[Federal Register Volume 65, Number 199 (Friday, October 13, 2000)]
[Notices]
[Pages 61000-61005]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-26379]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27244]


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

October 6, 2000.

    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 under the Act. 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 amendment(s) is/are available for public 
inspection through the Commission's Branch 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 October 31, 2000, to the Secretary, Securities and Exchange 
Commission, Washington, D.C. 20549-0609, and serve a copy on the 
relevant application(s) and/or declaration(s) at the address(es) 
specified below. Proof of service (by affidavit or, in the case of an 
attorney at law, by certificate) should be filed with the request. Any 
request for hearing should identify specifically the issues of facts or 
law that are disputed. A person who so requests will be notified of any 
hearing, if ordered, and will receive a copy of any notice or order 
issued in the matter. After October 31, 2000, the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

Scottish Power plc, et al. (70-9669)

    Scottish Power plc (``Scottish Power''), a foreign registered 
public utility holding company; Scottish Power UK plc, a first-tier 
utility subsidiary of Scottish Power (``SPUK''); \1\ Scottish Power NA 
1 Limited, Scottish Power NA 2 Limited, and NA General Partnership 
(together, ``Intermediate Companies''), each of which is a subsidiary 
of Scottish Power, all located at 1 Atlantic Quay, Glasgow G2 8SP, 
Scotland, United Kingdom; PacifiCorp, an electric utility subsidiary of 
Scottish Power; and PacifiCorp's nonutility subsidiaries (``PacifiCorp 
Subsidiaries''), Centralia Mining Company, Energy

[[Page 61001]]

West Mining Company, Glenrock Coal Company, Interwest Mining Company, 
Pacific Minerals, Inc., PacifiCorp Environmental Remediation Company, 
PacifiCorp Investment Management, Inc., PacifiCorp Group Holdings 
Company (``PGHC''), New Energy Holdings Inc., PACE Group, PacifiCorp 
Energy, Inc., PacifiCorp Energy Services, Inc., PacifiCorp Energy 
Ventures, Inc., PacifiCorp International Group Holdings Company, 
PacifiCorp Power Marketing, Inc., PacifiCorp Trans, Inc., PacifiCorp 
Financial Services, Inc., Eastern Investment Company, and Pan Pacific 
Global Corporation, all located at Suite 2000, 825 N.E. Multnomah 
Street, Portland, OR 97232 (collectively, ``Applicants''), have filed 
an application-declaration under sections 6(a), 7, 9(a), 10, 12, 13(b) 
and 33 of the Act and rules 42, 43, 45, 53, 54, 83, 87, 90, and 91 
under the Act.
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    \1\ Scottish Power's other operations have been segregated under 
SPUK, which is a foreign utility company within the meaning of 
section 33 of the Act.
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I. Introduction, Background and Summary

