File No. 70-10166
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.
AEP GENERATING COMPANY
AEP TEXAS CENTRAL COMPANY (formerly CENTRAL POWER AND LIGHT COMPANY)
AEP TEXAS NORTH COMPANY (formerly WEST TEXAS UTILITIES COMPANY)
AEP UTILITIES, INC. (formerly CENTRAL AND SOUTH WEST CORPORATION)
AMERICAN ELECTRIC POWER SERVICE CORPORATION
APPALACHIAN POWER COMPANY
COLUMBUS SOUTHERN POWER COMPANY
INDIANA MICHIGAN POWER COMPANY
KENTUCKY POWER COMPANY
KINGSPORT POWER COMPANY
OHIO POWER COMPANY
PUBLIC SERVICE COMPANY OF OKLAHOMA
SOUTHWESTERN ELECTRIC POWER COMPANY
WHEELING POWER COMPANY
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, INC.
and additional subsidiaries identified on Signature Page.
1 Riverside Plaza, Columbus, Ohio 43215
(Name of company or companies filing this statement
and address of principal executive offices)
***
AMERICAN ELECTRIC POWER COMPANY, INC.
1 Riverside Plaza, Columbus, Ohio 43215
(Name of top registered holding company parent
of each applicant or declarant)
***
Stephen P. Smith, 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
(Names and addresses of agents for service)
The Application Declaration filed in this proceeding on September 11,
2003, is hereby amended and restated in its entirety to read as follows:
American Electric Power Company, Inc., a New York corporation ("AEP") and
AEP Utilities, Inc. (formerly Central and South West Corporation), a Delaware
corporation ("AEP Utilities"), both registered holding companies under the
Public Utility Holding Company Act of 1935, as amended (the "Act") and the
following direct and indirect subsidiaries of AEP ("Applicants"), including the
following public utility subsidiaries: AEP Generating Company ("Generating"),
AEP Texas Central Company, formerly Central Power and Light Company ("TCC"), AEP
Texas North Company, formerly West Texas Utilities Company ("TNC"), Appalachian
Power Company ("Appalachian"), 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"), and Wheeling Power Company ("Wheeling") (collectively, "the Public
Utility Subsidiaries") and the following nonutility subsidiaries which are
currently participants in the AEP Utility Money Pool and are Applicants in this
proceeding: American Electric Power Service Corporation, 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, all coal mining companies and Franklin Real Estate Company,
and Indiana Franklin Realty, Inc., both real estate companies, are Applicants in
this filing ("Utility Money Pool Participants").
The entities that are currently participants in the Nonutility Money Pool
and Applicants in this Filing ("Nonutility Money Pool Participants") are listed
on Exhibit A hereto.
In addition, certain additional nonutility subsidiaries are seeking
authority to become participants in the Nonutility Money Pool and are Applicants
in this proceeding:
Entity Description Authorization
AEP Houston Pipe Line Company, LLC Gas pipeline Order 70-9353
AEP Texas POLR GP, LLC Marketing of natural Rule 58
gas, electricity or
energy related
products
AEP Coal Marketing, LLC Marketing of natural Rule 58
gas, electricity or
energy related
products
AEP Emissions Marketing, LLC Marketing emissions Rule 58
CSW Orange, Inc. Independent Power Rule 58
CSW Mulberry, Inc. Independent Power Rule 58
Noah I Power GP, Inc. Independent Power Rule 58
CSW Orange II, Inc. Independent Power Rule 58
CSW Mulberry II, Inc. Independent Power Rule 58
CSW Sweeny GP I, Inc. Independent Power Rule 58
CSW Sweeny GP II, Inc. Independent Power Rule 58
CSW Sweeny LP I, Inc. Independent Power Rule 58
CSW Sweeny LP II, Inc. Independent Power Rule 58
CSW Services International, Inc. Non-regulated Rule 58
energy-related
services and products
Trent Wind Farm, L.P. Wind power generation EWG
AEP Wind LP, LLC Wind power generation EWG
AEP Wind GP, LLC Wind power generation EWG
HPL GP LLC Gas pipeline and Order 70-9353
processing
AEPR Ohio, LLC International FUCO/PP
energy-related
investments, trading
and other projects
AEP Wind LP II, LLC Wind power generation EWG
AEP Desert Sky LP II, LLC Wind power generation EWG
AEP Wind Holding, LLC Wind power generation EWG
For purposes hereof "Subsidiaries" shall also include other direct or
indirect subsidiaries that AEP may form pursuant to the Rule 58 exception or
pursuant to Sections 32, 33 or 34 of the Act. All of AEP's direct and indirect
Subsidiaries, other than Public Utility Subsidiaries, are herein called
"Nonutility Subsidiaries." All subsidiaries and AEP and AEP Utilities are
sometimes referred to collectively as the "Companies".
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTIONS
I. Current and Requested Financing Authority
A. Background and Previously Existing Authority
By Order dated June 14, 2000 (Release No. 35-27186 in File No. 70-9381),
AEP was authorized to acquire by merger all of the outstanding common stock of
Central and South West Corporation ("CSW"), now AEP Utilities, Inc. By that
order, AEP, its operating subsidiaries and certain other subsidiaries were added
to the CSW Money Pool, now the AEP Utility Money Pool.
B. Current Authority
By order dated April 11, 2002 (Release No. 35-27517 in File no. 70-10021),
AEP is authorized to issue and sell through June 30, 2004 shares of common
stock, preferred securities, long-term debt and other securities in an aggregate
amount at anytime outstanding not to exceed $3.0 billion (not including shares
of common stock issued pursuant to various stock ownership plans) and to form
certain financing subsidiaries.
By order dated December 18, 2002, in File No. 70-10088 (HCAR Release No.
35-27623), the Commission authorized through March 31, 2006:
(i) SWEPCO and Wheeling to issue long-term debt in amounts not to exceed
$350 million and $40 million, respectively, and to engage in hedging
transactions;
(ii) AEP, AEP Utilities, Inc. and the Public Utility Subsidiaries to have
aggregate short-term financing authority in the amount of $7.2 billion
outstanding;
(iii) Columbus, Ohio, TCC, and TNC, companies affected by restructuring,
to issue short and long-term debt in an amount not to exceed $3.9 billion;
(iv) Public Utility Subsidiaries to organize financing entities for the
purpose of facilitating certain types of financings;
(v) AEP and its Subsidiaries are authorized to enter into and perform
interest rate hedging transactions to manage the volatility of interest
rates associated with outstanding indebtedness and anticipated debt
offerings.
(vi) AEP, AEP Utilities, Inc. and Utility Money Pool Participants to
continue and fund the Utility Money Pool through the Authorization Period;
(vii) AEP and certain of its Nonutility Subsidiaries 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 to issue guarantees and other forms of
credit support in an aggregate amount not to exceed $900 million
outstanding at any time; and
(ix) AEP's Nonutility Subsidiaries to pay dividends out of capital or
unearned surplus to the fullest extent of the law.
C. Summary of the Requested Authority
The Applicants hereby request authorization to replace and supercede the
authority granted in File Nos. 70-10021 (HCAR 35-27517) and 70-10088 (HCAR
35-27623) with respect to the ongoing financing activities, the provision of
intrasystem financing and guarantees and other matters pertaining to AEP and its
Subsidiaries through March 31, 2007 ("Authorization Period") as follows:
1) Applicants in this file request authorization for financing
transactions for the period beginning with the effective date of an
order issued pursuant to this filing and continuing until March 31,
2007 ("Authorization Period") unless otherwise provided;
2) AEP seeks authority to increase its capitalization by issuing and
selling from time to time during the Authorization Period (i)
directly, additional Common Stock or options, warrants,
equity-linked securities or stock purchase contracts convertible
into or exercisable for Common Stock, and Preferred Stock, (ii)
indirectly through one or more Financing Subsidiaries, other forms
of preferred securities (including trust preferred securities)
(collectively, "Preferred Securities"),(iii)directly or indirectly
through one or more Financing Subsidiaries new long-term debt
securities having maturities of one year or more up to 50 years
("Long Term Debt"), in an amount up to $3 billion (excluding
securities issued for purposes of refunding or replacing other
outstanding securities where AEP's capitalization is not increased
as a result thereof and excluding securities otherwise authorized or
exempt).
3) AEP seeks to issue, directly or indirectly through one or more
Financing Subsidiaries, commercial paper, promissory notes and other
forms of short-term indebtedness having maturities of less than one
year ("Short-term Debt") in an aggregate amount not to exceed $7.2
billion to fund the AEP Money Pools and for its own requirements.
4) Kingsport, SWEPCO, TCC, TNC and Wheeling seek authority to issue
secured or unsecured long-term debt in an amount not to exceed $50
million, $600 million, $600 million, $250 million and $50 million,
respectively, including the issuance of long-term debt to AEP, and
to enter into hedging transactions (excluding securities issued for
purposes of refunding or replacing other outstanding securities
where the Public Utility Subsidiary's capitalization is not
increased as a result thereof).
5) AEP and its Subsidiaries seek authority to enter into and perform
interest rate hedging transactions to manage the volatility of
interest rates associated with outstanding indebtedness and
anticipated debt offerings.
6) AEP and the Public Utility Subsidiaries seek authority to issue the
short-term debt to the extent of the borrowing limits set forth
below for Public Utility Subsidiaries through the AEP Utility Money
Pool, external borrowings or borrowings from AEP or from a Financing
Subsidiary.
7) The following Public Utility Subsidiaries seek authority to refund
and reissue currently outstanding pollution control revenue
refunding bonds as follows: TCC $450,000,000, TNC $45,000,000, and
SWEPCO $185,000,000.
8) AEP Utilities, Inc., a registered holding company, seeks authority
to borrow short-term debt in an amount up to $100,000,000 from
external sources or from its parent AEP for its general corporate
purposes.
9) AEP and the Subsidiaries seek authority to acquire, directly or
indirectly, the equity securities of one or more entities
("Financing Subsidiaries") created specifically for the purpose of
facilitating the financing of authorized and exempt activities of
the Applicants through the issuance of long-term debt, short-term
debt, preferred securities and other equity securities to third
parties and to provide guarantees and enter into expense agreements
with respect to the securities or other obligations of Financing
Subsidiaries. Financing Subsidiaries are authorized to transfer
proceeds of any financing to their respective parent companies.
Financing Subsidiaries will, among other things, be authorized to
fund the AEP Money Pools.
10) AEP and the participants in the Money Pools seek certain authority
to continue the AEP Utility Money Pool and the AEP Nonutility Money
Pool during the Authorization Period; to fund the Money Pools with
separate Financing Subsidiaries; to add certain nonutility
subsidiaries to the Nonutility Money Pool; and to move Dolet Hills
Lignite Company from the Nonutility Money Pool to the Utility Money
Pool.
11) AEP requests the Commission approve the issuance by AEP and its
Subsidiaries of guarantees and other forms of credit support in an
aggregate amount not to exceed $8.125 billion outstanding at any
time in exposure as more fully described below; and
12) AEP and its Nonutility Subsidiaries request authorization for the
Nonutility Subsidiaries to pay dividends out of capital or unearned
surplus.
