File No. 70-10186
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 3 TO
FORM U-1
APPLICATION OR DECLARATION
under
The Public Utility Holding Company Act of 1935
THE SOUTHERN COMPANY
270 Peachtree Street, N.W.
Atlanta, Georgia 30303
ALABAMA POWER COMPANY SOUTHERN COMMUNICATIONS SERVICES, INC.
600 North 18th Street 5555 Glenridge Connector, Suite 500
Birmingham, Alabama 35291 Atlanta, Georgia 30342
GEORGIA POWER COMPANY SOUTHERN COMPANY CAPITAL FUNDING, INC.
241 Ralph McGill Boulevard, N.E. 1403 Foulk Road, Suite 102
Atlanta, Georgia 30308 Wilmington, Delaware 19803
GULF POWER COMPANY SOUTHERN COMPANY ENERGY SOLUTIONS LLC
One Energy Place 241 Ralph McGill Boulevard, N.E.
Pensacola, Florida 32520 Atlanta, Georgia 30308
MISSISSIPPI POWER COMPANY SOUTHERN COMPANY SERVICES, INC.
2992 West Beach 241 Ralph McGill Boulevard, N.E.
Gulfport, Mississippi 39501 Atlanta, Georgia 30308
SAVANNAH ELECTRIC AND POWER COMPANY SOUTHERN NUCLEAR OPERATING COMPANY, INC.
600 East Bay Street 40 Inverness Center Parkway
Savannah, Georgia 31401 Birmingham, Alabama 35242
(Name of company or companies filing this statement
and addresses of principal executive offices)
THE SOUTHERN COMPANY
(Name of top registered holding company parent of each
applicant or declarant)
Tommy Chisholm, Secretary
The Southern Company
270 Peachtree Street, N.W.
Atlanta, Georgia 30303
William E. Zales, Jr., Vice President Tommy Chisholm, Secretary
and Corporate Secretary Southern Communications Services, Inc.
Alabama Power Company 5555 Glenridge Connector, Suite 500
600 North 18th Street Atlanta, Georgia 30342
Birmingham, Alabama 35291
Janice G. Wolfe, Corporate Secretary Daniel P. McCollom, Secretary
Georgia Power Company Southern Company Capital Funding, Inc.
241 Ralph McGill Boulevard, N.E. 1403 Foulk Road, Suite 102
Atlanta, Georgia 30308 Wilmington, Delaware 19803
Susan N. Ritenour, Secretary and Treasurer Tommy Chisholm, Secretary
Gulf Power Company Southern Company Energy Solutions LLC
One Energy Place 241 Ralph McGill Boulevard, N.E.
Pensacola, Florida 32520 Atlanta, Georgia 30308
Vicki L. Pierce, Corporate Secretary Tommy Chisholm, Vice President and Secretary
Mississippi Power Company Southern Company Services, Inc.
2992 West Beach 241 Ralph McGill Boulevard, N.E.
Gulfport, Mississippi 39501 Atlanta, Georgia 30308
Nancy E. Frankenhauser, Corporate Secretary Sherry A. Mitchell, Corporate Secretary
Savannah Electric and Power Company Southern Nuclear Operating Company, Inc.
600 East Bay Street 40 Inverness Center Parkway
Savannah, Georgia 31401 Birmingham, Alabama 35242
(Names and addresses of agents for service)
The Commission is requested to mail signed copies of all orders,
notices and communications to:
Thomas A. Fanning John D. McLanahan, Esq.
Executive Vice President, Treasurer Troutman Sanders LLP
and Chief Financial Officer 600 Peachtree Street, N.E.
The Southern Company Suite 5200
270 Peachtree Street, N.W. Atlanta, Georgia 30308-2216
Atlanta, Georgia 30303
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The Application in the foregoing file is amended and restated in its
entirety as follows:
Item 1. Description of Proposed Transactions.
1.1 Introduction.
This Application seeks a renewal and extension of certain existing
authorizations with respect to the ongoing financing activities of The Southern
Company ("Southern"). 1.2 Description of Southern and its Subsidiaries and
Existing Financing Authority.
Southern is a registered holding company under the Public Utility
Holding Company Act of 1935, as amended (the "Act"). Its public utility
subsidiaries include Alabama Power Company, Georgia Power Company, Gulf Power
Company, Mississippi Power Company and Savannah Electric and Power Company
(collectively, the "Retail Operating Companies"). Alabama Power Company and
Georgia Power Company each owns 50% of the outstanding common stock of Southern
Electric Generating Company ("SEGCO"), which is also an operating public utility
company. In addition, Southern owns all of the common stock of Southern Power
Company ("Southern Power"), which is also an operating public utility company.
Southern also owns all the outstanding common stock of Southern Communications
Services, Inc., Southern Company Gas LLC, Southern Nuclear Operating Company,
Inc., Southern Company Services, Inc. ("SCS"), Southern Management Development,
Inc., Southern Telecom, Inc. and Southern Company Holdings, Inc. (collectively,
the "Other Subsidiaries").
Southern also indirectly owns all of the outstanding shares of common
stock of Southern Company Capital Funding, Inc. ("Capital Funding"). Capital
Funding was organized under the laws of Delaware on January 24, 1997 and was
authorized to be formed as a financing subsidiary pursuant to an order dated
February 9, 2000 in File No. 70-9335 (HCAR No. 35-27134). Capital Funding is the
only finance subsidiary (other than trusts formed by Capital Funding to issue
trust preferred securities) that has been formed pursuant to the authority
granted in HCAR No. 35-27134. The business of Capital Funding is limited to
effecting financing transactions for Southern. In connection with such financing
transactions, Southern may enter into one or more guarantee or credit support
agreements in favor of Capital Funding. Capital Funding will be the only
financing subsidiary on behalf of Southern that will issue Long-term Debt (as
defined below in Section 1.7), debt obligations related to Preferred Securities,
Preferred Stock and Equity-linked Securities (each as defined below in Section
1.7). Southern or Capital Funding may create trusts or other financing
subsidiaries to issue Preferred Securities.
