File No. 70-10021
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT NO. 1
TO
FORM U-1
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APPLICATION OR DECLARATION
under the
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
* * *
AMERICAN ELECTRIC POWER COMPANY, INC.
1 Riverside Plaza, Columbus, Ohio 43215
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(Name of company or companies filing this statement
and address of principal executive office)
* * *
AMERICAN ELECTRIC POWER COMPANY, INC.
1 Riverside Plaza, Columbus, Ohio 43215
(Name of top registered holding company
parent of each applicant or declarant)
* * *
A. A. Pena, Senior Vice President and Treasurer
American Electric Power Service Corporation
1 Riverside Plaza, Columbus, Ohio 43215
Jeffrey D. Cross, General Counsel
American Electric Power Service Corporation
1 Riverside Plaza, Columbus, Ohio 43215
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(Names and addresses of agents for service)
American Electric Power Company, Inc., a registered holding company
under the Public Utility Holding Company Act of 1935, hereby amends its
Application or Declaration on Form U-1 in File No. 70-10021 by restating Item 1
as follows:
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTIONS
American Electric Power Company, Inc. ("AEP") is a registered holding
company under the Public Utility Holding Company Act of 1935, as amended (the
"Act").
Summary of Existing Authority
Pursuant to File No. 70-9729 and by order dated April 20, 2001 (HCAR
No. 27382), the Commission authorized AEP to organize and acquire all of the
common stock or other equity interests of one or more financing subsidiaries for
the purpose of effecting various financing transactions through June 30, 2004,
involving the issuance and sale of up to $1.5 billion unsecured (cash proceeds
to AEP) in any combination of preferred securities, debt securities, interest
rate hedges, anticipatory hedges, stock purchase contracts and stock purchase
units, as well as stock issuable under the stock purchase contracts and stock
purchase units. AEP has issued $1.25 billion debt under this Order. The
Commission further authorized AEP to effect directly such financing transactions
involving preferred securities, debt securities, stock purchase contracts or
stock purchase units. By supplemental order dated May 29, 2001 (HCAR No. 27408)
the Commission released jurisdiction and authorized the use of proceeds of the
financings authorized in HCAR No. 27382 for investment in exempt wholesale
generators ("EWGs") and foreign utility companies ("FUCOs").
Request For Additional Authority
AEP proposes to organize and acquire all of the common stock or other
equity interests of one or more subsidiaries (collectively, the "Financing
Subsidiary") for the purpose of effecting various financing transactions from
time to time through June 30, 2004 involving the issuance and sale of up to an
aggregate of $3.0 billion (cash proceeds to AEP) in any combination of Common
Stock, Preferred Securities, Debt Securities, Stock Purchase Contracts and Stock
Purchase Units, as well as its common stock issuable pursuant to such Stock
Purchase Contracts and Stock Purchase Units, all as defined below and described
herein. AEP further proposes that it may effect directly (i.e., without the
Financing Subsidiary) any such transaction involving Common Stock, Preferred
Securities, Debt Securities, Stock Purchase Contracts or Stock Purchase Units as
described herein, provided that AEP shall not issue any secured indebtedness.
Any security issued pursuant to the authority granted in this File will be
represented on the balance sheet of AEP. Neither AEP, any Finance Subsidiary nor
any Special Purpose Subsidiary, as defined below, will publicly issue unsecured
indebtedness or Preferred Securities (or to the extent they are rated, Stock
Purchase Contracts and/or Stock Purchase Units) pursuant to this File unless it
has maintained at least an investment grade corporate or senior unsecured debt
rating by at least one nationally recognized rating agency. AEP requests the
Commission reserve jurisdiction over its issuance of any security pursuant to
this File, which security is rated below investment grade. No Finance Subsidiary
or Special Purpose Subsidiary, as defined below, shall acquire or dispose of,
directly or indirectly, any interest in any Utility Asset, as that term is
defined under the Act. Additionally, AEP's forecasted cash flow analysis and
capitalization forecast for the next two years (attached hereto as Exhibit C),
which forecasts assume the issuance of $1 billion of common stock out of the
$3.0 billion total financing authority requested herein, indicate that AEP's
common equity will remain above 30% of its consolidated capitalization for each
time period set forth in Exhibit C. AEP commits that it and each of its public
utility subsidiaries will maintain common equity of at least 30% of its
consolidated capitalization including common equity, preferred stock, long-term
debt, short-term debt and current maturities of long-term debt.
