As filed with the Securities and Exchange Commission on September 20, 2002
File No. 70-_____
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------
FORM U-1 APPLICATION-DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
---------------------------------
SCANA CORPORATION PRIMESOUTH, INC.
SOUTH CAROLINA ELECTRIC & GAS COMPANY PALMARK, INC.
SOUTH CAROLINA GENERATING COMPANY, INC. SCANA RESOURCES, INC.
SOUTH CAROLINA FUEL COMPANY, INC. SCANA DEVELOPMENT CORPORATION
SOUTH CAROLINA PIPELINE CORPORATION SCANA PETROLEUM RESOURCES, INC.
SCG PIPELINE, INC. SCANA SERVICES, INC.
SCANA ENERGY MARKETING, INC. PUBLIC SERVICE COMPANY OF NORTH CAROLINA, INCORPORATED
SCANA ENERGY TRADING, LLC PSNC BLUE RIDGE CORPORATION
SCANA PUBLIC SERVICE COMPANY, LLC PSNC CARDINAL PIPELINE COMPANY
SCANA COMMUNICATIONS, INC. CLEAN ENERGY ENTERPRISES INC.
SERVICECARE, INC.
1426 Main Street
Columbia, South Carolina 29201
(Name of company or companies filing this statement and address
of principal executive offices)
--------------------------------------------------------------------------------
SCANA CORPORATION
(Name of top registered holding company parent of each applicant or declarant)
---------------------------------
Kevin B. Marsh
H. Thomas Arthur
SCANA CORPORATION
1426 Main Street
Columbia, South Carolina 29201
(Name and address of agent for service)
---------------------------------
The Commission is requested to send copies of all notices, orders and
communications in connection with this Application-Declaration to:
William J. Harmon
Debra J. Schnebel
Jones, Day, Reavis & Pogue
77 West Wacker, Suite 3500
Chicago, IL 60601
(312) 782-3939
TABLE OF CONTENTS
PAGE
----
Item 1. Description of Proposed Transaction.....................................................................1
A. Introduction.......................................................................................1
B. Background.........................................................................................1
C. Description of the Parties to the Transaction......................................................3
D. Overview of the Requests...........................................................................4
E. Parameters for Financing Authorization.............................................................6
F. Financial Condition................................................................................7
G. Description of Specific Types of Financing........................................................11
H. Direct Stock Purchase and Dividend Reinvestment Plan, Incentive
Compensation Plans and other Employee Benefit Plans...........................................22
I. Payment of Dividends out of Capital or Unearned Surplus by Non-Utility Subsidiaries...............24
J. Development and Administrative Activities.........................................................24
K. Intermediate Subsidiaries.........................................................................25
L. Internal Reorganization of Existing Investments...................................................27
M. Solicitation of Proxies...........................................................................28
N. Filing of Certificates of Notification............................................................28
Item 2. Fees, Commissions And Expenses.........................................................................30
Item 3. Applicable Statutory Provisions........................................................................30
A. Applicable Provisions.............................................................................30
B. Rule 53 and 54 Analysis...........................................................................30
Item 4. Regulatory Approval....................................................................................31
Item 5. Procedure..............................................................................................31
Item 6. Exhibits And Financial Statements......................................................................31
A. Exhibits..........................................................................................31
B. Financial Statements..............................................................................33
Item 7. Information as to Environmental Effects................................................................33
-i-
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION
A. Introduction
In this Application-Declaration (this "Application"), SCANA Corporation
("SCANA"), a registered holding company under the Public Utility Holding Company
Act of 1935, as amended (the "Act"), the Utility Subsidiaries (as hereinafter
defined) and the additional companies listed on the signature page of this
Application (collectively, the "Applicants") seek approval pursuant to Sections
6(a), 7, 9, 10 and 12 of the Act and Rules 42, 43, 44, 45, 46, 52, 53, 54, 58
and 62 thereunder to engage in the various transactions set forth herein.
B. Background.
By order dated February 9, 2000 (the "Merger Order")(1), the Commission
authorized SCANA, a South Carolina corporation, to acquire all of the issued and
outstanding common stock of Public Service Company of North Carolina,
Incorporated ("PSNC"), an exempt holding company (the "Merger"). SCANA
registered as a holding company under the Act on February 11, 2000. As a result
of the Merger, SCANA now owns directly all of the issued and outstanding common
stock of three public utility companies within the meaning of the Act, PSNC,
South Carolina Electric & Gas Company ("SCE&G"), which generates, transmits,
distributes and sells electricity and purchases and sells natural gas in South
Carolina, and South Carolina Generating Company, Inc. ("GENCO"), which owns and
operates a 580 MW generating facility in Goose Creek, South Carolina and sells
all of the power generated by the facility to SCE&G (PSNC, SCE&G and GENCO are
collectively referred to as the "Utility Subsidiaries"). All of SCANA's direct
and indirect subsidiaries, other than the Utility Subsidiaries, are herein
referred to as the "Non-Utility Subsidiaries."(2) The Utility Subsidiaries and
Non-Utility Subsidiaries are collectively referred to herein as the
"Subsidiaries."
In connection with the Merger, the Commission issued an order dated
February 14, 2000, (as supplemented and amended, the "Prior Orders"),(3)
authorizing SCANA, the Utility Subsidiaries and the Non-Utility Subsidiaries to
engage in the following activities:
(a) external issuances by SCANA of common stock, long-term debt,
short-term debt, and other securities for cash;
(b) the entering into by SCANA of transactions to manage interest rate
risk ("hedging transactions");
---------------------------
(1) See Holding Co. Act Release No. 27133.
(2) For purpose of the requests by Applicants as more fully described
herein, the terms "Non-Utility Subsidiary" and "Non-Utility Subsidiaries" shall
also include other direct and indirect non-utility subsidiaries that SCANA may
form or acquire from time to time with approval of the Commission or pursuant to
exemption under the Act.
(3) See Holding Co. Act Release Nos. 27135 and 27137. In Holding Co.
Act Release No. 27341 (Jan. 31, 2001) and Holding Co. Act Release No. 27476
(Dec. 19, 2001) the Commission issued supplemental orders increasing various
financing limitations throughout the authorization period.
1
(c) issuances of debt securities (including commercial paper) and the
entering into of hedging transactions by the Utility Subsidiaries;
(d) issuances by Non-Utility Subsidiaries of debt securities which are
not exempt pursuant to Rule 52;
(e) the establishment of a utility money pool (the "Utility Money
Pool") and a non-utility money pool (the "Non-Utility Money Pool");
(f) the issuance of intra-system guarantees by SCANA and the
Non-Utility Subsidiaries on behalf of Subsidiaries;
(g) the ability of wholly-owned Subsidiaries to alter their capital
stock in order to engage in financing transactions with their parent company and
to engage in a reverse stock split to reduce franchise taxes, subject, in the
case of Utility Subsidiaries, to the approval of, if required, the applicable
state commission;
(h) the ability of PSNC to pay dividends out of capital or unearned
surplus;
(i) the formation of financing entities and the issuance by such
entities of securities otherwise authorized to be issued and sold pursuant to
the Prior Orders; and
(j) the ability of SCANA to keep outstanding advances in favor of
certain of its Subsidiaries in an amount of approximately $600 million
following the merger. (4)
The approvals summarized in items (a) through (f) above are referred to
as the "Financing Activities." Authorization for Financing Activities under the
Prior Orders expires February 11, 2003. Other authorizations in the Prior Orders
are not subject to this expiration date.
More specifically, the Prior Orders granted authority for SCANA and its
Subsidiaries to issue and sell common stock, short-term debt and long-term debt
up to an aggregate principal amount not to exceed $3.85 billion. In particular,
the Commission authorized SCANA to issue and sell:
(a) common stock (other than for employee benefit plans or stock
purchase and dividend reinvestment plans) and long-term debt in an aggregate
principal amount not to exceed $2.45 billion;
(b) up to 10 million shares of SCANA common stock under SCANA's direct
stock purchase and dividend reinvestment plan, certain incentive compensation
plans and certain other employee benefit plans;
(c) to issue and sell commercial paper and short-term debt in an
aggregate amount not to exceed $450 million; and
(d) to enter into guarantees, letters of credit or similar credit
support agreements with respect to the debt of its direct or indirect
Subsidiaries in an aggregate amount not to exceed $305 million.
-------------------
(4) Of the previously authorized $600 million, SCANA currently has
advances in an amount of approximately $1.25 million outstanding. SCANA is
seeking to retain the authority granted in the Prior Orders in the amount of
$1.25 million.
2
The Commission authorized SCE&G and PSNC to issue commercial paper and
establish credit lines not exempt under Rule 52 in the aggregate amount not to
exceed $300 million and $200 million, respectively, and for PSNC to issue $450
million of long-term debt. SCE&G, PSNC, and GENCO were authorized to borrow up
to $30 million, $15 million, and $25 million, respectively, at any one time
outstanding from the Utility Money Pool.
The Commission reserved jurisdiction over a proposal to allocate the
consolidated income tax liability of SCANA among the members of the consolidated
group in a manner that would differ in one respect from the method allowed under
Rule 45(c) of the rules and regulations under the Act. SCANA expects to file a
Post Effective Amendment to Form U-1 in File No. 70-9533 at a later date
requesting that the Commission release jurisdiction over the proposed tax
allocation agreement (the "Tax Allocation Application").
Finally, by order dated June 9, 2000 (the "Plan Order")(5) the
Commission authorized SCANA Corporation to:
(a) grant awards of stock options, stock appreciation rights,
restricted stock, performance shares and performance units under its Long-Term
Equity Compensation Plan,
(b) issue with respect to such plan up to five million shares of its
common stock through June 8, 2003, and
(c) solicit proxies with respect to such plan at SCANA's 2000 Annual
Meeting of Shareholders.
C. Description of the Parties to the Transaction
In addition to the Utility Subsidiaries, SCANA also holds directly all
of the outstanding equity securities of (1) SCANA Services, Inc. ("SCANA
Services"), a subsidiary service company that provides administrative,
management and other services to Subsidiaries and business units within the
SCANA system, as more fully described below; (2) South Carolina Pipeline
Corporation ("SCPC"), a subsidiary engaged in the purchase, transmission and
sale of natural gas to commercial, industrial and wholesale customers, including
SCE&G; (3) South Carolina Fuel Company, Inc. ("Fuel Company"), which acquires,
owns and provides financing for SCE&G's nuclear fuel, fossil fuel and sulfur
dioxide emission allowances;(4) SCANA Energy Marketing, Inc. ("SCANA
Marketing"), a subsidiary that markets electricity and natural gas primarily in
the southeast and provides energy-related risk management services to producers
and customers; (5) ServiceCare, Inc. ("ServiceCare"), a subsidiary that provides
energy-related products and service contracts on home appliances; (6)
Primesouth, Inc., a subsidiary engaged in power plant management and maintenance
services; (7) SCANA Resources, Inc., a subsidiary that conducts energy-related
businesses and provides energy-related services; (8) SCG Pipeline, Inc., a
subsidiary organized to engage in the transportation of natural gas in Georgia
and South Carolina; and of (9) SCANA Communications, Inc., an "exempt
telecommunications company" ("ETC"), as defined in Section 34 of the Act.