In addition to the Retail Operating Companies, SEGCO, Southern Power
and the Other Subsidiaries, Southern also engages through other direct and
indirect subsidiaries in various other energy-related and non-utility
businesses.
1.3 Financing Authorization.
By an order dated December 27, 2000 in File No. 70-8277 (HCAR No.
35-27323), Southern is authorized to issue and sell from time to time in one or
more transactions, through September 30, 2004, up to 35 million shares of its
authorized but unissued common stock, $5 par value (the "Common Stock")
(pursuant to which no shares have been issued as of May 17, 2004) (the "December
2000 Order").1 By an order dated March 28, 2001 in File No. 70-8789 (HCAR No.
35-27367), Southern is authorized to issue and sell from time to time through
December 31, 2004 short-term and/or term loan notes and/or commercial paper in
an aggregate principal amount not to exceed $2 billion outstanding at any time
(pursuant to which approximately $210 million was outstanding as of June 30,
2004) (the "March 2001 Order"). By an order dated December 22, 1999 in File No.
70-9557 (HCAR No. 35-27118), Southern is authorized to issue and sell up to 88
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million shares of Common Stock under its Southern Investment Plan, its Employee
Savings Plan and its Employee Stock Ownership Plan (each as defined below in
Section 1.7) through September 30, 2004 (the "December 1999 Order").2 By an
order dated October 8, 1999 in File No. 70-8961 (HCAR No. 35-27082), Southern
was authorized to guarantee the debt or other obligations of SCS, for an
aggregate principal amount up to $160 million at any time outstanding through
June 30, 2004 (pursuant to which approximately $53 million was outstanding as of
June 30, 2004) (the "October 1999 Order").3 By an order dated February 9, 2000
in File No. 70-9335 (HCAR No. 35-27134), Southern and Capital Funding were
authorized to issue and sell from time to time in one or more transactions,
through September 30, 2003, preferred securities and/or notes in an aggregate
principal amount not to exceed $1.5 billion (the "February 2000 Order" and,
together with the December 2000 Order, the March 2001 Order, the December 1999
Order and the October 1999 Order, collectively, the "Financing Orders").
1.4 Summary of Requested Approvals.
The applicant-declarants propose herein to amend and restate their
current financing authorizations, as contained in the Financing Orders, for the
period commencing with the effective date of the Commission's order in this
proceeding and ending June 30, 2007 (the "Authorization Period"). Upon the
effective date of the Commission's order in this proceeding, the
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1 Southern is authorized under its charter to issue up to 1 billion
shares of Common Stock. Capital Funding is authorized under its charter
to issue up to 1,000 shares of its common stock.
2 As of May 1, 2004, Southern has issued 61 million shares pursuant to
the December 1999 Order.
3 Pursuant to an order dated October 11, 2000 in File No. 70-9035 (HCAR
No. 35-27246), Southern has existing authority to issue up to 40
million shares of Common Stock in accordance with the Southern Company
Performance Stock Plan through February 17, 2007. Pursuant to an order
dated June 7, 2001 in File No. 70-9869 (HCAR No. 35-27416), Southern
has existing authority to issue up to 30 million shares of Common Stock
in accordance with the Southern Company Omnibus Incentive Compensation
Plan through May 22, 2011. Pursuant to an order dated June 4, 2004 in
File No. 70-10215 (HCAR No. 35-27854), Southern has existing authority
to issue 1.7 million shares of Common Stock in accordance with the
Southern Company Outside Directors Stock Plan through May 26, 2014. The
authorization under these orders is not being renewed pursuant to this
filing.
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applicant-declarants will relinquish their authority to issue securities and
engage in the other transactions authorized under the Financing Orders.
Specifically, the applicant-declarants request authorization for the
following transactions during the Authorization Period:
1. Southern and Capital Funding request authority to issue and
sell from time to time, directly, Preferred Stock and,
directly or indirectly through one or more financing
subsidiaries, Preferred Securities (including without
limitation trust preferred securities), Equity-linked
Securities and/or Long-term Debt in an aggregate amount not to
exceed $1.5 billion. Any such securities issued by Capital
Funding (or other financing subsidiary for Preferred
Securities) or a trust may be guaranteed by Southern. Any such
securities may be convertible into Common Stock, provided that
the value of Common Stock issuable upon such conversions may
not exceed $2 billion in the aggregate.
2. Southern requests authority to issue and sell from time to
time up to 35 million shares of Common Stock.
3. Southern requests authority to issue up to 85 million shares
of Common Stock pursuant to its Employee Savings Plan, its
Employee Stock Ownership Plan and its Southern Investment
Plan, or other similar stock-based plans adopted in the future
(collectively, the "Plans"), such shares to be in addition to
any shares of Common Stock issued under the authority
requested in (1) and (2) above. The Employing Companies (as
defined below in Section 1.7) request authority to purchase
Common Stock pursuant to the Employee Stock Ownership Plan.
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4. Southern requests authority to issue and sell from time to
time notes to effect Short-term and Term Loan Notes and
Commercial Paper (each as defined below in Section 1.7)
borrowings in an amount at any time outstanding not to exceed
$3 billion.
5. Southern requests authority to provide guarantees on behalf or
for the benefit of SCS in an aggregate principal amount not to
exceed $330 million at any time outstanding.
