File No. 70-8421
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C 20549
Amendment No. 1 to
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
The Application or Declaration heretofore filed in this
proceeding is hereby amended and restated in its entirety as
follows:
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
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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
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.
Southern requests authority to make direct or indirect
investments in Project Parents in an aggregate amount at any one
time outstanding not to exceed $400 million, provided, however,
that 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), and provided further, that 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 development
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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.
It is proposed that investments by Southern in any
Project Parents may take the form of any combination of the
following: (i) purchases of capital shares, partnership
interests, trust certificates, or the equivalent of any of the
foregoing under the laws of foreign jurisdictions, if applicable;
(ii) cash capital contributions or open account advances; (iii)
loans evidenced by promissory notes; and (iv) guaranties by
Southern of the principal of or interest on any promissory notes
or other evidences of indebtedness of any Project Parent issued
to lenders other than Southern. The form of the promissory note
to be issued to Southern is included herewith as Exhibit A.
It is proposed that any investment in the capital shares
or other equity securities of a Project Parent that have a stated
par value will be in an amount equal to or greater than such par
value, and that any open account advance made by Southern to a
Project Parent be non-interest bearing and repayable within one
year of the date of the advance. It is further proposed that any
promissory note issued by a Project Parent to Southern, and any
promissory note or similar evidence of indebtedness issued by a
Project Parent to a lender other than Southern with respect to
which Southern may issue a guaranty, would mature not later than
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30 years after the date of issuance thereof, and would bear
interest at a rate (a) not greater than the prime rate at a bank
to be designated by Southern in the case of any promissory note
issued to Southern, and (b) not greater than 3% over such prime
rate in the case of any note or similar evidence of indebtedness
issued to a lender other than Southern and guarantied by
Southern.
Any promissory note issued to Southern by any Project
Parent may, at Southern's option, be converted to a capital
contribution to such Project Parent through Southern's
forgiveness of the indebtedness evidenced thereby.
Funds for any direct or indirect investment by Southern
in any Project Parent (including the guaranty of any securities
of 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 not requesting authority herein to
issue any additional securities for the purpose of financing
investments in any Project Parents.
Southern states that it is currently investigating
potential opportunities to acquire or construct electric
generation, transmission and/or distribution facilities in
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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 to date, including the preparation and
submission of bid proposals in 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
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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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
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.
Southern states that, within 45 days after Southern
determines that the purpose for which any Project Parent whose
securities it has acquired no longer exists (whether due to
termination of a proposed project acquisition, loss of a bid,
change of law, or otherwise), it shall (to the extent that it is
able to do so) liquidate or dissolve such Project Parent, unless,
within that time, Southern determines that such Project Parent
may be used in conjunction with a proposal or plan to acquire an
interest in a different Exempt Subsidiary. To the extent needed,
Southern requests authority to liquidate or dissolve any Project
Parent under such circumstances.
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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1.2 Financing By Project Parents. Approval is also
requested for any Project Parent to issue equity securities and
debt securities to persons other than Southern (and with respect
to which there is no recourse to 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 may 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. It is proposed that the
aggregate principal amount of non-recourse debt securities issued
by Project Parents to persons other than Southern will not exceed
$800 million at any one time outstanding, provided that no more
than $200 million principal amount of such non-recourse debt
securities at any time outstanding may be denominated in (i.e.,
evidence borrowings in) currencies other than U.S. dollars. In
any case in which Southern directly or indirectly owns less than
all of the equity interests of a Project Parent, only that
portion of the non-recourse indebtedness of such Project Parent
equal to Southern's equity ownership percentage shall be included
for purposes of the foregoing limitations.
Equity securities issued by any Project Parent to a
person other than Southern may include capital shares,
partnership interests, trust certificates, or the equivalent of
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any of the foregoing under applicable foreign law. Non-recourse
debt securities issued to persons other than Southern may include
secured and unsecured promissory notes, subordinated notes,
bonds, or other evidence of indebtedness. Securities issued by
Project Parents may be denominated in either U.S. dollars or
foreign currencies.
