SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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
ALABAMA POWER COMPANY SOUTHERN COMMUNICATIONS SERVICES, INC.
600 North 18th Street 5555 Glenridge Connector, Suite 500
Birmingham, Alabama 35291 Atlanta, Georgia 30342
GEORGIA POWER COMPANY SOUTHERN COMPANY ENERGY SOLUTIONS, INC.
241 Ralph McGill Boulevard, N.E. 241 Ralph McGill Boulevard, N.E.
Atlanta, Georgia 30308 Atlanta, Georgia 30308
GULF POWER COMPANY SOUTHERN COMPANY SERVICES, INC.
One Energy Place 241 Ralph McGill Boulevard, N.E.
Pensacola, Florida 32520 Atlanta, Georgia 30308
MISSISSIPPI POWER COMPANY SOUTHERN ENERGY RESOURCES, INC.
2992 West Beach 900 Ashwood Parkway, Suite 500
Gulfport, Mississippi 39501 Atlanta, Georgia 30338
SAVANNAH ELECTRIC AND POWER COMPANY SOUTHERN NUCLEAR OPERATING COMPANY, INC.
600 Bay Street East 40 Inverness Center Parkway
Savannah, Georgia 31401 Birmingham, Alabama 35242
(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
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<S> <C>
William E. Zales, Jr., Vice President and Tommy Chisholm, Secretary
Corporate Secretary Southern Communications Services, Inc.
Alabama Power Company 5555 Glenridge Connector, Suite 500
600 North 18th Street Atlanta, Georgia 30342
Birmingham, Alabama 35291
Judy M. Anderson, Vice President Tommy Chisholm, Secretary
and Corporate Secretary Southern Company Energy Solutions, Inc.
Georgia Power Company 241 Ralph McGill Boulevard, N.E.
241 Ralph McGill Boulevard, N.E. Atlanta, Georgia 30308
Atlanta, Georgia 30308
Warren E. Tate, Secretary Tommy Chisholm, Vice President
and Treasurer and Secretary
Gulf Power Company Southern Company Services, Inc.
One Energy Place 241 Ralph McGill Boulevard, N.E.
Pensacola, Florida 32520 Atlanta, Georgia 30308
Michael W. Southern, Vice President, Tommy Chisholm, Vice President
Chief Financial Officer, Secretary and Treasurer and Secretary
2992 West Beach Southern Energy Resources, Inc.
Gulfport, Mississippi 39501 900 Ashwood Parkway, Suite 500
Atlanta, Georgia 30338
Kirby R. Willis, Vice President, Sherry A. Mitchell, Corporate Secretary
Treasurer and Chief Financial Officer Southern Nuclear Operating Company, Inc.
Savannah Electric and Power Company 40 Inverness Center Parkway
600 Bay Street East Birmingham, Alabama 35242
Savannah, Georgia 31401
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(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 John D. McLanahan
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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INFORMATION REQUIRED
Item 1. Description of Proposed Transactions.
1.1 Summary. The Southern Company ("Southern"), a registered
holding company under the Public Utility Holding Company Act of 1935, as amended
(the "Act"), proposes to issue and sell up to 60,000,000 additional shares of
its authorized but unissued common stock, par value $5 per share, as such number
may be adjusted for any share split or distribution hereafter authorized by the
Commission (the "SIP Stock"), pursuant to its Southern Investment Plan (the
"SIP"), up to 25,000,000 additional shares of its authorized but unissued common
stock, par value $5 per share, as such number may be adjusted for any share
split or distribution hereafter authorized by the Commission (the "ESP Stock"),
pursuant to The Southern Company Employee Savings Plan (the "Savings Plan") and
up to 3,000,000 additional shares of its authorized but unissued common stock,
par value $5 per share, as such number may be adjusted for any share split or
distribution hereafter authorized by the Commission (the "ESOP Stock"), in order
to provide common stock to fund The Southern Company Employee Stock Ownership
Plan (the "ESOP"). It is proposed that the SIP Stock, the ESP Stock and the ESOP
Stock (collectively, the "Plan Stock") will be issued and sold from time to time
on or prior to September 30, 2004.