1.5 Parameters Applicable to Authorized Financing Transactions.
The following general terms will be applicable where appropriate to the
proposed external financing activities requested to be authorized hereby:
Effective Cost of Money. The effective cost of capital on Long-term
Debt, Preferred Stock, Preferred Securities, Equity-linked Securities,
Short-term and Term Loan Notes and Commercial Paper will not exceed competitive
market rates available at the time of issuance for securities having the same or
reasonably similar terms and conditions issued by similar companies of
reasonably comparable credit quality; provided that in no event will the
effective cost of capital (i) on any series of Long-term Debt and any Term Loan
Note with a maturity of greater than one year exceed 500 basis points over a
U.S. Treasury security having a remaining term equal to the term of such
security, (ii) on any series of Short-term or Term Loan Notes with maturity of
one year or less or Commercial Paper exceed 300 basis points over the London
Interbank Offered Rate for maturities of less than one year, (iii) on any series
of Preferred Stock, Preferred Securities or Equity-linked Securities exceed 500
basis points over a U.S. treasury security having a remaining term equal to the
term of such series and (iv) on any guarantee by Southern of debt of SCS exceed
500 basis points over a U.S. treasury security having an amount equal to the
guaranteed amount.
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Maturity. The maturity of Long-term Debt and Preferred Securities will
be between one and 50 years after the issuance thereof. Equity-linked Securities
will be redeemed or mature no later than 50 years after the issuance thereof,
unless converted into Common Stock. Preferred Stock will be redeemed no later
than 50 years, unless it is perpetual in duration.
Issuance Expenses. The underwriting fees, commissions or other similar
remuneration paid in connection with the non-competitive issue, sale or
distribution of (i) Long-term Debt and Short-term and Term Loan Notes will not
exceed 6% of the principal or total amount of the securities being issued and
(ii) Preferred Stock, Common Stock, Preferred Securities or Equity-linked
Securities will not exceed 6% of the principal or total amount of the securities
being issued. No commission or fee will be payable in connection with the
issuance and sale of Commercial Paper, except for a commission, payable to the
dealer, not to exceed one-eighth of one percent per annum in respect of
Commercial Paper sold through the dealer as principal.
Common Equity Ratio. At all times during the Authorization Period,
Southern represents that it and its public utility subsidiaries will each
maintain a common equity ratio of at least thirty percent of its consolidated
capitalization (common equity, preferred stock and long-term and short-term
debt) as reflected in its most recent Form 10-K or Form 10-Q filed with the
Commission adjusted to reflect changes in capitalization since the balance sheet
date, unless otherwise authorized.
Investment Grade Ratings. Southern and Capital Funding further
represent that no guarantees or securities, other than Common Stock, Commercial
Paper or short-term bank debt (with a maturity of one year or less), may be
issued in reliance upon the authorization granted by the Commission pursuant to
this Application, unless upon original issuance thereof: (i) the security to be
issued, if rated, is rated investment grade; (ii) all outstanding securities of
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the issuer that are rated are rated investment grade; and (iii) all outstanding
securities of Southern that are rated are rated investment grade. For purposes
of this provision, a security will be deemed to be rated "investment grade" if
it is rated investment grade by at least one nationally recognized statistical
rating organization, as that term is used in paragraphs (c)(2)(vi)(E), (F) and
(H) of Rule 15c3-1 under the Securities Exchange Act of 1934, as amended (the
"1934 Act"). Southern and Capital Funding also request the Commission to reserve
jurisdiction over the issuance of any guarantees or securities that do not
satisfy these conditions.
Authorization Period. No security will be issued pursuant to the
authorization sought herein after the last day of the Authorization Period (June
30, 2007).
Security Ratings. The ratings of the securities issued by Southern and
Capital Funding are as follows:
Southern Senior Unsecured Debt Moody's: A3 S&P: A-
Southern Commercial Paper, Short-Term Moody's: P1 S&P: A1
Capital Funding Senior Unsecured Debt Moody's: A3 S&P: A-
1.6 Use of Proceeds.
The proceeds from the sale of the securities authorized hereunder,
including the Long-term Debt, the Short-term and Term Loan Notes, the Commercial
Paper, the Preferred Stock, the Preferred Securities and the Common Stock,
including the Common Stock sold pursuant to the Plans, will be used by Southern
for general corporate purposes, to acquire the securities of associate companies
and to acquire interests in other businesses, as permitted under the Act,
including interests in "exempt wholesale generators" ("EWGs"), "energy related
companies" under Rule 58 of the Act and "foreign utility companies" ("FUCOs"),
in transactions permitted under Act, and for other lawful purposes. However, no
proceeds will be used to acquire interests in other businesses or the securities
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of associate companies unless the financing is consummated in accordance with
Commission order or is exempt from the Act. Southern does not seek in this
proceeding any increase in the amount it is permitted to invest in EWGs and
FUCOs.4 The proceeds of any financing by Capital Funding will be remitted, paid
as a dividend, loaned or otherwise transferred directly or indirectly to
Southern. The proceeds realized by SCS from borrowings guaranteed by Southern
will be used to fund the general requirements of the business of SCS, including
the possible refunding of outstanding indebtedness.
1.7 Description of Specific Financing Proposals.
1. Common Stock. Southern requests authority to issue and sell up to 35
million shares of Common Stock in ordinary regular-way transactions in the
auction market on the floor of the New York Stock Exchange, or any regional
exchange on which the Common Stock may be admitted to trading privilege, in
block transactions on such exchanges or in the over-the-counter market, in which
a broker or dealer may act as a principal for its own account and in
"fixed-price offerings" off the floor of such exchanges, or "special offerings"
and "exchange distributions" in accordance with the rules of such exchanges.
Public distributions may be pursuant to private negotiations with underwriters,
dealers or agents, or effected through competitive bidding among underwriters.
In addition, sales may be made through private placements or other non-public
offerings to one or more persons. The sale of the Common Stock will be made at
market prices prevailing at the time of sale in the case of transactions on
exchanges and at prices negotiated by the broker or dealer and related to
prevailing market prices in the case of over-the-counter transactions.
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4 Pursuant to the Rule 53(c) Order (as defined below in Item 3), Southern
is currently permitted to invest 100% of its consolidated retained
earnings ($5.336 billion as of March 31, 2004) in EWGs and FUCOs.
