File No. 70-8725
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Amendment No. 5
to
FORM U-1
APPLICATION OR DECLARATION
under
The Public Utility Holding Company Act of 1935
THE SOUTHERN COMPANY
270 Peachtree Street, N.W.
Atlanta, Georgia 30303
(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
270 Peachtree Street, N.W.
Atlanta, Georgia 30303
(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 International, Inc.
The Southern Company 900 Ashwood Parkway
270 Peachtree Street, N.W. Suite 500
Atlanta, Georgia 30303 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
The Application or Declaration filed in this proceeding, as amended and
restated by Amendment No. 4, is hereby further amended as follows:
1. The third paragraph under the heading "Legal risks" in
Item 1.3 is amended and restated to read as follows:
"Also at the outset of development work in a foreign country, Southern
Electric seeks local partners who are experienced in doing business in the host
country.1 Local partners are a very important element in mitigating the risk of
future expropriation or unfair regulatory treatment. An additional mitigating
factor is the participation of official or multilateral agencies in a project.2
When funds for the project are supplied by government-sponsored export credit
agencies or other governments or institutions, such as the World Bank through
its International Finance Corporation affiliate, or the obligation of the power
purchaser is otherwise contractually supported by the host country,3 the host
country has strong
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1 For example, in connection with the Alicura project investment, Southern
teamed with Bemberg Investments S.A., a diversified Argentine industrial group
with interests in electric distribution, and the governments of two of
Argentina's provinces. Southern's partner in the PowerGen project is T&TEC, the
state-owned utility company and the purchaser of PowerGen's output. The 50%
interest in Freeport Power not held by Southern is owned by International
Diversified Utilities, a Bahamian company with other interests in the Freeport
area. 2 As examples, the International Finance Corporation (a unit of the World
Bank) served as financial advisor to the government of Trinidad and Tobago in
connection with the PowerGen project; a Spanish export credit agency provided
the non-recourse debt to EDELNOR; and Southern Electric is currently working
with various export credit agencies, including the U.S. Export-Import Bank, to
secure financial backing for a "green-field" power project in Indonesia. 3 As
examples of host government financial support, Southern Electric negotiated an
Indonesian government "support letter" backing the obligation of the national
utility, which will be the wholesale power purchaser from a project currently
under development in Indonesia; a similar "implementation agreement" with the
government of Trinidad and Tobago which backs the obligation of T&TEC under the
power purchase agreement between T&TEC and PowerGen; and, in connection with
another project which is under development in Pakistan, a "facilitation
agreement" with the government of Pakistan guaranteeing the power purchaser's
obligations, as well as the convertibility of project revenues to U.S. dollars
and repatriation of income.
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incentives not to take actions which would harm a project's viability. In
addition, political risk can often be addressed through political risk insurance
obtained from the Overseas Private Investment Corporation ("OPIC"), a U.S.
agency, or the Multilateral Investment Guaranty Agency ("MIGA"), a World Bank
affiliate, or in the commercial insurance market.4"
2. Part 1 of Item 3.2 , Analysis of Rule 53(c) Issues, is amended by
deleting the third bullet point thereof and replacing it with the following
revised bullet point:
"o Southern's consolidated capitalization ratios at December 31, 1995,
49.3% equity and 50.7% debt (including all short-term debt and $1,684,969,000 of
non-recourse Exempt Project-related debt which is consolidated in accordance
with applicable financial reporting rules), are within accepted industry ranges
and within the limits set by the independent rating agencies (such as Standard &
Poor's) for "A" rated utilities.5
Capitalization Ratios at December 31, 1995:
(Including Short-Term Debt and Non-Recourse Project Debt)
Equity 49.3% (common - 42.4%; preferred - 6.9%)
Debt 50.7%
'A' Industry Benchmark
Range* A' (Range)*
Equity 44 - 60% 48 - 53%
Debt 40 - 56% 47 - 52%
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4 Political risk insurance is available to insure the project debt or the return
of an investor's equity. One can also insure against outright expropriation,
acts of civil violence, or even "creeping" nationalization brought about by
punitive regulation. 5 If non-recourse Exempt Project-related debt is excluded,
Southern's consolidated capitalization ratios at December 31, 1995 would be
approximately 45% debt and 55% equity.
