File No. 70-9531
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.
139 East Fourth Street
Cincinnati, Ohio 45202
New Century Energies, Inc.
1225 17th Street
Denver, Colorado 80202
Cadence Network LLC
105 East Fourth Street, Suite 200
Cincinnati, Ohio 45202
(Name of companies filing this statement
and addresses of principal executive offices)
Cinergy Corp.
New Century Energies, Inc.
(Name of top registered holding company parents)
Mark L. Shunk, President
Cadence Network LLC
105 East Fourth Street, Suite 200
Cincinnati, Ohio 45202
(Name and address of agent of service)
Applicants request that all notices, orders and communications be given to:
George Dwight II William M. Dudley
Senior Counsel Associate General Counsel
Cinergy Corp New Century Services, Inc.
221 East 4th Street, 25 AT2 1225 17th Street, Suite 600
Cincinnati, Ohio 45202 Denver, Colorado 80202
513-287-2643 303-294-2500
513-287-3810 (fax) 303-294-8255 (fax)
William C. Weeden William T. Baker, Jr.
Skadden Arps Slate Meagher & Flom Thelen Reid & Priest LLP
1400 New York Avenue, N.W. 40 West 57th Street
Washington, D.C. 20005 New York, New York 10019
202-371-7877 212-603-2106
202-371-7973 (fax) 212-603-2182 (fax)
The application-declaration as previously filed in this proceeding is
hereby amended and restated in its entirety.
Item 1. Description of Proposed Transactions
A. Introduction/ Authorization Requested
Cinergy Corp. ("Cinergy") and New Century Energies, Inc. ("NCE")
are registered holding companies under the Public Utility Holding Company
Act of 1935, as amended (the "Act")/1/. Cadence Network LLC, a Delaware
limited liability company ("Cadence" or "Company"), is a nonutility
subsidiary of both Cinergy and NCE, each of whom indirectly holds a
one-third ownership interest therein. Specifically, Cinergy holds its
one-third interest in Cadence through its wholly-owned, special-purpose
nonutility subsidiary, Cinergy-Cadence, Inc. ("Cinergy-Cadence"); likewise,
NCE holds its one-third interest in Cadence through its wholly-owned,
special-purpose nonutility subsidiary, New Century-Cadence, Inc. ("New
Century-Cadence"). Florida Progress Corporation ("FPC") owns the remaining
one-third ownership interest in Cadence, holding that interest indirectly
through its subsidiary, Progress Holdings, Inc. Cinergy, NCE and FPC
formed Cadence in September 1997 pursuant to a joint venture between the
parties. (Cinergy, NCE and Cadence are collectively referred to herein as
"Applicants.")
Cadence uses information to reduce energy-related costs for
commercial businesses that own and operate families of chain stores or
other multi-location retail establishments. As the essential first step,
Cadence collects, centralizes and redistributes to customers relevant cost
information using sophisticated technology. More specifically, The Cadence
Network ("Cadence Network" or "Network"), a Web-based interactive
reporting tool developed by Cadence, permits the Company's clients to
better track and manage electricity, natural gas and related costs incurred
at their facilities. At the same time, the Network lays the groundwork for
Cadence to achieve significant reductions in the customer's energy costs -
e.g., by consolidating site information, detecting billing errors, finding
better rates, identifying high-cost stores, and determining how to get
costs back into line. The Cadence Network thus anchors the range of
additional services offered by Cadence, which are specifically targeted at
reducing the customer's energy-related costs. Currently these services
consist of bill verification and correction, "best rate" assurance, and
consulting with respect to gas and electric commodity purchasing and energy
efficiency projects. At June 30, 1999, Cadence was serving customers
including Blockbuster Entertainment, CKE/Hardees, Winn Dixie Supermarkets
and Service Merchandise in all 50 states.
Cinergy and NCE acquired their ownership interests in Cadence
(including the special-purpose subsidiaries established to hold those
interests, Cinergy-Cadence and New Century-Cadence) without prior
Commission authorization pursuant to Rule 58 under the Act/2/. As an
"energy-related company," substantially all of Cadence's revenues must
derive, and have derived, from permissible energy-related activities
carried out within the United States.
However, this geographical restriction saddles Cadence with
significant business and competitive disadvantages. Some of Cadence's
customers, including Blockbuster, Motel 6, Venator and others, have
locations outside of the United States for which they would like Cadence to
provide services consistent with what is being provided within the U.S.
For instance, Cadence is currently serving 3,800 Blockbuster sites in the
U.S., with a pending request from Blockbuster to service 380 additional
sites in Canada. Unless Cadence can provide its services to all of its
existing customers' stores - not just those located in the U.S. - the
Company risks losing to competitors who are not subject to this
disadvantage not just the incremental business, but also the existing
business within the U.S. In addition, to the extent that Cadence is
precluded from providing its services outside the U.S., the Company will be
foreclosed from competing for potential new business from chains that are
not currently customers of Cadence but have this requirement. More
fundamentally, Cadence's business was founded on the strategy of tracking
and reducing utility-related costs for all the retail sites operated by
chain businesses. Coverage of merely a subset of the client's stores
undercuts Cadence's business strategy and its appeal to clients.