1.2 Southern Investment Plan. The SIP provides shareholders of
record of Southern's common stock with a means of purchasing additional shares
through the reinvestment of cash dividends and/or through optional cash
payments. In addition, the SIP has a direct purchase feature that enables other
eligible investors to become participants by making initial cash payments for
the purchase of common stock. Participants may acquire additional shares of
common stock by reinvesting all or a portion of their dividends and by making
optional cash payments of not less than $25 per payment and not more than
$150,000 per calendar year.
Shares of common stock are purchased under the SIP, at the
option of Southern, from newly issued shares or shares purchased on the open
market.
The price per share for shares purchased on the open market will
be the weighted average price paid to acquire the shares, excluding broker
commissions. The price per share for shares purchased from Southern with
dividends will be equal to the average of the high and low sale prices on the
dividend payment date. For shares purchased from Southern with cash payments,
the price per share will be equal to the average of the high and low sale prices
on the 10th or 25th of the month, as applicable.
When shares are purchased from Southern and the common stock is
not traded on the New York Stock Exchange on the days specified above, the price
for shares purchased with dividends will be equal to the average of the high and
low sale prices on the trading days immediately preceding and following the
dividend payment date. For shares purchased with cash payments, the price will
be the average of the high and low sales prices on the trading day immediately
following the 10th or 25th. The price for shares purchased from Southern will be
calculated based on sale prices as reported on the NYSE Composite Transactions
as published by The Wall Street Journal.
Southern Company Services, Inc. ("SCS") administers the SIP. SCS
appoints a registered broker-dealer or bank as independent agent to purchase and
sell stock on behalf of the SIP.
All SIP shares are voted in the same manner as shares of
Southern common stock registered in a participant's own name. Participants can
close their SIP accounts upon written request. Southern reserves the right to
suspend, modify or terminate the SIP at any time.
1.3 Employee Savings Plan. The ESP Stock will be offered to
employees of Southern's subsidiaries pursuant to the Savings Plan under which
such employees voluntarily may contribute, through payroll deductions, any whole
percentage which is not more than 16% of their compensation (base salary or
wages, including all amounts by which a Participant's compensation is reduced
pursuant to his salary reduction election under The Southern Company Flexible
Benefits Plan) ("Voluntary Participant Contribution"). In addition, a Savings
Plan member may elect to have his compensation reduced by a whole percentage
which is not more than 16% of his compensation, such amount to be contributed to
his account under the Savings Plan ("Elective Employer Contribution"). The
maximum Voluntary Participant Contribution shall be reduced by the percent, if
any, which is contributed as an Elective Employer Contribution on behalf of the
Savings Plan member. The maximum Elective Employer Contributions any Participant
may elect to defer under the Savings Plan in any taxable year of the Participant
are subject to certain limitations under the Internal Revenue Code of 1986, as
amended. Each employing company currently contributes, on behalf of each of the
Savings Plan members in its employ, an amount equal to 75% of the member's
Voluntary Participant Contribution, plus the Elective Employer Contribution made
on his behalf, to the extent such contributions, when combined, do not exceed 6%
of his compensation.
Merrill Lynch Trust Company of Florida acts as Trustee for the
trust which is part of the Savings Plan, and the Savings Plan is administered by
the Savings Plan Committee consisting of three officers of Southern.
Each Savings Plan member must direct that his contributions be
invested in one or more of several funds, including a Southern Company Stock
Fund consisting of Southern's common stock. All employer matching contributions
are initially invested in the Southern Company Stock Fund.
Investment purchases by the Trustee for the funds may be made
either on the open market or by private purchase, provided that no private
purchase may be made of common stock of Southern at a price greater than the
last sale price or the highest current independent bid price, whichever is
higher, for such stock on the New York Stock Exchange, plus an amount equal to
the commission payable in a stock exchange transaction if such private purchase
is not made from Southern. The Trustee may purchase common stock of Southern
directly from Southern under the SIP or under any other similar plan made
available to holders of record of shares of common stock of Southern, at the
purchase price provided for in such plan.
