SECURITIES AND EXCHANGE COMMISSION
(Release No. 35-27777; 70-10159)
Ameren Corporation, et al.
Order Authorizing Acquisition of Securities and Nonutility Energy Assets; Restructuring of Nonutility Subsidiaries; Guarantees; Sale of Goods and Services; Payment of Dividends Out of Capital and Unearned Surplus; Anticipatory Interest Rate Hedges; and Reserving Jurisdiction
December 18, 2003
Ameren Corporation ("Ameren"), a registered holding company, Ameren Energy, Inc., and Ameren's nonutility subsidiaries Ameren Development Company ("Ameren Development"), Ameren ERC, Inc. ("Ameren ERC"), Ameren Energy Resources Company ("Ameren Energy Resources"), Ameren Energy Marketing Company, Ameren Energy Fuels and Services Company, Illinois Materials Supply Co., Missouri Central Railroad Company, Union Electric Development Company ("UEDC"), AFS Development Company, LLC, all located in St. Louis, Missouri, and nonutility subsidiaries CIPSCO Investment Company ("CIC"), Springfield, Illinois, CILCORP Investment Management Inc., CILCORP Ventures Inc., CILCORP Energy Services, Inc., QST Enterprises Inc., CILCO Exploration and Development Company, and CILCO Energy Corporation, all located in Peoria, Illinois, and nonutility subsidiaries AmerenEnergy Medina Valley Cogen (No. 4), L.L.C., AmerenEnergy Medina Valley Cogen (No. 2) L.L.C., AmerenEnergy Medina Valley Cogen, L.L.C., an exempt wholesale generator ("EWG") and AmerenEnergy Medina Valley Operations, L.L.C., a nonutility subsidiary all located in Mossville, Illinois (collectively, "Applicants" and excluding Ameren "Nonutility Subsidiaries") have filed with the Securities and Exchange Commission ("Commission") an application-declaration ("Application") under sections 6(a), 7, 9(a), 10, 12(b), 12(c), 12(f) and 13(b) of the Public Utility Holding Company Act of 1935, as amended ("Act") and rules 43, 45, 46, 87, 90 and 91 under the Act. The Commission issued a notice of the filing of the Application on November 21, 2003 (Holding Co. Act Release No. 27767).
By order dated July 23, 1999 (the "1999 Order"),1 Ameren, Ameren Union Electric Company d/b/a AmerenUE, and certain direct and indirect non-utility subsidiaries of Ameren were authorized to engage in various transactions from time to time through December 31, 2003, relating generally to Ameren's reorganization of its nonutility subsidiary companies and the acquisition and ownership of new nonutility subsidiaries.
In this Application, the Applicants are seeking to extend and restate their current authorization under the 1999 Order for the period through December 31, 2006 (the "Authorization Period"), subject to a continuation of the Commission's reservation of jurisdiction over certain specified proposals, as described below.
I. Intermediate Subsidiaries
Ameren proposes to acquire, directly or indirectly through the Nonutility Subsidiaries, the securities of one or more new subsidiaries ("Intermediate Subsidiaries") organized exclusively for the purpose of acquiring, holding and/or financing the acquisition of the securities of or other interest in EWGs, foreign utility companies ("FUCOs"), exempt telecommunications companies" ("ETCs") under section 34 of the Act, energy-related companies" under rule 58 ("Rule 58 Subsidiaries") or other nonutility companies the acquisition of which has been expressly authorized by the Commission. Applicants state that the Intermediate Subsidiaries would be organized exclusively for the purpose of acquiring, holding and/or financing the acquisition of the securities of or other interest in one or more of EWGs, FUCOs, ETCs under section 34 of the Act, (collectively, "Exempt Subsidiaries"), Rule 58 Subsidiaries, or other current or future non-exempt subsidiaries that have been authorized by the Commission ("Non-Exempt Subsidiaries"), provided that Intermediate Subsidiaries may also engage in Development Activities2 and Administrative Activities3 relating to such subsidiaries.