---------------------------
(5) See Holding Co. Act Release No. 27183.
3
D. Overview of the Requests
The Applicants hereby request authorization to engage in the financing
transactions set forth herein during the period from the effective date of the
order in this proceeding through April 15, 2006 (the "Authorization Period").
The authority sought herein will replace and substitute for all the
authority granted by the Prior Orders with respect to Financing Activities and
will replace and substitute for the authority granted by the Plan Order with
respect to issuance of shares of common stock for benefit plans as described
herein.
The approval by the Commission of this Application will give the
Applicants the flexibility that will allow them to respond quickly and
efficiently to their financing needs and to changes in market conditions,
allowing them to efficiently and effectively carry on business activities
designed to provide benefits to customers and shareholders. Approval of this
Application is consistent with the Prior Orders and existing Commission
precedent.(6)
The authorizations requested herein relate to:
(a) external issuances by SCANA of common stock, preferred stock,
preferred or equity-linked securities (including units with incorporated
options, warrants and/or forward equity purchase contracts or provisions that
are exercisable or exchangeable for or convertible into common stock) and
long-term debt to increase SCANA's capitalization by up to $2.2 billion;
(b) external issuances by SCANA of short-term debt in an amount issued
and outstanding at any time not to exceed $500 million;
(c) external issuances by SCANA of common stock, preferred stock,
preferred and equity-linked securities, long-term debt and short-term debt to
refund or replace existing securities without increasing capitalization;
(d) external issuances of up to 10 million shares of SCANA common stock
under SCANA's direct stock purchase and dividend reinvestment plan, certain
incentive compensation plans and certain other employee benefit plans;
(e) the entering into by SCANA of hedging transactions;
(f) solicitation of proxies from the holders of SCANA common stock in
connection with proposed amendments to SCANA's Articles of Incorporation to (A)
authorize the creation of a class of preferred stock and the issuance of
preferred stock from time to time having the provisions determined by the board
of directors as permitted by Section 33-6-102 (a) of the
---------------------------
(6) See e.g., E.ON AG, Holding Co. Act Release No. 27539 (June 14,
2002); First Energy Corporation, Holding Co. Act Release No. 27459 (Oct. 29
2001); Exelon Corporation, Holding Co. Act Release No. 27266 (Nov. 2, 2000); New
Century Energies, Holding Co. Act Release No. 27212 (Aug. 16, 2000); Dominion
Resources, Inc., Holding Co. Act Release No. 27112 (Dec. 15, 1999)), Conectiv,
Inc., Holding Co. Act Release No. 26833 (Feb. 26, 1998), and Ameren Corporation,
Holding Co. Act Release No. 26809 (Dec. 30, 1997).
4
South Carolina Business Corporation Act(7), and (B) increase the number of
authorized shares of common stock from 150 million shares to a number not to
exceed 250 million shares;
(g) the issuance of intra-system advances and guarantees by SCANA to or
on behalf of Subsidiaries of SCANA;
(h) the issuance of intra-system advances and guarantees, to the extent
not exempt pursuant to Rule 52, by the Non-Utility Subsidiaries to or on behalf
of other Non-Utility Subsidiaries;
(i) the issuance of intra-system advances and guarantees, to the extent
not exempt pursuant to Rule 52, by the Utility Subsidiaries to or on behalf of
such Utility Subsidiary's direct or indirect subsidiaries;
(j) issuances of long-term and short-term debt securities (including
commercial paper) and the entering into of hedging transactions by the Utility
Subsidiaries and external issuances by the Utility Subsidiaries of long-term
debt or short-term debt to refund or replace existing securities without
increasing capitalization, to the extent not exempt pursuant to Rule 52;
(k) the continuation of authorization for the Utility Money Pool and
the Non-Utility Money Pool;
(l) the ability of the Non-Utility Subsidiaries to pay dividends out of
capital or unearned surplus;
(m) the right of SCANA to acquire directly or through Subsidiaries the
securities of one or more corporations, trust, partnerships, limited liability
companies or other entities ("Intermediate Subsidiaries") to facilitate the
acquisition, holding and/or financing of SCANA's non-utility investments;
(n) the authority for SCANA to engage, directly or through
Subsidiaries, in preliminary development activities ("Development Activities")
and administrative and management activities ("Administrative Activities") in
each case related to SCANA's pemitted non-utility investments; and
(o) the authority for SCANA and its Subsidiaries to undertake internal
reorganizations of then existing and permitted Subsidiaries and businesses.
E. Parameters for Financing Authorization
Authorization is requested herein to engage in certain financing
transactions during the Authorization Period for which the specific terms and
conditions are not at this time known, and which may not be covered by Rule 52,
without further prior approval by the Commission. The
---------------------------
(7) The Board of Directors will have the authority to determine the
designations, preferences, limitations, and relative rights as well as other
terms permitted by the Articles of Incorporation of SCANA and the South Carolina
Business Corporation Act.
5
following general terms will be applicable where appropriate to the financing
transactions requested to be authorized hereby:
1. Effective Cost of Money on Financings. The effective cost of
capital on debt and preferred or equity-linked financings 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.(8)
2. Maturity. The maturity of indebtedness will not exceed 50 years.
Preferred stock or preferred or equity-linked securities (other than perpetual
preferred stock) will be redeemed no later than 50 years after the issuance
thereof, unless converted into common stock.
3. Issuance Expenses. The underwriting fees, commissions or other
similar remuneration paid in connection with the non-competitive issue, sale or
distribution of securities pursuant to this Application will not exceed the
greater of (i) 5% of the principal or total amount of the securities being
issued or (ii) issuance expenses that are generally paid at the time of the
pricing for sales of the particular issuance, having the same or reasonably
similar terms and conditions issued by similar companies of reasonably
comparable credit quality.(9)
4. Use of Proceeds. The proceeds from the sale of securities in
external financing transactions will be used for general corporate purposes
including (i) the financing, in part, of the capital expenditures of the SCANA
system, (ii) the financing of working capital requirements of the SCANA system,
(iii) the acquisition, retirement or redemption pursuant to Rule 42 of
securities previously issued by SCANA or its Subsidiaries or as otherwise
authorized by Commission, and (iv) direct or indirect investment in companies
authorized under the Act or by Commission Rule (including exempt wholesale
generators ("EWGs") or foreign utility companies ("FUCOs") or in a separate
proceeding and (v) other lawful purposes. The Applicants represent that no such
financing proceeds will be used to acquire a new subsidiary unless such
financing is consummated in accordance with an order of the Commission or an
available exemption under the Act. The aggregate amount of proceeds of
financings and guaranties used to fund investments in EWGs and FUCOs will not,
when added to SCANA's "aggregate investment" in these entities at any point in
time, exceed 50% of SCANA's "consolidated retained earnings" as defined in Rule
53.
5. Common Equity Ratio. At the time of any security issuance under the
authority sought herein, the common equity (as reflected in the most recent 10-K
or 10-Q filed with the Commission pursuant to the 1934 Act) of the issuer,
taking into account such issuance, will be at least 30% of its consolidated
capitalization (common equity, preferred stock and debt (long and short-term)).
6. Investment Grade Ratings. At the time of any security issuance
under the authority sought herein, the rating of any security issued (or the
rating of the same class of security) shall be at least 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
---------------------------
(8) See National Grid Group plc., Holding Co. Act Release No. 27490
(January 16, 2002).
(9) See Emera Incorporated, Holding Co. Act Release No. 27445 (Oct. 1,
2001).
6
the Securities Exchange Act of 1934. If such issuance is of a type of security
that is unrated, the issuer shall have a corporate or senior unsecured debt
rating of at least investment grade. The ratings test will not apply to any
issuance of common stock or to issuances of indebtedness by GENCO.(10) It is
requested that the Commission reserve jurisdiction over the issuance by SCANA or
Subsidiaries of any such securities that are rated below investment grade where
approval is required. The ratings requirement does not apply to any issuance for
which Commission approval is not required.
7. Authorization Period. No security will be issued pursuant to the
authority sought herein after the last day of the Authorization Period (which is
April 15, 2006).(11)
F. Financial Condition
The financial condition of SCANA and each of its Utility Subsidiaries
is strong. The following tables show actual and pro forma capitalization amounts
and ratios for SCANA, SCE&G and PSNC. The adjustments in the following tables
include (1) adjustment for transactions that have occurred or are planned to
occur subsequent to June 30, 2002 and (2) adjustments to reflect the financing
authority sought herein.
SCANA CORPORATION
HISTORICAL AND PRO FORMA CAPITAL STRUCTURE
JUNE 30, 2002
(UNAUDITED)
($ IN MILLIONS)
Additional Pro Forma % of Total
% of Total Financing Amount Capitalization
Actual Capitalization Adjustments as adjusted as adjusted
Common stock equity $2,150 36.3% $ (250)(b)
150 (c)
1,100 (e) $3,150 33.3%
Preferred stock equity 116 2.0% 116 1.2%
SCE&G Obligated Mandatorily
Redeemable Preferred Securities 50 0.8% 50 0.5%
Debt (long and short-term) 3,602 60.9% (200) (a)
200 (d)
1,100 (e)
500 (f)
237 (f)
300 (f)
300 (g)
400 (h) $6,039 65.0%
Total $5,918 100.0% $3,537 $9,455 100.0%
Notes:
---------------------------
(10) GENCO does not currently have any rated securities outstanding and
is not expected to have a security rating during the Authorization Period.
(11) The Authorization Period limitation does not apply to the requests
described in Item 1. I, J and K.
7
(a) To record retirement on July 15, 2002 of $300 million floating rate medium
term notes and issuance on August 15, 2002 of $100 million of one year floating
rate medium term notes (for a net retirement of $200 million).
(b) To record anticipated writedown for goodwill impairment at PSNC resulting
from implementation of Statement of Financial Accounting Standard (SFAS) No.
142. The anticipated writedown is not expected to exceed $250 million and will
have no impact on income taxes.
(c) To record anticipated issuance of up to 6 million shares of SCANA common
stock. Proceeds from the issuance are expected to be advanced to SCE&G as a
capital contribution.
(d) To record anticipated issuance by SCE&G of $200 million first mortgage
bonds.
(e) To record increased capitalization requested in this Application totaling
$2,200 million (assumed to be $1,100 million common stock and $1,100 million
debt).
(f) To record increased short-term debt to reflect maximum amount requested in
this Application. Pro forma does not include an aggregate of $140 million
attributable to Utility Money Pool borrowings (See Item 1.G.3.(b) below.) Net
adjustment for additional short-term debt is shown below:
SCANA SCE&G PSNC
Authority requested $500 million $ 450 million $300 million
Issued $ 0 million $(213) million $ 0 million
Available for issue $500 million $ 237 million $300 million
(g) To record increased PSNC long-term debt of $300 million to reflect maximum
amount requested in this Application.
(h) To record increased GENCO long-term debt of $100 million to reflect the
maximum amount requested in this Application.
