[Federal Register Volume 67, Number 212 (Friday, November 1, 2002)]
[Notices]
[Pages 66677-66683]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-27776]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 35-27586]
Filings Under the Public Utility Holding Company Act of 1935, as
Amended (``Act'')
October 25, 2002.
Notice is hereby given that the following filing has been made with
the Commission pursuant to provisions of the Act and rules promulgated
under the Act. All interested persons are referred to the application/
declaration for a complete statements of the proposed transaction
summarized below. The application/declaration is available for public
inspection through the Commission's Branch of Public Reference.
Interested persons wishing to comment or request a hearing on the
application/declaration should submit their views in writing by
November 18, 2002, to the Secretary, Securities and Exchange
Commission, Washington, DC 20549-0609, and serve a copy on the relevant
applicant/declarant at the address specified below. Proof of service
(by affidavit or, in the case of an attorney at law, by certificate)
should be filed with the request. Any request for hearing should
identify specifically the issues of facts or law that are disputed. A
person who so requests will be notified of any hearing, if ordered, and
will receive a copy of any notice or order issued in the matter. After
November 18, 2002, the application/declaration, as filed or as amended,
may be granted and/or permitted to become effective.
[[Page 66678]]
Ameren Corporation, et al. (70-10078)
Ameren Corporation (``Ameren''), a registered public utility
holding company, Ameren Energy Fuels and Services Company (``Ameren
Fuels''), Ameren's indirect wholly owned nonutility subsidiary, both
located at 1901 Chouteau Avenue, St. Louis, Missouri 63103; and CILCORP
Inc. (''CILCORP''), an exempt holding company under section 3(a)(1) of
the Act and a wholly owned subsidiary of The AES Corporation (``AES''),
an exempt holding company under section 3(a)(5) of the Act, CILCORP's
direct wholly owned public utility subsidiary, Central Illinois Light
Company (''CILCO''), and CILCO's wholly owned nonutility subsidiary,
Central Illinois Generation, Inc. (``CIGI''), all located at 300
Liberty Street, Peoria, Illinois 61602 (collectively, and together with
Ameren and Ameren Fuels, ``Applicants''), have filed an application-
declaration under sections 3(a)(1), 6(a), 7, 8, 9(a), 9(c)(3), 10,
11(b), 12(b), 12(c), 12(d), 12(f), 13(b) and 32 of the Act and rules
45, 46, 51, 54, 87, 90 and 91 under the Act (``Application'').
I. Introduction
Applicants request authority for the acquisition of CILCORP by
Ameren and associated transactions (collectively, ``Transaction''). The
Transaction will be effected through a stock purchase agreement
(``Stock Purchase Agreement'' ) entered into by Ameren and The AES
Corporation (''AES''), CILCORP's parent company, under which Ameren has
agreed to purchase, for cash, all of the issued and outstanding shares
of common stock of CILCORP. As a result of the Transaction, Ameren will
indirectly acquire all of the common stock of CILCO and CIGI, which
will become additional public utility subsidiaries of Ameren,\1\ and
the nonutility subsidiaries and investments held directly and
indirectly by CILCORP. The Transaction is subject to, among other usual
and customary conditions precedent, receipt by the parties of approvals
by the Commission as well as the FERC and the Illinois Commerce
Commission (``ICC'') and filing of pre-merger notification statements
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the expiration or termination of the according statutory
waiting period.
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\1\ Applicants state CIGI, which has been determined by the
Federal Energy Regulatory Commission (``FERC'') to be an ``exempt
wholesale generator'' (``EWG''), as defined under section 32 of the
Act, will relinquish its EWG status upon completion of Ameren's
acquisition of CILCORP. Accordingly, in the Application, Ameren is
treating CIGI as a public utility company for all purposes under the
Act.
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In conjunction with the Transaction, Ameren states that it has also
agreed to purchase from AES all of the membership interests in AES
Medina Valley (No. 4), LLC, which indirectly through intermediate
subsidiaries holds all of the membership interests of AES Medina Valley
Cogen, L.L.C. (''AES Medina Valley''), an EWG. AES Medina Valley owns a
40 MW gas-fired cogeneration facility in Mossville, Illinois that
produces electricity, steam and chilled water that is sold to CILCO for
resale to CILCO's largest customer, Caterpillar Inc.
II. Summary of Requests
In addition to authorization of the Transaction, CILCORP, CILCO and
CIGI are requesting authorization through March 31, 2006
(``Authorization Period'') for a program of long-term and short-term
financing. CILCORP is requesting authorization to issue guarantees and
provide other forms of credit support on behalf of its subsidiaries,
and to pay dividends out of capital and unearned surplus, subject to
certain limitations. Applicants are requesting authorization to permit
Ameren Services to enter into separate service agreements with CILCORP,
CILCO, CIGI and certain of CILCORP's other subsidiaries. Ameren Fuels
is requesting authorization to enter into a fuel services agreement
with CILCO and CIGI. Ameren is requesting authority to retain certain
of CILCORP's nonutility subsidiaries and investments. To the extent
required, Applicants are requesting authorization to maintain in place
a tolling agreement with AES Medina Valley, a fuel supply and services
agreement between a gas marketing subsidiary of CILCORP and AES Medina
Valley and a FERC-approved interconnection agreement between CILCO and
AES Medina Valley. Finally, CILCORP and CILCO are requesting an order
granting to each of them an exemption under section 3(a)(1) of the Act.