The Commission has issued a number of orders authorizing registered
holding companies to market similar services both inside and outside the
United States. For example, in February 1997, the Commission authorized
another of Cinergy's nonutility subsidiaries, Cinergy Solutions, Inc.
("Cinergy Solutions"), to market energy management services and
utility-related consulting services (collectively, the "Cinergy Solutions
Global Services") anywhere in the world, directly or through subsidiaries,
with no restrictions on the amount or proportion of revenues from services
outside the U. S./3/ The Commission's order broadly defined energy
management
services for these purposes as:
(1) identification (through energy audits or otherwise)
of energy and other resource (water, labor, maintenance,
materials, etc.) cost reduction or efficiency
opportunities; (2) design of facility and process
modifications or enhancements to realize such
opportunities; (3) management, or direct construction and
installation, of energy conservation or efficiency
equipment; (4) training of client personnel in the
operation of equipment; (5) maintenance of energy
systems; (6) design, management or direct construction
and installation of new and retrofit heating,
ventilating, and air conditioning ( HVAC'), electrical
and power systems, motors, pumps, lighting, water and
plumbing systems, and related structures, to realize
energy and other resource efficiency goals or to
otherwise meet a customer's energy-related needs; (7)
system commissioning (i.e., monitoring the operation of
an installed system to ensure that it meets design
specifications); (8) reporting of system results; (9)
design of energy conservation programs; (10)
implementation of energy conservation programs; (11)
provision of conditioned power services (i.e., services
designed to prevent, control or mitigate adverse effects
of power disturbances on a customer's electrical system
to ensure the level of power quality required by the
customer, particularly with respect to sensitive
electronic equipment); and (12) other similar or related
activities/4/.
The Commission applied a similarly broad definition to the consulting
services that Cinergy Solutions was permitted to market throughout the
world, to wit:
technical and consulting services involving technology
assessments, power factor correction and harmonics mitigationn
alysis, commercialization of electro-technologies, meter reading and
repair, rate schedule analysis and design, environmental services,
engineering services, billing services including conjunctive billing,
summary billing for customers with multiple locations and bill
auditing, risk management services, communications systems,
information systems/data processing, system planning, strategic
planning, finance, feasibility studies, and other similar or related
services./5/
In May 1998, the Commission also authorized Columbia Energy Group
to market energy management services and utility-related consulting
services anywhere in the world, again with no restriction on the proportion
of overall revenues derived from services outside the U.S./6/ The energy
management services and consulting services were broadly defined consistent
with the Cinergy Solutions Global Services.
In light of the business imperatives and Commission precedent just
described, for an initial period commencing with the date of the
Commission's order herein and continuing through January 31, 2005,
Applicants now request authority for Cadence to market its utility-related
cost reporting and reduction services anywhere outside the United States,
without restriction on the amount or proportion of revenues derived from
such activities outside the U.S., and in that connection Cinergy and NCE
request authority to retain their ownership interests in Cadence,
Cinergy-Cadence and New Century-Cadence previously acquired pursuant to
rule 58. Applicants propose that the authority to offer services outside
the United States cover not merely the utility-related cost reporting and
reduction services now in place and described in this application, but
additional similar and complementary energy-related services that Cadence
may develop and seek to offer to customers in the future, both in the
United States and abroad, provided that in no event would these future
services be broader in scope than the Cinergy Solutions Global Services.
Applicants further request that Cadence be granted the flexibility to
provide its services not just directly, but also indirectly through one or
more special-purpose subsidiaries, formed as corporations, partnerships,
limited liability companies or other legal entities, as applicable
business, legal, tax, accounting or strategic considerations dictate./7/
The foregoing paragraph notwithstanding, Applicants request that
the Commission reserve jurisdiction over the provision of any such services
by Cadence outside the United States, except to the extent such services
are provided solely in Canada and Mexico. Except as just provided, Cadence
will not provide any international services without further express
authorization from the Commission.
Neither Cinergy nor NCE will seek recovery through higher rates to
customers of their utility subsidiaries for any losses or inadequate
returns that may arise from the proposed transactions.
Set forth below is a more detailed description of Cadence and its
business.
B. Cadence/Information Reporting & Cost Reduction
As stated above, the cost reduction services Cadence provides to
its customers are anchored by the cost reporting and tracking capabilities
of the Cadence Network.
The Cadence Network is an Internet-enabled database proprietary to
Cadence that consolidates, analyzes and manages customer site-specific cost
information for electricity and related services, reporting that
information back to customers in an interactive, flexible context. Cadence
collects the cost information that is fed into the Cadence Network
primarily from customer utility bills. Cadence then utilizes the
information provided to the Network to identify and analyze opportunities
for energy-related savings; to implement and administer cost saving
programs; and finally to measure and report results to the customer over
the Network.
