File No. 70-8733
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 4
(Post-Effective Amendment No. 1)
to
APPLICATION OR DECLARATION
on
FORM U-1
under
The Public Utility Holding Company Act of 1935
THE SOUTHERN COMPANY SOUTHERN ELECTRIC MOBILE ENERGY SERVICES
270 Peachtree Street, N.W. INTERNATIONAL, INC. HOLDINGS, INC.
Atlanta, Georgia 30303 900 Ashwood Parkway 900 Ashwood Parkway
Suite 500 Suite 450
SOUTHERN ELECTRIC Atlanta, Georgia 30338 Atlanta, Georgia 30338
WHOLESALE GENERATORS,
INC. SEI HOLDINGS, INC.
900 Ashwood Parkway 900 Ashwood Parkway SEI EUROPE, INC.
Suite 500 Suite 500 900 Ashwood Parkway
Atlanta, Georgia 30338 Atlanta, Georgia 30338 Suite 500
Atlanta, Georgia 30338
SEI NEWCO 1, INC.
900 Ashwood Parkway
Suite 500
Atlanta, Georgia 30338
(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 Thomas G. Boren, President
The Southern Company Southern Electric
270 Peachtree Street, N.W. International, Inc.
Atlanta, Georgia 30303 900 Ashwood Parkway
Suite 500
Atlanta, Georgia 30338
(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 Thomas G. Boren, President
Financial Vice-President Southern Electric
The Southern Company International, Inc.
270 Peachtree Street, N.W. 900 Ashwood Parkway
Atlanta, Georgia 30303 Suite 500
Atlanta, Georgia 30338
John D. McLanahan, Esq.
Troutman Sanders LLP
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 Background. SEI Holdings, Inc. ("Holdings") is a wholly-owned
non-utility subsidiary of The Southern Company ("Southern"), a registered
holding company under the Act. Through Holdings and other direct and indirect
subsidiaries of Holdings, Southern has acquired and currently holds interests in
"exempt wholesale generators" ("EWGs"), as defined in Section 32, and "foreign
utility companies" ("FUCOs"), as defined in Section 33. By order dated February
2, 1996 (Holding Company Act Release No. 26468) (the "February 1996 Order"),
Holdings was authorized, among other things, to acquire the securities of one or
more special-purpose subsidiaries (called "Intermediate Subsidiaries") organized
exclusively for the purpose of acquiring and holding one or more EWGs or FUCOs
or subsidiaries (called "Energy-Related Companies") which derive or will derive
substantially all of their revenues from the ownership and/or operation of
certain categories of non-utility businesses, namely: "qualifying facilities"
(as defined in the Public Utility Regulatory Policies Act of 1978, as amended;
steam production, conversion and distribution; and electricity brokering and
marketing. Holdings is also authorized to acquire and hold certain other kinds
of non-utility subsidiaries.1
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1 Specifically, one subsidiary of Holdings (called "Domestic Holdings" in the
February 1996 Order) is the umbrella company for Holdings' domestic operations,
and another (called "Foreign Holdings" in the February 1996 Order) is the
umbrella company for Holdings' international operations. Holdings is also
authorized to acquire from Southern the shares of Southern Electric
International, Inc. ("Southern Electric"), and to acquire the securities of one
or more direct or indirect subsidiaries organized to engage in any of those
activities or businesses in which Southern Electric has previously been
authorized to engage by order dated December 30, 1994 (Holding Company Act
Release No. 26212).
2
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1.2 Proposed Modification. Holdings now proposes, on behalf of itself
and every direct or indirect subsidiary of Holdings (other than those subsidiary
companies that are exempt under the Act), that such companies be permitted to
pay dividends with respect to the securities of such companies, from time to
time through December 31, 2000, out of capital and unearned surplus (including
revaluation reserve), to the extent permitted under applicable corporate law. As
an alternative or additional basis for relief with respect to any current or
future subsidiary companies of Holdings that derive no material part of their
income from sources within the United States, Holdings requests that the
Commission grant an order pursuant to Section 3(b) exempting such companies from
the requirements of Section 12(c) and Rule 46 thereunder.
