SECURITIES AND EXCHANGE COMMISSION
(Release No. 35-27866; 70-10223)
Georgia Power Company, et. al.
Order Authorizing the Issue and Sale of Commercial Paper From Time to Time Prior to June 30, 2007 and Reserving Jurisdiction
June 30, 2004
Georgia Power Company ("Georgia Power"), Atlanta, Georgia; Gulf Power Company ("Gulf Power"), Pensacola, Florida; Mississippi Power Company ("Mississippi Power"), Gulfport, Mississippi; and Savannah Electric and Power Company ("Savannah Power"), Savannah, Georgia, each a wholly-owned utility subsidiary of The Southern Company ("Southern"), a registered holding company under the Public Utility Holding Company Act of 1935 ("Act"); and Southern Company Funding Corporation ("Southern Funding"), Atlanta, Georgia, a wholly-owned subsidiary of Southern (collectively, "Applicants"), have filed a declaration/application ("Declaration") under sections 6, 7, 9(a), 10, and 12(b) of the Act and rules 45 and 54 under the Act. The Commission issued a notice of the proposed transaction on May 27, 2004 (Holding Company Act Release No. 27849). No request for a hearing was received.
By order dated November 8, 2000 (Holding Company Act Release No. 27273) Southern Funding was authorized to issue commercial paper at the request and for the benefit of the Applicants and Alabama Power Company, a utility subsidiary of Southern ("Alabama Power"), and Southern Electric Generating Company ("SEGCO"), an electric utility owned equally by Alabama Power and Georgia Power (collectively, "Operating Companies") in an amount not to exceed $3.5 billion outstanding at any time prior to June 30, 2004. The Operating Companies were authorized to borrow the proceeds from the sale of the commercial paper issued for their benefit.
Applicants now seek authority for Southern Funding to issue and sell commercial paper at the request of the Operating Companies from time to time prior to June 30, 2007 ("Authorization Period") in an aggregate principal amount at any one time outstanding not to exceed $8.4 billion. Applicants also seek authority for Georgia Power, Gulf Power, Mississippi Power and Savannah Power to borrow the proceeds of the sale of commercial paper in amounts that will not at any time during the Authorization Period exceed $3.2 billion for Georgia Power, $600 million for Gulf Power, $500 million for Mississippi Power, and $120 million for Savannah Power. The remaining amount of commercial paper authorized to be issued by Southern Funding will be issued at the request of, and borrowed by, Alabama Power and SEGCO.1 Finally, Applicants seek authority for Georgia Power to guarantee any loan by Southern Funding to SEGCO in an amount of up to $150 million, or to re-lend any borrowing Georgia Power makes from Southern Funding to SEGCO.2
Currently, Georgia Power, Mississippi Power and Savannah Power have authority to make short term and term loan borrowings in amounts not to exceed $3.2 billion, $500 million, and $120 million, respectively, prior to March 31, 2006,3 and Gulf Power has authority to effect short term and term loan borrowings in an amount not to exceed $600 million prior to January 1, 20074 (collectively, "Short-Term Borrowing Orders"). Applicants propose to aggregate the authority requested in the Declaration with the existing authority in the Short-Term Borrowing Orders so that at all times when this order is in effect, Georgia Power, Mississippi Power, Savannah Power and Gulf Power will have short-term borrowing authorizations in an amount not to exceed $3.2 billion, $500 million, $120 million and $600 million aggregate principal amount, respectively.
Southern Funding has entered into financial services agreements with each Operating Company under which Southern Funding has agreed to use its reasonable best efforts to issue commercial paper in amounts and at times as requested by each Operating Company. Each of Georgia Power, Gulf Power, Mississippi Power and Savannah Power proposes to borrow the cash proceeds of each issuance it requests. Each Operating Company's requested borrowing will be evidenced on a grid promissory note from the Operating Company to Southern Funding, on which each borrowing will be reflected until repaid. The terms of each borrowing will be identical to those of the related commercial paper issued for its benefit. In addition, Georgia Power also requests authority to guarantee any loan by Southern Funding to SEGCO, or to re-lend any borrowing Georgia Power makes from Southern Funding to SEGCO on the same terms. The amount of any guarantee by Georgia Power will not exceed $150 million at any one time outstanding.
