File No. 70-9631
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Amendment No. 2
to
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
GEORGIA POWER COMPANY GULF POWER COMPANY
241 Ralph McGill Boulevard, N.E. One Energy Place
Atlanta, Georgia 30308 Pensacola, Florida 32520
MISSISSIPPI POWER COMPANY SAVANNAH ELECTRIC AND POWER COMPANY
2992 West Beach 600 Bay Street East
Gulfport, Mississippi 39501 Savannah, Georgia 31401
(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
Judy M. Anderson, Vice President Warren E. Tate, Secretary
and Corporate Secretary and Treasurer
Georgia Power Company Gulf Power Company
241 Ralph McGill Boulevard, N.E. One Energy Place
Atlanta, Georgia 30308 Pensacola, Florida 32520
Michael W. Southern, Vice President, Kirby R. Willis, Vice President,
Chief Financial Officer, Treasurer and Chief
Secretary and Treasurer Financial Officer
Mississippi Power Company Savannah Electric and Power Company
2992 West Beach 600 Bay Street East
Gulfport, Mississippi 39501 Savannah, Georgia 31401
(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
The statement on Form U-1 as initially filed in this proceeding is
hereby amended and restated in its entirety as follows:
Item 1. Description of Proposed Transactions.
The Southern Company ("Southern") is a registered holding company under
the Public Utility Holding Company Act of 1935, as amended (the "Act"). Alabama
Power Company ("Alabama"), Georgia Power Company ("Georgia"), Gulf Power Company
("Gulf"), Mississippi Power Company ("Mississippi") and Savannah Electric and
Power Company ("Savannah") are wholly-owned subsidiaries of Southern. Alabama
and Georgia each owns 50% of the outstanding common stock of Southern Electric
Generating Company ("SEGCO"), and Alabama and Georgia are each entitled to
one-half of SEGCO's capacity and energy. Alabama, Georgia, Gulf, Mississippi,
Savannah and SEGCO are sometimes referred to herein individually as an
"Operating Company" and collectively as the "Operating Companies."
Southern proposes to organize and acquire all of the outstanding
capital stock of a new corporation (the "SPV") for the purpose of issuing its
commercial paper at the request and for the benefit of the Operating Companies
as described herein.1 Such investment by Southern in the SPV will not in any
event be less than the minimum required by any applicable law. It is proposed
that the SPV may issue and sell such commercial paper to or through dealers from
time to time prior to June 30, 2004 in an aggregate principal amount at any one
time outstanding of up to $3.5 billion (including up to $1.7 billion for
Georgia, $300 million for Gulf, $350 million for Mississippi and $90 million for
Savannah). Such commercial paper will be in the form of promissory notes with
______________________________________
1 While it is contemplated that the SPV will initially issue commercial paper
for the benefit of the Operating Companies, it is also proposed that the SPV
may, pursuant to authorization granted by the Commission in this proceeding,
issue such securities for the benefit of any other associate company that may
issue its debt securities to the SPV pursuant to Rule 52 under the Act. It is
hereby requested that the Commission reserve jurisdiction over any such issuance
for the benefit of any other associate company.
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varying maturities not to exceed one year, which maturities may be subject to
extension to a final maturity not to exceed 390 days. Actual maturities will be
determined by market conditions, the effective interest costs and the
anticipated cash flows of the respective Operating Companies, including the
proceeds of other borrowings, at the time of issuance. The commercial paper
notes will be issued in denominations of not less than $50,000 and will not by
their terms be prepayable prior to maturity.
The commercial paper will be sold by the SPV directly to or through a
dealer or dealers (the "dealer"). The discount rate (or the interest rate in the
case of interest-bearing notes), including any commissions, will not be in
excess of the discount rate per annum (or the equivalent interest rate)
prevailing at the date of issuance for commercial paper of comparable quality
with the same maturity sold by issuers thereof to commercial paper dealers.
No commission or fee will be payable in connection with the issuance
and sale of commercial paper, except for a commission not to exceed 1/8th of 1%
per annum payable to the dealer in respect of commercial paper sold through the
dealer as principal. The dealer will reoffer such commercial paper at a discount
rate of up to 1/8th of 1% per annum less than the prevailing interest rate to
the SPV or at an equivalent cost if sold on an interest-bearing basis.
It is proposed that the SPV will enter into a financial services
agreement with each Operating Company pursuant to which the SPV will agree to
use its reasonable best efforts to issue commercial paper in amounts and at
times as requested by such Operating Company. Each of Georgia, Gulf, Mississippi
and Savannah propose to borrow the cash proceeds of each issuance it requests
which will be evidenced by a "grid" promissory note. The terms of each such
borrowing will be identical to those of the related commercial paper issued for
its benefit.
