File No. 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
APPLICATION-DECLARATION WITH RESPECT TO
EUA ENERGY INVESTMENT CORPORATION'S INVESTMENT IN
A SOLID AND LIQUID MATERIALS SEPARATION TECHNOLOGY COMPANY
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
EUA ENERGY INVESTMENT CORPORATION
P.O. Box 2333, Boston, Massachusetts 02107
(Name of companies filing this statement
and address of principal executive office)
EASTERN UTILITIES ASSOCIATES
(Name of top registered holding company
parent of applicant or declarant)
CLIFFORD J. HEBERT, JR., TREASURER
EASTERN UTILITIES ASSOCIATES
P.O. Box 2333, Boston, Massachusetts 02107
(Name and address of agent for service)
The Commission is requested to mail signed copies
of all orders, notices and communications to:
ARTHUR I. ANDERSON, P.C.
McDermott, Will & Emery
75 State Street
Boston, Massachusetts 02109
Item 1. Description of Proposed Transactions.
I. Overview
A. Background of Applicant. This application-declaration is filed
with the United States Securities and Exchange Commission (the
"Commission") by EUA Energy Investment Corporation ("EEIC"), a
Massachusetts corporation and a wholly-owned subsidiary of Eastern
Utilities Associates ("EUA"), a Massachusetts voluntary association and a
registered public holding company under the Public Utility Holding Company
Act of 1935 (the "Act"). The holding company system of EUA is sometimes
hereinafter referred to as the "EUA System".
B. Overview of Application. In this application-declaration, EEIC
seeks Commission approval to invest in Separation Technologies, Inc., a
Delaware corporation having its principal office in Needham, Massachusetts
("STI"), which is engaged in the research, development, design, sale,
installation, construction and servicing of solid and liquid materials
separation systems and facilities including, without limitation, a system
for economically separating unburned carbon from coal (or fly) ash produced
by utility generating plants. Using STI's system, the resulting carbon
potentially can be reburned by the utility and the processed ash can be
sold as a cement substitute in the manufacture of concrete.
C. Acquisition of STI Stock by EEIC. EEIC proposes to invest in STI
by acquiring approximately 1,052,630 shares of STI's common stock, which
shares upon their issuance will represent approximately twenty percent
(20%) of STI's issued and outstanding capital stock (the "Acquired
Shares"). In this application-declaration, EEIC requests authorization to
make an investment in STI by acquiring shares of (i) STI's authorized
common stock, and (ii) a to-be-formed class of non-voting common stock
which, in all respects other than voting rights, is identical to STI's
currently authorized common stock, such acquisition to be in such
combination of voting and non-voting common stock as may be determined by
EEIC, subject to Commission approval, at a purchase price of $3.80 per
share and pursuant to the terms of a stock purchase agreement in the form
attached hereto as Exhibit B-1 (the "Stock Purchase Agreement") (Footnote
1). The Stock Purchase Agreement provides that, effective upon EEIC's
acquisition of the STI common stock, EEIC would have the right to appoint
one member to STI's seven-member Board of Directors, which EEIC-appointed
director would have certain negotiated approval rights. Exhibit A to the
Stock Purchase Agreement contains a summary of STI's research and
development undertakings for calendar years 1996 and 1997.
Footnote 1. EEIC anticipates that, subject to its receipt of Commission
authorization, it will acquire a number of shares
representing up to 9.9% of the then outstanding (voting)
common stock of STI, and that the balance of EEIC's interest
in STI will be acquired in the form of non-voting common
stock. As provided by and subject to the terms of the Stock
Purchase Agreement, any shares of non-voting common stock
acquired by EEIC would automatically convert to shares of
(voting) common stock upon the closing of an initial public
offering of STI common stock. In the event EEIC acquires
more than 9.9% of STI's (voting) common stock, EEIC
acknowledges that STI would become a subsidiary of EEIC
within the meaning of Section 2(a)(8) of the Act.
D. Financing Rights Granted to EEIC. In this application-
declaration, EEIC also requests authorization to make available up to an
aggregate of $15 million as project financing for the installation and
construction of STI fly ash separation projects. The Stock Purchase
Agreement contains provisions granting EEIC an exclusive right of first
negotiation with respect to financing all fly ash separation projects
designed, sold, constructed and/or installed by STI during the eighteen
month period immediately following the execution of the Stock Purchase
Agreement, excepting only financing for (i) STI's Colbert Station project
located in Alabama, and (ii) any host utility finance projects.
EEIC proposes to provide such financing by entering into joint
arrangements with STI at locations where STI equipment will be installed.
EEIC's investment in these utility locations is anticipated to range
between $0.5 and $2.5 million per installation. EEIC's investments in such
future projects with STI may take the form of, without limitation, joint
ventures, general partnerships, limited partnerships, teaming agreements,
royalties or other revenue sharing, special purpose entities, loans and
equity participations.
