SECURITIES AND EXCHANGE COMMISSION
(Release No. 35-27916)
Filings Under the Public Utility Holding Company Act of 1935, as amended ("Act")
November 23, 2004
Notice is hereby given that the following filing(s) has/have been made with the Commission pursuant to 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 December 17, 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 December 17, 2004, the application(s) and/or declaration(s), as filed or as amended, may be granted and/or permitted to become effective.
Northeast Utilities et al. (70-9541)
Northeast Utilities ("NU"), a public utility holding company registered under the Public Utility Holding Company Act of 1935, as amended ("Act"), The Connecticut Light and Power Company ("CL&P"), Public Service Company of New Hampshire ("PSNH") and Western Massachusetts Electric Company ("WMECO"), each an electric utility subsidiary of NU, North Atlantic Energy Corporation ("NAEC"), formerly a public utility company under the Act, NU Enterprises, Inc. ("NUEI"), a sub-holding company over certain of NU's non-utility subsidiaries, Northeast Generation Company ("NGC"), Northeast Generation Services Company ("NGS"), Select Energy, Inc. ("SE"), HEC Inc., now known as Select Energy Services, Inc. ("SESI"), Select Energy Portland Pipeline, Inc. ("SEPPI"), Reeds Ferry Supply Co., Inc. ("Reeds"), Select Energy Contracting, Inc. ("SECI") and HEC Energy Consulting Canada Inc. ("HEC Energy"), each a direct or indirect non-utility subsidiary of NU, and E.S. Boulos Company ("Boulos") and Woods Electrical Contracting, Inc. ("Woods"), wholly-owned subsidiaries of NGS, Yankee Energy Service Company ("YESCO") and Yankee Energy Financial Services Company ("Yankee Financial"), subsidiaries of Yankee Energy System, Inc., Select Energy New York, Inc. ("SENY"), a subsidiary of SE, ("Applicants"), have filed with the Commission a post-effective application/declaration ("Application") under sections 6(a), 7, 9(a), 10 and 12(c) of the Act and rules 26(c)(3), 42, 43, 44, 46(a) and 54 under the Act.
On March 7, 2000, the Commission issued an order (HCAR No. 27147) ( "Prior Order") granting Applicants' previously-submitted application/declaration ("Original Application") and authorizing (a) the payment of dividends to, and/or the repurchase of stock from, NU out of capital or unearned surplus by each of CL&P, PSNH, WMECO and NAEC, from certain restructuring proceeds, though, as a result of the issuance of Rate Reduction Bonds (as described herein) each of CL&P, WMECO and PSNH ("Utilities"), and NU , on a consolidated basis, would fall below the Commission's common equity-to- total capitalization threshold of 30% (the "30% Threshold"), (b) the payment of dividends to, and/or the repurchase of stock from, NU out of capital or unearned surplus by NUEI, the payment of dividends, and/or the repurchase of stock out of capital or unearned surplus by each of NGC, NGS, SE, SESI, SEPPI, Reeds, SECI and HEC Energy, in each case from their respective parent company, (c) the payment of dividends and/or the repurchase of stock out of capital or unearned surplus by CL&P from certain restructuring proceeds in accordance with the provisions of CL&P's dividend covenant under its First Mortgage Indenture and Deed of Trust dated May 1, 1921 to the Bankers Trust Company as trustee all through December 31, 2004 (the "Initial Authorization Period"), and (d) the issuance of additional shares by NU to the extent necessary to fulfill its obligations under one or more forward stock purchase contracts through June 30, 2001.
Applicants now seek (a) seek a modification and extension through December 31, 2007 ("Authorization Period") of the authorization for the payment of dividends to, and/or the repurchase of stock from, NU out of capital or unearned surplus by NUEI, the payment of dividends to, and/or the repurchase of stock from their respective parent company, out of capital or unearned surplus by each of NGC, NGS, SE, SESI and SECI, subject to the limitations set forth herein; (b) authorization for E.S. Boulos Company ("Boulos") and Woods Electrical Contracting, Inc. ("Woods"), wholly-owned subsidiaries of NGS, Yankee Energy Service Company ("YESCO") and Yankee Energy Financial Services Company ("Yankee Financial"), subsidiaries of Yankee Energy System, Inc., Select Energy New York, Inc. ("SENY"), a subsidiary of SE, and any other direct or indirect to-be-formed non-utility subsidiary of NU, to pay dividends to, and/or repurchase stock from their respective parent company out of capital or unearned surplus, (NUEI, NGC, NGS, SE, SENY, SESI, Reeds, SECI, Boulos, Woods, YESCO, Yankee Financial and any direct or indirect non-utility subsidiary of NU are collectively referred to as the "Non-Utility Subsidiaries"),1 and (c) an extension through the Authorization Period of the authorization granted in the Prior Order for CL&P and PSNH to remain below the 30% Threshold, as a result of the impact of the Rate Reduction Bonds. The Utilities are not seeking an extension of any other authorizations granted in the Prior Order.