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2. Preferred Stock, Preferred Securities, Equity-linked Securities and
Long-term Debt. Southern and Capital Funding request authority to issue and sell
from time to time, directly, Preferred Stock and, directly or indirectly through
one or more financing subsidiaries, Preferred Securities (including without
limitation trust preferred securities), Equity-linked Securities and/or
Long-term Debt in an aggregate amount not to exceed $1.5 billion. Any such
securities may be convertible into Common Stock, provided that the value of
Common Stock issuable upon such conversions may not exceed $2 billion in the
aggregate. For purposes of calculating compliance with this limit, the Common
Stock will be valued based upon an agreement between the buyer and seller of
such securities.
Southern and Capital Funding wish to have the flexibility to issue,
directly or indirectly through one or more statutory or business trusts or any
other finance subsidiary, preferred securities (including, without limitation,
trust preferred securities) (the "Preferred Securities"). 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 the board of directors of Southern or Capital Funding, as applicable.
Dividends or distributions on such 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. Southern would guarantee certain payments made by any trust or other
finance subsidiary and associated with the Preferred Securities. Southern
expects that the Preferred Securities would be issued using up to two different
types of special purpose subsidiaries. One or more subsidiaries (each a
"Financing Subsidiary") would issue the Preferred Securities. These subsidiaries
would be established by Southern and/or Capital Funding that Southern would use
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to hold interests in one or more of the Finance Subsidiaries.5 A Financing
Subsidiary would lend, dividend or otherwise transfer to Capital Funding or
Southern, as applicable, the proceeds of the Preferred Securities it issues,
together with the equity contributed to the Financing Subsidiary. In turn,
Capital Funding would lend, 6 dividend or otherwise transfer directly or
indirectly the proceeds to Southern. Southern or Capital Funding would issue
guarantees7 related to: (a) payment of dividends or distributions on the
Preferred Securities of any Financing Subsidiary, if, and to the extent that,
the Financing Subsidiary has funds legally available for this purpose; (b)
payments to holders of the Preferred Securities of amounts due upon liquidation
of the Financing Subsidiary or redemption of its Preferred Securities; and (c)
certain additional amounts that may be payable in respect of the Preferred
Securities. In connection with the issuance of Preferred Securities, Southern
proposes to organize one or more separate subsidiaries as a statutory trust or
trusts of the State of Delaware or other comparable trust in any jurisdiction
considered advantageous by Southern or any other entity or structure, foreign or
domestic, that is considered advantageous by Southern. Southern requests that
the Commission reserve jurisdiction over the use of a foreign entity as a
Financing Subsidiary.
Southern and Capital Funding propose that, in addition to, or as an
alternative to, any Preferred Securities financing as described hereinabove,
Southern or Capital Funding may issue and sell notes directly to investors. It
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5 In the event that a Financing Subsidiary is organized as a limited
liability company, Southern or Capital Funding may also organize a
second special purpose subsidiary under Delaware or other state law
("Investment Subsidiary") to acquire and hold Financing Subsidiary
membership interests, so as to comply with any requirement under any
applicable law that a limited liability company have at least two
members. Similarly, in the event that any Financing Subsidiary is
organized as a limited partnership, an Investment Subsidiary may be
organized to act as the general partner of the Financing Subsidiary. If
a Financing Subsidiary is organized as a limited partnership, Southern
may acquire, directly or indirectly through the Investment Subsidiary,
a limited partnership interest in the Financing Subsidiary, in order to
ensure that the Financing Subsidiary will have a limited partner to the
extent required by applicable law.
6 The terms of any loan to Southern of the proceeds from the issuance of
Preferred Securities would mirror the terms of those Preferred
Securities.
7 Guarantees issued by Capital Funding would in turn be supported by
Southern's own credit.
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is proposed that any notes so issued will be unsecured, may be either senior or
subordinated obligations of Southern or Capital Funding, as the case may be, may
be convertible or exchangeable into Common Stock or Preferred Stock and may have
the benefit of a sinking fund (the "Long-term Debt"). Long-term Debt of Capital
Funding will have the benefit of a guarantee or other credit support by Southern
and may be subject to redemption or remarketing or a put option. Southern or
Capital Funding will not issue Long-term Debt unless it has evaluated all
relevant financial considerations (including, without limitation, the cost of
equity capital) and has determined that to do so is preferable to issuing Common
Stock or short-term debt.
It is proposed that Southern or Capital Funding may issue and sell from
time to time shares of its preferred stock (the "Preferred Stock"). Any such
issue of Preferred Stock will have a specified par or stated value per share
and, in accordance with applicable state law, will have such voting powers (if
any), designations, preferences, rights and qualifications, limitations or
restrictions as shall be stated and expressed in the resolution or resolutions
providing for such issue adopted by the board of directors of Southern or
Capital Funding, as the case may be, pursuant to authority vested in it by the
provisions of its certificate of incorporation. The foregoing may include rights
of conversion or exchange into Common Stock.
Southern or Capital Funding may also issue and sell equity-linked
securities, typically in the form of stock purchase units, which combine a
security with a fixed obligation (e.g., Long-term Debt, Preferred Securities,
Preferred Stock or other debt obligations of third parties, including U.S.
Treasury securities) with a stock purchase contract that is exercisable (either
mandatorily or at the option of the holder) within a relatively short period
(e.g., one to six years after issuance) ("Equity-linked Securities"). Any such
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securities issued by Capital Funding or a trust or other finance subsidiary may
be guaranteed by Southern. In addition, Southern proposes to issue and sell
stock purchase contracts ("Stock Purchase Contracts") issued either separately
or as part of units ("Stock Purchase Units"). The Stock Purchase Units would
consist of (a) Stock Purchase Contracts and (b) Preferred Securities, Long-term
Debt and/or debt obligations of third parties.
