File No. 70-9731
SECURITIES AND EXCHANGE COMMISSION
450 FIFTH STREET
WASHINGTON, D.C. 20549
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FORM U-1 DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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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)
Lisa D. Gamblin George Dwight II
Vice President & Treasurer Senior Counsel
Cinergy Corp. Cinergy Corp.
139 East Fourth Street, 24AT2 139 East Fourth Street, 25AT2
Cincinnati, Ohio 45202 Cincinnati, Ohio 45202
513-287-2643 (ph)
513-287-3810 (f)
[email protected]
(Name and address of agents for service)
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Item 1. Description of Proposed Transactions
Cinergy Corp., a Delaware corporation and registered public utility
holding company ("Cinergy" or the "Company"), seeks Commission authorization
under the Public Utility Holding Company Act of 1935, as amended (the "Act"), to
amend its certificate of incorporation and to solicit proxies with respect
thereto, as described below. As a preliminary matter, so that it may mail proxy
solicitation materials in a timely manner, Cinergy requests issuance of a
combined notice of the proposed transactions and order authorizing the
solicitation of proxies by not later than February 15, 2001.
By order dated June 23, 2000 in File No. 70-9577 (HCAR No. 27190), the
Commission authorized Cinergy over a five-year period commencing with the date
of the Commission's order to engage in various financing transactions, including
issuing preferred securities, subject to the terms and conditions specified in
the order.
Under its certificate of incorporation, Cinergy is currently authorized
to issue one class of stock, namely, 600 million shares of common stock, $0.01
par value per share (the "Common Stock"), 158,967,661 shares of which were
issued and outstanding on October 31, 2000.
Cinergy intends to amend its certificate of incorporation to permit the
Company to issue preferred securities (the "Proposed Amendment"), in addition to
the Common Stock. Under the Delaware General Corporation Law, Cinergy may amend
its certificate of incorporation to create new classes of stock upon appropriate
action by the Board of Directors and shareholders duly adopting the proposed
amendment. In particular, in order for the Proposed Amendment to be duly
adopted, following adoption of the Proposed Amendment by Cinergy's Board of
Directors, not less than a majority of the outstanding shares of Common Stock
entitled to vote thereon must vote in favor of the Proposed Amendment.
Cinergy's Board of Directors will consider the Proposed Amendment at a
meeting scheduled to occur on December 14, 2000. It is anticipated that the
Proposed Amendment will be submitted for consideration by Cinergy's shareholders
at the next annual meeting thereof, scheduled to take place on or about May 1,
2001. Cinergy anticipates that it will begin mailing its proxy solicitation
materials in connection therewith on or about March 20, 2001.
Item 2. Fees, Commissions and Expenses
The fees, commissions, and expenses paid or to be paid or incurred by
Cinergy or any associate company thereof in connection with the proposed
transactions are estimated as follows:
Fees of proxy solicitation consultant $8,500
Printing, mailing, miscellaneous $150,000
TOTAL $158,500
Item 3. Applicable Statutory Provisions
Section 12(e) of the Act and Rules 62 and 65 thereunder are applicable
to the proxy solicitation described herein. Section 6(a)(2) is applicable to the
Proposed Amendment. Rule 54 under the Act is also 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 exempt wholesale generator (as defined in section 32 of the
Act, "EWG") or a foreign utility company (as defined in section 33 of the Act,
"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 if paragraphs (a), (b) and
(c) of Rule 53 are satisfied.
Cinergy currently does not meet the conditions of Rule 53(a). As of
September 30, 2000, Cinergy's "aggregate investment," as defined in Rule
53(a)(1), in EWGs and FUCOs was approximately $751,983,000. This amount is equal
to approximately 67% of Cinergy's average "consolidated retained earnings," also
as defined in Rule 53(a)(1), for the four quarters ended September 30, 2000, of
approximately $1,122,511,250, which exceeds the 50% "safe harbor" limitation
contained in the rule.
By order dated March 23, 1998 (HCAR No. 26848) ("1998 Order"), the
Commission authorized Cinergy to increase its aggregate investment in EWGs and
FUCOs to an amount equal to 100% of Cinergy's average "consolidated retained
earnings." By order dated June 23, 2000 (HCAR No. 27190) ("2000 Order"), the
Commission granted Cinergy additional authorization to invest in EWGs and FUCOs
beyond that granted in the 1998 Order, specifically, $1,000,000,000 in addition
to Cinergy's aggregate investment at the date of such order (approximately
$731,000,000). Therefore, although Cinergy's aggregate investment at September
30, 2000 exceeds the 50% "safe harbor" limitation, this investment is below the
limitation authorized by the 1998 and 2000 Orders.
