File No. 70-8733
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 9
(Post-Effective Amendment No. 6)
to
APPLICATION OR DECLARATION
on
FORM U-1
under
<TABLE>
<CAPTION>
The Public Utility Holding Company Act of 1935
<S> <C> <C> <C>
THE SOUTHERN COMPANY SOUTHERN MOBILE ENERGY SERVICES
270 Peachtree Street, N.W. ENERGY, INC. HOLDINGS, INC.
Atlanta, Georgia 30303 900 Ashwood Parkway 900 Ashwood Parkway
Suite 500 Suite 450
SOUTHERN ENERGY Atlanta, Georgia 30338 Atlanta, Georgia 30338
NORTH AMERICA,
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
SOUTHERN ENERGY INTERNATIONAL, 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 SEI Holdings, Inc.
270 Peachtree Street, N.W. 900 Ashwood Parkway
Atlanta, Georgia 30303 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 SEI Holdings, 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
</TABLE>
<PAGE>
INFORMATION REQUIRED
Item 1. Description of Proposed Transaction. Item 1.1 as filed in
Amendment No. 8 (Post-Effective No. 5) is hereby amended to read as follows:
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 "Initial Order") in this
proceeding, Holdings is currently 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 brokering and marketing of electricity and other energy
commodities.1 Holdings is also authorized to acquire and hold certain other
kinds of non-utility subsidiaries.2
1 The Initial Order, as it pertained to power marketing subsidiaries of
Holdings, was modified by order dated September 26, 1996 (Holding Company
Act No. 26581) in File No. 70-8823. Further, certain aspects of the Initial
Order, as it pertains to "Energy-Related Companies," may be superseded upon
the effectiveness of new Rule 58, 17 C.F.R. P. 250.58.
2
<PAGE>
By supplemental order dated July 17, 1996 (Holding Company Act Release No.
26543) in this proceeding (the "Supplemental Order"), Holdings and its
subsidiaries were authorized to pay dividends to their parent companies from
time to time through June 30, 1997, out of capital and unearned surplus
(including revaluation reserve) to the extent permitted by applicable law. The
Commission reserved jurisdiction over the payment of dividends out of capital or
unearned surplus by subsidiaries of Holdings that are Energy-Related Companies
which derive substantially all of their revenues from brokering or marketing of
energy and by other categories of Energy-Related Companies that Holdings may be
authorized to acquire by subsequent rule.3
The Supplemental Order also granted Southern, Holdings, Southern Energy
and Mobile Energy Services Holdings, Inc. ("Mobile Energy"), also a
wholly-owned subsidiary of Southern, an extension through June 30,
1997, in which to consummate certain other proposed transactions
relating to (i) the transfer of Southern Energy's common stock to
Holdings, (ii) the transfer of the stock of certain subsidiaries of
Southern Energy to other direct or indirect subsidiaries of Holdings,
and (iii) the issuance by Mobile Energy to Southern of one or more
series of preferred stock and the contribution thereof by Southern to
Holdings. Although the transactions described in (i) and (ii), above,
2 Specifically, one subsidiary of Holdings, Southern Energy North America,
Inc. (formerly Southern Electric Wholesale Generators, Inc.) ("Domestic
Holdings" in the Initial Order) is the umbrella company for Holdings'
domestic operations, and another subsidiary, Southern Energy International,
Inc. (formerly SEI Newco 1, Inc.) ("Foreign Holdings" in the Initial Order)
is the umbrella company for Holdings' international operations. Holdings
was also authorized to acquire from Southern the shares of Southern Energy,
Inc. (formerly Southern Electric International, Inc.) ("Southern Energy"),
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 Energy has
previously been authorized to engage.
3 At the time the Supplemental Order was issued, the Commission was
considering a rule proposal, recently adopted as Rule 58, that
conditionally exempts the acquisition of securities of certain categories
of "energy-related" companies. Also pending was an application filed by
Holdings to restate its authority with respect to investments in power and
energy brokering and marketing subsidiaries, which was approved by order
dated September 26, 1996 (Holding Company Act Release No. 26581).
3
<PAGE>
have been consummated or are expected to be consummated prior to June 30, 1997,
MESH has not yet issued any shares of preferred stock, and, for various business
reasons, may not be in a position to do so prior to June 30, 1997.
Item 1.2 as filed in Amendment No. 8 (Post-Effective No. 5) is hereby
amended to read as follows:
1.2 Proposed Modification to Supplemental Order. Holdings now requests a
modification of and an extension to the Supplemental Order which would permit
Holdings and each current and future subsidiary of Holdings to pay dividends
with respect to the securities of such companies, from time to time through June
30, 2000, out of capital or unearned surplus (including revaluation reserve), to
the extent permitted under applicable law. Holdings requests that the Commission
reserve jurisdiction over the payment of dividends out of capital or unearned
surplus by any current or future subsidiary company of Holdings that derives any
material part of its revenues from the sale of goods, services, electricity or
natural gas to any of Southern's five domestic electric utility subsidiaries4 or
to Southern Company Services, Inc.