SOUTH CAROLINA ELECTRIC & GAS COMPANY
HISTORICAL AND PRO FORMA CAPITAL STRUCTURE
JUNE 30, 2002
(UNAUDITED)
($ IN MILLIONS)
Additional % of Total
% of Total Financing Pro Forma as Capitalization
Actual Capitalization Adjustments adjusted as adjusted
Common stock equity $ 1,768 46.8% $ 150 (a) $ 1,918 43.9%
Preferred stock equity 116 3.1% 116 2.7%
SCE&G Obligated Mandatorily
Redeemable Preferred Securities 50 1.3% 50 1.1%
Debt (long and short-term) 1,847 48.8% 237 (b) 2,284 52.3%
200 (c)
Total $ 3,781 100.0% $ 587 $ 4,368 100.0%
8
Notes:
(a) To record anticipated capital contribution from SCANA. See Note (c) above.
(b) To record net increase in short-term debt authorized to be outstanding
pursuant to request herein. See note (f) above. Pro forma does not include $60
million attributable to Utility Money Pool borrowings by SCE&G. (See Item
1.G.3.(b) below.)
(c) To record anticipated issuance of $200 million first mortgage bonds.
PUBLIC SERVICE CO OF NORTH CAROLINA, INCORPORATED
HISTORICAL AND PRO FORMA CAPITAL STRUCTURE
JUNE 30, 2002
(UNAUDITED)
($ IN MILLIONS)
Additional % of Total
% of Total Financing Pro Forma Capitalization
Actual Capitalization Adjustments as adjusted as adjusted
Common stock equity $ 725 71.1% $ (250)(a) $ 475 34.7%
Debt (long and short-term) 295 28.9% $ 300 (b)
$ 300 (c) $ 895 65.3%
Total $ 1,020 100.0% $ 350 $ 1,370 100.0%
Notes:
(a) To record anticipated writedown for goodwill impairment at PSNC resulting
from implementation of Statement of Financial Accounting Standard (SFAS) No.
142. The anticipated writedown is not expected to exceed $250 million and will
have no impact on income taxes.
(b) To record net increase in short-term debt authorized to be outstanding
pursuant to request herein. See note (f) above. Pro forma does not include $30
million attributable to Utility Money Pool borrowings by PSNC. (See Item
1.G.3.(b) below.)
(c) To record increased PSNC long-term debt of $300 million to reflect maximum
amount requested in this Application.
SOUTH CAROLINA GENERATING COMPANY, INCORPORATED
HISTORICAL AND PRO FORMA CAPITAL STRUCTURE
JUNE 30, 2002
(UNAUDITED)
($ IN MILLIONS)
Additional % of Total
% of Total Financing Pro Forma Capitalization
Actual Capitalization Adjustments as adjusted as adjusted
Common stock equity $ 44 36.4% $ 50 (a) $ 94 34.7%
Debt (long and short-term) $ 77 63.6% $ 100 (b) $ 177 65.3%
----------------------- --------- -----------------------
Total $ 121 100.0% $ 150 $ 271 100.0%
======================= ========= =======================
(a) To record the receipt by GENCO of $50 million as a capital contribution
from SCANA. SCANA will provide the capital contribution with proceeds from the
issuance of securities approved herein. See note (e) above.
(b) To record increased GENCO long-term debt of $100 million to reflect the
maximum amount requested in this Application.
9
The following table includes the current ratings of SCANA companies:
-----------------------------------------------------------------------
COMPANY MOODY'S S&P FITCH
-----------------------------------------------------------------------
SCANA
-----------------------------------------------------------------------
Issuer/Corporate A3 A- NR*
-----------------------------------------------------------------------
Senior Unsecured A3 BBB+ A-
-----------------------------------------------------------------------
-----------------------------------------------------------------------
SCE&G
-----------------------------------------------------------------------
Issuer/Corporate A2 A- NR
-----------------------------------------------------------------------
Senior Secured A1 A- A+
-----------------------------------------------------------------------
Commercial Paper P-1 A-1 F-1
-----------------------------------------------------------------------
Preferred Stock Baa1 BBB A
-----------------------------------------------------------------------
-----------------------------------------------------------------------
PSNC
-----------------------------------------------------------------------
Issuer/Corporate NR A- NR
-----------------------------------------------------------------------
Senior Unsecured A2 A- NR
-----------------------------------------------------------------------
Commercial Paper P-1 A-1 NR
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Fuel Company
-----------------------------------------------------------------------
Commercial Paper P-1 A-1 NR
-----------------------------------------------------------------------
*NR - no rating provided
G. Description of Specific Types of Financing
1. SCANA External Financing
SCANA requests authorization to obtain funds externally through sales
of common stock, preferred stock, preferred and equity-linked securities,
long-term debt and short-term debt securities. With respect to common stock,
SCANA also requests authority to issue common stock to third parties in
consideration for the acquisition by SCANA or a Non-Utility Subsidiary of equity
or debt securities of a company being acquired pursuant to an exemption under
the Act or pursuant to Commission authorization. In addition, SCANA seeks the
flexibility to enter into certain hedging transactions to manage interest rate
risk.
(a) Common Stock
The aggregate amount of financing obtained by SCANA during the
Authorization Period from issuance and sale of common stock, no par value (other
than for employee benefit plans or stock purchase and dividend reinvestment
plans), when combined with issuances of preferred stock, preferred and
equity-linked securities and long-term debt, as described in this section, and
other than for refunding or replacement of securities where capitalization is
not increased as a result thereof, shall not exceed $2.2 billion for the uses
set forth in Section E above.
This represents a decrease of $250 million from the authority granted
in the Prior Orders reflecting lower anticipated capital requirements for SCANA.
i. General
SCANA may sell common stock covered by this Application in any one of
the following ways: (i) through underwriters or dealers; (ii) through agents;
(iii) directly to a limited number of purchasers or a single purchaser; or (iv)
directly to employees (or to trusts established for their benefit), shareholders
and others. Issuances of common stock under SCANA's employee benefit
10
plans and stock purchase and dividend reinvestment plans will not count towards
the limitations proposed in this section; approval to issue common stock for
such plans is being sought under Item 1 H. below. If underwriters are used in
the sale of the securities, such securities will be acquired by the underwriters
for their own account and may be resold from time to time in one or more
transactions, including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of sale. The securities may be
offered to the public either through underwriting syndicates (which may be
represented by a managing underwriter or underwriters designated by SCANA) or
directly by one or more underwriters acting alone. The securities may be sold
directly by SCANA or through agents designated by SCANA from time to time. If
dealers are utilized in the sale of any of the securities, SCANA will sell such
securities to the dealers as principals. Any dealer may then resell such
securities to the public at varying prices to be determined by such dealer at
the time of resale. If common stock is being sold in an underwritten offering,
SCANA may grant the underwriters thereof a "green shoe" option permitting the
purchase from SCANA at the same price of additional shares then being offered
solely for the purpose of covering over-allotments.
Public distributions may be pursuant to private negotiation with
underwriters, dealers or agents as discussed above or effected through
competitive bidding among underwriters. In addition, sales may be made through
private placements or other non-public offerings to one or more persons. All
such common stock sales will be with terms and conditions, at rates or prices
and under conditions negotiated or based upon, or otherwise determined by,
competitive capital markets.
ii. Acquisitions
Under the terms of the Act and orders of the Commission, including the
Merger Order, SCANA is authorized to acquire securities of companies engaged in
energy-related consumer services, "energy-related businesses" as described in
Rule 58, ETCs, EWGs and FUCOs. Historically, similar acquisitions have
occasionally involved the exchange of parent company stock for securities of the
company being acquired in order to provide the seller with certain tax
advantages. These transactions are individually negotiated. The SCANA common
stock to be exchanged may be purchased on the open market pursuant to Rule 42,
or may be original issue. Original issue stock may be registered under the
Securities Act of 1933, as amended (the "1933 Act"), but at present it is
expected that the common stock would not be registered and the common stock
acquired by the third parties would be subject to resale restrictions pursuant
to Rule 144 under the 1933 Act.
The ability to offer stock as consideration may make a transaction more
economical for SCANA as well as for the seller of the business. The SCANA common
stock would be valued at market value based upon the closing price on the day
prior to the date of issuance (or, if appropriate, the date of a binding
contract providing for the issuance of the common stock) or based upon average
high and low prices for a period as negotiated by the parties. From the
perspective of the Commission, the use of stock as consideration valued at
market value should be no different than a sale of common stock on the open
market and use of the proceeds to acquire securities, the acquisition of which
is otherwise authorized.
(b) Preferred Stock and Preferred and Equity-linked Securities
11
SCANA requests Commission authorization during the Authorization Period
to issue preferred stock (subject to approval by shareholders of the necessary
amendment to the Articles of Incorporation described in Item 1.I. below) and to
issue directly or indirectly through one or more Financing Subsidiaries
preferred securities (including, specifically, trust preferred securities) or
equity-linked securities (including, specifically, debt or preferred securities
that are convertible, either mandatorily or at the option of the holder, into
common stock or SCANA indebtedness and forward purchase contracts for common
stock).(12) The aggregate amount of financing obtained by SCANA during the
Authorization Period from issuance and sale of preferred stock and preferred and
equity-linked securities, when combined with issuances of common stock (other
than for employee benefit plans or stock purchase and dividend reinvestment
plans) and long-term debt, as described in this section and other than for
refunding or replacement of securities where capitalization is not increased
from that in place at June 30, 2002), shall not exceed $2.2 billion for the uses
set forth in Section E above.
There are many different variations of equity-linked products offered
in the marketplace. Typically, these products combine a security with a fixed
obligation (e.g., preferred stock or debt) with a conversion feature that is
exercisable (often mandatorily) within a relatively short period (e.g., three to
six years after issuance). These instruments may also be tax advantaged. From
the issuer's standpoint, an equity-linked security may offer a means to raise
capital at a lower overall economic or after-tax cost than other types of
long-term securities, in that the fixed obligation component may have a lower
after-tax cost than straight preferred stock and all or a portion of the
interest or dividends paid may be tax deductible. From an economic standpoint,
these types of securities also generally carry a lower cost than common equity.
Preferred or equity-linked 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. Dividends or distributions on preferred or
equity-linked securities will be made periodically and to the extent funds are
legally available for such purpose, but may be made subject to terms that allow
the issuer to defer dividend payments or distributions for specified periods.
Preferred or equity-linked securities may be convertible or exchangeable into
shares of common stock or other indebtedness and may be issued in the form of
shares or units.
Preferred stock and preferred equity linked securities may be sold
directly or indirectly through underwriters or dealers in connection with an
acquisition similar to that described for common stock in Item 1. G.1.(a) above.
The Commission has approved the issuance of such securities on several
occasions.(13)
(c) Long-Term Debt
SCANA requests Commission authorization during the Authorization Period
to issue long-term debt securities in an aggregate principal amount outstanding
at any time, when
---------------------------
(12) SCANA's articles of incorporation do not authorize preferred
stock. However, the "preferred securities" for which authority is sought herein
do not require issuance of a separate class of equity security by SCANA. Instead
a Financing Subsidiary could issue the preferred securities backed up by a debt
instrument of SCANA. SCANA may directly issue the other securities referred to
in this section.
(13) The Southern Company, Holding Co. Act Release No. 27134 (Feb. 9,
2000); Ameren Corporation, Holding Co. Act Release No. 27449 (Oct. 5, 2001).
