[Federal Register: November 26, 2002 (Volume 67, Number 228)]
[Notices]
[Page 70777-70782]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26no02-91]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 35-27605]
Filings Under the Public Utility Holding Company Act of 1935, as
Amended (``Act'')
November 19, 2002.
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 13, 2002, to the Secretary, Securities and Exchange
Commission, Washington, DC 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 13, 2002, 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. (70-9343)
Northeast Utilities (``NU''), 174 Brush Hill Avenue, West
Springfield, Massachusetts 01090-0010, a registered holding company,
NU's wholly-owned nonutility subsidiary, NU Enterprises, Inc.
(``NUEI''), and Northeast Utilities Service Company, both located at
107 Selden Street, Berlin, Connecticut 06037, (collectively, the
``Applicants'') have filed a post effective amendment to their
application-declaration under section 12(b) and rules 45 and 54 under
the Act.
By order dated November 12, 1998 (HCAR No. 26939) (``Prior
Order''), the Commission authorized NU and NUEI to, among other things,
issue guarantees or provide similar forms of credit support or
enhancements (collectively, ``Guarantees'') to, or for the benefit of
NUEI, NUEI's nonutility subsidiaries, or NU's other to-be-formed direct
or indirect energy-related companies, as defined in rule 58 of the Act.
The Commission, through subsequent orders in this file, authorized an
increase in this Guarantee authority to $500 million and the extension
of the date through which Guarantees may be provided through December
31, 2002, under the terms and conditions of the Prior Order. Applicants
request in this filing to maintain the Guarantee authority at $500
million and to extend the date through which the Guarantees may be
provided through September 30, 2003, under the terms and conditions of
the Prior Order.
American Electric Power Company, et al. (70-10088)
American Electric Power Company Inc. (``AEP''), Central and South
West Corporation (``CSW''), both registered holding companies under the
Act, 1
[[Page 70778]]
Riverside Plaza, Columbus, Ohio 43215, and the following direct and
indirect subsidiaries of AEP (collectively ``Subsidiaries'' and with
AEP and CSW ``Applicants''), which include:
(a) Public utility subsidiaries: AEP Generating Company
(``Generating''), Appalachian Power Company (``Appalachian''), Central
Power and Light Company (``CPL''), Columbus Southern Power Company
(``Columbus''), Indiana Michigan Power Company (``Indiana''), Kentucky
Power Company (``Kentucky''), Kingsport Power Company (``Kingsport''),
Ohio Power Company (``Ohio''), Public Service Company of Oklahoma
(``PSO''), Southwestern Electric Power Company (``SWEPCO''), West Texas
Utilities Company (``West Texas''), and Wheeling Power Company
(``Wheeling''), all located at 1 Riverside Plaza, Columbus, Ohio 43215
(collectively, ``Utility Subsidiaries'');
(b) Nonutility subsidiaries that participate in the AEP utility
money pool: Cedar Coal Company, Central Appalachian Coal Company,
Central Coal Company, Colomet Inc., Simco Inc., Southern Appalachian
Coal Company, Blackhawk Coal Company, Conesville Coal Preparation
Company, Franklin Real Estate Company, Indiana Franklin Realty Company,
all located at 1 Riverside Plaza, Columbus, Ohio 43215 (collectively
``Nonutility Participants In The Utility Money Pool''); and
(c) Nonutility subsidiaries that wish to participate in the AEP
nonutility money pool: Universal Supercapacitators LLC, AEP Coal Inc.,
AEP Power Marketing Inc., AEP Pro Serv Inc., AEP Retail Energy LLC, AEP
T&D Services LLC, AEP Credit Inc., Industry and Energy Associates LLC,
AEP C&I Company LLC, AEP Gas Power System GP LLC, AEP Gas Power GP LLC,
AEP Retail Energy, AEP Texas Commercial & Industrial Retail CP LLC, AEP
Communications Inc., AEP Communications LLC, C3 Networks GP LLC, C3
Networks Limited Partnership, C3 Networks & Comm LP, AEP Fiber Venture
LLC, C3 Communications Inc., AEP Energy Services Inc., AEP EmTech LLC,
AEP Investments Inc., Ventures Lease Co. LLC, AEP Resource Services
LLC, AEP Resources Inc., AEP Delaware Investment Company, AEP MEMCO
LLC, AEP Elmwood LLC, United Sciences Testing Inc., AEP Energy Services
