[Federal Register Volume 62, Number 23 (Tuesday, February 4, 1997)]
[Notices]
[Pages 5261-5264]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-2628]



[[Page 5261]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-26656]


Filing Under the Public Utility Holding Company Act of 1935, as 
amended (``Act'')

January 29, 1997.
    Notice is hereby given that the following filing(s) has/have been 
made with the Commission pursuant to provisions of the Act and rules 
promulgated thereunder. All interested persons are referred to the 
application(s) and/or declaration(s) for complete statements of the 
proposed transaction(s) summarized below. The application(s) and/or 
declaration(s) and any amendments thereto is/are available for public 
inspection through the Commission's Office of Public Reference.
    Interested persons wishing to comment or request a hearing on the 
application(s) and/or declaration(s) should submit their views in 
writing by February 24, 1997, to the Secretary, Securities and Exchange 
Commission, Washington, D.C. 20549, and serve a copy on the relevant 
applicant(s) and/or declarant(s) at the address(es) specified below. 
Proof of service (by affidavit or, in case of an attorney at law, by 
certificate) should be filed with the request. Any request for hearing 
shall identify specifically the issues of fact or law that are 
disputed. A person who so requests will be notified of any hearing, if 
ordered, and will receive a copy of any notice or order issued in the 
matter. After said date, the application(s) and/or declaration(s), as 
filed or as amended, may be granted and/or permitted to become 
effective.

American Electric Power Company, Inc, et al. (70-8991)

Notice of Proposal to Amend Articles of Incorporation and Authorize 
Registered Holding Company to Acquire Preferred Stock of Utility 
Subsidiaries; Order Authorizing Solicitation of Proxies

    American Electric Power Company, Inc. (``AEP''), 1 Riverside Plaza, 
Columbus, Ohio 43215, a registered holding company, and its wholly-
owned public utility subsidiaries, Appalachian Power Company 
(``APCo''), 40 Franklin Road, Roanoke, Virginia 24022, Indiana Michigan 
Power Company (``I&M''), One Summit Square, Fort Wayne, Indiana 46801, 
and Ohio Power Company (``OPCo''), 301 Cleveland Avenue, S.W., Canton, 
Ohio 44702, have filed an application-declaration under sections 6(a), 
7, 9(a), 10 and 12(b)-(e) of the Act and rules 43, 44, 51, 54, 62 and 
65 thereunder.\1\
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    \1\ APCo, I&M and OPCo are sometimes referred to herein 
individually as a ``Subsidiary'' or collectively as 
``Subsidiaries.''
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APCo

