SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
APPLICATION OR DECLARATION UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
ALABAMA POWER COMPANY GEORGIA POWER COMPANY
ALABAMA PROPERTY COMPANY PIEDMONT-FORREST CORPORATION
600 North 18th Street 241 Ralph McGill Boulevard, N.E.
Birmingham, Alabama 35291 Atlanta, Georgia 30308
GULF POWER COMPANY MISSISSIPPI POWER COMPANY
One Energy Place 2992 West Beach
Pensacola, Florida 32520 Gulfport, Mississippi 39501
(Name of company or companies filing this statement
and addresses of principal executive offices)
THE SOUTHERN COMPANY
(Name of top registered holding company parent of each applicant or declarant)
William E. Zales, Jr. Janice G. Wolfe
Vice President and Corporate Secretary Corporate Secretary
Alabama Power Company Georgia Power Company
600 North 18th Street 241 Ralph McGill Boulevard, N.E.
Birmingham, Alabama 35291 Atlanta, Georgia 30308
William E. Zales, Jr. Janice G. Wolfe
Secretary Vice President and Secretary
Alabama Property Company Piedmont-Forrest Corporation
600 North 18th Street 241 Ralph McGill Boulevard, NE
Birmingham, Alabama 35291 Atlanta, Georgia 30308
Warren E. Tate Vicki L. Pierce
Vice President, Secretary and Treasurer Corporate Secretary
Gulf Power Company Mississippi Power Company
One Energy Place 2992 West Beach
Pensacola, Florida 32520 Gulfport, Mississippi 39501
(Names and address of agents for service)
The Commission is requested to mail signed copies of all orders,
notices and communications to:
Gale E. Klappa John D. McLanahan, Esq.
Executive Vice President Troutman Sanders LLP
The Southern Company 600 Peachtree Street, NE
270 Peachtree Street, NW Suite 5200
Atlanta, Georgia 30303 Atlanta, Georgia 30308-2216
Walter M. Beale, Jr., Esq.
Balch & Bingham LLP
1901 Sixth Avenue North, Suite 2600
Birmingham, Alabama 35203
Item 1. Description of Proposed Transactions.
Alabama Power Company ("Alabama Power"), Georgia Power Company
("Georgia Power"), Gulf Power Company ("Gulf Power") and Mississippi Power
Company ("Mississippi Power") (collectively the "Operating Companies") are
wholly-owned electric utility subsidiaries of The Southern Company ("Southern"),
a registered holding company under the Public Utility Holding Company Act of
1935, as amended (the "Act"). Alabama Property Company ("Alabama Property"), an
Alabama corporation, and Piedmont-Forrest Corporation ("PFC"), a Georgia
corporation, are wholly-owned nonutility subsidiaries of Alabama Power and
Georgia Power, respectively. Alabama Power, Georgia Power, Gulf Power,
Mississippi Power, Alabama Property and PFC are sometimes collectively referred
to herein as the "Applicants."
Applicants currently hold real property originally acquired to be used
in connection with utility operations. A portion of this real estate, including
property adjacent to hydroelectric reservoirs, excess office and warehouse
space, miscellaneous facilities held for future use or sale, and other improved
and unimproved land (the "Surplus Property"), has proven to be unneeded or
unsuitable for use in the normal course of utility operations.
Particularly in the case of unimproved tracts of land, the bulk sale of
Surplus Property is not an efficient means of minimizing this expense.
Applicants believe that commercial, residential, recreational or other
development is currently the highest and best use of much of the Surplus
Property. Consequently, the value of parcels of Surplus Property, if sold in an
unimproved state, is significantly lower than the value that could be realized
if such parcels were more efficiently managed according to their highest and
best use. Applicants believe that the capture of this excess value from the
Surplus Property holdings, whether in the form of increased rents or a higher
return on sale, will directly or indirectly benefit utility operations and will
ultimately benefit investors and result in cost savings to consumers.
Alabama Property and PFC are special-purpose subsidiaries, each
authorized to acquire, hold and dispose of real property on behalf of Alabama
Power and Georgia Power, respectively. Since the establishment of Southern as a
registered holding company in 1947, the Securities and Exchange Commission (the
"Commission") has permitted Alabama Property to engage in a program of acquiring
and holding real property for future use by Alabama Power.1 The Commission, upon
application, has periodically granted Alabama Property specific authority to
enter into real estate transactions with associate companies in connection with
Alabama Power's utility operations and has authorized related capital
contributions and open account advances to Alabama Property.2 Similarly, in
1978, the Commission granted PFC general authority to acquire, hold, maintain
and dispose of property in connection with and incidental to the utility
operations of Georgia Power.3 The Commission has since specifically authorized
PFC to engage in real estate projects with associate and nonassociate companies
to be financed with capital contributions and advances from Georgia Power.4
Alabama Power and Georgia Power propose that the existing authority of
Alabama Property and PFC to engage in real estate transactions be extended to
permit greater flexibility in identifying and pursuing the most efficient and
cost-effective use of the Surplus Property of Alabama Power and Georgia Power.
