SECURITIES AND EXCHANGE COMMISSION
(Release No. 35-27853)
Filings Under the Public Utility Holding Company Act of 1935, as amended ("Act")
June 3, 2004
Notice is hereby given that the following filing(s) has/have been made with the Commission under provisions of the Act and rules promulgated under the Act. All interested persons are referred to the application(s) and/or declaration(s) for complete statements of the proposed transaction(s) summarized below. The application(s) and/or declaration(s) and any amendment(s) is/are available for public inspection through the Commission's Branch of Public Reference.
Interested persons wishing to comment or request a hearing on the application(s) and/or declaration(s) should submit their views in writing by June 28, 2004, to the Secretary, Securities and Exchange Commission, Washington, D.C. 20549-0609, and serve a copy on the relevant applicant(s) and/or declarant(s) at the address(es) specified below. Proof of service (by affidavit or, in the case of an attorney at law, by certificate) should be filed with the request. Any request for hearing should identify specifically the issues of facts or law that are disputed. A person who so requests will be notified of any hearing, if ordered, and will receive a copy of any notice or order issued in the matter. After June 28, 2004, the application(s) and/or declaration(s), as filed or as amended, may be granted and/or permitted to become effective.
The Southern Company (70-10186)
The Southern Company ("Southern"), 270 Peachtree Street, N.W., Atlanta, Georgia, 30303, a registered holding company under the Act; Georgia Power Company ("Georgia Power"), Southern Company Services, Inc. ("SCS"), and Southern Company Energy Solutions, Inc., each located at 241 Ralph McGill Boulevard, N.E., Atlanta, Georgia, 30308 and each a wholly-owned subsidiary of Southern; Gulf Power Company ("Gulf Power"), One Energy Place, Pensacola, Florida, 32520 and a wholly-owned utility subsidiary of Southern; Mississippi Power Company ("Mississippi Power"), 2992 West Beach, Gulfport, Mississippi, 39501 and a wholly-owned utility subsidiary of Southern; Savannah Electric and Power Company ("Savannah Power"), 600 Bay Street East, Savannah, Georgia, 31401 and a wholly-owned utility subsidiary of Southern; Alabama Power Company ("Alabama Power"), 600 North 18th Street, Birmingham, Alabama, 35291 and a wholly-owned utility subsidiary of Southern; Southern Company Capital Funding, Inc. ("Capital Funding"), 1403 Foulk Road, Suite 102, Wilmington, Delaware, 19803 and a wholly-owned subsidiary of Southern; Southern Communications Services, Inc., 555 Glenridge Connector, Suite 500, Atlanta, Georgia, 30342 and a wholly-owned subsidiary of Southern; and Southern Nuclear Operating Company, Inc., 40 Inverness Center Parkway, Birmingham, Alabama, 35242 and a wholly-owned subsidiary of Southern (collectively, "Applicants"), have filed a declaration/application ("Declaration") under sections 6(a), 7, 9(a), 10, and 12(b), 12(c), and 12(f) of the Act and rules 42, 45, 53, and 54 under the Act.
Southern owns the following public utilities: Alabama Power, Georgia Power, Gulf Power, Mississippi Power, Savannah Power, Southern Power Company and Southern Electric Generating Company.
I. Current Authority
Southern currently has authority to issue the following securities:
Upon the effectiveness of the order in this filing, Applicants will relinquish their authority to issue securities and engage in the transactions authorized in the orders listed above.
II. Overview of Request
Applicants request authorization to engage in the following financing transactions during the period from the effective date of the order in this filing through June 30, 2007 ("Authorization Period"):
III. Financing Parameters
Applicants propose that the following general terms will be applicable where appropriate to the financing transactions requested:
IV. Financial Condition
Applicants state that the ratings of the securities issued by Southern and Capital Funding are:
V. Description of Specific Types of Financings
1. Common Stock. Southern proposes to issue and sell up to 35 million shares of common stock in ordinary regular-way transactions in the auction market on the floor of the New York Stock Exchange, or any regional exchange on which Southern's common stock may be admitted to trading privilege, in block transactions on exchanges or in the over-the-counter market, in which a broker or dealer may act as a principal for its own account and in "fixed-price offerings" off the floor of the exchanges, or "special offerings" and "exchange distributions" in accordance with the rules of the exchanges. Public distributions may be as a result of private negotiations with underwriters, dealers or agents, or effected through competitive bidding among underwriters. In addition, sales may be made through private placements or other non-public offerings to one or more persons. The sale of the common stock will be made at market prices prevailing at the time of sale in the case of transactions on exchanges and at prices negotiated by the broker or dealer and related to prevailing market prices in the case of over-the-counter transactions.
