File No. 70-8789
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
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 the above agents for service and to:
W. L. Westbrook John D. McLanahan, Esq.
Financial Vice President Troutman Sanders LLP
The Southern Company 600 Peachtree Street, N.E.
270 Peachtree Street, N.W. Suite 5200
Atlanta, Georgia 30303 Atlanta, Georgia 30308-2216
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The Application or Declaration heretofore filed in this proceeding is
hereby amended and restated in its entirety to read as follows:
Item 1. Description of Proposed Transactions.
1.1 Summary. The Southern Company ("Southern") is a registered holding
company under the Public Utility Holding Company Act of 1935, as amended (the
"Act"). Pursuant to orders dated March 15, 1994 and August 1, 1995 (Holding
Company Act Rel. Nos. 26004 and 26346, respectively), Southern is currently
authorized to issue and sell from time to time, prior to April 1, 2000,
short-term and/or term-loan notes to lenders and commercial paper to dealers in
an aggregate principal amount at any one time outstanding of up to $1 billion.1
At January 31, 1996, commercial paper and notes evidencing bank borrowings in an
aggregate principal amount of $584,452,378 were outstanding under such
authorization.2
The August 1, 1995 order authorizes Southern to use the proceeds of
such borrowings and/or commercial paper sales to make investments in "exempt
wholesale generators" ("EWGs") and "foreign utility companies" ("FUCOs"),
provided that the sum of (i) the outstanding amount of borrowings and/or
proceeds of commercial paper sales at any time invested by Southern in EWGs and
FUCOs, (ii) the net proceeds of sales of new common stock used for the purpose
of making such investments, as authorized in File Nos. 70-8277 and 70-8435, and
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1 At December 31, 1995, the maximum aggregate principal amount of notes that
may be issued pursuant to the exemption from the provisions of Section 6(a) of
the Act afforded by the first sentence of Section 6(b) was $167,385,729.
2 Effective September 28, 1995, Southern established a commercial paper
program with J.P. Morgan Securities, Inc., Lehman Brothers, Inc., and Morgan
Stanley & Co. Incorporated, as dealers. At January 31, 1996, Southern had issued
and outstanding commercial paper notes in an aggregate principal amount of
$581,452,378.
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(iii) the principal amount of any securities of any EWGs or FUCOs in respect of
which Southern has provided a guarantee, as authorized in File No. 70-8733,
shall not, when added to Southern's "aggregate investment" (as defined in Rule
53) in all EWGs and FUCOs, exceed, at any point in time, 50% of Southern's
"consolidated retained earnings" (also as defined in Rule 53) (hereinafter
referred to as the "Investment Limitation"). At January 31, 1996, Southern's
"aggregate investment" in all EWGs and FUCOs was $1,231,236,316,3 which is equal
to 37.4% of Southern's "consolidated retained earnings" for the four quarters
ended September 30, 1995.
In a separate proceeding (File No. 70-8725), Southern is seeking relief
which, if granted, would permit Southern to use the proceeds of authorized
securities sales and guarantees to make investments in EWGs and FUCOs in an
aggregate amount which, when added to Southern's "aggregate investment" at any
time in all such entities, would not exceed an amount equal to Southern's
"consolidated retained earnings."
Southern is now requesting authorization to issue short-term and
term-loan notes and/or commercial paper from time to time prior to April 1,
2001, in an aggregate amount at any time outstanding not to exceed $2 billion.
Southern proposes to use the proceeds of such borrowings and/or commercial paper
sales to invest in subsidiaries in accordance with authorizations obtained in
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3 "Aggregate investment," as stated, is inclusive of amounts that
Southern has invested in special purpose subsidiaries (so-called
"Intermediate Subsidiaries") organized to acquire and hold investments
in EWGs and FUCOs. See File No. 70-8733.
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separate proceedings, as described in Item 1.5, below, and to make additional
investments, directly or indirectly, in one or more EWGs and FUCOs, subject to
the Investment Limitation stated above, or to such greater investment limitation
as may be allowed in File No.
70-8725.