Financing Subsidiary
1.1 AEP will acquire all of the outstanding shares of common stock or
other equity interests of the Financing Subsidiary for amounts (inclusive of
capital contributions that may be made from time to time to the Financing
Subsidiary by AEP) aggregating up to 35% of the total capitalization of the
Financing Subsidiary (i.e., the aggregate of the equity accounts and
indebtedness of the Financing Subsidiary). Such investment by AEP will not in
any event be less than the minimum required by any applicable law. The business
of the Financing Subsidiary will be limited to effecting financing transactions
for AEP and its associates. In connection with such financing transactions, AEP
will enter into one or more guarantee or other credit support agreements in
favor of the Financing Subsidiary. Effecting financings through the Financing
Subsidiary would have the benefit of better distinguishing securities issued by
AEP to finance its investments in non-core businesses from those issued to
finance its investments in core business operating companies. A separate
Financing Subsidiary may be used by AEP with respect to different types of
non-core businesses. It is anticipated that AEP may utilize a Financing
Subsidiary should it decide to issue Stock Purchase units described below.
No Finance Subsidiary has been organized or otherwise acquired by AEP
pursuant to File No. 70-9729. Any Finance Subsidiary or Special Purpose
Subsidiary, as defined below, organized by AEP pursuant to this File shall be
organized only if, in management's opinion, the creation and utilization of such
Finance Subsidiary or Special Purpose Subsidiary, as defined below, will likely
result in tax savings, increased access to capital markets and/or lower cost of
capital for AEP.
The ability to use finance subsidiaries or special purpose
subsidiaries in financing transactions can sometimes offer increased state
and/or federal tax efficiency. Increased tax efficiency can result if a finance
subsidiary or special purpose subsidiary is located in a state or country that
has tax laws that make the proposed financing transaction more tax efficient
relative to the sponsor's existing taxing jurisdiction. For example, foreign
finance subsidiaries, depending upon the identity of the borrowers, can often
earn income that is not subject to current U.S. federal income taxation.
However, decreasing tax exposure is usually not the primary goal when
establishing a finance subsidiary or special purpose subsidiary. Because of the
potential significant non-tax benefits of such transactions, discussed below,
use of a financing subsidiary can benefit an issuer even without a net
improvement in its tax position.
Financing subsidiaries and/or special purpose subsidiaries can
increase a company's ability to access new sources of capital by enabling it to
undertake financing transactions with features and terms attractive to a wider
investor base. Financing subsidiaries and/or special purpose subsidiaries can be
established in jurisdictions and/or in forms that have terms favorable to its
sponsor and that at the same time provide targeted investors with attractive
incentives to provide financing. Many of these investors would not be
participants in the sponsor's bank group, and they typically would not hold
sponsor bonds or commercial paper. Thus they represent potential new sources of
capital.
One aspect of transactions involving finance subsidiaries or special
purpose subsidiaries is that they can enable a more efficient allocation of
risks among investors and the sponsor, resulting in a lower all-in financing
rate. In a simple example, finance subsidiaries or special purpose subsidiaries
can be used to securitize specific assets, or pools of assets, at
reasonable-to-attractive rates. The financing cost could be lower because the
assets may have a unique risk profile that is especially appealing to specific
investors, or because the diversification achieved by pooling assets reduces the
total level of risk.