Holdings anticipates that there will be situations in which it or one
or more of its subsidiaries will have unrestricted cash available for
distribution in excess of current and retained earnings. In such situations, the
declaration and payment of a dividend would have to be charged, in whole or in
part, to capital or unearned surplus. As an example, if Holdings (directly or
indirectly through an Intermediate Subsidiary)
3
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purchases all of the stock of an EWG or FUCO, and following such acquisition,
the EWG or FUCO incurs non-recourse borrowings some or all of the proceeds of
which are distributed to the Intermediate Subsidiary as a reduction in the
amount invested in the EWG or FUCO (i.e., return of capital), the Intermediate
Subsidiary (assuming it has no earnings) could not, without the Commission's
approval, in turn distribute such cash to Holdings for possible distribution to
Southern.2
Similarly, using the same example, if an Intermediate Subsidiary,
following its acquisition of all of the stock of an EWG or FUCO, were to sell
part of that stock to a third party for cash, the Intermediate Subsidiary would
again have substantial unrestricted cash available for distribution, but
(assuming no profit on the sale of the stock) would not have current earnings
and therefore could not, without the Commission's approval, declare and pay a
dividend to Holdings out of such cash proceeds.
Further, there may be periods during which unrestricted cash available
for distribution by Holdings or a subsidiary exceeds current and retained
earnings due to the difference between accelerated depreciation allowed for tax
purposes, which may generate significant amounts of distributable cash, and
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2 The same problem would arise where an Intermediate Subsidiary is
over-capitalized in anticipation of a bid which is ultimately unsuccessful. In
such a case, Holdings would normally desire a return of some or all of the funds
invested.
4
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depreciation methods required to be used in determining book
income.3
Finally, even under circumstances in which an Intermediate Subsidiary
or other downstream subsidiary has sufficient earnings, and therefore may
declare and pay a dividend to its immediate parent, such immediate parent may
have negative retained earnings, even after receipt of the dividend, due to
losses from other operations. In this instance, cash would be trapped at a
subsidiary level where there is no current need for it.
Holdings, on behalf of itself and each of its current and future
subsidiaries, represents that it will not declare or pay any dividend out of
capital or unearned surplus in contravention of any law restricting the payment
of dividends. In this regard, it should be noted that all U.S. jurisdictions
limit to one extent or another the authority of corporations to make dividend
distributions to shareholders. Most State corporations statutes contain either
or both an equity insolvency test or some type of balance sheet test.4 Holdings
also states that many of its subsidiaries (including Intermediate Subsidiaries,
EWGs and FUCOs) have issued debt securities pursuant to the terms of
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3 See e.g., The Southern Company, et al., Holding Company
Act Release No. 26440, dated December 28, 1995.
4 See generally, Fletcher Cyclopedia of the Law of Private
Corporations, ss. 5329 (1995 Revised Ed.).
5
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credit agreements and indentures that also restrict the amount
and timing of distributions to shareholders.5
Holdings' request, if granted, would not contravene the purposes of
Section 12(c), which was primarily intended to safeguard the working capital of
the public-utility companies.6 In contrast, there is no clear evidence that
Congress was specifically concerned with the declaration and payment of
dividends by non-utility subsidiaries of registered holding companies,7 at least
in the absence of evidence of any indirect impact that a non-utility
subsidiary's dividend policy could have on the protected interests. Thus, even
if it could be argued that the dividend policies of a non-utility subsidiary
that is organized to sell services or goods to its associate public utility
companies could somehow have an indirect negative impact on consumers and
investors, such logic could not possibly extend
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5 In a non-recourse project financing, the credit documents
typically limit the borrower's ability to make any distribution
during a default period, and limit distributions at other times
to an amount determined after payment of all operations and
maintenance expenses and debt service (including funding of any
required cash reserves).
6 See Eastern Utilities Associates, Holding Company Act
Release No. 25330 (June 13, 1991), citing S. Rep. No. 621, 74th
Cong., 1st Sess. p. 35 (1935); Summary Report of the FTC to the
U.S. Senate Pursuant to S.R. No. 83, 70th Cong., 1st Sess. Doc.
92, vol. 73-A, pp. 61-62.