II. Analysis.
By order dated December 4, 1987, as amended January 11, 1988 (Release
No. 35-24515A; File No. 70-7426), EEIC was authorized to conduct energy and
energy conservation research and to invest, directly or indirectly in such
activities. STI's 1996-1997 research and development program, as well as
its ongoing business activities, include direct utility applications which
are consistent with EEIC's authorization under the above-referenced Order.
The Commission has previously authorized a non-utility subsidiary of a
registered public utility holding company system to acquire capital stock
of STI and to enter into financing arrangements of the types described in
this application-declaration in an aggregate amount of up to $10 million.
(See, New England Electric System, HCAR No. 26277, File No. 70-8475.) For
the same reasons as were presented in that application-declaration, EEIC
believes that its investment in STI and its authorization to enter into
financing arrangements as described herein meet the criteria set forth by
the Commission for these activities.
III. Proposed Activities and/or Transactions.
A. Request for Authorization to Acquire the Acquired Shares. EEIC
hereby requests authorization to acquire the Acquired Shares for a purchase
price of $3.80 per share, in accordance with the terms and conditions
described in Section I.C. above.
B. Requests For Authorization to Finance Fly Ash Separation
Projects. EEIC requests Commission authorization to provide, at EEIC's
discretion, an aggregate total of up to $15 million as project financing
for the construction and installation of STI systems, such financing to be
negotiated with each recipient project host in accordance with the terms of
the Stock Purchase Agreement and on such other commercially reasonable
terms as the parties may determine.
C. No Services to be Provided by System Companies. STI has its own
employees, and no employees of the EUA System retail electric utilities
will be assigned to perform services for STI. EEIC does not anticipate the
need to hire any additional personnel in connection with EEIC's investment
in, or exercise of its financing rights with respect to, STI.
D. No Ownership Interests in EWGs or FUCOs. With the exception, by
virtue of EUA BIOTEN, Inc.'s partnership interest in BIOTEN Partnership
(see, Release No. 35-26314 dated June 21, 1995, File No. 70-8617), of
EEIC's indirect ownership interest in a commercial prototype plant (which
will either be an EWG as defined in Section 32 of the Act or a Qualified
Facility within the meaning of the Public Utility Regulatory Policies Act
of 1978, as amended), neither EEIC nor any subsidiary thereof has acquired
an ownership interest in any EWG or FUCO, or now is or as a consequence of
the transactions proposed herein will become a party to or has or will as a
consequence of the transactions proposed herein have any right under a
service, sales or construction contract with an EWG or FUCO, except in
accordance with the provisions of the Act. EEIC, for itself and its
subsidiaries, will not acquire any such interest or right without first
obtaining any necessary Commission authorization.
ITEM 2. FEES, COMMISSIONS, AND EXPENSES.
The fees, commissions and expenses of the Applicants expected to be
paid or incurred, directly or indirectly, in connection with the
transaction described above are estimated as follows:
Securities and Exchange Commission Fees $ 2,000
Legal Fees $________*
Miscellaneous $________*
TOTAL $________*
* To be filed by amendment.
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
The sections of the Act and rules or exemptions thereunder that the
applicants consider applicable to the transactions for the basis for
exemption therefrom are set forth below:
Acquisition by EEIC of the (voting Sections 9(a) and 10.
and non-voting) common stock of
STI.
Provision of project finance Section 6(a), 7; Rule 45(a).
funding to customers of STI
ITEM 4. REGULATORY APPROVALS.
No consent or approval of any state commission or any federal
commission other than the Commission is necessary for the transactions
which are the subject of this Application-Declaration.
ITEM 5. PROCEDURE.
(a) In order to enable the Applicant to enter into the proposed
transactions promptly, the Applicant hereby requests that this
Application/Declaration be granted and made effective at the earliest
convenient date.
(b) It is not considered necessary that there be a recommended
decision by a hearing officer or by any other responsible office of the
Commission. The Office of Public Utility Regulation may assist in the
preparation of the decision of the Commission, and it is believed that a
thirty (30) day waiting period between the issuance of the order of the
Commission and the day on which the order is to become effective would not
be appropriate.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS
(* To be filed by amendment.)
(+ Confidential treatment requested.)
(a) Exhibits.
* Exhibit A-1 Certificate of Incorporation of STI, as
amended
* Exhibit A-2 By-Laws of STI, as amended
*+ Exhibit B-1 Stock Purchase Agreement
* Exhibit F Opinion of Counsel
* Exhibit H Proposed Form of Notice
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.
The transactions described in Item 1 do not involve major federal
actions significantly affecting the quality of the human environment. No
federal agency has prepared or is preparing an environmental impact
statement with respect to the proposed transaction.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned Applicant has duly caused this statement to be
signed on its behalf by the undersigned duly authorized individual.
EUA ENERGY INVESTMENT CORPORATION
By: /s/ Clifford J. Hebert, Jr.
Clifford J. Hebert, Jr.
Treasurer
Dated: April 9, 1996