To this end, Alabama Property and PFC may from time to time find it necessary to
invest in additional real estate holdings, to sell or otherwise dispose of
existing real estate holdings outside the Southern system, or to participate in
real estate ventures with nonassociate third parties. Alabama Power and Georgia
Power request authority for Alabama Property and PFC to proceed with such
transactions as they may become necessary or advantageous without further
Commission approval.
Gulf Power and Mississippi Power do not currently hold special-purpose
real estate subsidiaries similar to Alabama Property and PFC. Gulf Power and
Mississippi Power each request authority to form a special-purpose subsidiary in
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1 In the Matter of Commonwealth and Southern Corporation, 26 S.E.C. 464 (1947).
2 See, e.g., Alabama Power Company, HCAR No. 18228 (December 19, 1973); Alabama
Power Company, HCAR No. 14755 (November 30, 1962); Alabama Power Company, HCAR
No. 13210 (June 28, 1956).
3 Georgia Power Company, HCAR No. 20503 (April 14, 1978).
4 See, e.g., Georgia Power Company, HCAR No. 24748 (November 17, 1988);
Piedmont-Forrest Corporation, HCAR No. 21045 (May 9, 1979); Piedmont-Forrest
Corporation, HCAR No. 21138 (July 29, 1979).
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which its real estate activities will be centralized, and request that these
to-be-formed subsidiaries be granted the same authority to engage in real estate
activities as Alabama Property and PFC.
Specifically, from time to time beginning with the effective date of
the Commission's order granting and permitting this application to become
effective, Applicants request authorization for each of Alabama Property, PFC
and the to-be-formed real estate subsidiaries of Gulf Power and Mississippi
Power (collectively, the "Property Companies") to engage in the following:
(i) The acquisition or lease of any interest in real estate for
use by associate utility and nonutility companies.
(ii) The development and management of Surplus Property for future
sale, lease or use.
(iii) The sale, lease or other disposition of Surplus Property, in
whole or in part, to affiliates, other associate companies or
nonassociate companies at market rates.
(iv) The participation in joint ventures with nonassociate
third-party real estate development entities. The Property
Companies may contribute parcels of Surplus Property to such
entities in return for a passive equity interest in the
venture. Such equity interest shall not in any event include
more than 5% of the outstanding voting securities of any
single nonassociate entity.
(v) The negotiation of terms and conditions for real estate
transactions as agent for any affiliate company in its
dealings with associate or nonassociate companies.
The real estate activities proposed by Applicants are not without
precedent. By Orders dated January 27, 1999 (HCAR No. 26969) and October 15,
1999 (HCAR No. 27090), the Commission granted New England Electric System
("NEES") authority to form one or more special-purpose real estate subsidiaries
to (1) acquire or lease any interest in real estate for associate company use,
3
(2) lease, sell or otherwise dispose of unused or unneeded real estate within
the system to associate or nonassociate companies, and (3) manage such real
estate for future sale or use. NEES was permitted to capitalize such real estate
subsidiaries in an aggregate amount not exceeding $50 million. Further, by Order
dated May 24, 2001 (HCAR No. 27406), the Commission granted Dominion Resources,
Inc. ("DRI") and its subsidiaries authority to lease, sell or otherwise grant
third persons access to or rights in excess or unwanted real estate, and to
either designate an existing nonutility subsidiary or form one or more new
subsidiaries to centralize the real estate activities of the DRI system. Such
subsidiaries were authorized to (1) act as agents for DRI system companies in
these activities, (2) manage the real estate portfolio of DRI system companies,
(3) market excess or unwanted real estate, and (4) facilitate the exploitation
of resources on or in DRI system real estate. 5
In addition to the authorization of these special-purpose real estate
subsidiaries, other programs involving the development and disposition of unused
utility-owned real estate to nonaffiliated third parties (including office and
warehouse space, and other improved and unimproved land) have been found to meet
the standards of the Act in the past.6 Finally, the Commission has previously
authorized passive investment in nonassociate third-party real estate
development entities by holding companies and subsidiaries.7
Alabama Power requests authority to make additional capital
contributions and open account advances to Alabama Property in an aggregate
amount not to exceed $50 million. Georgia Power requests authority to make
__________________________
5 See also PowerGen plc, HCAR No. 27291 (December 6, 2000); New Century
Energies, Inc., HCAR No. 26748 (August 1, 1997); American Gas and Electric
Company, HCAR No. 6333 (December 28, 1945) (in which it was noted that a
special-purpose real estate subsidiary provides flexibility in the purchase and
disposition of real estate and helps to avoid the complex provisions of
operating company mortgages).