D. DESCRIPTION OF PROPOSED FINANCING PROGRAM
1. Investment Grade Ratings
Applicants represent that, except for securities issued for the purpose of
funding AEP Money Pools operations, no guarantees or securities or other
securities, other than common stock, may be issued in reliance upon the
authorization to be granted by the Commission, unless (i) the security to be
issued, if rated, is rated investment grade; (ii) all outstanding securities of
such issuer that are rated are rated investment grade; and (iii) all outstanding
securities of AEP that are rated are rated investment grade ("Investment Grade
Condition"). For purposes of this Investment Grade Condition, 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.
2. Effective Cost of Money on Debt Securities and Borrowings Under Credit
Agreements
The effective cost of capital on Preferred Stock, equity-linked
securities, Preferred Securities, Long-term Debt and Short-term 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. Applicants state that in no
event will the effective cost of capital (i) on any series of Long-term Debt,
exceed 500 basis points over a U.S. Treasury security having a remaining term
equal to the term of such series, (ii) on any series of Preferred Stock,
Preferred Securities or equity-linked securities, exceed 600 basis points over a
U.S. Treasury security having a remaining term equal to the term of such series,
and (iii) on Short-term Debt, exceed 500 basis points over the London Interbank
Offered Rate ("LIBOR") for maturities of less than one year.
3. Maturity of Debt
The maturity of Long-term Debt will be between one and 50 years after the
issuance. Preferred Securities and equity-linked securities will be redeemed no
later than 50 years after the issuance, unless converted into common stock.
Preferred Stock issued directly by AEP may be perpetual in duration.
4. Issuance Expenses
The underwriting fees, commissions, or other similar expenses paid in
connection with the issue, sale or distribution of a security pursuant to the
Application will not exceed the greater of (i) 5% of the principal or total
amount of the securities being issued, or (ii) issuance expenses that are
generally paid at the time of the pricing for sales of the particular issuance,
having the same or reasonably similar terms and conditions issued by similar
companies of reasonably comparable credit quality.
5. Common Equity Ratio
AEP hereby represents that it will maintain during the Authorization
Period for itself and for all the Public Utility Subsidiaries minimum 30% common
equity as a percentage of consolidated capital (inclusive of short-term debt and
inclusive of securitization bonds for the recovery of regulatory assets in
connection with state-mandated utility restructuring); however TCC seeks
authority to maintain a common equity ratio of 25% for so long as securitization
bonds are outstanding. Data for September 30, 2003 is attached to this
Application as Exhibit B. The 25% common equity as a percentage of consolidated
capital is required only because of the issuance of securitization bonds.
Securitization bonds are expected to be outstanding until the currently
outstanding TCC Transition Funding securitization bond issue is scheduled to be
fully retired by January 15, 2016. However, TCC is anticipating an additional
issuance which would remain outstanding for approximately 15 years after it is
issued.
6. Use of Proceeds
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 such Applicant; and
(iv) other lawful purposes, including direct or indirect investment in
Rule 58 companies by AEP, other subsidiaries approved by the
Commission, EWGs and FUCOs.
The Applicants represent that no such financing proceeds will be used to
acquire a new subsidiary unless such financing is consummated in accordance with
an order of the Commission or an available exemption under the Act.
7. Borrowing Limits
The aggregate amount of outstanding external financing effected by the
Applicants pursuant to the authorization requested hereunder during the
Authorization Period, other than the refinancing of currently outstanding
securities, which shall not be limited, will not exceed:
(a) Long-term debt limits:
AEP $3,000,000,000
Kingsport $ 50,000,000
SWEPCO $ 600,000,000
TCC $ 600,000,000
TNC $ 250,000,000
Wheeling $ 50,000,000
(b) Short-term borrowing limits:
AEP requires an amount of authority for short-term borrowings sufficient
to fund the Utility Money Pool and the Nonutility Money Pool, to make direct
loans to other Subsidiaries, as well as for its own requirements in an amount
not to exceed $7,200,000,000.
The following Public Utility Subsidiaries seek short-term debt
authorization through the Utility Money Pool or external borrowings, or
borrowings from AEP or from a Financing Subsidiary as follows:
Appalachian $ 600,000,000
Columbus $ 350,000,000
Generating $ 125,000,000
Indiana $ 500,000,000
Kentucky $ 200,000,000
Kingsport $ 40,000,000
Ohio $ 600,000,000
PSO $ 300,000,000
SWEPCO $ 350,000,000
TCC $ 600,000,000
TNC $ 250,000,000
Wheeling $ 40,000,000
(c) AEP Utilities, Inc.:
AEP Utilities. Inc., a registered public utility holding company, requests
authority to borrow up to $100,000,000 outstanding at any one time from external
sources or from its parent AEP for its own corporate purposes. This authority is
in addition to its authority to borrow to fund the Utility Money Pool. AEP
Utilities will not borrow from either the Utility Money Pool or the Nonutility
Money Pool.
8. Description of Specific Types of Financing
8.1. AEP External Financing
All external financing will be at rates or prices and under conditions
based upon, or otherwise determined, by competitive capital markets.
AEP seeks authority to increase its capitalization by issuing and selling
from time to time during the Authorization Period: (i) directly additional
Common Stock and/or options, warrants, equity-linked securities or stock
purchase contracts convertible into or exercisable for Common Stock, and (ii)
indirectly through one or more Financing Subsidiaries, other forms of preferred
securities and Preferred Stock (including trust preferred securities)
(collectively, "Preferred Securities"), and (iii) directly or indirectly through
one or more Financing Subsidiaries, new long-term debt securities having
maturities of one year or more up to 50 years ("Long Term Debt"), in an amount
up to $3 billion (excluding securities issued for purposes of refunding or
replacing other outstanding securities where AEP's capitalization is not
increased as a result thereof and excluding securities otherwise authorized
pursuant to AEP's Dividend Reinvestment and Direct Purchase Plan (File No.
70-5943) and Employee Savings Plans (File No. 70-6126) or exempt under the Act).
Common Stock. AEP seeks authority to issue and sell Common Stock and to
issue and sell options, warrants, equity-linked securities or other stock
purchase rights exercisable for Common Stock. The aggregate amount of financing
obtained by AEP during the Authorization Period from issuance and sale of Common
Stock (other than for employee benefit plans or stock purchase and dividend
reinvestment plans), when combined with issuances of preferred stock, Preferred
Securities, equity linked securities, and long-term debt, as described in this
section, and other than for refunding or replacement of securities where
capitalization is not increased as a result thereof, shall not exceed $3 billion
for the uses set forth in Item I.D.6 above. Any refunding or replacement of
securities where capitalization is not increased from that in place at September
30, 2003, will be through the issuance of securities of the type authorized in
this Application. Common Stock financings may be effected pursuant to
underwriting agreements of a type generally standard in the industry. Public
distributions may be pursuant to private negotiation with underwriters, dealers
or agents as discussed below 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. All such Common Stock sales will be
at rates or prices and under conditions negotiated or based upon, or otherwise
determined by, competitive capital markets.
AEP may sell Common Stock covered by this Application/Declaration in any
one of the following ways: (i) through underwriters or dealers; (ii) through
agents; or (iii) directly through a limited number of purchasers or a single
purchaser. If underwriters are used in the sale of the securities, such
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 a managing underwriter or
underwriters designated by AEP) or directly by one or more underwriters acting
alone. If Common Stock is being sold in an underwritten offering, AEP may grant
the underwriters thereof a "green shoe" option permitting the purchase from AEP
at the same price of additional shares then being offered solely for the purpose
of covering over-allotments.
Preferred Securities. AEP seeks to have the flexibility to issue Preferred
Stock or other types of Preferred Securities (including, without limitation,
trust preferred securities or monthly income preferred securities) directly or
indirectly through one or more special-purpose Financing Subsidiaries organized
by AEP specifically for such purpose as described herein. The aggregate amount
of financing obtained by AEP during the Authorization Period from issuance and
sale of preferred stock, Preferred Securities and equity linked securities, when
combined with issuances of Common Stock (other than for employee benefit plans
or stock purchase and dividend reinvestment plans), and long-term debt, as
described in this section and other than for refunding or replacement of
securities where capitalization is not increased from that in place at September
30, 2003, shall not exceed $3 billion for the uses set forth in Item I.D.6
above. Any refunding or replacement of securities where capitalization is not
increased from that in place at September 30, 3003, will be through the issuance
of securities of the type authorized in this Application.
Preferred Stock or other types of Preferred Securities may be issued in
one or more series with such rights, preferences and priorities as may be
designated in the instrument creating each such series, as determined by AEP's
Board of Directors. Dividends or distributions on Preferred Securities will be
made periodically and to the extent funds are legally available for such
purpose, but may be made subject to terms which allow the issuer to defer
dividend payments for specified periods. Equity linked securities will be
exercisable or exchangeable for or convertible, either mandatorily or at the
option of the holder, into Common Stock or indebtedness or allow the holder to
surrender to the issuer or apply the value of a security issued by AEP as
approved by the Commission to such holder's obligation to make a payment on
another security of AEP issued as permitted by the Commission. Any convertible
or equity linked securities will be convertible into or linked to Common Stock.
Preferred Securities or unsecured debt that AEP is otherwise authorized to issue
by Commission order directly, or indirectly through Financing Subsidiaries on
behalf of AEP. Applicants state that any refunding or replacement of securities
where capitalization is not increased from that in place at December 31, 2003
will be through the issuance of securities of the type authorized in this
Application.
Long-Term Debt. AEP requests Commission authorization during the
Authorization Period to issue unsecured, long-term debt securities in an
aggregate principal amount outstanding at any time, when combined with issuances
of Common Stock (other than for benefit plans or stock purchase and dividend
reinvestment plans) preferred stock, Preferred Securities, and equity linked
securities as described in this section, and other than for refunding or
replacement of securities where capitalization is not increased as a result
thereof from that in place at September 30, 2003, not to exceed $3 billion for
the uses set forth in Item I.D.6 above. Any refunding or replacement of
securities where capitalization is not increased will be through the issuance of
securities of the type authorized in this Application.
Unsecured long-term debt may be issued directly by AEP or indirectly
through one or more Financing Subsidiaries in the form of bonds, notes,
medium-term notes or debentures under one or more indentures or long-term
indebtedness under agreements with banks or other institutional lenders. Each
series of Long-term Debt would have such designation, aggregate principal
amount, maturity, interest rate(s) or methods of determining the same, terms of
payment of interest, redemption provisions, sinking fund terms and other terms
and conditions as AEP may determine at the time of issuance. Any Long-term Debt
(a) may be convertible into any other securities of AEP, (b) will have
maturities up to 50 years, (c) may be subject to optional and/or mandatory
redemption, in whole or in part, at par or at various premiums above the
principal amount thereof, (d) may be entitled to mandatory or optional sinking
fund provisions, (e) may provide for reset of the coupon pursuant to a
remarketing arrangement, (f) may be subject to tender or the obligation of the
issuer to repurchase at the election of the holder or upon the occurrence of a
specified event, (g) may be called from existing investors by a third party and
(h) may be entitled to the benefit of affirmative or negative financial or other
covenants.