AEP will file, on a quarterly basis corresponding with the periodic
reporting requirements of the Securities Exchange Act of 1934, the information
required pursuant to Rule 24 with respect to any Finance Subsidiary or Special
Purpose Subsidiary, as defined below, organized or otherwise acquired pursuant
to this File. Such filings, if any, will include a representation that the
financial statements of AEP shall account for any Finance Subsidiary or Special
Purpose Subsidiary, as defined below, in accordance with generally accepted
accounting principles and shall further disclose, with respect to any such
subsidiary, (i) the name of the subsidiary; (ii) the value of AEP's investment
account in such subsidiary; (iii) the balance sheet account where the investment
and the cost of the investment are booked; (iv) the amount invested in the
subsidiary by AEP; (v) the type of corporate entity; (vi) the percentage owned
by AEP; (vii) the identification of other owners if not 100% owned by AEP;
(viii) the purpose of the investment in the subsidiaries; and (ix) the amounts
and types of securities to be issued by the subsidiaries. Regardless if any such
duty to file is triggered, AEP maintains sufficient internal controls to enable
it to monitor the creation and use of any such entity. See Exhibit B filed
herewith. To the extent any securities are issued by any entity pursuant to this
File, which securities are not set forth on the balance sheet of the issuer,
then the terms and conditions of such securities will be included in the
applicable report filed pursuant to Rule 24.
AEP requests the Commission to reserve jurisdiction over its request
for any Finance Subsidiaries and/or Special Purpose Subsidiaries to issue
securities the proceeds of which would exceed an aggregate of $1 billion,
subject to all other terms and conditions of this File, pending completion of
the record.
Preferred Securities
1.2 In connection with the issuance of Preferred Securities (as
hereinafter defined), AEP or the Financing Subsidiary proposes to organize one
or more separate special purpose subsidiaries as any one or any combination of
(a) a limited liability company under the Limited Liability Company Act (the
"LLC Act") of the State of Delaware or other jurisdiction considered
advantageous by AEP, (b) a limited partnership under the Revised Uniform Limited
Partnership Act of the State of Delaware or other jurisdiction considered
advantageous by AEP, (c) a business trust under the laws of the State of
Delaware or other jurisdiction considered advantageous by AEP, or (d) any other
entity or structure, foreign or domestic, that is considered advantageous by
AEP. The special purpose subsidiaries to be so organized are hereinafter
referred to individually as a "Special Purpose Subsidiary" and collectively as
the "Special Purpose Subsidiaries". In the event that any Special Purpose
Subsidiary is organized as a limited liability company, AEP or the Financing
Subsidiary may also organize a second special purpose wholly-owned subsidiary
under the General Corporation Law of the State of Delaware or other jurisdiction
("Investment Sub") for the purpose of acquiring and holding Special Purpose
Subsidiary membership interests so as to comply with any requirement under the
applicable LLC Act that a limited liability company have at least two members.
In the event that any Special Purpose Subsidiary is organized as a limited
partnership, AEP or the Financing Subsidiary also may organize an Investment Sub
for the purpose of acting as the general partner of such Special Purpose
Subsidiary and may acquire, either directly or indirectly through such
Investment Sub, a limited partnership interest in such Special Purpose
Subsidiary to ensure that such Special Purpose Subsidiary will at all times have
a limited partner to the extent required by applicable law.
The respective Special Purpose Subsidiaries then will issue and sell
to public or private investors at any time or from time to time unsecured
preferred securities described hereinbelow (the "Preferred Securities"), with a
specified par or stated value or liquidation preference per security.
1.3 AEP, the Financing Subsidiary and/or an Investment Sub will
acquire all of the common stock or all of the general partnership or other
common equity interests, as the case may be, of any Special Purpose Subsidiary
for an amount not less than the minimum required by any applicable law and not
exceeding 21% of the total equity capitalization from time to time of such
Special Purpose Subsidiary (i.e., the aggregate of the equity accounts of such
Special Purpose Subsidiary) (the aggregate of such investment by AEP, the
Financing Subsidiary and/or an Investment Sub being herein referred to as the
"Equity Contribution"). The Financing Subsidiary may issue and sell to any
Special Purpose Subsidiary, at any time or from time to time in one or more
series, unsecured subordinated debentures, unsecured promissory notes or other
unsecured debt instruments (individually, a "Note" and collectively, the
"Notes") governed by an indenture or other document, and such Special Purpose
Subsidiary will apply both the Equity Contribution made to it and the proceeds
from the sale of Preferred Securities by it from time to time to purchase Notes.
Alternatively, the Financing Subsidiary may enter into a loan agreement or
agreements with any Special Purpose Subsidiary under which such Special Purpose
Subsidiary will loan to the Financing Subsidiary (individually, a "Loan" and
collectively, the "Loans") both the Equity Contribution to such Special Purpose
Subsidiary and the proceeds from the sale of the Preferred Securities by such
Special Purpose Subsidiary from time to time, and the Financing Subsidiary will
issue to such Special Purpose Subsidiary Notes evidencing such borrowings.
