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Previous: SL INDUSTRIES INC, 8-K, 1999-10-05 |
Next: SOUTHERN CO, U-1/A, 1999-10-05 |
File No. 70-8961
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Amendment No. 3
to
FORM U-1
APPLICATION OR DECLARATION
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
(Name and address of agent for service)
The Commission is requested to mail signed copies
of all orders, notices and communications to the
above agent for service and to:
W. L. Westbrook
Financial Vice President
The Southern Company
270 Peachtree Street, N.W.
Atlanta, Georgia 30303
John D. McLanahan
Walter M. Beale, Jr.
Troutman Sanders LLP
Balch & Bingham LLP
600 Peachtree Street, N.E., Suite 5200
1901 Sixth Avenue North, Suite 2600
Atlanta, Georgia 30308-2216
Birmingham, Alabama 35203
INFORMATION REQUIRED
The
statement on Form U-1 as initially filed and heretofore amended
in this proceeding
is hereby further amended and restated in its entirety as
follows:
Item 1. Description of Proposed Transactions.
1.1
Southern Company Services, Inc.
("Services") is a wholly-owned subsidiary
of The Southern Company ("Southern"), a registered
holding company under the Public Utility
Holding Company Act of 1935, as amended (the "Act").
Services provides certain services for
Southern and its associate companies in the Southern electric
system pursuant to authorization of
the Commission. Southern proposes that, from time to time on or
before June 30, 2004, it may
guarantee indebtedness or other obligations incurred by Services
as described herein in an
aggregate principal amount up to $200,000,000 at any time
outstanding. Southern hereby
requests authority for such guarantees. The transactions by
Services referred to herein do not
require Commission approval.
1.2 Services may issue and
sell new notes (the "Proposed Notes") to a lender or
lenders other than Southern. The Proposed Notes would be issued
pursuant to an agreement or
agreements with such lender or lenders and may be guaranteed by
Southern as to principal,
premium, if any, and interest. The Proposed Notes may have terms
of up to 40 years, contain
sinking funds and bear interest at a rate or rates not to exceed
3 1/2 percentage points per
annum over the rate for United States Treasury securities of
corresponding maturity at the time
the lender or lenders commit to purchase the particular issue.
Services may engage an agent to place
the Proposed Notes for a commission based upon the principal
amount borrowed.
1.3 Services also may effect
short-term or term-loan borrowings under one
or more revolving credit commitment agreements. Short-term
borrowings under such agreement or
agreements would have a maximum maturity of one year; term loans
would have maturities up to
10 years. It is expected that the borrowings would be evidenced
by a "grid" promissory note to
be dated the date of the initial borrowing and the date of each
borrowing thereafter when a "grid"
short-term or term-loan note, as the case may be, is not
outstanding.
Such borrowings would
bear interest at rates to be negotiated with the
lending financial institution or institutions. In addition, it is
expected that Services will be
obligated to pay fees in connection with the credit arrangements.
Such interest rates and fees will
be negotiated based upon prevailing market conditions.
1.4
Services also may
effect borrowings from certain banks and other
institutions. Such institutional borrowings will be evidenced by
notes to be dated as of the date of
such borrowings and to mature in not more than 10 years after the
date of borrowing, or by "grid"
notes evidencing all outstanding borrowings from each lender to
be dated as of the date of the
initial borrowing and to mature in not more than 10 years after
the date of borrowing. Generally,
borrowings will be prepayable in whole, or in part, without
penalty or premium, and will be at
rates to be negotiated with the lending institutions based upon
prevailing market conditions.
Services also may negotiate separate rates for, and/or agree not
to prepay, particular borrowings
if it is considered more favorable to Services.
1.5
The net proceeds realized by
Services from borrowings guaranteed by
Southern pursuant to authorization granted hereunder will be used
to fund the general
requirements of Services' business, including the possible
refunding of outstanding indebtedness.
The proceeds will be used in the routine course of business for
funding required capital
expenditures, including computer equipment, software, office
equipment and office facilities,
other requirements as approved by the Commission and maintaining
an adequate working capital
level. None of the proceeds from any borrowings or from the sale
of any of the Notes proposed
to be guaranteed by Southern herein will be used by Southern or
any subsidiary company thereof
for the acquisition of an interest in an EWG or a FUCO (each as
defined in Item 3.2 hereof).
Services will not use the proceeds of borrowings guaranteed by
Southern as authorized hereunder
to refund outstanding indebtedness unless the estimated present
value savings derived from the
net difference between interest payments on a new issue of
comparable securities and those
securities refunded is on an after tax basis greater than the
estimated present value of all
redemption, tendering and issuing costs, assuming an appropriate
discount rate. Such discount
rate is based on the estimated after-tax interest rate on
securities issued for refunding purposes.
Any such refunding will be exempt under Rule 42.