    APCo has outstanding 13,499,500 shares of common stock, no par 
value per share (``APCo Common Stock''), all of which are held by AEP. 
APCo's outstanding preferred stock consists of 2,198,150 shares of 
cumulative preferred stock, no par value per share (``APCo Preferred 
Stock''), issued in five series \2\ (each, an ``APCo Series''), all of 
which are publicly held. APCo Common Stock and APCo Preferred Stock of 
each APCo Series are entitled to one vote per share. No other class of 
APCo equity securities is outstanding.
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    \2\ The five series of APCo Preferred Stock consist of a 4\1/2\% 
series, of which 298,150 shares are outstanding (``4\1/2\% 
Series''); a 5.90% series, of which 500,000 shares are outstanding 
(``5.90% Series''); a 5.92% series, of which 600,000 shares are 
outstanding (``5.92% Series''); a 6.85% series, of which 300,000 
shares are outstanding (``6.85% Series); and a 7.80% series, of 
which 500,000 shares are outstanding (``7.80% Series).
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    APCo's restated articles of incorporation (``APCo Articles'') 
currently provide that, so long as any shares of APCo's cumulative 
preferred stock in any series are outstanding, without the consent of 
the holders of a majority of the total number of votes which holders of 
the outstanding shares of APCo Preferred Stock of all APCo Series are 
entitled to cast, APCo shall not issue or assume any evidence of 
indebtedness, secured or unsecured (other than for purposes of 
refunding or renewing outstanding evidences of indebtedness or 
redeeming or otherwise retiring all outstanding shares of APCo 
Preferred Stock and other than first mortgage bonds and certain secured 
indebtedness) if, immediately after such issue or assumption, (a) the 
total principal amount of all such indebtedness issued or assumed by 
APCo and then outstanding would exceed 20% of the aggregate of (1) the 
total principal amount of all then-outstanding bonds or other secured 
debt of APCo (other than certain bonds issued under a mortgage) and (2) 
the stated capital and surplus of APCo as stated in APCo's books, or 
(b) the total principal amount of all unsecured debt would exceed 20% 
of the aggregate of (1) the total principal amount of all then-
outstanding bonds or other secured debt of APCo and (2) the stated 
capital and surplus of APCo as stated on APCo's books, or (c) the total 
outstanding principal amount of all secured debt of maturities of less 
than ten years would exceed 10% of the aggregate of (1) the total 
principal amount of all then-outstanding bonds or other secured debt of 
APCo and (2) the stated capital and surplus of APCo as stated on APCo's 
books (``APCo Restricted Provisions'').
    APCo proposes to solicit proxies from the holders of outstanding 
shares of APCo Common Stock and APCo Preferred Stock (``APCo Proxy 
Solicitation'') for use at a special meeting of its stockholders 
(``APCo Special Meeting'') to consider a proposed amendment to APCo's 
Articles that would eliminate in its entirety the APCo Restriction 
Provision (``APCo Proposed Amendment'') from the APCo Articles. 
Approval of the APCo Proposed Amendment requires the affirmative vote 
at the APCo Special Meeting of the holders of not less than two-thirds 
of the total number of the then-outstanding shares of (1) the APCo 
Preferred Stock of all APCo Series, voting together as one class, and 
(2) the APCo Common Stock. AEP will vote its shares of APCo Common 
Stock in favor of the APCo Proposed Amendment.
    If the APCo Proposed Amendment is adopted, APCo would make a 
special cash payment of $1.00 per share (``APCo Cash Payment'') to each 
holder of APCo Preferred Stock who voted (in person by ballot or by 
proxy) his shares of APCo Preferred Stock (each, an ``APCo Share'') in 
favor of the APCo Proposed Amendment at the APCo Special Meeting 
(except that no APCo Cash Payment will be made with respect to any APCo 
Share validity tendered pursuant to the concurrent tender offer 
described below). APCo will disburse APCo Cash Payments out of its 
general funds following adoption of the APCo Proposed Amendment.
    Concurrently with the APCo Proxy Solicitation, and subject to the 
terms and conditions stated in an Offer to Purchase and Proxy Statement 
and accompanying Letter of Transmittal (together, ``APCo Offer 
Documents''), AEP proposes to make a cash tender offer (``APCo Tender 
Offer'') to acquire any and all outstanding shares of APCo Preferred 
Stock and each APCo Series, at cash purchase prices which AEP 
anticipates will include a market premium for each APCo Series (each, 
an ``APCo Purchase Price''). The APCo Tender Offer consists of separate 
offers for each of the five APCo Series, with the offer for each APCo 
Series being independent of the offer for any other APCo Series. The 
applicable APCo Purchase Price and the other terms and conditions of 
the APCo Tender Offer apply equally to all holders of APCo Preferred 
Stock of each APCo Series (``APCo Preferred Stockholders'').

[[Page 5262]]

    AEP anticipates that the APCo Tender Offer will expire on February 
28, 1997, the date of the APCo Special Meeting (``APCo Expiration 
Date''), unless otherwise extended. The APCo Tender Offer is not 
conditioned upon any minimum number of shares of APCo Preferred Stock 
being tendered. APCo Preferred Stockholders who wish to tender their 
APCo Preferred Stock pursuant to the APCo Tender Offer are not required 
to vote in favor of the APCo Proposed Amendment; however, one of the 
conditions of the APCo Tender Offer requires that the APCo Amendment be 
approved and adopted at the APCo Special Meeting.