1.2 Credit Facilities. Southern proposes to effect borrowings from one
or more banks or other lending institutions, provided that the aggregate amount
of borrowings by Southern from such institutions, together with the aggregate
amount of commercial paper at any time issued and outstanding, will not exceed
$2 billion. Such borrowings will be evidenced by notes to be dated as of the
date of such borrowings and to mature in not more than seven (7) years after the
date of issue, or by "grid" notes evidencing all outstanding borrowings from
each lender to be dated as of the date of the initial borrowings and to mature
in not more than seven (7) years after the date of issue. Southern proposes that
it may provide that any note evidencing such borrowings may not be prepayable,
or that it may be prepaid with payment of a premium that is not in excess of the
stated interest rate on the note to be prepaid, which premium, in the case of a
note having a maturity of more than one year, would generally thereafter decline
to the date of the note's final maturity. The form of note applicable to this
paragraph will be filed by amendment as Exhibit A-1.
Borrowings from the lending institutions will be at the lender's
prevailing rate offered to corporate borrowers of similar quality, which will
not exceed the prime rate or (i) LIBOR plus up to 3/4 of 1%, (ii) the lender's
certificate of deposit rate plus up to 1%, or (iii) a rate not to exceed the
prime rate to be established by bids obtained from the lenders prior to a
proposed borrowing.
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Southern may pay a commitment fee based upon the unused portion of each
lender's commitment. The total fee is determined by multiplying the unused
portion of the lender's commitment by up to 1/2 of 1%. Compensating balances may
be used in lieu of fees to compensate certain of the lenders.4
1.3 Commercial Paper Sales to or through Dealers. Southern also
proposes that it have authority to issue and sell commercial paper to or through
dealers from time to time prior to April 1, 2001. Such commercial paper will be
in the form of promissory notes with varying maturities not to exceed nine
months. Actual maturities will be determined by market conditions, the effective
interest costs and Southern's anticipated cash flow, including the proceeds of
other borrowings, at the time of issuance. The commercial paper notes will be
issued in denominations of not less than $250,000 and will not by their terms be
prepayable prior to maturity.
The form of commercial paper note will be filed by amendment as Exhibit A-2.
The commercial paper will be sold by Southern directly to or through a
dealer or dealers (the "dealer"). The discount rate (or the interest rate in the
case of interest-bearing notes), including any commissions, will not be in
excess of the discount rate per annum (or equivalent interest rate) prevailing
at the date of issuance for commercial paper of comparable quality of the
particular maturity sold by issuers thereof to commercial paper dealers.
_____________________
4 Currently, Southern has committed credit facilities with 21 banks totaling
commitments of $1 billion, as well as several uncommitted facilities.
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No commission or fee will be payable in connection with the issuance
and sale of commercial paper, except for a commission not to exceed 1/8 of 1%
per annum payable to the dealer in respect of commercial paper sold through the
dealer as principal. The dealer will reoffer such commercial paper at a discount
rate of up to 1/8 of 1% per annum less than the prevailing discount rate to the
issuer or at an equivalent cost if sold on an interest-bearing basis.
Each certificate under Rule 24 with respect to the issue and sale of
commercial paper will include the name or names of the commercial paper dealers,
the amount of commercial paper outstanding as of the end of each quarter and
information with respect to the discount rate and interest rate.
1.4 Relation to Other Authorizations. Upon the issuance of the
Commission's order in this proceeding, Southern will relinquish its
authorization in File No. 70-8309 without prejudice, however, to transactions
that are consummated in reliance upon the orders of the Commission in said
proceeding prior to such date. It is Southern's intent that the authorization
sought in this file would supersede and replace the authorization in File No.
70-8309 effective immediately upon the date of the Commission's order herein.
1.5 Use of Proceeds. As indicated, Southern proposes to use the net
proceeds from the borrowings and/or commercial paper sales proposed herein,
together with other available funds, to make additional investments in
subsidiaries. Investments by Southern in subsidiaries would only be made in
accordance with existing or future authorizations in separate proceedings, or in
accordance with such exemptions as may exist under the Act and the rules and
regulations thereunder. Southern states that it will not use any portion of the
proceeds from the borrowings and/or commercial paper sales for which authority
is sought herein to make investments in such subsidiaries, except in accordance
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with and subject to any limitations contained in the Commission's orders
granting the applications in those related proceedings and/or in accordance with
any applicable exemption, including Rules 45(b) and 52.