II. Financing Subsidiaries
Applicants request authority to acquire, directly or indirectly, the equity securities of one or more new subsidiaries ("Financing Subsidiaries") organized exclusively for the purpose of issuing long-term debt or equity securities to investors other than Ameren in order to finance, in whole or in part, Ameren's direct or indirect acquisition of Exempt Subsidiaries and Rule 58 Subsidiaries created specifically for the purpose of facilitating the financing of the Applicants' authorized and exempt activities (including exempt and authorized acquisitions) through the issuance of long-term debt or equity securities to third parties and the transfer of the proceeds of such financings to the parent company of the Financing Subsidiary.
The amount and terms (i.e., interest rate, maturity, etc.) of any long-term debt or preferred equity securities issued by a Financing Subsidiary of Ameren will count against the limitation and comply with the specific terms applicable to that type of security under the any applicable order approving financing by Ameren. Ameren also proposes, if required, to guarantee or enter into expense agreements in respect of the obligations of any such Financing Subsidiaries. To avoid double counting, however, the guarantee of that security by Ameren would not also be counted against the then current limit on guarantees that Ameren is authorized to issue under any applicable order. Nonutility Subsidiaries may also provide guarantees and enter into expense agreements, if required, on behalf of such entities pursuant to rules 45(b)(7) and 52, as applicable. Ameren further requests authorization to issue its unsecured subordinated promissory notes ("Subordinated Notes") to any Financing Subsidiary to evidence a loan of the proceeds of any financing by a Financing Subsidiary to Ameren. The amount and terms (i.e., interest rate, maturity, default provisions, prepayment terms, etc.) of any Subordinated Notes issued by Ameren to a Financing Subsidiary will be designed to parallel the amount and terms of the specific securities of a Financing Subsidiary in respect of which such Subordinated Notes are issued. Again, to avoid double counting, the amount of Subordinated Notes issued by Ameren to any Financing Subsidiary will not be counted against the then applicable limit on long-term debt and preferred equity securities that Ameren is authorized to issue.
III. Special Purpose Subsidiaries
Ameren requests authority to acquire, directly or indirectly through a Nonutility Subsidiary, the equity securities of one or more new subsidiaries ("Special Purpose Subsidiaries") organized to purchase or otherwise acquire any of the assets of or securities held by UEDC and/or CIC at the time Ameren became a registered holding company, and UEDC and CIC request authorization to sell or otherwise transfer such assets or securities to Special Purpose Subsidiaries. In addition, Special Purpose Subsidiaries may also be formed to engage in any of the following additional business activities:
(i) Making or guaranteeing loans to customers to finance the purchase of home and business heating, ventilation and cooling equipment; energy conservation and management equipment, products and services; lighting equipment and supplies; and home and business security systems. Ameren proposes that the aggregate principal amount of loans, guarantees or customer installment obligations with respect to which there is recourse to any Special Purpose Subsidiary shall not exceed $300 million at any one time during the Authorization Period.
(ii) Development Activities and operations and maintenance, construction and construction management, fuel procurement and other types of services for or on behalf of any Nonutility Subsidiary. The Applicants are requesting a continuation of their current authority to expend up to $250 million in the aggregate outstanding at any time during the Authorization Period on all Development Activities.
(iii) The marketing of energy bill payment insurance in Illinois and Missouri, which would enable utility customers to pay their energy bills in the event of unemployment, illness, disability or death. This program would be underwritten and administered by an independent insurance company or companies.
(iv) The offering of economic development services for businesses wishing to expand or relocate their facilities to anywhere within the wholesale or retail service area of the Union Electric Company d/b/a AmerenUE ("AmerenUE"), Central Illinois Public Service Company d/b/a AmerenCIPS ("AmerenCIPS"), Central Illinois Light Company, d/b/a AmerenCILCO ("AmerenCILCO,"), and AmerenEnergy Resources Generating Company (f/k/a Central Illinois Generation, Inc.) ("AERG" and together with AmerenCILCO, AmerenUE, and AmerenCIPS, the "Utility Subsidiaries"), including consultation with local economic development officials, building and site screening, customized tax comparison studies and workforce analyses, liaison services to identify financing and leasing sources for building construction, equipment and working capital, and other similar services. These services will be similar in scope to those which the Utility Subsidiaries have in the past provided to relocating businesses, often without charge. Ameren states that minimal capital will be required to provide these types of services and that, without further order of the Commission, it will not acquire any securities of or other interest in any industrial/commercial development enterprise except as may be permitted by rule 40(a)(5).