1.4 AEP or the Financing Subsidiary also proposes to guarantee solely
in connection with any security issued pursuant to this File (individually, a
"Guaranty" and collectively, the "Guaranties") (i) payment of dividends or
distributions on the Preferred Securities of any Special Purpose Subsidiary if
and to the extent such Special Purpose Subsidiary has funds legally available
therefor, (ii) payments to the Preferred Securities holders of amounts due upon
liquidation of such Special Purpose Subsidiary or redemption of the Preferred
Securities of such Special Purpose Subsidiary, and (iii) certain additional
amounts that may be payable in respect of such Preferred Securities. AEP's
credit would support any such Guaranty by the Financing Subsidiary.
1.5 Each Note will have a term of up to 50 years. Prior to maturity,
the Financing Subsidiary will pay interest only on the Notes at a rate equal to
the dividend or distribution rate on the related series of Preferred Securities,
which dividend or distribution rate may be either a fixed rate or an adjustable
rate which may be reset by auction, remarketing, put or call features, a formula
or formulae based upon certain reference rates and/or by other predetermined
methods. Such interest payments will constitute each respective Special Purpose
Subsidiary's only income and will be used by it to pay dividends or
distributions on the Preferred Securities issued by it and dividends or
distributions on the common stock or the general partnership or other common
equity interests of such Special Purpose Subsidiary. Dividend payments or
distributions on the Preferred Securities will be made on a monthly or other
periodic basis and must be made to the extent that the Special Purpose
Subsidiary issuing such Preferred Securities has legally available funds and
cash sufficient for such purposes. However, the Financing Subsidiary may have
the right to defer payment of interest on any issue of Notes for up to five or
more years. Each Special Purpose Subsidiary will have the parallel right to
defer dividend payments or distributions on the related series of Preferred
Securities for up to five or more years, provided that if dividends or
distributions on the Preferred Securities of any series are not paid for up to
18 or more consecutive months, then the holders of the Preferred Securities of
such series may have the right to appoint a trustee, special general partner or
other special representative to enforce the Special Purpose Subsidiary's rights
under the related Note and Guaranty. The dividend or distribution rates, payment
dates, redemption and other similar provisions of each series of Preferred
Securities will be substantially identical to the interest rates, payment dates,
redemption and other provisions of the Note issued by the Financing Subsidiary
with respect thereto. The Preferred Securities may be convertible or
exchangeable into common stock of AEP.
1.6 The Notes and related Guaranties will be subordinate to all other
existing and future unsubordinated indebtedness for borrowed money of the
Financing Subsidiary (or AEP, as the case may be) and may have no cross-default
provisions with respect to other indebtedness of the Financing Subsidiary (or
AEP), i.e., a default under any other outstanding indebtedness of the Financing
Subsidiary (or AEP) would not result in a default under any Note or Guaranty.
However, AEP and/or the Financing Subsidiary may be prohibited from declaring
and paying dividends on its outstanding capital stock and making payments in
respect of pari passu debt unless all payments then due under the Notes and
Guaranties (without giving effect to the deferral rights discussed above) have
been made.
1.7 It is expected that the Financing Subsidiary's interest payments
on the Notes will be deductible for federal income tax purposes and that each
Special Purpose Subsidiary will be treated as either a partnership or a passive
grantor trust for federal income tax purposes. Consequently, holders of the
Preferred Securities and AEP (and any Investment Sub) will be deemed to have
received distributions in respect of their ownership interests in the respective
Special Purpose Subsidiary and will not be entitled to any "dividends received
deduction" under the Internal Revenue Code. The Preferred Securities of any
series, however, may be redeemable at the option of the Special Purpose
Subsidiary issuing such series (with the consent or at the direction of AEP) at
a price equal to their par or stated value or liquidation preference, plus any
accrued and unpaid dividends or distributions, (i) at any time after a specified
date not later than approximately 10 years from their date of issuance, or (ii)
upon the occurrence of certain events, among them that (x) such Special Purpose
Subsidiary is required to withhold or deduct certain amounts in connection with
dividend, distribution or other payments or is subject to federal income tax
with respect to interest received on the Notes issued to such Special Purpose
Subsidiary, or (y) it is determined that the interest payments by the Financing
Subsidiary on the related Notes are not deductible for income tax purposes, or
(z) such Special Purpose Subsidiary becomes subject to regulation as an
"investment company" under the Investment Company Act of 1940. The Preferred
Securities of any series may also be subject to mandatory redemption upon the
occurrence of certain events. The Financing Subsidiary also may have the right
in certain cases or in its discretion to exchange the Preferred Securities of
any Special Purpose Subsidiary for the Notes or other junior subordinated debt
issued to such Special Purpose Subsidiary.