Southern does not anticipate the need to make any additional
investments in any of its operating electric utility subsidiaries during the
proposed authorization period.
The proposed increase in the amount of borrowings and commercial paper
at any time outstanding is required primarily to enable Southern to fund
possible future investments in EWGs and FUCOs, subject to the Investment
Limitation, as it may be modified in File No. 70-8725. In this connection, it
has been Southern's experience since 1993 that purchases of existing power
plants and distribution systems, such as may be offered in foreign utility
system privatization programs, are typically cash funded at closing using
short-term credit sources, and subsequently refinanced in part on a non-recourse
basis, with the proceeds of such refinancing used to pay down short-term
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borrowings by Southern or, alternatively, short-term borrowings by Intermediate
Subsidiaries that have been guaranteed by Southern.5 Ultimately, Southern
projects the need to fund a substantial part of its investment in EWGs and FUCOs
from the proceeds of new sales of common stock. However, the timing of common
stock sales tends to be driven by market conditions, by dividend reinvestment
levels, and by the appetite of employees for Southern's common stock under
various stock purchase plans that are maintained by Southern.
Although Southern currently has authority to guarantee up to $1.2
billion of the securities issued by EWGs, FUCOs and Intermediate Subsidiaries in
order to fund a cash closing on the purchase of a project,6 Southern believes
that indirect borrowings (i.e., borrowings by EWGs, FUCOs and Intermediate
Subsidiaries) that are guaranteed by Southern are generally more costly than
direct borrowings by Southern, as well as more difficult to arrange on short
notice. Currently, Southern's lowest cost short-term credit options are
commercial paper sales, combined with borrowings under uncommitted bank credit
facilities.
1.6 Retirement of Notes. Any short-term borrowings outstanding
hereunder after March 31, 2001 will be retired from internal sources of cash or
the proceeds of financings heretofore or hereafter approved in separate filings,
including but not limited to File Nos. 70-8277 and 70-8435, refinancings of EWG
and FUCO indebtedness on a non-recourse basis, and other distributions from EWGs
and FUCOs.
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5 For example, this was Southern's experience in the case of its investments
in Chile and Trinidad and Tobago, as well as in the case of its purchase of a
non-exempt cogeneration facility in Alabama (see File No. 70-8505).
6 See Holding Company Act Rel. No. 26468, dated February 2, 1996 (File No.
70-8733).
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Appended as Exhibit G hereto (pursuant to a request for confidential
treatment under Rule 104) is a monthly cash budget through December 31, 1997,
showing, among other things, projected levels of borrowings by Southern based on
certain assumptions regarding the amounts and timing of potential investments in
EWGs and FUCOs, and anticipated levels of common stock sales, which are also
dependent in terms of both timing and amount upon Southern's success in making
new investments in EWGs and FUCOs. There is no certainty that Southern will make
any of these investments. The cash forecast is intended merely to depict the
relationship of the aggregate amount of bank borrowings and commercial paper at
any time outstanding and future common stock sales to Southern's "aggregate
investment" in EWGs and FUCOs using a realistic set of assumptions.
1.7 Filing of Certificates. Southern hereby requests authority to file
certificates of notification under Rule 24 relating to the financing
transactions proposed herein on a quarterly basis (within 45 days following the
close of each calendar quarter).
Item 2. Fees, Commissions and Expenses.
The fees, commissions, and expenses paid or incurred or to be paid or
incurred in connection with the proposed transactions (in addition to those
described in Item 1 hereof) of this Application or Declaration are estimated not
to exceed $10,000, including the Commission's $2,000 filing fee.
<PAGE>
Item 3. Applicable Statutory Provisions.
The transactions proposed herein are subject to Sections 6(a), 7, 32
and 33 of the Act (to the extent not exempt from the provisions of Sections 6(a)
and 7 by reason of the first sentence of Section 6(b)) and to Rules 23, 42, 53
and 54 thereunder. The proposed transactions will be carried out in accordance
with the procedures specified in Rule 23 and pursuant to an order of the
Commission with respect thereto.
Compliance with Rule 53. Under Rule 53(a), the Commission shall not
make certain specified findings under Sections 7 and 12 in connection with a
proposal by a holding company to issue securities for the purpose of acquiring
the securities of or other interest in an EWG, or to guarantee the securities of
an EWG, if each of the conditions in paragraphs (a)(1) through (a)(4) thereof
are met, provided that none of the conditions specified in paragraphs (b)(1)
through (b)(3) of Rule 53 exists.
