[Federal Register Volume 62, Number 236 (Tuesday, December 9, 1997)]
[Notices]
[Pages 64897-64899]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-32170]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-26788]


Filings Under the Public Utility Holding Company Act of 1935, as 
Amended (``Act'')

December 3, 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 December 28, 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.

Conectiv, et al.

[70-9095]

    Conectiv, Inc. (``Conectiv''), not currently subject to the Act,\1\ 
Delmarva Power & Light Company (``Delmarva''), a public utility 
company, and its subsidiaries, Delmarva Industries, Inc., Delmarva 
Energy Co., and Support Conectiv, Inc. (``Support Conectiv''), all 
located at 800 King Street, Wilmington, Delaware 19899-0231; Delmarva 
Services Company, Conectiv Services, Inc., Conectiv Communications, 
Inc., Delmarva Capital Investments, Inc., DCI I, Inc., DCI II, Inc., 
Delmarva Capital Technology Co., DCTC-Burney, Inc., Pine Grove, Inc., 
Pine Grove Landfill, Inc., Pine Grove Hauling Company, Delmarva Capital 
Realty Company, Christiana Capital Management, Inc. Post and Rail 
Farms, Inc., Delmarva Operating Services Company, DelStar Operating 
Company, DelWest Operating Company, DelCal Operating Company, Conectiv 
Solutions, Inc., Conectiv Enterprises, Inc., and Conectiv Energy, Inc., 
all located at 252 Chapman Road, P.O. Box 6066, Newark, Delaware 19714; 
Atlantic City Electric Company (``Atlantic Electric''), a public 
utility holding company currently claiming an exemption from regulation 
under section 3(a)(1) of the Act from all provisions except section 
9(a)(2), and its subsidiaries, Deepwater Operating Company, Atlantic 
Energy Enterprises, Inc., and Atlantic Energy International, Inc., all 
located at 6801 Black Horse Pike, Egg Harbor Township, New Jersey 
08234; ATE Investment, Inc., Atlantic Generation, Inc., Pedrick 
Limited, Inc., Pedrick General, Inc., Vineland Limited, Inc., Vineland 
General, Inc., Atlantic Southern Properties, Inc., Atlantic Thermal 
Systems, Inc., Atlantic Jersey Thermal Systems, Inc., ATS Operating 
Systems, Inc., CoastalComm, Inc., Atlantic Energy Technology, Inc., 
Binghamton General, Inc., Binghamton Limited, Inc., The Earth Exchange, 
Inc., and Atlantic Paxton Cogeneration, Inc., all located at 5100 
Harding Highway, Mays Landing, New Jersey 08330 (collectively, 
``Applicants'' or ``Conectiv System''), have filed an application-
delcaration under sections 6, 7, 9, 10, 12 and 13 under the Act and 
rules 43, 45, 46, and 54 under the Act.
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    \1\ Conectiv will register as a holding company under the Act 
upon consummation of the transactions contemplated in File No. 9069 
(``Merger U-1'').
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    Conectiv has previously filed an application-declaration with the 
Commission under section 9(a)(2) of the Act seeking approvals relating 
to the proposed acquisition by Conectiv of securities of Delmarva, and 
merger into Conectiv of Atlantic Energy, Inc. (``Atlantic''), parent of 
Atlantic Electric, (collectively, these transactions are referred to as 
the ``Merger''), and for other related transactions including the 
formation of Support Conectiv as a subsidiary service company in 
accordance with the provisions of rule 88 under the Act. A notice of 
the Merger U-1 was issued on October 3, 1997 (HCAR No. 26763). Each of 
the entities that will be directly and indirectly owned subsidiaries of 
Conectiv upon consummation of the transactions described in the Merger 
U-1 is referred to individually as a ``Subsidiary'' and collectively as 
``Subsidiaries''.\2\ Following the consummation of the Merger, Conectiv 
will have two utility subsidiaries, Delmarva and Atlantic Electric (the 
``Utility Subsidiaries''). All of Conectiv's direct and indirect 
Subsidiaries, other than the Utility