    Scottish Power registered as a holding company under the Act 
following its acquisition of PacifiCorp on November 29, 1999 
(``Merger'').\2\ As discussed more fully below, Scottish Power and 
PacifiCorp, together with the Intermediate Companies and the PacifiCorp 
Subsidiaries, now request authority to engage in a variety of financing 
transactions. In summary, Applicants seek authority to engage in the 
following transactions through March 31, 2004 (``Authorization 
Period''): (1) External financings by Scottish Power; (2) certain 
external financings by PacifiCorp and the PacifiCorp Subsidiaries 
(``PacifiCorp Group''); (3) certain intrasystem financings, including 
the creation of two new PacifiCorp money pools (``Money Pools''), and 
guarantees of the obligations of the PacifiCorp Subsidiaries and of the 
subsidiaries of Scottish Power's foreign utility subsidiary, Scottish 
Power UK plc (``SPUK'' and, together with its subsidiaries, the ``SPUK 
Group''); (4) the payment by the PacifiCorp Subsidiaries and, in 
certain circumstances, by PacifiCorp, of dividends out of capital or 
unearned surplus; (5) increases in the number of shares authorized by 
PacifiCorp or by any of the PacifiCorp Subsidiaries with respect to any 
capital security \3\ of the company, as well as alteration of the terms 
of any capital security, without further Commission authorization; (6) 
the formation of financing entities and the issuance by such entities 
of securities otherwise authorized to be issued and sold under the 
authority requested in this filing; (7) the formation of a holding 
company (``Nevada Holdco'') to act as a pass through entity regarding 
the shares of both PacifiCorp and PGHC;\4\ and (8) the execution of a 
system tax allocation agreement. In addition, Applicants propose to 
engage in various intrasystem transactions. Applicants further request 
that the Commission reserve jurisdiction over certain transactions, as 
described below.
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    \2\ Scottish Power field with the Commission a Notification of 
Registration on Form U5A on November 30, 1999, and a Registration 
Statement on Form U5B on March 7, 2000.
    \3\ Capital stock includes common stock, preferred stock, other 
preferred securities, options and/or warrants convertible into 
common or preferred stock, rights, and similar securities.
    \4\ PGHC is the holding company for PacifiCorp's principal 
subsidiaries. Through its subsidiary companies, PGHC is engaged in 
the acquisition or development of electrical power projects or 
systems internationally, and leveraged lease tax-advantages 
investments. Nevada Holdco will be authorized to issue 1000 shares 
of common stock, par value $.01 per share. Nevada Holdco proposes to 
issue its common shares to NA General Partnership and, accordingly, 
NA General Partnership proposes to acquire all of the outstanding 
common shares of Nevada Holdco.
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    Applicants state that the proceeds from the sale of securities in 
external financing transactions will be used for the acquisition, 
retirement or redemption of securities issued by Scottish Power and its 
subsidiaries (``Scottish Power System''), without the need for prior 
Commission approval and for necessary general corporate purposes 
including: (a) The financing, in part, of the capital expenditures of 
the Scottish Power System; (b) the financing of working capital 
requirements of the Scottish Power System; and (iii) other lawful 
general purposes. The proceeds of external financings will be allocated 
to companies in the Scottish Power System in various ways through the 
proposed intrasystem financing discussed below.
    In addition, Scottish Power seeks authority to invest in exempt 
wholesale generators (``EWGs'') and foreign utility companies 
(``FUCOs''), as those terms are defined in sections 32 and 33 of the 
Act, respectively, up to an aggregate outstanding amount equal to 154% 
of its consolidated retained earnings at any one time during the 
Authorization Period. Further, Scottish Power seeks authority to use 
its ordinary shares (or associated American Depository Shares 
(``ADSs'') or American Depositary receipts (``ADRs'')) as consideration 
for acquisitions that are otherwise authorized under the Act or exempt 
under the Act, and to provide shares for various award and shareholder 
investment programs.

II. General Terms and Conditions of Financing

    Financings by each Applicant will be subject to the following 
general terms and conditions (``Financing Conditions''): (1) During the 
Authorization Period, Scottish Power's total common equity (``Total 
Common Equity'')\5\ will be at least 30% of its total capitalization 
(``Total Capitalization''),\6\ and PacifiCorp's total Common Equity 
will be at least 30% of its Total Capitalization; (2) Scottish Power 
will maintain its and PacifiCorp's long-term debt ratings at an 
investment grade level through the Authorization Period; (3) the cost 
of money on debt financings of Scottish Power at the date of issuance 
will not exceed 300 basis points over that for comparable term U.S. 
treasury securities or government benchmark for the currency concerned; 
(4) the cost of money on preferred securities of Scottish Power at the 
date of issuance will not exceed 500 basis points over that for 
comparable term U.S. treasury securities or government benchmark for 
the currency concerned; (5) the aggregate amount of external debt and 
equity issued by Scottish Power under the authority requested in this 
application-declaration will not exceed $6 billion at any one time 
outstanding; (6) Scottish Power's aggregate investment in EWGs and 
FUCOs, as defined in rule 53 under the Act, will not exceed, without 
prior Commission approval, 154% of the consolidated retained earnings 
of the Scottish Power System; and (7) the proceeds from the sale of 
securities in external financing transactions will be used for the 
acquisition, retirement or redemption of securities issued by the 
Scottish Power System, without the need for prior Commission approval 
and for necessary general corporate purposes including (i) the 
financing, in part, of the capital expenditures of the Scottish Power 
System, (ii) the financing of working capital requirements of the 
Scottish Power System, and (iii) other lawful general purposes.
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    \5\ Total Common Equity includes common stock, retained 
earnings, and accumulated other comprehensive income, presented in 
accordance with U.S. generally accepted accounting practices (``U.S. 
GAAP'').
    \6\ Total Capitalization means the sum of Total Common Equity, 
preferred stock, short-term debt, and long-term debt, including 
current maturities.
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    Specifically, Applicants seek authority for the following:

III. Existing Financing Arrangements

    Applicants request Commission authorization to maintain in effect 
through the Authorization Period all existing financing arrangements of

[[Page 61002]]

Scottish Power, the Intermediate Companies and the PacifiCorp Group, to 
the extent the Commission has jurisdiction over these existing 
arrangements.\7\ Applicants represent that all existing PacifiCorp 
Group financings qualify for exemptions from the Act under rules 45(b) 
and 52.\8\
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    \7\ As of March 31, 2000, Scottish Power has approximately $6.9 
billion of long-term debt, $1.1 billion of short-term debt, and 
$11.2 billion in common equity outstanding, calculated in accordance 
with U.S. GAAP.
    \8\ PacifiCorp's presently outstanding securities include 
preferred stock, first mortgage bonds, subordinated debt, pollution 
control revenue bond financings, and short-term debt, including 
commercial paper. Members of the PacifiCorp Group also participate 
in a variety of interest rate and currency exchange swap agreements.
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IV. Scottish Power External Financing

A. Introduction

    Scottish Power proposes to issue equity and debt securities, in 
amounts that would not aggregate more than $6 billion at any one time 
outstanding during the Authorization Period (``Aggregate Limitation''). 
\9\ These shares could include, but would not necessarily be limited 
to, ordinary shares, preferred shares, options, warrants, long- and 
short-term debt (including commercial paper), convertible securities, 
subordinated debt, bank borrowings and securities with call or put 
options. In addition, Scottish Power may enter into currency and 
interest rate swaps as described below.
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    \9\ The Aggregate Limitation is in addition to Scottish Power's 
current outstanding equity and debt securities, described above.
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    Scottish Power proposes that the various securities to be issued 
would fall within the following limits, but would not in the aggregate 
exceed the Aggregate Limitation stated above:

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                                                             Amount  (In
                        Type of debt                          billions)
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Equity, including options and warrants.....................         $3.0
Preferred Stock............................................          1.0
Bank Debt..................................................          1.0
Commercial Paper...........................................          1.0
Bond Issues--Straight......................................          3.0
Bond Issues--Convertible...................................          3.0
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B. Ordinary Shares

1. General
    Scottish Power's common equity consists of ordinary shares, with a 
par value of 50 pence each, that are listed on the London Stock 
Exchange. Scottish Power currently has a small number of ADs in the 
U.S. that trade as ADRs, and represent four ordinary shares each. 
Scottish Power has established a sponsored ADR program in the U.S. and 
has its ADRs listed on the New York Stock Exchange and registered under 
the Securities Act of 1933, as amended. As a result, Scottish Power has 
registered under the Securities Exchange Act of 1934, as amended, and 
files the periodic disclosure reports required of a foreign issuer with 
the Commission. The request contained in this application-declaration 
with respect to ordinary shares refers to the issuance of ordinary 
shares directly or through the ADR program and, for purposes of this 
request, the ADSs and ADRs are not considered separate securities from 
the underlying ordinary shares. Scottish Power requests authority to 
issue up to $3 billion in equity \10\ through the Authorization Period 
(``Equity Limitation'').
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    \10\ This would include stock options or warrants that Scottish 
Power may issue from time to time.
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    Scottish Power seeks authority to use its ordinary shares (or 
associated ADSs or ADRs) as consideration for acquisitions that are 
otherwise authorized under the Act. Among other things, transactions 
may involve the exchange of parent company equity securities for 
securities of the company being acquired in order to provide the seller 
with certain tax advantages. The Scottish Power ordinary shares to be 
exchanged may, among other things, be purchased on the open market 
under rule 42 or may be original issue. For purposes of the Aggregate 
Limitation, Scottish Power ordinary shares used to fund an acquisition 
of a company through the exchange of Scottish Power equity for 
securities being acquired would be valued at market value based upon 
the closing price of the ordinary shares on the London Stock Exchange 
on the day before closing of the sale or issuance.
2. Employee Benefit Plans
    In addition to other general corporate purposes, the ordinary 
shares will be used to fund employee benefit plans. More particularly, 
Scottish Power intends to issue ADRs to U.S. employees through 
PacifiCorp's Stock Incentive Plan, Compensation Reduction Plan and K 
Plus Employee Savings and Stock Ownership Plan (``U.S. Plans''). 
Scottish Power states that it may develop other share-based plans to 
motivate and retain key executives. Scottish Power also intends to 
issue ordinary shares, or certain conditional rights relating to 
ordinary shares, to its U.K. personnel through its Long Term Incentive 
Plan \11\ and Scottish Power Sharesave Scheme (``U.K. Plans'').\12\ 
Scottish Power requests authority to issue approximately 39.1 million 
ordinary shares to employees under the U.S. Plans, the U.K. Plans, and 
those additional plans (``Additional Plans'', and, together with the 
U.S. Plans and the U.K. Plans, ``Plans'') that may be developed for the 
purposes stated above. All shares issued under the Plans will be 
subject to the Aggregate Limitation. Securities issued under the Plans 
will be valued, if ordinary shares, at market value based on the 
closing price on the London Stock Exchange on the day before the award. 
Securities issued by Scottish Power that are not ordinary shares will 
be valued based on a reasonable and consistent method applied at the 
time of the award. Scottish Power requests that the Commission reserve 
jurisdiction over the Additional Plans, pending completion of the 
record.
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    \11\ Scottish Power also operates the Scottish Power Executive 
Share Option Scheme which applies to executive directors and certain 
senior managers. All future grants under this plan have been 
replaced by the company's Long Term Incentive Plan. Existing options 
remain exercisable.
    \12\ In order for Scottish Power to provide ordinary shares to 
participants in the U.K. Plans when they are entitled to exercise 
their share options, Scottish Power states that it must provide a 
loan to the trustee, or equivalent (``Trustee''), of the employee 
share plans to allow the Trustee to acquire Scottish Power's 
ordinary shares on the open market on behalf of the eligible 
participants. On exercise of the share options by the eligible 
participants, the option price money payable by the share option 
holder is applied by the Trustee to reduce the loan amount from 
Scottish Power. Scottish Power proposes to engage in these 
transactions, in order to provide ordinary shares to its employees 
under the U.K. Plans.
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C. Preferred Stock