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
performance characteristics of each project. Accordingly,
Southern proposes that it have the flexibility to negotiate the
terms and conditions of such securities without further approval
by the Commission.
Notwithstanding the foregoing, Southern states that no
equity security having a stated par value would be issued or sold
by a Project Parent for a consideration that is less than such
par value; and that any note, bond or other evidence of
indebtedness issued or sold by any Project Parent will mature not
later than 30 years from the date of issuance thereof, and will
bear interest at a rate not to exceed the following: (i) if such
note, bond or other indebtedness is U.S. dollar denominated, at a
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fixed rate not to exceed 6.5% over the yield to maturity on an
actively traded, non-callable, U.S. Treasury note having a
maturity equal to the average life of such note, bond or other
indebtedness (the "Applicable Treasury Rate"),3 or at a floating
rate not to exceed 6.5% over the then applicable prime rate at a
U.S. money center bank to be designated by Southern (the
"Applicable Prime Rate"); and (ii) if such note, bond or other
indebtedness is denominated in the currency of a country other
than the United States, at a fixed or floating rate which, when
adjusted (i.e., reduced) for the prevailing rate of inflation in
such country, as reported in official indices published by such
country, would be equivalent to a rate on a U.S. dollar
denominated borrowing of identical average life that does not
exceed 10% over the Applicable Treasury Rate (interpolated if
necessary) or Applicable Prime Rate, as the case may be.
In connection with the issuance of any non-recourse debt
securities by any Project Parent, it is anticipated that such
Project Parent may grant security in its assets. Such security
interest may take the form of a pledge of the shares or other
equity securities of an Exempt Subsidiary that it owns, including
a security interest in any distributions from any such Exempt
Subsidiary, and/or a collateral assignment of its rights under
3 If there is no actively traded Treasury note with a
maturity equal to the average life of such note, bond or other
evidence of indebtedness, then the Applicable Treasury Rate would
be determined by interpolating linearly with reference to the
yields to maturity on actively traded, non-callable, Treasury
notes having maturities near (i.e., both shorter and longer than)
such average life.
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and interests in other property, including rights under
contracts. It is also anticipated that fees in the form of
placement or commitment fees, or other similar fees, would be
paid to lenders, placement agents, or others in connection with
the issuance of any such non-recourse debt securities. Southern
requests authority for any Project Parent to agree in any case to
pay placement or commitment fees, and other similar fees, in
connection with any borrowing, provided that the effective annual
interest charge on any indebtedness evidencing such borrowing is
not greater than 115% of the stated interest rate thereon.
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
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
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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, where the
proceeds of any such financing (including any refinancing) are
utilized to make an investment in any Exempt Subsidiary, and
there is no recourse directly or indirectly to Southern with
respect to the securities issued or sold, there is no basis for
any adverse findings under Section 6, 7 and 12 of the Act,
provided that, at the time of the issuance thereof, Southern is
in compliance with Rule 53.
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.
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
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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Act. Sections 6(a) and 7 may also be applicable to the
liquidation or dissolution of any Project Parent. 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 by Southern in any
such Project Parents (including guarantees by Southern of
securities issued by Project Parents to third parties) will, when
added to amounts invested by Southern in Exempt Subsidiaries, be
within the limitations of Rule 53(a); 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, and the basis for inflation adjustment in the case of
non-recourse indebtedness denominated in any currency other than
U.S. dollars) of securities issued by any Project Parent to third
persons. Southern proposes to combine the information included
in this quarterly certificate with the quarterly certificate to
be filed pursuant to Rule 24 in accordance with the Commission's
order approving the Application or Declaration of Southern and
SEI in File No. 70-7932.
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
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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.
Item 6. Exhibits and Financial Statements.
(a) Exhibit:
A - Form of Promissory Note to be issued by
Project Parent to Southern. (To be filed by
amendment).
B - None.
C - None.
D - None.
E - None.
F - Opinion of Troutman Sanders. (To be filed by
amendment.)
G - Form of Federal Register Notice. (Previously
filed.)
(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.
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(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 statement to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: July 1, 1994 THE SOUTHERN COMPANY
By: /s/ Tommy Chisholm
Tommy Chisholm, Secretary
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