File No. 70-9319
SECURITIES AND EXCHANGE COMMISSION
450 FIFTH STREET, N.W.
WASHINGTON, D.C. 20549
__________________________________________
AMENDMENT NO. 1 TO
FORM U-1 APPLICATION-DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
____________________________________________
Cinergy Corp.
Cinergy Investments, Inc.
Cinergy Global Resources, Inc.
139 East Fourth Street
Cincinnati, Ohio 45202
(Name of companies filing this statement
and addresses of principal executive offices)
Cinergy Corp.
(Name of top registered holding company parent)
William L. Sheafer
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:
Jerome A. Vennemann William T. Baker, Jr.
Associate General Counsel Thelen, Reid & Priest LLP
Cinergy Corp. 40 West 57th Street
(address above) New York, New York 10019
The application in this proceeding, originally filed on June 19, 1998, is
hereby amended in the following respects:
1. The penultimate paragraph of Item 1.B ("Description of Proposed
Transactions/Overview of Requested Authorization") is replaced in its
entirety by the following text:
Applicants propose that upon issuance of the
requested order certain outstanding orders be superseded,
in whole or in part, or amended./1/
2. Item 1.D.2 ("Description of Proposed Transactions/Proposed
Transactions/Issuance by Cinergy of guarantees") is replaced in its
entirety by
the following text:
2. Issuance by Cinergy of guarantees
Under prior Commission orders, Cinergy is currently
authorized to issue guarantees on behalf of certain system
companies, subject to different ceilings on the total
amount of guarantees that Cinergy can issue. As
explained below, one ceiling applies to guarantees of
Exempt Projects and EWG/FUCO Project Parents; another to
guarantees of rule 58 subsidiaries and certain other
Cinergy subsidiaries; and still another to guarantees of
Cinergy Solutions and its subsidiaries. In addition, the
guarantee authority in the prior orders expires at
varying dates.
Applicants propose to centralize and consolidate the
existing guarantee authority and to substitute a single
ceiling limiting the maximum amount of guarantees in
place of the three different ceilings that now apply.
The requested authorization would also expand the roster
of Cinergy system companies on whose behalf Cinergy can
issue guarantees, throughout the Authorization Period, to
include (among other system companies) Intermediate Parents and
Nonutility Companies.
a. Existing Cinergy guarantee authority
Under the Project Parent Order as amended by the
100% Order, Cinergy can issue guarantees on behalf of
obligations of Exempt Projects and EWG/FUCO Project Parents from
time to time through December 31, 1999, provided that Cinergy's "aggregate
investment" as determined
pursuant to rule 53 does not exceed 100% of Cinergy's
consolidated retained earnings ("100% Limitation").
Under the May 1997 Order, Cinergy is authorized to
guarantee, through December 31, 2002, obligations of (a)
certain existing Cinergy system companies (i.e., Cinergy
Services, KO, Tri-State, Cinergy Resources, Cinergy Capital &
Trading, Cinergy Technology and Enertech Associates) and (b) rule 58
companies in which Cinergy or any
of its subsidiaries thereafter acquires an interest.
Initially, these guarantees were subject to a $1 billion
cap (in addition to the aggregate investment provisions
of rule 58, where applicable), which also covered short-term debt
and commercial paper issued by Cinergy. Under
the terms of the January 1998 Order, the cap was raised
to $2 billion, covering these guarantees, Cinergy short-term debt
and commercial paper as well as up to $400 million of Cinergy debentures if
and when authorized by the
Commission./2/
Finally, the Cinergy Solutions Order authorized
Cinergy to guarantee debt and other obligations of
Cinergy Solutions and its subsidiaries from time to time
through December 31, 2001 in a maximum principal amount
at any time outstanding not to exceed $250 million.
b. Proposed Cinergy guarantee authority
To the extent not otherwise exempt under the Act,
Cinergy requests authority from time to time through the
Authorization Period to guarantee the debt or other securities or
obligations of (i) any and all existing and
future Intermediate Parents (including Cinergy Investments and
Cinergy Global Resources) and Nonutility Companies (excluding Nth Power
Fund), and (ii) Cinergy Services and the existing nonutility subsidiaries
of CG&E
and PSI - KO, Tri-State and South Construction. The
terms and conditions of any guarantees would be established at arm's
length based upon market conditions.