3. Short-term and Term Loan Notes and Commercial Paper. Southern
proposes to issue and sell from time to time unsecured short-term and term loan
notes ("Short-term and Term Loan Notes") and commercial paper ("Commercial
Paper") in an aggregate principal amount at any time outstanding not to exceed
$3 billion. Short-term and Term Loan Notes and Commercial Paper may include
commercial paper notes, bank notes and other forms of short-term indebtedness.
Southern proposes to effect Short-term and Term Loan Note borrowings from one or
more lending institutions. These borrowings will be evidenced by short-term
and/or term loan notes, dated as of the date of the borrowings, and maturing not
more than seven years after the date of issue, or "grid" short-term and/or long
term notes, evidencing all outstanding borrowings from each lender, dated as of
the date of the initial borrowings, and maturing not more than seven years after
the date of issue. Southern proposes to issue Commercial Paper in the form of
promissory notes with varying maturities not to exceed one year. These
maturities may be subject to extension to a final maturity not to exceed 390
days. Actual maturities will be determined by market conditions, the effective
interest costs and Southern's anticipated cash flow, including the proceeds of
other borrowings, at the time of issuance.
4. Common Stock issued under Stock-based Plans. In addition to the
foregoing, Southern also proposes to issue up to 85 million shares of Common
Stock under the Plans. Currently, Southern maintains the following Plans:
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Southern Investment Plan. The Southern Investment Plan (the "SIP")
provides shareholders of record of Common Stock with a means of purchasing
additional shares through the reinvestment of cash dividends and/or through
optional cash payments. In addition, the SIP has a direct purchase feature that
enables other eligible investors to become participants by making initial cash
payments for the purchase of Common Stock. Shares of Common Stock are purchased
under the SIP, at the option of Southern, from newly issued shares or shares
purchased on the open market. The price per share for shares purchased on the
open market will be the weighted average price paid to acquire the shares,
excluding broker commissions. When shares are purchased from Southern using cash
dividends, the price per share generally will be equal to the average of the
high and low sale prices on the dividend payment date. When shares are purchased
from Southern with the investor's cash payments, the price per share generally
will be equal to the average of the high and low sale prices on the 10th or 25th
of each month, as applicable.
Employee Savings Plan. Under the Employee Savings Plan (the "Savings
Plan"), each employee of Southern's subsidiaries may generally contribute a
certain percentage of his or her compensation to an account administered on his
or her behalf under the Savings Plan. These funds, together with funds
contributed by the employer, would be invested in one or more of several funds,
including a Southern Company Stock Fund consisting of Common Stock. Investment
purchases for the funds may be made either on the open market or by private
purchase, provided that no private purchase may be made of Common Stock at a
price greater than the last sale price or the highest current independent bid
price, whichever is higher, for the stock on the New York Stock Exchange, plus
any applicable commission. In addition, Common Stock may be purchased directly
from Southern under the SIP or under any similar plan made available to holders
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of record of shares of Common Stock, at the purchase price provided for in that
plan.
Employee Stock Ownership Plan. The purpose of the Employee Stock
Ownership Plan (the "ESOP") is to enable eligible employees of SCS and other
affiliates or subsidiaries of Southern that adopt the ESOP (the "Employing
Companies") to share in the future of Southern, to provide participants with an
opportunity to accumulate capital for their future economic security and to
enable participants to acquire Common Stock. All of the applicant-declarants
except for Capital Funding are currently Employing Companies. The ESOP permits
the Employing Companies to contribute cash or Common Stock in an amount or under
a formula that SCS will determine in its sole and absolute discretion. Cash
contributions would be used to purchase Common Stock at market value, as
determined by SCS. Cash dividends paid on the contributed Common Stock allocated
to participating employees' accounts generally would be reinvested in additional
shares of Common Stock, unless the employee elects to have the dividends
distributed to him.
5. Guarantees. SCS is a wholly-owned subsidiary of Southern. SCS
provides certain services for Southern and its associate companies in the
Southern electric system pursuant to authorization of the Commission.
Southern proposes that it may guarantee indebtedness or other
obligations incurred by SCS, as described herein, in an aggregate amount not to
exceed $330 million at any time outstanding. Southern hereby requests authority
for such guarantees. The transactions by SCS referred to herein do not require
Commission approval.
SCS may issue and sell new notes (the "Proposed Notes") to a lender or
lenders other than Southern. The Proposed Notes would be issued pursuant to an
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agreement or agreements with such lender or lenders and may be guaranteed by
Southern as to principal, premium, if any, and interest. The Proposed Notes may
have terms of up to 50 years, contain sinking funds and bear interest at a rate
or rates not to exceed 500 basis points per annum over the rate for United
States Treasury securities of corresponding maturity at the time the lender or
lenders commit to purchase the particular issue. SCS may engage an agent to
place the Proposed Notes for a commission based upon the principal amount
borrowed.
SCS also may effect short-term or term-loan borrowings under one or
more revolving credit commitment agreements. Short-term borrowings under such
agreement or agreements would have a maximum maturity of one year; term loans
would have maturities up to 10 years. It is expected that the borrowings would
be evidenced by a "grid" promissory note to be dated the date of the initial
borrowing and the date of each borrowing thereafter when a "grid" short-term or
term-loan note, as the case may be, is not outstanding. Such borrowings would
bear interest at rates to be negotiated with the lending financial institution
or institutions. In addition, it is expected that SCS will be obligated to pay
fees in connection with the credit arrangements. Such interest rates and fees
will be negotiated based upon prevailing market conditions.
SCS also may effect borrowings from certain banks and other
institutions. Such institutional borrowings will be evidenced by notes to be
dated as of the date of such borrowings and to mature in not more than 10 years
after the date of borrowing or by "grid" notes evidencing all outstanding
borrowings from each lender to be dated as of the date of the initial borrowing
and to mature in not more than 10 years after the date of borrowing. Generally,
borrowings will be prepayable in whole, or in part, without penalty or premium,
and will be at rates to be negotiated with the lending institutions based upon
prevailing market conditions. SCS also may negotiate separate rates for, and/or
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agree not to prepay, particular borrowings if it is considered more favorable to
SCS.
