SOUTHERN CO, POS AMC, 1997-08-12

SOUTHERN CO
POS AMC, 1997-08-12
ELECTRIC SERVICES

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File No. 70-8733
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Amendment No. 10
(Post-Effective Amendment No. 7)
to
APPLICATION OR DECLARATION
on
FORM U-1
APPLICATION OR DECLARATION
under
The Public Utility Holding Company Act of 1935

THE SOUTHERN COMPANY SEI HOLDINGS, INC. MOBILE ENERGY SERVICES
270 Peachtree Street, N.W. 900 Ashwood Parkway HOLDINGS, INC.
Atlanta, Georgia 30303 Suite 500 900 Ashwood Parkway
Atlanta, Georgia 30338 Suite 450
Atlanta, Georgia 30338

SOUTHERN ENERGY, SOUTHERN ENERGY MOBILE ENERGY SERVICES
INC. NORTH AMERICA, INC. COMPANY, L.L.C.
900 Ashwood Parkway 900 Ashwood Parkway 900 Ashwood Parkway
Suite 500 Suite 500 Suite 500
Atlanta. Georgia 30338 Atlanta, Georgia 30338 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

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INFORMATION REQUIRED

The Applications and Declarations heretofore filed in File No. 70-8733, as
amended, are hereby amended on a post-effective basis to provide the additional
authority requested below.

Item 1. Description Of Proposed Transaction

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1% voting interest in MESC and 1% economic interest in MESC, currently held by
Southern Energy, Inc., a wholly-owned subsidiary of SEI Holdings, Inc. The
transfers will take the form of either direct transfers or through distributions
made to Southern and then contributed (through intermediate entities) to SE
Mobile. Ultimately, SE Mobile will hold 99% of the nonvoting economic interest
in MESC and 1% of the voting interest in MESC, and MESH will hold 1% of the
nonvoting economic interest and 99% of the voting interest in MESC. The
transfers of interests is anticipated to occur in at least two stages, separated
by twelve or more months.

1.1. Background

By order dated February 2, 1996 (HCAR No. 26468) ( the "Initial
Order") SEI Holdings, Inc. 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 which derive or will derive
substantially all of their revenues from the ownership or operation, or both, of
certain categories of non-utility businesses, namely qualifying facilities (as
defined in the Public Utility Regulatory Policies Act of 1978); steam
production, conversion and distribution; and brokering and marketing of
electricity and other energy commodities. The Initial Order authorized the
formation of "Domestic Holdings" (now renamed Southern Energy North America,
Inc.) as an umbrella organization for Holdings' domestic operations. Holdings
was also authorized to acquire from Southern the shares of Southern Energy, Inc.
(formerly Southern Electric International, Inc.). The Initial Order also
authorized the issuance by MESC to Southern of a series of preferred stock and
contribution thereof by Southern to Holdings.

The Mobile Energy Project is a cogeneration facility. MESH currently
holds 99% of the membership interests in MESC. The remaining 1% in MESC is held
by Southern Energy, Inc. But for 100% ownership by Southern, the Mobile Energy
Project would constitute a qualifying facility under the Public Utility
Regulatory Policies Act of 1978. Because the Southern electric system owns 100%
of MESC, it is an "electric utility company" as defined by Section 2(3) of the

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Public Utility Holding Company Act of 1935, as amended ( the "Act"). Under the
proposed arrangement Southern's economic interest in the Mobile energy project
will be owned within the same group of companies which own Southern's other
interests in independent energy projects. That economic ownership, however,
would be passive in nature. Control of MESC, which is a public utility under the
Act, would continue to be exercised through MESH, a direct subsidiary of
Southern. The proposed issuance of securities by MESC and acquisitions of
securities by SE Mobile will result in no increase in investment in the Mobile
Energy Project and in no change in either the operation of the Mobile Energy
Project or the control of the Mobile Energy Project. Southern's realignment of
its ownership interest in this independent energy project places the economic
ownership with the ownership group of Southern's other independent energy
projects and will facilitate the evaluation of the performance of Southern's
independent energy portfolio by all interested parties, including the investment
community.