12
combined with issuances of common stock (other than for benefit plans or stock
purchase and dividend reinvestment plans and other than for refunding or
replacement of securities where capitalization is not increased) under this
Application and when combined with issuances of preferred stock and preferred
and equity linked securities, as described in this section shall not exceed $2.2
billion for the uses set forth in Section E above.
Long-term debt securities may be comprised of bonds, notes, medium-term
notes or debentures under one or more indentures (the "SCANA Indenture") or
long-term indebtedness under agreements with banks or other institutional
lenders. Any long-term debt security would have such designation, aggregate
principal amount, maturity, interest rate(s) or methods of determining the same,
terms of payment of interest, redemption provisions, sinking fund terms, terms
for conversion into any other security of SCANA and other terms and conditions
as SCANA may determine at the time of issuance.
The maturity dates, interest rates, redemption and sinking fund
provisions, tender or repurchase and conversion features, if any, with respect
to the long-term securities of a particular series, as well as any associated
placement, underwriting or selling agent fees, commissions and discounts, if
any, will be established by negotiation or competitive bidding.
Borrowings from banks and other financial institutions may be unsecured
and pari passu with debt securities issued under the SCANA Indenture and the
short-term credit facilities (as described below). Long-term debt may be secured
by property of SCANA; however, in no case will any property of any Utility
Subsidiary be used as security for obligations of SCANA.(14)
Specific terms of any borrowings will continue to be determined by
SCANA at the time of issuance and will comply in all regards with the parameters
on financing authorization set forth in Section E above.
The request for authorization for SCANA to issue long-term debt
securities is consistent with the current authority under the Prior Orders and
authorization that the Commission has granted to other combination gas and
electric holding companies.(15)
(d) Short-Term Debt
SCANA requests authorization to have outstanding at any one time during
the Authorization Period, up to $500 million of short-term debt, which may
include institutional borrowings, commercial paper or bid notes (all as
described below) and short-term debt issued under the SCANA Indenture or
otherwise. This request represents an increase of $50 million over the authority
previously granted in the Prior Orders. The authorization for short-term debt is
in addition to the $2.2 billion requested for common stock, preferred stock and
preferred and equity-linked securities and long-term debt as described in Item
1.G.1. (a), (b) and (c) above.
---------------------------
(14) See FirstEnergy Corp., Holding Co. Act Release No. 27459 (Oct. 29,
2001).
(15) See e.g., E.ON AG, Holding Co. Act Release No. 27539 (June 14,
2002); Allegheny Energy, Inc., Holding Co. Act Release No. 27486 (Dec. 31,
2001); Exelon Corporation, Holding Co. Act Release No. 27266 (Nov. 2, 2000); New
Century Energies, Holding Co. Act Release No. 27212 (Aug. 16, 2000).
13
SCANA may sell commercial paper, from time to time, in established
domestic commercial paper markets. Such commercial paper would be sold to
dealers at the discount rate or the coupon rate per annum prevailing at the date
of issuance for commercial paper of comparable quality and maturities sold to
commercial paper dealers generally. It is expected that the dealers acquiring
commercial paper from SCANA will reoffer such paper at a discount to corporate
and institutional investors. Institutional investors are expected to include
commercial banks, insurance companies, pension funds, investment trusts,
foundations, colleges and universities and finance companies.
SCANA may, without counting against the limit set forth above, maintain
back-up lines of credit in connection with a commercial paper program in an
aggregate amount not to exceed the amount of authorized commercial paper.
Credit lines may be set up for use by SCANA for general corporate
purposes in addition to credit lines to support commercial paper as described in
this subsection. SCANA will borrow and repay under such lines of credit, from
time to time, as it is deemed appropriate or necessary.
(e) Financing Risk Management Devices
i. Interest Rate Risk. SCANA requests authority to enter into,
perform, purchase and sell financial instruments intended to reduce or manage
the volatility of interest rates, including but not limited to interest rate
swaps, caps, floors, collars and forward agreements or any other similar
agreements. Hedges may also include issuance of structured notes (i.e., a debt
instrument in which the principal and/or interest payments are indirectly linked
to the value of an underlying asset or index), or transactions involving the
purchase or sale, including short sales, of U.S. Treasury or Agency (e.g., FNMA)
obligations or LIBOR based swap instruments (collectively referred to as "Hedge
Instruments"). The transactions would be for fixed periods and stated notional
amounts. SCANA would employ interest rate derivatives as a means of prudently
managing the risk associated with any of its outstanding debt issued pursuant to
this authorization or an applicable exemption by, in effect, synthetically (i)
converting variable rate debt to fixed rate debt, (ii) converting fixed rate
debt to variable rate debt and (iii) limiting the impact of changes in interest
rates resulting from variable rate debt. In no case will the notional principal
amount of any interest rate swap exceed the greater of the face value of the
underlying debt instrument or the present market value of the underlying debt
instrument and related interest rate exposure. Transactions will be entered into
for a fixed or determinable period. Thus, SCANA will not engage in speculative
transactions unassociated with its existing outstanding debt and financing needs
and activities. SCANA will only enter into agreements with counterparties
("Approved Counterparties") whose senior debt ratings, as published by a
national recognized rating agency, are greater than or equal to "BBB," or an
equivalent rating.
ii. Anticipatory Hedges. In addition, SCANA requests authorization to
enter into interest rate hedging transactions with respect to anticipated debt
offerings (the "Anticipatory Hedges"), subject to certain limitations and
restrictions. Such Anticipatory Hedges would only be entered into with Approved
Counterparties, and would be utilized to fix and/or limit the interest rate risk
associated with any new issuance through (i) a forward sale of exchange-traded
Hedge Instruments (a "Forward Sale"), (ii) the purchase of put options on Hedge
Instruments (a "Put Options Purchase"), (iii) a Put Options Purchase in
combination with the sale of call options
14
Hedge Instruments (a "Zero Cost Collar"), (iv) transactions involving the
purchase or sale, including short sales, of Hedge Instruments, or (v) some
combination of a Forward Sale, Put Options Purchase, Zero Cost Collar and/or
other derivative or cash transactions, including, but not limited to, structured
notes, caps and collars, appropriate for the Anticipatory Hedges. Anticipatory
Hedges may be executed on-exchange ("On-Exchange Trades") with brokers through
the opening of futures and/or options positions traded on the Chicago Board of
Trade ("CBOT"), the opening of over-the-counter positions with one or more
counterparties ("Off-Exchange Trades"), or a combination of On-Exchange Trades
and Off-Exchange Trades. SCANA or the appropriate Subsidiary will determine the
optimal structure of each Anticipatory Hedge transaction at the time of
execution. SCANA or the appropriate Subsidiary may decide to lock in interest
rates and/or limit its exposure to interest rate increases.
iii. Accounting Standards. SCANA will comply with Statement of
Financial Accounting Standards ("SFAS") 133 ("Accounting for Derivative
Instruments and Hedging Activities"), SFAS 138 ("Accounting for Certain
Derivative Instruments and Certain Hedging Activities") or such other standards
relating to accounting for derivative transactions as are adopted and
implemented by the FASB. The Hedge Instruments and Anticipatory Hedges approved
hereunder will qualify for hedge accounting treatment under the current FASB
standards in effect and as determined at the date such Hedge Instruments or
Anticipatory Hedges are entered into. SCANA also requests authority to enter
into Hedge Instruments and Anticipatory Hedges which do not qualify for hedge
accounting treatment by the FASB, and requests that the Commission reserve
jurisdiction on this request until the record is complete.
2. Utility Subsidiary Financing
The South Carolina Public Service Commission (the "SCPSC") has
jurisdiction over issuances of securities by SCE&G, other than securities
payable within one year of the date of issuance or the renewal of short-term
obligations for a two-year or shorter period. Consequently, Rule 52 provides an
exemption from the prior authorization requirements of the Act for such
issuances and sales. The North Carolina Utilities Commission ("NCUC") has
jurisdiction over issuances of securities by PSNC, other than the issuance of
notes with a maturity of two years or less or renewals thereof for a six-year or
shorter period. Because PSNC is incorporated under the laws of South Carolina,
technically the approval by the NCUC does not satisfy Rule 52.(16) The
financings by the Utility Subsidiaries for which authorization is requested
herein are outside the Rule 52 exemption. In addition to the requests below,
each Utility Subsidiary also requests authority to issue securities not exempt
under Rule 52 for refunding or replacement of securities where its
capitalization is not increased from that in place.
(a) SCE&G and PSNC Short-Term Debt
Authority is requested for SCE&G to issue short-term debt, including
commercial paper and credit lines, in the aggregate amount of $450 million to be
outstanding at any one time during the Authorization Period. Authority is
requested for PSNC to issue short-term debt, including commercial paper and
credit lines, in the aggregate amount of $300 million to be outstanding at any
one time during the Authorization Period. These requests represent an
---------------------------
(16) See Release 27476 (Dec. 19, 2001).
15
increase of $150 million and $100, respectively, over the authorization granted
in the Prior Orders with respect to SCE&G and PSNC.
SCE&G and PSNC request authority to sell commercial paper, from time to
time, in established domestic commercial paper markets in a manner similar to
SCANA as discussed above. Such Utility Subsidiaries may, without counting
against the limit set forth above, further maintain back up lines of credit in
an aggregate amount not to exceed the amount of authorized commercial paper.
Credit lines may be set up for use by the Utility Subsidiaries for general
corporate purposes in addition to credit lines to support commercial paper as
described in this subsection. These Utility Subsidiaries will borrow and repay
under such lines of credit, from time to time, as it is deemed appropriate or
necessary. Subject to the limitations described herein, each such Utility
Subsidiary may engage in other types of short-term financings as it may deem
appropriate in light of its needs and market conditions at the time of issuance.
(b) PSNC Long-Term Debt
Authority is requested for PSNC to issue up to $300 million in
long-term debt securities during the Authorization Period. This request
represents a decrease of $150 million from the authorization granted in the
Prior Orders.
(c) GENCO Long-Term Debt
Authority is requested for GENCO to issue up to $100 million in
long-term debt securities during the Authorization Period. As noted above SCANA
expects to make additional exempt capital contributions to GENCO under Rule 45.
In addition thereto, authority is requested for GENCO to issue debt obligations
to effectuate the refunding (including reasonable costs and redemption premiums
incurred in connection with such refunding) of its now or hereafter outstanding
debt obligations including pollution control loan obligations to achieve lower
costs of money, extend maturity or for other proper corporate purposes. At June
30, 2002 GENCO had $77.4 million of long-term debt obligations outstanding. The
amounts issued under this authority will not count against any financing limits
provided for herein to the extent they will exclusively constitute refunding
transactions that will not increase total capitalization.
(d) Financing Risk Management Devices
To the extent not exempt under Rule 52, the Utility Subsidiaries also
request authority to enter into interest rate risk management transactions
(hedge instruments) and Anticipatory Hedges of the same type and under the same
conditions as are requested above by SCANA.