Rule 53(a)(1): At January 31, 1996, Southern had invested, directly or
indirectly, an aggregate of $1,231,236,316 in EWGs and FUCOs (inclusive of
investments in Intermediate Subsidiaries), or 37.4% of "consolidated retained
earnings" for the four consecutive quarters ended September 30, 1995. As
indicated, in a related proceeding, Southern is seeking relief which would
enable it to finance investments in EWGs and FUCOs in an amount that is equal to
Southern's "consolidated retained earnings."
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Rule 53(a)(2): Southern maintains and will maintain books and records
enabling it to identify investments in and earnings from each EWG and FUCO in
which it directly or indirectly holds an interest. In addition, each domestic
EWG in which Southern holds an interest maintains its books and records and
prepares its financial statements in conformity with U.S. generally accepted
accounting principles ("GAAP"). The books and records and financial statements
of each FUCO in which Southern holds an interest (including those that are
"majority-owned subsidiaries" and those that are not) are maintained and
prepared in conformity with GAAP. All of such books and records and financial
statements will be made available to the Commission, in English, upon request.
Rule 53(a)(3): No more than 2% of the employees of Southern's operating
utility subsidiaries will, at any one time, directly or indirectly, render
services to EWGs and FUCOs.
Rule 53(a)(4): Southern is simultaneously submitting a copy of this
Application or Declaration, and will submit copies of any Rule 24 certificates
required hereunder, as well as a copy of Southern's Form U5S (commencing with
the Form U5S to be filed for calendar year 1995), to each of the public service
commissions having jurisdiction over the retail rates of Southern's operating
utility subsidiaries.
In addition, Southern states that the provisions of Rule 53(a) are not
made inapplicable to the authorization herein requested by reason of the
provisions of Rule 53(b).
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Rule 53(b)(1): Neither Southern nor any subsidiary of Southern is the
subject of any pending bankruptcy or similar proceeding.
Rule 53(b)(2): Southern's average consolidated retained earnings for
the four most recent quarterly periods ($3.292 billion) represented an increase
of approximately $79 million in the average consolidated retained earnings for
the previous four quarterly periods ($3.213 billion).
Rule 53(b)(3): For the year ended December 31, 1995, Southern did not
report operating losses attributable to its direct or indirect investments in
EWGs and FUCOs.
Item 4. Regulatory Approval.
The issuance and sale of securities by Southern are not subject to the
jurisdiction of any State commission or of any federal commission other than
this 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) Exhibits.
A-1 - Form of note. (To be filed by amendment).
A-2 - Form of commercial paper note. (To be filed
by amendment).
F - Opinion of Counsel. (To be filed by amendment).
G - Monthly Cash Budget for 1996 - 1997 (Filed
pursuant to Rule 104)("P") (Previously Filed)
H - Form of Federal Register Notice. (Previously
Filed)
(b) Financial Statements.
Corporate balance sheet of Southern at September 30,
1995. (To be filed by amendment).
Corporate statement of income and statements of
earnings retained in the business and of amount paid
in for common stock in excess of par value of
Southern for the twelve months ended September 30,
1995. (To be filed by amendment).
Consolidated balance sheet of Southern and its
subsidiaries at September 30, 1995. (Designated in
Southern's Form 10-Q for the quarter ended September
30, 1995, File No.
1-3526).
Consolidated statement of income and statements of
earnings retained in the business and amount paid in
for common stock in excess of par value of Southern
and its subsidiaries for the twelve months ended
September 30, 1995. (Designated in Southern's Form
10-Q for the quarter ended September 30, 1995, File
No. 1-3526).
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Since September 30, 1995, there have been no material changes, not in
the ordinary course of business, in the financial conditions of Southern or of
Southern and its subsidiaries consolidated from that set forth in or
contemplated by the foregoing financial statements.
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 company has duly caused this statement to be signed on
its behalf by the undersigned thereunto duly authorized.
Dated: February 15, 1996 THE SOUTHERN COMPANY
By _/s/Tommy Chisholm____
Tommy Chisholm
Secretary
