[Federal Register Volume 69, Number 111 (Wednesday, June 9, 2004)]
[Notices]
[Pages 32385-32389]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-13023]
-----------------------------------------------------------------------
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, 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 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, NW.,
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, NE., 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:
1. Up to 35 million shares of common stock (Holding Company Act
Release No. 27323) (December 27, 2000);
2. Up to $2 billion aggregate principal amount of short-term notes,
term loan notes and commercial paper (Holding Company Act Release No.
27367) (March 28, 2001);
3. Up to 88 million shares of common stock under its dividend
reinvestment plan, employee savings plan and employee stock ownership
plan (Holding Company Act Release No. 27118) (December 22, 1999). All
of the Applicants, except Capital Funding, may purchase Southern common
stock to contribute to the employee stock ownership plan for the
benefit of their employees;
4. Up to $160 million aggregate amount of guarantees of the debt or
other obligations of SCS (Holding Company Act Release No. 27082)
(October 8, 1999); and
5. Up to $1.5 billion aggregate principal amount of preferred
securities, notes, stock purchase contracts and stock purchase units
(Holding Company Act Release No. 27134) (February 9, 2000). These
securities may also be issued on Southern's behalf by Capital Funding.
In connection with these financing transactions, Southern may enter
into one or more guarantees or credit support agreements in favor of
Capital Funding.
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''):
1. Southern requests authority to issue and sell from time-to-time
up to 35 million shares of its common stock;
2. Southern requests authority to issue and sell from time-to-time
unsecured notes to effect short-term, term loan and commercial paper
borrowings (collectively, ``Institutional Debt'') in an aggregate
principal amount not to exceed $3 billion at any time outstanding;
3. Southern requests authority to issue and sell from time-to-time
up to 85 million shares of its common stock to its dividend
reinvestment plan, employee savings plan, employee stock ownership plan
or other similar stock based plans adopted in the future. These shares
will be in addition to the common stock proposed to be issued by
Southern in paragraph II.1, above.\1\ In addition, all of
[[Page 32386]]
the Applicants, except Capital Funding, request authority to purchase
Southern common stock to contribute to the employee stock ownership
plan for the benefit of their employees;
---------------------------------------------------------------------------
\1\ Under an order dated October 11, 2000 (Holding Company Act
Release No. 27246), Southern has existing authority to issue up to
40 million shares of its common stock in accordance with the
Southern Company Performance Stock Plan through February 17, 2007.
Under an order dated June 7, 2001 (Holding Company Act Release No.
27416), Southern has existing authority to issue up to 30 million
shares of its common stock in accordance with the Southern Company
Omnibus Incentive Compensation Plan through May 22, 2011. The
authority granted in these orders will remain in place and will not
be affected by the authority that may be granted to the Applicants
in the present matter.
---------------------------------------------------------------------------
4. Southern requests authority to provide from time-to-time
guarantees on behalf or for the benefit of SCS in an aggregate
principal amount not to exceed $330 million at any time outstanding;
and
5. Southern and Capital Funding request authority to issue and sell
from time-to-time directly shares of their preferred stock and,
directly or indirectly preferred securities (including without
limitation trust preferred securities) (``Preferred Securities''), as
defined below, equity-linked securities (``Equity-Linked Securities''),
as defined below, and/or long-term debt (``Long-term Debt''), as
defined below, in an aggregate principal amount not to exceed $1.5
billion. Southern and Capital Funding request authority to issue and
sell Preferred Securities indirectly through one or more financing
subsidiaries. Any securities issued by Capital Funding, or any
Preferred Securities issued by a financing subsidiary, may be
guaranteed by Southern. Any 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. The common
stock issuable upon conversion will be in addition to the common stock
proposed to be issued by Southern in paragraphs II.1 and II.3, above.