With respect to capitalization, there has been no material adverse
impact on Cinergy's consolidated capitalization resulting from Cinergy's
investments in EWGs and FUCOs. As of September 30, 1997, the most recent period
for which financial statement information was evaluated in the 1998 Order,
Cinergy's consolidated capitalization consisted of 44.1% equity and 55.9% debt.
As of September 30, 2000, Cinergy's consolidated capitalization consisted of
42.2% equity and 57.8% debt. These ratios are within acceptable ranges, as
further reflected by the fact that at September 30, 2000 Cinergy's senior
unsecured debt was rated "investment grade" by all the major rating agencies.
The proposed transactions have no impact on Cinergy's consolidated
capitalization.
With respect to earnings, Cinergy's interests in EWGs and FUCOs have
made consistent and significant contributions to Cinergy's consolidated retained
earnings, as reflected in the quarterly certificates filed by Cinergy in Docket
Nos. 70-9011 and 70-9577. Although Cinergy's consolidated earnings for the year
ended December 31, 1997 were negatively affected by Cinergy's 50% ownership
interest in Midlands Electricity plc ("Midlands"), a FUCO, this was solely as a
result of the imposition by the United Kingdom of a one-time, non-recurring
windfall tax. Significantly, this tax did not affect earnings from ongoing
operations, and therefore would not have any negative impact on earnings in
future periods. In July 1999, Cinergy sold all of its ownership in Midlands,
realizing a substantial profit.
Cinergy satisfies all of the other conditions of paragraphs (a) and (b)
of Rule 53. With reference to Rule 53(a)(2), Cinergy maintains books and records
in conformity with, and otherwise adheres to, the requirements thereof. With
reference to Rule 53(a)(3), no more than 2% of the employees of Cinergy's
domestic public utility companies render services, at any one time, directly or
indirectly, to EWGs or FUCOs in which Cinergy directly or indirectly holds an
interest. With reference to Rule 53(a)(4), Cinergy will concurrently provide a
copy of this application to each regulator referred to therein, and will
otherwise comply with the requirements thereof concerning the furnishing of
information. With reference to Rule 53(b), none of the circumstances enumerated
in subparagraphs (1), (2) and (3) thereunder have occurred. Finally, Rule 53(c)
by its terms is inapplicable since the proposed transactions do not involve the
issue or sale of a security to finance the acquisition of an EWG or FUCO.
Item 4. Regulatory Approval
The proposed transactions are not subject to the jurisdiction of any
state or federal commission other than this Commission.
Item 5. Procedure
Cinergy requests that the Commission issue and publish as soon as
practicable the requisite notice under Rule 23 with respect to the filing of
this Declaration, together with an order under Section 12(e) and Rule 62
permitting Cinergy to solicit proxies with respect to the Proposed Amendment.
Cinergy waives a recommended decision by a hearing officer or other
responsible officer of the Commission; consents that the Staff of the Division
of Investment Management may assist in the preparation of the Commission's
order; and requests that there be no waiting period between the issuance of the
Commission's order and its effectiveness.
Item 6. Exhibits and Financial Statements
(a) Exhibits
A-1 Certificate of incorporation of Cinergy (incorporated by reference from
Cinergy's 1993 Form 10-K in File No. 1-11377) A-2 By-laws of Cinergy, as amended
on April 27, 2000 (incorporated by reference from Cinergy's March 31, 2000 Form
10-Q in File No. 1-11377)
B-1 Proxy statement with respect to Proposed Amendment
(to be filed by amendment)
B-2 Form of proxy with respect to Proposed Amendment
(to be filed by amendment)
C Not applicable
D Not applicable E Not applicable
F-1 Preliminary opinion of counsel (to be filed by amendment)
G Form of notice and order permitting proxy solicitation (b) Financial
Statements NOTE: Cinergy corporate and consolidated actual and pro forma
financial statements are omitted since the proposed transactions will have no
impact thereon.
Item 7. Information as to Environmental Effects
(a) The Commission's action in this matter will not constitute any
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 Public Utility Holding Company Act
of 1935, the undersigned company has duly caused this application to be signed
on its behalf by the officer indicated below.
Dated: November 10, 2000
Cinergy Corp.
By: /s/Lisa D. Gamblin
Vice President & Treasurer