I&M

    I&M has outstanding 1,400,000 shares of common stock, par value 
$100 per share (``I&M Common Stock''), all of which are held by AEP. 
I&M's outstanding preferred stock consists of 1,569,767 shares of 
cumulative preferred stock, par value $100 per share (``I&M Preferred 
Stock''), issued in seven series \3\ (each, an ``I&M Series''), all of 
which are publicly held. I&M Common Stock and I&M Preferred Stock of 
each I&M Series are entitled to one vote per share. No other class of 
I&M equity securities is outstanding.
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    \3\ The seven Series of I&M Preferred Stock consist of a 4\1/8\% 
series, of which 119, 767 shares are outstanding (``4\1/8\% 
Series''); a 4.12% series, of which 40,000 shares are outstanding 
(``4.12% Series''); a 4.56% series, of which 60,000 shares are 
outstanding (``4.56% Series''); a 5.90% series, of which 400,000 
shares are outstanding (``5.90 Series''), 6\1/4\% series, of which 
300,000 shares are outstanding (``6\1/4\% Series''); a 6\7/8\% 
series, of which 300,000 shares are outstanding (``6\7/8\% 
Series''); and a 6.30% series, of which 350,000 shares are 
outstanding (``6.30% Series'').
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    I&M's amended articles of acceptance (``I&M Articles'') currently 
provide that, so long as any shares of I&M's cumulative preferred stock 
of any series are outstanding, without the consent of the holders 
entitled to cast a majority of the total number of votes which holders 
of the outstanding shares of I&M Preferred Stock of all I&M Series are 
entitled to cast, I&M shall not issue or assume any unsecured debt 
securities (other than for purposes of the reacquisition, redemption or 
other retirement of any evidences of indebtedness previously issued or 
assumed by I&M or the reacquisition, redemption or other retirement of 
all outstanding shares of I&M Preferred Stock) if, immediately after 
such issue or assumption, the total principal amount of all unsecured 
debt securities (other than the principal amount of all long-term 
unsecured debt securities not in excess of 10% of the capitalization of 
I&M \4\) issued or assumed by I&M and then outstanding would exceed 10% 
of the capitalization of I&M (``I&M Restriction Provision'').
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    \4\ ``Capitalization'' means an amount equal to the sum of (i) 
the total principal amount of all bonds or other secured debt 
securities issued or assumed by I&M outstanding at the time of 
determination and (ii) the aggregate of the stated capital of all 
classes of I&M stock outstanding at the time of determination and 
surplus of I&M at such time.
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    I&M proposes to solicit proxies from the holders of outstanding 
shares of I&M Common Stock and I&M Preferred Stock (``I&M Proxy 
Solicitation'') for use at a special meeting of its stockholders (``I&M 
Special Meeting'') to consider a proposed amendment to I&M Articles 
that would eliminate in its entirely the I&M Restriction Provision 
(``I&M Proposed Amendment'') from the I&M Articles. Approval of the I&M 
Proposed Amendment requires the affirmative vote at the I&M Special 
Meeting of the holders of not less than two-thirds of the total number 
of the then-outstanding shares of (1) the I&M Preferred Stock of all 
I&M Series, voting together as one class, and (2) the I&M Common Stock. 
AEP will vote its shares of I&M Common Stock in favor of the I&M 
Proposed Amendment.
    If the I&M Proposed Amendment is adopted, I&M would make a special 
cash payment of $1.00 per share (``I&M Cash Payment'') to each holder 
of I&M Preferred Stock who voted (in person by ballot or by proxy) his 
shares of I&M Preferred Stock (each, an ``I&M Share'') in favor of the 
I&M Proposed Amendment at the I&M Special Meeting (except that no I&M 
Cash Payment will be made with respect to any I&M Share validly 
tendered pursuant to the concurrent tender offer described below). I&M 
will disburses I&M Cash Payments out of its general funds following 
adoption of the I&M Proposed Amendment.
    Concurrently with the I&M Proxy Solicitation, and subject to the 
terms and conditions stated in an Offer to Purchase and Proxy Statement 
and accompanying letter of Transmittal (together, ``I&M Offer 
Documents''), AEP proposes to make a cash tender offer (``I&M Tender 
Offer'') to acquire any and all outstanding shares of I&M Preferred 
Stock of each I&M Series, at cash purchase prices which AEP anticipates 
will include a market premium for each I&M Series (each, an ``I&M 
Purchase Price''). The I&M Tender Offer consists of separate offers for 
each of the seven I&M Series, with the offer for each I&M Series being 
independent of the offer for any other I&M Series. The applicable I&M 
Purchase Price and the other terms and conditions of the I&M Tender 
Offer apply equally to all holders of I&M Preferred Stock of each I&M 
Series (I&M Preferred Stockholders'').
    AEP anticipates that the I&M Tender Offer will expire on February 
28, 1997, the date of the I&M Special Meeting (``I&M Expiration 
Date''), unless otherwise extended. The I&M Tender Offer is not 
conditioned upon any minimum number of shares of I&M Preferred Stock 
being tendered. I&M Preferred Stockholders who wish to tender their I&M 
Preferred Stock pursuant to the I&M Tender Offer are not required to 
vote in favor of the I&M Proposed Amendment; however, one of the 
conditions of the I&M Tender Offer requires that the I&M Proposed 
Amendment be approved and adopted at the I&M Special Meeting.