III. Parties to the Transaction
A. Ameren
Ameren's primary operating subsidiaries are AmerenCIPS and
AmerenUE, which are electric and gas utility companies, and Ameren
Energy Generating Company (``Ameren Energy Generating''), which is an
EWG. Together, AmerenCIPS and AmerenUE provide electric service to
approximately 1.5 million customers in Missouri and Illinois and
natural gas service to approximately 300 customers, also in Missouri
and Illinois. Ameren Energy Generating, an indirect wholly owned
subsidiary of Ameren, was organized to facilitate the restructuring of
AmerenCIPS in accordance with the Illinois Electric Service Customer
Choice and Rate Relief Law of 1997 (``Customer Choice Law''). In May
2000, Ameren Energy Generating acquired all of the existing generating
assets of AmerenCIPS.
AmerenUE and Ameren Energy Generating together own and operate
about 12,600 MW of electric generating capacity, all of which is
located in Missouri and Illinois. As of December 31, 2001, AmerenUE and
AmerenCIPS owned and operated, or partially owned, a total of
approximately 5,400 circuit miles of electric transmission lines and
approximately 7,800 miles of natural gas transmission and distribution
mains, substantially all of which are located in Missouri and Illinois.
Ameren's directly owns CIPSCO Investment Company, Ameren Services
Company (``Ameren Services''), Ameren Energy, Inc., Ameren Development
Company and Ameren Energy Resources Company, all nonutility
subsidiaries. CIPSCO Investment Company holds various nonutility
businesses, including passive investments in low income housing
projects and investments in equipment leases. Ameren Services is a
service company subsidiary that provides administrative, accounting,
legal, engineering, executive, and other corporate support services to
Ameren and its associate companies. Ameren Energy, Inc. is an energy-
related company under rule 58 that primarily serves as the short-term
energy trading and marketing agent for AmerenUE and Ameren Energy
Generating and provides a range of energy and risk management services.
Ameren Development Company is an intermediate nonutility holding
company that directly and indirectly owns all of the outstanding stock
of two energy-related companies under rule 58 (Ameren ERC, Inc., which
provides energy management services, and Missouri Central Railroad, a
fuel transportation subsidiary) and of Ameren Energy Communications,
Inc., an exempt telecommunications company within the meaning of
section 34 of the Act. Ameren Energy Resources Company, also an
intermediate nonutility holding company, holds all of the outstanding
common stock of Ameren Energy Development Company, an EWG, as well as
of two energy-related companies under rule 58, Ameren Energy Marketing
Company, a power marketer, and Ameren Fuels, which brokers and markets
energy
[[Page 66679]]
commodities and owns and manages fuel procurement and delivery assets.
Ameren Energy Generating is a wholly owned subsidiary of Ameren Energy
Development Company.
In addition, Ameren indirectly owns 60% of the common stock of
Electric Energy, Inc. (``EEI''), an EWG. EEI owns and/or operates
electric generation and transmission facilities in Illinois that supply
electric power primarily to a uranium enrichment plant located in
Paducah, Kentucky.\2\
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\2\ Applicants state the remaining 40% of the stock of EEI is
held equally by two unaffiliated electric utility companies.
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Ameren also indirectly owns all of the common stock of Ameren
Fuels, an ``energy-related company'' under rule 58 that brokers and
markets energy commodities and owns and manages fuel procurement and
delivery assets.
For the twelve months ended December 31, 2001, Ameren reported
total operating revenues of $4,505,867,000, operating income of
$664,987,000, and net income of $468,545,000. On a consolidated basis,
approximately 92.2% of Ameren's 2001 operating revenues were derived
from sales of electricity, 7.6% from sales of gas and gas
transportation service, and .2% from other sources. At December 31,
2001, Ameren had $10,400,575,000 in total assets, including net
property and plant of $8,426,562,000. As of August 9, 2002, Ameren had
issued and outstanding 144,946,829 shares of common stock, $.01 par
value. Ameren's common stock is listed and traded on the New York Stock
Exchange.
B. CILCORP, CILCO and CIGI
CILCORP, an Illinois corporation, directly owns all of the issued
and outstanding common stock of CILCO, its predominant subsidiary.
