SECURITIES AND EXCHANGE COMMISSION
Washington, D. C 20549
FORM U-1
APPLICATION OR DECLARATION
under
The Public Utility Holding Company Act of 1935
THE SOUTHERN COMPANY
64 Perimeter Center East
Atlanta, Georgia 30346
(Name of company or companies filing this statement
and addresses of principal executive offices)
THE SOUTHERN COMPANY
(Name of top registered holding company parent
of each applicant or declarant)
Tommy Chisholm, Secretary
The Southern Company
64 Perimeter Center East
Atlanta, Georgia 30346
(Names and addresses of agents for service)
The Commission is requested to mail signed copies of all
orders, notices and communications to:
W. L. Westbrook John F. Young
Financial Vice President Vice President
The Southern Company Southern Company Services, Inc.
64 Perimeter Center East One Wall Street, 42nd Floor
Atlanta, Georgia 30346 New York, New York 10005
John D. McLanahan
Troutman Sanders
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308-2216
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INFORMATION REQUIRED
Item 1. Description of Proposed Transaction.
1.1 Investments in Project Parents. The Southern
Company ("Southern"), a registered holding company under the
Public Utility Holding Company Act of 1935, as amended (the
"Act"), requests approval for the acquisition, in one or more
transactions, of the securities of one or more companies engaged
directly or indirectly, and exclusively, in the business of
owning and holding the securities of one or more "foreign utility
companies" ("FUCOs"), as defined in Section 33(a) of the Act.
Such companies (hereinafter referred to as "Project Parents") may
also acquire and hold the securities of one or more "exempt
wholesale generators" ("EWGs"), as defined in Section 32(a) of
the Act. It is proposed that the authorization requested herein
shall remain effective until the earlier of (i) December 31,
1996, and (ii) the effective date of any rule of general
applicability adopted by the Commission that would exempt the
acquisition of any securities of any Project Parent from the
application requirements of Sections 9 and 10 of the Act.
A Project Parent may be organized at the time of, and in
order to facilitate, the making of bids or proposals to acquire
an interest in any EWG or FUCO (hereinafter referred to
collectively as "Exempt Subsidiaries"); after the award of a bid
proposal, in order to facilitate closing on the purchase or
financing of any such Exempt Subsidiary; or at any time
subsequent to the consummation of an acquisition of an interest
in an Exempt Subsidiary in order, among other things, to effect
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an adjustment in the respective ownership interests in any Exempt
Subsidiary held by Southern and unaffiliated co-investors, to
facilitate a partial sale of an interest in any such Exempt
Subsidiary, to comply with applicable laws of foreign
jurisdictions limiting or otherwise relating to the ownership of
domestic companies by foreign nationals, as a part of tax
planning in order to limit Southern's exposure to U.S. and
foreign taxes, or for other lawful business purposes.
Direct or indirect investments by Southern in any
Project Parent may take the form of any combination of the
following: (i) purchases of capital shares, partnership
interests, trust certificates, promissory notes, or other
securities; (ii) the making of cash capital contributions or open
account advances; and (iii) the guaranty by Southern of the
securities of any Project Parent issued to third persons. Any
direct or indirect investment by Southern in any Project Parent
would be consummated only if, at the time thereof, and giving
effect thereto, Southern's "aggregate investment," determined in
accordance with Rule 53(a)(1)(i), in all FUCOs, EWGs and Project
Parents shall not exceed 50% of Southern's "consolidated retained
earnings," as defined in Rule 53(a)(1)(ii). Further, Southern
will limit its direct and indirect investment in any particular
Project Parent to an amount which is no greater than the amount
reasonably required in connection with making the underlying
investment in any Exempt Subsidiary(ies) with respect to which
such Project Parent was organized or formed, taking into account
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development expenditures, working capital needs, and cash
reserves required to be maintained in accordance with financing
documents. Southern will also comply with all other applicable
rules under the Act, including, without limitation, such rules as
may be promulgated pursuant to Sections 32 and 33.