Any guarantees issued by Cinergy over the Authorization Period
would not exceed at any time outstanding
$1,000,000,000 in aggregate principal amount ("$1 Billion
Guarantee Cap"), provided further that (1) any guarantees
of Exempt Projects would also be subject to the 100%
Limitation, and (2) any guarantees of rule 58 companies
would also be subject to the aggregate investment
limitation of rule 58.
In connection with the proposed guarantee authority,
Applicants request that the Commission's order in this
proceeding:
1. supersede the Project Parent Order in its entirety;
2. supersede the May 1997 Order and the Cinergy
Solutions Order in part, i.e., solely to the
extent these orders authorize Cinergy to issue
guarantees on behalf of the respective system
companies specified therein; and
3. amend the terms of the January 1998 Order solely to
exclude the applicable Cinergy guarantees covered by
that order (i.e., any guarantees issued on behalf of
Cinergy Services, KO, Tri-State, Cinergy Resources,
Cinergy Capital & Trading, Cinergy Technology, Enertech
Associates together with future rule 58 companies) from the
scope of the $2 Billion Debt Cap
prescribed by that order. Henceforth, those guaran- tees
would be covered by the $1 Billion Guarantee
Cap, and the $2 Billion Debt Cap would be limited to
Cinergy short-term notes, commercial paper and
debentures.
3. The current text under Item 3 ("Applicable Statutory Provisions")
is replaced in its entirety by the following:
Applicants believe that sections 6(a), 7, 9(a), 10,
12(b), 12(c), 13, 32, 33 and 34 of the Act and rules 43,
45, 46, 53, 54, 58, 83, 87 and 90 are or may be applicable to the
proposed transactions.
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 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 a FUCO upon the registered
holding company system if the conditions of rule 53(a),
(b) and (c) are satisfied.
Cinergy currently does not meet the conditions of
rule 53(a). At June 30, 1998, Cinergy's "aggregate investment," as
defined in rule 53(a)(1), in EWGs and FUCOs
was approximately $590 million. This amount equals approximately
62% of Cinergy's "consolidated retained earnings," also as defined in rule
53(a)(1) (approximately
$948 million), which exceeds the 50% "safe harbor" limitation
contained in rule 53(a). The 100% Order authorized Cinergy to increase its
total investments in EWGs
and FUCOs to 100% of consolidated retained earnings.
Accordingly, although Cinergy's aggregate investment exceeds the 50%
safe harbor, that circumstance is expressly
permitted under the 100% Order.
At September 30, 1997, the most recent period for
which financial statement information was evaluated in
the 100% Order, Cinergy's consolidated capitalization
consisted of 44.1% equity and 55.9% debt. As shown in
Item I filed herewith, Cinergy's pro forma consolidated
capitalization at June 30, 1998, taking into account all
non-recourse debt applicable to Cinergy's ownership interest in EWGs
and FUCOs, is 35.9% equity and 64.1% debt.
With respect to earnings, the 100% Order stated that
Cinergy did not report a full-year operating loss attributable to
its investments in EWGs and FUCOs for any year
1992 through 1996. That order also stated that Midlands
Electricity plc ("Midlands"), a FUCO in the United kingdom in which
Cinergy has an ownership interest, recorded
a one-time extraordinary charge in the third quarter of
1997 as a result of a windfall profits tax imposed by the
authorities in the United Kingdom, of which $109 million
was allocable to Cinergy. However, the 100% Order noted
that Midland's credit ratings by Standard and Poor's remained
unchanged following the charge. Since the date of
the 100% Order, Cinergy's investments in EWGs and FUCOs
have continued to make a positive contribution to
Cinergy's earnings.
With respect to the remaining conditions of rule 54,
Cinergy has complied and will continue to comply with the
record-keeping requirements of rule 53(a)(2), the
limitation under rule 53(a)(3) on the use of operating
company personnel in rendering services to EWGs and
FUCOs, and the requirements of rule 53(a)(4) concerning
submission of specified filings under the Act to retail
rate regulatory agencies. In addition, none of the
conditions in rule 53(b) has occurred.
4. The following exhibits are filed herewith:
Exhibit G-1 Revised Form of Notice
Exhibit I Pro Forma Capitalization at June 30, 1998<PAGE>
<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: September 22, 1998
CINERGY CORP.