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*(Source: 'A' Industry Range - Regulatory Research Associates, Inc.,
January 17, 1996 (includes A-, A, A+); Benchmark 'A' (Range) - Standard
& Poor's, Creditweek, October 27, 1993)"
3. The following additional bullet points are added at
the end of Part 2 of Item 3.2, Analysis of Rule 53(c) Issues:
"o Southern has complied and will continue to comply with the
requirements of Rule 53(a)(4) regarding filing of copies of applications and
reports with other regulatory commissions.
o None of the circumstances described in Rule 53(b) has occurred.
Southern undertakes to notify the Commission by filing a post-effective
amendment in this proceeding in the event that any of the circumstances
described in Rule 53(b) should occur during the authorization period."
4. The following additional paragraph is added at the end
of Item 5, Procedure:
"Southern proposes to file a quarterly report pursuant to Rule 24,
commencing with the report for the quarter ending June 30, 1996, which contains
the following information:
(i) A computation in accordance with Rule 53(a) (as
modified by the Commission's order in this
proceeding) of Southern's "aggregate
investment"in all Exempt Projects;
(ii) Southern's cumulative "aggregate investment" in
all Exempt Projects expressed as a percentage of:
total capitalization, net utility plant, total
consolidated assets, and market value of common
equity, all as of the end of such quarter;
(iii) Consolidated capitalization ratios as of the end of such
quarter, with consolidated debt to be inclusive of all
short-term debt and non-recourse Exempt Project Debt to the
extent normally consolidated under applicable financial
reporting rules;
(iv) The market-to-book ratio of Southern's common
stock at the end of such quarter;
(v) An analysis of the growth in consolidated retained
earnings which segregates earnings growth
attributable to Exempt Projects as a whole versus all
other subsidiaries of Southern; and
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(vi) A breakdown in revenues and net income of each of
the Exempt Projects for the 12-months then ended.
Southern proposes to file a single report under Rule 24
which combines the foregoing information with the information
required pursuant to Rule 24 in File No. 70-8733 (Holding Co. Act
Rel. No. 26468, dated February 2, 1996)."
5. Item 6, Exhibits and Financial Statements, is
supplemented with the filing of the following revised or
additional exhibits:
"(a) Exhibits.
F - Opinion of Troutman Sanders L.L.P."
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: March 21, 1995 THE SOUTHERN COMPANY
By: /s/Tommy Chisholm
Tommy Chisholm, Secretary
Exhibit F
TROUTMAN SANDERS LLP
600 PEACHTREE STREET
SUITE 5200
ATLANTA, GA 30308
404-885-3000
March 21, 1996
Securities and Exchange Commission
Washington, D.C. 20549
Re: The Southern Company - Application or
Declaration on Form U-1 (File No. 70-8725)
Ladies and Gentlemen:
We are familiar with the statement on Form U-1 filed by The Southern
Company ("Southern") in the above-referenced proceeding, as it has been amended,
and are furnishing this opinion with respect to the action requested therein,
which, if granted, would allow Southern to utilize the proceeds of financings
and guaranties heretofore authorized in separate proceedings to make investments
directly or indirectly in "exempt wholesale generators" and "foreign utility
companies" in amounts which, when added to Southern's "aggregate investment" (as
defined in Rule 53) at any time in all such entities would not exceed Southern's
"consolidated retained earnings" (also as defined in Rule 53).
We are of the opinion that Southern is a validly organized and duly
existing corporation under the laws of the State of its incorporation and that,
upon the issuance of your order or orders herein, and in the event that the
issuance and sale of securities and guaranties by Southern for the purpose of
acquiring any "exempt wholesale generator" or "foreign utility company" are made
in accordance with the terms of such statement on Form U-1 and your order or
orders (as well as in accordance with the terms of all other applicable rules,
regulations and orders):
(a) all state laws applicable to the proposed
transactions will have been complied with;
(b) securities and guaranties issued by Southern for the
purposes described in the statement on Form U-1 will be legal,
valid and binding obligations of Southern; and
(c) the consummation of the proposed transactions will not
violate the legal rights of the holders of any securities issued by
Southern or any associate company of Southern.
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Securities and Exchange Commission
March 21, 1996
Page 2
We hereby consent to the use of this opinion in connection with the
filing of such statement on Form U-1.
Very truly yours,
/s/Troutman Sanders LLP
Troutman Sanders LLP