III. Financing Parameters
Applicants propose that the following general terms will be
applicable where appropriate to the financing transactions requested:
1. Effective Cost of Money. The effective cost of capital on Long-
term Debt, preferred stock, Preferred Securities, Equity-linked
Securities and Institutional Debt will not exceed competitive market
rates available at the time of issuance for securities having the same
or reasonably similar terms and conditions issued by similar companies
of reasonably comparable credit quality; provided that in no event will
the effective cost of capital (a) on any series of Long-term Debt
exceed 700 basis points over a U.S. Treasury security having a
remaining term equal to the term of the series, (b) on any series of
Institutional Debt exceed 700 basis points over the London Interbank
Offered Rate for maturities of less than one year, and (c) on any
series of Preferred Stock, Preferred Securities or Equity-linked
Securities exceed 700 basis points over a U.S. treasury security having
a remaining term equal to the term of the series.
2. Maturity. The maturity of Long-term Debt and Preferred
Securities will be between one and 50 years after the issuance. Equity-
linked Securities will be redeemed or mature no later than 50 years
after the issuance, unless converted into common stock. Preferred stock
will be redeemed no later than 50 years, unless it is perpetual in
duration.
3. Issuance Expenses. The underwriting fees, commissions or other
similar remuneration paid in connection with the non-competitive issue,
sale or distribution of (a) Long-term Debt and Institutional Debt will
not exceed 7% of the principal or total amount of the securities being
issued and (b) preferred stock, common stock, Preferred Securities or
Equity-linked Securities will not exceed 7% of the principal or total
amount of the securities being issued. However, no commission or fee
will be payable in connection with the issuance and sale of commercial
paper, except for a commission, payable to the dealer, not to exceed
one-eighth of one percent per annum in respect of commercial paper sold
through the dealer as principal.
4. Common Equity Ratio. At all times during the Authorization
Period, Southern represents that it, and each of its public utility
subsidiaries, will maintain a common equity ratio of at least thirty
percent of their consolidated capitalization (common equity, preferred
stock, long-term and short-term debt) as reflected in its most recent
Form 10-K and Form 10-Q filed with the Commission adjusted to reflect
changes in capitalization since the balance sheet date, unless
otherwise authorized.
5. Investment Grade Ratings. Southern and Capital Funding represent
that no guarantees or securities, other than common stock, commercial
paper or short-term bank debt (with a maturity of one year or less),
may be issued in reliance upon the authorization that may be granted by
the Commission, unless upon original issuance (a) the security to be
issued, if rated, is rated investment grade; (b) all outstanding
securities of the issuer that are rated are rated investment grade; and
(c) all outstanding securities of Southern that are rated are rated
investment grade. 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 that term is used in paragraphs (c)(2)(vi)(E), (F) and (H) of Rule
15c3-1 under the Securities Exchange Act of 1934, as amended. Southern
and Capital Funding also request the Commission to reserve jurisdiction
over the issuance of any guarantees or securities that do not satisfy
these conditions.
6. Use of Proceeds. Applicants state that the proceeds from the
issuance or sale of securities in the proposed transactions will be
used by Southern for general corporate purposes, to acquire the
securities of associate companies and to acquire interests in other
businesses, as permitted under the Act, including interests in ``exempt
wholesale generators'' (``EWGs''), ``energy related companies'' under
Rule 58 and ``foreign utility companies'' (``FUCOs''), in transactions
permitted under Act, and for other lawful purposes. Southern does not
seek in this proceeding any increase in the amount it is permitted to
invest in EWGs and FUCOs.\2\ However, no proceeds will be used to
acquire interests in other businesses or the securities of associate
companies unless the financing is consummated in accordance with
Commission order or is exempt from the Act. The proceeds of any
financing by Capital Funding or a financing subsidiary will be
remitted, paid as a dividend, loaned or otherwise transferred to
Southern. The proceeds realized by SCS from borrowings guaranteed by
Southern will be used to fund the general requirements of the business
of SCS including the possible refunding of outstanding indebtedness.
---------------------------------------------------------------------------
\2\ Under an order dated April 1, 1996, Southern is authorized
to invest up to 100% of its consolidated retained earnings in EWGs
and FUCOs (Holding Company Act Release No. 26501).