[[Page 64898]]

Subsidiaries shall be referred to as ``Non-Utility Subsidiaries.''
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    \2\ Applicants state that for purposes of sections in the 
application-declaration related to non-utility financing, 
guarantees, changes in capital stock of wholly-owned subsidiaries, 
and dividends out of capital or unearned surplus by non-utility 
subsidiaries, the terms ``Subsidiary'' and ``Subsidiaries'' shall 
also include other direct or indirect subsidiaries that Conectiv may 
form after the Merger with either the approval of the Commission, 
under the Rule 58 exemption or under Section 34 of the Act. Thus, 
future Rule 58 and exempt telecommunication companies (``ETCs'') are 
included in the term ``Subsidiaries'' for purposes of these 
sections.
    Applicants also state that for purposes of sections in the Form 
U-1 related to the Money Pool, the terms ``Subsidiary'' and 
``Subsidiaries'' will only include those companies specifically 
named on the cover and signature pages of the application-
declaration and specifically exclude Conectiv Communications, Inc. 
and CoastalComm., Inc, both wholly-owned ETCs. Applicants further 
request the Commission to reserve jurisdiction over the 
participation in the Conectiv System Money Pool of future companies 
formed by Conectiv.
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    Applicants propose to enter into numerous types of financing 
transactions to meet Conectiv's capital requirements immediately 
following the Merger and to plan future financing. Applicants request 
authorization to engage in the financing transactions through December 
31, 2000 (``Authorization Period'') described below.
    Financings by each Applicant will be subject to the following 
limitations: (i) the effective cost of money on long-term debt 
securities will not exceed 300 basis points over comparable term U.S. 
Treasury securities and the effective cost of money on short-term 
securities will not exceed 300 basis points over the comparable term 
London Interbank Offered Rate; (ii) maturity of indebtedness will not 
exceed 50 years; (iii) the underwriting fees, commissions, or similar 
remuneration paid in connection with the issue, sale or distribution of 
a security will not exceed 5% of the principal amount of the financing; 
and (iv) Conectiv represents that at all times during the Authorization 
Period its common equity will be at least 30% of its consolidated 
capitalization.
    The proceeds from the sale of securities in external financing 
transactions will be used for general and corporate purposes including: 
(i) the financing of capital expenditures of the Conectiv System; (ii) 
the financing of working capital requirements of the Conectiv System; 
(iii) the acquisition, retirement, or redemption of existing 
securities; and (iv) direct or indirect investment in companies 
authorized under the Merger U-1 and in other rule 58 companies and 
ETCs.

