy now requests in each case (other than that
of KO) that the Commission release its reservation of jurisdiction and
issue an appropriate order authorizing Cinergy's retention thereof.
Specifically, Cinergy requests authorization to retain (1) Tri-State
Improvement Company, a subsidiary of CG&E that is devoted to acquiring and
holding property in Ohio, Kentucky and Indiana for substations, electric
and gas rights of way, office space, and other uses in connection with the
utility business of CG&E and its utility subsidiaries; (2) Enertech
Associates, Inc. (formerly Enertech Associates International, Inc.), a
presently inactive company involved in litigation that is a subsidiary of
Cinergy Investments, Inc. ("Cinergy Investments"), a direct subsidiary of
Cinergy that holds many of Cinergy's nonutility interests; (3) certain
"good citizen" limited partnership investments held by CG&E (namely, (i)
North Rhine I Limited Partnership, (ii) North Rhine II Limited Partnership
and (iii) Franciscan Homes II Limited Partnership, each formed to invest in
affordable housing within CG&E's service territory, and (iv) Blue Chip
Capital Fund and (v) Blue Chip Opportunity Fund, each formed to invest in
small and minority- or female-owned businesses in the service territories
of CG&E and its subsidiaries); (4) South Construction Company, Inc., a
subsidiary of Cinergy's Indiana electric utility subsidiary, PSI Energy,
Inc. ("PSI Energy"), devoted to holding legal title to interests in real
estate not used and useful in the conduct of the utility business of PSI
Energy or having some defect in title unacceptable to PSI Energy; (5) PSI
Power Resource Development, Inc., presently inactive and a subsidiary of
Cinergy Investments; (6) Cinergy International, Inc. (formerly PSI
International, Inc.), presently inactive and a subsidiary of Cinergy
Investments; (7) PSI Sunnyside, Inc., presently inactive and a subsidiary
of Cinergy Investments; (8) Cinergy Technology, Inc. (formerly PSI
Environmental Corp.), a subsidiary of Cinergy Investments that is dedicated
primarily to commercializing electrotechnologies and is party to several
telecommunications contracts in the process of being transferred to an
"exempt telecommunications company" (as such term is defined in the
Telecommunications Act of 1996, "ETC") affiliate; (9) PSI T&D
International, Inc., presently inactive and a subsidiary of Cinergy
Investments; (10) PSI Yacyreta, Inc., presently inactive and a subsidiary
of PSI T&D International, Inc.; and (11) certain "good citizen" limited
partnership investments held by PSI Energy (namely, (i) Cambridge Ventures,
L.P. and (ii) CID Equity Partners (comprised of three constituent
partnerships), each formed to invest in start-up Indiana or midwestern
companies, and (iii) Circle Centre Partners L. P., formed to help finance
and to invest in the Circle Centre retail shopping mall located in downtown
Indianapolis, Indiana). Cinergy requests authorization also to make
further limited partnership investments aggregating $620,000 in two of the
funds just described. The inactive companies described above Cinergy
proposes to retain subject to the terms of an "Activation Commitment"
described below.
Cinergy represents that it will not seek recovery through higher
rates to Cinergy system utility customers to compensate Cinergy for any
losses or inadequate returns it may experience on capital invested in the
Residual Interests.
With respect to those of the Residual Interests that are presently
inactive, Cinergy will not "activate" any such company, in the absence of
further express Commission authorization, except in the event Cinergy
determines to utilize any such company as either (a) an ETC, (b) a rule 58
company, (c) a "Special Purpose Subsidiary" - i.e., a company dedicated,
directly or indirectly, and exclusively, to the business of acquiring and
holding the securities of, or providing services to, exempt wholesale
generators (each, an "EWG") and foreign utility companies (each, a "FUCO")
as contemplated by, and subject to the restrictions of, the Commission's
orders dated May 8, 1996 and September 21, 1995 in File No. 70-8589
(Release Nos. 35-26486 and 35-26367,respectively); or (d) a direct or
indirect subsidiary of Cinergy Solutions, Inc., a Delaware corporation
("Solutions"), to engage in any of the activities that the Commission in
its February 7, 1997 order in File No.70-8933 (Release No. 35-26662)
authorized Solutions to engage in, either directly or indirectly through
one or more subsidiaries created from time to time. Cinergy refers to the
foregoing undertaking as the "Activation Commitment."
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
ENDNOTES
/1/ Cinergy states that the following subsidiaries are all
energy-related companies as defined in rule 58: (1) Cinergy Resources,
Inc. (formerly CG&E Resource Marketing, Inc.), (2) Cinergy Capital &
Trading, Inc. (formerly Wholesale Power Services, Inc.), and (3)
Cinergy-Cadence, Inc. (formerly PSI Power Resource Operations, Inc.).
/2/ Cinergy states that since the Merger Order the following
nonutility companies have been sold or dissolved or are in the process of
dissolution:(1) the subsidiary companies of Enertech Associates, Inc.
(formerly Enertech Associates International, Inc.) - namely, Beheer-En
Beleggingsmaatschappij Bruwabel B.V., a Dutch company, and its two Czech
subsidiaries, Power Development s.r.o. and Power International s.r.o.,
(2) CGE ECK, Inc. and its Czech subsidiary, ECK s.r.o., (3) CGE Corp., (4)
PSI Recycling, Inc., (5) Power Equipment Supply Company, (6) PSI
Investments, Inc. and (7) Energy Services Inc. of Buenos Aires.