2. Institutional Debt. Southern proposes to issue and sell from time to time unsecured Institutional Debt in an aggregate principal amount at any time outstanding not to exceed $3 billion. These borrowings will be evidenced by short-term and/or term loan notes, dated as of the date of the borrowings, and maturing not more than seven years after the date of issue, or "grid" short-term and/or long-term notes, evidencing all outstanding borrowings from each lender, dated as of the date of the initial borrowings, and maturing not more than seven years after the date of issue. Southern proposes to issue commercial paper in the form of promissory notes with varying maturities not to exceed one year. The commercial paper 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 Southern's anticipated cash flow, including the proceeds of other borrowings, at the time of issuance.
3. Common Stock Issuable under Stock-based Plans. Southern proposes to issue up to 85 million shares of common stock under several stock-based plans as described below and any similar stock based plans adopted in the future (collectively, "Plans"). The common stock issuable under the Plans would be in addition to the common stock issuable under paragraph V.1 above.
4. Guarantees. SCS provides certain services for Southern and its associate companies in the Southern electric system. Southern proposes to guarantee indebtedness or other obligations incurred by SCS in an aggregate amount not to exceed $330 million at any time outstanding. Applicants state that security issuances by SCS are exempt from prior Commission review in accordance with rule 52(b) under the Act, as they will be in the routine course of its business.
SCS may issue and sell notes ("SCS Notes") to lenders other than Southern. The SCS Notes would be issued under agreements with lenders and may be guaranteed by Southern as to principal, premium, if any, and interest. The SCS Notes may have terms of up to 50 years, contain sinking funds and bear interest at a rate or rates not to exceed 700 basis points per annum over the rate for United States Treasury securities of corresponding maturity at the time the lenders commit to purchase the particular issue. SCS may engage an agent to place the SCS Notes for a commission based upon the principal amount borrowed.
SCS also may effect short-term or term-loan borrowings under one or more revolving credit commitment agreements. Short term borrowings would have a maximum maturity of one year; term loans would have a maximum maturity of ten years. It is expected that the borrowings would be evidenced by a "grid" promissory note to be dated the date of the initial borrowing and the date of each borrowing thereafter when a "grid" short-term or term-loan note, as the case may be, is not outstanding. Borrowings would bear interest at rates to be negotiated with the lending financial institution or institutions. In addition, it is expected that SCS will be obligated to pay fees in connection with the credit arrangements. Interest rates and fees will be negotiated based upon prevailing market conditions.
SCS also may effect borrowings from certain banks and other institutions. Institutional borrowings will be evidenced by notes to be dated as of the date of the borrowings and to mature in not more than ten years after the date of borrowing or by "grid" notes evidencing all outstanding borrowings from each lender to be dated as of the date of the initial borrowing and to mature in not more than ten years after the date of borrowing. Generally, borrowings will be prepayable in whole, or in part, without penalty or premium, and will be at rates to be negotiated with the lending institutions based upon prevailing market conditions. SCS also may negotiate separate rates for, and/or agree not to prepay, particular borrowings if it is considered more favorable to SCS.
Southern further proposes that it may guarantee obligations incurred by SCS in connection with installment purchases, sale-leasebacks, leases or other acquisitions of equipment or other assets.
5. Preferred Stock, Preferred Securities, Equity-linked Securities and Long-term Debt. Southern and Capital Funding request authority to issue and sell from time to time, directly, preferred stock, and directly or indirectly through one or more financing subsidiaries, Preferred Securities, Equity-linked Securities and/or Long-term Debt in an aggregate amount at any time outstanding not to exceed $1.5 billion. Any of these securities may be convertible into common stock of Southern, provided that the value of the common stock issuable upon conversion may not exceed $2 billion in the aggregate, and will be in addition to the common stock authorized for issuance under paragraphs V.1 and V.3 above.