CILCO is engaged in the generation, transmission, distribution and sale
of electric energy in an area of approximately 3,700 square miles in
central and east-central Illinois, and the purchase, distribution,
transportation and sale of natural gas in an area of approximately
4,500 square miles in central and east-central Illinois. CILCO
furnishes electric service to approximately 201,000 retail customers in
136 Illinois communities (including Peoria, East Peoria, Pekin, Lincoln
and Morton). CILCO owns and operates two coal-fired base load
generating plants, a natural gas-fired cogeneration plant, two natural
gas combustion turbine generators and 16 diesel-fueled power modules
and leases 14 diesel-fueled power modules, all of which are located in
Illinois. These facilities had an available summer capability of 1,172
MW in 2001 and 1,197 MW in 2002. CILCO's transmission system (all of
which is located in Illinois) includes approximately 285 circuit miles
operating at 138 kV, 48 circuit miles operating at 345 kV and 18
principal substations with an installed capacity of approximately 3,724
megavolt-amperes. CILCO's electric distribution system (all of which is
located in Illinois) includes approximately 6,516 circuit miles of
overhead pole and tower lines and 1,933 miles of underground
distribution cables. The distribution system also includes
approximately 108 substations with an installed capacity of 1,766
megavolt-amperes.
CILCO has a power purchase agreement with AmerenCIPS for the
purchase of 100 MW of capacity and firm energy for the months of June
through September through 2003. The agreement also provides for CILCO
to purchase 100 MW of firm energy for the month of January through
2003. CILCO and Ameren also make short-term sales of power to each
other from time to time under market-based rate tariffs as authorized
by the FERC.
Applicants state that CILCO intends to transfer substantially all
of its generating assets and certain associated transmission facilities
to CIGI in exchange for all of CIGI's common stock and CIGI's
assumption of certain liabilities.\3\ Applicants expect to complete
this transfer prior to the closing of the Transaction, but state that
the transfer could possibly be delayed until after closing. The
transferred assets will remain subject to the lien of CILCO's Indenture
of Mortgage and Deed of Trust, which secures CILCO's first mortgage
bonds (``CILCO Mortgage'').\4\ This choice of reorganization is being
undertaken pursuant to the Customer Choice Law. CILCO will retain all
of its other electric transmission and distribution assets and
operations. As part of this reorganization, CILCO and CIGI will also
enter into a power supply agreement and an interconnection agreement
under which CIGI will supply the full requirements of CILCO's customers
through at least December 31, 2004.
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\3\ Applicants state CILCO will transfer generating facilities
representing 1,136 MW of its total generating capacity. These
include the Duck Creek and E.D. Edwards coal-fired units and certain
peaking units. CILCO will continue to own and maintain a natural
gas-fired cogeneration plant and 26 MW of capacity provided by 16
diesel-fueled power modules located at various substations, which
will be managed by CIGI.
\4\ Applicants state CILCO does not have sufficient unfunded
property additions at this time to obtain a complete release of the
generation assets under the CILCO Mortgage. Under the CILCO
Mortgage, CILCO does not require the trustee's approval to transfer
the generating assets to CIGI (although CILCO has notified the
trustee of its intent to do so) and also would not require the
trustee's approval to transfer CIGI's common stock to CILCORP or
another subsidiary of Ameren after the Transaction closes. In
general, the CILCO Mortgage permits CILCO to transfer a portion of
its assets, subject to the lien. However, even after the transfer of
the assets to CIGI, CILCO will continue to have certain ongoing
obligations with respect to the transferred property, such as
ensuring that the lien is maintained, taxes are paid and the
property is insured. The trustee under the CILCO Mortgage will
continue to have recourse against the transferred assets in the
event of a CILCO default under the CILCO Mortgage.
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CILCO's electric service territory is adjacent to AmerenCIPS'
service territory. The transmission systems of the two companies are
directly interconnected via a 345 kV line that runs approximately 21.3
miles between CILCO's Duck Creek station, which is southwest of Peoria,
to a 345/138 kV transformer owned by AmerenCIPS near Ipava, Illinois.
CILCO also provides gas service to approximately 204,000 customers
in 128 Illinois communities (including Peoria, East Peoria, Pekin,
Lincoln and Springfield). CILCO's gas system includes approximately
3,632 miles of transmission and distribution mains (all of which are
located in Illinois) and associated gas storage facilities.
CILCO is regulated by the ICC with respect to retail electric and
gas rates and other matters and by the FERC with respect to the
transmission service and wholesale electric rates. CIGI is not a public
utility company under the laws of Illinois and is therefore not subject
to regulation by the ICC. However, CIGI is subject to regulation by the
FERC with respect to wholesale electric rates and other matters.
CILCORP directly owns all of the common stock of three nonutility
subsidiaries: CILCORP Investment Management Inc., CILCORP Ventures
Inc., and QST Enterprises Inc. The assets of these companies consist
primarily of investments in affordable housing projects that qualify
for federal tax credits and in leveraged leases of equipment and
commercial real estate. Applicants maintain that other direct and
indirect subsidiaries of CILCORP provide energy-related services.