The services Cadence offers to its customers thus fall into two
broad categories: (i) the core service consisting of reporting and
cracking, via the Cadence Network, of site costs for electricity, natural
gas and related services (currently limited to water/sewage; heating,
ventilation and air conditioning ("HVAC"); telephone; cable; and trash
collection); and (ii) additional services specifically targeted at reducing
energy-related costs. Customers compensate Cadence on a fixed fee or
shared savings basis. The Cadence web site, http://www.cadencenetwork.com,
provides further information on the Company and its services.
1. Cost Reporting & Tracking /Cadence Network
The customer utility bill is the primary source for the cost data
that drives the Cadence Network./8/ Cadence has entered into arrangements
with Cass Information Systems ("Cass") and Insite Services ("Insite"), both
of which are industry leaders in outsourced utility accounts payable
services. Whenever Cass or Insite pays a utility bill on behalf of a
Cadence client, the data is electronically fed into Cadence's database; the
information then becomes available for analysis, display and retrieval by
the customer over the Cadence Network. The transmitted utility bill data
covers electricity and natural gas usage or consumption and the fees and
expenses charged by the supplier therefor, and may also cover other utility
or utility-like services, such as for water/sewage, telephone, cable and
trash collection. Under the arrangement with Cadence, Cass or Insite
continues to pay the utility bill on behalf of the customer or in a
subcontractor role on behalf of Cadence.
Cadence recently entered into a similar arrangement with a national
HVAC preventive maintenance and service company. Cadence will connect to
the HVAC company's database to pull in HVAC-related information about the
customer's stores or other retail sites - maintenance history, service
performance by contractors and subcontractors, equipment cost information,
etc. - and will then display that information on the Cadence Network for
the customer's benefit, together with the customer's utility cost
information. The HVAC company will continue to collect and maintain the
data; Cadence will download a daily file from the HVAC company and import
that data into Cadence's database. Cadence will not assume any actual
service function, other than reporting the information to the customer.
Cadence or the customer pays Cass/Insite a fixed fee or other
consideration for its services. The HVAC company will pay Cadence an
access fee for use of the Cadence Network.
Once the electronic link to the underlying cost data has been
established, the Cadence Network is in a position to begin generating
interactive reports, charts and graphs for the customer analyzing and
continuously tracking those costs, making the data more usable, and
pointing up opportunities for cost savings. The customer can access these
reporting tools 24 hours a day at Cadence's secure, password-protected Web
site. Because Cadence's database is continually replenished with the
latest cost data for the customer's stores, the reporting tools are kept
current and accurate. With these interactive reports, the customer can
track utility/HVAC costs by site, vendor, or region; run cost comparisons
between facilities; view actual bill images online; and otherwise better
understand and manage its utility/HVAC costs. And Cadence's technical
experts use this same data to identify and implement cost saving actions
for the customer.
One service option of the Cadence Network is TempuTrak .
Overlaying energy usage patterns at customer facilities with corresponding
weather patterns in those areas, TempuTrak weather adjusts, or
"normalizes," energy usage per location. This enhances the value of the
Network's reporting tools, by allowing "apples to apples" comparisons,
helping to account for budget variances, and pinpointing energy-inefficient
sites.
The Cadence Network also plays a critical role in terms of
measuring and verifying specific cost-reduction steps taken by Cadence on
the customer's behalf. With the customer's historical and ongoing cost
data connected to the Network, Cadence is able to ensure, month by month,
that rates have in fact been changed and that new programs are actually
saving money.
2. Cost Reduction Services
In addition to the core service of cost tracking and reporting via
the Cadence Network, Cadence offers a number of additional services
specifically targeted at reducing the customer's energy-related costs.
Currently these services are comprised of bill verification and correction;
"best rate" assurance; electricity and gas commodity consulting; and energy
efficiency consulting, as described further below.
a. Bill verification and correction
Under this program, Cadence audits and otherwise reviews and
monitors individual invoices and invoicing patterns for electricity,
natural gas and water/sewage service furnished to customer sites. Cadence
also identifies clusters of likely savings and provides comparative
reports. Once errors are detected, Cadence's utility billing experts
isolate the cause and negotiate on the client's behalf directly with the
utility supplier for refunds and credits.
b. Best rate assurance
Cadence also helps clients reduce energy costs through its best
rate assurance program, under which Cadence assures that the client's high
priority facilities are being assessed optimal utility rates for
electricity and natural gas service. Cadence scrutinizes and verifies
facility load data and utility rate schedules and negotiates or
renegotiates directly with the utility supplier to ensure application of
the optimal rates to these high-priority customer facilities. In
connection with this program, clients can also authorize Cadence to conduct
a national rate assessment, identifying and prioritizing tariff-based rate
savings opportunities for electric and natural gas service with respect to
all of the customer's sites throughout the United States.
c. Electric and gas commodity consulting
Cadence will also assist its customers in shopping for electric and
natural gas supplies. Cadence can help secure the most attractive
commodity rates possible through custom proposals and proposal reviews.