    Scottish Power proposes to issue preferred stock from time to time 
during the Authorization Period. The aggregate outstanding amount of 
preferred stock would not exceed $1 billion. Any issuance of preferred 
stock would have dividend rates or methods of determining dividend 
rates, redemption provisions, conversion or put terms and other terms 
and conditions as Scottish Power may determine at the time of issuance; 
provided, however, that the cost of money on preferred stock of 
Scottish Power, when issued, will not exceed 500 basis points over that 
for comparable term U.S. treasury securities or government benchmark 
for the currency concerned.

D. Debt

    Scottish Power proposes to issue debt securities from time to time 
during the Authorization Period. Subject to the following conditions, 
any issuance of debt securities would have the designation, aggregate 
principal amount, interest rate(s) or method of determining

[[Page 61003]]

interest rate(s), terms of payment of interest, redemption provisions, 
non-refunding provisions, sinking fund terms, conversion or put terms 
and other terms and conditions as are deemed appropriate at the time of 
issuance.
    The cost of money on debt financings of Scottish Power will not 
exceed 300 basis points over that for comparable term U.S. treasury 
securities or government benchmark for the currency concerned. The 
maturity of any debt security will not exceed 50 years.
    Parent-level debt may be issued for the acquisition, retirement or 
redemption of securities issued by a Scottish Power System company, and 
for necessary and urgent general and corporate purposes, including the 
financing of capital expenditures, the financing of working capital 
requirements, and other lawful general corporate purposes.

E. Interest Rate and Currency Risk Management Devices

    In order to protect the Scottish Power System from adverse interest 
rate movements, the interest rate on the debt portfolio is managed 
through the use of fixed-rate debt, combined with interest rate and 
cross currency swaps, options and option-related instruments with a 
view to maintaining a significant proportion of fixed rates over the 
medium term. Scottish Power seeks authority to continue to engage in 
interest rate and cross currency swaps, options, option-related 
instruments, forward exchange contracts, and similar instruments 
through the Authorization Period. Scottish Power states that these 
transactions will meet the criteria established by the Financial 
Accounting Standards Board in order to qualify for hedge-accounting 
treatment or will so qualify under generally accepted accounting 
principles in the United Kingdom (``U.K. GAAP''). In the event 
transactions in financial instruments or products are qualified for 
hedge accounting treatment under U.K. GAAP, but not under U.S. GAAP, 
Scottish Power's financial statements filed in accordance with Form 20-
F will contain a reconciliation of the difference between the two 
methods of accounting treatment.