Gas Holding Company, Mid-Texas Pipeline Company, Jefferson Island
Storage & Hub LLC, AEP Acquisition LLC, AEP Energy Services Investments
Inc., LIG Inc., LIG Pipeline Company, Tuscaloosa Pipeline Company, LIG
Liquids Company LLC, Louisiana Intrastate Gas Company LLC, LIG Chemical
Company, Houston Pipe Line Company, AEP Gas Marketing LP, HPL Holdings
Inc., AEP Resources International Limited, AEP Resources Project
Management Company Ltd., AEP Pushan Power LDC, CSW International Inc.,
AEP Delaware Investment Company II, AEP Delaware Investment Company
III, AEP Holdings I, AEP Holdings II, AEP Energy Services UK Gen Ltd.,
AEP Energy Services Limited, CSW Energy Inc., CSW Power Marketing Inc.,
CSWE/Ft. Lupton Inc., Newgulf Power Venture, CSW Development I Inc.,
Eastex Cogeneration LP, CSW Eastex LP I Inc., CSW Energy Services Inc.,
EnerShop Inc., Mutual Energy SWEPCO LP, REP Holdco Inc., Mutual Energy
CPL LP, REP General Partner LLC, Mutual Energy WTU LP, Mutual Energy
Service Company LLC, AEP Ohio Commercial & Industrial Retail Company
LLC, AEP Ohio Retail Energy LLC, Mutual Energy LLC, AEP Texas Retail GP
LLC, POLR Power LP, Dolet Hills Lignite Company LLC, AEP Desert Sky GP
LLC, AEP Desert Sky LP LLC, all located at 1 Riverside Plaza, Columbus,
Ohio (collectively, ``Nonutility Money Pool Participants'') have filed
an application-declaration (``Application'') under sections 6(a), 7,
9(a), 10, 12(b) and 12(c) of the Act and rules 43, 45, 46 and 54 under
the Act.
Subsidiaries may also include direct or indirect subsidiaries that
AEP may form under sections 32, 33 or 34 of the Act or rule 58 under
the Act. All of AEP's direct and indirect Subsidiaries, other than
Public Utility Subsidiaries, are referred to as nonutility subsidiaries
(``Nonutility Subsidiaries''). All subsidiaries and AEP and CSW are
sometimes referred to collectively as the ``Companies.''
The Application seeks authority for various financing transactions
(``Financing Plan'') as described below. In summary, the Application
seeks the following authorizations and approvals of the Commission for
the period ending March 31, 2006 (``Authorization Period''):
(i) SWEPCO and Wheeling request authorization to issue long-term
debt in amounts not to exceed $350 million and $40 million,
respectively;
(ii) AEP and its Public Utility Subsidiaries request aggregate
short-term financing in the amount of $7.2 billion outstanding;
(iii) CPL, Columbus, Ohio and West Texas seek interim authority
until restructuring is implemented to issue short- and long-term debt
in an amount not to exceed $3.9 billion;
(iv) Subsidiaries seek authorization to organize financing entities
for certain types of financings described more fully below;
(v) Applicants seek authority to make tender offers for their
securities and to repurchase their own securities from affiliates;
(vi) AEP and certain Subsidiaries that are participants in the
system utility money pool request the continuation of the money pool
through the Authorization Period;
(vii) AEP and certain Nonutility Subsidiaries request authority to
form and continue a nonutility money pool on substantially the same
terms and conditions as the utility money pool;
(viii) AEP and its Subsidiaries request authority to issue
guarantees and other forms of credit support in an aggregate amount not
to exceed $900 million outstanding at any one time as more fully
described below; and
(ix) AEP and its Nonutility Subsidiaries request authorization for
the Nonutility Subsidiaries to pay dividends out of capital or unearned
surplus to the fullest extent allowed by law.
By order dated December 30, 1997 (HCAR No. 35-26811), CSW and its
electric public utility subsidiary companies, CPL, PSO, SWEPCO, WTU and
Central and South West Services Inc., were authorized to engage in
various financing and related transactions through December 31, 2002.
By order dated June 14, 2000 (HCAR No. 35-27186), AEP was authorized to
acquire by merger all of the outstanding common stock of CSW; and AEP,
its operating subsidiaries and certain other subsidiaries were added to
the CSW money pool. By order dated October 26, 2001 (HCAR No. 35-
27457), the money pool authority was extended to December 31, 2002, and
certain sublimits related to restructuring of the AEP system were
established.