After Cadence determines which facilities are most likely to profit from
electric and gas deregulation and other competitive purchasing
opportunities, Cadence uses the Cadence Network to aggregate load
information and create the custom RFPs necessary to shop for the commodity
supply. Cadence then reviews proposals from the various marketers,
analyzes rate pricing options, and helps to negotiate the contractual
terms. Throughout this process, Cadence acts as a consultant for the
customer. Cadence does not take title to the commodity nor act as a broker
for the buyer or seller.
d. Energy efficiency consulting
Finally, Cadence helps implement energy efficiency projects to
realize further cost savings for its customers. Using the detailed data
captured from the Cadence Network, Cadence can begin to identify high-cost
facilities that cannot be corrected by better rates or more accurate
billing. To zero in on the most likely targets for cost reductions,
Cadence conducts internal benchmarking, drawing on internal data-mining
techniques. Once it has identified the problem and likely solution,
Cadence will prepare proposals for national energy-efficiency projects and
develop comprehensive strategies. Whether for a lighting retrofit project,
or installation of an entire energy management system, Cadence will develop
the implementation plan, recommend the proposed application, and negotiate
for project procurement. In short, Cadence acts as a project facilitator
or overseer, rather than a contractor.
Item 2. Fees, Commissions and Expenses
The fees, commissions and expenses that have been or will be incurred,
directly or indirectly, by Cinergy or NCE or any of their associate
companies in connection with the proposed transactions are not expected to
exceed approximately $15,000, consisting primarily of fees and expenses of
Thelen Reid & Priest and Skadden Arps Slate Meagher & Flom, outside counsel
for both Cinergy and NCE in connection with the proposed transactions.
Item 3. Applicable Statutory Provisions
Sections 6(a), 7, 9(a) and 10 of the Act and Rule 54 thereunder 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 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, 1999, its "aggregate investment," as defined in Rule
53(a)(1), in EWGs and FUCOs was approximately $568,371,000. This amount is
equal to 57.2% of Cinergy's average "consolidated retained earnings," also
as defined in Rule 53(a)(1), for the four quarters ended September 30,
1999, of approximately $993,377,000, which exceeds the 50% "safe harbor"
limitation contained in the rule.
By order dated March 23, 1998 (HCAR No. 26848) ("Cinergy 100%
Order"), the Commission authorized Cinergy to increase the aggregate amount
which it may invest in EWGs and FUCOs to 100% of its average "consolidated
retained earnings." Although Cinergy's aggregate investment at September
30, 1999 exceeds the 50% "safe harbor" limitation, this investment is below
the 100% limitation authorized by the Cinergy 100% Order.
Moreover, 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 Cinergy 100% Order,
Cinergy's consolidated capitalization consisted of 44.1% equity and 55.9%
debt. As of September 30, 1999, Cinergy's consolidated capitalization
consisted of 45.1% common equity. Thus, at September 30, 1999, Cinergy's
capitalization ratios remain within acceptable ranges.
Further, Cinergy's interests in EWGs and FUCOs have made consistent
and significant contributions to Cinergy's consolidated earnings. 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,
adding $0.43 per share to Cinergy's earnings for the calendar quarter ended
September 30, 1999. Finally, the proposed transactions will require no
further commitment of capital by Cinergy.
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 amended application-declaration 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.
With respect to NCE, it too has complied or will comply with the
record-keeping requirements of Rule 53(a)(2), the limitation under Rule
53(a)(3) on the use of the NCE system's domestic public utility company
personnel to render services to EWGs and FUCOs, and the requirements of
Rule 53(a)(4) concerning the submission of copies of certain filings under
the Act to retail regulatory commissions. Further, none of the
circumstances described in Rule 53(b) has occurred or is continuing. Rule
53(c) is inapplicable by its terms because the proposals contained herein
do not involve the issue or sale of a security to finance an acquisition of
an EWG or FUCO.
NCE currently does not meet the conditions of Rule 53(a). As of
September 30, 1999, its "aggregate investment," as defined in Rule
53(a)(1), in EWGs and FUCOs was approximately $388,677,000. This amount is
equal to 50.87% of NCE's average "consolidated retained earnings," also as
defined in Rule 53(a)(1), for the four quarters ended September 30, 1999,
of approximately $765,426,000, which exceeds the 50% "safe harbor"
limitation contained in the rule.
By order dated February 26, 1999 (HCAR No. 26982) ("NCE 100%
Order"), the Commission authorized NCE to increase the aggregate amount
which it may invest in EWGs and FUCOs to 100% of its average "consolidated
retained earnings." Although NCE's aggregate investment at September 30,
1999 exceeds the 50% "safe harbor" limitation, this investment is below the
100% limitation authorized by the NCE 100% Order.
Moreover, there has been no material adverse impact on NCE's
consolidated capitalization resulting from NCE's investments in EWGs and
FUCOs. As of September 30, 1998, the most recent period for which
financial statement information was evaluated in the NCE 100% Order, NCE's
consolidated capitalization consisted of 49.4% equity and 50.6% debt. As
of September 30, 1999, NCE's consolidated capitalization consisted of 44.1%
common equity. Thus, at September 30, 1999, NCE's capitalization ratios
remain within acceptable ranges.