F. Guarantees and Loans

    Applicants request authorization to enter into guarantees, obtain 
letters of credit, enter into guaranty-type agreements or otherwise 
provide credit support with respect to the obligations of the 
PacifiCorp Group, and of SPUK and the SPUK Subsidiaries (``SPUK 
Group''), as may be appropriate to enable these system companies to 
carry on their respective authorized or permitted businesses. This 
credit support may be in the form of committed bank lines of credit. 
Guarantees entered into by Scottish Power would not be subject to the 
Aggregate Limitation, but instead would be subject to a separate $6 
billion limit (``Scottish Power Guarantee Limitation''), based on the 
amount at risk.\13\ Any guarantees and credit support entered into by 
Scottish Power that support obligations of the SPUK Group will be 
included as part of Scottish Power's aggregate investment in FUCOs and 
EWGs for purposes of rule 53 under the Act.
    Scottish Power also proposes to make loans or capital contributions 
to the SPUK Group from time to time up to an aggregate principal amount 
of $3 billion through the Authorization Period. Loans made to the SPUK 
Group will be of a short-term nature, payable on demand and will carry 
an interest rate of Royal Bank of Scotland Base plus one percent. These 
loans and capital contributions will be included as part of Scottish 
Power's aggregate investment in FUCOs and EWGs, as that term is defined 
in rule 53 under the Act.
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    \13\ Scottish Power currently has approximately $568 million in 
Guarantees outstanding. Applicants state that the Scottish Power 
Guarantee Limitation is in addition to these existing guarantees.
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V. PacifiCorp Group Financings

A. Existing Intercompany Loans

    PacifiCorp and the PacifiCorp subsidiaries currently participate in 
an intercompany loan agreement (``PacifiCorp Loan Agreement'') allowing 
PacifiCorp to loan up to $200 million to certain of its subsidiaries, 
and allowing these subsidiaries to loan unlimited amounts to 
PacifiCorp.\14\ Loans made under the PacifiCorp Loan Agreement are 
payable on demand, are evidenced by notes and bear interest at 
PacifiCorp's short-term borrowing rate whether the loan is to or from 
PacifiCorp. PGHC also participates in an intercompany borrowing 
agreement (``PGHC Loan Agreement'', and, collectively, ``Loan 
Agreements'') allowing up to $350 million in loans to be made among 
PGHC and its subsidiaries, and among PGHC and certain other direct 
subsidiaries of PacifiCorp, including PacifiCorp Environmental 
Remediation Company, PacifiCorp Minerals, Inc., and PacifiCorp 
Investment Management, Inc. Loans made under the PGHC Loan Agreement 
are payable on demand and, if from PGHC, bear interest at a negotiated 
rate \15\ or at PGHC's short-term borrowing rate if the borrower is 
PGHC. Since completion of the Merger, all loans under both the 
PacifiCorp Loan Agreement and the PGHC Loan Agreement have been made on 
an interest-free basis. Applicants request authorization to maintain 
these Loan Agreements through the Authorization Period, to the extent 
the Loan Agreements are not exempt under rule 52.
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    \14\ The PacifiCorp Loan Agreement was approved by the Oregon 
Public Utility Commission.
    \15\ Borrowings from PGHC will bear interest on the outstanding 
principal amount thereof, for each day from the date such borrowing 
is made until it becomes due, at a rate per annum equal to the prime 
rate for such day plus a margin (depending on the ratings of the 
borrower) as agreed to from time to time by PGHC and the borrower 
and set forth in the ledger maintained by PGHC. However, in no event 
will the borrower's rate exceed PGHC's cost of short-term funds for 
such day plus \3/8\%.
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B. Intrasystem Non-Money Pool Financing

    Each of the Intermediate Companies is seeking authorization to 
issue and sell securities to, and acquire securities from, its 
immediate parent, subsidiary companies, and other Intermediate 
Companies, respectively. Each of the Intermediate companies and 
Scottish Power is also seeking authorization to issue guarantees and 
other forms of credit support to direct and indirect subsidiaries. In 
no case would the Intermediate Companies or Scottish Power borrow, or 
receive any extension of credit indemnity from any of their respective 
direct or indirect subsidiaries.