1. Conectiv External Financing

    a. Common Stock. Conectiv requests authorization to issue common 
stock, par value $0.01 per share, up to an aggregate amount of $500 
million. Of this amount, Conectiv proposes that $100 million be issued 
as consideration for the acquisition by Conectiv or a Non-Utility 
Subsidiary of securities of a business (the acquisition of which is 
exempt under rule 58 or section 34 of the Act, or which has been 
authorized in the Merger U-1). Conectiv requests authorization to issue 
up to 10 million shares of Conectiv common stock (or options to 
purchase such shares) pursuant to benefit plans and the dividend 
reinvestment plan. The number of shares to be issued under the benefit 
plans will not exceed 5 million.
    b. Long-term Debt. Conectiv requests authorization to issue long-
term debt securities in an amount, when combined with the issuances of 
common stock (other than for benefit plans or the Conectiv Dividend 
Reinvestment Plan), not to exceed $500 million. The long-term debt 
securities would include notes, debentures and medium-term notes issued 
under an indenture (``Conectiv Indenture'') and/or borrowings from 
banks and other financial institutions.\3\ Specific terms of any 
borrowings will be determined by Conectiv at the time of issuance and 
will comply with the parameters of financing authorization stated 
earlier.
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    \3\ Applicants state that the Conectiv Indenture will permit the 
issuance of a wide variety of unsecured debt securities in one or 
more series. The Conectiv Indenture will contain numerous variable 
terms, such as principal amount, interest rate, redemption terms, 
denominations, events of default, etc. The Conectiv Indenture 
contains no negative covenants or restrictions.
    Borrowings from banks and other financial institutions will be 
unsecured debt and will rank pari passu with debt securities issued 
under the Conectiv Indenture and the Conectiv short-term Credit 
Facility (described in footnote 4 below).
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    c. Short-term Debt. Conectiv requests authorization to have 
outstanding at any one time, up to $500 million of short-term debt 
consisting of borrowings under a revolving credit facility with a group 
of banks, the issuance of commercial paper \4\ and the sale of bid 
notes under bid-note agreements (``Bid-Note Agreements'').\5\ The 
short-term debt will be used to refund pre-Merger short-term debt, to 
provide for the reissuance of pre-Merger letters of credit and to 
provide financing for general corporate purposes, working capital 
requirements and Subsidiary capital expenditures until long-term 
financing can be obtained.
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    \4\ Conectiv anticipates entering into a revolving credit 
facility (the ``Credit Facility'') with a group of banks on or 
before the effective date of the Merger in order to repay existing 
obligations of certain Subsidiaries. A portion of the Credit 
Facility may be used to support letters of credit issued by Conectiv 
or the Subsidiaries in the ordinary course of business. Also, if a 
Utility Subsidiary issues commercial paper, it may be made a party 
to the Credit Facility as a backup for the commercial paper.
    The interest rates on the Credit Facility are expected to be 
based on a triple option pricing formula as follows: (1) prime rate, 
(2) LIBOR plus a margin, or (3) CD plus a margin. Maturities on 
loans under the LIBOR rate option are expected to be for 1, 2, 3 or 
6 months. Maturities on loans under the CD rate option are expected 
to be for 30, 60, 90 or 180 days. All of these loans will be 
evidenced by promissory notes. It is expected that the Credit 
Facility will contain negative covenants consistent with those 
covenants required by bank lenders for comparable bank facilities. 
The Credit Facility will be unsecured debt of Conectiv and will rank 
pari passu with debt issued under the Conectiv Indenture and any 
long-term securities issued directly to banks or other financial 
institutions.
    It is anticipated that the sale of commercial paper will be in 
established domestic or European commercial paper markets. It will 
be sold to dealers at the discount rate or coupon rate per annum 
prevailing at the date of issuance for commercial paper of 
comparable quality and maturities sold to commercial paper dealers 
generally. The credit Facility will serve as backup for Conectiv's 
commercial paper program.
    \5\ Conectiv request authorization to enter into individual Bid-
Note Agreements with one or more commercial banks which may or may 
not be lenders under the Credit Facility. The Bid-Note Agreements 
would permit Conectiv to negotiate with one or more banks to 
purchase promissory notes (``Bid Notes'') directly from Conectiv. 
The Bid Notes would bear interest rates comparable to or lower than, 
those available through other forms of short-term borrowing with 
similar terms requested in the application-declaration. The maturity 
of any Bid Note would not exceed 270 days.
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    d. Hedging Transactions. Conectiv requests authorization to enter 
into, perform, purchase and sell financial instruments intended to 
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. Conectiv would employ interest rate swaps 
as a means of prudently managing the risk associated with any of its 
outstanding debt issued under this authorization by (i) converting 
variable rate debt to fixed rate debt, (ii) converting fixed rate debt 
to variable rate debt, (iii) limiting the impact of changes in interest 
rates resulting from variable rate debt and (iv) providing an option to 
enter into interest rate swap transactions in future periods for 
planned issuances of debt securities.

2. Subsidiary Financing

    Applicants request authorization for Delmarva to issue up to $275 
million of short-term debt consisting of commercial paper, unsecured 
bank loans and borrowings under the Conectiv system money pool. These 
issuances of securities will comply with the parameters for financing 
described above. Any short-term borrowings by Delmarva, when combined 
with short-term borrowings by Conectiv, will not exceed $500 million at 
any time during the Authorization Period. In addition the Applicants 
request authorization for the Utility Subsidiaries to enter into 
hedging transactions of the same type and under the same conditions as 
those identified above for Conectiv.