AEP, American Electric Power Services Company (``AEPSC''), CSW,
CPL, Columbus, Ohio, SWEPCO and West Texas have pending before this
Commission an application (``Restructuring Application''), for which
the Commission issued a notice on June 14, 2002 (HCAR No. 27450). The
application seeks authority to restructure their operations to comply
with deregulation statutes in Texas and Ohio that will result in the
separation of the generation and energy delivery functions of CPL,
Columbus, Ohio, and West Texas. The authority sought in the
Restructuring Application includes the issuance of short- and long-term
debt by the new generation, distribution and transmission entities and
guarantees relating to these new entities. It is possible that an order
in this matter will
[[Page 70779]]
not be issued until after December 31, 2002. Interim financing
authority for these companies is requested pending issuance of the
restructuring order.
The Applicants request authority to engage in financing
transactions without further Commission approval for which the specific
terms and conditions are not currently known but will engage in these
transactions subject to the following conditions concerning the
financial condition of the Applicants: (a) The effective cost of money
on long-term debt borrowings issued will not exceed the greater of (i)
450 basis points over comparable term U.S. Treasury securities or (ii)
a gross spread over U.S. Treasury securities which is consistent with
similar securities of comparable credit quality and maturities issued
by other companies, (b) the maturity of indebtedness will not exceed 50
years, (c) the underwriting fees, commissions, or other similar
expenses paid in connection with the issue, sale or distribution of a
security will not exceed 5% of the principal or total amount of the
financing, (d) all debt issued by AEP will be unsecured, (e) except in
accordance with a further order of the Commission, the Applicants will
not publicly issue any long-term debt unless the securities are rated
at the time of issuance at the investment grade level as established by
at least one ``nationally recognized statistical rating organization,''
as that term is used in paragraphs (c)(2)(vi)(E), (F) and (H) of rule
15c3-1 under the Securities Exchange Act of 1934.
AEP states that it will maintain during the authorization period
for itself and for all Public Utility Subsidiaries common equity of 30%
of consolidated capital (including short-term debt); however, CPL
requests that it be permitted to maintain a common equity ratio of 25%
for so long as securitization bonds are outstanding.
The proceeds from the sale of securities in external financing
transactions by the Applicants will be added to their respective
treasuries and subsequently used principally for general corporate
purposes including: (i) The financing, in part, of capital
expenditures; (ii) the financing of working capital requirements; (iii)
the acquisition, retirement or redemption of securities previously
issued by AEP or its Subsidiaries without the need for prior Commission
approval; and (iv) other lawful purposes, including direct or indirect
investment in energy related companies as defined in rule 58 (``Rule 58
Companies''), other subsidiaries approved by the Commission, exempt
wholesale generators (``EWGs''), and foreign utility companies
(``FUCOs'').
Applicants request approval for the following aggregate amounts of
outstanding external financing during the Authorization Period (not
including refinancing of outstanding securities):
(i) Long-term debt limits: SWEPCO, $350,000,000; Wheeling,
$40,000,000.
(ii) Short-term borrowing limits through the Money Pool or external
borrowings, or borrowings from AEP, as follows: Appalachian,
$600,000,000; Indiana, $500,000,000; Kentucky, $200,000,000;
Generating, $125,000,000; Kingsport, $40,000,000; PSO, $300,000,000;
SWEPCO, $350,000,000; Wheeling, $40,000,000. In addition, AEP requests
authority for short-term borrowings sufficient to fund the Utility
Money Pool and the Nonutility Money Pool as well as its own
requirements in an amount not to exceed $7,200,000,000.
(iii) Interim limits: If the Restructuring Order referred to above
is not obtained by December 31, 2002, the companies affected by
restructuring will need interim authority to issue debt, including both
long and short-term debt, both on the external market or from the
Utility Money Pool, until restructuring is implemented as described in
SEC File 70-9785. The companies involved in the restructuring request
the following authority to issue debt if the Restructuring Order is not
issued by the end of 2002: CPL, $1,400,000,000; Columbus, $800,000,000;
Ohio, $1,200,000,000; West Texas, $500,000,000.