C. Subsidiary Money Pools

    In addition to the above-described intercompany arrangements, 
Applicants request authority to create two new money pools that will be 
administered by PacifiCorp. One money pool will be exclusively for 
certain of the nonutility subsidiaries of PGHC (``Nonutility Money 
Pool''),\16\ and the second money pool will be for PacifiCorp and 
certain of the PacifiCorp Subsidiaries (``Utility Money Pool'', and, 
together with the Nonutility Money Pool, ``Money Pools'').\17\ The 
funds available to the Utility Money Pool will be loaned on a short-
term basis and will come from the Utility Money Pool participants

[[Page 61004]]

themselves.\18\ Scottish Power and/or PacifiCorp will make available 
short-term funds from time to time to the Utility Money Pool in amounts 
up to $800 million. Scottish Power also will make available short-term 
funds from time to time for the Nonutility Money Pool in amounts not to 
exceed $800 million. Applicants state that Scottish Power will 
participate in the Money Pools only to the extent that it has funds 
available for lending. Under no circumstances will Scottish Power 
borrow from either of the Money Pools. Funds will be made available 
from such sources in such order as PacifiCorp, as administrator of the 
Money Pools, may determine will result in a lower cost of borrowing, 
consistent with the individual borrowing needs and financial standing 
of the participating Subsidiaries.
    If at any time there are funds remaining in the Money Pools after 
satisfaction of the borrowing needs of the participating Subsidiaries, 
PacifiCorp, as the agent of the Money Pools, will invest these funds 
appropriately and consistent with applicable state and federal 
regulations and allocate the earnings on any of these investments 
between or among those participants within each respective Money Pool 
according to the amount of excess funds provided by each respective 
participant. PacifiCorp will administer the Money Pools on an ``at 
cost'' basis. PacifiCorp will maintain separate records for each Money 
Pool and funds in each Money Pool will be separately invested. 
Applicants request that the Commission reserve jurisdiction over the 
participation by future companies formed or acquired by Scottish Power 
in the relevant Money Pool, until a specific post-effective amendment 
is filed that seeks authority to add any specific Subsidiary as a 
participant in that Money Pool.
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    \16\ Foreign EWGs, exempt telecommunications companies 
(``ETCs''), as that term is defined in section 34 of the Act, and 
FUCOs will not be participants in the Utility Money Pool, and ETCs 
and FUCOs will not participate in the Nonutility Money Pool.
    \17\ The names of the PacifiCorp Subsidiaries participating in 
each of the Money Pools are set forth in Scottish Power's 
application-declaration.
    \18\ PacifiCorp proposes to borrow up to $800 million under the 
Utility Money Pool.
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D. Short-term Debt

    PacifiCorp requests authority to issue commercial paper and 
promissory notes in an aggregate amount not to exceed $1.5 billion to 
be outstanding at any one time during the Authorization Period. 
Applicants state that this commercial paper will be sold to or through 
dealers at discount rates or bearing interest rates per annum 
prevailing at the date of issuance for commercial paper of comparable 
quality and maturity.

VI. Payment of Dividends Out of Capital or Unearned Surplus

    Applicants state that there may be situations in which one or more 
PacifiCorp Subsidiaries will have unrestricted cash available for 
distribution in excess of current and retained earnings. Accordingly, 
Applicants propose that current and future PacifiCorp Subsidiaries be 
permitted to pay dividends out of capital and unearned surplus through 
the Authorization Period. Without further approval of the Commission, 
no PacifiCorp Subsidiary will declare or pay any dividend out of 
capital or unearned surplus if that PacifiCorp Subsidiary derives any 
material part of its revenues from the sale of goods, services or 
electricity to PacifiCorp (``Non-Exempt PacifiCorp Subsidiaries''). 
Scottish Power requests that the Commission reserve jurisdiction over 
dividends paid by any Non-Exempt PacifiCorp Subsidiary.
    Applicants also request authority for PacifiCorp to pay dividends 
out of capital and unearned surplus up to the lesser of $900 million or 
to the extent of the proceeds it receives from the sale of assets 
outside of its regulated utility business.\19\
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    \19\ PacifiCorp recently completed the sale of its FUCO 
investments in Australia. The requested authority would allow the 
proceeds from any such sale to be distributed by PacifiCorp to its 
shareholders.
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VII. Approval of Amended Tax Allocation Agreement

    Applicants request approval of an amended agreement for the 
allocation of consolidated tax among the Intermediate Companies and the 
PacifiCorp Group (``Tax Allocation Agreement''). Applicants state that 
the Tax Allocation Agreement will enable Scottish Power to receive 
payment for certain tax losses of subsidiary companies in order to 
obtain appropriate tax credits under United Kingdom law for non-United 
Kingdom taxes paid on subsidiary operations. Accordingly, Applicants 
seeks an exemption from the provisions of rule 45(c)(5) under the Act, 
which would otherwise require that these losses be retained by the 
subsidiary companies without payment.