OPCo

    OPCo has outstanding 27,952,473 shares of common stock, no par 
value per share (``OPCo Common Stock''), all of which are held by AEP. 
OPCo's outstanding preferred stock consists of 1,484,316 shares of 
cumulative preferred stock, par value $100 per share (``OPCo Preferred 
Stock''), issued in seven series \5\ (each, an ``OPCo Series''), all of 
which are publicly held. OPCo Common Stock and OPCo Preferred Stock of 
each OPCo Series are entitled to one vote per share. No other class of 
OPCo equity securities is outstanding.
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    \5\ The seven series of OPCo Preferred Stock consist of a 4\1/
2\% series, of which 202,403 shares are outstanding (``4\1/2\% 
Series''); a 4.08% series, of which 42,575 shares are outstanding 
(``4.08% Series''); a 4.20% series, of which 51,975 shares are 
outstanding (``4.20% Series''); a 4.40% series, of which 88,363 
shares are outstanding (``4.40% Series''); a 5.90% series, of which 
404,000 shares are outstanding (``5.90% Series''); a 6.02% series, 
of which 395,000 shares are outstanding (``6.02% Series''); and a 
6.35% series, of which 300,000 shares are outstanding (``6.35% 
Series'').
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    OPCo's amended articles of incorporation (``OPCo Articles'') 
currently provide that, so long as any shares of OPCo's cumulative 
preferred stock are outstanding, without the consent of the holders of 
a majority of the total number of votes which holders of the 
outstanding shares of OPCo Preferred Stock of all series are entitled 
to cash, OPCo shall not issue or assume any unsecured debt securities 
(other than for purposes of the reacquisition, redemption or other 
retirement of any evidences of indebtedness previously issued or 
assumed by OPCo or the reacquisition, redemption or other retirement of 
all outstanding shares of OPCo Preferred Stock) if, immediately after 
such issue or assumption, the total principal amount of all unsecured 
debt securities (other than the principal