Southern further proposes that it may guarantee obligations incurred by
SCS in connection with installment purchases, sale-leasebacks, leases or other
acquisitions of equipment or other assets.
1.8 Certificate of Notification.
With respect to transactions pursuant to the authority sought in this
Application, Southern will file, on a quarterly basis corresponding with the
periodic reporting requirements of the 1934 Act, the following information in
accordance with Rule 24 under the Act: (i) the issuances of any Common Stock
under the authority requested (except issuances pursuant to the Plans),
Preferred Securities, Preferred Stock or Equity-linked Securities during the
quarter, including the number of shares, the purchase price per share and the
market price per share at the date of the agreement of sale, and also showing,
separately, the cumulative amount of each type of security issued to date during
the Authorization Period; (ii) the amount and terms of any Long-term Debt issued
during the quarter which shall also separately show the amount of Long-term Debt
cumulatively issued to date during the Authorization Period; (iii) the amount of
any Short-term or Term Loan Notes or Commercial Paper outstanding at the end of
the quarter; (iv) a statement describing the uses for the proceeds of the
securities issued; (v) the total capitalization ratio of Southern as of the end
of the quarter, including the dollar and percentage components of the capital
structure on a consolidated basis, with consolidated debt to include all
short-term debt and nonrecourse debt of all EWGs and FUCOs; (vi) market-to-book
ratio of the Common Stock; (vii) the total number of shares of Common Stock
issued or issuable under any of the Plans, together with the cumulative number
of shares issued under the Plans to date during the Authorization Period; (viii)
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consolidated balance sheets as of the end of the quarter for Southern and
Capital Funding (if either are engaged in any financings pursuant to the
authority granted in connection with this Application during the quarter); (ix)
if a guaranty is issued during the quarter, the name of the guarantor, the name
of the beneficiary of the guarantee and the amount, terms and purpose of the
guaranty; (x) if Common Stock has been transferred to a seller of securities of
a company being acquired, the number of shares so issued, the value per share
and whether the shares are restricted in the hands of the acquirer; (xi)
information on significant variable interest entities where Southern is not the
primary beneficiary, formed with any financing proceeds pursuant to the order in
connection herewith, including a description of any financing transactions
conducted during the reporting period that were used to fund such variable
interest entities and a description of the accounting for such transactions
under FASB Interpretation 46R, and (xii) future registration statements filed
under the Securities Act of 1933, as amended (the "1933 Act"), with respect to
securities that are the subject of the instant Application will be filed or
incorporated by reference as exhibits to the next certificate filed under Rule
24. Southern will file Rule 24 certificates to notify the Commission of its
issuances of securities that are exempt under the rules and regulations of the
Act. Portions of the 1933 Act filings or the 1934 Act reports that contain
disclosures of transactions occurring pursuant to the authorizations to be
granted pursuant to this Application may be incorporated by reference into this
proceeding through Rule 24 certificates of notification if the filings or
reports contain the specific information required as set forth above. The
certificates will also contain all other information required by Rule 24,
including the certification that each transaction being reported on has been
carried out in accordance with the terms and conditions of, and for the purposes
represented in, this Application.
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Item 2. Fees, Commissions and Expenses.
The fees and expenses in connection with the proposed transactions
(other than those described in Item 1 hereof and other than underwriting
discounts and commissions) are estimated not to exceed $5,000,000. The
prospectus supplement relating to each offering of Common Stock, Long-term Debt,
Preferred Stock, Preferred Securities or Equity-linked Securities will reflect
the actual expenses based upon the amount of the related offering.
Item 3. Applicable Statutory Provisions.
Southern considers that Sections 6(a), 7, 9(a), 10, 12(b), 12(c) and
12(f) of the Act and Rules 42, 45, 53 and 54 thereunder are applicable to the
proposed transactions. Any notes issued by SCS to evidence borrowings by it as
described herein will be exempt pursuant to Rule 52 under the Act. Other
transactions by SCS referred to herein will be in the routine course of its
business and not subject to Commission approval. Southern considers that the
proposed issuance and sale of Common Stock under the Plans are subject to the
provisions of Sections 6(a) and 7 of the Act and Rules 53 and 54 thereunder.
Southern considers that any purchases of Common Stock by the Employing Companies
pursuant to the ESOP prior to contributing such stock to the trust established
pursuant to the ESOP are subject to the provisions of Sections 9(a) and 10 of
the Act. The proposed transactions will be carried out in accordance with the
procedure specified in Rule 23 and pursuant to an order of the Commission with
respect thereto.
Rule 53 Analysis. The proposed transactions are subject to Rule 53,
which provides that, in determining whether to approve the issue or sale of a
security for purposes of financing the acquisition of an "exempt wholesale
generator" ("EWG") or "foreign utility company" ("FUCO"), as those terms are
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defined in sections 32 and 33, respectively, of the Act, the Commission shall
not make certain adverse findings if the conditions set forth in Rule 53(a)(1)
through (a)(4) are met, and are not otherwise made inapplicable by reason of the
existence of any of the circumstances described in Rule 53(b).
Southern currently meets all of the conditions of Rule 53(a). At March
31, 2004, Southern's "aggregate investment," as defined in Rule 53(a)(1), in
EWGs and FUCOs was approximately $244 million, or about 4.57% of Southern's
"consolidated retained earnings," also as defined in Rule 53(a)(1), as of March
31, 2004 ($5.336 billion).8
With respect to Rule 53(a)(1), however, the Commission has determined
that Southern'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 Southern Company,
Holding Company Act Release No. 26501, dated April 1, 1996 (the "Rule 53(c)
Order"); and Holding Company Act Release No. 26646, dated January 15, 1997
(order denying request for reconsideration and motion to stay). The Rule 53(c)
Order allows Southern to invest 100% of its consolidated retained earnings in
EWGs and FUCOs.