External Financing
All external financing will be at rates or prices and under
conditions based upon, or otherwise determined, by competitive capital
markets. The Applicants request authority to sell securities covered by
this Application in any of the following ways: (i) Through underwriters
or dealers; (ii) directly to a limited number of purchasers or to a
single purchaser, or (iii) through agents or dealers. If underwriters
are used in the sale of the securities, the securities will be acquired
by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions,
at a fixed public offering price or at varying prices determined at the
time of sale. The securities may be offered to the public either
through underwriting syndicates (which may be represented by managing
underwriters) or directly by one or more underwriters acting alone. The
securities may be sold directly by AEP or a Subsidiary or through
agents designated from time to time. If dealers are used in the sale of
any securities, the securities will be sold to the dealers as
principal. Any dealer may then resell such securities to the public at
varying prices to be determined by the dealer at the time of resale.
If debt securities are being sold, they may be sold in connection
with ``delayed delivery contracts'' which permit the underwriters to
locate buyers who will agree to buy the debt at the same price but at a
later date than the date of the closing of the sale to the
underwriters. Debt securities may also be sold through the use of
medium-term notes and similar programs, including transactions covered
by rule 144A under the Securities Act of 1933. Pollution control
revenue bonds may be sold either currently or in forward refundings
where the price of the securities is established currently for delivery
at a future date.
Long-Term Debt: Under current law, the public utility commissions
in the states of Indiana, Virginia, Tennessee, Ohio, Oklahoma and
Kentucky approve the issuance of long-term securities by public utility
companies. Therefore, rule 52(a) under the Act provides an exemption
from the Commission for the issuances of long term debt securities by
all of AEP's Public Utility Subsidiaries except CPL, SWEPCO, West Texas
and Wheeling. Financing authorization is being sought for CPL and West
Texas in the Restructuring Application and in the request for interim
limits above. SWEPCO and Wheeling seek long-term debt authority in
amounts not to exceed $350 million and $40 million, respectively. Any
long-term debt or other security would have such designations,
aggregate principal amount, maturity, interest rate(s) or methods of
determining these amounts, maturities or rates, interest payment terms,
redemption provisions, non-refunding provisions, sinking fund terms,
conversion or put terms and other terms and conditions as the
Applicants may determine at the time of issuance.
Short-Term Debt: The Public Utility Subsidiaries are members of the
AEP utility money pool (``Money Pool'') and make short-term borrowings
from the Money Pool. The Money Pool is funded by AEP currently through
a commercial paper program. No participant in the Money Pool
(``Participants'') may borrow from the Money Pool if the borrowing
company could borrow more cheaply directly from banks or through the
issuance of its own commercial paper. In the event funds are not
available from the Money Pool, AEP and the Public Utility Subsidiaries
seek authorization for the issuance of short-term debt in the form of
bank loans,
[[Page 70780]]
commercial paper programs and other products in the amount set forth in
above, as well as direct issuance from AEP. Commercial paper would be
sold in established domestic or European commercial paper markets.
Short-term borrowings will have maturities of less than one year from
the date of issuance. The Public Utility Subsidiaries may engage in
other types of short-term financing generally available to borrowers
with comparable credit ratings as it may deem appropriate in light of
its needs and market conditions at the time of issuance.
AEP requests flexibility in the types of short-term debt by which
it borrows externally to take advantage of new products being offered
in the market for short-term securities, including but not limited to,
the extendible commercial notes program currently being offered by
certain commercial paper dealers and new products to provide alternate
backup liquidity for commercial paper and short-term notes.
Credit Enhancements: Applicants seek authority to obtain credit
enhancement for securities to be offered as proposed in this
Application. Credit enhancements could include insurance, a letter of
credit or a liquidity facility. Applicants anticipate that even though
they would be required to pay a premium or fee to obtain the credit
enhancement, they would realize a net benefit through a reduced
interest rate on new securities. Applicants would obtain credit
enhancement only if it is economically beneficial to do so.
Financing Entities: The Subsidiaries seek authority to organize new
corporations, trusts, partnerships or other entities that would
facilitate certain types of financings, such as the issuance of tax
advantaged preferred securities. Request is also made for these
financing entities to issue these types of securities to third parties.