[[Page 5263]]

amount of all long-term unsecured debt securities not in excess of 10% 
of the capitalization of OPCo \6\) issued or assumed by OPCo and then 
outstanding would exceed 10% of the capitalization of OPCo (``OPCo 
Restriction Provision'').
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    \6\ ``Capitalization'' means an amount equal to the sum of (i) 
the total principal amount of all bonds or other secured debt 
securities issued or assumed by OPCo outstanding at the time of 
determination and (ii) the aggregate of the stated capital of all 
classes of OPCo stock outstanding at the time of determination and 
surplus of OPCo at such time.
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    OPCo proposes to solicit proxies from the holders of outstanding 
shares of OPCo Common Stock and OPCo Preferred Stock (``OPCo Proxy 
Solicitation'') for use at a special meeting of its stockholders 
(``OPCo Special Meeting'') to consider a proposed amendment to OPCo's 
Articles that would eliminate in its entirety the OPCo Restriction 
Provision (``OPCo Proposed Amendment'') from the OPCo Articles. 
Approval of the OPCo Proposed Amendment requires the affirmative vote 
at the OPCo Special Meeting of the holders of not less than two-thirds 
of the total number of the then-outstanding shares of (1) the OPCo 
Preferred Stock of all OPCo Series, voting together as one class, and 
(2) the OPCo Common Stock. AEP will vote its shares of OPCo Common 
Stock in favor of the OPCo Proposed Amendment.
    If the OPCo Proposed Amendment is adopted, OPCo would make a 
special cash payment of $1.00 per share (``OPCo Cash Payment'') to each 
holder of OPCo Preferred Stock who voted (in person by ballot or by 
proxy) his shares of OPCo Preferred Stock (each, an ``OPCo Share'') in 
favor of the OPCo Proposed Amendment at the OPCo Special Meeting 
(except that no OPCo Cash Payment will be made with respect to any OPCo 
Share validly tendered pursuant to the concurrent tender offer 
described below). OPCo will disburse OPCo Cash Payments out of its 
general funds following adoption of the OPCo Proposed Amendment.
    Concurrently with the OPCo Proxy Solicitation, and subject to the 
terms and conditions stated in an Offer to Purchase and Proxy Statement 
and accompanying Letter of Transmittal (together, ``OPCo Offer 
Documents''), AEP proposes to make a cash tender offer (``OPCo Tender 
Offer'') to acquire any and all outstanding shares of OPCo Preferred 
Stock of each OPCo Series, at cash purchase prices which AEP 
anticipates will include a market premium for each OPCo Series (each, 
an ``OPCo Purchase Price''). The OPCo Tender Offer consists of separate 
offers for each of the seven OPCo Series, with the offer for each OPCo 
Series being independent of the offer for any other OPCo Series. The 
applicable OPCo Purchase Price and the other terms and conditions of 
the OPCo Tender Offer apply equally to all holders of OPCo Preferred 
Stock of each OPCo Series (``OPCo Preferred Stockholders'').
    AEP anticipates that the OPCo Tender Offer will expire on February 
28, 1997, the date of the OPCo Special meeting (``OPCo Expiration 
Date''), unless otherwise extended. The OPCo Tender Offer is not 
conditioned upon any minimum number of shares of OPCo Preferred Stock 
being tendered. OPCo Preferred Stockholders who wish to tender their 
OPCo Preferred Stock pursuant to the OPCo Tender Offer are not required 
to vote in favor of the OPCo Proposed Amendment; however, one of the 
conditions of the OPCo Tender Offer requires that the OPCo Proposed 
Amendment be approved and adopted at the OPCo Special Meeting.
    In addition, OPCo proposes to solicit proxies to amend the OPCo 
Articles to clarify the authority of the OPCo Board of Directors to 
purchase or acquire cumulative preferred stock of OPCo (``OPCo Second 
Proposed Amendment''). The affirmative vote of the holders of at least 
a majority of the outstanding shares of OPCo's common stock and 
cumulative preferred stock, the common stock and preferred stock voting 
together as one class, is required to approve the OPCo Second Proposed 
Amendment.
    Tenders of APCo Shares, I&M Shares and OPCo Shares (collectively, 
``Shares'') made pursuant to the APCo Tender Offer, I&M Tender Offer 