The maturity dates, interest rates, redemption and sinking fund
provisions, tender or repurchase and conversion features, if any, with respect
to the Long-term Debt of a particular series, as well as any associated
placement, underwriting or selling agent fees, commissions and discounts, if
any, will be established by negotiation or competitive bidding. Specific terms
of any Long-term Debt will be determined by AEP at the time of issuance and will
comply in all regards with the parameters on financing authorization set forth
above.
Short-Term Debt. AEP also seeks authority to issue directly, or
indirectly through a Financing Subsidiary, commercial paper, promissory notes
and other forms of short-term indebtedness having maturities of less than one
year ("Short-term Debt") in an aggregate amount not to exceed $7.2 billion to
fund the Money Pools, to make loans to Subsidiaries and for its own corporate
purposes.
Commercial paper would be sold in established domestic or European
commercial paper markets. Such commercial paper would be sold to dealers at the
discount rate or the coupon rate per annum prevailing at the date of issuance
for commercial paper of comparable quality and maturities sold to commercial
paper dealers generally. It is expected that the dealers acquiring commercial
paper from AEP, AEP Utilities, any Financing Subsidiary or the Public Utility
Subsidiaries will re-offer such paper at a discount to corporate and
institutional investors. Institutional investors are expected to include
commercial banks, insurance companies, pension funds, investment trusts,
foundations, colleges and universities and finance companies. AEP, AEP
Utilities, any Financing Subsidiary or the Public Utility Subsidiaries may,
without counting against their borrowing limits, maintain back up lines of
credit in connection with a commercial paper program in an aggregate amount not
to exceed the amount of authorized commercial paper.
AEP, AEP Utilities, any Financing Subsidiaries and the Public Utility
Subsidiaries require flexibility in the types of short-term debt issued
externally to take advantage of new products being offered in the short-term
securities market, including but not limited to, the extendible commercial notes
program currently being offered by certain commercial paper dealers, and other
new products to provide alternate backup liquidity for commercial paper and
short-term notes.
AEP, AEP Utilities, any Financing Subsidiary and the Public Utility
Subsidiaries having the flexibility to allocate short-term borrowings between
sales of notes and sales of commercial paper, will be able to realize economies
in meeting their short-term financing requirements, and such companies propose,
in general, taking appropriate long and short-term considerations into account,
to utilize the most economical means available at any time to meet their
short-term financing requirements.
AEP, AEP Utilities, any Financing Subsidiary and the Public Utility
Subsidiaries may engage in other types of short-term financing generally
available to borrowers with comparable credit ratings as each individual entity
may deem appropriate in light of its needs and market conditions at the time of
issuance, including making borrowings from AEP, AEP Utilities or any Financing
Subsidiary.
8.2. Long-Term Debt - Public Utility Subsidiaries Public Utility Subsidiaries.
Under current law, the public utility commission 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) provides an
exemption from this Commission for the issuances of long term debt securities by
all of AEP's public utility subsidiaries except Kingsport, SWEPCO, TCC, TNC and
Wheeling.
Financing authorization is being sought for Kingsport, SWEPCO, TCC, TNC
and Wheeling as described in Borrowing Limits above. This authorization would
include any new pollution control financing by SWEPCO.
Any long-term debt, such as first mortgage bonds, pollution control
revenue bonds, notes (secured and unsecured) and debentures, sales of
tax-advantaged preferred securities and borrowings under credit agreements,
would have such designations, aggregate principal amount, maturity, interest
rate(s) or methods of determining the same, interest payment terms, redemption
provisions, non-refunding provisions, sinking fund terms, conversion or put
terms and other terms and conditions in accordance with parameters set forth in
Section 1 above and as described in subsection (a) above, as the Applicants may
at the time of issuance determine. Kingsport, SWEPCO, TCC, TNC and Wheeling,
seek authorization to issue long-term debt to AEP at a rate designed to parallel
AEP's effective cost of debt.
8.3. Short-Term Debt - AEP and Public Utility Subsidiaries The
Public Utility Subsidiaries are members of the AEP Utility Money Pool
and make short-term borrowings from the Utility Money Pool. The Utility Money
Pool and the Nonutility Money Pool (together, the "Money Pools") are funded by
AEP currently through a commercial paper program. No participant in the Money
Pools ("Participants") would be required to borrow from the specific Money Pool
if the borrowing Company could borrow more cheaply directly from banks or
through the issuance of its own commercial paper. The Public Utility
Subsidiaries require authority for short term borrowing in the event funds are
not available from the Money Pool. AEP is seeking authority in this filing to
create Financing Subsidiaries to fund the Money Pools (see Section H below).
Therefore, AEP, any Financing Subsidiary, AEP Utilities and the Public Utility
Subsidiaries seek authorization for the issuance of short-term debt in the form
of bank loans and commercial paper programs in the amounts set forth in
Borrowing Limits above.
8.4. Pollution Control Revenue Refunding Bonds The following Public
Utility Subsidiaries seek authority through the Authorization Record to
refund and reissue currently outstanding pollution control revenue bonds in
amounts not to exceed:
SWEPCO $185,000,000
TCC $450,000,000
TNC $ 45,000,000
8.5. AEP Utilities, Inc.
AEP Utilities, Inc., a registered holding company, seeks authority to
issue unsecured short-term debt in an amount up to $100,000,000 to external
sources or to its parent AEP for its general corporate purposes. This authority
would not be used to fund the Utility Money Pool. AEP Utilities, Inc. will not
borrow from either the Utility Money Pool or the Nonutility Money Pool.
8.6. Credit Enhancement
Applicants may obtain credit enhancement for the securities covered by
this Application, which could include insurance, a letter of credit or a
liquidity facility. The Applicants anticipate they may be required to provide
credit enhancement if they were to issue floating rate securities, whereas
credit enhancement would be a purely economic decision for fixed rate
securities. The 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 the new securities. Applicants will
obtain credit enhancement only if it is economically beneficial to do so taking
into consideration fees required to obtain the product.
E. Hedging Transactions
Interest rate hedging transactions with respect to existing indebtedness
("Interest Rate Hedges"), subject to the limitations and restrictions set forth
herein, 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 as set forth herein 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. 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. The Applicants will comply with Statement of
Financial Accounting Standard ("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 ("FASB"). The Applicants
will also comply with any future FASB financial disclosure requirements
associated with hedging transactions.
F. Authority to Form Financing Subsidiaries
AEP and the Subsidiaries request authority to acquire, directly or
indirectly, the equity securities of one or more Financing Subsidiaries.
Financing Subsidiaries may be corporations, trusts, partnerships or other
entities created specifically for the purpose of facilitating the financing of
the authorized and exempt activities (including exempt and authorized
acquisitions) of AEP and the Subsidiaries through the issuance of long-term
debt, or Preferred Securities, to third parties and the transfer of the proceeds
of such financings to AEP or other Subsidiaries. See also Section H.2 below. AEP
and the Subsidiaries also request authorization to issue their subordinated
unsecured notes ("Subordinated Notes") to any Financing Subsidiary to evidence
the transfer of financing proceeds by a Financing Subsidiary to its parent
company. The principal amount, maturity and interest rate on any such
Subordinated Notes will be designed to parallel the amount, maturity and
interest or distribution rate on the securities issued by a Financing Subsidiary
in respect of which the Subordinated Note is issued.
The amount of securities issued by any Financing Subsidiary to third
parties pursuant to the authorization requested herein will be included in the
overall external financing limitation, if any, authorized for the parent company
of such Financing Subsidiary. However, the amount of Subordinated Notes issued
by a parent company to its Financing Subsidiary will not be counted against such
external financing limitation.
AEP or a Subsidiary may, if required, guarantee or enter into support or
expense agreements in respect of the obligations of any such Financing
Subsidiaries. Subsidiaries may also provide guarantees and enter into support or
expense agreements, if required, on behalf of such entities. However, to avoid
double counting, the guarantees of securities issued by Financing Subsidiaries
shall not be counted against the limitation on AEP Guarantees and Subsidiary
Guarantees set forth below.
G. Guarantee of Indebtedness/Obligations
The provision of parent guarantees by holding companies to affiliates in
the generation and power marketing business is a standard industry practice. AEP
requests authorization herein directly or indirectly through one or more
Financing Subsidiaries to enter into guarantees, obtain letters of credit, enter
into support or expense agreements or otherwise provide credit support with
respect to debt securities or other contractual obligations of any Subsidiary
from time to time through the Authorization Period on behalf of any of its
direct or indirect Subsidiaries up to $5 billion, provided however, that the
amount of any parent guarantees in respect of obligations of any Subsidiaries
shall also be subject to the limitations of Rule 53(a)1) or Rule 58(a)(i), as
applicable. 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.
AEP Utilities seeks authority to provide guarantees and other credit
support with respect to its direct or indirect subsidiaries in an amount not to
exceed $1,000,000,000 outstanding at any one time.
The Public Utility Subsidiaries seeks authorization to enter into
guarantees and other credit support with respect to obligations of each of its
subsidiaries in an aggregate amount not to exceed $125,000,000 outstanding at
any one time.
Nonutility Subsidiaries also request authority for each Nonutility
Subsidiary to provide guarantees of indebtedness or contractual obligations and
other forms of credit support to other nonutility subsidiaries in an aggregate
principal amount not to exceed an aggregate of $2 billion outstanding at any one
time, exclusive of any guarantees and other forms of credit support that are
exempt pursuant to Rule 45(b) and Rule 52(b), provided however, that the amount
of Nonutility Subsidiary guarantees in respect of obligations of any Rule 58
companies shall remain subject to the limitations of Rule 58(a)(i).
Certain of the guarantees referred to above may be in support of the
obligations of Subsidiaries which 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 by appropriate means
including estimation of exposure based on loss experience or projected potential
payment amounts. If appropriate, these estimates will be made in accord with
GAAP and these estimates will be re-evaluated periodically.
AEP or a Subsidiary issuing a guarantee, as the case may be, proposes to
charge each Subsidiary a fee for each guarantee provided on its behalf that is
not greater than the costs, if any, of obtaining the liquidity necessary to
perform the guarantee for the period of time the guarantee remains outstanding.
Any guarantee that is outstanding at the end of the Authorization Period shall
remain in force until it expires or terminates in accordance with its terms.
The aggregate amount of the guarantees will not exceed $8.125 billion (not
taking into account obligations exempt pursuant to Rule 45 and under other
outstanding commission orders.
H. Continuation of Money Pools; Financing Subsidiaries; Addition of
Participants to Nonutility Money Pool; Addition to Utility Money Pool
1. Background and Request
By Order dated December 30, 1976 (HCAR No. 19829; 70-5930) and in
subsequent Orders, the Commission authorized CSW (now AEP Utilities), to
establish and utilize a system money pool, the CSW Money Pool, to coordinate
short-term borrowings for CSW, its electric subsidiary companies and Central and
South West Services, Inc. as set forth in Central and South West Corp., HCAR No.