The applicants also respectfully request a further extension through June
30, 1998 to consummate the proposals relating to Mobile Energy's preferred
stock and request authority for Southern or Holdings to contribute the preferred
stock of Mobile Energy referred to in Item 1.1 herein to Southern Energy
North America, Inc. In all other respects, these transactions will be
4 These include Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company, and Savannah Electric and Power
Company. 5 Currently, capitalization ratios, including short-term debt, for
"A" rated vertically integrated electric utilities have a median total debt
to total capital ratio of 45% as noted by Standard & Poor's in May 1997 for
companies rated both publicly and confidentially. Prior to issuing this
rating standard, the Standard & Poor's total debt to total capital
benchmark for an "A" rated vertically integrated investor-owned-utility
having an average business position was 47%.
4
<PAGE>
carried out in accordance with the terms and conditions contained in the Initial
Order and the Supplemental Order.
Item 2. Fees, Commissions and Expenses.
Item 2 as filed in Amendment No. 8 (Post-Effective Amendment No. 5) is
hereby amended to read as follows:
The additional fees, commissions and expenses to be paid or incurred
in connection with the transactions proposed in this Post-Effective Amendment
are estimated not to exceed $2,000.
Item 3. Applicable Statutory Provisions.
Item 3 is hereby amended by replacing the Rule 54 Analysis filed in
Amendment No. 8 (Post-Effective Amendment No. 5) with the following:
Rule 54 Analysis: The proposed transactions are also subject to Rule
54, which provides that, in determining whether to approve an application which
does not relate to any "exempt wholesale generator" ("EWG") or "foreign utility
company" ("FUCO"), the Commission shall not consider the effect of the
capitalization or earnings of any such EWG or FUCO which is a subsidiary of a
registered holding company if the requirements of Rule 53(a), (b) and (c) are
satisfied.
Southern currently meets all of the conditions of Rule 53(a), except
for clause (1). At May 31, 1997, Southern's "aggregate investment," as defined
in Rule 53(a)(1), in EWGs and FUCOs was approximately $2.117 billion, or about
56.78% of Southern's "consolidated retained earnings," also as defined in Rule
53(a)(1), for the four quarters ended March 31, 1997 ($3,728 million). With
respect to Rule 53(a)(1), however, the Commission has determined that Southern's
5
<PAGE>
financing of investments in EWGs and FUCOs in an amount greater than the amount
that would otherwise be allowed by Rule 53(a)(1) would not have either of the
adverse effects set forth in Rule 53(c). See The Southern Company, Holding
Company Act Release No. 16501, dated April 1, 1996 (the "Rule 53(c) Order"); and
Holding Company Act Release No. 26646, dated January 15, 1997 (order denying
request for reconsideration and motion to stay).
In addition, Southern has complied and will continue to comply with the
record-keeping requirements of Rule 53(a)(2), the limitation under Rule 53(a)(3)
on the use of Operating Company personnel to render services to EWGs and FUCOs,
and the requirements of Rule 53(a)(4) concerning the submission of copies of
certain filings under the Act to retail rate regulatory commissions. Further,
none of the circumstances described in Rule 53(b) has occurred.
Moreover, 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 were considered, there is no basis for the Commission to withhold
or deny approval for the proposal made in this Application-Declaration. The
action requested in the instant filing (viz. certain transactions by the
Applicants as described in Item 1.1 herein) would not, by itself, or even
considered in conjunction with the effect of the capitalization 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.
The Rule 53(c) Order was predicated, in part, upon an assessment of
Southern's overall financial condition which took into account, among other
6
<PAGE>
factors, Southern's consolidated capitalization ratio and the recent growth
trend in Southern's retained earnings. As of December 31, 1995, the most recent
fiscal year preceding the Rule 53(c) Order, Southern's consolidated
capitalization consisted of 49.3% equity (including mandatorily redeemable
preferred securities) and 50.7% debt (including $1.68 billion of long-term,
non-recourse debt and short-term debt related to EWGs and FUCOs). As of year-end
1996, that ratio was 52.9% equity and 47.1% debt (including $1.74 billion of
long-term, non-recourse debt and short-term debt related to EWGs and FUCOs); and
as of March 31, 1997, following completion of Southern's acquisition of a
controlling interest in Consolidated Electric Power Asia Ltd., the comparable
ratio was 48.7% equity and 51.3% debt (including $3.82 billion of long-term,
non-recourse debt and short-term debt related to EWGs and FUCOs). On a pro forma
basis, the proposed transactions contemplated in the instant filing have no
effect on consolidated capitalization. The common equity component of Southern's
pro forma consolidated capitalization represents 37.7% of total capitalization
at March 31, 1997. Thus, since the date of the Rule 53(c) Order, there has been
no material change in Southern's consolidated capitalization ratio, which
remains within acceptable ranges and limits of rating agencies as evident by the
continued "A" corporate credit rating of Southern Company. Specifically, in
January 1997 Standard & Poor's assigned Southern Company its corporate credit
rating of "A" which was consistent with the implied corporate rating previously
held by Southern. This implied rating had been in effect since May 1995.