The commercial paper that may be issued by Southern Funding will be in the form of promissory notes with 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 payable prior to maturity.
The commercial paper will be sold by Southern Funding 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 other issuers 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 re-offer such commercial paper at a discount rate of up to 1/8th of 1% per annum less than the prevailing interest rate to Southern Funding or at an equivalent cost if sold on an interest-bearing basis.
Each Operating Company represents that through the Authorization Period it will maintain its common equity as a percentage of capitalization (inclusive of short-term debt) at no less than thirty percent. Southern Funding will not issue any securities on behalf of an Operating Company (other than commercial paper with a maturity of one year or less) under the Declaration unless upon original issuance: (1) the securities, if rated, are rated at least investment grade, (2) all outstanding securities of the Operating Company on whose behalf the borrowing will be made that are rated are rated investment grade, and (3) all outstanding securities of Southern that are rated are rated investment grade (collectively, "Investment Grade Criteria"). For purposes of this provision, a security will be deemed to be rated "investment grade" if it is rated investment grade by at least one nationally recognized statistical rating organization, as defined in paragraphs (c)(2)(vi)(E), (F) and (H) of Rule 15c3-1 under the Securities Exchange Act of 1934, as amended. Gulf Power requests that Southern Funding be permitted to issue a security on Gulf Power's behalf that does not satisfy the foregoing condition if the requirements of rule 52(a)(1) and rule 52(a)(3) are met and the issue and sale of the security have been expressly authorized by the Florida Public Service Commission. Applicants request that Southern Funding be permitted to issue a security on behalf of Alabama and SEGCO that does not satisfy the foregoing condition if the requirements of rule 52(a)(1) and rule 52(a)(3) are met and the issue and sale of the security have been expressly authorized by the Alabama Public Service Commission. Applicants request that the Commission reserve jurisdiction over the issuance of any securities at any time that the conditions set forth above are not satisfied.
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. Applicants state that none of the proceeds will be used by the Operating Companies, directly or indirectly, for the acquisition of any interest in an exempt wholesale generator ("EWG") or foreign utility company ("FUCO").
Applicants state that the proposed transactions are 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 EWG or FUCO which is a subsidiary of a registered holding company if the requirements of rule 53(a), (b) and (c) are satisfied.
Applicants state that Southern currently meets all of the conditions of rule 53(a). At March 31, 2004 Southern's "aggregate investment," as defined in rule 53(a)(1), in EWGs and FUCOs was approximately $244 million, or about 4.57% of Southern's "consolidated retained earnings," also as defined in rule 53(a)(1), as of March 31, 2004 ($5.336 billion).5 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).6
In addition, Applicants state that 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. Finally, rule 53(c) is, by its terms, inapplicable since the requirements of rules 53(a) and 53(b) are satisfied.
The fees, commissions and expenses paid or incurred or to be paid or incurred in connection with the proposed transaction (in addition to those set forth above) are estimated not to exceed $15,000. Applicants state that the proposed issuance by Gulf of its promissory note to Capital Funding evidencing loans to Gulf has been expressly authorized by the Florida Public Service Commission, which has jurisdiction over the issuance of securities by public utility companies operating in Florida. Applicants state that other than as set forth above, no other state or federal commission, other than this Commission, has jurisdiction over the proposed transactions.
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, except as to those matters over which jurisdiction is reserved, the applicable standards of the Act are satisfied and no adverse findings are necessary.
IT IS ORDERED, under the applicable provisions of the Act and the rules under the Act, that, except as to the matter as to which jurisdiction has been reserved, the Application is granted and permitted to become effective 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 the issuance by an Applicant of any security that does not meet the Investment Grade Criteria.
For the Commission, by the Division of Investment Management, pursuant to delegated authority.
Margaret H. McFarland
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