---------------------------------------------------------------------------
IV. Financial Condition
Applicants state that the ratings of the securities issued by
Southern and Capital Funding are:
Southern senior unsecured debt--Moody's: A3, S&P: A-
Southern commercial paper, short term--Moody's: P1, S&P: A1-
Capital Funding senior unsecured debt--Moody's: A3, S&P: A-
V. Description of Specific Types of Financings
1. Common Stock. Southern proposes to issue and sell up to 35
million shares
[[Page 32387]]
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.
Southern Investment Plan. The Southern Investment Plan
(``SIP'') provides shareholders of record of Southern's common stock
with a means of purchasing additional shares through the reinvestment
of cash dividends and/or through optional cash payments. In addition,
the SIP has a direct purchase feature that enables other eligible
investors to become participants by making initial cash payments for
the purchase of common stock. Shares of common stock are purchased
under the SIP, at the option of Southern, from newly issued shares or
shares purchased on the open market. The price per share for shares
purchased on the open market will be the weighted average price paid to
acquire the shares, excluding broker commissions. When shares are
purchased from Southern using cash dividends, the price per share
generally will be equal to the average of the high and low sale prices
on the dividend payment date. When shares are purchased from Southern
with the investor's cash payments, the price per share generally will
be equal to the average of the high and low sale prices on the 10th or
25th of each month, as applicable.
Employee Savings Plan. Under the Employee Savings Plan
(``Savings Plan''), each employee of Southern's subsidiaries may
generally contribute a certain percentage of his compensation to an
account administered on his behalf under the Savings Plan. These funds,
together with funds contributed by the employer, would be invested in
one or more of several funds, including a stock fund consisting of
Southern's common stock. Investment purchases for the funds may be made
either on the open market or by private purchase, provided that no
private purchase may be made of common stock of Southern at a price
greater than the last sale price or the highest current independent bid
price, whichever is higher, for the stock on the New York Stock
Exchange, plus any applicable commission. In addition, common stock of
Southern may be purchased directly from Southern under the SIP or under
any similar plan made available to holders of record of shares of
common stock of Southern, at the purchase price provided for in that
plan.
Employee Stock Ownership Plan. The purpose of the Employee
Stock Ownership Plan (``ESOP'') is to enable eligible employees of SCS
and other affiliates or subsidiaries of Southern that adopt the ESOP
(``Employing Companies'') to share in the future of Southern, to
provide participants with an opportunity to accumulate capital for
their future economic security and to enable participants to acquire
Southern common stock. All of the Applicants except for Capital Funding
are currently Employing Companies. The ESOP permits the Employing
Companies to contribute cash or common stock in an amount or under a
formula that SCS will determine in its sole and absolute discretion.
Cash contributions would be used to purchase common stock at market
value, as determined by SCS. Cash dividends paid on the contributed
common stock allocated to participating employees' accounts generally
would be reinvested in additional shares of common stock, unless the
employee elects to have the dividends distributed to him.
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.
[[Page 32388]]
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 guarantees \5\
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.
---------------------------------------------------------------------------
\3\ If a Financing Subsidiary is organized as a limited
liability company, Southern or Capital Funding may also organize a
second special purpose subsidiary under Delaware or other state law
(``Investment Subsidiary'') to acquire and hold Financing Subsidiary
membership interests, so as to comply with any requirement under any
applicable law that a limited liability company have at least two
members. Similarly, if any Financing Subsidiary is organized as a
limited partnership, an Investment Subsidiary may be organized to
act as the general partner of the Financing Subsidiary. if a
Financing Subsidiary is organized as a limited partnership, Southern
may acquire, directly or indirectly through the Investment
Subsidiary, a limited partnership interest in the Financing
Subsidiary, in order to ensure that the Financing Subsidiary will
have a limited partner to the extent required by applicable law.
\4\ The terms of any loan to Southern of the proceeds from the
issuance of Preferred Securities would mirror the terms of those
Preferred Securities.
\5\ Guarantees issued by Capital Funding would in turn be
supported by Southern's own credit.
---------------------------------------------------------------------------
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.
[[Page 32389]]
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 04-13023 Filed 6-8-04; 8:45 am]
BILLING CODE 8010-01-P