File No. 70-9701
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 6
(Post-Effective Amendment No. 1)
to
FORM U-1
APPLICATION OR DECLARATION
under
The Public Utility Holding Company Act of 1935
THE SOUTHERN COMPANY
270 Peachtree Street, N.W.
Atlanta, Georgia 30303
SOUTHERN POWER COMPANY
270 Peachtree Street, N.W.
Atlanta, Georgia 30303
(Name of company or companies filing this statement
and addresses of principal executive offices)
THE SOUTHERN COMPANY
(Name of top registered holding company parent of each applicant or declarant)
Tommy Chisholm, Corporate Secretary and Assistant Treasurer
The Southern Company
270 Peachtree Street, N.W.
Atlanta, Georgia 30303
(Names and address of agents for service)
This Commission is requested to mail signed copies of all orders,
notices and communications to:
Gale E. Klappa
Executive Vice President, Chief
Financial Officer and Treasurer
The Southern Company
270 Peachtree Street, N.W.
Atlanta, Georgia 30303
Cliff S. Thrasher John D. McLanahan, Esq.
Vice President, Chief Financial Troutman Sanders LLP
Officer and Treasurer 600 Peachtree Street, N.E.
Southern Power Company Suite 5200
270 Peachtree Street, N.W. Atlanta, Georgia 30308-2216
Atlanta, Georgia 30303
INFORMATION REQUIRED
Item 1. Description of Proposed Transactions.
1.1 Background. The Southern Company ("Southern") is a registered
holding company under the Public Utility Holding Company Act of 1935, as amended
(the "Act"). Southern Power Company ("Southern Power") is a public utility
company subsidiary of Southern.
By order dated December 27, 2000 (the "2000 Order"), the Securities and
Exchange Commission (the "Commission") authorized Southern to form NewCo,1 a new
subsidiary, and approved certain financing authority for NewCo. Under the 2000
Order, the Commission reserved jurisdiction over "sale/leaseback" transactions
by NewCo pending completion of the record.
In December 2000 and December 2001, Georgia Power Company ("Georgia
Power"), a public utility company subsidiary of Southern, completed a series of
transactions as described more fully below in Section 1.2 and substantially
similar to the transactions for which authority is being requested hereby. Such
prior transactions did not require Commission approval because the transactions
did not involve the sale of a "utility asset" as defined by the Act. In December
2001, Georgia Power assigned all of its rights, titles and interests in the
transactions to Southern Power and Southern Power assumed all of Georgia Power's
rights, titles and interests. In June 2002, the Project (as defined below)
became operational and is now, therefore, deemed to be a "utility asset."
Therefore, Southern Power now requests that the Commission release
jurisdiction over the "sale/leaseback" transactions of utility assets described
below. Southern Power is not herein
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1 NewCo is presently known as Southern Power Company, a Delaware corporation.
requesting any other modification to the terms and conditions of the 2000 Order.
1.2 The "Sale/Leaseback" Transaction. Southern Power has
completed construction of, and owns, Units 6 and 7 at Georgia Power's Plant
Wansley site in Heard County, Georgia ("Project"). Pursuant to a tax abatement
agreement, ("Tax Abatement Agreement"), Heard County, Georgia ("County"), acting
by and through its Board of Commissioners, the Board of Tax Assessors of Heard
County, the Development Authority of Heard County ("Authority") and Southern
Power have agreed to levelize and abate the property taxes due from Southern
Power to the County over a period of approximately 20 years, as follows:
a) Southern Power will sell an interest in the Project to the County in
an amount equal to approximately $42,000,000 ("Sale Price"). To finance the
purchase of such interest in the Project, the Authority will issue and sell its
revenue bonds ("Revenue Bonds") to Southern Power (or its assignee) in the
aggregate amount of the Sale Price.2 Since the Sale Price equals the cost of
such Revenue Bonds, no money will be exchanged between Southern Power and the
Authority.
b) Simultaneously with the sale of the Project to the Authority,
Southern Power will lease the Project back from the Authority for a term of
approximately 20 years (the estimated useful life of the Project) pursuant to a
lease agreement ("Agreement"), the substantial form of which is attached as
Exhibit A-1. The Agreement provides for lease payments to be made by Southern
Power at times and in amounts which correspond to the payments with respect to
the
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2 In December 2000, the Authority issued $125,000,000 in Revenue Bonds. In
December 2001, the Authority issued $265,000,000 in Revenue Bonds. After the
Commission's approval, the Authority will issue $42,000,000 in Revenue Bonds.
The aggregate amount of the Revenue Bonds previously issued and the Revenue
Bonds contemplated hereby will be $432,000,000, the total cost of the Project.
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principal of and interest on the Revenue Bonds whenever and in whatever manner
the same shall become due, whether at stated maturity, upon redemption or
declaration or otherwise.
c) The Agreement provides for lease payments to be deposited with a
trustee ("Trustee") under an indenture between the Authority and the Trustee
("Trust Indenture"), the substantial form of which is attached as Exhibit A-2,
and pursuant to which the Revenue Bonds will be issued and secured. Since
Southern Power will make lease payments in the same amounts and at the same
times that the Trustee will pay interest and principal on the Revenue Bonds to
Southern Power, no lease payments or Revenue Bond payments actually will be paid
by or to Southern Power. The Trust Indenture will provide for the specific terms
of the Revenue Bonds, including a final maturity of January 1, 2023 and an
interest rate of 5.00%. The Trust Indenture will also specify the term and
details of the Revenue Bonds and will contain various provisions, covenants and
agreements to protect the security of the bondholders, including the following:
(a) pledging and assigning the rents, revenues and receipts of the County
derived from the Project to secure the payment of the Revenue Bond; (b)
describing the redemption provisions and other features of the Revenue Bond; (c)
setting forth the form of the Revenue Bond; (d) establishing the various funds
and accounts to handle the Revenue Bond proceeds and revenues of the Project and
setting forth covenants regarding the administration and investment of such
funds and accounts by the trustee bank; (e) setting forth the duties of the
trustee bank; (f) defining events of default and provisions for enforcing the
rights and remedies of the bondholder in such events; and (g) restricting the
issuance of additional bonds and the terms upon which the same may be issued and
secured. The Agreement obligates Southern Power to pay the fees and charges of
the Trustee.
d) The Agreement permits Southern Power (or its assignee) to buy the
Project back from the Authority for a nominal purchase price at the expiration
(or earlier termination) thereof.