In the event that any Special Purpose Subsidiary is required to
withhold or deduct certain amounts in connection with dividend, distribution or
other payments, such Special Purpose Subsidiary may also have the obligation to
"gross up" such payments so that the holders of the Preferred Securities issued
by such Special Purpose Subsidiary will receive the same payment after such
withholding or deduction as they would have received if no such withholding or
deduction were required. In such event, the Financing Subsidiary's obligations
under its related Note and Guaranty may also cover such "gross up" obligation.
In addition, if any Special Purpose Subsidiary is required to pay taxes with
respect to income derived from interest payments on the Notes issued to it, the
Financing Subsidiary may be required to pay such additional interest on the
related Notes as shall be necessary in order that net amounts received and
retained by such Special Purpose Subsidiary, after the payment of such taxes,
shall result in the Special Purpose Subsidiary's having such funds as it would
have had in the absence of such payment of taxes.
1.8 In the event of any voluntary or involuntary liquidation,
dissolution or winding up of any Special Purpose Subsidiary, the holders of the
Preferred Securities of such Special Purpose Subsidiary will be entitled to
receive, out of the assets of such Special Purpose Subsidiary available for
distribution to its shareholders, partners or other owners (as the case may be),
an amount equal to the par or stated value or liquidation preference of such
Preferred Securities plus any accrued and unpaid dividends or distributions.
1.9 The constituent instruments of each Special Purpose Subsidiary,
including its Limited Liability Company Agreement, Limited Partnership Agreement
or Trust Agreement, as the case may be, will provide, among other things, that
such Special Purpose Subsidiary's activities will be limited to the issuance and
sale of Preferred Securities from time to time and the lending to the Financing
Subsidiary or Investment Sub of (i) the proceeds thereof and (ii) the Equity
Contribution to such Special Purpose Subsidiary, and certain other related
activities.
1.10 The distribution rate to be borne by the Preferred Securities and
the interest rate on the Notes will not exceed the greater of (i) 300 basis
points over U.S. Treasury securities having comparable maturities or (ii) a
gross spread over U.S. Treasury securities that is consistent with similar
securities having comparable maturities and credit quality issued by other
companies. Current market conditions suggest the costs for issuing long-term
indebtedness with a three to five year maturity are less than or equal to the
costs for issuing short-term indebtedness over the same time period.
Debt Securities
1.11 AEP proposes that, in addition to, or as an alternative to, any
Preferred Securities financing as described hereinabove, AEP and/or the
Financing Subsidiary may issue and sell Notes directly to public or private
investors without an intervening Special Purpose Subsidiary. It is proposed that
any Notes so issued will be unsecured, may be either senior or subordinated
obligations of AEP or the Financing Subsidiary, as the case may be, may be
convertible or exchangeable into common stock of AEP or Preferred Securities,
may have the benefit of a sinking fund, may have a term of up to 50 years, may
have fixed or adjustable rates of interest which may be reset by predetermined
methods such as auction, remarketing, put or call features and/or a formula or
formulae based upon certain reference rates and otherwise will have terms and
provisions substantially as described hereinabove (the "Debt Securities"). Debt
Securities of the Financing Subsidiary will have the benefit of a guarantee or
other credit support by AEP. AEP will not issue the Debt Securities, either
directly or through the Financing Subsidiary, 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 common
stock or short-term debt. Current market conditions suggest the costs for
issuing long-term indebtedness with a three to five year maturity are less than
or equal to the costs for issuing short-term indebtedness over the same time
period.