Funds for any direct or indirect investment by Southern
in any Project Parent will be derived from the sale of common
stock and/or the issuance of guarantees (within such limitations
as are set forth in HCAR No. 25980, dated January 25, 1994, or in
any future authorization obtained from the Commission), from bank
borrowings and/or commercial paper sales (within such limitations
as are set forth in HCAR No. 26004, dated March 15, 1994, or any
future authorization obtained from the Commission), and from
available cash.
Southern is currently investigating potential
opportunities to acquire or construct electric generation,
transmission and/or distribution facilities in Europe, Asia,
Australia and South America. Southern believes that, in almost
all cases, such facilities will qualify as facilities that a FUCO
may own or operate.1 It has been Southern's experience, in
connection with its foreign project development activities,
including the preparation and submission of bid proposals in
1 In some instances, a foreign utility facility may also
qualify as an "eligible facility," as defined in Section 32(a)(2)
of the Act. Depending upon various facts and circumstances,
Southern may in the future pursue any particular foreign utility
investment opportunity as an EWG rather than as a FUCO, in which
case the requisite filing or filings would be made with the
Federal Energy Regulatory Commission.
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foreign government privatization programs, that the formation and
acquisition of one or more Project Parents (usually, but not
always, foreign corporations or the equivalent thereof) is
necessary or desirable to facilitate the acquisition and
ownership of a FUCO. For example, laws of some foreign countries
may require that the bidder in a privatization program be a
domestic company. In such cases, it would be necessary for
Southern to form a foreign subsidiary as the entity submitting
the bid or other proposal.
There would typically be other business reasons for
creating Project Parents. For example, the interposition of one
or more wholly-owned Project Parents may be necessary to minimize
U.S. income taxes (e.g., by deferring repatriation of foreign
source income, or in order to take full advantage of favorable
tax treaties among foreign countries). Further, Project Parents
are useful in cases in which Southern may bid as a part of a
consortium of companies, since each member of the consortium will
typically want to have at least one consolidated subsidiary in
the final FUCO ownership structure for tax and accounting
purposes. Finally, Project Parents serve to isolate business
risks and facilitate subsequent adjustments to or sales of
interests among or by the members of the ownership group.
Southern proposes herein that a Project Parent may also
acquire and hold direct or indirect interests in both FUCOs and
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EWGs.2 The ability to combine ownership of both FUCOs and EWGs
under a single company will enable Southern to minimize the
number of separate intermediate subsidiaries needed in connection
with its investments in EWGs and FUCOs.
1.2 Financing By Project Parents. Approval is also
requested for any Project Parent to engage in financing through
the issuance of notes or other securities to persons other than
Southern, including banks, insurance companies, and other
financial institutions, exclusively for the purpose of financing
(including any refinancing of) investments in Exempt
Subsidiaries. Such securities would be issued in one or more
transactions from time to time through the earlier to occur of
(i) December 31, 1996, and (ii) the effective date of any rule of
general applicability adopted by the Commission exempting such
transactions from the application requirements under the Act.
Southern states that the amount and type of such
securities, and the terms thereof, including (in the case of any
indebtedness) interest rate, maturity, prepayment or redemption
privileges, and the terms of any collateral security granted with
respect thereto, would be negotiated on a case by case basis,
taking into account differences from project to project in
optimum debt-equity ratios, projections of earnings and cash
flow, depreciation lives, and other similar financial and
2 An entity engaged exclusively in the business of holding
the securities of one or more EWGs may itself seek a
determination of EWG status from the Federal Energy Regulatory
Commission. However, such an entity could not hold the
securities of both EWGs and FUCOs.