Additionally, request is made for authorization with respect to (i) the
issuance of debentures or other evidences of indebtedness by the
Subsidiaries to a financing entity in return for the proceeds of the
financing and (ii) the acquisition by a Subsidiary of voting interests
or equity securities issued by the financing entity to establish the
Subsidiary's ownership of the financing entity (the equity portion of
the entity generally being created through a capital contribution or
the purchase of equity securities, such as shares of stock or
partnership interests, involving an amount usually ranging from one to
twenty-five percent of the capitalization of the financing entity). The
Subsidiaries also request authorization to enter into expense
agreements with their respective financing entities through which they
would agree to pay all expenses of a financing entity. The Subsidiaries
may also guarantee (i) payment of interest, dividends or distributions
on the securities issued by their subsidiary financing entities if and
to the extent such financing entities declare dividends or
distributions or pay interest out of funds legally available for that
purpose; (ii) payments to the holders of the securities issued by
financing entities of amounts due upon liquidation of these entities or
redemption of the securities of these entities; and (iii) certain
additional amounts that may be payable in respect of these securities.
Tender Offers and Repurchase of Securities: AEP and the
Subsidiaries may determine to acquire outstanding securities
(``Outstanding Securities'') through tender offers to the holders of
Outstanding Securities. Tender offers may be conditioned upon receipt
of a certain percentage of the Outstanding Securities. The tender offer
price would be based on a number of factors, including the coupon rate
of the Outstanding Securities, the date of expiration of the refunding
protection of the Outstanding Securities, the redemption price on such
expiration date and the then current market rates for similar
securities, all of which are relevant to the decision of an informed
holder as to whether to hold or sell Outstanding Securities. Holders of
Outstanding Securities may be offered a fixed price for their
Outstanding Securities, or the tender offer may be a ``fixed spread''
offer pursuant to which the Applicants will offer a price based upon a
fixed spread over comparable U.S. Treasury securities. Any tender offer
will be conducted in accordance with standard market practice, i.e.,
the length of time the offer will be held open, the method of
solicitation, etc., at the time of the tender offer.
AEP and the Subsidiaries would, in connection with any tender
offer, retain one or more investment banking firms experienced in such
matters to act as tender agent and dealer-manager. The dealer-manager
will act as the agent in disseminating the tender offer and receiving
responses to it. As a dealer-manager, the investment banking firm will
not itself become obligated to purchase or sell any of the Outstanding
Securities. The dealer-manager's fee will be determined following
negotiation and investigation of fees in similar transactions and will
include reasonable out-of-pocket expenses and attorney's fees. It is
expected that the Applicants will be required, as is customary, to
indemnify the dealer-manager for certain liabilities. The Applicants
may also retain a depositary to hold the tendered Outstanding
Securities pending the purchase of them or an information agent to
assist in the tender offer. AEP and the Public Utility Subsidiaries
also seek authority to repurchase their own securities issued to
affiliates.
Hedging Transactions
Interest rate hedging transactions with respect to existing
indebtedness (``Interest Rate Hedges''), subject to certain limitations
and restrictions, would be entered into in order to reduce or manage
interest rate cost or risk. Interest Rate Hedges would only be entered
into with counterparties (``Approved Counterparties'') whose senior
debt ratings, or whose parent companies' senior debt ratings, 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 or
Fitch Investor Service. Interest Rate Hedges will involve the use of
financial instruments and derivatives commonly used in today's capital
markets, such as interest rate swaps, options, caps, collars, floors,
and structured notes (i.e., a debt instrument in which the principal
and/or interest payments are indirectly linked to the value of an
underlying asset or index), or transactions involving the purchase or
sale, including short sales, of U.S. Treasury obligations. The
transactions would be for fixed periods and stated notional amounts. In
no case will the notional principal amount of any interest rate swap
exceed that of the underlying debt instrument and related interest rate
exposure. Applicants will not engage in speculative transactions. Fees,
commissions and other amounts payable to the counterparty or exchange
(excluding the swap or option payments) in connection with an Interest
Rate Hedge will not exceed those generally obtainable in competitive
markets for parties of comparable credit quality.