1.6 Southern further proposes
that it may guarantee obligations incurred by
Services in connection with installment purchases,
sale-leasebacks, leases or other acquisitions of
equipment or other assets. Lease transactions may include the
procurement of office facilities.
1.7 Services' current capital
budget for the period 1999 through 2003 includes
approximately $77.7 million related to acquisitions or
replacements of system aircraft, $5.8
million related to the relocation of the system's data center,
and $14.9 million for a new energy
management system. Other transactions contemplated or under
consideration by Services include
the new lease of office space in Washington, D.C. and the
possible buyout of the lease on its
former space in Atlanta.
1.8 Southern hereby requests that
the Commission issue its order (a) authorizing the
proposed guaranty of indebtedness or other obligations of
Services in an aggregate amount up to
$160,000,000 at any time outstanding and (b) reserving
jurisdiction over the balance of $40,000,000
of such guarantees proposed herein pending completion of the
record with respect to such balance.
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 of this
Application or Declaration are
estimated not to exceed $20,000.
Item 3. Applicable Statutory Provisions.
3.1
Southern considers that its
guaranty of indebtedness or other obligations
incurred by Services as described herein may be subject to
Sections 6(a), 7 and 12(b) of the Act
and Rule 45 thereunder. Any notes issued by Services to evidence
borrowings by it as described
herein will be exempt pursuant to Rule 52 under the Act. Other
transactions by Services referred
to herein will be in the routine course of its business and not
subject to Commission approval.
3.2
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
August 31, 1999, Southern's "aggregate investment," as
defined in Rule 53(a)(1), in EWGs and
FUCOs was approximately $3.604 billion, or approximately 90.9% of
Southern's "consolidated
retained earnings," also as defined in Rule 53(a)(1), for
the four quarters ended June 30, 1999
($3.965 billion). 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. 26501, 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 would be 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.
Southern's guarantee of certain obligations of Services) 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
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). Southern's consolidated
capitalization as of June 30, 1999, was
44.4% equity, 55.6% debt including all non-recourse debt, and
56.0% equity and 44.0% debt
excluding all non-recourse debt. Both are within accepted
industry ranges and within the limits
set by independent rating agencies (such as Standard and Poor's)
for "A" rated utilities.
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. Specifically,
in January 1997 Standard & Poor's assigned Southern 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
corporate rating, are all "A+" or better.
As a point of reference, the percentage of debt in the total
capital structure of the Southern
domestic operating utility companies was 46.9% at June 30, 1999,
which is lower than the average
for the Standard & Poor's "A" rated electric
utilities. At year-end 1998, according to
Standard & Poor's, the average total debt (both long-term and
short-term) for "A" rated
electric utilities was 50.4% of total capitalization.
Southern's consolidated retained earnings grew on average
approximately 5.5% per
year over the last five years. Excluding the $111 million
one-time windfall profits tax imposed on
SWEB in 1997 and the write down of assets in 1998, the average
growth would be 7.2%. In
1998, consolidated retained earnings increased $36 million, or
slightly less than 1%. Southern's
interests in EWGs and FUCOs have made a positive contribution to
earnings in the three calendar
years ending after the Rule 53(c) order.
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.
3.3
With respect to the
transactions proposed hereunder, Southern hereby
requests authority to file certificates of notification under
Rule 24 on a quarterly basis (within 45
days following the close of each calendar quarter). Such
certificates will include a description of
the underlying transactions by Services, including the amount of
any borrowings and the interest
rate thereon guaranteed by Southern.
Item 4. Regulatory Approval.
The proposed transactions are not subject to the jurisdiction of
any state commission
or of any federal commission other than the Securities and
Exchange Commission.
Item 5. Procedure.
Southern requests that the Commission's order herein 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 herein, unless such Division opposes the
transactions herein proposed.
Item 6. Exhibits and Financial Statements.
(a) Exhibits.
A - None.
B - None.
C - None.
D - None.
E - None.
F - Opinion of Troutman Sanders LLP, counsel for Southern.
(b) Financial Statements.
Consolidated
balance sheet of Southern and subsidiary companies at June 30,
1999.
(Designated in Southern's Form 10-Q for the quarter ended June
30, 1999,
File
No. 1-3526.)
Statements
of income and cash flows of Southern for the quarter ended June
30,
1999.
(Designated in Southern's Form 10-Q for the quarter ended June
30, 1999,
File
No. 1-3526.)
Since
June 30, 1999, there have been no material changes, not in the
ordinary course of
business, in the financial condition of Southern from that set
forth in or contemplated by the
foregoing financial statements.
Item 7. Information as to Environmental Effects.
(a) As described in Item 1, the proposed transactions are of a
routine and strictly financial
nature in the ordinary course of the business of Services and
Southern. Accordingly, the
Commission's action in these matters 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 amendment to be
signed on its behalf by the
undersigned thereunto duly authorized.
Dated October 5, 1999
THE SOUTHERN COMPANY
By: /s/Tommy Chisholm
Tommy Chisholm
Secretary
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