In the Prior Order, the Commission noted that restructuring legislation in each state in which the utility subsidiaries of NU were located allowed for the issuance of Rate Reduction Bonds by each Utility to finance a portion of its cost incurred in the sale of its regulatory assets and/or renegotiation of its obligations under purchase power contracts. Rate Reduction Bonds are securities issued by a subsidiary of the Utility and are non-recourse to the Utility or the NU system. Because of the mandated divestiture of generating assets and issuance of Rate Reduction Bonds, the Utilities experienced a significant decrease in the amount of tangible assets that each owned and received a significant influx of cash.
The Original Application noted that as a result of increased debt from the issuance of the Rate Reduction Bonds, NU and the Utilities would fall below the Commission's benchmark 30% common equity-to-total capitalization ratio ("Common Equity Ratio"). After giving effect to various restructuring transactions, including the then-contemplated issuance of the Rate Reduction Bonds, CL&P's pro forma Common Equity Ratio, as reported in Exhibit K filed with the Original Application was projected to be 19.1%, WMECO's pro forma Common Equity Ratio was projected to be 16.6%, PSNH's pro forma Common Equity Ratio was projected to be 14.2%, and NU's pro forma Common Equity Ratio was projected to be 29.1%. In the Original Application, the Applicants stated that they expected NU's Common Equity Ratio to be above 30% by December 31, 2001 but that the Utilities expect that their Common Equity Ratios would remain below 30% throughout the duration of the Initial Authorization Period and thereafter. The Commission, in the Prior Order, noted that after the end of the Initial Authorization Period, further Commission authority would be required if the Common Equity Ratios of any of the Utilities would be below 30%. CL&P and PSNH seek authorization through the Authorization Period for their respective Common Equity Ratios to remain below the 30% Threshold when the impact of Rate Reduction Bonds is considered.
Applicants seek a modification and extension, through the Authorization Period, of the authorization contained in the Prior Order for the payment of dividends to, and/or the repurchase of stock from, the respective parent company of each such Non-Utility Subsidiary, in each case out of capital or unearned surplus, subject to the new limitations set forth in the Application to extend that authorization to Boulos, Woods, SENY, YESCO and Yankee Financial and to add the limitations on the payment of dividends as set forth below. There may be situations in which one or more of the Non-Utility Subsidiaries would have unrestricted cash available for distribution in excess of current and retained earnings resulting from a disposition of assets, a restructuring or other accounting charge that eliminated retained earnings or its normal operations (excluding debt financing). Consistent with these considerations, Applicants seek authorization for the payment of dividends to, and/or the repurchase of stock from, the respective parent company of each such Non-Utility Subsidiary, in each case out of capital or unearned surplus provided, however, that, without further approval of the Commission, no Non-Utility Subsidiary will declare or pay any dividend out of capital or unearned surplus if it derives any material part of its revenues from the sale of goods, services or electricity to an associate Utility ( "Non-exempt Subsidiary"). In addition, no Non-Utility Subsidiary will declare or pay any dividend out of capital or unearned surplus unless it: (a) has received excess cash as a result of the sale of its assets; (b) has engaged in a restructuring or reorganization; and/or (c) is returning capital to an associate company. NU further requests that the Commission reserve jurisdiction over the payment of dividends out of capital or unearned surplus by any Non-exempt Subsidiary.
Northeast Utilities (70-10256)
Northeast Utilities ("NU"), a public utility holding company registered under the Public Utility Holding Company Act of 1935, as amended ("Act") has filed with the Commission a declaration under sections 6(a) and 7 of the Act and rule 54 under the Act.
NU requests authority to issue up to 275,000 Northeast Utilities Common Shares, $5.00 par value ("Common Shares") from the date of the order granting the authorization requested through December 31, 2014, inclusive. This figure is based on a projected need of not more than 25,000 Common Shares per year from 2005 through 2014, plus the 25,000 shares currently needed to satisfy deferred shares obligations. NU expects to modify its trustee compensation program from time to time in the future as necessary or desirable to take into account trends in director compensation, regulatory and tax changes and business needs.