and OPCo Tender Offer, respectively (individually, ``Tender Offer'' and 
collectively, ``Tender Offers''), may be withdrawn at any time prior to 
the APCo Expiration Date, I&M Expiration Date and the OPCo Expiration 
Date, respectively (individually and collectively, ``Expiration 
Date''). Thereafter, such tenders are irrevocable, subject to certain 
exceptions identified in the APCo Offer Documents, I&M Offer Documents 
and OPCo Offer Documents (individually and collectively, ``Offer 
Documents''). AEP states that its obligations to proceed with the 
Tender Offers and to accept for payment and to pay for any Shares 
tendered will be made in accordance with rule 51 under the Act and are 
subject to various conditions enumerated in the Offer Documents, 
including the receipt of a Commission order under the Act authorizing 
the proposed transactions and the adoption of the APCo Proposed 
Amendment, I&M Proposed Amendment and the OPCo Proposed Amendment 
(individually, ``Proposed Amendment'' and collectively, ``Proposed 
Amendments'') at the APCo Special Meeting, I&M Special Meeting and OPCo 
Special Meeting, respectively (individually and collectively, ``Special 
Meeting'').
    Applicants undertake to comply with all requirements of the 
Securities Exchange Act of 1934 (``Exchange Act'') and rules and 
regulations thereunder in connection with the APCo Proxy Solicitation 
I&M Proxy Solicitation and OPCo Proxy Solicitation, as applicable 
(individually, ``Proxy Solicitation'' and collectively, ``Proxy 
Solicitations''), the proxy solicitation in connection with the OPCo 
Second Proposed Amendment and the Tender Offers, except to the extent 
applicants rely on exemptions from the requirements of Rule 13e-3 and 
Regulation 14A of the Exchange Act, and acknowledge that any 
authorization granted under the Act is conditioned upon such 
compliance. Shares validly tendered will be held by AEP until the 
Expiration Date (or returned in the event a Tender Offer is 
terminated). Subject to the terms and conditions of the Tender Offers, 
as promptly as practicable after the Expiration Date, AEP will accept 
for payment (and thereby purchase) and pay for Shares validly tendered 
and not withdrawn. AEP intends to use its general funds and/or incur 
short-term indebtedness in an amount sufficient to pay the APCo 
Purchase Price, I&M Purchase Price and OPCo Purchase Price 
(individually and collectively, ``Purchase Price'') for all tendered 
Shares. Merrill Lynch, Pierce, Fenner & Smith Incorporated and Salomon 
Brothers Inc. will act as dealer managers for AEP in connection with 
the Tender Offers.\7\
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    \7\ AEP has agreed to pay the dealer managers a fee of $.50 per 
share for any Shares tendered, accepted for payment and paid for 
pursuant to the Tender Offers, the Subsidiaries have agreed to pay 
the dealer managers a fee of $.50 per share for any Shares that are 
not tendered pursuant to the Tender Offers but which vote in favor 
of the Proposed Amendment, and AEP has agreed to reimburse the 
dealer managers for their reasonable out-of-pocket expenses, 
including attorneys' fees.
    In addition, AEP has agreed to pay soliciting brokers and 
dealers a separate fee of (i) $1.50 per share for any Shares of the 
APCo 4\1/2\% Series, the I&M 4\1/8\% Series, 4.12% Series and 4.56% 
Series, and the OPCo 4\1/2\% Series, 4.08% Series, 4.20% Series and 
4.40% Series, tendered, accepted for payment and paid for pursuant 
to the Tender Offers (except that for transactions with beneficial 
owners equal to or exceeding 5,000 Shares, AEP will pay a 
solicitation fee of $1.00 per share for Shares of such Series), and 
(ii) $.50 per share for the remaining Shares of the APCo Series, I&M 
Series and OPCo Series. The Subsidiaries will pay a separate fee of 
$.50 per share for any of their Shares of the APCo 4\1/2\% Series, 
the I&M 4\1/8\% Series, 4.12% Series and 4.56% Series, and the OPCo 
4\1/2\% Series, 4.08% Series, 4.20% Series and 4.40% Series that are 
not tendered pursuant to the Tender Offers but which are voted in 
favor of the Proposed Amendment.
    AEP proposes to pay First Chicago Trust Company of New York, in 
its capacity as a depositary for the Tender Offers, a fee estimated 
at approximately $50,000.