(v) The offering of customer goodwill or retention programs, such as packaged discounts on products for the home, travel, and health services, prepaid phone cards or "affinity" cards to promote customer goodwill, and programs to help customers stay informed and protect their credit rating, driving record, and social security number.
(vi) The marketing of "outage" insurance, which would enable customers to protect against lost revenues due to power interruptions, and surge protection service.
Ameren requests authorization to invest in Special Purpose Subsidiaries an aggregate amount at any time outstanding not to exceed $250 million.
IV. Guarantees by Nonutility Subsidiaries
Nonutility Subsidiaries request authorization to provide guarantees or other forms of credit support in respect of obligations of each other in an aggregate principal amount at any time outstanding during the Authorization Period not to exceed $300 million, in addition to any guarantees that are exempt under rules 45(b) and 52(b), as applicable, provided that any guaranty or other form of credit support outstanding on December 31, 2006, shall remain in effect until it expires in accordance with its terms.
V. Sales of Services and Goods Among Nonutility Subsidiaries
Nonutility Subsidiaries request authorization to provide services or sell goods to each other at fair market prices determined without regard to cost, and therefore request an exemption pursuant to section 13(b) from the cost standard of rules 90 and 91 as applicable to such transactions, in any case in which any of the following circumstances may apply:
(i) The client company is a FUCO or foreign EWG that derives no part of its income, directly or indirectly, from the generation, transmission, or distribution of electric energy for sale within the United States;
(ii) The client company is an EWG that sells electricity at market-based rates which have been approved by the Federal Energy Regulatory Commission ("FERC"), provided that the purchaser thereof is not a Utility Subsidiary;
(iii) The client company is a "qualifying facility" ("QF") within the meaning of the Public Utility Regulatory Policies Act of 1978, as amended ("PURPA") that sells electricity exclusively (a) at rates negotiated at arms'-length to one or more industrial or commercial customers purchasing the electricity for their own use and not for resale, and/or (ii) to an electric utility company (other than a Utility Subsidiary) at the purchaser's "avoided cost" as determined in accordance with the regulations under PURPA;
(iv) The client company is a domestic EWG or QF that sells electricity at rates based upon its cost of service, as approved by FERC or any state public utility commission having jurisdiction, provided that the purchaser thereof is not a Utility Subsidiary; or
(v) Any other Nonutility Subsidiary that (1) is partially-owned, provided that the ultimate purchaser of such goods or services is not a Utility Subsidiary or Ameren Services Company ("Ameren Services"), a service company subsidiary, (or any other entity within the Ameren system whose activities and operations are primarily related to the provision of goods and services to the Utility Subsidiaries, (2) is engaged solely in the business of developing, owning, operating and/or providing services or goods to Nonutility Subsidiaries described in paragraphs (i) through (iv) immediately above, or (3) does not derive, directly or indirectly, any material part of its income from sources within the United States and is not a public utility company operating within the United States.