1.4 Employee Stock Ownership Plan. The exact number of shares of
ESOP Stock to be issued by Southern will be determined by the aggregate amount
of contributions to be invested by the trust established pursuant to the ESOP
(the "ESOP Trust") and the purchase price per share of Southern's common stock
determined as set forth below.
The purpose of the ESOP, which was originally effective January
1, 1976 and was last amended and restated effective as of January 1, 1997, is to
enable eligible employees of SCS and other affiliates or subsidiaries of
Southern that adopt the ESOP (the "Employing Companies") to share in the future
of Southern, to provide participants with an opportunity to accumulate capital
for their future economic security, and to enable participants to acquire
Southern common stock. All of the current Employing Companies are applicants in
this proceeding.
The ESOP permits the Employing Companies to contribute cash or
common stock in an amount or under such formula as SCS shall determine in its
sole and absolute discretion. Participant contributions are neither required nor
permitted under the ESOP.
It is anticipated that the contributions by the Employing
Companies to the ESOP Trust generally will be made in cash. However, if a
contribution consists of ESOP Stock, the number of shares contributed will be
determined by the market value of the shares, as determined by SCS. The purchase
price per share of ESOP Stock acquired from Southern by the ESOP Trust with cash
contributions shall be the market value thereof as determined by SCS.
Under the ESOP, the ESOP Trust is required to reinvest cash
dividends paid on shares of Southern's common stock allocated to a participant's
account in additional shares of common stock, unless the participant elects to
have such cash dividends distributed to him currently or the Employing Company
distributes cash dividends in order to qualify such distribution for a tax
deduction under the 1986 Code. In reinvesting any cash dividends, the ESOP Trust
may purchase common stock under the SIP (at the price provided for in such
plan), on the open market or by private purchase, including purchases directly
from Southern.
1.5 Use of Proceeds. The proceeds from the sale of the Plan
Stock will be used by Southern to acquire the securities of associate companies
and interests in other businesses, including interests in "exempt wholesale
generators" ("EWGs") and "foreign utility companies" ("FUCOs"), all in any
transactions permitted under the Act, and for other general corporate purposes.
Southern does not seek in this proceeding any increase in the amount it is
permitted to invest in EWGs and FUCOs.
Item 2. Fees, Commissions and Expenses.
Information as to fees and expenses to be incurred in connection
with the issuance and sale of the Plan Stock will be set forth in an amendment
hereto.
Item 3. Applicable Statutory Provisions.
(a) Southern considers that the proposed issuance and sale of
the Plan Stock are subject to the provisions of Sections 6(a), 7, 32 and 33 of
the Act and Rules 53 and 54 thereunder.
Southern considers that any purchases of Southern's common stock
by the Employing Companies pursuant to the ESOP prior to contributing such stock
to the ESOP Trust are subject to the provisions of Sections 9(a) and 10 of the
Act.
The proposed transactions will be carried out in accordance with
the procedure specified in Rule 23 and pursuant to an order of the Commission
with respect thereto.
(b) Rule 53 Analysis. The proposed transactions are subject to
Rule 53, which provides that, in determining whether to approve the issue or
sale of a security for purposes of financing the acquisition of an EWG or FUCO,
the Commission shall not make certain adverse findings if the conditions set
forth in Rule 53(a)(1) through (a)(4) are met, and are not otherwise made
inapplicable by reason of the existence of any of the circumstances described in
Rule 53(b).
Southern currently meets all of the criteria 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 Nos. 26501 and 26646, dated April 1, 1996 and
January 15, 1997, respectively.
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 domestic utility subsidiary 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 issuance of the Plan Stock as proposed 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
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. On a pro forma basis, taking into consideration the
transactions contemplated hereby, such ratios are 48.5% and 51.5%, respectively,
for equity and debt. The common equity component of Southern's pro forma
consolidated capitalization represents 39.2% of total capitalization at June 30,
1999. 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 evidenced 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
Standard & Poor's "A" rated vertically integrated 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 approximately $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 issuance of 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 have not had any adverse impact on Southern's financial integrity.