Further, NCE's interests in EWGs and FUCOs have contributed
positively to NCE's consolidated earnings. Although NCE's consolidated
earnings for the year ended December 31, 1997 were negatively affected by
NCE's interest in Yorkshire Electricity Group plc, 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. Finally, the proposed transactions
will require no further commitment of capital by NCE.
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
Applicants request that the Commission issue and publish as soon as
practicable the requisite notice under Rule 23 with respect to the filing
of this application, and that the Commission issue an order granting the
authority requested herein as soon as practicable after expiration of the
public notice period.
Applicants waive a recommended decision by a hearing officer or other
responsible officer of the Commission; consent that the Staff of the
Division of Investment Management may assist in the preparation of the
Commission's order; and request that there be no waiting period between the
issuance of the Commission's order and its effectiveness.
Pursuant to Rule 24 under the Act, Applicants propose to file a
certificate in this docket within 60 days after the end of each calendar
quarter (commencing with the first full calendar quarter after issuance of
the order requested herein), providing certain information regarding
Cadence's business and operations, namely:
1. an unaudited balance sheet dated the end of such quarter
together with an unaudited statement of income for the quarter then-ended
and year-to-date period (except that no such financial statements would be
filed with the year-end quarterly report); and
2. (a) a narrative summary of the services provided by Cadence
outside the United States, including identification of the countries in
which such services are provided, and (b) the total operating revenues from
such services outside the United States.
Item 6. Exhibits and Financial Statements
(a) Exhibits:
A Not applicable
B Not applicable
C Not applicable
D Not applicable
E Not applicable
F-1 Preliminary opinion of counsel for Cinergy
F-2 Preliminary opinion of counsel for NCE
G Form of Federal Register notice (previously filed)
(b) Financial Statements:
FS-1 Cinergy Consolidated Financial Statements, dated
September 30, 1999
FS-2 Cinergy Financial Statements, dated September 30,
1999
FS-3 Cinergy Consolidated Financial Data Schedule, dated
September 30, 1999 (included as part of electronic submission only)
FS-4 NCE Consolidated Financial Statements, dated
September 30, 1999 (incorporated by reference from the Quarterly Report on
Form 10-Q of NCE for the quarter ended September 30, 1999 (File No.
1-12927))
FS-5 Cadence Financial Statements, dated September 30,
1999 (filed under request for confidential treatment)
Item 7. Information as to Environmental Effects
(a) The Commission's action in this matter will not constitute
major federal action significantly affecting the quality of the human
environment.
(b) No other federal agency has prepared or is preparing an
environmental impact statement with regard to the proposed transactions.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the undersigned companies
have duly caused this statement to be signed on their behalf by the
undersigned thereunto duly authorized.
Dated: December 20, 1999
CINERGY CORP.
By: /s/ William L. Sheafer
Vice President and Treasurer
NEW CENTURY ENERGIES, INC.
By: /s/ Richard C. Kelly
Executive Vice President &
Chief Financial Officer
CADENCE NETWORK LLC.
By: /s/ Mark L. Shunk
President
ENDNOTES
/1/ NCE and Northern States Power ("NSP") have entered into an Agreement
and Plan of Merger, dated as of March 24, 1999, providing for the merger of
NCE into NSP, with NSP as the surviving corporation. See HCAR No. 27031,
May 19, 1999 (order authorizing proxy solicitation).
/2/ See Cinergy's and NCE's Quarterly Reports on Form U-9C-3 dated
September 30, 1997.
/3/ Cinergy Corp., et al., HCAR No. 26662, February 7, 1997.
/4/ Id.
/5/ Id.
/6/ Columbia Energy Group, et al., HCAR No. 26868, May 6, 1998.
/7/ Cinergy and NCE anticipate that they will satisfy their allocable
shares of Cadence's financing needs through capital contributions or loans
exempt under Rules 45 and 52. In addition, Cadence may issue its
securities to outside parties to finance its business in transactions
exempt under rule 52. To the extent necessary, any Cinergy guarantees in
respect of such securities would be issued under, and consistent with, the
authority therefor granted to Cinergy in File No. 70-9319 (see HCAR No.
26984, March 1, 1999). Likewise, any NCE guarantees in respect of such
securities would be issued under, and consistent with, the authority
therefor granted to NCE in File No. 70-9397 (see HCAR No. 27000, April 7,
1999).
/8/ In certain cases Cadence may also obtain customer cost data from
meters on site. In those situations information from the customer's meter
is transmitted over a public telephone or cellular network to the Cadence
database.
EXHIBIT F-1
January 10, 2000
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Cinergy Corp., et al./File No. 70-9531
Ladies and Gentlemen:
I am Senior Counsel for Cinergy Corp. ("Cinergy"), a Delaware
corporation and registered holding company under the Public Utility Holding
Company Act of 1935. This opinion letter is delivered pursuant to the
rules of the Commission thereunder as an exhibit to the
Application-Declaration on Form U-1 in the above file (including any
amendments thereto, the "Application").