26697 (Mar. 28, 1997, 70-8557) HCAR No. 24855 (April 5, 1989, 70-7643), HCAR No.
26254 (March 21, 1995, 70-8557), HCAR No. 26854 (Apr. 3, 1998, 70-8557).
In its Order dated June 14, 2000 in File 70-9381 (HCAR No. 27186), the
Commission authorized AEP to continue the Money Pool and to add its utility
subsidiaries and certain other subsidiaries1 as participants in the AEP System
Money Pool (the "Participants") and established borrowing limits for all
Participants.
By Order dated December 18, 2002 (HCAR No. 35-27623), AEP was authorized
to form a Nonutility Money Pool (copy of the Nonutility Money Pool Agreement is
attached hereto as Exhibit C-2) on substantially the same terms as the Utility
Money Pool. The list of current participants in the Nonutility Money Pool is set
forth on pp. 2-3 above.
AEP and the participants in each of the Money Pools hereby request
authorization to continue to participate in the Money Pools as set forth in this
Application during the Authorization Period. Each participant in either the
Utility Money Pool or the Nonutility Money Pool makes unsecured short-term
borrowings from its applicable Money Pool, contributes surplus funds to its
applicable Money Pool and lends to and or extends credit to other participants
in its applicable Money Pool.
From the Date of any Order issued in this File, EWG's and FUCO's will only
be lenders to, not borrowers from, the Nonutility Money Pool.
Currently the following EWG's and/or FUCO's have outstanding loans from
the Nonutility Money Pool:
Company Amount Borrowed
AEP Desert Sky LP, LLC $ 19,784,355
AEP Delaware Investment Co.. $ 883
AEP Energy Services Ltd (UK) $ 350,616,061
These three borrowers represent that they will repay these outstanding
loans in full. Such repayment will be reported on the appropriate Quarterly Rule
24 Report.
Current Operations. All short-term borrowing needs of the Participants may
be met by funds in the Money Pools to the extent such funds are available. Each
Participant shall have the right to borrow from the respective 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 approved hereunder
shall not exceed the applicable borrowing limits set forth in orders of the
Commission and other regulatory authorities, and agreements binding upon such
Participant. No Participant shall be obligated to borrow from the Money Pool if
lower cost funds can be obtained from its own external borrowing. Neither AEP
nor AEP Utilities will borrow funds from either of the Money Pools or any
Participant. No funds from the Utility Money Pool or Nonutility Money Pool will
be invested in EWG's or FUCO's.
AEPSC, a Rule 88 subsidiary service company, acts as administrative agent
of the Money Pools. AEPSC will administer the Money Pools on an "at cost" basis
and will maintain separate records for each Money Pool. Each Participant, any
Financing Subsidiary and AEP determine the amount of funds it has available for
contribution to the Money Pools. The determination of whether a Participant or
AEP at any time has surplus funds, or shall lend such funds to the Money Pool,
will be made by such Participant's treasurer, or by a designee thereof, on the
basis of cash flow projections and other relevant factors, in such Participant's
sole discretion. Each Participant may withdraw any of its funds at any time upon
notice to AEPSC.
Each Participant may borrow from the Utility Money Pool to the extent of
its Borrowing Limits for short-term debt.
Participants in the Nonutility Money Pool will not engage in lending and
borrowing transactions with Participants in the Utility Money Pool. Neither
Money Pool will borrow from the other Money Pool.
Sources of Funds. The Money Pools are 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, any Financing
Subsidiary or, in the case of the Utility Money Pool, AEP Utilities, Inc. All
debt issued in connection with the Money Pools will be unsecured. AEP funds made
available to the Money Pools will be used first to fund the Utility Money Pool
and thereafter to fund the Nonutility Money Pool.
2. Financing Subsidiaries.
Currently, the Utility Money Pool is funded by AEP through a commercial
paper program. AEP Utilities and the Public Utility Participants in the Utility
Money Pool are also authorized to fund the Utility Money Pool through the
issuance of short-term debt. Currently AEP funds the Nonutility Money Pool.
AEP proposes to create two Financing Subsidiaries: one to fund the Utility
Money Pool and a separate subsidiary to fund the Nonutility Money Pool. Each of
the Financing Subsidiaries will be a limited liability corporate subsidiary of
AEP formed under the Delaware law. Each Financing Subsidiary will have a
separate bank account for the separate money pool it funds. Any funds
transferred to the money pools will flow through this Financing Subsidiary bank
account.
AEP is modifying its corporate borrowing program to more fully separate
the operations of the Utility Money Pool and the Nonutility Money Pool to
further assure that there can be no cross-subsidization. This new structure will
facilitate a separate external borrowing program for the Utility Money Pool.
The formation of a similar subsidiary to issue commercial paper for the
benefit of other subsidiaries was granted to Southern Company in HCAR Release
No. 35-27273 in File No. 70-9631.
The Financing Subsidiary formed to fund the Utility Money Pool may obtain
funds from external sources or from AEP or AEP Utilities. It is anticipated that
this Financing Subsidiary Pool will have the ability to establish an external
commercial paper program supported by the Public Utility Subsidiaries and should
therefore obtain a higher credit rating than the AEP program currently has.
AEP's current credit rating for commercial paper is A2/P3/F2 - and it is
anticipated that the Utility Money Pool Financing Subsidiary should initially be
rated A2/P2/F2. This will result in lower financing costs depending on market
conditions.
When the Financing Subsidiary directly issues commercial paper to dealers
to fund the Utility Money Pool, each Public Utility Subsidiary that borrows from
the Financing Subsidiary must maintain comparable debt ratings equal to or
greater than the Financing Subsidiary and maintain requisite backup facilities
with one or more financial institutions. Each Public Utility Subsidiary will pay
all liabilities incurred by the Financing Subsidiary relating to the offer and
sale of the commercial paper the proceeds of which were used to make loans to
that Public Utility Subsidiary and its pro rata share of other expenses and
administrative costs of the Financing Subsidiary in connection with its funding
of the Utility Money Pool. No Public Utility Subsidiary will be liable for the
borrowings of any other affiliate under the Money Pool. The proceeds from the
borrowings of the Financing Subsidiary will be used to repay its borrowings or
be invested to continue funding the Utility Money Pool. The proceeds of
borrowings by the Financing Subsidiary will not be loaned to AEP.
The Financing Subsidiaries that fund the Money Pools would be solely
financial conduits. They will not have any business purpose other than to fund
the Money Pools. Commission approval will be sought if other types of
transactions are contemplated.
AEP will continue to fund the Nonutility Money Pool with the sale of
commercial paper. If it is determined that AEP can borrow money at a cheaper
rate than that obtained by the Financing Subsidiary that is funding the Utility
Money Pool then AEP will fund the Utility Money Pool directly. As stated above,
AEP funds made available to the Money Pools will be used first to fund the
Utility Money Pool and thereafter to fund the Nonutility Money Pool.
AEPSC administers the Money Pools 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 applicable Money
Pool and then from AEP corporate funds to the extent available. To the extent
that Participant contributions of surplus funds to the applicable 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 applicable Money Pool
which are not required to satisfy borrowing needs of other Participants will be
invested on the behalf of the respective Money Pool in one or more short-term
instruments, including (i) interest-bearing accounts with banks; (ii)
obligations issued or guaranteed by the U.S. government and/or its agencies and
instrumentalities, including obligations under repurchase agreements; (iii)
obligations issued or guaranteed by any state or political subdivision thereof,
provided that such obligations are rated not less than "A" by a nationally
recognized rating agency; (iv) commercial paper rated not less than "A-1" or
"P-1" or their equivalent by a nationally recognized rating agency; (v) money
market funds; (vi) bank certificates of deposit, (vii) Eurodollar funds; (viii)
short-term debt securities rated AA or above by Standard & Poor's, Aa or above
by Moody's Investors Service, or AA or above by Fitch Ratings; (ix) short-term
debt securities issued or guaranteed by an entity rated AA or above by Standard
& Poor's, Aa or above by Moody's Investors Service, or AA or above by Fitch
Ratings; and (x) such other investments as are permitted by Section 9(c) of the
Act and Rule 40 thereunder.
Use of Proceeds. The Money Pools make funds available to Participants for
the interim financing of their capital expenditure programs and their other
working capital needs and to repay previous borrowings incurred for such
purposes. External borrowings by AEP, AEP Utilities, Inc., or any Financing
Subsidiary will not be made unless there are no surplus funds in the treasuries
of the Participants sufficient to meet borrowing needs. However, no loan must be
made by AEP or AEP Utilities, Inc. or any Financing Subsidiary if the borrowing
Participant company could borrow more cheaply directly from banks or through the
sale of its own commercial paper. Each Participant will borrow pro rata from
each funding source in the same proportion that the amount of funds provided by
that funding source bears to the total amount of short-term funds available to
the Money Pool.
Interest Rate. The interest rate applicable on any day to then outstanding
loans through the Money Pools will be the composite weighted average daily
effective cost incurred by AEP, AEP Utilities, Inc., or any Financing Subsidiary
for short-term borrowings from external sources for that Money Pool. 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.
Each Participant receiving a loan hereunder shall repay the principal
amount of such loan, together with all interest accrued thereon, on demand and
in any event not later than the expiration date of the SEC authorization for the
operation of the Money Pool. All loans made through the applicable Money Pool
may be prepaid by the borrower without premium or penalty.
If the Money Pool is in an invested position, 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.
3. Addition of Participants to Nonutility Money Pool.
The direct and indirect subsidiaries of AEP set forth on p. 4 of this
Application hereby seek authority to become additional participants in the
Nonutility Money Pool. No additional participants will be added to either of the
Money Pools without specific SEC approval.
4. Addition of Dolet Hills Lignite Company, LLC to Utility Money Pool
Dolet Hills Lignite Company, LLC, a subsidiary of SWEPCO, currently a
participant in the Nonutility Money Pool, seeks to become a participant in the
Utility Money Pool because it is a mining company similar to the other mining
companies which are currently Utility Money Pool Participants. It would no
longer be a participant in the Nonutility Money Pool.
I. Payments of Dividends out of Capital or Unearned Surplus
Section 12 of the Act and Rule 46 thereunder generally prohibit the
payment of dividends out of capital or unearned surplus except pursuant 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, provided,
however, that without further approval of the Commission, no Nonutility
Subsidiary will declare or pay any dividend out of capital or unearned surplus
if such Nonutility Subsidiary derives any material part of its revenues from the
sale of goods, services or electricity to any Public Utility Subsidiary. In
addition, the Nonutility Subsidiary will not declare any dividend out of capital
or unearned surplus unless it:
(i) has received excess cash as a result of the sale
of assets;
(ii) has engaged in a reorganization; and/or
(iii) is returning capital to an associate company.