Item 4. Regulatory Approval.
The issuance and sale by Southern of the Plan Stock as described
in Item 1 hereof 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.
It is hereby requested 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 applicant-declarants 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 this matter unless such Division
opposes the matters covered hereby. Item 6. Exhibits and Financial Statements.
(a) Exhibits
A-1(a) - Composite Certificate of Incorporation of Southern
reflecting all amendments to date. (Designated in
Registration No. 33-3546 as Exhibit 4(a), in
Certificate of Notification, File No. 70-7341, as
Exhibit A and in Certificate of Notification, File
No. 70-8181, as Exhibit A.)
A-1(b) - By-laws of Southern as amended effective October
21, 1991, and presently in effect. (Designated in
Form U-1, File No. 70-8181, as Exhibit A-2.)
B-1 - Southern Investment Plan. (See the prospectus
included in Exhibit C-1.)
B-2 - The Southern Company Employee Savings Plan, as
amended to date. (Designated in Southern's Form 10-K
for the year ended December 31, 1998, File No.
1-3526, as Exhibit 10(a)61.)
B-3 - The Southern Company Employee Stock Ownership Plan,
as amended to date. (Designated in Southern's Form
10-K for the year ended December 31, 1998, File No.
1-3526, as Exhibit 10(a) 62.)
C-1 - Registration statement of Southern with respect to
the SIP filed pursuant to the Securities Act of 1933,
as amended. (Filed electronically March 3, 1995 and
Post-Effectively amended September 20, 1996, File No.
33-57951.)
C-2 - Registration statement of Southern with respect to
the Savings Plan filed pursuant to the Securities Act
of 1933, as amended. (Filed electronically January
14, 1998, File No. 333-44261.)
F-1 - Opinion of Troutman Sanders LLP, counsel for
Southern. (To be filed by amendment.)
G - Form of Notice.
Exhibits heretofore filed with the Securities and Exchange
Commission and designated as set forth above are hereby incorporated herein by
reference and made a part hereof with the same effect as if filed herewith.
(b) Financial Statements.
Condensed balance sheet of Southern 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 six months 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 adverse 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 Southern's
business. Accordingly, 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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SIGNATURES
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: October 15, 1999 THE SOUTHERN COMPANY
By: /s/Tommy Chisholm
Tommy Chisholm
Secretary
ALABAMA POWER COMPANY
By: /s/Wayne Boston
Wayne Boston
Assistant Secretary
GEORGIA POWER COMPANY
By: /s/Wayne Boston
Wayne Boston
Assistant Secretary
GULF POWER COMPANY
By: /s/Wayne Boston
Wayne Boston
Assistant Secretary
MISSISSIPPI POWER COMPANY
By: /s/Wayne Boston
Wayne Boston
Assistant Secretary
SAVANNAH ELECTRIC AND POWER COMPANY
By: /s/Wayne Boston
Wayne Boston
Assistant Secretary
SOUTHERN COMMUNICATIONS SERVICES, INC.
By: /s/Tommy Chisholm
Tommy Chisholm
Secretary
SOUTHERN COMPANY ENERGY SOLUTIONS, INC.
By: /s/Tommy Chisholm
Tommy Chisholm
Secretary
SOUTHERN COMPANY SERVICES, INC.
By: /s/Wayne Boston
Wayne Boston
Assistant Secretary
SOUTHERN ENERGY RESOURCES, INC.
By: /s/Tommy Chisholm
Tommy Chisholm
Secretary
SOUTHERN NUCLEAR OPERATING COMPANY, INC.