Preferred Stock. Southern and Capital Funding propose to issue and sell from time to time shares of their preferred stock. Any issue of preferred stock will have a specified par or stated value per share and, in accordance with applicable state law, will have voting powers (if any), designations, preferences, rights and qualifications, limitations or restrictions as shall be stated and expressed in the resolution or resolutions providing for the issue adopted by the board of directors of Southern or Capital Funding, as the case may be, under authority vested in it by the provisions of its certificate of incorporation. The foregoing may include rights of conversion or exchange into common stock of Southern.
Preferred Securities. Southern and Capital Funding request the authority to issue, directly or indirectly through one or more Financing Subsidiaries (as defined below) preferred securities (including, without limitation, trust preferred securities) ("Preferred Securities"). Preferred Securities may be issued in one or more series with rights, preferences and priorities as may be designated in the instrument creating each series, as determined by the board of directors of Southern or Capital Funding, as applicable. Dividends or distributions on the Preferred Securities will be made periodically and to the extent funds are legally available for that purpose, but may be made subject to terms which allow the issuer to defer dividend payments for specified periods. Southern proposes to guarantee certain payments made by a Financing Subsidiary in regard to the issuance of any Preferred Security.
Southern expects that one or more statutory or business trusts or other finance subsidiary (each a "Financing Subsidiary") established by Southern and/or Capital Funding would issue the Preferred Securities.3 Southern proposes to organize one or more separate Financing Subsidiaries as a statutory trust of the State of Delaware or other comparable trust in any jurisdiction considered advantageous by Southern or any other entity or structure, foreign or domestic, that is considered advantageous by Southern. Southern requests that the Commission reserve jurisdiction over the use of a foreign entity as a Financing Subsidiary. The Financing Subsidiary would lend, dividend or otherwise transfer to Southern or Capital Funding, as applicable, the proceeds of the Preferred Securities it issues, together with the equity contributed to the Financing Subsidiary.4 In turn, Capital Funding would lend, dividend or otherwise transfer the proceeds to Southern. Southern or Capital Funding would issue guarantees5 related to: (a) payment of dividends or distributions on the Preferred Securities of any Financing Subsidiary, if, and to the extent that, the Financing Subsidiary has funds legally available for this purpose; (b) payments to holders of the Preferred Securities of amounts due upon liquidation of the Financing Subsidiary or redemption of its Preferred Securities; and (c) certain additional amounts that may be payable in respect of the Preferred Securities.
Equity-linked Securities. Southern or Capital Funding may also issue and sell equity-linked securities, typically in the form of stock purchase units, which combine a security with a fixed obligation (e.g., Long-term Debt, Preferred Securities, preferred stock or other debt obligations of third parties, including U.S. Treasury securities) with a stock purchase contract that is exercisable (either mandatorily or at the option of the holder) within a relatively short period (e.g., one to six years after issuance) ("Equity-linked Securities"). Any securities issued by Capital Funding or a trust or other finance subsidiary may be guaranteed by Southern. In addition, Southern proposes to issue and sell stock purchase contracts ("Stock Purchase Contracts") either separately or as part of units ("Stock Purchase Units"). The Stock Purchase Units would consist of (a) Stock Purchase Contracts and (b) Preferred Securities, Long-term Debt and/or debt obligations of third parties.
Long-term Debt. Southern and Capital Funding propose that, in addition to, or as an alternative to, any Preferred Securities financing, Southern or Capital Funding may issue and sell notes directly to investors. It is proposed that any notes so issued will be unsecured, may be either senior or subordinated obligations of Southern or Capital Funding, as the case may be, may be convertible or exchangeable into common stock of Southern or preferred stock and may have the benefit of a sinking fund ("Long-term Debt"). Long-term Debt of Capital Funding will have the benefit of a guarantee or other credit support by Southern and may be subject to redemption or remarketing or a put option. Southern or Capital Funding will not issue Long-term Debt unless it has evaluated all relevant financial considerations (including, without limitation, the cost of equity capital) and has determined that to do so is preferable to issuing Southern common stock or short-term debt.
For the Commission, by the Division of Investment Management, pursuant to delegated authority.
Margaret H. McFarland
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