Therefore, since the April 1996 issue of the Rule 53(c) Order, the Southern
consolidated credit rating has remained at "A" thereby demonstrating Southern's
continued strong financial integrity. In addition, the underlying ratings of the
7
<PAGE>
affiliated operating companies, which have a strong influence on the Southern
Company corporate rating, are all "A+". As a point of reference, the
consolidated pro forma percentage of debt in the total capital structure of the
Southern domestic operating utility companies is 42.8%, which is solidly below
the median total debt ratio of the Standard & Poor's "A" rated vertically
integrated utilities.5
Southern's consolidated retained earnings grew on average approximately
8.8% per year from 1991 through 1995. In 1996, consolidated retained earnings
increased $280,365,000, or slightly more than 8%. The small reduction in the
rate of earnings growth was primarily attributable to reduced domestic utility
sales due to mild weather conditions throughout most of 1996 in the southeastern
United States. Earnings attributable to Southern's investments in EWGs and FUCOs
continued to contribute modestly to consolidated retained earnings.
Accordingly, since the date of the Rule 53(c) Order, the capitalization
and earnings attributable to Southern's investments in EWGs and FUCOs has not
had any adverse impact on Southern's financial integrity.
Reference is made to Exhibit I filed herewith which reflects
capitalization at March 31, 1997 and the Statement of Income for the twelve
months ended March 31, 1997 for The Southern Company and subsidiaries
consolidated. In addition, the exhibit is adjusted to give effect to certain
transactions proposed by Georgia Power Company and Gulf Power Company.
8
<PAGE>
Item 6. Exhibits and Financial Statements.
(a) Exhibits:
F - Opinion of Troutman Sanders LLP.
I - Capitalization and Income Statement of The
Southern Company and Subsidiary Companies
after giving effect to certain transactions.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, each of the undersigned companies has duly caused this statement to be
signed on its behalf by the undersigned thereunto duly authorized.
Dated: June 30, 1997
THE SOUTHERN COMPANY
By:/s/ Tommy Chisholm
Tommy Chisholm
Secretary
MOBILE ENERGY SERVICES HOLDINGS, INC.
By: /s/ Tommy Chisholm
Tommy Chisholm
Secretary
SOUTHERN ENERGY, INC.
By: /s/ Tommy Chisholm
Tommy Chisholm
Vice President and Secretary
(Signatures Continued on Next Page)
9
<PAGE>
SEI HOLDINGS, INC.
By: /s/ Tommy Chisholm
Tommy Chisholm
Secretary
SOUTHERN ENERGY NORTH AMERICA, INC.
By: /s/ Tommy Chisholm
Tommy Chisholm
Secretary
SEI EUROPE, INC.
By: /s/ Tommy Chisholm
Tommy Chisholm
Secretary
SOUTHERN ENERGY INTERNATIONAL, INC.
By: /s/ Tommy Chisholm
Tommy Chisholm
Secretary
10
Exhibit F
TROUTMAN SANDERS LLP
600 PEACHTREE STREET, NE
ATLANTA, GEOEGIA 30308-2216
June 30, 1997
Securities and Exchange Commission
Washington, D.C. 20549
Re: The Southern Company, et al. - Application or Declaration on Form U-1
(File No. 70-8733), as amended
Ladies and Gentlemen:
We are familiar with the statement on Form U-1 referred to above, as
amended by Amendment No. 8 (Post-Effective No. 5) and Amendment
No. 9 (Post-Effective No. 6), and are furnishing this opinion
with respect to the transactions proposed therein.
We are of the opinion that Southern, Southern Energy, Mobile Energy,
Holdings, and the other named applicants are each 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
proposed transactions are consummated in accordance with such statement on Form
U-1, as amended, and your order or orders:
(a) all state laws applicable to the proposed transactions will have
been complied with;
(b) the Preferred Stock will be validly issued, fully paid and
non-assessable, and the holder thereof will be entitled to the rights
and privileges appertaining thereto set forth in Mobile Energy's
articles of incorporation; and
(c) the consummation of the transactions described above will not
violate the legal rights of the holders of any securities issued by
Southern, Southern Energy Mobile Energy, Holdings or any associate
company of any of the foregoing.