By: /s/Wayne Boston
Wayne Boston
Assistant Secretary
Exhibit G
Form of Notice
The Southern Company ("Southern"), a registered holding company, 270
Peachtree Street, NW, Atlanta, Georgia 30303, and its subsidiary companies,
Alabama Power Company, 600 North 18th Street, Birmingham, Alabama 35291, Georgia
Power Company, 241 Ralph McGill Boulevard, N.E., Atlanta, Georgia 30308, Gulf
Power Company, One Energy Place, Pensacola, Florida 32520, Mississippi Power
Company, 2992 West Beach, Gulfport, Mississippi 39501, Savannah Electric and
Power Company, 600 Bay Street East, Savannah, Georgia 31401, Southern
Communications Services, Inc., 5555 Glenridge Connector, Suite 500, Atlanta,
Georgia 30342, Southern Company Energy Solutions, Inc., 241 Ralph McGill
Boulevard, N.E., Atlanta, Georgia 30308, Southern Company Services, Inc., 241
Ralph McGill Boulevard, N.E., Atlanta, Georgia 30308, Southern Energy Resources,
Inc., 900 Ashwood Parkway, Suite 500, Atlanta, Georgia 30338, and Southern
Nuclear Operating Company, Inc., 40 Inverness Center Parkway, Birmingham,
Alabama 35242, have filed an application/declaration pursuant to Sections 6(a),
7, 9(a), 10, 32 and 33 of the Act and Rules 53 and 54 thereunder.
Southern proposes to issue and sell up to 60,000,000 additional shares
of its authorized but unissued common stock, par value $5 per share, as such
number may be adjusted for any share split or distribution hereafter authorized
by the Commission (the "SIP Stock"), pursuant to its Southern Investment Plan
(the "SIP"), up to 25,000,000 additional shares of its authorized but unissued
common stock, par value $5 per share, as such number may be adjusted for any
share split or distribution hereafter authorized by the Commission (the "ESP
Stock"), pursuant to The Southern Company Employee Savings Plan (the "Savings
Plan") and up to 3,000,000 additional shares of its authorized but unissued
common stock, par value $5 per share, as such number may be adjusted for any
share split or distribution hereafter authorized by the Commission (the "ESOP
Stock"), in order to provide common stock to fund The Southern Company Employee
Stock Ownership Plan (the "ESOP"). It is proposed that the SIP Stock, the ESP
Stock and the ESOP Stock (collectively, the "Plan Stock") will be issued and
sold from time to time on or prior to September 30, 2004.
The SIP provides shareholders of record of Southern's common
stock with a means of purchasing additional shares through the reinvestment of
cash dividends and/or through optional cash payments. In addition, the SIP has a
direct purchase feature that enables other eligible investors to become
participants by making initial cash payments for the purchase of common stock.
Participants may acquire additional shares of common stock by reinvesting all or
a portion of their dividends and by making optional cash payments of not less
than $25 per payment and not more than $150,000 per calendar year.
Shares of common stock are purchased under the SIP, at the
option of Southern, from newly issued shares or shares purchased on the open
market.
The price per share for shares purchased on the open market will
be the weighted average price paid to acquire the shares, excluding broker
commissions. The price per share for shares purchased from Southern with
dividends will be equal to the average of the high and low sale prices on the
dividend payment date. For shares purchased from Southern with cash payments,
the price per share will be equal to the average of the high and low sale prices
on the 10th or 25th of the month, as applicable.
When shares are purchased from Southern and the common stock is
not traded on the New York Stock Exchange on the days specified above, the price
for shares purchased with dividends will be equal to the average of the high and
low sale prices on the trading days immediately preceding and following the
dividend payment date. For shares purchased with cash payments, the price will
be the average of the high and low sales prices on the trading day immediately
following the 10th or 25th. The price for shares purchased from Southern will be
calculated based on sale prices as reported on the NYSE Composite Transactions
as published by The Wall Street Journal.
Southern Company Services, Inc. ("SCS") administers the SIP. SCS
appoints a registered broker-dealer or bank as independent agent to purchase and
sell stock on behalf of the SIP.
All SIP shares are voted in the same manner as shares of
Southern common stock registered in a participant's own name. Participants can
close their SIP accounts upon written request. Southern reserves the right to
suspend, modify or terminate the SIP at any time.