In addition, Southern has complied and will continue to comply with the
record-keeping requirements of Rule 53(a)(2), the limitation under Rule 53(a)(3)
on the use of operating company personnel to render services to EWGs and FUCOs
and the requirements of Rule 53(a)(4) concerning the submission of copies of
------------------------------
8 Although Southern owns all of the equity in four indirect subsidiaries
(EPZ Lease, Inc., Dutch Gas Lease, Inc., GAMOG Lease, Inc. and NUON
Lease, Inc.), Southern has no direct or indirect investment or any
aggregate investment within the meaning of Rule 53 in these FUCOs,
including any direct or indirect guarantees or credit positions related
to any capital or financing leases. (See Southern's application on Form
U-1, File No. 70-9727, for further information.) Southern has executed
limited keep-well commitments whereby Southern would be required to
make capital contributions to SE Finance Capital Corp. II, SE Finance
Capital Corp. or SE Finance Company, Inc. in the event of a shortfall
in the scheduled debt service resulting from certain changes in the
payments due from Southern under the Southern Company Income Tax
Allocation Agreement. The maximum potential capital contribution
required under these commitments is the unamortized balance of the
related loans, which totaled approximately $380 million as of March 31,
2004.
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certain filings under the Act to retail rate regulatory commissions. Further,
none of the circumstances described in Rule 53(b) has occurred. Finally, Rule
53(c) is, by its terms, inapplicable since the requirements of paragraphs 53(a)
and 53(b) are satisfied.
Item 4. Regulatory Approval.
No state commission and no federal commission (other than the
Commission) has jurisdiction over the proposed transactions.
Item 5. Procedure.
The applicant-declarants hereby request that the Commission's order be
issued as soon as the rules allow. The applicant-declarants hereby waive a
recommended decision by a hearing officer or other responsible officer of the
Commission, consent that the Division of Investment Management may assist in the
preparation of the Commission's decision and/or order in this matter, unless
such Division opposes the transactions proposed herein, and request that there
be no 30-day waiting period between the issuance of the Commission's order and
the date on which it is to become effective.
Item 6. Exhibits and Financial Statements.
(a) Exhibits
A-1 - Composite Certificate of Incorporation of Southern
reflecting all amendments thereto through January 5,
1994. (Designated in Registration No. 33-3546 as
Exhibit 4(a), in Certificate of Notification, File
No. 70-7341, as Exhibit A, and in Certificate of
Notification, File No. 70-8181, as Exhibit A.)
A-2 - By-Laws of Southern as amended effective February
17, 2003 and presently in effect. (Designated in Form
10-Q for the quarter ended June 30, 2003, File No.
1-3526, as Exhibit 3(a)1.)
A-3 - Articles of Incorporation of Capital Funding dated
January 24, 1997.*
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A-4 - Bylaws of Capital Funding effective January 24,
1997 and presently in effect.*
A-5 - Subordinated Note Indenture dated as of February 1,
1997, among Southern, Capital Funding and Deutsche
Bank Trust Company Americas (formerly known as
Bankers Trust Company), as Trustee, and indentures
supplemental thereto dated as of February 4, 1997.
(Designated in Registration No. 333-28349 as Exhibits
4.1 and 4.2 and 333-28355 as Exhibit 4.2.)
A-6 - Subordinated Note Indenture dated as of June 1,
1997, among Southern, Capital Funding and Deutsche
Bank Trust Company Americas (formerly known as
Bankers Trust Company), as Trustee, and indentures
supplemental thereto through July 31, 2002.
(Designated in Southern's Form 10-K for the year
ended December 31, 1997, File No. 1-3526, as Exhibit
(4)(a)2, in Form 8-K dated June 18, 1998, File No.
1-3526, as Exhibit 4.2, in Form 8-K dated December
18, 1998, File No. 1-3526, as Exhibit 4.4 and in Form
8-K dated July 24, 2002, File No. 1-3526, as Exhibit
4.4.)
A-7 - Senior Note Indenture dated as of February 1, 2002,
among Southern, Capital Funding and The Bank of New
York, as Trustee, and indentures supplemental thereto
through those dated February 1, 2002. (Designated in
Form 8-K dated January 29, 2002, File No. 1-3526, as
Exhibits 4.1 and 4.2 and in Form 8-K dated January
30, 2002, File No. 1-3526, as Exhibit 4.2.)
A-8 - 364-Day Credit Agreement among Southern, as
Borrower, Bank of America, N.A., as Administrative
Agent, and the Lenders identified therein, dated as
of June 11, 2004 (Filed confidentially pursuant to
Rule 104.)
A-9 - Multi-Year Credit Agreement among Southern, as
Borrower, Bank of America, N.A., as Administrative
Agent, and the Lenders identified therein, dated as
of June 11, 2004 (Filed confidentially pursuant to
Rule 104.)
F - Opinion of Troutman Sanders LLP.
G - Form of Notice.*
H - Projected Cash Flow Summary of Southern for years
2004-07 (Filed confidentially pursuant to Rule 104).
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I - Projected Capitalization of Southern for years
2004-07 (Filed confidentially pursuant to Rule 104).
* Previously filed.
Exhibits heretofore filed with the Commission and designated as set
forth above are hereby incorporated herein by reference and made a part hereof
with the same effect as if filed herewith.
(b) Financial Statements.
Consolidated balance sheet, consolidated statements of
capitalization, stockholders' equity and comprehensive income
of Southern at March 31, 2004. (Designated in Southern's Form
10-Q for the quarter ended March 31, 2004, File No. 1-3526.)
Statements of income and cash flows of Southern for the
quarter ended March 31, 2004. (Designated in Southern's Form
10-Q for the quarter ended March 31, 2004, File No. 1-3526.)
Balance sheet of Alabama Power Company at March 31, 2004.