J. Summary of Requests for Authority
1) Applicants in this file request authorization for financing
transactions for the period beginning with the effective date of an
order issued pursuant to this filing and continuing until March 31,
2007 ("Authorization Period") unless otherwise provided;
2) AEP seeks authority to increase its capitalization by issuing and
selling from time to time during the Authorization Period (i)
directly, additional Common Stock or options, warrants,
equity-linked securities or stock purchase contracts convertible
into or exercisable for Common Stock, and Preferred Stock, (ii)
indirectly through one or more Financing Subsidiaries, other forms
of preferred securities (including trust preferred securities)
(collectively, "Preferred Securities"),(iii)directly or indirectly
through one or more Financing Subsidiaries new long-term debt
securities having maturities of one year or more up to 50 years
("Long Term Debt"), in an amount up to $3 billion (excluding
securities issued for purposes of refunding or replacing other
outstanding securities where AEP's capitalization is not increased
as a result thereof or and excluding securities otherwise authorized
or exempt);
3) AEP seeks to issue, directly or indirectly through one or more
Financing Subsidiaries, commercial paper, promissory notes and other
forms of short-term indebtedness having maturities of less than one
year ("Short-term Debt") in an aggregate amount not to exceed $7.2
billion to fund the AEP Money Pools and for its own requirements.
4) Kingsport, SWEPCO, TCC, TNC and Wheeling seek authority to issue
secured or unsecured long-term debt in an amount not to exceed $50
million, $600 million, $600 million, $250 million and $50 million,
respectively, excluding securities issued for refunding or replacing
other outstanding securities where the Public Utility Subsidiary's
capitalization is not increased as a result thereof, including the
issuance of long-term debt to AEP, and to enter into hedging
transactions.
5) AEP and its Subsidiaries seek authority to enter into and perform
interest rate hedging transactions to manage the volatility of
interest rates associated with outstanding indebtedness and
anticipated debt offerings.
6) AEP and the Public Utility Subsidiaries seek authority to issue the
short-term debt to the extent of the borrowing limits set forth
below for Public Utility Subsidiaries through the AEP Utility Money
Pool, external borrowings or borrowings from AEP or from a Financing
Subsidiary.
7) The following Public Utility Subsidiaries seek authority to refund
and reissue currently outstanding pollution control revenue
refunding bonds as follows: TCC $450,000,000, TNC $45,000,000, and
SWEPCO $185,000,000.
8) AEP Utilities, Inc., a registered holding company, seeks authority
to borrow short-term debt in an amount up to $100,000,000 from
external sources or from its parent AEP for its general corporate
purposes.
9) AEP and the Subsidiaries seek authority to (i) acquire, directly or
indirectly, the equity securities of one or more entities
("Financing Subsidiaries") created specifically for the purpose of
facilitating the financing of authorized and exempt activities of
the Applicants through the issuance of long-term debt, short-term
debt, preferred securities and other equity securities to third
parties and to provide guarantees and enter into expense agreements
with respect to the securities or other obligations of Financing
Subsidiaries. Financing Subsidiaries are authorized to transfer
proceeds of any financing to their respective parent companies.
Financing Subsidiaries will, among other things, be authorized to
fund the AEP Money Pools.
10) AEP and participants in the Money Pools seek authority to continue
the Utility Money Pool and the Nonutility Money Pool during the
Authorization Period; to fund the Money Pools with separate
Financing Subsidiaries; to add certain additional nonutility
subsidiaries to the Nonutility Money Pool; and to add Dolet Hills
Lignite Company, LLC currently a participant in the Nonutility Money
Pool to the Utility Money Pool.
11) AEP requests the Commission approve the issuance by AEP and its
Subsidiaries of guarantees and other forms of credit support in an
aggregate amount not to exceed $8.125 billion outstanding at any
time in exposure as more fully described below; and
12) AEP and its Nonutility Subsidiaries request authorization for the
Nonutility Subsidiaries to pay dividends out of capital or unearned
surplus as set forth on the application.
K. Compliance with Rule 54
The proposed transaction is also subject to Rule 54. Rule 54 provides
that, in determining whether to approve the issue or sale of any securities for
purposes other than the acquisition of any "exempt wholesale generator" ("EWG")
or "foreign utility company" ("FUCO") or other transactions unrelated to EWGs or
FUCOs, the Commission shall not consider the effect of the capitalization or
earnings of subsidiaries of a registered holding company that are EWGs or FUCOs
if the requirements of Rule 53(a), (b) and (c) are satisfied. Under Rule 53(a),
the Commission shall not make certain specified findings under Sections 7 and 12
in connection with a proposal by a holding company to issue securities for the
purpose of acquiring the securities of or other interest in an EWG, or to
guarantee the securities of an EWG, if each of the conditions in paragraphs
(a)(1) through (a)(4) thereof are met, provided that none of the conditions
specified in paragraphs (b)(1) through (b)(3) of Rule 53 exists.
AEP consummated the merger with Central and South West Corporation, now
AEP Utilities, Inc. ("CSW"), on June 15, 2000 pursuant to an order dated June
14, 2000 (HCAR No. 27186), which further authorized AEP to invest up to 100% of
its consolidated retained earnings, with consolidated retained earnings to be
calculated on the basis of the combined consolidated retained earnings of AEP
and CSW (the "Rule 53(c) Order").
AEP currently meets all of the conditions of Rule 53(a), except for clause
(1). At September 30, 2003, AEP's "aggregate investment", as defined in Rule
53(a)(1), in EWGs and FUCOs was approximately $1.724 billion, or about 77.5% of
AEP's "consolidated retained earnings", also as defined in Rule 53(a)(1), for
the four quarters ended September 30, 2003 ($2.226 billion).
With respect to Rule 53(a)(1), however, the Commission has determined that
AEP's financing of investments in EWGs and FUCOs in an amount greater than the
amount that would otherwise be allowed by Rule 53(a)(1) would not have either of
the adverse effects set forth in Rule 53(c). See the Rule 53(c) Order.
In addition, AEP 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)(1) or (3) has occurred or is
continuing.
The circumstances described in Rule 53(b)(2) have occurred. As a result of
the recording of a loss with respect to impairment charges, AEP's consolidated
retained earnings declined for the period ending September 30, 2003. The average
consolidated retained earnings of AEP for the four quarterly periods ended
September 30, 2003 was $2.226 billion, or a decrease of approximately 28.3% from
the company's average consolidated retained earnings for the four quarterly
periods ended September 30, 2003 of $3.106 billion. In addition, AEP's
"aggregate investment" in EWGs and FUCOs as of September 30, 2003 exceeded 2% of
the total capital invested in utility operations.
If the effect of the capitalization and earnings of EWGs and FUCOs in
which AEP has an ownership interest upon the AEP holding company system were
considered, there would be no basis for the Commission to withhold or deny
approval for the proposal made in this Application-Declaration. The action
requested in the instant filing would not, by itself, or even considered in
conjunction with the effect of the capitalization and earnings of AEP's EWGs and
FUCOs, have a material adverse effect on the financial integrity of the AEP
system, or an adverse impact on AEP's public-utility subsidiaries, their
customers, or the ability of State commissions to protect such public-utility
customers. The Rule 53(c) Order was predicated, in part, upon an assessment of
AEP's overall financial condition which took into account, among other factors,
AEP's consolidated capitalization ratio and the growth trend in AEP's retained
earnings.
As of December 31, 1999, the most recent period for which financial
statement information was evaluated in the 53(c) Order, AEP's consolidated
capitalization (including CSW on a pro forma basis) consisted of 37.3% common
and preferred equity, 61.3% debt and $335 million principal amount of certain
subsidiary obligated mandatorily redeemable preferred securities of subsidiary
trusts holding solely junior subordinated debentures of such subsidiaries
("Trust Preferred Securities") representing 1.4%.
As of September 30, 2003, AEP's consolidated capitalization consisted of
60.9% debt, 39.1% common and preferred equity (consisting of 395,004,720 shares
of common stock representing 36.8%, $376 million principal amount of equity
units representing 1.6% and $144 million principal amount of preferred stock
representing 0.7%).
AEP respectfully submits that the requirements of Rule 53(c) are met. The
requested authority will not have a substantial adverse impact upon the
financial integrity of AEP or its Utility Subsidiaries.
None of AEP's Utility Subsidiaries or their customers will be adversely
impacted by the requested relief.
The ratio of common equity to total capitalization, net of securitization
debt, of each of the Utility Subsidiaries will continue to be maintained at not
less than 30% (except for TCC which will maintain 25% so long as securitization
bonds are outstanding). In addition, each of the Utility Subsidiaries is subject
to regulation by one or more state commissions that are able to protect utility
customers within their respective states.
Since the date of the Rule 53(c) Order, there has been a reduction in
AEP's consolidated equity capitalization ratio; however, it remains within
acceptable ranges and limits of rating agencies for strong investment grade
corporate credit ratings. In addition, the operating subsidiaries, which will
have a significant influence on the determination of the AEP corporate rating,
continue to show strong financial statistics as measured by the rating agencies.
As of December 31, 1999, Standard and Poor's ("S&P") rating of secured
debt for AEP's operating subsidiaries was as follows: Appalachian Power Company,
A; Columbus Southern Power Company, A-; Indiana Michigan Power Company, A-;
Kentucky Power Company, A; Ohio Power Company, A-; AEP Texas Central Company
(formerly Central Power and Light Company), A; Public Service Company of
Oklahoma, AA-; Southwestern Electric Power Company, AA-; and AEP Texas North
Company, A. AEP did not have a long-term debt rating as of December 31, 1999.
As of September 30, 2003, S&P's rating of secured debt for AEP's operating
subsidiaries was as follows: Appalachian Power Company, BBB; Columbus Southern
Power Company, BBB; Indiana Michigan Power Company, BBB; Kentucky Power Company,
BBB, Ohio Power Company, BBB, AEP Texas Central Company (formerly Central Power
and Light Company), BBB; Public Service Company of Oklahoma, BBB; Southwestern
Electric Power Company, BBB; and AEP Texas North Company (formerly, West Texas
Utilities Company), BBB.
Reporting
AEP and the Participants will report quarterly to the Commission pursuant
to Rule 24 under the Act within 60 days after the end of each calendar quarter.
Each certificate will set forth the following information:
1. The sales of any Common Stock by AEP and the purchase price per share
of stock issued and sold pursuant to the Authority;
2. Amount and terms of any Long-Term Debt, Preferred Stock, Preferred
Securities, equity-linked securities directly or indirectly issued by
AEP.
3. The amount and terms of any long-term debt issued by Kingsport, SWEPCO,
TCC, TNC or Wheeling issued pursuant to this authority;
4. The amount and terms of any pollution control refinancing issued
pursuant to this Order.
5. If a guarantee is issued during the quarter pursuant to this authority,
the name of the guarantor, the name of the beneficiary of the guarantee
and the amount of the guarantee;
6. The amount and terms of any short-term debt issued by AEP, AEP
Utilities, any Financing Subsidiary or any of the Public Utility
Subsidiaries during the quarter;
7. The notional amount and principal terms of any hedge instruments or
Anticipatory Hedges entered into during the quarter and the identity of
the other parties thereto;
8. The name, parent company and the amount invested in any financing
entity during the quarter;
9. A table showing at the end of each quarter a capitalization chart for
AEP and each of the Public Utility Subsidiaries similar to the table
attached as Exhibit B hereto;
10. With respect to each participant in the Utility Money Pool and each
participant in the Nonutility Money Pool, the maximum borrowings from
and loans to the respective Money Pool during the quarter and the
interest rate applied to borrowings and loans;
11. A list of Form U-6B-2 statements filed with the Commission, including
the name of the filing entity and the date of the filing.