In connection with this opinion, I have reviewed the Application
and such other documents and made such other investigation as I have deemed
appropriate.
Based on the foregoing and subject to the other paragraphs hereof,
I express the following opinions:
1. All state laws applicable to the proposed transactions will
have been complied with.
2. The consummation of the proposed transactions will not violate
the legal rights of the holders of any securities issued by Cinergy or any
associate company thereof.
The foregoing opinions assume that the proposed transactions are
consummated in accordance with the Application and the Commission's order
granting and permitting the Application to become effective.
I am admitted to the Bar of the State of Ohio. The foregoing opinions
are limited to the laws of the State of Ohio, the Delaware General
Corporation Law and the Delaware Limited Liability Company Act.
I hereby consent to the Commission's use of this opinion letter in
connection with the Application. This opinion letter may not be used for
any other purpose or relied on by or furnished to any other party without
my prior written consent.
Very truly yours,
/s/George Dwight II
Senior Counsel
EXHIBIT F-2
January 10, 2000
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: New Century Energies, Inc., et al./File No. 70-9531
Ladies and Gentlemen:
I am Associate General Counsel for New Century Services, Inc., the
service company subsidiary of New Century Energies, Inc. ("NCE"). NCE is a
Delaware corporation and registered holding company under the Public
Utility Holding Company Act of 1935. This opinion letter is delivered
pursuant to the rules of the Commission thereunder as an exhibit to the
Application-Declaration on Form U-1 in the above file (including any
amendments thereto, the "Application").
In connection with this opinion, I have reviewed the Application
and such other documents and made such other investigation as I have deemed
appropriate.
Based on the foregoing and subject to the other paragraphs hereof,
I express the following opinions:
1. All state laws applicable to the proposed transactions will
have been complied with.
2. The consummation of the proposed transactions will not violate
the legal rights of the holders of any securities issued by NCE or any
associate company thereof.
The foregoing opinions assume that the proposed transactions are
consummated in accordance with the Application and the Commission's order
granting and permitting the Application to become effective.
I am admitted to the bar of the State of Colorado. The foregoing
opinions are limited to the laws of the State of Colorado, the Delaware
General Corporation Law and the Delaware Limited Liability Company Act.
I hereby consent to the Commission's use of this opinion letter in
connection with the Application. This opinion letter may not be used for
any other purpose or relied on by or furnished to any other party without
my prior written consent.
Sincerely,
/s/William M. Dudley
FINANCIAL STATEMENTS
TWELVE MONTHS ENDED SEPTEMBER 30, 1999
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM U-1
CINERGY CORP. CONSOLIDATED
(Unaudited)
Pages 1 through 7
<PAGE>
CINERGY CORP.
CONSOLIDATED BALANCE SHEET
as of September 30, 1999
(unaudited)
(dollars in thousands)
ASSETS
Current Assets
Cash and temporary cash investments $ 57,486
Restricted deposits 1,425
Notes receivable 290
Accounts receivable less accumulated
provision for doubtful accounts of
$31,057 at September 30, 1999, and
$25,622 at December 31, 1998 761,768
Materials, supplies, and fuel -
at average cost 208,931
Energy risk management assets 135,817
Prepayments and other 75,208
-----------
1,240,925
Utility Plant - Original Cost
In service
Electric 9,330,180
Gas 811,552
Common 170,772
-----------
10,312,504
Accumulated depreciation 4,206,192
-----------
6,106,312
Construction work in progress 266,981
-----------
Total Utility Plant 6,373,293
Other Assets
Regulatory assets 1,128,957
Investments in unconsolidated
subsidiaries 309,578
Energy risk management assets 21,507
Other 460,227
-----------
1,920,269
$ 9,534,487
1
<PAGE>
CINERGY CORP.
CONSOLIDATED BALANCE SHEET
As of September 30, 1999
(unaudited)
(dollars in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
ACTUAL
Current Liabilities
Accounts payable $ 935,430
Accrued taxes 248,441
Accrued interest 37,813
Notes payable and other short-term
obligations 363,780
Long-term debt due within one year 31,822
Energy risk management liabilities 123,885
Other 81,854
----------
1,823,025
Non-current Liabilities
Long-term debt 2,723,483
Deferred income taxes 1,141,312
Unamortized investment tax credits 149,629
Accrued pension and other postretirement
benefit costs 346,994
Energy risk management non-current
liabilities 130,188
Other 488,892
----------
4,980,498
Total Liabilities 6,803,523
Cumulative Preferred Stock of Subsidiaries
Not Subject to Mandatory Redemption 92,597
Common Stock Equity
Common stock - $.01 par value; authorized
shares - 600,000,000; outstanding shares
- 158,917,210 at September 30, 1999, and
158,664,532 at December 31, 1998 1,589
Paid-in capital 1,605,674
Retained earnings 1,038,660
Accumulated other comprehensive loss (7,556)
----------
Total Common Stock Equity 2,638,367
$9,534,487
<PAGE>
CINERGY CORP.