7 In this regard, it should be noted that Section 1(b)(3)
of the Act proclaims that the interests of consumers and
investors may be adversely affected "when control of subsidiary
public-utility companies affects the accounting practices and
rate, dividend, and other policies of such companies so as to
complicate and obstruct State regulation of such companies
. . . ." (Emphasis added).
6
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to unregulated subsidiaries such as EWGs and FUCOs (and the Intermediate
Subsidiaries which own them) which do not engage in affiliate sales.
Finally, it should be noted that the Division of Investment Management
has itself recommended that the Commission study the continuing need for any
rule restricting the payment of dividends out of capital or unearned surplus,
particularly as such restriction may apply to the dividend policies of
non-utility subsidiaries.8 The applicants hereby encourage the Division of
Investment Management to recommend to the Commission an amendment to or
rescission of Rule 46.
As an alternative or additional basis for relief, Holdings urges that
it would be appropriate and in the public interest for the Commission to exempt
any current or future subsidiary of Holdings that does not derive any material
part of its income from U.S. sources from Section 12(c) of the Act, pursuant to
Section 3(b) thereof. The Commission has granted exemptions pursuant to Section
3(b) from Section 12(c) and other provisions of the Act in comparable situations
in the past.9
1.3 Other Matters. Under the terms of the February 1996
Order, Southern, Holdings, Southern Electric and Mobile Energy
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8 See "The Regulation of Public-Utility Holding Companies,"
Report of the Division of Investment Management (June 1995), pp.
56-57.
9 See e.g., The Southern Company, et. al., Holding Company
Act Release No. 25639, dated September 23, 1992 (granting
exemption from Section 12(c) and other enumerated provisions of
the Act to certain intermediate subsidiaries proposed to be
organized in connection with possible Australian project).
7
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Services Holdings, Inc. ("Mobile Energy"), also a wholly-owned subsidiary of
Southern, were authorized to carry out certain other proposed transactions
relating to (i) the transfer of Southern Electric's common stock to Holdings,
(ii) the transfer of the stock of certain subsidiaries of Southern Electric to
other direct or indirect subsidiaries of Holdings, and (iii) the issuance by
Mobile Energy to Southern of a series of preferred stock and contribution
thereof by Southern to Holdings. These transactions have not yet been carried
out in accordance with Rule 24(c). The applicants request an additional period
of up to one year in which to consummate these transactions, and propose to
certify that these transactions have been carried out as a part of the quarterly
report pursuant to Rule 24 that is prescribed in the February 1996 Order.
Item 2. Fees, Commissions and Expenses.
The additional fees, commissions and expenses to be paid or
incurred in connection with this Post-Effective Amendment are
estimated not to exceed $3,000.
Item 3. Applicable Statutory Provisions.
Section 12(c) of the Act and Rules 23, 46 and 54 thereunder
are applicable to the proposed transaction. Section 3(b) of the Act is
applicable to the alternative or additional request made by Holdings for an
exemption from Section 12(c) for itself and its current and future subsidiaries.
8
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Rule 54 Analysis: Rule 54 provides, in pertinent part, that, in
determining whether to approve a transaction by a registered holding company or
subsidiary thereof other than with respect to an EWG or FUCO, the Commission
shall not consider the effect of the capitalization or earnings of any such
subsidiary of a registered holding company if the requirements of Rule 53(a),
(b) and (c) are satisfied. In this regard, Holdings represents that each of the
conditions of Rule 53(a) is met,10 and that none of the circumstances described
in Rule 53(b) has occurred.
Item 4. Regulatory Approval.
No state commission, and no federal commission other than this
Commission, has jurisdiction of the transactions proposed herein.
Item 5. Procedure.
The applicants request 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. The applicants hereby waive a recommended decision by a hearing
officer or other responsible officer of the Commission and hereby consent that
the Division of Investment Management may assist in the preparation of the
Commission's decision and/or order in the matter unless such Division opposes
the matters covered hereby.
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10 In a separate proceeding (File No. 70-8725), Southern has been authorized to
issue securities (including guaranties) in order to finance investments in EWGs
(as well as FUCOs) in amounts which would exceed the limitation in Rule
53(a)(1). Holdings' representation regarding compliance with Rule 54 is
therefore expressly subject to the Commission's order in File No.