CILCO's nonutility subsidiaries engage in the exploration and
development of gas, oil, coal and other mineral resources and research
and development activities relating to new sources of energy, including
the conversion of coal and other minerals into gas. With certain
exceptions, Ameren is requesting approval to retain CILCORP's
nonutility subsidiaries and investments.
[[Page 66680]]
For the twelve months ended December 31, 2001, CILCORP reported
consolidated revenues of $814,870,000, of which $391,811,000 (48.1%)
were derived from sales of electricity, $271,434,000 (33.3%) from sales
of gas and gas transportation service, and $151,625,000 (18.6%) from
CILCORP's nonutility operations. At December 31, 2001, CILCORP had
$1,811,698,000 in total assets, including total net property, plant and
equipment of $857,987,000.
IV. The Transaction
Applicants request approval for the acquisition by Ameren of all of
the issued and outstanding common stock of CILCORP pursuant to the
Stock Purchase Agreement. Under the Stock Purchase Agreement, Ameren
will pay AES, in consideration for all of the issued and outstanding
common stock of CILCORP, cash in an amount equal to $1,340,000,000,
less certain ``assumed obligations'' \5\ (which includes long-term
debt, short-term debt and preferred stock of CILCORP and its
subsidiaries), increased or decreased, as appropriate, by the amount,
if any, by which ``working capital'' \6\ of CILCORP as of the closing
date exceeds or is less than the ``base working capital'' \7\ of
CILCORP, and increased or decreased, as appropriate, by the amount of
the ``cap ex adjustment,'' \8\ the net amount of the foregoing being
the ``purchase price.'' Applicants state if the closing date under the
Stock Purchase Agreement had occurred on March 31, 2002, and assuming
no change in the base working capital amount and no cap ex adjustment
amount, the cash paid by Ameren at closing for the common stock of
CILCORP would have been approximately $522 million. Ameren states that
it will finance the cash portion of the purchase price using cash on
hand and/or proceeds of debt and/or equity financings previously
authorized in SEC File No. 70-9877.\9\
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\5\ Applicants state the term ``assumed obligations'' means the
amounts required to be included on CILCORP's balance sheet as of the
closing date as long-term debt (including the current portion),
short-term debt, capital lease obligations, preferred stock of
subsidiaries, and other obligations for borrowed money.
\6\ Applicants state the term ``working capital'' means the
current assets of CILCORP less current liabilities (not counting in
current liabilities any short-term debt or current maturity of long-
term debt that is included in Assumed Obligations) as of the closing
date.
\7\ Applicants state that, as agreed to in the Stock Purchase
Agreement, ``base working capital'' is $75 million.
\8\ Applicants state the term ``cap ex adjustment'' amount
represents the amount, if any, by which expenditures by CILCORP for
certain capital improvements prior to closing are less or greater
than the amounts agreed to under the Stock Purchase Agreement.
\9\ See, Ameren Corporation, HCAR No. 27449 (Oct. 5, 2001). On
September 10, 2002, Ameren sold 8.05 million new shares of common
stock in a public offering at $42.00 per share. Net proceeds (after
underwriting discount) to Ameren were $327 million.
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The Stock Purchase Agreement further provides that, in the event
that the closing date does not occur by the ``Trigger Date,'' then the
``purchase price'' shall be increased by $33,699 per day from the
Trigger Date through the closing date, subject to certain limitations.
The Trigger Date is the later of (a) December 31, 2002, (b) the date on
which AES is capable (without further action by any third party) of
completing performance in all material respects of its obligations
required to be performed on or prior to closing, and (c) the date which
is 90 days following the date on which the ICC grants its approval of
the Transaction. Subject to certain limitations and exceptions, either
party may terminate the Stock Purchase Agreement if closing has not
occurred by March 27, 2003.
Following the acquisition of CILCORP, Ameren proposes to retain
CILCORP as a direct subsidiary for the foreseeable future, and
CILCORP will continue to own all of the common stock of CILCO. CILCO,
in turn, will continue to hold all of the common stock of CIGI for the
foreseeable future. CILCO will maintain its headquarters in Peoria for
a period of at least five years and will maintain a local management
team and adequate staffing levels to operate its utility system. CILCO
will continue to operate as a separate control area. CILCO's generating
plants (which CILCO intends to transfer to CIGI by the time of the
closing) will not be jointly dispatched with the generating plants
owned by AmerenUE and Ameren Energy Generating.
V. Agreements for Sale of Goods and Services
Applicants state that Ameren Services intends to enter into
separate service agreements with CILCORP, CILCO, CIGI and certain of
CILCORP's other subsidiaries that are identical in all material
respects with an existing general service agreement between Ameren
Services, Ameren, AmerenUE, AmerenCIPS and certain other associate
companies. Thus, Ameren Services will provide to the new client
companies the same administrative, management, and technical services
that it now provides to Ameren system companies under the general
services agreement, utilizing the same work order procedures and the
same methods of allocating costs that are specified in that agreement.
In connection with the Transaction, certain employees of CILCORP and
its subsidiaries may be transferred to and become employees of Ameren
Services.