12. The date, amount and payee of dividends out of capital or unearned
surplus paid by any Nonutility Subsidiary.
ITEM 2. Fees, Commissions and Expenses.
The fees, commissions and expenses incurred or to be incurred in
connection with the preparation and filing of this Application/Declaration are
estimated not to exceed $2,000.
ITEM 3. Applicable Statutory Provisions.
Sections 6(a), 7, 9(a), 10 and 12 and Rules 43, 45 and 46 thereunder are
or may be applicable to the proposed transactions. To the extent any other
sections of the Act may be applicable to the proposed transactions, the
Applicants hereby request appropriate orders thereunder.
ITEM 4. Regulatory Approval.
No state and regulatory authority which has not already been obtained and
no federal regulatory authority, other than the Commission under the Act, has
jurisdiction over the proposed transactions. The Virginia State Corporation
Commission and the West Virginia Public Services Commission may have
jurisdiction over the organization of a Financing Subsidiary to provide services
for Appalachian or Wheeling. No other approvals are required.
ITEM 5. PROCEDURE.
The Commission is requested to publish a notice under Rule 23 with respect
to the filing of this Application/Declaration as soon as practicable. The
Applicant requests that the Commission's order be issued as soon as practicable
after the notice period and in any event not later than May 14, 2004 in order to
accommodate the financing needs of the Company. The Applicants further request
that there should not be a 30-day waiting period between issuance of the
Commission's order and the date on which the order is to become effective,
hereby waives a recommended decision by a hearing officer or any other
responsible officer of the Commission, and consents to the assistance of the
Division of Investment Management in the preparation of the Commission's
decision and/or order, unless the Division of Investment Management opposes the
matters proposed herein.
ITEM 6. Exhibits and Financial Statements.
A. Exhibits.
A List of current Nonutility Money Pool Participants
B - Table of Equity Debt Ratios (to be filed by
amendment)
C-1 - Copy of AEP System Utility Money Pool Agreement
[incorporated by reference to Exhibit C to AEP's
Application/Declaration on Form U-1, as amended,
in File No. 70-10088].
C-2 - Copy of AEP System Nonutility Money Pool Agreement
dated as of December 18, 2002.
D - Inapplicable.
E - Opinion of Counsel.
F - Form of Federal Register Notice.
G - Projected cash flow summary of AEP Consolidated
for years 2004-06 (to be filed confidentially by
amendment pursuant to Rule 104).
B. Financial Statements.
Balance Sheets as of December 31, 2003 and Statements Of Income and
Retained Earnings for the 12 months ended December 31, 2003 of AEP and its
subsidiaries consolidated. (To be filed by amendment).
ITEM 7. Information as to Environmental Effects.
None of the matters that are the subject of this Application/Declaration
involves a "major federal action" nor do such matters "significantly affect the
quality of the human environment" as those terms are used in section 102(2)(C)
of the National Environmental Policy Act. The transaction that is the subject of
this Application/Declaration will not result in changes in the operation of the
Applicant that will have an impact on the environment. The Applicant is not
aware of any federal agency that has prepared or is preparing an environmental
impact statement with respect to the transaction that is the subject of this
Application/Declaration.
SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, the undersigned company has duly caused this Form U-1 to be signed on its
behalf by the undersigned thereunto duly authorized.
AMERICAN ELECTRIC POWER COMPANY, INC.
and
AEP GENERATING COMPANY
AMERICAN ELECTRIC POWER SERVICE CORPORATION
APPALACHIAN POWER COMPANY
AEP UTILITIES, INC.
COLUMBUS SOUTHERN POWER COMPANY
INDIANA MICHIGAN POWER COMPANY
KENTUCKY POWER COMPANY
KINGSPORT POWER COMPANY
OHIO POWER COMPANY
PUBLIC SERVICE COMPANY OF OKLAHOMA
SOUTHWESTERN ELECTRIC POWER COMPANY
AEP TEXAS CENTRAL COMPANY
AEP TEXAS NORTH COMPANY
WHEELING POWER COMPANY
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, INC.
DOLET HILLS LIGNITE COMPANY, LLC
AEP PRO SERV, INC.
AEP TEXAS COMMERCIAL & INDUSTRIAL RETAIL LIMITED PARTNERSHIP
AEP C & I COMPANY, LLC
AEP GAS POWER GP, LLC
AEP TEXAS COMMERCIAL & INDUSTRIAL RETAIL GP, LLC
AEP COMMUNICATIONS, INC.
AEP COMMUNICATIONS, LLC
C3 NETWORKS GP, L.L.C.
C3 NETWORKS LIMITED PARTNERSHIP
C3 NETWORKS & COMMUNICATIONS LIMITED PARTNERSHIP
AEP FIBER VENTURE, LLC
C3 COMMUNICATIONS, INC.
AEP ENERGY SERVICES, INC.
AEP EMTECH, LLC
AEP INVESTMENTS, INC.
VENTURES LEASE CO., LLC
AEP RESOURCES, INC.
AEP DELAWARE INVESTMENT COMPANY
AEP DELAWARE INVESTMENT COMPANY II
AEP MEMCO LLC
AEP ELMWOOD LLC
UNITED SCIENCES TESTING, INC.
AEP ENERGY SERVICES GAS HOLDING COMPANY
JEFFERSON ISLAND STORAGE & HUB L.L.C.
AEP ACQUISITION, L.L.C.
AEP ENERGY SERVICES INVESTMENTS, INC.
HOUSTON PIPE LINE COMPANY, LP
AEP GAS MARKETING LP
HPL HOLDINGS, INC.
NGLE INTERNATIONAL, LIMITED
NGLE PROJECT MANAGEMENT COMPANY LIMITED
NGLE PUSHAN POWER, LDC
CSW INTERNATIONAL, INC.
AEP DELAWARE INVESTMENT COMPANY III
AEP ENERGY SERVICES UK GENERATION LIMITED
AEP ENERGY SERVICES LIMITED
CSW ENERGY, INC.
CSW ENERGY SERVICES, INC.
REP HOLDCO, LLC
REP GENERAL PARTNER L.L.C.
AEP OHIO RETAIL ENERGY, LLC
MUTUAL ENERGY L.L.C.
AEP TEXAS POLR, LLC (FORMERLY AEP TEXAS RETAIL GP, LLC)
POLR POWER, L.P.
AEP HOUSTON PIPE LINE COMPANY, LLC
AEP COAL, INC.
AEP POWER MARKETING, INC.
AEP TEXAS POLR GP, LLC
AEP COAL MARKETING, LLC
AEP WIND LP, LLC
AEP WIND LP II, LLC
AEP WIND GP, LLC
AEP WIND HOLDING, LLC
HPL GP, LLC
AEP DESERT SKY GP, LLC
AEP DESERT SKY LP, LLC
AEPR OHIO, LLC
AEP DESERT SKY LP II, LLC
AEP EMISSIONS MARKETING, LLC
AEP T&D SERVICES, LLC
By: /s/ Stephen P. Smith
Treasurer of all the
above-listed companies.
Dated: April 23, 2004
CSW POWER MARKETING, INC.
CSW FT. LUPTON, INC.
NEWGULF POWER VENTURE, INC.
CSW DEVELOPMENT-I, INC.
CSW SERVICES INTERNATIONAL, INC.
CSW ORANGE, INC.
CSW MULBERRY, INC.
NOAH I POWER GP, INC.
CSW ORANGE II, INC.
CSW MULBERRY II, INC.
CSW SWEENY GP I, INC.
CSW SWEENY GP II, INC.
CSW SWEENY LP I, INC.
CSW SWEENY LP II, INC.
By: /s/ Wendy Hargus
Treasurer of all the
above-listed companies.
Dated: April 23, 2004
-and-
AEP HOLDINGS I C.V.
By: AEP Delaware Investment
Company III
Its: Managing Partner
By: /s/ Stephen P. Smith
Treasurer of
AEP DELAWARE INVESTMENT COMPANY III
Dated: April 23, 2004
-and-
AEP HOLDINGS II C.V.
By: AEP Delaware Investment Company II
Its: Managing Partner
By: /s/ Stephen P. Smith
Treasurer of
AEP DELAWARE INVESTMENT COMPANY II
Dated: April 23, 2004
-and-
MUTUAL ENERGY SWEPCO L.P.
By: REP Holdco, LLC
Its: Managing Partner
By: /s/ Stephen P. Smith
Treasurer of
REP HOLDCO, LLC
Dated: April 23, 2004
-and-
TRENT WIND FARM, L.P.
By: AEP Wind LP II, LLC
Its: Managing Partner
By: /s/ Stephen P. Smith
Treasurer of
AEP WIND LP II, LLC
Dated: April 23, 2004
Exhibit A
NONUTILITY MONEY POOL PARTICIPANTS
The entities that are currently participants in the Nonutility Money Pool
and Applicants to this Filing ("Nonutility Money Pool Participants") are listed
below.2
Entity Description Authorization
AEP Coal, Inc. Coal Mining Operations in Rule 58
Midwest
AEP Power Marketing, Inc. Power Marketing Rule 58/Order
AEP Pro Serv, Inc. Professional Services for Order
industrial and energy
customers
AEP Texas Commercial & Industrial Gas and electric retail Rule 58
Retail Limited Partnership marketing
AEP T&D Services, LLC Professional Services for Rule 58
transmission and
distribution
AEP C & I Company, LLC Gas and electric Rule 58
commercial and industrial
retail marketing
AEP Gas Power GP, LLC Gas and electric Rule 58
commercial and industrial
retail marketing
AEP Texas Commercial & Industrial Gas and electric Rule 58
Retail GP, LLC commercial and industrial
retail marketing
AEP Communications, Inc. Telecom and fiber optics ETC
company
AEP Communications, LLC Telecom and fiber optics ETC
company
C3 Networks GP, L.L.C. Telecom and fiber optics ETC
company
C3 Networks Limited Partnership Telecom and fiber optics ETC
company
C3 Networks & Communications Telecom and fiber optics ETC
Limited Partnership company
AEP Fiber Venture, LLC Telecom and fiber optics ETC
company
C3 Communications, Inc. Telecom and fiber optics ETC
company
AEP Energy Services, Inc. Energy trading operations Rule 58
AEP EmTech, LLC Owns and manages Rule 58
intellectual property
AEP Investments, Inc. Owns and manages Order
intellectual property
Ventures Lease Co., LLC 100% owned by AEP Resources Order
AEP Resources, Inc. Service company Order
AEP Delaware Investment Company 1% owner of AEP holdings FUCO/PP
AEP Delaware Investment Company II Holding company FUCO/PP
AEP Delaware Investment Company III Energy management FUCO/PP
AEP MEMCO LLC Barge operations Order
AEP Elmwood LLC Barge maintenance Order
United Sciences Testing, Inc. Emissions testing systems Rule 58
AEP Energy Services Gas Holding Gas marketing Order
Company
Jefferson Island Storage & Hub Gas marketing Order
L.L.C.
