File No. 70-8733
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 6
(Post-Effective Amendment No. 3)
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
Post-Effective Amendment No. 1, as amended by Post-Effective
Amendment No. 2, is hereby amended and restated in its entirety
to read as follows:
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
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is also authorized to acquire and hold certain other kinds of
non-utility subsidiaries.1
An organizational chart showing the ownership of Holdings and its
direct and indirect subsidiaries at March 31, 1996, is filed herewith as Exhibit
H-3.
1.2 Proposed Modification. Holdings now requests authority, for itself
and on behalf of Domestic Holdings, Foreign Holdings, every current and future
Intermediate Subsidiary of Holdings, every current and future Special Purpose
Subsidiary of Holdings, and every Energy-Related Company hereafter organized to
engage in the business of owning or operating a "qualifying facility" or a steam
production, conversion or distribution business, to pay dividends with respect
to the securities of such companies, from time to time through June 30, 1997,
out of capital or unearned surplus (including revaluation reserve), to the
extent permitted under applicable corporate law. Holdings requests that the
Commission reserve jurisdiction over the payment of dividends out of capital or
unearned surplus by any
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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 (called "Special Purpose 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).
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other category of Energy-Related Company that Holdings may hereafter be
authorized by rule or order to acquire.
Holdings anticipates that there will be situations in which it or one
or more of the above-enumerated categories of 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)
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
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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.
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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
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 of such direct or indirect 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 (U.S. or foreign)
restricting the payment of dividends or making of other distributions. In this
regard, it should be noted that all U.S. jurisdictions limit to
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3 See e.g., The Southern Company, et al., Holding Company
Act Release No. 26440, dated December 28, 1995.
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one extent or another the authority of corporations to make dividend
distributions to shareholders.4 Most State corporations statutes contain either
or both an equity insolvency test or some type of balance sheet test.5 Holdings
also states that many of its subsidiaries (including Intermediate Subsidiaries,
EWGs and FUCOs) have issued debt securities pursuant to the terms of credit
agreements and indentures that also restrict the amount and timing of
distributions to shareholders.6
Holdings' request, if granted, would not contravene the purposes of
Section 12(c), which was primarily intended to safeguard the working capital of
public-utility companies.7 In
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4 To Holdings' knowledge, all foreign jurisdictions in
which Southern currently holds interests in EWGs or FUCOs also
restrict the declaration and payment of dividends and/or
reduction of capital in some fashion. For example, in the United
Kingdom, a company may only pay dividends in amounts up to
"profits available for distribution," generally the equivalent of
retained earnings (ss.263, Companies Act of 1985), and may reduce
share capital only upon obtaining a court order authorizing it to
do so. (ss.ss. 135 - 150, Companies Act). Further, a "private"
limited company may redeem its own shares otherwise than out of
its distributable profits (that is, out of capital), provided
that the company is not thereby rendered insolvent or left
without adequate financial resources to continue to carry out its
business. (ss.ss. 171 - 173, Companies Act).
5 See generally, Fletcher Cyclopedia of the Law of Private
Corporations, ss. 5329 (1995 Revised Ed.).
6 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).
7 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.
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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,8 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
policy 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
to unregulated subsidiaries which do not engage in affiliate sales, such as the
Intermediate Subsidiaries organized to hold investments in EWGs and FUCOs (whose
dividend policies are, in any case, not subject to Section 12(c)).
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
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8 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).
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subsidiaries.9 The applicants hereby encourage the Division of Investment
Management to recommend to the Commission an amendment to or rescission of Rule
46.
1.3 Explanation of Accounting Treatment. Holdings represents that in
all cases its accounting treatment for dividends paid from capital or unearned
surplus will be consistent with Rule 46. Specifically, dividends paid by
Holdings or any subsidiary of Holdings will first be charged (debited) to
current and retained earnings, and dividends in excess of current and retained
earnings will be accounted for by charging (debiting) capital surplus or
paid-in-capital. This accounting treatment is also consistent with generally
accepted accounting principles ("GAAP").
Applicable accounting principles in foreign countries may require or
permit accounting treatment for dividends paid out of capital or unearned
surplus that is different than allowed by U.S. GAAP, as described above.
However, it has been Holdings' practice, consistently applied, to convert, in
its consolidation, the financial statements of all of its foreign incorporated
subsidiaries to conform to U.S. GAAP.