VI. Sale of Certain Goods and Services by Nonutility Subsidiaries Outside the United States
Nonutility Subsidiaries request authority to sell goods and services to customers both within and outside the United States. These goods and services include:
(i) the brokering and marketing of electricity, natural gas and other energy commodities;
(ii) Energy Management Services, which include the marketing, sale, installation, operation and maintenance of various products and services related to energy management and demand-side management, including energy and efficiency audits; facility design and process control and enhancements; construction, installation, testing, sales and maintenance of (and training client personnel to operate) energy conservation equipment; design, implementation, monitoring and evaluation of energy conservation programs; development and review of architectural, structural and engineering drawings for energy efficiencies, design and specification of energy consuming equipment; and general advice on programs; the design, construction, installation, testing, sales and maintenance of new and retrofit heating, ventilating, and air conditioning ("HVAC"), electrical and power systems, alarm and warning systems, motors, pumps, lighting, water, water-purification and plumbing systems, and related structures, in connection with energy-related needs; and the provision of services and products designed to prevent, control, or mitigate adverse effects of power disturbances on a customer's electrical systems;
(iii) performance contracting services aimed at assisting customers in realizing energy and other resource efficiency goals in the areas of process control, fuel management, and asset management services (including operation and maintenance services) in respect of energy-related systems, facilities and equipment located on or adjacent to the premises of a customer and used by that customer in connection with business activities, including: (a) distribution systems and substations, (b) transmission, storage and peak-shaving facilities, (c) gas supply and/or electrical generation facilities (i.e., stand-by generators and self-generation facilities), (d) boilers and chillers, (e) alarm/warning systems, (f) HVAC, water and lighting systems, and (g) environmental compliance, energy supply and building automation systems and controls;
(iv) Technical Support Services, which include technology assessments, power factor correction and harmonics mitigation analysis, meter reading and repair, rate schedule design and analysis, environmental services, engineering services, billing services (including consolidation billing and bill disaggregation tools), risk management services, communications systems, information systems/data processing, system planning, strategic planning, finance, feasibility studies, and other similar services;
(v) certain retail services, including the provision of centralized bill payment centers for payment of all utility and municipal bills and related services; annual inspection, maintenance and replacement of energy-related equipment and appliances; service line repair and extended warranties with respect to all of the utility- or energy-related service lines internal and external to a customer's premises; provision of surge protection equipment and services; marketing services to associate and nonassociate businesses in the form of bill insert; and automated meter-reading services;
(vi) sale of monitoring and response goods and services, which include products used in connection with energy and gas-related activities that enhance safety, increase energy/process efficiency; sale of energy-related information, as well as repair services, in connection with such problems as carbon monoxide leaks and faulty equipment wiring; operation of call/dispatch centers on behalf of associate and nonassociate companies in connection with the proposed sale of goods and services or with activities that Nonutility Subsidiaries are otherwise authorized to engage in under the Act;
(vii) sale of energy-peaking services via propane-air or liquefied natural gas ("LNG"), which involves the provision of back-up electricity or gas supply in periods of high or "peak" energy demand using a propane-air mixture or LNG as fuel sources for such back-up services; and
(viii) project development and ownership activities, which involves the installation and ownership of gas-fired turbines for on-site generation and consumption of electricity.
In addition, Nonutility Subsidiaries request authorization to provide other energy-related goods and services that may not be permitted under rule 58. These include incidental goods and services closely related to the consumption of energy and the maintenance of energy consuming property by customers, provided that the proposed incidental goods and services would not involve the manufacture of energy consuming equipment but could be related to, among other things, the maintenance, financing, sale or installation of such equipment.
The Applicants request that the Commission (1) authorize electricity and energy commodity brokering and marketing activities in Canada and reserve jurisdiction over such activities outside the United States and Canada pending completion of the record in this proceeding, (2) authorize the proposed sale of Energy Management Services and Technical Support Services and related customer financing anywhere outside the United States, and (3) continue to reserve jurisdiction over sale of the remaining goods and services described above in subparagraphs (iii) and (v)-(viii) outside the United States, pending completion of the record.
VII. Sale of Agency Services by Ameren Energy and Ameren Energy Marketing Company to Utility Subsidiaries
Ameren Energy requests authorization to continue to act as agent for AmerenUE in connection with the brokering and marketing of electricity and other energy commodities by AmerenUE. Such services include negotiation and administration of power sales agreements with third parties and negotiation of associated credit support and risk management documents. Ameren Energy will provide agency and any other incidental services at cost, determined in accordance with rules 90 and 91. Ameren Energy Marketing Company ("AE Marketing"), an "energy-related company" under rule 58, requests authorization to provide similar agency services to AERG in connection with brokering and marketing of electricity produced by AERG.