The ESP Stock will be offered to employees of Southern's
subsidiaries pursuant to the Savings Plan under which such employees voluntarily
may contribute, through payroll deductions, any whole percentage which is not
more than 16% of their compensation (base salary or wages, including all amounts
by which a Participant's compensation is reduced pursuant to his salary
reduction election under The Southern Company Flexible Benefits Plan)
("Voluntary Participant Contribution"). In addition, a Savings Plan member may
elect to have his compensation reduced by a whole percentage which is not more
than 16% of his compensation, such amount to be contributed to his account under
the Savings Plan ("Elective Employer Contribution"). The maximum Voluntary
Participant Contribution shall be reduced by the percent, if any, which is
contributed as an Elective Employer Contribution on behalf of the Savings Plan
member. The maximum Elective Employer Contributions any Participant may elect to
defer under the Savings Plan in any taxable year of the Participant are subject
to certain limitations under the Internal Revenue Code of 1986, as amended. Each
employing company currently contributes, on behalf of each of the Savings Plan
members in its employ, an amount equal to 75% of the member's Voluntary
Participant Contribution, plus the Elective Employer Contribution made on his
behalf, to the extent such contributions, when combined, do not exceed 6% of his
compensation.
Merrill Lynch Trust Company of Florida acts as Trustee for the
trust which is part of the Savings Plan, and the Savings Plan is administered by
the Savings Plan Committee consisting of three officers of Southern.
Each Savings Plan member must direct that his contributions be
invested in one or more of several funds, including a Southern Company Stock
Fund consisting of Southern's common stock. All employer matching contributions
are initially invested in the Southern Company Stock Fund.
Investment purchases by the Trustee for the funds may be made
either on the open market or by private purchase, provided that no private
purchase may be made of common stock of Southern at a price greater than the
last sale price or the highest current independent bid price, whichever is
higher, for such stock on the New York Stock Exchange, plus an amount equal to
the commission payable in a stock exchange transaction if such private purchase
is not made from Southern. The Trustee may purchase common stock of Southern
directly from Southern under the SIP or under any other similar plan made
available to holders of record of shares of common stock of Southern, at the
purchase price provided for in such plan.
Southern states that the exact number of shares of ESOP Stock to
be issued by Southern will be determined by the aggregate amount of
contributions to be invested by the trust established pursuant to the ESOP (the
"ESOP Trust") and the purchase price per share of Southern's common stock
determined as set forth below.
The purpose of the ESOP, which was originally effective January
1, 1976 and was last amended and restated effective as of January 1, 1997, is to
enable eligible employees of SCS and other affiliates or subsidiaries of
Southern that adopt the ESOP (the "Employing Companies") to share in the future
of Southern, to provide participants with an opportunity to accumulate capital
for their future economic security, and to enable participants to acquire
Southern common stock. All of the current Employing Companies are applicants in
this proceeding.
The ESOP permits the Employing Companies to contribute cash or
common stock in an amount or under such formula as SCS shall determine in its
sole and absolute discretion. Participant contributions are neither required nor
permitted under the ESOP.
It is anticipated that the contributions by the Employing
Companies to the ESOP Trust generally will be made in cash. However, if a
contribution consists of ESOP Stock, the number of shares contributed will be
determined by the market value of the shares, as determined by SCS. The purchase
price per share of ESOP Stock acquired from Southern by the ESOP Trust with cash
contributions shall be the market value thereof as determined by SCS.
Under the ESOP, the ESOP Trust is required to reinvest cash
dividends paid on shares of Southern's common stock allocated to a participant's
account in additional shares of common stock, unless the participant elects to
have such cash dividends distributed to him currently or the Employing Company
distributes cash dividends in order to qualify such distribution for a tax
deduction under the 1986 Code. In reinvesting any cash dividends, the ESOP Trust
may purchase common stock under the SIP (at the price provided for in such
plan), on the open market or by private purchase, including purchases directly
from Southern.
Southern states that the proceeds from the sale of the Plan
Stock will be used by Southern to acquire the securities of associate companies
and interests in other businesses, including interests in "exempt wholesale
generators" ("EWGs") and "foreign utility companies" ("FUCOs"), all in any
transactions permitted under the Act, and for other general corporate purposes.
Southern does not seek in this proceeding any increase in the amount it is
permitted to invest in EWGs and FUCOs.