3. Guarantees, Intra-system Advances and Intra-System Money Pool
(a) Guarantees and Intra-system Advances
SCANA requests continued authorization to enter into guarantees, obtain
letters of credit, enter into expense agreements or otherwise provide credit
support with respect to the obligations of its Subsidiaries as may be
appropriate or necessary to enable such Subsidiaries to carry on in the ordinary
course of their respective businesses in an aggregate principal amount not to
exceed $600 million outstanding at any one time (not taking into account
obligations exempt pursuant to Rule 45). Included in this amount are guarantees
and other credit support mechanisms by SCANA in favor of its subsidiaries which
were previously issued. This request represents an
16
increase of $295 million over the authority granted in the Prior Orders
reflecting increased business activity and additional requirements of SCANA's
counterparties. SCANA may charge each Subsidiary a fee for each guarantee
provided on its behalf that is not more than that obtainable by the beneficiary
of the guarantee from third parties. Any guarantees or other credit support
arrangements outstanding at the end of the Authorization Period will continue
until expiration or termination in accordance with their terms.
The existing intra-system guarantees and support provided by SCANA,
which are expected to remain in place, are as follows: (1) SCANA guarantees the
obligations of its marketing subsidiary (SCANA Energy) to Atlanta Gas Light
Company (estimated amount $40 million); (2) SCANA guarantees GENCO's $41.5
million 7.78% Senior Secured Notes due December 31, 2011 and GENCO's $35.85
million 6.5% Pollution Control Facilities Revenue Bonds and (3) SCANA provides a
$5 million letter of credit for the benefit of Primesouth to support
Primesouth's ability to bid on contracts.
SCANA requests that this guarantee authority include the ability to
guarantee debt. The debt guaranteed will comply with the parameters for
financing authorization set forth in Section E above or be exempt. To the extent
that a guaranty issued pursuant to the authority granted herein is of a security
issued pursuant to the authority granted herein such that both the guaranty and
the underlying obligation are subject to limitation amounts, such issuance will
count only against the applicable limitation related to the underlying
obligation to avoid a double count. To provide otherwise would be to in effect
count the obligation twice since the system is obligated to the obligee only
with respect to the principal amount of the underlying obligation.(17)
In addition to the current authority by SCANA, Applicants request
authorization for the Non-Utility Subsidiaries to enter into guarantees, obtain
letters of credit, enter into expense agreements and otherwise provide credit
support with respect to other Non-Utility Subsidiaries, in an aggregate
principal amount not to exceed $250 million outstanding at any one time in
addition to guarantees that are exempt under Rule 52. The Non-Utility Subsidiary
providing any such credit support may charge its associate company a fee for
each guarantee provided on its behalf determined in the same manner as specified
above.
Furthermore, Applicants request authorization for the Utility
Subsidiaries to enter into guarantees, obtain letters of credit, enter into
expense agreements and otherwise provide credit support with respect to their
direct and indirect subsidiaries, in an aggregate principal amount not to exceed
$250 million outstanding at any one time in addition to guarantees that are
exempt under Rule 52. The Utility Subsidiary providing any such credit support
may charge its associate company a fee for each guarantee provided on its behalf
determined in the same manner as specified above.
Certain of the guarantees referred to above may be in support of the
obligations of Subsidiaries which are not capable of exact quantification. In
such cases, SCANA will determine the exposure under such guarantee for purposes
of measuring compliance with the
---------------------------
(17) See E.ON AG, Holding Co. Act Release No. 27539 (June 14, 2002);
National Grid, Holding Co. Act Release No. 27490 (Jan. 16, 2002); Kansas City
Power & Light Co., Holding Co. Act Release No. 27436 (Sept. 7, 2001); Ameren
Corporation, Holding Co. Act Release No. 27449 (Oct. 5, 2001); Dominion
Resources, Holding Co. Act Release No. 27406 (May 24, 2001).
17
$600 million limitation by appropriate means including estimation of exposure
based on loss experience or projected potential payment amounts. If appropriate,
such estimates will be made in accordance with GAAP. Such estimation will be
reevaluated periodically.
SCANA also requests authorization to keep in place advances to its
Subsidiaries in an aggregate amount outstanding at any one time of up to $1.25
million. The interest rate used is the weighted average rate on SCANA's
long-term and short-term debt. Such outstanding advances by SCANA to its
Subsidiaries are open advances with no maturities and are callable by SCANA at
any time.
(b) Authorization and Operation of the Money Pools
SCANA and the Utility Subsidiaries hereby request authorization to
continue the Utility Money Pool established pursuant to the authority granted in
the Prior Orders, and the Utility Subsidiaries, to the extent not exempted by
Rule 52, also request authorization to continue to make, from time to time,
unsecured short-term borrowings from the Utility Money Pool and to contribute
surplus funds to the Utility Money Pool and to lend and extend credit to (and
acquire promissory notes from) one another through the Utility Money Pool. In
addition to the Utility Subsidiaries, SCANA requests that Fuel Company be
allowed to continue participating in the Utility Money Pool as a result of its
financing relationship with SCE&G. Thus, for purposes of this Section G.3.(b)
only, the term Utility Subsidiaries shall include Fuel Company.
In addition, SCANA and the Non-Utility Subsidiaries (other than Fuel
Company)(16), hereby request authorization to continue the Non-Utility Money
Pool. The Non-Utility Money Pool activities of all of the Non-Utility
Subsidiaries are exempt from the prior approval requirements of the Act under
Rule 52. Funds made available by SCANA for loans through the money pools are
made available first for loans through the Utility Money Pool (to the extent
being operated) and thereafter for loans through the Non-Utility Money Pool.
SCANA is requesting authorization to contribute surplus funds and to
lend and extend credit to (a) the Utility Subsidiaries through the Utility Money
Pool and (b) the Non-Utility Subsidiaries through the Non-Utility Money Pool.
The Applicants believe that the cost of the proposed borrowings through
the two Money Pools will continue to generally be more favorable to the
borrowing participants than the comparable cost of external short-term
borrowings, and the yield to the participants contributing available funds to
the two Money Pools will generally be higher than the typical yield on
short-term investments.
i. Utility Money Pool
---------------------------
(16) I.e., South Carolina Pipeline Corporation; SCG Pipeline, Inc.;
SCANA Energy Marketing, Inc.; SCANA Energy Trading, LLC; SCANA Public Service
Company, LLC; SCANA Communications, Inc.; ServiceCare, Inc.; Primesouth, Inc.;
Palmark, Inc.; SCANA Resources, Inc.; SCANA Development Corporation; SCANA
Petroleum Resources, Inc.; SCANA Services, Inc.; PSNC Blue Ridge Corporation;
PSNC Cardinal Pipeline Company; and Clean Energy Enterprises Inc.
18
The Utility Money Pool is currently not operated. However, under the
terms of the Utility Money Pool, short-term funds would be made available from
the following sources for short-term loans to the Utility Subsidiaries from time
to time: (1) surplus funds in the treasuries of Utility Money Pool participants
other than SCANA, (2) surplus funds in the treasury of SCANA, and (3) proceeds
from bank borrowings or the sale of commercial paper by SCANA or the Utility
Subsidiaries for loan to the Utility Money Pool ("External Funds"). Funds would
be made available from such sources in such order as SCANA Services, as
administrator of the Utility Money Pool, determines to result in a lower cost of
borrowing, consistent with the individual borrowing needs and financial standing
of the companies providing funds to the pool. The determination of whether a
Utility Money Pool participant at any time has surplus funds to lend to the
Utility Money Pool or shall lend funds to the Utility Money Pool will be made by
such participant's chief financial officer or treasurer, or by a designee
thereof, on the basis of cash flow projections and other relevant factors, in
such participant's sole discretion. See Exhibit J-1 for a copy of the Form of
Utility Money Pool Agreement.
Utility Money Pool participants borrow pro rata from each company that
lends, in the proportion that the total amount loaned by each such lending
company bears to the total amount then loaned through the Utility Money Pool. On
any day when more than one fund source (e.g., surplus treasury funds of SCANA
and other Utility Money Pool participants ("Internal Funds") and External
Funds), with different rates of interest, is used to fund loans through the
Utility Money Pool, each borrower borrows pro rata from each such fund source in
the Utility Money Pool in the same proportion that the amount of funds provided
by that fund source bears to the total amount of short-term funds available to
the Utility Money Pool.
Borrowings from the Utility Money Pool require authorization by the
borrower's chief financial officer or treasurer, or by a designee thereof. No
party is required to effect a borrowing through the Utility Money Pool if it is
determined that it could (and has authority to) effect a borrowing at lower cost
directly from banks or through the sale of its own commercial paper. No loans
through the Utility Money Pool are made to, and no borrowings through the
Utility Money Pool are made by, SCANA.
The cost of compensating balances, if any, and fees paid to banks to
maintain credit lines and accounts by Utility Money Pool participants lending
External Funds to the Utility Money Pool are paid by the participant maintaining
such line. A portion of such costs -- or all of such costs in the event a
Utility Money Pool participant establishes a line of credit solely for purposes
of lending any External Funds obtained thereby into the Utility Money Pool -- is
retroactively allocated every month to the companies borrowing such External
Funds through the Utility Money Pool in proportion to their respective daily
outstanding borrowings of such External Funds.
If only Internal Funds make up the funds available in the Utility Money
Pool, the interest rate applicable and payable to or by Subsidiaries for all
loans of such Internal Funds is the rate for high-grade unsecured 30-day
commercial paper sold through dealers by major corporations as quoted in The
Wall Street Journal.
If only External Funds comprise the funds available in the Utility
Money Pool, the interest rate applicable to loans of such External Funds will be
equal to the lending company's
19
cost for such External Funds (or, if more than one Utility Money Pool
participant makes available External Funds on such day, the applicable interest
rate will be a composite rate equal to the weighted average of the cost incurred
by the respective Utility Money Pool participants for such External Funds).
In cases where both Internal Funds and External Funds are concurrently
borrowed through the Utility Money Pool, the rate applicable to all loans
comprised of such "blended" funds is the composite rate equal to the weighted
average of (a) the cost of all Internal Funds contributed by Utility Money Pool
participants (as determined pursuant to the second-preceding paragraph above)
and (b) the cost of all such External Funds (as determined pursuant to the
immediately preceding paragraph above). In circumstances where Internal Funds
and External Funds are available for loans through the Utility Money Pool, loans
may be made exclusively from Internal Funds or External Funds, rather than from
a "blend" of such funds, to the extent it is expected that such loans would
result in a lower cost of borrowings.
Funds not required by the Utility Money Pool to make loans (with the
exception of funds required to satisfy the Utility Money Pool's liquidity
requirements) are ordinarily invested in one or more short-term investments,
including: (i) interest-bearing accounts with banks; (ii) obligations issued or
guaranteed by the U.S. government and/or its agencies and instrumentalities,
including obligations under repurchase agreements; (iii) obligations issued or
guaranteed by any state or political subdivision thereof, provided that such
obligations are rated not less than "A" by a nationally recognized rating
agency; (iv) commercial paper rated not less than "A-1" or "P-1" or their
equivalent by a nationally recognized rating agency; (v) money market funds;
(vi) bank certificates of deposit, (vii) Eurodollar funds; and (viii) such other
investments as are permitted by Section 9(c) of the Act and Rule 40 thereunder.
The interest income and investment income earned on loans and
investments of surplus funds would be allocated among the participants in the
Utility Money Pool in accordance with the proportion each participant's
contribution of funds bears to the total amount of funds in the Utility Money
Pool and the cost of funds provided to the Utility Money Pool by such
participant.