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performance characteristics of each project. In most cases,
notes or other securities issued by Project Parents to third
persons would not be recourse, directly or indirectly, to
Southern or any subsidiary of Southern (other than any subsidiary
that is an EWG, FUCO or other Project Parent). If, however,
through guarantees or similar financial accommodations, there is
recourse, directly or indirectly, to Southern with respect to any
securities of any Project Parent, then the full amount thereof
shall be included in Southern's "aggregate investment" in all
FUCOs, EWGs and Project Parents, and would be subject to the
limitations described in Item 1.1, above.3
In connection with investments in Exempt Subsidiaries,
it is typical that a portion of the capital requirements of any
such Exempt Subsidiary would be obtained through non-recourse
financing involving borrowings from banks and other financial
institutions. In some cases, however, it may be necessary or
desirable to structure an investment in an Exempt Subsidiary such
that the obligations created are not those of the Exempt
Subsidiary, but instead those of its parent companies. For
example, in a consortium of non-affiliated companies bidding to
purchase the securities or assets of an EWG or FUCO, each of the
consortium members would be obligated to fund its respective
share of the proposed purchase price. If external sources of
3 As indicated, among other limitations, it is proposed
that any such guaranty or other financial accommodation granted
by Southern with respect to the securities of any Project Parent
would be subject to the limitations set forth in HCAR No. 25980,
dated January 25, 1994.
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funds are needed for this purpose, a participant in the
consortium may choose to engage in non-recourse financing through
one or more single-purpose subsidiaries that would then utilize
the proceeds of the financing to acquire an ownership interest in
the Exempt Subsidiary.4
Southern believes that external financing by any Project
Parent involves the same issues that are involved when the
financing is carried out by an Exempt Subsidiary, in terms of the
potential adverse impacts upon the financial integrity of a
registered holding company system. Accordingly, Southern
proposes that the requirements and limitations of Rule 53 apply
to any financing by a Project Parent with respect to which there
is recourse, directly or indirectly, to Southern, as if such
Project Parent were an EWG or FUCO; otherwise, if there is no
such recourse, directly or indirectly, to Southern, then it is
appropriate that Project Parents have the flexibility to engage
in financing without such limitation.
Item 2. Fees, Commissions and Expenses.
The fees and expenses to be incurred in connection with
this Application or Declaration are estimated at $5,000, which
includes the Commission's $2,000 filing fee.
4 Typically, the capital shares or other equity interests
in the Exempt Subsidiary would be pledged to secure the
securities issued by the Project Parent.
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Item 3. Applicable Statutory Provisions.
Southern considers that the issuance of securities by
any Project Parent and the direct or indirect acquisition thereof
by Southern is subject to Sections 6(a), 7, 9(a) and 10 of the
Act. In addition, Section 12(b) and Rule 45 thereunder would
apply to any direct or indirect cash capital contribution or loan
by Southern to any Project Parent and to the guaranty by Southern
of any security of any Project Parent.
Southern states that, assuming compliance with the
limitations and conditions specified in Item 1, above, the
acquisition by Southern of the securities of any Project Parent
and the issuance of securities by any Project Parent will satisfy
the standards of Sections 7, 10 and 12(b), as applicable, in
that: (i) such securities will be issued solely for the purpose
of financing (including any refinancing of) the acquisition and
ownership of interests in FUCOs and EWGs in transactions that are
permitted under Section 32(g) or Section 33(c), as applicable;
(ii) the amounts invested or to be invested in any such Project
Parents will be within the limitations of Rule 53(a) and
Southern's current financing authorizations; and (iii) the
issuance and acquisition of such securities will not otherwise be
detrimental to the interests of investors or consumers.
The transactions proposed herein will be carried out in
accordance with the procedures specified in Rule 23. Southern
proposes to comply with the procedures specified in Rule 24 by
filing, not later than 60 days after the end of each calendar
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quarter, a certificate notifying the Commission of each
investment made by Southern, directly or indirectly, in any
Project Parent in the previous quarter, indicating the amount and
type of such investment and generally identifying the facility
with respect to which such Project Parent was organized or
formed. Such certificate will also describe in reasonable detail
the amount, type, and terms (including interest rate and
maturity) of securities issued by any Project Parent to third
persons.