Applicants state that historically, CILCO has provided certain
administrative, management and technical services at cost to CILCORP
and all of its other associate companies under a service agreement that
has been approved by the ICC.\10\ Although Applicants expect Ameren
Services will assume the responsibility for providing these services
after the Transaction closes under new service agreements, there may be
a period, not to exceed two years, during the transition in which CILCO
will continue to provide certain corporate support services, such as
accounting, tax, cash management and billing and sales services, to the
same associate companies to which these services were provided prior to
the Transaction. In addition, following the transfer of its generating
assets to CIGI, CILCO and CIGI request authorization to provide to each
other, on a permanent basis, certain technical services relating to the
operation and maintenance of generating assets located at CILCO
substations and the equipment connecting CIGI's generation facilities
with CILCO's transmission facilities. Applicants state that all of
these services will be performed at cost in accordance with rules 90
and 91 under a services and facilities agreement to be executed when
the generating assets are transferred to CIGI.
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\10\ Applicants state that, with one exception, CILCO's
nonutility associate companies do not have employees of their own.
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To the extent required, Applicants request authorization to
maintain in place (a) a tolling agreement under which AES Medina Valley
sells electricity, steam and chilled water to CILCO, (b) a fuel supply
and services agreement between CILCORP Energy Services Inc. (``CESI''),
a nonutility gas marketing subsidiary of CILCORP, and AES Medina
Valley, under which CESI supplies AES Medina Valley's gas requirements
and also provides certain ancillary services relating to the supply of
gas to the Mossville facility, and (c) a FERC-approved interconnection
agreement between CILCO and AES Medina Valley, under which CILCO
provides metering and other ancillary services to AES Medina Valley, at
cost.
In addition, Ameren Fuels requests authorization to enter into
separate fuel services agreements with CILCO and CIGI under which
Ameren Fuels will manage gas supply resources for CILCO
[[Page 66681]]
and manage fuel procurement for CIGI. These services will be provided
at cost, in accordance with rule 90 and 91.\11\
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\11\ By order dated April 5, 2001 in File No. 70-9775 (HCAR No.
27374), the Commission authorized Ameren Fuels to provide AmerenUE
and AmerenCIPS with the same fuel management services that Ameren
Fuels is now proposing to provide to CILCO and CIGI.
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VI. Financing by CILCORP, CILCO and CIGI
The existing equity and long-term and short-term debt securities of
CILCORP, CILCO and CIGI will remain outstanding after the Transaction
closes.\12\ In addition, CILCORP, CILCO and CIGI are requesting
authority, to the extent these transactions are not exempt, to engage
in certain ongoing external and intrasystem financing transactions from
time to time during the Authorization Period. Any securities issued by
CILCORP, CILCO or CIGI to third parties may be issued directly, or may
be issued indirectly through one or more special purpose entities
formed solely for this purpose (``Financing Subsidiaries'').
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\12\ CILCORP currently has issued and outstanding 1,000 shares
of common stock, no par value, all held by AES. In addition, CILCORP
has outstanding $225 million of 8.7% senior notes, due 2009, and
$250 million of 9.375% senior notes, due 2029 (the ``Senior
Notes''), which are secured by a pledge of the common stock of
CILCO. CILCORP also had committed bank lines totaling $35 million at
December 31, 2001, under which it had outstanding borrowings of $20
million.
At March 31, 2002, CILCO had issued and outstanding 13,563,871
shares of common stock, no par value, all of which are held by
CILCORP; 191,204 shares of cumulative preferred stock, $100 par
value, and 220,000 shares of Class A preferred stock, no par value,
totaling $41,120,000; and $242,250,000 of long-term debt. In
addition, at December 31, 2001, CILCO had issued and outstanding
$43,000,000 of commercial paper, and had in place bank lines
totaling $100,000,000 which are used to backstop its commercial
paper.
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A. Financing Parameters
The financing authorizations requested in the Application will be
subject to the following parameters:
[sbull] CILCORP, CILCO and CIGI state that they will not engage in
any financing transactions for which approval is sought unless, on a
pro forma basis to take into account the amount and types of the
financing and the subsequent application of the proceeds, common equity
as a percentage of capitalization (including short-term debt and
current maturities of long-term debt) of each company is at least 30%;
[sbull] Except in accordance with a further order of the Commission
in this proceeding, CILCORP and CIGI will not publicly issue any Long-
term Securities (defined below) unless the securities are rated at the
investment grade level as established 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.