VIII. Changes in Capital Stock of Subsidiaries

    Applicants state that the portion of an individual PacifiCorp 
Subsidiary's aggregate financing to be effected through the sale of 
equity securities to its immediate parent company during the 
Authorization Period may in some cases exceed the then authorized 
capital stock of that PacifiCorp Subsidiary. In addition, that 
PacifiCorp Subsidiary may choose to use other forms of capital 
securities.\20\ Each PacifiCorp Subsidiary requests authority to 
increase the amount or change the terms of any of its authorized 
capital securities, without additional Commission approval, as needed 
to accommodate the sale of additional equity.\21\ The terms that may be 
changed include dividend rates, conversion rates and dates, and 
expiration dates. These proposed changes to the terms of and increases 
in the amounts of capital securities affect only the manner in which 
financing is conducted by the PacifiCorp Subsidiaries and will not 
alter the terms or limits proposed in the application.
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    \20\ As noted above, these securities include common stock, 
preferred stock, other preferred securities, options and/or warrants 
convertible into common or preferred stock, rights, and similar 
securities.
    \21\ Applicants request that the Commission reserve jurisdiction 
over changes to the capital stock of PacifiCorp.
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IX. Financing Entities

    Applicants seek authority, through the Authorization Period, for 
Scottish Power and the PacifiCorp Group to organize new corporations, 
trusts, partnerships or other entities (``Financing Entities'') created 
for the purpose of facilitating financings through their issuance to 
third parties of income preferred securities or other securities 
authorized under this filing or issued under an applicable exemption. 
Applicants also seek authority for the Financing Entities to issue 
these securities to third parties in the event these issuances are not 
exempt under rule 52. In addition, authority is requested for: (1) The 
issuance of debentures or other evidences of indebtedness by any of 
Scottish Power or the PacifiCorp Group to a Financing Entity in return 
for the proceeds of the financing; (2) the acquisition by any of 
Scottish Power or the PacifiCorp Group of voting interests or equity 
securities issued by the Financing Entity to establish ownership of 
that Financing Entity; and (3) the guaranty by the Applicants of that 
Financing Entity's obligations in connection with its voting interests 
or equity securities. Each of Scottish Power and the PacifiCorp Group 
also may enter into expense agreements with its respective Financing 
Entity, under which it would agree to pay all expenses of that 
Financing Entity.
    Any amounts issued by a Financing Entity to third parties under 
this authorization will be included in the

[[Page 61005]]

proposed external financing limits applicable to the immediate parent 
of that Financing Entity. However, Applicants request that the 
underlying intrasystem mirror debt and parent guaranty not be included 
in that limitation or the separate Scottish Power Guarantee Limitation.

X. Proposed Corporate Restructuring

    Scottish Power proposes to engage in corporate restructuring or 
reorganization of the SPUK Group without prior Commission approval.\22\ 
Scottish Power further states that, as it continues to review the 
combined operations of the Scottish Power System, it may prove prudent 
to reorganize its nonutility companies to merge current FUCO 
investments held in the PacifiCorp Group with those of SPUK. Scottish 
Power also requests authorization to consolidate or otherwise 
reorganize a nonutility subsidiary if the acquisition of the securities 
of that nonutility subsidiary is exempt from prior Commission approval. 
Scottish Power requests that the Commission reserve jurisdiction, 
pending completion of the record, over any other consolidation or 
reorganization of its direct or indirect ownership interests in any 
nonutility company.
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    \22\ Scottish Power has given commitments to regulators in the 
U.K. regarding the reorganization of SPUK and its subsidiaries, 
including the incorporation of divisions of SPUK's business.
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XI. EWG/FUCO-related Financings