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[[Page 5264]]

    If a Proposed Amendment is adopted at a Subsidiary's Special 
Meeting, promptly after consummation of the Tender Offer the Subsidiary 
will purchase the Shares sold to AEP pursuant to the Tender offer at 
the relevant Purchase Price plus expenses incurred in the Tender Offer, 
and the Subsidiary will retire and cancel such Shares.
    If a Proposed Amendment is adopted not at the Special Meeting, AEP 
may elect, but is not obligated, to waive adoption of the Proposed 
Amendment as a condition to its obligation to proceed with the Tender 
Offer, subject to applicable law. In that case, as promptly as 
practicable after AEP's waiver of such condition and its purchase of 
Shares validly tendered pursuant to the Tender Offers, the affected 
Subsidiary anticipates that it would call another special meeting of 
its common and preferred stockholders to solicit proxies (to secure the 
requisite two-thirds affirmative vote of stockholders to amend the APCo 
Articles, I&M Articles and OPCo Articles (individually and 
collectively, ``Articles''), as the case may be, to eliminate the APCo 
Restriction Provision, I&M Restriction Provision and OPCo Restriction 
Provision (collectively, ``Restriction Provisions''), as the case may 
be. At each such meeting, AEP would vote any Shares acquired by it 
pursuant to the Tender Offer or otherwise \8\ (as well as all of its 
shares of Common Stock of the affected Subsidiaries) in favor of the 
Proposed Amendment. If a Proposed Amendment is adopted at that meeting 
and in any event within one year from the Expiration Date (including 
any potential extension thereto pursuant to a Tender Offer), AEP will 
promptly after such meeting or at the expiration of such one-year 
period, as applicable, sell the Shares to the Subsidiary at the 
applicable Purchase Price plus expenses paid therefor pursuant to the 
Tender Offer, and the Subsidiary will retire and cancel such Shares.
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    \8\ Following the Expiration Date and the completion of the 
purchase of Shares pursuant to a Tender Offer, AEP may determine to 
purchase additional Shares on the open market, in privately 
negotiated transactions, through one or more tender offers or 
otherwise. AEP states that it will not undertake any such 
transactions without receipt of any required Commission 
authorizations under the Act. Likewise, in the event the additional 
special meeting is necessary, the affected Subsidiary would not 
undertake any proxy solicitation to amend its Articles prior to 
receipt of any required Commission authorizations under the Act.
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    The applicants believe that regulatory, legislative, technological 
and market developments are likely to lead to a more competitive 
environment within the extremely capital-intensive electric utility 
industry. The applicants further content that elimination of the 
Restrictions Provisions will produce competitive advantages, financing 
flexibility and cost benefits that outweigh the one-time costs of the 
Tender Offers and the Proxy Solicitations,\9\ and will be in the best 
long-term competitive interests of their customers and 
shareholders.\10\ Moreover, the applicants represent that the Proposed 
Amendments will allow the Subsidiaries to issue a greater amount of 
unsecured debt and also allow the Subsidiaries to issue a greater 
amount of total debt.\11\
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    \9\ The Subsidiaries have engaged Morrow & Co., Inc. to act as 
information agent in connection with the Proxy Solicitations and the 
solicitation of proxies in connection with the OPCo Second Proposed 
Amendment for a fee and reimbursement of reasonable out-of-pocket 
expenses expected not to exceed approximately $27,500.
    \10\ The applicants state that the proposed acquisition by AEP 
of Shares pursuant to the Tender Offers will benefit AEP's utility 
system customers and shareholders through the lowering of the 
Subsidiaries' cost of capital through the anticipated reduction in 