VIII. Investments in Energy Assets
Ameren, indirectly through one or more Nonutility Subsidiaries, requests authorization to acquire or construct nonutility energy assets in the United States, including, without limitation, natural gas production, gathering, processing, storage and transportation facilities and equipment, liquid oil reserves and storage facilities, and associated facilities (collectively, "Energy-Related Assets"), that would be incidental or functionally related to energy marketing, brokering and trading. Ameren requests authorization to invest up to $400 million at any one time during the Authorization Period (the "Investment Limitation") in Energy-Related Assets or in the equity securities of existing or new companies substantially all of whose physical properties consist or will consist of Energy Assets. Such Energy-Related Assets (or equity securities of companies owning Energy Assets) may be acquired for cash or in exchange for common stock or other securities of Ameren or any Nonutility Subsidiary. If common stock of Ameren is used as consideration in connection with any such acquisition, the market value of the stock on the date of issuance will be counted against the proposed Investment Limitation. The stated amount or principal amount of any other securities issued as consideration in any such transaction will also be counted against the Investment Limitation. Under no circumstances will Ameren Energy or any marketing subsidiary acquire, directly or indirectly, any assets or properties the ownership or operation of which would cause such companies to be considered an "electric utility company" or "gas utility company" as defined under the Act.
IX. Payment of Dividends Out of Capital and Unearned Surplus.
Ameren, on behalf of its direct or indirect Nonutility Subsidiaries, requests that these Nonutility Subsidiaries be permitted to pay dividends with respect to the securities of these Nonutility Subsidiaries and/or reacquire their securities that are held by any associate company, from time to time through the Authorization Period, out of capital and unearned surplus to the extent permitted under applicable corporate law, provided that, without further approval of the Commission, no Nonutility Subsidiary will declare or pay any dividend out of capital or unearned surplus if that Nonutility Subsidiary derives any material part of its revenues from sales of goods, services, electricity or natural gas to any of the Utility Subsidiaries or if, at the time of such declaration or payment, such Nonutility Subsidiary has negative retained earnings.
X. Anticipatory Interest Rate Hedges by Nonutility Subsidiaries
Nonutility Subsidiaries request authorization to enter into interest rate hedging transactions with respect to anticipated debt offerings ("Anticipatory Hedges"), subject to certain limitations and restrictions. These Anticipatory Hedges would only be entered into with counterparties whose senior debt ratings, or the senior debt ratings of the parent companies of the counterparties, as published by Standard and Poor's Ratings Group, are equal to or greater than BBB, or an equivalent rating from Moody's Investors Service, Fitch Investor Service or Duff and Phelps.
XI. Changes in Capitalization of Nonutility Subsidiaries; Subsequent Internal Reorganizations of Nonutility Subsidiaries
Applicants request authorization to change the terms of any Nonutility Subsidiary's authorized capitalization by an amount deemed appropriate by Ameren or other parent company, provided that, if a Nonutility Subsidiary is not wholly owned, the consent of all other shareholders has been obtained for such change. Thus, a Nonutility Subsidiary would be able to increase the number of its authorized shares of capital stock, change the par value of its capital stock, change between par value and no-par value stock, or convert from one form of business organization to another without additional Commission approval.
In addition, to the extent that such transactions are not otherwise exempt under the Act or rules under the Act, Ameren requests approval to consolidate, sell, transfer or otherwise reorganize all or any part of its direct and indirect ownership interests in Nonutility Subsidiaries, as well as investment interests in entities that are not subsidiary companies. To effect any such consolidation or other reorganization, Ameren may wish to either contribute the equity securities of one Nonutility Subsidiary to another Nonutility Subsidiary (including a newly formed Intermediate Subsidiary) or sell (or cause a Nonutility Subsidiary to sell) the equity securities or all or part of the assets of one Nonutility Subsidiary to another one. Such transactions may also take the form of a Nonutility Subsidiary selling or transferring the equity securities of a subsidiary or all or part of such subsidiary's assets as a dividend to an Intermediate Subsidiary or to another Nonutility Subsidiary, and the acquisition, directly or indirectly, of the equity securities or assets of such subsidiary, either by purchase or by receipt of a dividend. The purchasing Nonutility Subsidiary in any transaction structured as an intrasystem sale of equity securities or assets may execute and deliver its promissory note evidencing all or a portion of the consideration given. Ameren may also liquidate or merge Nonutility Subsidiaries.