[sbull] The effective cost of money on all external short-term
borrowings by CILCORP will not exceed at the time of issuance the
greater of (1) 300 basis points over the six-month London Interbank
Offered Rate (``LIBOR''), or (2) a gross spread over LIBOR that is
consistent with similar securities of comparable credit quality and
maturities issued by other companies;
[sbull] The maturity date of any new series of long-term notes
issued by CILCORP will be not later than October 15, 2029, which is the
maturity date of the longest of the two series of outstanding Senior
Notes;
[sbull] Any new long-term notes issued by CILCORP in a refinancing
transaction will bear interest at a rate not to exceed at the time of
issuance the greater of (1) 500 basis points over the yield to maturity
of a U.S. Treasury security having a remaining term equal to the
average life of the new notes (or, if no such Treasury security is
outstanding, then the yield to maturity of a 30-year U.S. Treasury
Bond), or (2) a gross spread over U.S. Treasuries that is consistent
with similar securities of comparable credit quality and maturities
issued by other companies;
[sbull] The effective cost of money on all external short-term
borrowings by CILCO and CIGI will not exceed at the time of issuance
the greater of (1) 300 basis points over the six-month LIBOR, or (2) a
gross spread over LIBOR that is consistent with similar securities of
comparable credit quality and maturities issued by other companies;
[sbull] Any preferred stock or other types of preferred securities
issued by CIGI will be redeemed no later than 50 years after issuance;
[sbull] The dividend rate on any series of preferred stock or other
preferred securities issued by CIGI will not exceed at the time of
issuance the greater of (1) 700 basis points over the yield to maturity
of a U.S. Treasury security having a remaining term equal or closest to
the term of the securities (or, if no such Treasury security is
outstanding, then the yield to maturity of a 30-year U.S. Treasury
Bond), or (2) a gross spread over U.S. Treasuries that is consistent
with similar securities of comparable credit quality and maturities
issued by other companies;
[sbull] Long-term debt issued by CIGI will have a maturity ranging
from one to 50 years; and
[sbull] Long-term debt issued by CIGI will bear interest at a rate
not to exceed at the time of issuance the greater of (1) 600 basis
points over the yield to maturity of a U.S. Treasury security having a
remaining term equal or closest to the average life of the series (or,
if no such U.S. Treasury security is outstanding, then the yield to
maturity of a 30-year U.S. Treasury Bond), or (2) a gross spread over
U.S. Treasuries that is consistent with similar securities of
comparable credit quality and maturities issued by other companies.
B. External Financing Transactions
1. CILCORP
(a) Short-Term Debt
CILCORP requests authorization to issue and sell commercial paper
and/or establish and make unsecured short-term borrowings (i.e., less
than one year) under credit facilities with banks or other
institutional lenders on terms that are generally available to
borrowers with a comparable credit rating as CILCORP as CILCORP deems
appropriate in light of its needs and existing market conditions,
provided that the aggregate amount of borrowings by CILCORP at any time
outstanding under all credit facilities, when added to the amount of
any direct short-term borrowings by CILCORP from Ameren will not exceed
$250 million.
(b) Refinancing of CILCORP Senior Notes
CILCORP also requests authorization to issue, in one or more
transactions from time to time during the Authorization Period, long-
term notes for the purpose of refinancing or acquiring $475 million
principal amount of senior notes (``Senior Notes'') that are currently
outstanding at or prior to their scheduled maturity. The principal
amount of any new long-term notes issued will not exceed the unpaid
principal amount of the Senior Notes, plus any ``make whole'' premium
required to be paid in connection with any prepayment and/or the
premium, if any, that is paid in connection with any acquisition of the
Senior Notes in open market purchases. In connection with any issuance,
Ameren requests authorization to guaranty any new CILCORP notes issued
in a refinancing transaction or to issue a guarantee of the outstanding
CILCORP Senior Notes in order to obtain a termination and release of
the pledge of CILCO's common stock \13\ or for other corporate
purposes.
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\13\ Applicants state CILCORP has outstanding $225 million of
8.7% senior notes, due 2009, and $250 million of 9.375% senior
notes, due 2029 that are secured by a pledge of the common stock of
CILCO
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[[Page 66682]]
2. CILCO and CIGI
(a) Short-Term Debt
CILCO and CIGI are requesting authorization to issue commercial
paper and establish and make unsecured short-term borrowings (i.e.,
less than one year) under credit lines from time to time during the
Authorization Period, provided that the aggregate amount of external
short-term borrowings by CILCO at any time outstanding under all credit
facilities, when added to the amount of any direct short-term
borrowings by CILCO from Ameren (see part VI.C.1., ``Intrasystem
Financing Transactions'' below), will not exceed $250 million, and that
the aggregate amount of borrowings by CIGI at any time outstanding
under all credit facilities, when added to the amount of any direct
short-term borrowings by CIGI from Ameren (see part VI.C.1.,
``Intrasystem Financing Transactions'' below), will not exceed $250
million.
(b) Long-Term Securities of CIGI
CIGI is also requesting authorization to issue and sell from time
to time during the Authorization Period long-term securities consisting
of any combination of preferred stock or other forms of preferred
securities and long-term debt (``Long-term Securities''). Preferred
stock or other types of preferred securities may be issued in one or
more series with rights, preferences, and priorities as may be
designated in the instrument creating each series provided that the
aggregate amount of all such securities at any time outstanding, when
added to the amount of any direct long-term borrowings by CIGI from
Ameren (see part VI.C.1., ``Intrasystem Financing Transactions''
below), will not exceed $500 million.