AEP Acquisition, L.L.C. Gas marketing Order
AEP Energy Services Investments, Gas marketing Order
Inc.
Houston Pipe Line Company, LP Gas pipeline Order
AEP Gas Marketing LP Gas marketing Order
HPL Holdings, Inc. Gas marketing Order
NGLE Project Management Company Foreign power plant FUCO/PP
Limited (formerly AEP Resources operations
Project Management Company, Ltd.)
NGLE International, Limited Foreign power plant FUCO/PP
(formerly AEP Resources operations
International Limited)
NGLE Pushan Power, LDC (formerly Foreign power plant FUCO/PP
AEP Pushan Power LDC) operations
CSW International, Inc. International holding Order
company
AEP Holdings I CV Holding company FUCO/PP
AEP Holdings II CV Holding company FUCO/PP
AEP Energy Services UK Generation European power generation FUCO/PP
Limited
AEP Energy Services Limited European trading operations FUCO/PP
CSW Energy, Inc. Domestic IPP's Order
CSW Power Marketing, Inc. Power marketing Rule 58
CSW Ft. Lupton, Inc. Power plant operations Rule 58
Newgulf Power Venture, Inc. Power plant operations EWG
CSW Development-I, Inc. Power plant operations Rule 58
CSW Energy Services, Inc. Energy Marketer Rule 58
Mutual Energy SWEPCO L.P. Retail electric provider Rule 58
REP Holdco, LLC Retail electric provider Rule 58
REP General Partner L.L.C. Retail electric provider Rule 58
AEP Ohio Retail Energy, LLC Retail electric provider Rule 58
Mutual Energy L.L.C. Retail electric provider Rule 58
AEP Texas POLR, LLC (formerly AEP Retail electric provider Rule 58
Texas Retail GP, LLC) of last resort
POLR Power, L.P. Retail electric provider Rule 58
of last resort
Dolet Hills Lignite Company, LLC Coal mining operations in Rule 58
Louisiana
AEP Desert Sky GP, LLC Wind generation operations EWG
AEP Desert Sky LP, LLC Wind generation operations EWG
Exhibit C-2
AEP SYSTEM NONUTILITY
MONEY POOL AGREEMENT
This NONUTILITY MONEY POOL AGREEMENT ("Agreement") is made and entered
into this 18th day of December, 2002 by and among American Electric Power
Company, Inc. ("AEP"), a New York corporation, a registered holding company
under the Public Utility Holding Company Act of 1935, as amended (the "Act"),
and certain of AEP's direct or indirect subsidiaries, each of which are
signatories hereto, or which subsequently become signatories hereto and agree to
abide by the terms herein (each direct or indirect subsidiary, a "Party" and
collectively, the "Parties").
WHEREAS, the Parties from time to time have need to borrow funds on a
short-term basis; and
WHEREAS, some of the Parties from time to time are expected to have funds
available to loan on a short-term basis; and
WHEREAS, AEP and the Parties desire to establish a pool (the "Nonutility
Money Pool") to coordinate and provide for certain of the Parties' short-term
cash requirements;
NOW THEREFORE, in consideration of the premises, and the mutual promises
set forth herein, the Parties and AEP hereto agree as follows:
ARTICLE I
CONTRIBUTIONS AND BORROWINGS
Section 1.1. Contributions to the Nonutility Money Pool.
American Electric Power Service Corporation ("AEPSC") shall act as
administrative agent of the Nonutility Money Pool. Each Party and AEP will
determine from time to time, the amount of funds it has available for
contribution to the Nonutility Money Pool. The determination of whether a Party
or AEP at any time has surplus funds, or shall lend such funds to the Nonutility
Money Pool, will be made by such Party's treasurer, or by a designee thereof, on
the basis of cash flow projections and other relevant factors, in such Party's
sole discretion. Each Party may withdraw any of its funds at any time upon
notice to AEPSC.
Section 1.2 Rights to Borrow.
(a) Subject to the provisions of Section 1.4(b) of this Agreement, all
short-term borrowing needs of the Parties may be met by funds in the Nonutility
Money Pool to the extent such funds are available. Each Party shall have the
right to borrow from the Nonutility Money Pool from time to time, subject to the
availability of funds and the limitations and conditions set forth herein and in
the applicable orders of the Securities and Exchange Commission ("SEC") and
other regulatory authorities. Each Party may request loans from the Nonutility
Money Pool from time to time during the period from the date hereof until this
Agreement is terminated by written agreement of the Parties and AEP; provided,
however, that the aggregate amount of all loans requested by any Party hereunder
shall not exceed the applicable borrowing limits set forth in applicable orders
of the SEC and other regulatory authorities, resolutions of such Party's
shareholders and Board of Directors, such Party's governing corporate documents,
and agreements binding upon such Party. No Party shall be obligated to borrow
from the Nonutility Money Pool if lower cost funds can be obtained from its own
external borrowing.
(b) AEP will not borrow funds from the Nonutility Money Pool or any Party.
Section 1.3 Source of Funds.
(a) Funds will be available through the Nonutility Money Pool from the
following sources for use by the Parties from time to time: (i) surplus funds in
the treasuries of the Parties; (ii) surplus funds in the treasury of AEP; and
(iii) external borrowings by AEP from the sale of commercial paper notes and/or
other instruments authorized by the SEC, and/or bank borrowings ("External
Funds"), the proceeds of which would be added to AEP's treasury funds, in each
case to the extent permitted by applicable laws and regulatory orders. Funds
will be made available from such sources in such stated order of priority.
(b) Each borrowing Party will borrow pro rata from each fund source in the
same proportion that the amount of funds provided from that fund source bears to
the total amount of short-term funds available to the Nonutility Money Pool.
Section 1.4 Authorization.
(a) The determination of whether a Party or AEP has at any time surplus
funds to lend to the Nonutility Money Pool will be made by its treasurer, or by
a designee thereof.
(b) Any loan from the Nonutility Money Pool to a Party shall be authorized by
the borrowing Party's treasurer, or by a designee thereof. No Party shall be
required to effect a borrowing through the Nonutility Money Pool if such Party
determines that it can (and is authorized to) effect such borrowing at lower
cost through the sale of its own commercial paper or other instruments, or
borrowing directly from banks.
Section 1.5 External Investment of Nonutility Investment Pool Funds.
Funds which are loaned from Parties into the Nonutility Money Pool which are not
required to satisfy borrowing needs of other Parties ("Nonutility Investment
Pool") will be invested by AEP on the behalf of the lending Parties in one or
more short-term instruments ("External Investments").
Section 1.6 Nonutility Money Pool Interest.
The interest rate applicable on any day to then outstanding loans through
the Nonutility Money Pool, whether or not evidenced by a promissory demand note,
will be the composite weighted average daily effective cost incurred by AEP for
External Funds outstanding on that date. If there are no External Funds
outstanding on that date, then the rate would be the certificate of deposit
yield equivalent of the 30-day Federal Reserve "AA" Non-Financial Commercial
Paper Composite Rate (the "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 a 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 Funds.
Section 1.7 Nonutility Investment Pool Interest.
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 Nonutility Investment Pool funds on that date.
Section 1.8 Repayment.
Each Party receiving a loan hereunder shall repay the principal amount of
such loan, together with all interest accrued thereon, on demand and in any
event not later than the expiration date of the SEC authorization for the
operation of the Nonutility Money Pool. All loans made through the Nonutility
Money Pool may be prepaid by the borrower without premium or penalty.
Section 1.9 Form of Loans to Parties.
Loans to the Parties through the Nonutility Money Pool will be made
pursuant to open-account advances, although any lending Party would at all times
be entitled to receive upon demand a promissory note evidencing the transaction.
Any such note shall: (a) be substantially in the form attached herewith as
Exhibit A; (b) be dated as of the date of the initial borrowing; (c) mature on
demand or on a date mutually agreed to by the Parties to the transaction, but in
any event not later than the expiration date of the SEC authorization for the
operation of the Nonutility Money Pool; and (d) be repayable in whole at any
time or in part from time to time, without premium or penalty.
ARTICLE II
OPERATION OF THE NONUTILITY MONEY POOL
Section 2.1 Operation.
Operation of the Nonutility Money Pool, including record keeping and
coordination of loans, will be handled by AEPSC under the authority of the
treasurer of AEP and/or AEPSC. AEPSC shall be responsible for the determination
of all applicable interest rates and charges to be applied to any loans from the
Nonutility Money Pool and earnings to be applied to any loans to the Nonutility
Money Pool and/or Nonutility Investment Pool outstanding at any time hereunder,
shall maintain records of all advances, interest charges and accruals and
interest and principal payments for purposes hereof, and shall prepare periodic
reports thereof for the Parties.
Section 2.2 Certain Costs.
The cost of fees and/or compensating balances paid to banks to maintain
credit lines will initially be allocated to the Parties and AEP on the basis of
prior calendar year relative maximum non-coincidental borrowings, and such costs
will be retroactively reallocated at the end of each calendar year on the basis
of that year's actual relative maximum non-coincidental borrowings of the
Parties and AEP.
Section 2.3 Event of Default.
If any Party shall generally not pay its debts as such debts become due,
or shall admit in writing its inability to pay its debts generally, or shall
make a general assignment for the benefit of creditors, or any proceeding shall
be instituted by or against any Party seeking to adjudicate it a bankrupt or
insolvent, then the other Parties may declare the unpaid principal amount of any
loans to such Party, and all interest thereon, to be forthwith due and payable
and all such amounts shall forthwith become due and payable.
ARTICLE III
MISCELLANEOUS
Section 3.1 Amendments.
No amendment to this Agreement shall be effective unless the same be in
writing and signed by Parties thereto.
Section 3.2 Legal Responsibility.
Nothing herein contained shall render AEP or any Party liable for the
obligations of any other Party(ies) hereunder and the rights, obligations and
liabilities of AEP and the Parties are several in accordance with their
respective obligations, and not joint.
Section 3.3 Governing Law.
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York.
IN WITNESS WHEREOF, the undersigned companies have duly caused this document to
be signed on their behalf on the date first written above by the undersigned
thereunto duly authorized.
AMERICAN ELECTRIC POWER COMPANY, INC.
AMERICAN ELECTRIC POWER SERVICE CORPORATION
AEP ACQUISITION, L.L.C.
AEP C&I COMPANY, LLC
AEP COAL, INC.
AEP COMMUNICATIONS, INC.
AEP COMMUNICATIONS, LLC
AEP CREDIT, INC.
AEP DELAWARE INVESTMENT COMPANY II
AEP DELAWARE INVESTMENT COMPANY III
AEP DESERT SKY GP, LLC
AEP DESERT SKY LP LLC
AEP ELMWOOD LLC
AEP EMTECH, LLC
AEP ENERGY SERVICES GAS HOLDING COMPANY
AEP ENERGY SERVICES, INC.
AEP ENERGY SERVICES INVESTMENTS, INC.
AEP ENERGY SERVICES LIMITED
AEP ENERGY SERVICES UK GEN LTD.