    As a general matter, Scottish Power intends to fund its FUCO 
activities at the level of its first-tier subsidiary, SPUK, or at the 
level of the Intermediate Companies. However, it may be desirable from 
time to time for Scottish Power to provide some investment capital or 
credit support for FUCO acquisitions or operations. To that end, 
Scottish Power is seeking authority to finance EWG and FUCO investments 
and operations up to an amount equal to 154% of its consolidated 
retained earnings (``CRE'') at any one time outstanding during the 
Authorization Period.\23\ Applicants state that, as of March 31, 2000, 
Scottish Power's CRE on a U.S. GAAP basis was $3,116 million. 
Applicants further state that, as of March 31, 2000, the Scottish Power 
System had an existing ``aggregate investment,'' as that term is 
defined in rule 53 under the Act, in EWGs and FUCOs of an amount equal 
to 104% of Scottish Power's CRE, subject to an adjustment based on the 
sale of PacifiCorp's Australian FUCO assets.\24\ Therefore, Scottish 
Power's request for an additional investment authorization would result 
in an aggregate investment of approximately 154% of Scottish Power's 
CRE, or approximately $4,797 million.
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    \23\ Applicants state that Scottish Power's status as a foreign 
company makes it commercially impossible for it to comply fully with 
some of the technical requirements of rule 53. In particular, since 
Scottish Power has pre-existing foreign utility operations, 
Applicants states that it would be unreasonable to require that 
Scottish Power maintain the books and records of its FUCOs in 
accordance with U.S. GAAP, although it will provide reconciliation 
as required in Form 20-F.
    \24\ As of March 31, 2000, the Scottish Power System had an 
aggregate investment of $3,239 million in EWGs and FUCOs.
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XII. Affiliate Transactions

A. Existing Intrasystem Arrangements

    PacifiCorp has been providing administrative, management, 
technical, legal and other support services to its subsidiaries for 
many years.\25\ In addition, there have been occasions when 
subsidiaries of PacifiCorp have provided services to PacifiCorp or to 
other PacifiCorp Subsidiaries. Accordingly, PacifiCorp now proposes to 
continue these arrangements, with PacifiCorp providing services to the 
PacifiCorp Subsidiaries and on occasion the PacifiCorp Subsidiaries 
providing services to PacifiCorp and other associate companies in the 
Scottish Power System. All service transactions will be priced at cost 
in accordance with section 13(b) of the Act and the rules under the 
Act.\26\
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    \25\ All affiliate transactions among Scottish Power, 
PacifiCorp, and the PacifiCorp Subsidiaries are subject to review by 
all of the state utility commissions that regulate PacifiCorp, 
including the Idaho Public Utilities Commission, the Public Service 
Commission of Utah, the Washington Utilities and Transportation 
Commission, the Public Service Commission of Wyoming, the Oregon 
Public Utility Commission, and the California Public Utilities 
Commission.
    \26\ In the event that the market rate for these service 
transactions is less than the cost of these services, neither 
PacifiCorp nor the PacifiCorp Subsidiaries will provide these 
services.
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    In addition, SPUK, or another member of the SPUK Group, proposes to 
perform, on a limited basis, services for the PacifiCorp Group. These 
services may include: (1) Transition plan preparation and 
implementation; (2) network performance and customer service 
improvements; and (3) corporate services. These service transactions 
also will be priced at cost in accordance with section 13(b) of the Act 
and the rules under the Act.\27\ Applicants state that the costs of 
services provided by SPUK, or a SPUK, Subsidiary, to the PacifiCorp 
Group will be directly attributed to PacifiCorp. In the alternative, 
whenever it is possible to do so accurately, these costs will be 
attributed to a specific PacifiCorp Subsidiary.
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    \27\ Scottish Power estimates that the total charges by SPUK to 
PacifiCorp for the provision of anticipated services will be 
approximately $12 million annually.
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    Scottish Power further states that a PacifiCorp Group member may 
provide incidental services to SPUK or a SPUK Subsidiary at other than 
cost in compliance with rule 90(d)(1) under the Act. The PacifiCorp 
Subsidiaries also request authority to provide services and sell goods 
to SPUK and the SPUK Subsidiaries at fair market prices, under certain 
circumstances, to any nonutility associates company in the Scottish 
Power System.

    For the Commission by the Division of Investment Management, 
pursuant to delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 00-26379 Filed 10-12-00; 8:45 am]
BILLING CODE 8010-01-M