Long-term debt of a particular series (i) may be secured or
unsecured, (ii) may be subject to optional and/or mandatory redemption,
in whole or in part, at par or at various premiums above the principal
amount, (iii) may be entitled to mandatory or optional sinking fund
provisions, (iv) may provide for reset of the coupon under a
remarketing or auction arrangement, and (v) may be called from existing
investors by a third party.
CILCORP and CIGI request authority to issue Long-term Securities
that are rated below investment grade. Applicants request the
Commission reserve jurisdiction over CILCORP and CIGI in connection
with the issuance of any Long-term Securities that are rated below
investment grade.
3. Interest Rate and Anticipatory Hedging Transactions
To the extent not exempt under rule 52, CILCORP, CILCO and CIGI
also request authorization to enter into interest rate hedging
transactions with respect to outstanding indebtedness (``Interest Rate
Hedges''), subject to certain limitations and restrictions, in order to
reduce or manage the effective interest rate cost. In no case will the
notional amount of any Interest Rate Hedge exceed the principal amount
of the underlying debt instrument. Transactions will be entered into
for a fixed or determinable period. Thus, the applicants will not
engage in speculative transactions. Interest Interest Rate Hedges would
only be entered into with counterparties (``Approved Counterparties'')
whose senior debt ratings, or the senior debt ratings of any credit
support providers who have guaranteed the obligations of the Approved
Counterparties, as published by S&P, are equal to or greater than BBB,
or an equivalent rating from Moody's or Fitch, Inc. In addition,
CILCORP, CILCO and CIGI request authorization to enter into interest
rate hedging transactions with respect to anticipated debt offerings
(the ``Anticipatory Hedges''), subject to certain limitations and
restrictions.
Applicants state that Each Interest Rate Hedge and Anticipatory
Hedge will qualify for hedge accounting treatment under the current
Financial Accounting Standards Board (``FASB'') guidelines in effect
and as determined at the time entered into. Further, the Applicants
will comply with the Statement of Financial Accounting Standards
(``SFAS'') 133 (''Accounting for Derivatives 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 FASB.\14\
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\14\ Applicants state the authority sought for interest rate
hedging transactions in this Application is identical to the
authorization previously granted to Ameren in SEC File No. 70-9877.
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C. Intrasystem Financing Transactions
1. Long-Term and Short-Term Securities of CILCORP, CILCO and CIGI
Ameren may from time to time during the Authorization Period
acquire additional shares of CILCORP's common stock, make additional
capital contributions or non-interest bearing cash advances to CILCORP,
and/or make loans to CILCORP, CILCO and CIGI (and acquire unsecured
promissory notes of CILCORP, CILCO and CIGI evidencing the loans) in
order to enable CILCORP to fund additional investments in CILCO and its
other existing subsidiaries, to redeem or retire the outstanding Senior
Notes, and to fund working capital. Accordingly, CILCORP requests
authority to issue, and Ameren requests authority to acquire, from time
to time during the Authorization Period, (a) up to $1 billion at any
time outstanding of additional common stock and/or promissory notes
having maturities of one year or more, and (b) up to $250 million at
any time outstanding of promissory notes having maturities of less than
one year. Any promissory note issued by CILCORP to Ameren evidencing a
loan will be unsecured and will bear interest at a rate and have a
maturity date designed to parallel the effective cost of capital and
maturity date of a similar debt instrument issued by Ameren.
Ameren requests authorization to make long-term and short-term
loans to CIGI (and acquire promissory notes of CIGI evidencing the
loans) in order to fund CIGI's capital improvements and working capital
requirements. Accordingly, CIGI requests authority to issue, and Ameren
requests authority to acquire, from time to time during the
Authorization Period, (a) up to $500 million at any time outstanding of
promissory notes having maturities of one year or more, and (b) up to
$250 million at any time outstanding of promissory notes having
maturities of less than one year.
Ameren requests authorization to make short-term loans to CILCO
(and acquire promissory notes of CILCO evidencing the loans) in order
to fund CILCO's capital improvements and working capital requirements.
Accordingly, CILCO requests authority to issue, and Ameren requests
authority to acquire, from time to time during the Authorization
Period, up to $250 million at any time outstanding of promissory notes
having maturities of less than one year.
2. Guarantees Issued by CILCORP and Its Subsidiaries
CILCORP and certain of its nonutility subsidiaries request
authorization to maintain, renew and extend all guarantees and other
forms of credit support that they have issued and which are outstanding
at the time that the Transaction closes. In addition, CILCORP requests
authorization to provide additional guarantees and other forms of
credit support (collectively, ``Guarantees'') from time to time during
the Authorization Period on behalf of or for the benefit of any of its
subsidiaries,
[[Page 66683]]
provided that the aggregate amount of all CILCORP guarantees at any
time outstanding shall not exceed $500 million. Any Guarantee
outstanding on March 31, 2006 will expire or terminate in accordance
with its terms.