In addition, Alabama or Georgia, or both of them jointly and severally,
may guarantee any such loan by the SPV to SEGCO. The amount of any such
guarantees by Georgia will not exceed $150 million at any one time outstanding.
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Either Alabama or Georgia also may re-lend the proceeds of any borrowing by it
from the SPV to SEGCO on the same terms; Georgia hereby requests authority to
make any such loans.
Southern is not proposing to issue any guarantees under authority of
this proceeding. The proceeds from the proposed borrowings by the Operating
Companies will be used for general corporate purposes, including the financing
in part of their respective construction programs. None of such proceeds will be
used by the Operating Companies, directly or indirectly, for the acquisition of
any interest in an "exempt wholesale generator" ("EWG") or a "foreign utility
company" ("FUCO").
With respect to the transactions for which approval is sought
herein, Georgia, Gulf, Mississippi and Savannah, for themselves and on behalf of
the SPV, hereby request authority to file certificates of notification under
Rule 24 on a quarterly basis (within 60 days following the close of each
calendar quarter).
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 (in addition to those
described in Item 1 hereof) are estimated not to exceed $15,000.
Item 3. Applicable Statutory Provisions.
The acquisition by Southern of the capital stock of SPV in
connection with the organization of the SPV is subject to Sections 9(a) and 10
of the Act. The issuance and sale by the SPV of its commercial paper are subject
to Sections 6(a) and 7 of the Act, except to the extent exempted by the first
sentence of Section 6(b). The issuance by Georgia, Gulf, Mississippi and
Savannah of their respective promissory notes to the SPV is subject to Sections
6(a) and 7 of the Act, except to the extent exempted under the first sentence of
Section 6(b), and the acquisition by the SPV of such notes of Georgia, Gulf,
Mississippi and Savannah is subject to Sections 9(a) and 10 of the Act. The
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guarantee by Georgia of any loan by the SPV to SEGCO as described herein is
subject to Sections 6(a), 7 and 12(b) of the Act and Rule 45 thereunder. No
authorization by the Commission is required for any other transaction described
herein (although Gulf receives orders from the Florida Public Service Commission
for financings, Gulf is not exempted pursuant to Rule 52 of the Act because Gulf
is incorporated in Maine); the transactions involving Alabama and SEGCO
(including any guarantees by Alabama of loans by the SPV to SEGCO) are exempted
pursuant to Rule 52 under the Act for (1) the issuance of their notes or
guarantees, as the case may be, as described herein will be solely for the
purpose of financing the respective businesses of such public-utility subsidiary
companies, (2) each such issuance will have been authorized by the Alabama
Public Service Commission, the state commission of the state in which each
company is organized and doing business, and (3) the interest rates and maturity
rates of any note issued by SEGCO to Alabama, or by either SEGCO or Alabama to
the SPV, will be designed to parallel the effective cost of the related
borrowing to the respective associate companies.
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 EWG or 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, 2000, Southern's "aggregate investment," as defined
in Rule 53(a)(1), in EWGs and FUCOs was approximately $2.746 billion, or about
63.84% of Southern's "consolidated retained earnings," also as defined in Rule
53(a)(1), for the four quarters ended June 30, 2000 ($4.302 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
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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 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
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consolidated capitalization as of June 30, 2000 was 39.8% equity, 60.2% debt
including all non-recourse debt, and 54.3% equity and 45.7% debt excluding all
non-recourse debt.