the aggregate amount payable of APCo Preferred Stock, I&M Preferred 
Stock and OPCo Preferred Stock (collectively, ``Preferred Stock'') 
dividends and additional cost savings associated with the redemption 
and replacement of a portion of the Subsidiaries' high-coupon debt 
with lower cost short-term debt. Moreover, the applicants maintain 
that tendering APCo Preferred Stockholders, I&M Preferred 
Stockholders and OPCo Preferred Stockholders, who do not vote in 
favor of adopting the Proposed Amendments, will benefit by having 
the option to sell their Preferred Stock at prices that AEP expects 
will be a premium to the market price and without the usual 
transaction costs associated with a sale.
    \11\ The Subsidiaries state that they will be at a competitive 
disadvantage if the Restriction Provisions are not eliminated, 
citing the industry's new competitors (i.e., power marketers, exempt 
wholesale generators, independent power producers and owners of 
cogeneration facilities) that generally are not subject to the type 
of financing restrictions the Articles impose upon the Subsidiaries. 
The applicants also point out that some potential utility 
competitors and other AEP public utility subsidiaries have no 
comparable provision restricting the use of unsecured debt. Under 
the Restriction Provisions, APCo, I&M and OPCo have available only 
approximately $230 million, $172 million and $212 million, 
respectively, of unsecured debt capacity, based on capitalization as 
of September 30, 1996.
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    To finance its proposed purchase of Shares pursuant to the Tender 
Offers, AEP plans to use general funds and/or incur short-term debt in 
an amount sufficient to pay the Purchase Price for all tendered Shares, 
an amount not expected to exceed $540 million. Specifically, AEP 
requests authorization to issue up to $400 million in short-term debt 
through the issuance and sale of notes to banks and commercial 
paper.\12\ The additional $400 million of short-term borrowing 
authority shall decrease by the amount paid to AEP by the Subsidiaries 
for the repurchase of Shares therefrom, and would expire no later than 
February 28, 1998.
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    \12\ In connection with its proposed purchase of the Shares, AEP 
anticipates that it also may use existing financing authorization. 
See Holding Co. Act Release No. 26424 (Dec. 8, 1995) (authorizing 
AEP to issue short-term debt up to $150 million for general 
corporate purposes through December 31, 2000).
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    AEP proposes to issue and sell notes with maturities not in excess 
of 270 days from date of issuance and bearing a maximum effective 
annual interest cost not to exceed 125% of the prime commercial rate in 
effect from time to time. Commercial paper issued by AEP will be in the 
form of promissory notes in denominations of not less than $50,000 with 
maturities not in excess of 270 days from date of issuance.
    The applicants also request authorization to deviate from the 
preferred stock provisions of the Statement of Policy Regarding 
Preferred Stock Subject to the Public Utility Holding Company Act of 
1935, HCAR No. 13106 (Feb. 16, 1956), to the extent applicable with 
respect to the Proposed Amendments.
    It appears to the Commission that the application-declaration, to 
the extent that it relates to the proposed Proxy Solicitations and the 
solicitation of proxies in connection with the OPCo Second Proposed 
Amendment should be granted and permitted to become effective forthwith 
pursuant to rule 62(d).
    It is ordered, that the application-declaration, to the extent that 
it relates to the proposed Proxy Solicitations and the solicitation of 
proxies in connection with the OPCo Second Proposed Amendment be, and 
it hereby is, permitted to become effective forthwith, pursuant to rule 
62 and subject to the terms and conditions prescribed in rule 24 under 
the Act.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-2628 Filed 2-3-97; 8:45 am]
BILLING CODE 8010-01-M