E.ON AG, et al. (70-10260)
E.ON AG ("E.ON"), E.ON US Holding GmbH ("E.ON Holding"), E.ON US Investments Corp. ("EUSIC"), and LG&E Energy LLC ("LG&E Energy" and collectively with E.ON, E.ON Holding and EUSIC, the "E.ON Holding Companies"), registered holding companies under the Act, Louisville Gas and Electric Company, a public utility subsidiary of LG&E Energy ("LG&E" and together with the E.ON Holding Companies, the "E.ON Applicants"), and American Electric Power Company, Inc. ("AEP", together with the E.ON Applicants, the "Applicants"), a registered holding company not affiliated with E.ON, have filed an application-declaration ("Application") with the Commission under sections 8, 9(a), 10, 11(b) and 12(d) of the Act and rules 44 and 54 under the Act.
Applicants seek authorization for the proposed acquisition by LG&E from AEP of 730 shares of common stock, $100 par value ("Shares") of Ohio Valley Electric Corporation ("OVEC"), an Ohio corporation and an electric utility company under the Act (the "Transaction").
E.ON, an entity incorporated under the laws of the Federal Republic of Germany, registered as a holding company under the Act on July 1, 2002, as a result of E.ON's acquisition of Powergen Limited, formerly known as Powergen plc ("Powergen"). The Commission approved the acquisition of Powergen in Holding Company Act Release No. 27539 (June 14, 2002) (the "Acquisition Order"). E.ON owns LG&E Energy, which in turn owns two public utility companies, LG&E and Kentucky Utilities Company ("KU" and together with LG&E, the "E.ON Utility Subsidiaries"). E.ON's interest in LG&E Energy is held indirectly through E.ON Holding and EUSIC, as intermediate holding companies.
AEP, a New York corporation registered as a holding company under the Act, owns, directly, and indirectly through AEP Utilities, Inc. (formerly Central and South West Corporation), a Delaware corporation and registered holding company under the Act, numerous utility and non-utility subsidiaries, including the following public utility subsidiaries: AEP Generating Company, AEP Texas Central Company (formerly Central Power and Light Company), AEP Texas North Company (formerly West Texas Utilities Company), Appalachian Power Company, Columbus Southern Power Company, Indiana Michigan Power Company, Kentucky Power Company, Kingsport Power Company, Ohio Power Company, Public Service Company of Oklahoma, Southwestern Electric Power Company, and Wheeling Power Company (collectively, "the AEP Utility Subsidiaries"). OVEC and its wholly-owned subsidiary, Indiana-Kentucky Electric Corporation ("IKEC"), own two generating stations located in Ohio and Indiana with a combined electric production capability of approximately 2,256 megawatts. OVEC and IKEC are both electric utility companies within the meaning of the Act. OVEC is currently owned by AEP (39.9%), Columbus Southern Power Company, a subsidiary of AEP (4.3%), LG&E (4.9%), KU (2.5%), Allegheny Energy, Inc. (12.5%),(2) ]The Cincinnati Gas & Electric Company, a subsidiary of Cinergy Corp. (9.0%), The Dayton Power and Light Company, a subsidiary of DPL Inc. (4.9%), Ohio Edison Company, a subsidiary of FirstEnergy Corp. (16.5%), Southern Indiana Gas and Electric Company, a subsidiary of Vectren Corporation (1.5%), and the Toledo Edison Company, also a subsidiary of FirstEnergy Corp. (4.0%).
On April 8, 2004, LG&E and AEP entered into a stock purchase agreement ("Agreement"), under which the parties agreed, subject to certain conditions, including approval of the ransaction by the Commission, that AEP would AEP to sell, assign and transfer to LG&E, and for LG&E to purchase from AEP, the Shares upon closing of the Transaction (the "Closing"). LG&E agreed to pay $104,286 ("Purchase Price") for the Shares upon the Closing, which is subject to customary conditions for a transaction of this size and magnitude, all as set forth in the Agreement. LG&E will finance the Transaction with cash on hand on April 30, 2004, irrespective of the consummation of the proposed Transaction and not conditioned upon its approval, OVEC and its shareholders, including AEP (and/or its affiliates), LG&E and KU, entered into an Amended and Restated Inter-Company Power Agreement (the "Amended Power Agreement"), to be effective beginning March 2006, upon the expiration of the Power Agreement. In negotiation of the Amended Power Agreement, disputes arose between AEP and LG&E over a number of issues, including their respective ongoing rights to purchase power from OVEC. In order to avoid litigation, and the cost, delay and uncertainty relating thereto, AEP and LG&E settled these disputes. As part of the settlement, AEP agreed to sell, and LG&E agreed to purchase, the Shares, representing 0.73% of the outstanding common stock of OVEC, at the same price per share paid by AEP in 1990. Upon the effectiveness of the Amended Power Agreement, AEP (and/or its affiliates) and LG&E will receive allocations of marginal cost-based power from OVEC in an amount proportional to their respective ownership interests in OVEC after giving effect to the Transaction.
For the Commission by the Division of Investment Management, pursuant to delegated authority.
Margaret H. McFarland
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