6 See Connectiv, Inc., HCAR No. 26832 (February 25, 1998); Central Power and
Light Company, HCAR No. 26408 (November 13, 1995); Southwestern Electric Power
Company, HCAR No. 26705 (April 15, 1997). When the Commission authorized PFC to
acquire land for the construction of the Georgia Power office complex in
downtown Atlanta in 1978, it granted advance permission for portions of the
ground floor otherwise unused by Georgia Power to be leased to retail lessees
and authorized a projected future transfer of the complex to a developer or
other outside owner. Georgia Power Company, HCAR No. 20503 (April 14, 1978).
7 See, e.g., Ameren Corp., HCAR Nos. 27421 (June 28, 2001) and 26809 (December
30, 1997); Alliant Energy Corporation, HCAR No. 27418 (June 11, 2001); WPL
Holdings, Inc., HCAR No. 26856 (April 14, 1998); CP&L Energy, HCAR No. 27284
(November 27, 2000); NiSource Inc., HCAR No. 27263 (October 30, 2000).
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additional capital contributions and open account advances to PFC in an
aggregate amount not to exceed $50 million. Gulf Power and Mississippi Power
each request authority to capitalize its to-be-formed special purpose real
estate subsidiary with capital contributions and open account advances in an
aggregate amount not to exceed $10 million.
Item 2. Fees, Commissions and Expenses.
The fees, commissions and expenses to be paid or incurred, directly or
indirectly, in connection with seeking the authorizations herein requested are
estimated as follows:
Legal fees.................................$ 20,000
Miscellaneous.............................. 10,000
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Total.............................$ 30,000
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Item 3. Applicable Statutory Provisions.
Applicants believe that the proposed issue and sale of the securities
of the new real estate subsidiaries of Gulf Power and Mississippi Power is
subject to Sections 6(a) and 7 of the Act, and the proposed investment by Gulf
Power and Mississippi Power in the equity securities of these new subsidiaries
is subject to Sections 9(a) and 10 of the Act.
To the extent that the acquisition of real estate is an acquisition of
an interest in another business, Applicants believe that Sections 9(a) and 10 of
the Act apply.
Applicants believe that Property Company contributions of Surplus
Property to nonassociate real estate development entities in return for passive
equity interests in such entities are subject to Sections 9(a) and 10 of the
Act. In addition, Applicants believe that limiting such equity interest to
include no more than 5% of the outstanding voting securities of any single
nonassociate entity is necessary to avoid the provisions of Sections 2(a)(11),
9(a)(2) and 12(g).
To the extent that the Property Companies acquire any evidence of
indebtedness from a nonaffiliate or nonassociate that is executed in connection
with the sale of real property other than utility assets in the ordinary course
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of Property Companies' business, Applicants believe that Rule 40(a)(4) exempts
such transaction from Section 9(a) of the Act.
Applicants believe that any capital contributions or open account
advances to the Property Companies are subject to Section 12(b) of the Act but
exempted by Rule 45(b)(4) thereunder.
Applicants believe that real estate services and transactions among the
Property Companies and other associate companies may be subject to Sections
12(f) and 13 of the Act and Rules 87, 90 and 91 thereunder.
Rule 54 Analysis: The proposed transactions are also subject to Rule
54, which provides that, in determining whether to approve an application that
does not relate to any "exempt wholesale generator" ("EWG") or "foreign utility
company" ("FUCO"), the Commission shall not consider the effect of the
capitalization or earnings of any such EWG or FUCO which is a subsidiary of a
registered holding company if the requirements of Rule 53(a), (b) and (c) are
satisfied.