Since the date of the Rule 53(c) Order, there has been a reduction in
Southern's consolidated equity capitalization ratio; however, it remains within
acceptable ranges and limits of rating agencies for strong investment grade
corporate credit ratings. In addition, the affiliated operating companies, which
have a significant influence on the Southern corporate rating, continue to show
strong financial statistics as measured by the rating agencies. The following
table presents the senior secured ratings history for each as rated by S&P,
Moody's and Fitch:
<TABLE>
<CAPTION>
-------------------- --------------------- ------------- ------------- -------------- ------------- -------------
Company Agency 1995 1996 1997 1998 19992
-------------------- --------------------- ------------- ------------- -------------- ------------- -------------
-------------------- --------------------- ------------- ------------- -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Alabama S&P A+ A+ A+ A+ A+
Moody's A1 A1 A1 A1 A1
Fitch A+ AA- AA- AA- AA-
-------------------- --------------------- ------------- ------------- -------------- ------------- -------------
-------------------- --------------------- ------------- ------------- -------------- ------------- -------------
Georgia S&P A+ A+ A+ A+ A+
Moody's A1 A1 A1 A1 A1
Fitch AA- AA- AA- AA- AA-
-------------------- --------------------- ------------- ------------- -------------- ------------- -------------
-------------------- --------------------- ------------- ------------- -------------- ------------- -------------
Gulf S&P A+ A+ AA- AA- AA-
Moody's A1 A1 A1 A1 A1
Fitch A+ AA- AA- AA- AA-
-------------------- --------------------- ------------- ------------- -------------- ------------- -------------
-------------------- --------------------- ------------- ------------- -------------- ------------- -------------
Mississippi S&P A+ A+ AA- AA- AA-
Moody's Aa3 Aa3 Aa3 Aa3 Aa3
Fitch AA- AA- AA- AA- AA-
-------------------- --------------------- ------------- ------------- -------------- ------------- -------------
-------------------- --------------------- ------------- ------------- -------------- ------------- -------------
Savannah S&P A+ A+ AA- AA- AA-
Moody's A1 A1 A1 A1 A1
Fitch Not rated Not rated Not rated Not rated Not rated
-------------------- --------------------- ------------- ------------- -------------- ------------- -------------
</TABLE>
Southern's consolidated retained earnings grew on average approximately
5.9% per year over the last five years. Excluding the $111 million one-time
windfall profits tax imposed on South Western Electricity plc ("SWEB") in 1997,
the $221 million write down of assets in 1998, the $69 million write down of the
Mobile Energy investment in 1999 and the $78 million gain on the sale of the
_______________________________
2 In April 2000, Moody's and Duff & Phelps (now known as Fitch) reaffirmed their
ratings; however, S&P placed the ratings of Southern and its affiliates on
credit watch with negative implications.
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SWEB supply business in 1999, the average growth would be 7.4%. In 1999,
consolidated retained earnings increased $354 million, or 9.1%. Southern's
interests in EWGs and FUCOs have made a positive contribution to earnings over
the four 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 an adverse impact on Southern's financial integrity.
Item 4. Regulatory Approval.
The proposed issuance by Gulf of its promissory note to the SPV
evidencing loans by the SPV to Gulf has been or will have been expressly
authorized by the Florida Public Service Commission, which has jurisdiction over
the issuance of securities by public utility companies operating in Florida. The
transactions for which authorization is sought herein are not subject to the
jurisdiction of any other 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.
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<PAGE>
Item 6. Exhibits and Financial Statements.
(a) Exhibits
F-1 - Opinion of Troutman Sanders LLP, counsel for
Southern, Georgia and Savannah.
F-2 - Opinion of Beggs & Lane, counsel for Gulf.
F-3 - Opinion of Eaton and Cottrell, P.A., counsel for
Mississippi.
(b) Financial Statements.
Balance sheet of Georgia at June 30, 2000.
(Designated in Georgia's Form 10-Q for the quarter
ended June 30, 2000, File No. 1-6468.)
Statement of income of Georgia for the period ended
June 30, 2000. (Designated in Georgia's Form 10-Q
for the quarter ended June 30, 2000, File No.
1-6468.)
Balance sheet of Gulf at June 30, 2000. (Designated
in Gulf's Form 10-Q for the quarter ended June 30,
2000, File No. 0-2429.)
Statement of income of Gulf for the period ended
June 30, 2000. (Designated in Gulf's Form 10-Q for
the quarter ended June 30, 2000, File No. 0-2429.)
Balance sheet of Mississippi at June 30, 2000.
(Designated in Mississippi's Form 10-Q for the
quarter ended June 30, 2000, File No. 0-6849.)
Statement of income of Mississippi for the period
ended June 30, 2000. (Designated in Mississippi's
Form 10-Q for the quarter ended June 30, 2000, File
No. 0-6849.)
Balance sheet of Savannah at June 30, 2000.
(Designated in Savannah's Form 10-Q for the quarter
ended June 30, 2000, File No. 1-5072.)
Statement of income of Savannah for the period
ended June 30, 2000. (Designated in Savannah's Form
10-Q for the quarter ended June 30, 2000, File No.
1-5072.)
Since June 30, 2000, there have been no material adverse changes, not
in the ordinary course of business, in the financial condition of Georgia, Gulf,
Mississippi or Savannah from that set forth in or contemplated by the foregoing
financial statements.
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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 Operating Companies'
businesses. 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 amendment to be signed
on their behalf by the undersigned thereunto duly authorized.
Dated: November 7, 2000 THE SOUTHERN COMPANY
By: /s/Tommy Chisholm
Tommy Chisholm
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