By:/s/William L. Sheafer
Vice President and Treasurer
CINERGY INVESTMENTS, INC.
By:/s/William L. Sheafer
Vice President and Treasurer
CINERGY GLOBAL RESOURCES, INC.
By:/s/William L. Sheafer
Vice President and Treasurer
ENDNOTES
/1/ Specifically, Applicants propose that, upon issuance of the order
requested herein, the Project Parent Order and Commission order dated May
22,
1997 (HCAR No. 26719) (authorizing Cinergy Investments and certain other
Cinergy nonutility subsidiaries to pay dividends out of capital surplus to
their respective parent companies through December 31, 2002) be superseded
in their entirety.
Applicants also request that Commission orders dated February 7, 1997 (HCAR
No. 26662) (authorizing the formation of Cinergy Solutions, Inc. and
related transactions) and May 30, 1997 (HCAR No. 26723) (authorizing
Cinergy
to issue guarantees on behalf of Cinergy Services, Inc., certain Cinergy
nonutility subsidiaries, and future rule 58 companies in which Cinergy or
its subsidiaries acquires an interest) ("May 1997 Order") be superseded in
part by the requested order, i.e., to the extent that these prior orders
relate to guarantees issued by Cinergy.
Finally, Applicants propose that the requested order amend the terms of
Commission order dated January 20, 1998 (HCAR No. 26819) (authorizing
Cinergy to issue short-term notes and commercial paper in an aggregate
principal amount not to exceed $2 billion, when added to the principal
amount of certain other outstanding securities, including guarantees issued
pursuant to the May 1997 Order ("$2 Billion Debt Cap")), solely to the
extent of excluding the principal amount of guarantees issued pursuant to
the May 1997 Order from the coverage of the $2 Billion Debt Cap.
Henceforth, those guarantees would be covered by the $1 billion cap
applicable solely to guarantees as proposed below, and the $2 Billion Debt
Cap would be limited to Cinergy short-term notes, commercial paper and
debentures.
/2/ By order dated August 21, 1998 (HCAR No. 26909), the Commission
authorized Cinergy to issue up to $400 million principal amount of
debentures, subject to various terms and conditions.
/3/ See quarterly rule 24 certificates filed in File No. 70-9011.
Exhibit G-1
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- _____________)
Cinergy Corp., a registered holding company ("Cinergy"), and its
nonutility subsidiaries, Cinergy Investments, Inc. ("Cinergy Investments")
and Cinergy Global Resources, Inc. ("Cinergy Global Resources"), all at 139
East Fourth Street, Cincinnati Ohio 45202, have filed an
application-declaration as amended under sections 6(a), 7, 9(a), 10, 12(b),
12(c), 13, 32,
33 and 34 of the Act and rules 43, 45, 46, 53, 54, 58, 83, 87 and 90
thereunder.
Applicants propose to establish one or more special-purpose
subsidiaries to hold Cinergy's direct or indirect interests in any or all
of
Cinergy's existing and future nonutility businesses (excluding certain
existing nonutility interests held by Cinergy's utility subsidiaries) and
to engage in various related transactions from time to time through
December 31, 2003 ("Authorization Period").
The requested order is intended to supersede certain Commission
orders now in effect, in whole or in part, or amended./1/
Specifically, to the extent not otherwise exempt under the Act,
Applicants request authority over the Authorization Period to organize and
hold securities of one or more special-purpose subsidiaries (each an
"Intermediate Parent") to be formed for the exclusive purpose of acquiring,
owning and holding, directly or indirectly (including through one or more
additional Intermediate Parents), securities of or interests in, and/or
providing services to, any or all of Cinergy's existing and future
nonutility associate companies (other than existing nonutility interests
held by Cinergy's utility subsidiaries), including Cinergy's interests in:
1. existing and future exempt wholesale generators
("EWGs") and foreign utility companies ("FUCOs" and, together with
EWGs, "Exempt Projects");
2. special-purpose subsidiaries formed pursuant to the Project
Parent Order
prior to the date of the Commission's order in
this proceeding ("EWG/FUCO Project Parents");
3. existing and future exempt telecommunications companies
("ETCs");
4. existing and future "energy-related companies" as defined in
rule 58; and/or
5. other nonutility companies in which Cinergy (i) holds an
interest pursuant to certain prior orders of the Commission or
(ii) hereafter acquires (or is authorized to retain) an
interest pursuant to one or more (a) orders of the Commission issued in
subsequent proceedings or (b) exemptions from the requirement of prior
Commission approval subsequently adopted
under the Act (collectively, "Authorized Companies" and,
together with the companies included in the preceding categories
"1" through "4," "Nonutility Companies").