D. Organization and Acquisition of Financing Subsidiaries
In connection with the issuance of any securities for which
authorization is requested in the application/declaration, or (in the
case of CILCO) under rule 52(a), CILCORP, CILCO and CIGI request
authorization to acquire, directly or indirectly, the common stock or
other equity securities of one or more entities (each a ``Financing
Subsidiary'') formed exclusively for the purpose of facilitating the
issuance of long-term debt and/or preferred securities and the loan or
other transfer of the proceeds to the parent company of a Financing
Subsidiary. The proceeds of any financing carried out through a
Financing Subsidiary will be counted against the limits proposed in the
Application for the securities issued by CILCORP or CIGI, as the case
may be, and the terms, conditions and other limitations applicable to
any securities issued by a Financing Subsidiary will conform to those
proposed for the specified type of security (e.g., long-term debt,
preferred securities, etc.). In connection with any of these financing
transactions, CILCORP or CIGI, as the case may be, may enter into one
or more guarantees or other credit support agreements in favor of its
Financing Subsidiary. CILCORP, CILCO and CIGI also request
authorization to enter into an expense agreement with its respective
Financing Subsidiary, under which each company would agree to pay all
expenses of the Financing Subsidiary.
In addition, CILCORP and CIGI also request authority to issue and
sell to any Financing Subsidiary, at any time or from time to time in
one or more series, unsecured debentures, unsecured promissory notes or
other unsecured debt instruments (individually, a ``Note'' and,
collectively, the ``Notes'') governed by an indenture or indentures or
other documents, and the Financing Subsidiary will apply the proceeds
of any external financing by the Financing Subsidiary plus the amount
of any equity contribution made to it from time to time to purchase
Notes. The terms (e.g., interest rate, maturity, amortization,
prepayment terms, default provisions, etc.) of any Notes would
generally be designed to parallel the terms of the securities issued by
the Financing Subsidiary to which the Notes relate. The principal
amount of Notes issued to a Financing Subsidiary by its parent will not
be counted against the limits proposed in this Application on
securities issued by CILCORP or CIGI to third parties or to Ameren.\15\
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\15\ ``Mirror image'' Notes issued by CILCO to any Financing
Subsidiary will be exempt under rule 52(a) if the conditions of rule
52(a) are satisfied.
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Applicants state that any Financing Subsidiary organized under the
authority granted by the Commission in this proceeding shall be
organized only if, in management's opinion, the creation and
utilization of a Financing Subsidiary will likely result in tax
savings, increased access to capital markets and/or lower cost of
capital for CILCORP, CILCO or CIGI, as applicable.\16\
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\16\ Applicants state the creation of any Financing Subsidiary,
issuance of securities through these entities, and the use of
financing proceeds to make investments will be subject to a
comprehensive set of formal internal controls that Ameren has
adopted. These include delegation of authority limits on
expenditures, board of director budget approvals and comparison of
budgets against actual financial results on a monthly basis, daily
reconciliations of disbursements from major accounts by the
Treasurer's group, monthly review of financial statements of each
legal entity in the Ameren system by Ameren's Accounting Manager,
Controller and Vice President of Finance, external auditor review of
financial statements for each legal entity filing reports under the
Securities Exchange Act of 1934 on a quarterly basis, internal
audits, and corporate compliance procedures that are applicable to
all management employees.
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E. Payment of Dividends by CILCORP Out of Capital Surplus
CILCORP requests authorization to declare and pay dividends on its
common stock and/or redeem or repurchase its outstanding shares of
common stock from time to time through the Authorization Period out of
capital surplus (including revaluation reserve) to the extent permitted
under applicable corporate law and the terms of any applicable
covenants in its financing documents (including the CILCORP Indenture)
in an amount equal to CILCORP's retained earnings at the time that the
Transaction is consummated plus the amount, if any, recorded as an
impairment to goodwill on the books of CILCORP in accordance with SFAS
Nos. 141 and 142.\17\
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\17\ See, E.ON AG, et al., HCAR No. 27539 (June 14, 2002).
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VII. Exemption of CILCORP and CILCO as Holding Companies
Finally, in its capacity as a holding company over CILCO and CIGI,
CILCORP states that it will continue to be entitled to an exemption
under section 3(a)(1) because CILCORP, CILCO and CIGI are all
incorporated in Illinois, the state in which all of CILCO's and CIGI's
public utility operations are conducted. Likewise, Applicants state
that CILCO will be entitled to an exemption under section 3(a)(1) by
nature of its capacity as a holding company over CIGI. Accordingly,
CILCORP and CILCO request that the Commission issue an order exempting
them from the registration requirements of section 5 under section
3(a)(1).
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 02-27776 Filed 10-31-02; 8:45 am]
BILLING CODE 8010-01-P