1.4 Other Matters. Under the terms of the February 1996
Order, Southern, Holdings, Southern Electric and Mobile Energy
Services Holdings, Inc. ("Mobile Energy"), also a wholly-owned
subsidiary of Southern, were authorized to carry out certain
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9 See "The Regulation of Public-Utility Holding Companies,"
Report of the Division of Investment Management (June 1995), pp.
56-57.
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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
authority to consummate these transactions at any time prior to June 30, 1997,
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 $4,000.
Item 3. Applicable Statutory Provisions.
Section 12(c) of the Act and Rules 23, 46 and 54 thereunder
are applicable to the proposed transaction.
Rule 54 Analysis: Rule 54 provides that, in determining whether to
approve a proposed 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 subsidiary that is
an EWG or
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FUCO upon the registered holding company system if the requirements of Rule
53(a), (b) and (c) are satisfied. In this regard, Holdings represents that (i)
Southern is currently in compliance with all conditions of Rule 53(a), and (ii)
none of the circumstances described in Rule 53(b) that would render Rule 53(a)
inapplicable has occurred or exists.
With respect to Rule 53(a), Holdings represents that, at April 30,
1996, Southern's "aggregate investment" in all EWGs and FUCOs was approximately
$931.4 million, or about 27.05% of Southern's "consolidated retained earnings"
for the four consecutive quarters ended March 31, 1996. Further, Southern has
complied and will continue to comply with the other requirements of Rule 53(a)
regarding the maintenance of books and records, use of employees of domestic
utility subsidiaries to render services to associate EWGs and FUCOs, and
submission of certain filings under the Act with the appropriate retail rate
regulatory commissions.
Furthermore, even if the effect of the capitalization and earnings of
EWGs and FUCOs in which Southern has an ownership interest upon the Southern
holding company system are considered, there is no basis for the Commission to
withhold or deny approval for the proposal made in this Post-Effective
Amendment. The action requested in the instant filing (viz. approval for payment
of dividends out of capital and unearned surplus by certain non- utility
subsidiaries of Southern) would not, by itself, or even considered in
conjunction with the effect of the capitalization
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and earnings of Southern's EWGs and FUCOs, have a material adverse effect on the
financial integrity of the Southern system, or an adverse impact on Southern's
public-utility subsidiaries, their customers, or the ability of state
commissions to protect such public-utility customers. On the contrary, Holdings
believes that approval of the proposal contained in this Post- Effective
Amendment would have a modest beneficial effect on the Southern system, because
it will enable Holdings to pay dividends to Southern out of distributable cash
generated by EWGs and FUCOs and certain other categories of non-utility
subsidiaries, which Southern, in turn, could use to reduce outstanding bank
borrowings and/or to fund operations of other subsidiary operations.
Item 4. Regulatory Approval.
No state commission, and no federal commission other than this
Commission, has jurisdiction over the transaction 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
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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.
Item 6. Exhibits and Financial Statements.
(a) Exhibits:
G - Form of Federal Register Notice. (Previously
filed).
H-3 - Organizational Structure of SEI Holdings,
Inc. and Subsidiaries at March 31, 1996.
(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.
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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: June 25, 1996
THE SOUTHERN COMPANY
By:_/s/Tommy Chisholm_____________
Tommy Chisholm
Secretary
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
(Signatures Continued on Next Page)
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SEI EUROPE, INC.
By:__/s/Tommy Chisholm_________________
Tommy Chisholm
Secretary
SEI NEWCO 1, INC.
By:__/s/Tommy Chisholm_________________
Tommy Chisholm
Secretary
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EXHIBIT H-3
ORGANIZATION CHART - SEI UMBRELLA COMPANIES
Southern Electric International, Inc. (Project Development)
(100% - The Southern Company)
SEI Operadora de Argentina, S.A. (FUCO)
(99.99% -Southern Electric International, Inc.;.01% - SEI Holdings, Inc.)
Southern Electric International Asia, Inc. (Project Development)
(100% - Southern Electric International, Inc.)
Southern Electric International, GmbH (Project Development) (100% -
Southern Electric International, Inc.)
SEI Holdings, Inc. (PP)
(100% - The Southern Company)
Asociados de Electricidad, S.A. (PP)
(99.99% - SEI Holdings, Inc.; .01% - Foreign Corporation)
SEI y Asociados de Argentina, S.A. (PP)
(14% - Asociados de Electricidad, S.A.; 80% - SEI Holdings, Inc.:
5% - Foreign Corporation; 1% - Domestic Company)
Hidroelectrica Alicura, S.A. (FUCO)
(59% - SEI y Asociados de Argentina, S.A.; 41% - Foreign
Government)
Southern Electric, Inc. (EWG)
(100% - SEI Holdings, Inc.)