Any services provided by Intermediate Parents to other Intermediate
Parents or to Nonutility Companies would include project development and
administrative services and other support services. Without further
Commission approval, Intermediate Parents will not provide services to any
associate companies other than Intermediate Parents and Nonutility
Companies. To the extent not exempt under rule 90(d)(1) or otherwise under
the
Act, Applicants request an exemption pursuant to section 13(b) from the "at
cost" requirements of rules 90 and 91 with respect to the provision of
services among the Intermediate Parents and Nonutility Companies. Cinergy
Services will continue to provide services to Intermediate Parents and
Nonutility Companies pursuant to the Cinergy system nonutility service
agreement.
Intermediate Parents may be wholly- or partly-owned direct or
indirect subsidiaries of Cinergy, Cinergy Investments or Cinergy Global
Resources. Initial capitalization by Applicants of Intermediate Parents
will involve (1) purchases of shares of capital stock, partnership
interests, limited liability company member interests, trust certificates
or
other forms of equity interests; (2) capital contributions or open account
advances without interest; and/or (3) debt financing.
Cinergy will obtain funds for initial and subsequent investments in
Intermediate Parents from available internal sources or from external
sources involving sales of short-term notes and commercial paper or
additional shares of Cinergy common stock pursuant to the January 1998
Order. Cinergy Investments and Cinergy Global Resources will obtain funds
for initial and subsequent investments in Intermediate Parents from
available cash, capital contributions or loans from Cinergy, or external
borrowings or sales of capital stock.
To the extent that Applicants provide funds to Intermediate Parents
which in turn are applied to (1) investments in Exempt Projects or rule 58
companies, the amount of such funds will be included in Cinergy's
"aggregate investment" therein, as calculated in accordance with rule 53 or
rule
58, as applicable; or (2) investments in Authorized Companies, such
investments will conform to applicable rules under the Act (including rules
52
and 45(b)(4)) and applicable terms and conditions of any relevant
Commission orders.
To the extent not exempt under rule 43(b) or otherwise under the
Act, Applicants request authority on behalf of themselves and Intermediate
Parents and Nonutility Companies to sell to and purchase from each other
(but to or from no other associate companies) securities or other interests
in the businesses of Intermediate Parents and Nonutility Companies.
Cinergy also proposes to issue guarantees in respect of Intermediate
Parents and Nonutility Companies and certain other subsidiaries of
Cinergy. Specifically, to the extent not otherwise exempt under the Act,
Cinergy requests authority from time to time through the Authorization
Period to guarantee the debt or other securities or obligations of (i) any
and all existing and future Intermediate Parents (including Cinergy
Investments and Cinergy Global Resources) and Nonutility Companies
(excluding
Cinergy's investment in Nth Power Technologies Fund, HCAR No. 26562, August
28, 1996), and (ii) Cinergy Services, Inc., Cinergy's service company
subsidiary, and the existing nonutility subsidiaries of Cinergy's utility
subsidiaries, The Cincinnati Gas & Electric Company and PSI Energy, Inc. -
KO Transmission Company ("KO"), Tri-State Improvement Company ("Tri-State")
and South Construction Company, Inc. ("South Construction"). The terms and
conditions of any guarantees would be established at arm's length based
upon market conditions.
Any guarantees issued by Cinergy over the Authorization Period
would not exceed at any time outstanding $1,000,000,000 in aggregate
principal amount, provided further that (1) any guarantees of Exempt
Projects
would also be subject to the aggregate investment limitation prescribed in
the Commission's order dated March 23, 1998 (HCAR No. 26848) in File No.
70-9011 ("100% Order"), and (2) any guarantees of rule 58 companies would
also be subject to the aggregate investment limitation of rule 58.