Exhibit H
CINERGY SYSTEM CORPORATE STRUCTURE
Cinergy Corp. (Delaware, 6/30/1993)/1/
Cinergy Services, Inc. (Delaware, 2/23/1994)
The Cincinnati Gas & Electric Company (Ohio, 4/3/1837)
The Union Light, Heat and Power Company (Kentucky, 3/20/1901)
Tri-State Improvement Company (Ohio, 1/14/1964)
Lawrenceburg Gas Company (Indiana, 5/5/1868)
The West Harrison Gas and Electric Company (Indiana, 8/19/1942)
Miami Power Corporation (Indiana, 3/25/1930)
KO Transmission Company (Kentucky, 4/11/1994)
PSI Energy, Inc. (Indiana, 9/6/1941)
PSI Energy Argentina, Inc. (Indiana, 6/5/1992)
South Construction Company, Inc. (Indiana, 5/31/1934)
Cinergy Investments, Inc. (Delaware, 10/24/1994)
(subsidiaries listed below)
Cinergy Foundation, Inc. (Indiana, 12/7/1988)
Cinergy Investments, Inc. (Delaware, 10/24/1994)/2/
CGE ECK, Inc. (Delaware, 3/3/1994)
Cinergy-Cadence, Inc. (Indiana, 12/27/1989; formerly PSI Power
Resource Operations, Inc.)
Cadence Network LLC (Delaware, 9/3/1997)/3/
Cinergy Capital & Trading, Inc. (Indiana, 10/8/1992; formerly
Wholesale Power Services, Inc.)
Cinergy Communications, Inc. (Delaware, 9/20/1996)
Cinergy Engineering, Inc. (Ohio, 3/28/1997)
Cinergy International, Inc. (Indiana, 12/9/1991; formerly PSI
International, Inc.)
Cinergy Investments MPI, Inc. (Delaware, 9/4/1997)
Cinergy MPI I, Inc. (Cayman Islands, 9/4/1997)
Cinergy MPI II, Inc. (Cayman Islands, 9/4/1997)
Cinergy MPI III, Inc. (Cayman Islands, 9/4/1997)
Cinergy MPI IV, Inc. (Cayman Islands, 9/4/1997)
Cinergy MPI V, Inc. (Cayman Islands, 9/4/1997)
Cinergy MPI VI, Inc. (Cayman Islands, 9/4/1997)
Cinergy MPI VII, Inc. (Cayman Islands, 9/4/1997)
Cinergy MPI VIII, Inc. (Cayman Islands, 9/4/1997)
Cinergy MPI IX, Inc. (Cayman Islands, 9/4/1997)
Cinergy MPI X, Inc. (Cayman Islands, 9/4/1997)
Cinergy MPI XI, Inc. (Cayman Islands, 9/4/1997)
Cinergy MPI XII, Inc. (Cayman Islands, 9/4/1997)
Cinergy MPI XIII, Inc. (Cayman Islands, 9/4/1997)
Cinergy MPI XIV, Inc. (Cayman Islands, 9/4/1997)
Cinergy MPI XV, Inc. (Cayman Islands, 9/4/1997)
MPI International Limited (London, England, 8/14/1997)
Cinergy Resources, Inc. (Delaware, 1/10/1994; formerly CG&E
Resource Marketing, Inc.)
Cinergy Solutions, Inc. (Delaware, 2/11/1997)
Trigen-Cinergy Solutions LLC (Delaware, 2/18/1997)/4/
Trigen-Cinergy Solutions of Cincinnati LLC (Ohio,
7/29/1997)/5/
Trigen-Cinergy Solutions of Illinois L.L.C. (Delaware,
4/17/1997)/6/
Cinergy Technology, Inc. (Indiana, 12/12/1991; formerly PSI
Environmental Corp.)
Cinergy UK, Inc. (Delaware, 5/1/1996)
Avon Energy Partners Holdings (London, England,
5/3/1996)/7/
Avon Energy Partners PLC (London, England, 4/30/1996)
Midlands Electricity plc (London, England)
Enertech Associates, Inc. (Ohio, 10/26/1992)/8/
PSI Argentina, Inc. (Indiana, 4/10/1992)
Costanera Power Corp. (Indiana, 4/10/1992)
PSI Power Resource Development, Inc. (Indiana, 1/23/1990)
PSI Recycling, Inc. (Indiana, 6/1/1990)
PSI Sunnyside, Inc. (Indiana, 12/6/1990)
PSI T&D International, Inc. (Indiana, 8/3/1994)
PSI Yacyreta, Inc. (Indiana, 9/8/1994)
Power Equipment Supply Co. (Indiana, 1/23/1990)
/1/ Parenthetical information identifies place and date of incorporation.
Subsidiary status indicated by indentation. Unless otherwise indicated,
all subsidiaries are wholly-owned.
/2/ Certain of Investments' subsidiaries are not engaged in active
business operations and/or are being dissolved.
/3/ Jointly owned 33-1/3% each with Florida Progress Corporation and New
Century Energies.
/4/ Jointly owned 50% each with Trigen Solutions, Inc., a subsidiary of
Trigen Energy Corporation.
/5/ Effective August 29, 1997, the former Cinergy Cooling Corp. was merged
with and into Trigen-Cinergy Solutions of Cincinati LLC, with said LLC
being the surviving company jointly owned 51% by Cinergy Solutions, Inc.
and 49% by Trigen Solutions, Inc.
/6/ Jointly owned 49% by Cinergy Solutions, Inc. and 51% by Trigen
Solutions, Inc.
/7/ Jointly owned 50% each with EI UK Holdings, Inc., a subsidiary of EI
Energy, Inc., which is a subsidiary of GPU, Inc.
/8/ Formerly Power International, Inc. and formerly Enertech Associates
International, Inc.