(Designated in Alabama Power Company's Form 10-Q for the
quarter ended March 31, 2004, File No. 1-3164.)
Statement of income of Alabama Power Company for the quarter
ended March 31, 2004. (Designated in Alabama Power Company's
Form 10-Q for the quarter ended March 31, 2004, File No.
1-3164.)
Balance sheet of Georgia Power Company at March 31, 2004.
(Designated in Georgia Power Company's Form 10-Q for the
quarter ended March 31, 2004, File No. 1-6468.)
Statement of income of Georgia Power Company for the quarter
ended March 31, 2004. (Designated in Georgia Power Company's
Form 10-Q for the quarter ended March 31, 2004, File No.
1-6468.)
Balance sheet of Gulf Power Company at March 31, 2004.
(Designated in Gulf Power Company's Form 10-Q for the quarter
ended March 31, 2004, File No. 0-2429.)
Statement of income of Gulf Power Company for the quarter
ended March 31, 2004. (Designated in Gulf Power Company's Form
10-Q for the quarter ended March 31, 2004, File No. 0-2429.)
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Balance sheet of Mississippi Power Company at March 31, 2004.
(Designated in Mississippi Power Company's Form 10-Q for the
quarter ended March 31, 2004, File No. 001-11229.)
Statement of income of Mississippi Power Company for the
quarter ended March 31, 2004. (Designated in Mississippi Power
Company's Form 10-Q for the quarter ended March 31, 2004, File
No. 001-11229.)
Balance sheet of Savannah Electric and Power Company at March
31, 2004. (Designated in Savannah Electric and Power Company's
Form 10-Q for the quarter ended March 31, 2004, File No.
1-5072.)
Statement of income of Savannah Electric and Power Company for
the quarter ended March 31, 2004. (Designated in Savannah
Electric and Power Company's Form 10-Q for the quarter ended
March 31, 2004, File No. 1-5072.)
Balance sheet of Southern Communications Services, Inc. at
December 31, 2003. (Designated in Southern Communications
Services, Inc.'s U-13-60 for the year ended December 31, 2003,
File No. 49-000159.)
Statement of income of Southern Communications Services, Inc.
for the period ending December 31, 2003. (Designated in
Southern Communications Services, Inc.'s U-13-60 for the year
ended December 31, 2003, File No. 49-000159.)
Balance sheet of Capital Funding at December 31, 2003.
(Designated in Southern's U5S for the year ended December 31,
2003, File No. 070-10203.)
Statement of income of Capital Funding for the period ending
December 31, 2003. (Designated in Southern's U5S for the year
ended December 31, 2003, File No. 070-10203.)
Balance sheet of Southern Company Energy Solutions LLC at
December 31, 2003. (Designated in Southern's U5S for the year
ended December 31, 2003, File No. 070-10203.)
Statement of income of Southern Company Energy Solutions LLC
for the period ending December 31, 2003. (Designated in
Southern's U5S for the year ended December 31, 2003, File No.
070-10203.)
Balance sheet of SCS at December 31, 2003. (Designated in
SCS's U-13-60 for the year ended December 31, 2003, File No.
49-00059.)
Statement of income of SCS for the period ending December 31,
2003. (Designated in SCS's U-13-60 for the year ended December
31, 2003, File No. 49-00059.)
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Balance sheet of Southern Nuclear Operating Company, Inc. at
December 31, 2003. (Designated in Southern Nuclear Operating
Company, Inc.'s U-13-60 for the year ended December 31, 2003,
File No. 49-00099.)
Statement of income of Southern Nuclear Operating Company,
Inc. for the period ending December 31, 2003. (Designated in
Southern Nuclear Operating Company, Inc.'s U-13-60 for the
year ended December 31, 2003, File No. 49-00099.)
Since March 31, 2004, there have been no material adverse changes, not
in the ordinary course of business, in the financial condition of the
applicant-declarants from that set forth in or contemplated by the foregoing
financial statements.
Item 7. Information as to Environmental Effects.
a) As described in Item 1, the proposed transactions are of a routine
and strictly financial nature in the ordinary course of the
applicant-declarants' businesses. Accordingly, the Commission's action in this
matter will not constitute any major federal action significantly affecting the
quality of the human environment.
b) No other federal agency has prepared or is preparing an
environmental impact statement with regard to the proposed transactions.
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SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, each of the undersigned companies has duly caused this amendment to be
signed on its behalf by the undersigned hereunto duly authorized.
Dated: June 30, 2004 THE SOUTHERN COMPANY
By: /s/Tommy Chisholm
Tommy Chisholm
Secretary
ALABAMA POWER COMPANY
By: /s/Wayne Boston
Wayne Boston
Assistant Secretary
GEORGIA POWER COMPANY
By: /s/Wayne Boston
Wayne Boston
Assistant Secretary
GULF POWER COMPANY
By: /s/Wayne Boston
Wayne Boston
Assistant Secretary
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MISSISSIPPI POWER COMPANY
By: /s/Wayne Boston
Wayne Boston
Assistant Secretary
SAVANNAH ELECTRIC AND POWER COMPANY
By: /s/Wayne Boston
Wayne Boston
Assistant Secretary
SOUTHERN COMMUNICATIONS
SERVICES, INC.
By: /s/Wayne Boston
Tommy Chisholm
Secretary
SOUTHERN COMPANY CAPITAL
FUNDING, INC.
By: /s/Wayne Boston
Wayne Boston
Assistant Secretary
SOUTHERN COMPANY ENERGY SOLUTIONS LLC
By: /s/Tommy Chisholm
Tommy Chisholm
Secretary
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SOUTHERN COMPANY SERVICES, INC.
By: /s/Tommy Chisholm
Tommy Chisholm
Vice President and Secretary
SOUTHERN NUCLEAR OPERATING COMPANY, INC.
By: /s/Wayne Boston
Wayne Boston
Assistant Secretary
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