CONSOLIDATED STATEMENT OF INCOME
for the twelve months ended SeptembeR 30, 1999
(unaudited)
(in thousands, except per share amounts)
ACTUAL
Operating Revenues
Electric $4,271,839
Gas 1,538,518
Other 33,239
----------
5,843,596
Operating Expenses
Fuel and purchased and exchanged
power 2,303,287
Gas purchased 1,327,631
Other operation and maintenance 948,755
Depreciation and amortization 346,656
Taxes other than income taxes 275,197
----------
5,201,526
Operating Income 642,070
Other Income and (Deductions)
Equity in Earnings of Unconsolidated
subsidiaries 76,568
Gain on sale of investment in
unconsolidated subsidiary 99,272
Miscellaneous - net 19,315
Interest expense (240,034)
-----------
(44,879)
Income Before Taxes 597,191
Income Taxes 212,469
Preferred Dividend Requirements
of Subsidiaries 5,457
----------
Net Income $ 379,265
Average Common Shares Outstanding 158,786
Earnings Per Common Share
Net Income $2.39
Earnings Per Common Share -
Assuming Dilution Net Income $2.38
Dividends Declared Per Common Share $1.80
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCK EQUITY
For the twelve months ended September 30, 1999
(unaudited)
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
<C>
ACCUMULATED
OTHER TOTAL
TOTAL
COMMON PAID-IN RETAINED COMPREHENSIVE COMPREHENSIVE
COMMON STOCK
STOCK CAPITAL EARNINGS LOSS INCOME
EQUITY
Twelve Months Ended September 30, 1999
Balance At October 1, 1998 $1,587 $1,600,776 $ 943,647 $ (3,659)
$2,542,351
Comprehensive Income
Net Income 379,265 $379,265
379,265
Other Comprehensive Income,
net of tax
Foreign currency translation
adjustment (3,351)
(3,351)
Minimum pension liability
adjustment 30
30
Unrealized loss on grantor
trust (339)
(339)
Unrealized loss on
securities available for sale (237) (237)
--------
Other comprehensive loss
Total (3,897) (3,897)
--------
Comprehensive Income Total $375,368
========
Issuance of 369,509 shares of
common stock - net 2 9,700
9,702
Treasury shares purchased (9,191)
(9,191)
Treasury shares reissued 4,387
4,387
Dividends on common stock (285,776)
(285,776)
Other 2 1,524
1,526
------ ---------- ---------- --------
--------
Balance at September 30, 1999 $1,589 $1,605,674 $1,038,660 $ (7,556)
$2,638,367
</TABLE>
FINANCIAL STATEMENTS
TWELVE MONTHS ENDED SEPTEMBER 30, 1999
(dollars in thousands)
U. S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM U-1
CINERGY CORP.
(Unaudited)
Pages 1 through 7
<PAGE>
CINERGY CORP.
BALANCE SHEET
as of September 30, 1999
(unaudited)
(dollars in thousands)
ASSETS
ACTUAL
Current Assets
Cash and temporary cash investments $ 3,285
Notes receivable from affiliated
companies 286,496
Accounts receivable less accumulated
provision for doubtful accounts of
$0 at September 30, 1999, AND $0
at December 31, 1998 636
Accounts receivable from affiliated
companies 153,641
Prepayments and other 2,147
--------
446,205
Other Assets
Investments in consolidated
subsidiaries 2,619,601
Investments in unconsolidated
subsidiaries (4,100)
Other 20,051
----------
2,635,552
$3,081,757
<PAGE>
CINERGY CORP.
BALANCE SHEET
As of September 30, 1999
(unaudited)
(dollars in thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
ACTUAL
Current Liabilities
Accounts payable $ 5,954
Accounts payable to
affiliated companies 8,486
Accrued taxes 16,521
Accrued interest 8,014
Notes payable and other
short-term obligations 5,000
Other -
----------
43,975
Non-current Liabilities
Long-term debt 399,650
Deferred income taxes (463)
Other 228
----------
399,415
Total Liabilities 443,390
Common Stock Equity
Common stock - $.01 par value;
authorized shares - 600,000,000;
outstanding shares - 158,917,210
at September 30, 1999, and 158,
664,532 at December 31, 1998 1,589
Paid-in capital 1,605,674
Retained earnings 1,038,660
Accumulated other comprehensive loss (7,556)
Total common stock equity 2,638,367
----------
$3,081,757
<PAGE>
CINERGY CORP.
STATEMENT OF INCOME
For the Twelve Months Ended September 30, 1999
(unaudited)
(in thousands, except per share amounts)
ACTUAL
Operating Expenses
Other operation and maintenance $ 7,896
Taxes other than income taxes 142
--------
8,038
Operating Loss (8,038)
Equity in Earnings of Consolidated
Subsidiaries 229,272
Equity in Earnings of Unconsolidated
Subsidiaries 76,569
Gain On Sale of Investment in
Unconsolidated Subsidiary 99,272
Miscellaneous - Net 14,187
Interest Expense 47,371
--------
Income Before Taxes 363,891
Income Taxes (15,374)
Net Income $379,265
Average Common Shares Outstanding 158,786
Earnings Per Common Share
Net Income $2.39
Earnings Per Common Share - Assuming Dilution
Net Income $2.38
Dividends Declared Per Common Share $1.80
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
CINERGY CORP.