Each Applicant receiving a loan through the Utility Money Pool would be
required to repay the principal amount of such loan, together with all interest
accrued thereon, on demand and in any event not later than one year after the
date of such loan. All loans made through the Utility Money Pool may be prepaid
by the borrower without premium or penalty.
ii. Non-Utility Money Pool
A separate Non-Utility Money Pool is in existence among SCANA and
certain Non-Utility Subsidiary companies of SCANA. Each of the Non-Utility
Subsidiaries (other than Fuel Company) that is an applicant hereto requests
authorization to participate in the Non-Utility Money Pool.(19) The Non-Utility
Money Pool is operated on the same terms and conditions as set forth for the
Utility Money Pool, except that SCANA funds made available to the Money Pools
will be made available to the Utility Money Pool first (to the extent it is
operated) and thereafter to the Non-Utility Money Pool. No loans through the
Non-Utility Money Pool are made to, and
---------------------------
(19) See Note 16.
20
no borrowings through the Non-Utility Money Pool are made by, SCANA. Fuel
Company does not participate in the Non-Utility Money Pool as it is anticipated
to participate in the Utility Money Pool. See Exhibit J-2 for a copy of the form
of Non-Utility Money Pool Agreement.
iii. Other Contributions to Money Pool
SCANA and the Utility Subsidiaries may contribute funds from the
issuance of short term debt as authorized above to the Utility Money Pool. SCANA
and the Non-Utility Subsidiaries may contribute funds from the issuance of short
term debt to the Non-Utility Money Pool.
iv. Operation of the Money Pools and Administrative Matters
SCANA Services under the authority of the appropriate officers of the
participating companies will continue to handle the operation of the Utility and
Non-Utility Money Pools, including record keeping and coordination of loans.
SCANA Services administers the Utility and Non-Utility Money Pools on an "at
cost" basis and maintains separate records for each money pool. Surplus funds of
the Utility Money Pool and the Non-Utility Money Pool may be combined in common
short-term investments, but separate records of such funds are maintained by
SCANA Services as administrator of the pools, and interest thereon is separately
allocated, on a daily basis, to each money pool in accordance with the
proportion that the amount of each money pool's surplus funds bears to the total
amount of surplus funds available for investment from both money pools.
v. Use of Proceeds
Proceeds of borrowings from the money pools may be used for the
purposes set forth in Item 1. E above. SCE&G may borrow up to $60 million at any
one time outstanding from the Utility Money Pool, PSNC may borrow up to $30
million at any one time outstanding, and GENCO may borrow up to $50 million at
any one time outstanding from the Utility Money Pool. Each of these amounts is
twice the amount of the authority granted in the Prior Orders. Borrowings by
Fuel Company under the Utility Money Pool are exempt pursuant to Rule 52 under
the Act. Borrowings under the Utility Money Pool are in addition to the
authority for other financings for which authority is sought under Item 1. G.2.
above.
H. Direct Stock Purchase and Dividend Reinvestment Plan, Incentive
Compensation Plans and other Employee Benefit Plans
SCANA proposes, from time to time during the Authorization Period, to
issue and/or acquire in open market transactions, or by some other method which
complies with applicable law and Commission interpretations then in effect, up
to 10 million shares of SCANA common stock under SCANA's direct stock purchase
and dividend reinvestment plan, certain incentive compensation plans and certain
other employee benefit plans described below (collectively, the "Plans"). Under
the Prior Orders and the Plan Order SCANA had authority to issue 15 million
shares with respect to plans through February 11, 2003. Through June 30, 2002,
SCANA issued 4,160,474 shares under this authority.
21
1. Direct Investment and Dividend Reinvestment Plan
SCANA maintains a dividend reinvestment plan with a direct stock
purchase feature called the SCANA Investor Plus Plan ("SCANA Investor Plus").
The following summary of certain features of SCANA Investor Plus is qualified by
reference to such plan. A full statement of the current provisions of SCANA
Investor Plus is included in SCANA's Registration Statement on Form S-3 (Exhibit
G-1 hereto).
SCANA Investor Plus offers shareholders the opportunity to buy, hold
and sell shares of SCANA Corporation common stock. Any United States resident
may purchase shares through this plan. Residents of some states will receive
SCANA's information from a registered broker-dealer. The minimum initial
investment is $250 for the purchase of shares by a person who is not currently a
SCANA or SCE&G shareholder. Additional cash payments may be sent to SCANA.
SCANA's minimum cash investment amount is $25 and the maximum is $100,000 in a
calendar year. The current commission charge for purchasing shares is $.06 per
share. The plan purchases shares twice a month - usually on the 1st and 15th.
All cash must be received at least two business days prior to a purchase date.
Cash received and reinvested dividends are sent to the plan's custodian
(currently Merrill Lynch) on the purchase date. Plan shares are sold through the
custodian weekly at a current commission charge of $.18 per share. A statement
is sent each time there is activity in a shareholder's account.
Since February 1, 1997, SCANA Investor Plus has acquired shares in the
open market. All cash received for this plan is used to buy shares for plan
participants.
The total number of shares issued under SCANA Investor Plus in 2001 was
665,882.
2. SCANA Stock Purchase Savings Plan
SCANA currently maintains an employee stock-based plan, the SCANA Stock
Purchase Savings Plan ("Savings Plan"). The following summary of certain
features of the Savings Plan is qualified by reference to such plan (Exhibit
G-2). Employees 18 years of age or more may participate in the Savings Plan and
save up to 15% of their base salary on a pre-tax (401(k)) or after- tax basis.
Employees may invest contributions in any combination of either SCANA common
stock or a group of mutual funds and common and collective trust funds.
Employees are fully vested in the amounts they contribute to the plan. SCANA
will match up to 6% of the employee's contribution, with the SCANA contribution
being shares of SCANA common stock. The SCANA contribution may not be withdrawn
for two years following the year of contribution if the employee has less than
five years of service with SCANA. Employees can make contribution rate changes
once every 120 days and can change from pre-tax to after-tax (and vice versa)
annually.
3. SCANA Director Compensation and Deferral Plan
SCANA maintains a Director Compensation and Deferral Plan ("Director
Plan"). The following summary of certain features of the SCANA Director
Compensation and Deferral Plan is qualified by reference to such plan (Exhibit
G-3). Under the Director Plan, a director may elect to defer the 60% of the
annual retainer fee required to be paid in SCANA common stock, in
22
a hypothetical investment in SCANA common stock, with distribution from the plan
to be ultimately payable in actual shares of SCANA common stock. A director may
also elect to defer the 40% of the annual retainer fee not required to be paid
in shares of SCANA common stock and up to 100% of meeting attendance and
conference fees with distribution from the plan to be ultimately payable in
either SCANA common stock or cash. Amounts payable in SCANA common stock accrue
earnings during the deferral period at SCANA's dividend rate, which amount may
not be elected to be invested in hypothetical shares of SCANA common stock.
Amounts payable in cash accrue interest earnings until paid. The total number of
shares issued from the Director Plan in 2001 was 20,796.
4. Long-Term Equity Compensation Plan
SCANA maintains the Long-Term Equity Compensation Plan ("Compensation
Plan"). The following summary of the features of the Compensation Plan is
qualified by reference to such plan (Exhibit G-4). Under the Compensation Plan,
SCANA offers long-term compensation to its directors and the directors of
affiliates, as well as to employees of these companies who are selected as
significant contributors to the success of their company. There are five types
of long-term compensation available: stock options, stock appreciation rights,
restricted stock, performance stock, and performance units ("Equity
Compensation"). The Equity Compensation is administered by SCANA's board of
directors with respect to grants to directors and otherwise by a committee of
the board of directors that is comprised of directors who both satisfy the
"outside director" requirements of Section 162(m) of the Internal Revenue Code
of 1986, as amended, and are "Non-Employee Directors" as defined in Rule 16b-3
under the Securities and Exchange Act of 1934, as amended. Since its
implementation in June 2000, SCANA issued, in accordance with the Plan Order,
4,816 shares of SCANA common stock under the Compensation Plan.(20)
I. Payment of Dividends out of Capital or Unearned Surplus by
Non-Utility Subsidiaries
Applicants request authority for the Non-Utility Subsidiaries to pay
dividends with respect to the securities of such companies, from time to time,
out of capital and unearned surplus (including revaluation reserve), to the
extent permitted under applicable corporate law.(21) Without further approval of
the Commission, no Non-Utility Subsidiary will declare or pay any dividend out
of capital or unearned surplus if that Non-Utility Subsidiary derives any
material part of its revenues from sales of goods, services, electricity or
natural gas to any of the Utility Subsidiaries.(22)
---------------------------
(20) In addition thereto, SCANA maintains its SCANA Performance Share
Plan. However, there are no further awards made under this plan and awards
formerly made thereunder are now made under the Compensation Plan.
(21) See FirstEnergy Corp, Holding Co. Act Release No. 35-27459 (Oct.
29, 2001).
(22) FirstEnergy Corp, Holding Co. Act Release No. 35-27459 (Oct. 29,
2001).
23
J. Development and Administrative Activities
In connection with future investments in EWGs, FUCOs and in
subsidiaries permitted pursuant to Rule 58 ("Rule 58 Subsidiaries"), SCANA
requests authority to engage directly and through Subsidiaries in Development
Activities and Administrative Activities associated with such investments.(23)
Development Activities and Administrative Activities include preliminary
activities designed to result in a permitted non-utility investment such as an
investment in an EWG or FUCO pursuant to the authority requested herein;
however, such preliminary activities may not qualify for such status until the
project is more fully developed. Accordingly, approval is sought for Development
and Administrative Activities.
Development Activities will be limited to due diligence and design
review; market studies; preliminary engineering; site inspection; preparation of
bid proposals, including, in connection therewith, posting of bid bonds;
application for required permits and/or regulatory approvals; acquisition of
site options and options on other necessary rights; negotiation and execution of
contractual commitments with owners of existing facilities, equipment vendors,
construction firms, power purchasers, thermal "hosts," fuel suppliers and other
project contractors; negotiation of financing commitments with lenders and other
third-party investors; and such other preliminary activities as may be required
in connection with the purchase, acquisition or construction of facilities or
the securities of other companies. Development Activities will be designed to
eventually result in a permitted non-utility investment.
SCANA proposes to expend directly or through Subsidiaries up to $200
million in the aggregate outstanding at any time during the Authorization Period
on all such Development Activities.(24) SCANA proposes a "revolving fund"
concept for permitted Development Activities. To the extent a Subsidiary for
which such amounts were expended for Development Activities becomes an EWG,
FUCO, or Rule 58 Subsidiary, the amount so expended will cease to be Development
Activities and then be considered as part of the "aggregate investment" in such
entity. In the case of EWGs, FUCOs and Rule 58 Subsidiaries, such aggregate
investment will then count against the limitation on such aggregate investment
under Rule 53 or 58.
This type of approval for a revolving fund of permitted investment in
Development Activities has been approved by the Commission in prior cases.(25)
The Commission has approved the types of Development Activities and
Administrative Activities described above in several cases.(26)
---------------------------
(23) Intermediate Subsidiaries may also engage in Development
Activities and Administrative Activities.
(24) Expenditures in EWGs, FUCOs and in Rule 58 Subsidiaries which
count against the "aggregate investment" limitation of Rule 53 or Rule 58, will
not count against the $200 million limitation.