Southern Electric Wholesale Generators, Inc. (EWG)
(100% - SEI Holdings, Inc.)
Southern Energy Marketing, Inc. (EWG)
(100% - Southern Electric Wholesale Generators, Inc.)
SEI Birchwood, Inc. (EWG)
(95% - Southern Electric Wholesale Generators, Inc.;
5% - Southern Energy Marketing, Inc.)
Birchwood Power Partners, LP (EWG)
(50% - SEI Birchwood, Inc.; 50% - Domestic Corporation)
SEI Hawaiian Cogenerators, Inc. (EWG)
(100% - Southern Electric Wholesale Generators, Inc.)
Kalaeloa Partners, LP (QF)
(33 1/3% - SEI Hawaiian Cogenerators, Inc.;
66 2/3% - Domestic Corporations)
<PAGE>
- 2 -
ORGANIZATION CHART - SEI UMBRELLA COMPANIES
SEI Holdings, Inc. - CONTINUED
SEI Newco 1, Inc. (PP) (100% - SEI Holdings, Inc.)
Southern Electric International - Europe, Inc. (PP)
(100% - SEI Newco 1, Inc.)
Tesro Holding, BV (PP)
(100% - Southern Electric International - Europe, Inc.)
Southern Energy Investments Australia Pty, Ltd (PP) (100% -
Southern Electric International - Europe, Inc.)
Solaris Holding Company Pty, Ltd (PP)
(90% - Southern Energy Investments Australia Pty,
Ltd; 10% - Foreign Corporation)
Southern Electric International Finance, Inc. (PP)
(100% - Southern Electric International - Europe, Inc.)
Southern Investment Holdings, Ltd (PP) (100% - Southern
Electric International - Europe, Inc.)
Southern Investment UK PLC (PP)
(100% - Southern Investment Holdings, Ltd)
South Western Electricity PLC (FUCO)
(100% - Southern Investment UK PLC)
SEI Newco 2, Inc. (PP) (100% - SEI Newco I, Inc.)
SEI Chile, SA (PP) (100% - SEI Newco 2, Inc.)
Inversiones SEI Chile Limitada (PP) (99% - SEI Chile,
SA; 1% - SEI Holdings, Inc.)
Electrica SEI Chile Limitada (PP) (99% - SEI Chile,
SA; 1% - SEI Holdings, Inc.)
Energia del Pacifica, SA (PP)
(99.9% - SEI Chile, SA; .1% - Inversiones SEI Chile
Limitada)
Empressa Electrica del Norte Grande, SA (FUCO)
(26.63% - Inversiones SEI Chile Limitada;
38.35% - Electrica SEI Chile Limitada; 10.67% -
Foreign Government; 24.35% - Natural Persons)
Sitranor, SA (Transmission Subsidiary)
(60% - Empressa Electrica del Norte
Grande, SA; 40% - Foreign Government)
<PAGE>
-3-
ORGANIZATION CHART - SEI UMBRELLA COMPANIES
SEI Holdings, Inc. - CONTINUED
SEI Newco 1, Inc. - CONTINUED
SEI Newco 2, Inc. - CONTINUED
Southern Electric Bahamas Holdings, Ltd (PP) (100% - SEI
Newco 2, Inc.)
Southern Electric Bahamas Ltd (PP) (100% - Southern
Electric Bahamas Holdings, Ltd.)
Freeport Power Company Ltd (FUCO)
(50% - Southern Electric Bahamas Ltd;
50% - Foreign Company)
SEI Beteilligungs, GmbH (PP) (100% - SEI Newco 2, Inc.)
Southern Electric Brasil Participacoes, Limitada (PP) (99% -
SEI Newco 2, Inc.; 1% - SEI Holdings, Inc.)
Southern Electric International Trinidad, Inc. (EWG)
(100% - SEI Newco 1, Inc.)
The Power Generation Company of Trinidad & Tobago Ltd (EWG)
(39% - Southern Electric International Trinidad, Inc.;
51% - Foreign Government;
10% - Domestic Corporation)
Energia de Neuvo Leon, SA De CV (FUCO)
(33 1/3% - The Southern Company; 33 1/3% Foreign Corporations; 33 1/3% - Foreign
Government)