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
Exhibit I
<TABLE>
<CAPTION>
THE SOUTHERN COMPANY AND SUBSIDIARY COMPANIES
Capitalization Ratios at March 31, 1997
<S> <C> <C> <C> <C>
Consolidated Pro Forma
per 10-Q Amounts (C) Equity Debt
---------------- ------------- ---------------- ---------------
Capitalization (in thousands of dollars):
Common stock ..................................... $3,405,594 $0 $3,405,594
Paid-in capital................................... 2,125,534 0 2,125,534
Retained earnings................................. 3,730,782 0 3,730,782
Preferred stock .................................. 833,372 200,000 (A) 1,033,372
Capital & preferred securities.................... 1,353,500 189,250 (A) 1,542,750
Long-term debt.................................... 9,699,757 400,000 (A) $10,099,757
Preferred due within one year..................... 116,155 0 116,155
Long-term debt due within one year................ 466,515 0 466,515
Notes payable & commercial paper.................. 2,024,235 0 2,024,235
---------------- -------------- ----------------
Total (Incl Amts Due in 1 Year) $23,755,444 $789,250 $11,954,187 $12,590,507
================ ============= ================ ===============
Actual Amounts in Millions of Dollars....................$23,756 $11,565 $12,191
Actual Capitalization Ratios.................................100.0% 48.7% 51.3%
Pro Forma Amounts in Millions of Dollars.................$24,545.. $11,954 $12,591
Pro Forma Capitalization Ratios..............................100.0% 48.7% 51.3%
Pro Forma Consolidated Statements of Income (Unaudited)
(Stated in Thousands of Dollars)
For the Twelve Months Ended
March 31, 1997 Pro Forma (C) As Adjusted
OPERATING REVENUES $ 10,512,948 $ - $ 10,512,948
---------------- ------------ ----------------
OPERATING EXPENSES:
Operation--
Fuel 2,228,043 - 2,228,043
Purchased power 1,289,336 - 1,289,336
Other 1,834,924 - 1,834,924
Maintenance 786,664 - 786,664
Depreciation and amortization 1,041,171 - 1,041,171
Amortization of deferred Plant Vogtle costs 140,518 - 140,518
Taxes other than income taxes 617,085 - 617,085
Income taxes 732,834 (16,281)(B) 716,553
---------------- ------------ ----------------
Total operating expenses 8,670,575 (16,281) 8,654,294
---------------- ------------ ----------------
OPERATING INCOME 1,842,373 16,281 1,858,654
OTHER INCOME:
Allowance for equity funds used during construction 3,862 - 3,862
Interest income 66,245 - 66,245
Other, net 34,269 - 34,269
Income taxes applicable to other income (2,764) - (2,764)
---------------- ------------ ----------------
INCOME BEFORE INTEREST CHARGES 1,943,985 16,281 1,960,266
---------------- ------------ ----------------
INTEREST CHARGES AND OTHER:
Interest on long-term debt 542,498 27,500 (B) 569,998
Allowance for debt funds used during construction (18,357) - (18,357)
Interest on notes payable 113,778 - 113,778
Amortization of debt discount, premium and expense, net 27,733 - 27,733
Other interest charges 48,100 - 48,100
Minority interest in subsidiaries 29,258 - 29,258
Distributions on capital and preferred securities of subsidiary companies 39,597 14,667 (B) 54,264
Preferred dividends of subsidiary companies 80,178 14,000 (B) 94,178
---------------- ------------ ----------------
Interest charges and other, net 862,785 56,167 918,952
---------------- ------------ ----------------
CONSOLIDATED NET INCOME $ 1,081,200 $ (39,886) $ 1,041,314
================ ============ ================
</TABLE>
(See Notes on Following Page)
<PAGE>
NOTES
(A) To give effect to (i) the issuance by Georgia Power Capital Trust III of
$189,250,000 of preferred securities, and (ii) the proposed issuance by
Gulf Power Company of $200,000,000 of first mortgage bonds, $200,000,000
of preferred stock and $200,000,000 of pollution control obligations.
(B) To give effect to (i) the issuance by Georgia Power Capital Trust III of
$189,250,000 of preferred securities at an annual rate of 7.75% and (ii)
the proposed issuance by Gulf Power Company of $200,000,000 of first
mortgage bonds at an assumed rate of 7.75%, $200,000,000 of preferred
stock at an assumed rate of 7%, and $200,000,000 of pollution control
obligations at an assumed rate of 6%.
(C) The amounts and types of the securities to be issued by Gulf Power
Company will be dependent upon, among other things, market conditions
prevailing at the time of issuance. The amounts estimated to be issued
are the maximum amounts requested in the subject application and are used
solely for the purpose of illustrating the effect upon Southern Company
consolidated capitalization and earnings. In addition, no assumptions are
made in connection with possible refundings.