Interest rate hedging transactions with respect to anticipated debt
offerings (the ``Anticipatory Hedges'') and subject to certain
limitations and restrictions would only be entered into with Approved
Counterparties, and would be utilized to fix and/or limit the interest
rate risk associated with any new issuance through (i) a forward sale
of exchange-traded U.S. Treasury futures contracts, U.S. Treasury
obligations and/or a forward swap (each a ``Forward Sale''); (ii) the
purchase of put options on U.S. Treasury obligations (a ``Put
[[Page 70781]]
Options Purchase''); (iii) a Put Options Purchase in combination with
the sale of call options on U.S. Treasury obligations (a ``Zero Cost
Collar''); (iv) transactions involving the purchase or sale, including
short sales, of U.S. Treasury obligations; or (v) some combination of a
Forward Sale, Put Options Purchase, Zero Cost Collar and/or other
derivative or cash transactions, including, but not limited to
structured notes, options, caps and collars, appropriate for the
Anticipatory Hedges. Anticipatory Hedges may be executed on-exchange
(``On-Exchange Trades'') with brokers through the opening of futures
and/or options positions traded on the Chicago Board of Trade or the
Chicago Mercantile Exchange, the opening of over-the-counter positions
with one or more counterparties (``Off-Exchange Trades''), or a
combination of On-Exchange Trades and Off-Exchange Trades. Each
Applicant will determine the optimal structure of each Anticipatory
Hedge transaction at the time of execution. Applicants may decide to
lock in interest rates and/or limit its exposure to interest rate
increases. Applicants represent that each Interest Rate Hedge and
Anticipatory Hedge will be treated for accounting purposes under
generally accepted accounting principles. Applicants will comply with
the then existing financial disclosure requirements of the Financial
Accounting Standards Board associated with hedging transactions.
Extension of Authority for Utility Money Pool
By order dated December 30, 1976 (HCAR No. 19829), and in
subsequent orders (HCAR No. 26697 (March 28, 1997), HCAR No. 24855
(April 5, 1989), HCAR No. 26254 (March 21, 1995), and HCAR No. 26854
(April 3, 1998)), the Commission authorized Central and South West
Corporation (``CSW''), a Delaware corporation and a registered holding
company under the Act and a wholly owned subsidiary of AEP, to
establish and utilize a system Money Pool to coordinate short-term
borrowings for CSW, its electric subsidiary companies and Central and
South West Services Inc. By order dated June 14, 2000 (HCAR No. 27186),
the Commission authorized AEP to continue the Money Pool and to add its
Utility Subsidiaries as well as Nonutility Participants In the Utility
Money Pool as Participants in the AEP System Money Pool and established
borrowing limits for all Participants. By Order dated October 26, 2001
(HCAR No. 35-27457), AEP was authorized to increase its external
borrowing from $5 billion to $6.910 billion through December 31, 2002,
through the issuance and sale of short-term notes and commercial paper.
All short-term borrowing needs of the Participants may be met by
funds in the Money Pool to the extent funds are available. Each
Participant shall have the right to borrow from the Money Pool from
time to time, subject to the availability of funds and the limitations
and conditions set forth in orders of this Commission; provided,
however, that the aggregate amount of all loans requested by any
Participant shall not exceed the applicable borrowing limits set forth
in orders of the Commission and other regulatory authorities and
agreements binding upon a Participant. No Participant shall be
obligated to borrow from the Money Pool if lower cost funds can be
obtained from its own external borrowing. AEP will not borrow funds
from the Money Pool or any Participant.
AEPSC, a subsidiary service company, acts as administrative agent
of the Money Pool. Each Participant and AEP determine the amount of
funds it has available for contribution to the Money Pool. The
determination of whether a Participant or AEP at any time has surplus
funds, or shall lend surplus funds to the Money Pool, will be made by a
Participant's treasurer or by a designee of the Participant in his or
her sole discretion on the basis of cash flow projections and other
relevant factors. Each Participant may withdraw any of its funds at any
time upon notice to AEPSC. Each Participant may borrow from the Money
Pool to the extent of its Borrowing Limits for short-term debt.
The Money Pool is composed from time to time of funds from the
following sources: (i) Surplus funds of AEP; (ii) surplus funds of any
of the Participants; or (iii) short-term borrowings by AEP. AEPSC
administers the Money Pool by matching up, to the extent possible,
short-term cash surpluses and loan requirements of AEP and the various
Participants. Participants' requests for short-term loans are met first
from surplus funds of other Participants which are available to the
Money Pool and then from AEP corporate funds to the extent available.
To the extent that Participant contributions of surplus funds to the
Money Pool are insufficient to meet Participant requests for short-term
loans, borrowings are made from outside the system. Funds which are
loaned from Participants into the Money Pool which are not required to
satisfy borrowing needs of other Participants will be invested by AEP
on behalf of the lending Participants in one or more short-term
instruments.