1.2 Corporate Structure Under Applicable Alabama Law.

The Alabama Limited Liability Act, pursuant to which MESC is
organized, specifically provides for the bifurcation of securities issued by
Alabama limited liability companies into "financial rights," encompassing the
right to share in profits and losses under Section 10-12-2(d) of the Alabama act
and "governance rights" under Section 10-12-2(f) of the Alabama Act. "Governance
rights" are defined therein as wholly distinct from "financial rights."
Governance rights include all rights to manage the limited liability company.
Section 10-12-22 expressly allows the membership of an Alabama limited liability
company to restrict or enlarge the management rights and duties of any class of
persons, thus allowing for the bifurcation of interests. Pursuant to the

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authority requested herein, MESC will amend its operating agreement to make a
clear distinction between voting (governance) rights and non-voting economic
(financial) interests. The Alabama Act, however, does not permit a one member
limited liability company. Thus, a second entity in addition to MESH must be a
member of MESC. Currently, Southern Energy, Inc. provides the required second
member. Under this post-effective amendment, SE Mobile would become the second
member.

Item 2. Fees, Commission and Expenses.

The fees, commissions and expenses paid or incurred and to be paid or
incurred in connection with the proposals contained herein are estimated not to
exceed $5,000.

Item 3. Applicable Statutory Provisions.

In order to accomplish this transaction, MESC will exchange
outstanding MESC securities for two classes of membership interests, one
representing voting interests and the other nonvoting economic interests.
Southern Energy, Inc. must be authorized to transfer its resulting interest (1%
voting/1% economic) to SE Mobile. MESH must be authorized to transfer its
nonvoting economic interests ( 98%) to SE Mobile. SE Mobile must be authorized
to acquire these interests. SE Mobile requests authority to acquire its economic
interests cumulatively in two transactions over a period of at least twelve
months. These transactions are subject to sections 6(a), 7, 9(a), 10, 12(b),
12(c) , 12(d), and 12(f) of the Act and Rules 43 and 45 thereunder. Applicants
submit that the applicable standards of the Act have been met for the following
reasons: the proposal makes no change in the control of MESC, Southern does not
incur any new financial obligations by virtue of the proposed reorganization,

<PAGE>

the proposal makes no change in the operation of the Mobile Energy Project, and
the proposal results in an alignment of the economic rights and risks associated
with the Mobile Energy Project along with the economic rights and risks of other
independent energy projects within Southern's corporate structure while
retaining ownership of voting control in a direct subsidiary of Southern.

Rule 54 Analysis: Rule 54 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 June 30, 1997, Southern's "aggregate investment," as defined
in Rule 53(a)(1), in EWGs and FUCOs was approximately $2.235 billion, or about
59.96% 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
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

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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 does not have any effect upon
Southern's capitalization or 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
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). The proposed
transaction will have no effect on consolidated capitalization. Since the date

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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 affiliated operating
companies, which have a strong influence on the Southern Company corporate
rating, are all "A+". As a point of reference at March 31, 1997, 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.1

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

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1 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%.

<PAGE>

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 H 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.

Item 4. Regulatory Approval.

No state or federal regulatory approval is required other than that
of the Commission. The Mobile Energy Project is not a "public utility" under
either Alabama law or the Federal Power Act.

Item 5. Procedure.

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 be effective.
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 the Division opposes the matters covered
hereby.

Item 6. Exhibits and Financial Statements.

(a) Exhibits

A - Revised Exhibits A-2 and A-3 (To be filed by amendment)

B - Revised Exhibit B-6(d) (To be filed by amendment)

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G - Form of Federal Register Notice

H - Capitalization and Income Statement of the Southern
Company and Subsidiary Companies after giving effect to
certain transactions.

Item 7. Environmental Effects.

No other agency is preparing an environmental impact statement with
respect to this matter. This reorganization will not affect the operations
previously authorized and the issuance of the requested authority will not
constitute any major federal action significantly affecting the quality of the
human environment.

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SIGNATURES

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: August 12, 1997

THE SOUTHERN COMPANY