70-8725.
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Item 6. Exhibits and Financial Statements.
(a) Exhibits:
G - Form of Federal Register Notice.
(b) Financial Statements.
Not applicable.
Item 7. Information as to Environmental Effects.
(a) In light of the nature of the proposed transactions, as
described in Item 1 hereof, 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 companies have duly caused
this statement to be signed on their behalf by the undersigned
thereunto duly authorized.
Dated: April 2, 1996
THE SOUTHERN COMPANY
By:_/s/Tommy Chisholm______________
Tommy Chisholm
Secretary
(Signatures Continued on Next Page)
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MOBILE ENERGY SERVICES HOLDINGS,
INC.
By:_/s/Tommy Chisholm______________
Tommy Chisholm
Secretary
SOUTHERN ELECTRIC INTERNATIONAL,
INC.
By:_/s/Tommy Chisholm______________
Tommy Chisholm
Vice President and Secretary
SEI HOLDINGS, INC.
By:_/s/Tommy Chisholm______________
Tommy Chisholm
Secretary
SOUTHERN ELECTRIC WHOLESALE
GENERATORS, INC.
By:_/s/Tommy Chisholm_____________
Tommy Chisholm
Secretary
SEI EUROPE, INC.
By:_/s/Tommy Chisholm_____________
Tommy Chisholm
Secretary
SEI NEWCO 1, INC.
By:_/s/Tommy Chisholm______________
Tommy Chisholm
Secretary
11
Exhibit G
FORM OF FEDERAL REGISTER NOTICE
The Southern Company ("Southern"), a registered holding company whose
address is 270 Peachtree Street, N.W., Atlanta, Georgia 30303, its wholly-owned
subsidiary, SEI Holdings, Inc. ("Holdings"), and certain other direct and
indirect subsidiaries of Holdings, have filed a post-effective amendment to
their application or declaration in File No. 70-8733, pursuant to Sections 3(b)
and 12(c) of the Act and Rules 46 and 54 thereunder.
By order dated February 2, 1996 (HCAR No. 26468) (the "February 1996
Order"), Southern, Holdings, Southern Electric International, Inc. ("Southern
Electric"), also a wholly-owned subsidiary of Southern, and certain other direct
and indirect subsidiaries of Southern were authorized to carry out certain
transactions involved in the final restructuring of Southern's portfolio of
"exempt wholesale generators" ("EWGs") and "foreign utility companies" ("FUCOs")
(collectively, "Exempt Projects") and related intermediate subsidiaries (called
"Intermediate Subsidiaries"). The February 1996 Order also authorized Holdings
to make future investments in certain other specified categories of entities,
called "Energy-Related Companies."
The applicants now seek a modification to the February 1996
Order that would allow Holdings and its direct and indirect
subsidiaries (other than Exempt Projects, which are exempt from the
Act) to declare and pay dividends out of capital and unearned
surplus to the extent permitted under applicable corporate law. In
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support of its request, the applicants provide several examples of situations in
which Holdings or a subsidiary may receive substantial amounts of unrestricted
and distributable cash which, in the ordinary course, Holdings or such
subsidiary would typically wish to distribute to its immediate parent as a
partial return of capital. The amounts of such distributions may, however,
exceed current and retained earnings of Holdings or a subsidiary, as the case
may be.
The applicants state that distributions from capital and unearned
surplus would only be made to the extent permitted under applicable law, as well
as any applicable financing agreements to which Holdings or any of its
subsidiaries may be a party which restricts distributions to shareholders.
As an alternative or additional basis for relief under Section 12(c)
and Rule 46, the applicants state that it would be in the public interest for
the Commission to issue an order under Section 3(b) of the Act exempting from
Section 12(c) any current or future subsidiary of Holdings that does not derive
any material part of its income from U.S. sources.
The applicants also request an extension for one year in the period in
which certain transactions approved as a part of the February 1996 Order may be
consummated. Such transactions relate to the final steps in the internal
reorganization of Southern's ownership of Southern Electric and certain of its
subsidiaries and of Mobile Energy Services Holdings, Inc., a non-exempt project
holding company.