3. Other Securities

    The Applicants request authorization to issue other types of 
securities within the parameters of this Application-Declaration during 
the Authorization Period. The Applications request that the Commission 
reserve jurisdiction over the issuance of additional types of 
securities.

[[Page 64899]]

4. Guarantees

    Conectiv requests authorization to enter into guarantees, obtain 
letters of credit, enter into expense agreements or otherwise provide 
credit support with respect to the obligations of Subsidiaries in an 
aggregate amount not to exceed $350 million. In addition, the Non-
Utility Subsidiaries request authority to enter into arrangements with 
each other similar to those described with respect to Conectiv in an 
aggregate amount not to exceed $100 million. Applicants state that the 
debt guaranteed will comply with the parameters for financing.

5. Conectiv System Money Pool

    Conectiv and the Subsidiaries request authorization to establish a 
Conectiv system money pool (``System Money Pool''). Conectiv may 
invest, but not borrow from the System Money Pool. Also, Delmarva and 
Atlantic Electric would be authorized to borrow up to $275 million and 
$250 million, respectively, from the System Money Pool.\6\ No other 
participant in the System Money Pool would be permitted to have 
borrowings from the System Money Pool exceeding $25 million at any one 
time outstanding during the Authorization Period. Support Conectiv will 
administer the System Money Pool on an ``at cost'' basis. Support 
Conectiv will act strictly in an agency capacity, and not as principal, 
with regard to funds deposited in the System Money Pool by other 
participants.
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    \6\ As noted in footnote 2 above, the only Subsidiaries to be 
included in the System Money Pool are those companies specifically 
named on the cover and signature pages of the application-
declaration, but specifically excluding Conectiv Communications, 
Inc. and CoastalComm. Inc., both wholly-owned ETCs.
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6. Changes in Capital Stock of Wholly-Owned Subsidiaries and Dividends 
Out of Capital or Unearned Surplus by Non-Utility Subsidiaries

    Applicants request authority to change the terms of any wholly-
owned Subsidiary's authorized capital stock capitalization by an amount 
deemed appropriate by Conectiv or other immediate parent company. A 
Subsidiary would be able to change the par value, or change between par 
and no-par stock, without additional Commission approval. Any action by 
a Utility Subsidiary would be subject to and would only be taken upon 
receipt of necessary approvals by the state commission in the state or 
states where the Utility Subsidiary is incorporated and doing business.
    In addition, Conectiv requests the flexibility to withdraw capital 
from a Non-Utility Subsidiary with excess funds through a dividend out 
of capital surplus to the full extent permitted by the law of the state 
where the Non-Utility Subsidiary is incorporated.

7. Financing Entities

    The Subsidiaries seek authorization to organize new corporations, 
trusts, partnerships or other entities created for the purpose of 
facilitating financings. These entities will issue to third parties 
income preferred securities or other securities authorized or issued 
under an exemption. In addition, authority is requested for (i) the 
issuance of debentures or other evidences of indebtedness by any of the 
Subsidiaries to a financing entity in return for the proceeds of the 
financing, (ii) the acquisition by any of the Subsidiaries of voting 
interests or equity securities issued by the financing entity to 
establish any such Subsidiary's ownership of the financing entity and 
(iii) the guarantee by the Applicants of such financing entity's 
obligations.
    Applicants also request that (i) Delmarva be authorized to retain 
Delmarva Power Financing I, a wholly-owned trust, that has issued trust 
preferred securities and loaned the proceeds to Delmarva and (ii) 
Atlantic Electric be authorized to retain Atlantic Capital I, a wholly-
owned trust, that has issued trust preferred securities and loaned the 
proceeds to Atlantic Electric.

    For the Commission, by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 97-32170 Filed 12-8-97; 8:45 am]
BILLING CODE 8010-01-M