Finally, to the extent not otherwise exempt under the Act,
Applicants request authorization for all of Cinergy's existing and future
nonutility subsidiaries - namely, Cinergy Investments, Cinergy Global
Resources, any and all existing and future Intermediate Parents and
Nonutility Companies (other than Nth Power Technologies Fund), and KO,
Tri-State and South Construction - to declare and pay dividends out of
capital
or unearned surplus to their respective parent companies from time to time
through the Authorization Period, where permitted under applicable
corporate law and agreements with lenders or other third parties.
Cinergy states that it is in compliance with all the requirements
of rule 54 other than rule 53(a). Specifically, at June 30, 1998,
Cinergy's consolidated retained earnings were approximately $948 million
and its aggregate investment approximately $590 million (or about 62% of
consolidated retained earnings). Cinergy states that this incremental
aggregate investment above 50% but not in excess of 100% of consolidated
retained earnings is specifically permitted by the 100% Order. With
respect to the remaining conditions of rule 54, Cinergy states that it has
complied and will continue to comply with the record-keeping requirements
of rule 53(a)(2), the limitation under rule 53(a)(3) on the use of
operating company personnel in rendering services to EWGs and FUCOs, and
the requirements of rule 53(a)(4) concerning submission of specified
filings under the Act to retail rate regulatory agencies. In addition,
none of the conditions in rule 53(b) has occurred.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
ENDNOTES
/1/ Specifically, Applicants propose that upon issuance of the requested
order in the present proceeding the following Commission orders be
superseded in their entirety: (1) HCAR Nos. 26376 and 26486, dated
September 21, 1995 and March 8, 1996, in File No. 70-8589 (collectively,
"Project Parent Order") and (2) HCAR No. 26719, dated May 22, 1997, in File
No. 70-9023.
Applicants also request that two additional Commission orders be superseded
in part. Specifically, HCAR No. 26723, dated May 30, 1997, in File No.
70-9015 and HCAR No. 26662, dated February 7, 1997, in File No. 70-8933
would
be superseded by the Commission's order in this proceeding to the extent
that those approvals relate to guarantees issued by Cinergy.
Finally, Applicants propose that the requested order amend the terms of
Commission order dated January 20, 1998 (HCAR No. 26819) ("January 1998
Order") (authorizing Cinergy to issue short-term notes and commercial paper
in an aggregate principal amount not to exceed $2 billion, when added to
the principal amount of certain other outstanding securities, including
guarantees issued pursuant to the May 1997 Order ("$2 Billion Debt Cap")),
solely to the extent of excluding the principal amount of guarantees issued
pursuant to the May 1997 Order from the coverage of the $2 Billion Debt
Cap. Henceforth, those guarantees would be covered by the $1 billion cap
applicable solely to guarantees as proposed below, and the $2 Billion Debt
Cap would be limited to Cinergy short-term notes, commercial paper and
debentures.
Exhibit I in File No. 70-9319
CINERGY CORP. CONSOLIDATED CAPITALIZATION
ACTUAL
JUNE 30, 1998
$ Millions Percentage
Common Stock Equity
Common stock $ 2
Paid-in capital 1,599
Retained earnings 905
Accumulated other comprehensive income (3)
Total common stock equity 2,503 40.6%
Cumulative Preferred Stock of Subsidiaries
Not subject to mandatory redemption 93 1.5%
Debt
Long-term debt 2,193
Long-term debt due within one year 252
Notes payable and other short-term
obligations 1,120
Total debt 3,565 57.9%
Total capitalization $ 6,161 100.0%
The following table sets forth Cinergy's pro forma capitalization, assuming
that the entire amount of non-recourse debt applicable to Exempt Entities
which is attributable to Cinergy's ownership interest ($1.1 billion) 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.
CINERGY CORP. CONSOLIDATED CAPITALIZATION
PRO FORMA
JUNE 30, 1998
$ Millions Percentage
Common Stock Equity
Common stock $ 2
Paid-in capital 1,599
Retained earnings 905
Accumulated other comprehensive income (3)
Total common stock equity 2,503 34.6%
Cumulative Preferred Stock of Subsidiaries
Not subject to mandatory redemption 93 1.3%
Debt
Long-term debt 3,150
Long-term debt due within one year 254
Notes payable and other short-term
obligations 1,231
Total debt 4,635 64.1%
Total capitalization $7,231 100.0%