Item 4. Regulatory Approval.
The direct or indirect acquisition by Southern of the
securities of any Project Parent and the issuance of securities
by any such Project Parent are not subject to the jurisdiction of
any state commission or of any federal commission other than the
Securities and Exchange Commission.
Item 5. Procedure.
Southern requests that the Commission's order be issued
as soon as the rules allow, and that there be no thirty-day
waiting period between the issuance of the Commission's order and
the date on which it is to become effective. Southern hereby
waives a recommended decision by a hearing officer or other
responsible officer of the Commission and hereby consents that
the Division of Investment Management may assist in the
preparation of the Commission's decision and/or order in this
matter unless such Division opposes the matters covered hereby.
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Item 6. Exhibits and Financial Statements.
(a) Exhibit:
A - None.
B - None.
C - None.
D - None.
E - None.
F - Opinion of Troutman Sanders. (To be filed by
amendment.)
G - Form of Federal Register Notice.
(b) Financial Statements: (Inapplicable).
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.
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SIGNATURE
Pursuant to the requirements of the Public Utility
Holding Company Act of 1935, the undersigned company has duly
caused this statement to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 13, 1994 THE SOUTHERN COMPANY
By: /s/Tommy Chisholm
Tommy Chisholm, Secretary
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Exhibit G
FORM OF FEDERAL REGISTER NOTICE
The Southern Company ("Southern"), a registered holding
company, has filed an application or declaration pursuant to
Sections 6(a), 7, 9(a), 10 and 12(b) of the Act and Rule 45
thereunder seeking authorization for the acquisition of the
securities of or other investment in one or more companies
engaged directly or indirectly, and exclusively, in the business
of owning and holding the securities of one or more "foreign
utility companies" ("FUCOs"), as defined in Section 33(a). Such
companies may also acquire and hold the securities of one or more
"exempt wholesale generators" ("EWGs"). Southern proposes to
acquire the securities of such companies (referred to as "Project
Parents") in one or more transactions prior to the earlier of
December 31, 1996, and the effective date of a rule of general
applicability adopted by the Commission to exempt the acquisition
of the securities of such companies from the application
requirements of Sections 9(a)(1) and 10.
Southern states that it would make such direct or indirect
acquisitions only if, at the time thereof and after giving effect
thereto, Southern's "aggregate investment," as defined in Rule
53(a)(1)(i), in all FUCOs, EWGs and Project Parents would not
exceed 50% of Southern's "consolidated retained earnings," as
defined in Rule 53(a)(1)(ii). Southern would make such
acquisitions using proceeds of authorized sales of common stock
and borrowings and/or commercial paper sales, together with
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internally generated funds.
Southern states that the interposition of one or more
Project Parents between Southern and a FUCO in which Southern
seeks to invest, indirectly, is necessary for a variety of
business purposes, including to minimize U.S. income taxes, to
comply with laws of foreign countries restricting ownership of
domesticated companies by foreign nationals, and to facilitate
ownership of FUCOs with unaffiliated companies. Southern states
that having the flexibility to combine the ownership of both
FUCOs and EWGs under the same Project Parent will enable Southern
to minimize the number of separate intermediate companies needed
in order to acquire and hold interests in FUCOs and EWGs.
Southern further requests authority for any Project Parent
to issue securities exclusively for the purpose of financing
(including any refinancing of) its investment in a FUCO or EWG.
Southern states that such securities would typically not be
recourse to Southern. If, however, such securities are recourse
to Southern, through guarantees or other financial accommodations
granted by Southern, the full amount thereof would be included in
Southern's "aggregate investment" in all EWGs and FUCOs for
purposes of Rule 53(a), and would be subject to other limitations
contained in the Commission's order of January 25, 1994 (HCAR No.
25980).
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