STATEMENT OF CHANGES IN COMMON STOCK EQUITY
for the Twelve Months Ended September 30, 1999
(unaudited)
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
<C>
ACCUMULATED
OTHER TOTAL
TOTAL
COMMON PAID-IN RETAINED COMPREHENSIVE
COMPREHENSIVE COMMON STOCK
STOCK CAPITAL EARNINGS LOSS INCOME
EQUITY
Twelve Months Ended September 30, 1999
Balance at October 1, 1998 $1,587 $1,600,776 $ 943,647 $(3,659)
$2,542,351
Comprehensive income
Net income 379,265 $379,265
379,265
Other comprehensive income,
net of tax
Foreign currency translation
adjustment
(3,351) (3,351)
Minimum pension liability
adjustment 30
30
Unrealized loss on grantor
trust
(339) (339)
Unrealized loss on
securities available for sale
(237) (237)
--------
Other comprehensive loss
Total (3,897)
(3,897)
--------
Comprehensive income total $375,368
========
Issuance of 369,509 shares of
common stock - net 2 9,700
9,702
Treasury shares purchased (9,191)
(9,191)
Treasury shares reissued 4,387
4,387
Dividends on common stock (285,776)
(285,776)
Other 2 1,524
1,526
------ ---------- ---------- -------
----------
Balance at September 30, 1999 $1,589 $1,605,674 $1,038,660 $(7,556)
$2,638,367
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE
CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENTS OF INCOME AND
CONSOLIDATED
STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 6,373,293
<OTHER-PROPERTY-AND-INVEST> 309,578
<TOTAL-CURRENT-ASSETS> 1,240,925
<TOTAL-DEFERRED-CHARGES> 1,128,957
<OTHER-ASSETS> 481,734
<TOTAL-ASSETS> 9,534,487
<COMMON> 1,589
<CAPITAL-SURPLUS-PAID-IN> 1,605,674
<RETAINED-EARNINGS> 1,031,104
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,638,367
0
92,597
<LONG-TERM-DEBT-NET> 2,723,483
<SHORT-TERM-NOTES> 363,780
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 31,822
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,684,438
<TOT-CAPITALIZATION-AND-LIAB> 9,534,487
<GROSS-OPERATING-REVENUE> 5,843,596
<INCOME-TAX-EXPENSE> 212,469
<OTHER-OPERATING-EXPENSES> 5,201,526
<TOTAL-OPERATING-EXPENSES> 5,413,995
<OPERATING-INCOME-LOSS> 429,601
<OTHER-INCOME-NET> 195,155
<INCOME-BEFORE-INTEREST-EXPEN> 624,756
<TOTAL-INTEREST-EXPENSE> 240,034
<NET-INCOME> 384,722
5,457
<EARNINGS-AVAILABLE-FOR-COMM> 379,265
<COMMON-STOCK-DIVIDENDS> 285,776
<TOTAL-INTEREST-ON-BONDS> 200,591
<CASH-FLOW-OPERATIONS> 0
<EPS-BASIC> 2.39
<EPS-DILUTED> 2.38
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE
SHEETS, STATEMENTS OF INCOME AND STATEMENTS OF CASH FLOWS AND IS
QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CAPTION>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> OCT-01-1998
<PERIOD-END> SEP-30-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 0
<OTHER-PROPERTY-AND-INVEST> 2,615,501
<TOTAL-CURRENT-ASSETS> 446,205
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 20,051
<TOTAL-ASSETS> 3,081,757
<COMMON> 1,589
<CAPITAL-SURPLUS-PAID-IN> 1,605,674
<RETAINED-EARNINGS> 1,031,104
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,638,367
0
0
<LONG-TERM-DEBT-NET> 399,650
<SHORT-TERM-NOTES> 5,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 38,740
<TOT-CAPITALIZATION-AND-LIAB> 3,081,757
<GROSS-OPERATING-REVENUE> 0
<INCOME-TAX-EXPENSE> (15,374)
<OTHER-OPERATING-EXPENSES> 8,038
<TOTAL-OPERATING-EXPENSES> (7,336)
<OPERATING-INCOME-LOSS> 7,336
<OTHER-INCOME-NET> 419,300
<INCOME-BEFORE-INTEREST-EXPEN> 426,636
<TOTAL-INTEREST-EXPENSE> 47,371
<NET-INCOME> 379,265
0
<EARNINGS-AVAILABLE-FOR-COMM> 379,265
<COMMON-STOCK-DIVIDENDS> 285,776
<TOTAL-INTEREST-ON-BONDS> 16,767
<CASH-FLOW-OPERATIONS> 0
<EPS-BASIC> 2.39
<EPS-DILUTED> 2.38
</TABLE>