Ameren states, for purposes of rule 54, the conditions specificed in rule 53(a) are satisfied and that none of the adverse conditions specified in rule 53(b) exist. As a result, the Commission will not consider the effect on the Ameren system of the capitalization or earnings of any Ameren subsidiary that is an EWG or FUCO, as each is defined in sections 32 and 33 of the Act, respectively, in determining whether to approve the proposed transactions.
Ameren proposes to continue to file reports pursuant to rule 24 on a quarterly basis with respect to the transactions authorized in this order.4 This combined report will be in lieu of any separate notification on Form U-6B-2 that would otherwise be required of Ameren Development or any subsidiary thereof with respect to exempt securities issuances. The rule 24 report shall include:
(i) A copy of the balance sheet and income statement for Ameren and its consolidated subsidiaries.
(ii) The amount and type of investment in any Special Purpose Subsidiary during the quarter and a description of the business(es) of any such Special Purpose Subsidiary.
(iii) The amounts and form of any guarantee or other form of credit support provided by any Nonutility Subsidiary for the benefit of any other direct or indirect Nonutility Subsidiary of Ameren.
(iv) A chart, in the form of Exhibit E of this Application, showing, as of the end of such quarterly period, all associate companies of Ameren that identifies the type of each Nonutility Subsidiary (e.g., EWG, FUCO or ETC, Rule 58 Subsidiary, Intermediate Subsidiary, Financing Subsidiary, Special Purpose Subsidiary) and Ameren's percentage equity ownership in each such Nonutility Subsidiary.
(v) A narrative description of Development Activities during the quarter, the dollar amount expended on Development Activities, and the type of potential investment (e.g., EWG, Rule 58 Subsidiary, etc.) in respect of which such expenditures were made.
(vi) A description of nonutility business activities conducted by Nonutility Subsidiaries (other than any Exempt Subsidiary) outside the United States.
(vii) A description of the type and location of any Energy-Related Assets (or of the equity securities of any company owning such Energy-Related Assets) acquired or constructed during the quarter and the aggregate amount of expenditures thereon during the quarter.
(viii) The notional amount, identity of counterparty, and principal terms of any Anticipatory Hedge entered into by a Nonutility Subsidiary during the quarter.
(ix) With respect to any dividends paid by any Nonutility Subsidiary out of capital or unearned surplus during the quarter, the date and amount of those dividends and the name of the entity to which such dividends were paid.
(x) A brief description of any internal reorganization of Nonutility Subsidiaries completed during the quarter and the purpose of that reorganization.
Fees and expenses to be incurred in connection with the proposed transactions are estimated not to exceed $25,000. Applicants maintain that no other state or federal commission, other than this Commission, have jurisdiction over the proposed transactions in this Application.
Due notice of the filing of the Application has been given in the manner prescribed by rule 23 under the Act, and no hearing has been requested of or ordered by the Commission. Based on the facts in the record, the Commission finds that the applicable standards of the Act are satisfied and that no adverse findings are necessary.
IT IS ORDERED, under the applicable provisions of the Act and rules under the Act, that the Application be granted immediately, subject to the terms and conditions prescribed in rule 24 under the Act.
IT IS FURTHER ORDERED that jurisdiction is reserved, pending completion of the record, over: (1) electricity and energy commodity brokering and marketing activities outside of the United States and Canada; and (2) the sale of certain goods and services specified above in section VI subparagraphs (iii) and (v)-(viii), outside the United States.
For the Commission, by the Division of Investment Management, pursuant delegated authority.
Margaret H. McFarland
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