1.12 The interest rate on the Debt Securities will not exceed the
greater of (i) 300 basis points over U.S. Treasury securities having comparable
maturities or (ii) a gross spread over U.S. Treasury securities that is
consistent with similar securities having comparable maturities and credit
quality issued by other companies.
Stock Purchase Contracts, Stock Purchase Units and Common Stock
1.13 It is proposed that AEP or the Financing Subsidiary may issue and
sell from time to time stock purchase contracts ("Stock Purchase Contracts"),
including contracts obligating holders to purchase from AEP and/or AEP to sell
to the holders, a specified number of shares or aggregate offering price of AEP
common stock at a future date. The consideration per share of common stock may
be fixed at the time the Stock Purchase Contracts are issued or may be
determined by reference to a specific formula set forth in the Stock Purchase
Contracts. The Stock Purchase Contracts may be issued separately or as part of
units ("Stock Purchase Units") consisting of a stock purchase contract and debt
and/or preferred securities of AEP and/or U.S. Treasury securities, securing
holders' obligations to purchase the common stock of AEP under the Stock
Purchase Contracts. The Stock Purchase Contracts may require holders to secure
their obligations thereunder in a specified manner.
1.14 It is further proposed that AEP may issue and sell its common
stock ("Common Stock") other than as a component or in satisfaction of a Stock
Purchase Contract or Stock Purchase Unit ("Direct Sales") (i) through
solicitations of proposals from underwriters or dealers; (ii) through negotiated
transactions with underwriters or dealers; (iii) directly to a limited number of
purchasers or to a single purchaser; and/or (iv) through agents. The price
applicable to shares sold in any such transaction will be based on several
factors, including the current market price of the common stock and prevailing
capital market conditions. AEP is authorized under its restated articles of
incorporation to issue 600,000,000 shares of common stock ($6.50 par value), of
which 322,024,714 were issued and outstanding as of February 9, 2001. As of
September 30, 2001, AEP's consolidated capitalization consisted of 63.0%
indebtedness, 0.7% preferred stock, 1.3% mandatorily redeemable preferred
securities and 35.0% common equity.
For purposes of determining compliance with the financing limitation
set out herein, with respect to Direct Sales, Stock Purchase Contracts and/or
Stock Purchase Units, cash proceeds to AEP at time of issuance shall count
against the financing limitation.
Interest Rate Hedges
1.15 AEP requests authorization for it and/or the Financing Subsidiary
to enter into interest rate hedging transactions with respect to existing
indebtedness ("Interest Rate Hedges"), subject to certain limitations and
restrictions, 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. AEP and/or the
Financing Subsidiary will not engage in speculative transactions. Fees,
commissions and other amounts payable to the counterparty or exchange
(excluding, however, 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.
Anticipatory Hedges
1.16 In addition, AEP requests authorization for it and/or the
Financing Subsidiary to enter into interest rate hedging transactions with
respect to anticipated debt offerings (the "Anticipatory Hedges"), subject to
certain limitations and restrictions. Such Anticipatory Hedges 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 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. AEP
and/or the Financing Subsidiary will determine the optimal structure of each
Anticipatory Hedge transaction at the time of execution. AEP may decide to lock
in interest rates and/or limit its exposure to interest rate increases. AEP
represents that each Interest Rate Hedge and Anticipatory Hedge will be treated
for accounting purposes under generally accepted accounting principles. AEP will
comply with SFAS 133 (Accounting for Derivative Instruments and Hedging
Activities) and SFAS 138 (Accounting for Certain Derivative Instruments and
Certain Hedging Activities) or other standards relating to accounting for
derivative transactions as are adopted and implemented by the Financial
Accounting Standards Board. (1)
Use of Proceeds
1.17 The proceeds of any financing received by the Financing
Subsidiary or any Special Purpose Subsidiary, either existing or to be formed,
will be transferred to or paid as a dividend out of unearned surplus to AEP or
any associate company of AEP. Applicant's request to remit proceeds of a
financing subsidiary to a registered holding company by transfer or dividend is
identical in all material respects to similar requests approved by this
Commission. (2) The proceeds of the Common Stock, Preferred Securities, Debt
Securities, Stock Purchase Contracts and Stock Purchase Units will be used to
acquire the securities of associate companies and interests in other businesses,
including interests in EWGs and FUCOs, or in any transactions permitted under
the Act and for other authorized purposes, including the reduction of short-term
indebtedness. (3) No proceeds will be used to purchase generation assets
currently owned by AEP or any affiliate unless such purchase has been approved
by order of this Commission pursuant to File No. 70-9785 or other similar
applications. AEP had approximately $3.6 billion outstanding short-term
indebtedness as of September 30, 2001. AEP represents that no financing proceeds
will be used to acquire the equity securities of any company or any interest in
other businesses unless such acquisition has been approved by the Commission in
this proceeding or in File No. 70-9353 or is in accordance with an available
exemption under Sections 32, 33 and 34 of the Act or Rule 58 under the Act. AEP
does not seek in this proceeding any increase in the amount it is permitted to
invest in EWGs and FUCOs.