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e) Accordingly, Southern Power is treated as the owner of the Project
for financial accounting purposes and federal income tax purposes, and Southern
Power is in fact the beneficial owner of, with full control over, the Project.
As described herein, the Tax Abatement Agreement obligates Southern Power to
make level property tax payments on the lease payments, plus a fee to the
County.
Item 2. Fees, Commissions and Expenses.
The fees, commissions and expenses to be incurred in connection
herewith are estimated to be approximately $40,000.
Item 3. Applicable Statutory Provisions.
Southern Power considers that Sections 9 and 12 of the Act and Rules 44
and 54 under the Act may be applicable to the proposed transactions. The
acquisition of the Revenue Bonds by the Company are exempt pursuant to Section
9(c)(1) of the Act. Prior to becoming a utility asset, the "sale/leaseback" of
the unimproved and partially improved property at the Plant Wansley site was not
subject to the Commission's jurisdiction.
To the extent that other sections of the Act or the rules thereunder
are deemed to be applicable to the transactions described herein, such sections
and rules should be considered to be set forth in this Item 3.
Rule 54 Analysis: The proposed transaction is also subject to Rule 54,
which provides that, in determining whether to approve an application which does
not relate to any "exempt wholesale generator" ("EWG") or "foreign utility
company" ("FUCO"), the Commission shall not consider the effect of the
capitalization or earnings of any such EWG or FUCO which is a
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subsidiary of a registered holding company if the requirements of Rule 53(a),
(b) and (c) are satisfied.
Southern currently meets all of the conditions of Rule 53(a). At
September 30, 2002, Southern's "aggregate investment," as defined in Rule
53(a)(1), in EWGs and FUCOs was approximately $231.3 million, or 4.99% of
Southern's "consolidated retained earnings," also as defined in Rule 53(a)(1),
as of September 30, 2002 ($4.640 billion).3
In addition, 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.
Item 4. Regulatory Approval.
No state or federal regulatory agency, other than the Commission, has
jurisdiction over the proposed transactions.
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3 As discussed in Southern's Application on Form U-1 (File No. 70-9727) relating
to the spin-off of Mirant Corporation ("Mirant"), Southern and Mirant
reorganized certain energy-related and FUCO activities and Mirant completed a
tax-free distribution to Southern of these activities on March 5, 2001 (the
"Mini-Spin"). On April 2, 2001, Southern completed the spin-off of its remaining
ownership interest in Mirant to Southern's shareholders. Therefore, the four
indirect subsidiaries (EPZ Lease, Inc., Dutch Gas Lease, Inc., GAMOG Lease, Inc.
and NUON Lease, Inc.) obtained through the Mini-Spin are the only remaining FUCO
investments held by Southern. Although Southern now owns all of the equity in
these companies as a result of the Mini-Spin, Southern has no direct or indirect
investment or any aggregate investment within the meaning of Rule 53 in these
FUCOs, including any direct or indirect guarantees or credit positions related
to any capital or financing leases. Southern has executed limited keep-well
commitments whereby Southern would be required to make capital contributions to
Southern Energy Finance Capital Corp. or to Southern Energy Finance Company,
Inc. in the event of a shortfall in the scheduled debt service resulting from
certain changes in the payments due from Southern under the Southern Company
Income Tax Allocation Agreement. The maximum potential capital contribution
required under these commitments is the unamortized balance of the related
loans, which totaled approximately $372,000,000 as of September 30, 2002.
Furthermore, the only remaining EWG investment held by Southern after the
spin-off is Southern Company-Florida LLC, which was organized during the first
quarter of 2001.
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Item 5. Procedure.
Southern Power hereby requests that the Commission's order be issued as
soon as the rules allow. Southern Power hereby waives a recommended decision by
a hearing officer or other responsible officer of the Commission, consents that
the Division of Investment Management may assist in the preparation of the
Commission's decision and/or order in this matter, unless such Division opposes
the transactions proposed herein, and requests that there be no 30-day waiting
period between the issuance of the Commission's order and the date on which it
is to become effective.
Item 6. Exhibits and Financial Statements.
The following exhibits and financial statements are filed as a part of
this Application/Declaration:
(a) Exhibits
A-1 - Form of Agreement.
A-2 - Form of Trust Indenture.
F - Opinion of counsel.
(b) Financial Statements
Financial statements for Southern Power have been omitted because they
are not deemed to be material to or necessary for a proper disposition of the
proposed transactions.
Item 7. Information as to Environmental Effects.
(a) The issuance of an order by the Commission with respect to the
proposed transactions will not constitute a major federal action significantly
affecting the quality of the human environment.
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(b) No other federal agency has prepared or is preparing an
environmental impact statement with regard to the proposed transactions.
SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned company has duly caused this statement to be signed on
its behalf by the undersigned hereunto duly authorized.
Date: December 16, 2002
THE SOUTHERN COMPANY
By: /s/Tommy Chisholm
Tommy Chisholm
Corporate Secretary and
Assistant Treasurer
SOUTHERN POWER COMPANY
By: /s/Tommy Chisholm
Tommy Chisholm
Secretary