AEP FIBER VENTURE, LLC
AEP GAS MARKETING LP
AEP GAS POWER GP, LLC
AEP GAS POWER SYSTEM GP, LLC
AEP HOLDINGS I CV
AEP HOLDINGS II CV
AEP INVESTMENTS, INC.
AEP MEMCO LLC
AEP OHIO COMMERCIAL & INDUSTRIAL RETAIL CO., LLC
AEP OHIO RETAIL ENERGY LLC
AEP POWER MARKETING, INC.
AEP PRO SERV, INC.
AEP PUSHAN POWER, LDC
AEP RESOUCE SERVICES, LLC
AEP RESOURCES INTERNATIONAL, LIMITED
AEP RESOURCES PROJECT MANAGEMENT COMPANY, LTD.
AEP RESOURCES, INC.
AEP RETAIL ENERGY, LLC
AEP T&D SERVICES, LLC
AEP TEXAS COMMERCIAL & INDUSTRIAL RETAIL GP, LLC
AEP TEXAS RETAIL GP, LLC
C3 COMMUNICATIONS, INC.
C3 NETWORKS & COMMUNICATIONS LP
C3 NETWORKS GP, LLC
C3 NETWORKS LIMITED PARTNERSHIP
CSW DEVELOPMENT I, INC.
CSW EASTEX LP I, INC.
CSW ENERGY SERVICES, INC.
CSW ENERGY, INC.
CSW FT. LUPTON, INC.
CSW INTERNATIONAL, INC.
CSW POWER MARKETING, INC.
DOLET HILLS LIGNITE COMPANY, LLC
EASTEX COGENERATION LP
ENERSHOP INC.
HOUSTON PIPE LINE COMPANY LP
HPL HOLDINGS, INC.
INDUSTRY AND ENERGY ASSOCIATES LLC
JEFFERSON ISLAND STORAGE & HUB L.L.C.
LIG CHEMICAL COMPANY
LIG LIQUIDS COMPANY, L.L.C.
LIG PIPELINE COMPANY
LIG, INC.
LOUISIANA INTRASTATE GAS COMPANY, L.L.C.
MID-TEXAS PIPELINE COMPANY
MUTUAL ENERGY L.L.C.
MUTUAL ENERGY SERVICE COMPANY, L.L.C.
MUTUAL ENERGY SWEPCO L.P.
NEWGULF POWER VENTURE
POLR POWER, L.P.
REP GENERAL PARTNER L.L.C.
REP HOLDCO INC.
TUSCALOOSA PIPELINE COMPANY
UNITED SCIENCES TESTING, INC.
UNIVERSAL SUPERCAPACITATORS, LLC
VENTURES LEASE CO., LLC
By: /s/ Wendy G. Hargus
Assistant Treasurer of each of the above-listed companies
EXHIBIT A
FORM OF NONUTILITY MONEY POOL NOTE
TO BE EXECUTED BY BORROWING PARTIES
TO AEP OR OTHER PARTIES
___________________, 20__
FOR VALUE RECEIVED, the undersigned, ____________________ (the
"Borrower"), hereby promises to pay to the order of _____________________ (the
"Lender") at its principal office in ____________________, on demand or on
_____________________, 20__, or at the option of the Borrower, whichever first
occurs, but in any event not later than the expiration date of the SEC
authorization for the operation of the Nonutility Money Pool, the principal sum
set forth on the attachment hereto as "Principal Amount Outstanding." This note
may be paid in full at any time or in part from time to time without premium or
penalty. The Principal Amount Outstanding shall bear interest, calculated daily,
at a rate equal to AEP's weighted average daily effective cost for all External
Borrowings outstanding on that date. If there are no External Borrowings
outstanding on that date, then the rate would be the CD yield equivalent of the
30-day Federal Reserve "AA" Non-Financial Commercial Paper Composite Rate (the
"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 a
Composite is established.
This Note shall be governed by, and construed and interpreted in
accordance with, the Laws of the State of New York.
IN WITNESS WHEREOF, the undersigned, pursuant to due authorization, has
caused this Note to be executed in its name and on its behalf by its duly
authorized officer.
(Name of Borrower)
By: _______________________________
Name:
Title:
Principal
Loan Amount
Date (Repayment) Outstanding Rate Interest
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Exhibit E
March __, 2004
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: American Electric Power Company, Inc.
Application-Declaration on Form U-1
File No. 70
Dear Sirs:
I am an attorney employed by American Electric Power Service Corporation,
a subsidiary of American Electric Power, Inc. ("AEP") and have acted as counsel
for American Electric Power Company, Inc. and its subsidiaries (the
"Subsidiaries") in connection with the filing of the Application-Declaration on
Form U-1 (the "Application"), filed under the Public Utility Holding Company Act
of 1935, as amended (the "Act"), by AEP a registered holding company, and its
Subsidiaries. In the application, AEP and the Subsidiaries request authority
under the Act to engage in various financing and related transactions (the
"Proposed Transactions") through March 31, 2007.
I have examined originals, or copies certified to my satisfaction, of such
corporate records of AEP and the Subsidiaries, certificates of public officials,
certificates of officers and representatives of AEP and the Subsidiaries and
other documents as I have deemed necessary to require as a basis for the
opinions hereafter expressed. In such examination, I have assumed the
genuineness of all signatures and the authenticity of all documents submitted to
me as originals and the conformity with the originals of all documents submitted
to us as copies. As to various questions of fact material to such opinions I
have, when relevant facts were not independently established, relied upon
certificates by officers of AEP and other appropriate persons and statements
contained in the Application.
Based upon the foregoing, and having regard to legal considerations which
I deem relevant, I am of the opinion that, in the event that the Proposed
Transactions are consummated in accordance with the Application, and subject to
the assumptions and conditions set forth below:
1. AEP and each of the Subsidiaries are or will be validly organized and
duly existing under the laws of their states of incorporation.
2. All state laws applicable to the Proposed Transactions as described in
the Application (other than so-called "blue-sky" or state securities
laws as to which I express no opinion) will have been complied with.
3. Any debt securities and any guarantees issued as contemplated in the
Application will be valid and binding obligations of AEP or the
respective Subsidiary in accordance with their terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium or
other similar laws of general applicability relating to or affecting
the enforcement of creditors' rights generally and to the effects of
general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law), including without
limitation (a) the possible unavailability of specific performance,
injunctive relief or any other equitable remedies and (b) concepts
of materiality, reasonableness, good faith and fair dealing.
4. Any shares of common stock or preferred stock issued or sold by the
Subsidiaries as contemplated in the Application will be validly issued,
fully paid, and non-assessable and the holders thereof will be entitled
to the rights and privileges appertaining thereto set forth in the
charter or other documents defining such rights and privileges.
5. The consummation by AEP and the Subsidiaries of the Proposed
Transactions will not violate the legal rights of the holders of any
securities issued by AEP or the Subsidiaries or any "associate"
company, as such term is defined in the Act, of AEP or the
Subsidiaries.
The opinions expressed above in respect of the Proposed Transactions
described in the Application are subject to the following assumptions or
conditions:
a. The Proposed Transactions shall have been duly authorized and
approved to the extent required by state law by the Boards of
Directors of AEP and the Subsidiaries.
b. The Securities and Exchange Commission shall have duly entered an
appropriate order or orders granting and permitting the Application
to become effective.
c. The Proposed Transactions shall be consummated in accordance with
any required approvals, authorizations, consents, certificates and
orders of any state commission or regulatory authority and all such
required approvals, authorizations, consents, certificates and
orders shall have been obtained and remain in effect.
I hereby consent to the use of this opinion as an exhibit to the
Application.
Very truly yours,
/s/ Ann B. Graf
Ann B. Graf
Counsel to American Electric Power
Company, Inc. and its Subsidiaries
ABG/lrc
Exhibit F
UNITED STATES OF AMERICA
before the
SECURITIES AND EXCHANGE COMMISSION
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Release No. /March ___, 2004
In the Matter of
AMERICAN ELECTRIC POWER COMPANY, INC., et al.
1 Riverside Plaza
Columbus, OH 43215
(70- )
NOTICE IS HEREBY GIVEN that American Electric Power Company, Inc., a New York
corporation ("AEP") and AEP Utilities, Inc., formerly Central and South West
Corporation, a Delaware corporation ("AEP Utilities"), both registered holding
companies under the Public Utility Holding Company Act of 1935, as amended (the
"Act") and the direct and indirect subsidiaries of AEP ("Subsidiaries"),
including the following public utility subsidiaries: AEP Generating Company
("Generating"), Appalachian Power Company ("Appalachian"), AEP Texas Central
Company ("TCC"), AEP Texas North Company ("TNC"), 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"), and Wheeling Power Company ("Wheeling") (collectively,
"the Public Utility Subsidiaries") and additional nonutility subsidiaries have
filed a Form U-1 Application or Declaration with this Commission pursuant to
Sections 6(a), 7, 9(a), 10 and 12 of the Act, and Rules 43, 45 and 46 thereunder
for authorization for certain financial transactions described in the
Application through March 31, 2007 unless otherwise specified in the
Application.
It is stated that no other state commission, other than those whose approval has
been obtained, and no federal commission, other than this Commission, has
jurisdiction over the proposed transactions.
The Application or Declaration and any amendments thereto are available for
public inspection through the Commission's Office of Public Reference.
Interested persons wishing to comment or request a hearing should submit their
views in writing by October _____, 2004 to the Secretary, Securities and
Exchange Commission, Washington, D.C. 20549, and serve a copy on the applicant
or declarant at the address specified above. Proof of service (by affidavit or,
in case of any attorney at law, by certificate) should be filed with the
request. Any request for a hearing shall identify specifically the issues of
fact 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
this matter. After said date, the Application or Declaration, as filed or as it
may be amended, may be permitted to become effective.
For the Commission, by the Office of Public Utility Regulation, pursuant to
delegated authority.
Jonathan G. Katz
Secretary
1 The additional subsidiaries are Cedar Coal Co., Central Appalachian Coal Co.,
Central Coal Co., Colomet, Inc., Simco, Inc., Southern Appalachian Coal Co.,
Blackhawk Coal Co., Conesville Coal Preparation Company, Franklin Real Estate
Company, and Indiana Franklin Realty, Inc.
2 The following participants in the Nonutility Money Pool although authorized
are no longer participants because they have been removed, dissolved or sold:
AEP Retail Energy LLC, AEP Credit, Inc., Industry and Energy Associates LLC, AEP
Gas Power Systems, LLC, AEP Retail Energy LLC, AEP Resource Services LLC,
Mid-Texas Pipeline Company, Eastex Cogeneration LP, CSW Eastex LP I Inc.,
Enershop, Mutual Energy CPL LP, Mutual Energy WTU LP, Mutual Energy Service Co.,
LLC, AEP Ohio Commercial & Industrial Retail Company LLC, Universal
Supercapacitors, LIG, Inc., LIG Pipeline Company, Tuscaloosa Pipeline Company,
LIG Liquids Company, L.L.C., Louisiana Intrastate Gas Company, L.L.C., LIG
Chemical Company.