ITEM 2. FEES, COMMISSIONS AND EXPENSES is amended and restated as follows:
The fees and expenses in connection with the proposed transactions
(other than those described in Item 1 hereof and other than underwriting
discounts and commissions) are estimated not to exceed $8 million. Underwriting
discounts and commissions will not exceed 5% of the amount of the securities
issued. The prospectus supplement relating to each offering will reflect the
actual expenses based upon the amount of the related offering.
The first paragraph of ITEM 3. APPLICABLE STATUTORY PROVISIONS is
amended and restated as follows:
The requested increase in financing authority is subject to Sections
6, 7 and 12 of the Act and Rules 45, 46 and 54 thereunder.
The following exhibits are filed as a part of this application:
Exhibit B Response to SEC 2001 Audit Request AER #41 with a request for
confidential treatment
Exhibit C Cash flow analysis and capitalization forecast with a request for
confidential treatment
Exhibit F Opinion of Counsel
SIGNATURE
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 thereunto duly authorized.
AMERICAN ELECTRIC POWER COMPANY, INC.
By: /s/ Thomas G. Berkemeyer
Assistant Secretary
Dated: April 10, 2002
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1 The proposed terms and conditions of the Interest Rate Hedges and Anticipatory
Hedges are substantially the same as the Commission has approved in other cases.
See Entergy Corporation, HCAR No. 27371 (April 3, 2001); New Century Energies,
Inc., et al., HCAR No. 27000 (April 7, 1999); and Ameren Corp., et al., HCAR No.
27053 (July 23, 1999).
2 See The Southern Company, HCAR No. 27134 (Feb. 9, 2000) where the Commission
held that the upstream transfer of funds to Southern Company by an entity formed
exclusively for the purpose of serving as the vehicle by which Southern Company
may seek to raise capital would not violate the prohibition in section 12(a) of
the Act on loans or extensions of credit to a registered holding company. See
also Alliant Energy Corporation, HCAR No. 27344 (Feb. 12, 2001.
3 Pursuant to File No. 70-9937 and by order dated October 26, 2001 (HCAR No.
27457), the Commission authorized AEP to incur short-term indebtedness up to an
aggregate amount of $6.910 billion.
Exhibit F
Securities and Exchange Commission
Office of Public Utility Regulation
450 Fifth Street, N.W.
Washington, D.C. 20549
April 10, 2002
Re: American Electric Power Company, Inc. ("Company")
SEC File No. 70-10021
Gentlemen:
In connection with the transactions proposed and described in the Application or
Declaration on Form U-1 filed by the Company with this Commission in the
captioned proceeding, to which this opinion is an exhibit, I wish to advise you
as follows:
I am of the opinion that the Company is a corporation validly organized and duly
existing under the laws of the state in which it was incorporated.
I am further of the opinion that, in the event that the proposed transactions
are consummated in accordance with said Application or Declaration:
(a) All state laws applicable to the proposed transactions will have been
complied with; and
(b) Consummation of the proposed transactions will not violate the legal
rights of the holders of any securities issued by the Company or any
associate company thereof.
I hereby consent to the filing of this opinion as an exhibit to the
above-captioned Application or Declaration, as amended.
Very truly yours,
/s/ William E. Johnson
William E. Johnson
Counsel for American Electric Power Company, Inc.