The Money Pool makes funds available to Participants for the
interim financing of their capital expenditure programs and their other
working capital needs, to AEP to loan and to make capital contributions
to any of the Participants, and in both instances to repay previous
borrowings incurred. External borrowings by AEP will not be made unless
there are no surplus funds in the treasuries of the Participants
sufficient to meet borrowing needs. However, no loan will be made by
AEP or any Participant if the borrowing company could borrow more
cheaply directly from banks or through the sale of its own commercial
paper. When more than one Participant is borrowing, each borrowing
Participant will borrow pro rata from each fund source in the same
proportion that the amount of funds provided by that fund source bears
to the total amount of short-term funds available to the Money Pool.
The interest rate applicable on any day to then outstanding loans
through the Money Pool will be the composite weighted average daily
effective cost incurred by AEP for short-term borrowings from external
sources. If there are no borrowings outstanding then the rate would be
the certificate of deposit yield equivalent of the 30-day Federal
Reserve ``A2/P2'' Non Financial Commercial Paper Composite Rate
(``Composite''), or if no composite is established for that day then
the applicable rate will be the Composite for the next preceding day
for which the Composite is established. If the Composite shall cease to
exist, then the rate would be the composite which then most closely
resembles the Composite and/or most closely mirrors the pricing AEP
would expect if it had external borrowings.
Interest income related to external investments will be calculated
daily and allocated back to lending parties on the basis of their
relative contribution to the investment pool funds on that date. Each
Participant receiving a loan shall repay the principal amount of the
loan, together with all accrued interest, on demand and in any event
not later than the expiration date of the Commission's authorization
for the operation of the Money Pool. All loans made through the Money
Pool may be prepaid by the borrower without premium or penalty.
Nonutility Money Pool
AEP and the Nonutility Money Pool Participants propose to form and
participate in a separate system of inter-corporate borrowings
(``Nonutility Money Pool''). The Nonutility Money Pool would be
established and administered in the same manner and
[[Page 70782]]
subject to the same conditions as the Utility Money Pool described
above.
Applicants state that participation by a Nonutility Money Pool
Participant in the Nonutility Money Pool would permit their available
cash and/or short-term borrowing requirements to be matched on a daily
basis with other Nonutility Money Pool Participants to minimize the
need of the AEP system for external short-term borrowing. If the
Nonutility Money Pool Participants are authorized to participate in the
Nonutility Money Pool, funds will be loaned from the Nonutility Money
Pool in the form of open account advances under the same terms and
limitations as currently authorized for the Utility Money Pool.
Participants in the Nonutility Money Pool will not engage in lending
and borrowing transactions with Participants in the Utility Money Pool.
Guarantee of Indebtedness and Obligations
AEP requests authorization to enter into guarantees, obtain letters
of credit, enter into support or expense agreements or otherwise
provide credit support from time to time through March 31, 2006, on
behalf of any of its direct or indirect Subsidiaries in amounts up to
$900,000,000. AEP also requests authority to guarantee the obligations
of its direct or indirect Subsidiaries as may be appropriate or
necessary to enable the subsidiaries to carry on the ordinary course of
their businesses. Each of the Public Utility Subsidiaries seeks
authorization to enter into guarantees and other credit support with
respect to obligations of each of its subsidiaries. Nonutility
Subsidiaries also request authority for each Nonutility Subsidiary to
provide guarantees and other forms of credit support to other
Nonutility Subsidiaries. Certain of the guarantees referred to above
may be in support of the obligations of Subsidiaries that are not
capable of exact quantification. In such cases, AEP will determine the
exposure of the instrument for purposes of measuring compliance with
the total guarantee limit. The aggregate amount of the guarantees will
not exceed $900 million (excluding obligations exempt under rule 45 and
authorized under other Commission orders).
Payments of Dividends Out of Capital or Unearned Surplus
Section 12(c) of the Act and rule 46 under the Act generally
prohibit the payment of dividends out of capital or unearned surplus,
except according to an order of the Commission. AEP and the Nonutility
Subsidiaries hereby request authority for the direct and indirect
Nonutility Subsidiaries to pay dividends out of capital or unearned
surplus to the fullest extent of the law.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 02-29943 Filed 11-25-02; 8:45 am]
BILLING CODE 8010-01-P