(25) See Exelon Corporation, Holding Co. Act Release No. 35- 27545
(June 27, 2002); FirstEnergy Corp., Holding Co. Act Release No. 35-27459 (Oct.
29, 2001); Ameren Corporation, Holding Co. Act Release No. 35-27053 (July 23,
1999).
(26) E.g., Exelon Corporation, Holding Co. Act Release No. 35- 27545
(June 27, 2002); FirstEnergy Corp, Holding Co. Act Release No. 35-27459 (Oct.
29, 2001); Southern Co., Holding Co. Act Release No. 35-27303 (Dec. 15, 2000);
Energy East, Inc., Holding Co. Act Release No. 35-27228 (Dec. 12, 2000);
PowerGen, plc., Holding Co. Act Release No. 35-27291 (Dec. 6, 2000).
24
K. Intermediate Subsidiaries
SCANA proposes to create and acquire directly or indirectly the
securities of one or more Intermediate Subsidiaries. Intermediate Subsidiaries
may be corporations, trusts, partnerships, limited liability companies or other
entities. Intermediate Subsidiaries will be organized exclusively for the
purpose of acquiring and holding the securities of, or financing or facilitating
SCANA's investments in, other direct or indirect non-utility investments.
Intermediate Subsidiaries may also engage in Development Activities and
Administrative Activities.(27)
There are several legal and business reasons for the use of
Intermediate Subsidiaries in connection with making investments in EWGs, FUCOs
and Rule 58 Subsidiaries. For example, the formation and acquisition of limited
purpose subsidiaries is often necessary or desirable to facilitate financing the
acquisition and ownership of a FUCO, an EWG or another non-utility enterprise.
Furthermore, the interposition of one or more Intermediate Subsidiaries may
allow SCANA to secure favorable U.S. and foreign tax treatment that would not
otherwise be available. In particular, use of Intermediate Subsidiaries can
achieve tax efficient corporate structures which will result in minimizing state
or federal taxes for SCANA or its Subsidiaries.(28)
Intermediate Subsidiaries also serve to isolate business risks,
facilitate subsequent adjustments to, or sales of, ownership interests by or
among the members of the ownership group, or to raise debt or equity capital in
domestic or foreign markets.
An Intermediate Subsidiary may be organized, among other things: (1) in
order to facilitate the making of bids or proposals to develop or acquire an
interest in any EWG, FUCO, ETC, or other non-utility company which, upon
acquisition, would qualify as a Rule 58 Subsidiary; (2) after the award of such
a bid proposal, in order to facilitate closing on the purchase or financing of
such acquired company; (3) at any time subsequent to the consummation of an
acquisition of an interest in any such company in order, among other things, to
effect an adjustment in the respective ownership interests in such business held
by the SCANA system and non-affiliated investors; (4) to facilitate the sale of
ownership interests in one or more acquired Rule 58 Subsidiary, EWG or FUCO; (5)
to comply with applicable laws of foreign jurisdictions limiting or otherwise
relating to the ownership of domestic companies by foreign nationals; (6) as a
part of tax planning in order to limit SCANA's exposure to U.S. and foreign
taxes; (7) to further insulate SCANA and the Utility Subsidiaries from
operational or other business risks that may be associated with investments in
non-utility companies; or (8) for other lawful business purposes.(29)
---------------------------
(27) See Exelon Corporation, Holding Co. Act Release No. 35- 27545
(June 27, 2002); Emera Incorporated, Holding Co. Act Release No. 35-27445 (Oct.
1, 2001) (approving certain development and administrative activities); Progress
Energy, Inc., Holding Co. Act Release No. 35-27297 (Dec. 12, 2000) (approving
certain development and administrative activities).
(28) Any "tax sharing" aspects of such arrangements will comply with
Rule 45(c) or any tax allocation agreement which has been approved by the
Commission.
(29) Exelon Corporation, Holding Co. Act Release No. 35- 27545 (June
27, 2002); Interstate Energy Corporation, Holding Co. Act Release No. 35-27069
(Aug. 26, 1999) (each approving a virtually identical list of activities).
25
Investments in Intermediate Subsidiaries may take the form of any
combination of the following: (1) purchases of capital shares, partnership
interests, member interests in limited liability companies, trust certificates
or other forms of voting or non-voting equity interests; (2) capital
contributions; (3) open account advances without interest; (4) loans; and (5)
guarantees issued, provided or arranged in respect of the securities or other
obligations of any Intermediate Subsidiaries.(30)
Funds for any direct or indirect investment in any Intermediate
Subsidiary will be derived from SCANA's available funds. No authority is sought
under this heading for additional financing authority.
To the extent that SCANA provides funds directly or indirectly to an
Intermediate Subsidiary which are used for the purpose of making an investment
in any EWG or FUCO or a Rule 58 Subsidiary, the amount of such funds will be
included in SCANA's "aggregate investment" in such entities, as calculated (in
the case of EWGs, FUCOs and Rule 58 Subsidiaries) in accordance with Rule 53 or
Rule 58, as applicable.(31)
The authority requested for Intermediate Subsidiaries is intended to
allow for the corporate structuring alternatives outlined herein and will not
allow any increase in aggregate investment in EWGs, FUCOs, Rule 58 Subsidiaries,
or any other business subject to an investment limitation under the Act.
Intermediate Subsidiaries have been approved by the Commission in a
number of instances.(32)
L. Internal Reorganization of Existing Investments
SCANA currently engages directly or through Subsidiaries in certain
non-utility businesses. SCANA seeks authority to engage in internal corporate
reorganizations to better organize such Subsidiaries and investments. No
authority is sought under this heading to make new investments or to change the
organization for the Utility Subsidiaries.
SCANA and Subsidiaries request authority, to the extent needed,(33) to
sell or to cause any Subsidiary to sell or otherwise transfer (i) such
businesses, (ii) the securities of current
---------------------------
(30) See Exelon Corporation, Holding Co. Act Release No. 35- 27545
(June 27, 2002); Powergen plc., Holding Co. Act Release No. 35-27291 (Dec. 6,
2000).
(31) If the Intermediate Subsidiary is merely a conduit, the aggregate
investment will not "double count" both the conduit investment and the
investment in the operating company authorized as an EWG, FUCO, Rule 58
subsidiary or other approved investment.
(32) See Exelon Corporation, Holding Co. Act Release No. 35-27545 (June
27, 2002); Emera Incorporated, Holding Co. Act Release No. 35-27445 (Oct. 1,
2001); Progress Energy, Holding Co. Act Release No. 35-27297 (Dec. 12, 2000);
Energy East, Inc., Holding Co. Act Release No. 35-27228 (Dec. 12, 2000);
PowerGen, plc, Holding Co. Act Release No. 35-27291 (Dec. 6, 2000); NiSource,
Inc., Holding Co. Act Release No. 35-27265 (Nov. 1, 2000); AGL Resources, Inc.,
Holding Co. Act Release No. 35-27243 (Oct. 5, 2000); Cinergy Corp., Holding Co.
Act Rel. No. 35-27124 (Jan. 11, 2000); Ameren Corporation, Holding Co. Act Rel.
No. 35-27053 (July 23, 1999); New Century Energies, Inc., Holding Co. Act Rel.
No. 35-27000 (April 7, 1999).
(33) The sale of securities, assets or an interest in other business to
an associate company may, in some cases, be exempt pursuant to Rule 43(b).
26
Subsidiaries engaged in some or all of these businesses or (iii) investments
which do not involve a Subsidiary (i.e. less than 10% voting interest) to a
different Subsidiary, and, to the extent approval is required, the Subsidiaries
request authority to acquire the assets of such businesses, Subsidiaries or
other then existing investment interests. Alternatively, transfers of such
securities or assets may be effected by share exchanges, share distributions or
dividends followed by contribution of such securities or assets to the receiving
entity. In the future, following its direct or indirect acquisition of the
securities of new Non-Utility Subsidiaries, SCANA may determine to transfer such
securities or the assets of such Non-Utility Subsidiaries to other Subsidiaries
as described in the preceding sentence. SCANA may also liquidate or merge
Non-Utility Subsidiaries.
Such internal transactions would be undertaken in order to eliminate
corporate complexities, to combine related business segments for staffing and
management purposes, to eliminate administrative costs, to achieve tax savings,
or for other ordinary and necessary business purposes.
The transactions proposed under this heading will not involve the sale
or other disposition of any utility assets of the Utility Subsidiaries and will
not involve any change in the corporate ownership of the Utility Subsidiaries.
The approval sought under this heading does not extend to the acquisitions of
any new businesses or activities.
The Commission has given approval for such general corporate
reorganizations in prior cases.(34)
M. Solicitation of Proxies
SCANA has authority under its articles of incorporation, as amended, to
issue up to 150 million shares of its common stock. At June 30, 2002, SCANA had
104,732,446 shares of common stock issued and outstanding. SCANA may determine
that it would be desirable to seek the approval of its shareholders for a
further amendment to its articles of incorporation to increase the number of
authorized shares of common stock to an amount not greater than 250 million
shares to allow for further issuances for employee benefit plans, business
acquisitions or other transactions or for general corporate purposes.
SCANA's articles of incorporation do not currently provide for the
issuance of preferred stock. To give SCANA increased financing flexibility SCANA
may seek in the future approval from its shareholders to amend the articles of
incorporation to provide for a class of preferred stock. The terms of such
charter amendment will be provided by and approved by the board of directors of
SCANA and will provide that the board of directors may set the terms of each
series of preferred stock to the extent allowed under the South Carolina
Business Corporation Act.(35)
---------------------------
(34) Exelon Corporation, Holding Co. Act Release No. 35-27545 (June 27,
2002); Energy East, Inc., Holding Co. Act Release No. 35-27228 (Dec. 12, 2000);
PowerGen, plc, Holding Co. Act Release No. 35-27291 (Dec. 6, 2000); NiSource,
Inc., Holding Co. Act Release No. 35-27265 (Nov. 1, 2000); Entergy Corp.,
Holding Co. Act Release No. 35-27039 (June 22, 1999).
(35) The Commission has approved preferred stock in the capital
structure of registered holding companies on several occasions. See, e.g., First
Energy Corporation, Holding Co. Act Release No. 27459 (Oct. 29 2001), Emera
Incorporated, Holding Co. Act Release No. 27445 (Oct. 1, 2001); Progress Energy,
Inc., Holding Co. Act Release, No. 27297 (Dec. 12, 2000); KeySpan Corporation,
Holding Co. Act Release No. 27272 (Nov. 8, 2000), Exelon Corporation, Holding
Co. Act Release No. 27266 (Nov. 2, 2000).
27
SCANA will seek shareholder approval at its regular annual meeting to
be held in 2003 or 2004 or at a special meeting to be held on a date prior to
the date of the 2004 annual meeting. SCANA requests that the Commission include
in the order issued in this docket approval of the solicitation of proxies at
any such meeting of SCANA shareholders on the question of approving (1) the
amendment to increase the number of authorized shares of common stock and (2)
the amendment to create preferred stock.