Southern currently meets all the conditions of Rule 53(a). At September
30, 2001, Southern's "aggregate investment," as defined in Rule 53(a)(1), in
EWGs and FUCOs was approximately $22.3 million, or 0.5% of Southern's
"consolidated retained earnings," also defined in Rule 53(a)(1), as of September
30, 2001 ($4.6 billion).8
__________________________
8 As discussed in Southern's Application on Form U-1 (File No. 70-9727) relating
to the spin-off of Mirant Corporation ("Mirant"), Southern and Mirant
reorganized certain energy-related and FUCO activities and Mirant completed a
tax-free distribution to Southern of these activities on March 5, 2001 (the
"Mini-Spin"). On April 2, 2001, Southern completed the spin-off of its remaining
ownership interest in Mirant to Southern's shareholders. Therefore, the four
indirect subsidiaries (EPZ Lease, Inc., Dutch Gas Lease, Inc., GAMOG Lease, Inc.
and NUON Lease, Inc.) obtained through the Mini-Spin are the only remaining FUCO
investments held by Southern. Although Southern now owns all of the equity in
these companies as a result of the Mini-Spin, Southern has no direct or indirect
investment or any aggregate investment within the meaning of Rule 53 in these
FUCOs, including any direct or indirect guarantees or credit positions related
to any capital or financing leases. Furthermore, the only remaining EWG
investment held by Southern after the spin-off is Southern Company--Florida LLC,
which was organized during the first quarter of 2001. Southern has executed
limited keep-well commitments whereby Southern would be required to make capital
contributions to Southern Energy Finance Capital Corp. or to Southern Energy
Finance Company, Inc. in the event of a shortfall in the scheduled debt service
resulting from certain changes in the payments due from Southern under the
Southern Company Income Tax Allocation Agreement. The maximum potential capital
contribution required under these commitments is the unamortized balance of the
related loans, which totaled approximately $394.4 million as of September 30,
2001.
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In addition, Southern has complied and will continue to comply with the
record-keeping requirements of Rule 53(a)(2), the limitation under Rule 53(a)(3)
on the use of operating company personnel to render services to EWGs and FUCOs,
and the requirements of Rule 53(a)(4) concerning the submission of copies of
certain filings under the Act to retail rate regulatory commissions. Further,
none of the circumstances described in Rule 53(b) has occurred.
Item 4. Regulatory Approval.
No action by any state or federal commission (other than the
Commission) is necessary to carry out the proposed transactions.
Item 5. Procedure.
Applicants request that the Commission take action with respect to this
Application/Declaration without a hearing and that the Commission's order herein
be issued as soon as the rules will allow.
Applicants submit that a recommended decision by a hearing officer or
any other responsible officer of the Commission is not needed with respect to
the proposed transaction. The applicants hereby consent that the Division of
Investment Management may assist with the preparation of the Commission's
decision and/or order in this matter unless such Division opposes the matters
covered hereby. Applicants request that there be no 30-day waiting period
between the issuance of the Commission's order and the date on which it is to
become effective.
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Item 6. Exhibits and Financial Statements.
The following exhibits and financial statements are filed as a part of
this Application/Declaration:
(a) Exhibits.
A - Constituent instruments of Gulf Power and
Mississippi Power Property Companies. (To be filed by
amendment.)
B - None
C - None
D - None
E - None
F - Opinions of Counsel
F-1 Opinion of Balch & Bingham LLP, counsel to
Alabama Power, Alabama Property and
Mississippi Power. (To be filed by
amendment.)
F-2 Opinion of Troutman Sanders LLP, counsel to
Georgia Power and PFC. (To be filed by
amendment.)
F-3 Opinion of Beggs & Lane, counsel to Gulf
Power. (To be filed by amendment.)
G - None
H - Proposed Form of Notice
(b) Financial Statements.
No financial statements are filed herewith since the financial
condition of the Applicants is not material to the proposed transactions.
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Item 7. Information as to Environmental Effects.
The issuance of an order by the Commission with respect to the subject
transactions is not a major federal action significantly affecting the quality
of the human environment.
No federal agency has prepared or is preparing an environmental impact
statement with respect to the subject transactions.
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SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned companies have duly caused this statement to be signed
on their behalf by the undersigned thereunto duly authorized.
Date: February 28, 2002
ALABAMA POWER COMPANY
By: /s/Wayne Boston
Wayne Boston, Assistant Secretary
ALABAMA PROPERTY COMPANY
By: /s/Wayne Boston
Wayne Boston, Assistant Secretary
GEORGIA POWER COMPANY
By: /s/Wayne Boston
Wayne Boston, Assistant Secretary
PIEDMONT-FORREST CORPORATION
By: /s/Wayne Boston
Wayne Boston, Assistant Secretary
GULF POWER COMPANY
By: /s/Wayne Boston
Wayne Boston, Assistant Secretary
MISSISSIPPI POWER COMPANY
By: /s/Wayne Boston
Wayne Boston, Assistant Secretary
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