N. Filing of Certificates of Notification
It is proposed that, with respect to SCANA, the reporting systems of
the Securities Exchange Act of 1934, as amended (the "1934 Act") and the 1933
Act be integrated with the reporting system under the Act consistent with the
authority granted in the Prior Orders. This will continue to eliminate
duplication of filings with the Commission that cover essentially the same
subject matters, resulting in a reduction of expense for both the Commission and
SCANA. The portion of the 1933 Act and 1934 Act reports containing or reflecting
disclosures of transactions occurring pursuant to the authorizations granted in
this proceeding will be incorporated by reference into this proceeding through
Rule 24 certificates of notification. The certificates will also contain all
other information required by Rule 24, including the certification that each
transaction being reported on had been carried out in accordance with the terms
and conditions of and for the purposes represented in this Application. Such
certificates of notification will be filed within 60 days after the end of the
last calendar quarter, in which transactions occur.
The Rule 24 certificates will contain the following information:
a. If sales of common stock by SCANA are reported, the purchase price
per share and the market price per share at the date of the agreement of sale;
b. The total number of shares of SCANA common stock issued or issuable
pursuant to options granted during the quarter under employee benefit plans and
dividend reinvestment plans including any employee benefit plans or dividend
reinvestment plans hereafter adopted;
c. If SCANA 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
acquiror;
d. If a guarantee 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 guarantee;
e. The amount and terms of any short-term debt issued by any Utility
Subsidiary during the quarter;
28
f. The amount and terms of any financings consummated by any Utility
Subsidiary that are not exempt under Rule 52;
g. The amount and terms of any other securities issued under the
authority sought herein during the quarter;
h. Consolidated balance sheets as of the end of the quarter and
separate balance sheets as of the end of the quarter for each company, including
SCANA, that has engaged in jurisdictional financing transactions during the
quarter; and
i. Future registration statements filed under the 1933 Act with
respect to securities that are subject of the Application will be filed or
incorporated by reference as exhibits to the next certificate filed pursuant to
Rule 24.
In addition to this authority previously granted in the Prior Orders,
Applicants propose that, to further facilitate the reporting proceeding and to
eliminate duplication, applicable security issuances will be reported on a
quarterly filing of a Rule 24 Certificate, in lieu of Form U-6B-2.
ITEM 2. FEES, COMMISSIONS AND EXPENSES.
The fees, commissions and expenses paid or incurred or to be incurred
in connection with this Application are estimated at $25,000.
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
A. Applicable Provisions
Sections 6(a), 7, 9, 10 and 12 of the Act and Rules 42, 43, 44, 45, 46,
52, 53, 54, 58 and 62 thereunder are considered applicable to the proposed
transactions.
To the extent that the proposed transactions are considered by the
Commission to require authorizations, exemption or approval under any section of
the Act or the rules and regulations thereunder other than those set forth
above, request for such authorization, exemption or approval is hereby made.
B. Rule 53 and 54 Analysis.
The proposed transaction is subject to Rule 54, which refers to Rule
53. Rule 54 under the Act provides that in determining whether to approve
certain transactions other than those involving EWGs or FUCOs, as defined in the
Act, the Commission will not consider the effect of the capitalization or
earnings of any subsidiary which is an EWG or FUCO if Rule 53(a), (b) and (c)
under the Act are satisfied.
Neither SCANA nor any of its Subsidiaries presently has an interest in
any EWG or FUCO. Consequently, SCANA's "aggregate investment," as defined in
Rule 53(a)(1), in EWGs and FUCOs is not, and any investments by SCANA in EWGs
and FUCOs pursuant to the authority granted herein will not cause it to be, in
excess of 50% of SCANA's average
29
consolidated retained earnings which is the "safe harbor" limitation contained
in Rule 53(a). SCANA also meets all of the remaining tests of Rule 53(a), (b)
and (c). Rule 53(a)(2) requires SCANA to maintain books and records in
conformity with, and otherwise adhere to, the requirements thereof. According to
Rule 53(a)(3), no more than 2% of the employees of SCANA's domestic public
utility companies may render services, at any one time, directly or indirectly,
to EWGs or FUCOs in which SCANA directly or indirectly holds an interest. Rule
53(a)(4) requires SCANA to provide a copy of each application and certificate
relating to EWGs and FUCOs and relevant portions of its Form U5S to each
regulator referred to therein, and to otherwise comply with the requirements
thereof concerning information. Furthermore, none of the conditions described in
paragraph (b) of Rule 53 is applicable: (1) Neither SCANA nor any of its
Subsidiaries having assets with book values exceeding an amount equal to 10% or
more of consolidated retained earnings have been the subject of a bankruptcy or
similar proceeding. (2) The average consolidated retained earnings for the four
most recent quarterly periods have not decreased by 10% from the average for the
previous four quarterly periods and the aggregate investment in EWGs does not
exceed two percent of total capital invested in utility operations; and (3) In
the previous fiscal year, SCANA did not report operating losses attributable to
its direct or indirect investments in EWGs. Finally, Rule 53(c) by its terms is
inapplicable since SCANA does meet the requirements of paragraphs (a) and (b) of
Rule 53.
ITEM 4. REGULATORY APPROVAL.
The SCPSC has jurisdiction over issuances of securities by SCE&G, other
than securities payable within one year of the date of issuance or the renewal
of short-term obligations for a two-year or shorter period. The NCUC has
jurisdiction over issuances of securities by PSNC, other than the issuance of
notes with a maturity of two year or less or renewals thereof for a six-year or
shorter period.
Securities issued by the Utility Subsidiaries which are subject to
approval by the Commission are not subject to approval by the Federal Energy
Regulatory Commission under the Federal Power Act because of Section 318 of the
Federal Power Act.
Except as stated above, no state commission and no federal commission,
other than the Commission, has jurisdiction over the proposed transactions.
ITEM 5. PROCEDURE.
The Commission is respectfully requested to publish the requisite
notice under Rule 23 with respect to this Application as soon as possible, such
notice to specify a date by which comments must be entered and such date being
the date when an order of the Commission granting and permitting this
Application to become effective may be entered by the Commission. The Applicants
request that the Commission's order be issued as soon as the rules allow, and
that there should not be a 30-day waiting period between issuance of the
Commission's order and the date on which the order is to become effective. The
Applicants hereby waive a recommended decision by a hearing officer or any other
responsible officer of the Commission and consent that the Division of
Investment Management may assist in the preparation of the Commission's decision
and/or order, unless the Division opposes the matters proposed herein.
30
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.
A. Exhibits.
A-1 Restated Articles of Incorporation of SCANA as adopted on
April 26, 1989 (Filed with the Commission as Exhibit 3-A
to Registration Statement No. 33-49145 and incorporated
by reference herein).
A-2 Articles of Amendment of SCANA, dated April 27, 1995
(Filed with the Commission as Exhibit 4-B to Registration
Statement No. 33-62421 and incorporated by reference
herein).
A-3 By-Laws of SCANA as revised and amended on December 13,
2000 (Filed with the Commission as Exhibit 3.01 to
Registration No. 333-68266 and incorporated by reference
herein).
B-1 Agreements (to be provided by Certificate of Notification
as applicable).
B-2 SCANA Indenture (Filed with the Commission as Exhibit 4A
to SCANA's Registration Statement No. 33-32107 and
incorporated by reference herein).
C-1 Registration Statements (to be provided by Certificate of
Notification). See also Exhibits G-1 through G-5.
D-1 Not applicable.
E-1 Not applicable.
F-1 Opinion of counsel (Filed by amendment).
G-1 SCANA Investor Plus Plan (Filed with the Commission by
Registration Statement No. 333-86803 and incorporated by
reference herein).
G-2 SCANA Stock Purchase Savings Plan (Filed with the
Commission as Exhibit 4.3 to SCANA's Registration
Statement No. 333-87281 and incorporated by reference
herein).
G-3 SCANA Director Compensation and Deferral Plan (Filed with
the Commission as Exhibit 10.05 to SCANA's Registration
Statement No. 333-49960 and incorporated by reference
herein).
G-4 SCANA Long-Term Equity Compensation Plan dated January
2001 (Filed with the Commission as Exhibit 4.04 to
Registration Statement No. 333-37398 and incorporated by
reference herein).
31
H-1 Annual Report of SCANA on Form 10-K for the year ended
December 31, 2001 (Filed with the Commission on March 27,
2002 and incorporated by reference herein).
H-2 Quarterly Report of SCANA on Form 10-Q for the period
ended March 31, 2002 (Filed with the Commission on May
15, 2002 and incorporated by reference herein).
H-3 Quarterly Report of SCANA on Form 10-Q for the period
ended June 30, 2002 (Filed with the Commission on August
13, 2002 and incorporated by reference herein).
I-1 Proposed Form of Notice (Filed by amendment).
J-1 Form of Utility Money Pool Agreement. (Filed with the
Commission with the Form U-1 Application/Declaration in
Docket 70-09533 and incorporated by reference herein.)
J-2 Form of Non-Utility Money Pool Agreement. (Filed with the
Commission with the Form U-1 Application/Declaration in
Docket 70-09533 and incorporated by reference herein.)
B. Financial Statements.
FS-1 Consolidated Balance Sheet of SCANA Corporation as of
June 30, 2002 (Incorporated by reference to the filing of
SCANA Corporation on Form 10-Q for the quarter ended June
30, 2002)
FS-2 Consolidated Statement of Operations of SCANA Corporation
for the period ended June 30, 2002 (Incorporated by
reference to the filing of SCANA Corporation on Form 10-Q
for the quarter ended June 30, 2002)
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
The proposed transaction involves neither a "major federal action" nor
"significantly affects the quality of the human environment" as those terms are
used in Section 102(2)(C) of the National Environmental Policy Act, 42 U.S.C.
Sec. 4321 et seq. No federal agency is preparing an environmental impact
statement with respect to this matter.
32
SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, each of the undersigned companies has duly caused this Post-Effective
Amendment to be signed on its behalf by the undersigned thereunto duly
authorized.
SCANA CORPORATION
By /s/ H. Thomas Arthur
-----------------------
Name: H. Thomas Arthur
Title: Senior Vice President and
General Counsel
SOUTH CAROLINA ELECTRIC & GAS COMPANY
SOUTH CAROLINA GENERATING COMPANY, INC.
SOUTH CAROLINA FUEL COMPANY, INC.
SOUTH CAROLINA PIPELINE CORPORATION
SCG PIPELINE, INC.
SCANA ENERGY MARKETING, INC.
SCANA ENERGY TRADING, LLC
SCANA PUBLIC SERVICE COMPANY, LLC
SCANA COMMUNICATIONS, INC.
SERVICECARE, INC.
PRIMESOUTH, INC.
PALMARK, INC.
SCANA RESOURCES, INC.
SCANA DEVELOPMENT CORPORATION
SCANA PETROLEUM RESOURCES, INC.
SCANA SERVICES, INC.
PUBLIC SERVICE COMPANY OF NORTH
CAROLINA, INCORPORATED
PSNC BLUE RIDGE CORPORATION
PSNC CARDINAL PIPELINE COMPANY
CLEAN ENERGY ENTERPRISES INC.
By: SCANA CORPORATION
By /s/ H. Thomas Arthur
-----------------------
Name: H. Thomas Arthur
Title: Senior Vice President and
General Counsel
Date: September 20, 2002