[Federal Register Volume 65, Number 205 (Monday, October 23, 2000)]
[Notices]
[Pages 63269-63272]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-27132]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-27254]


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

October 16, 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 applicant(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 November 10, 2000, to the Secretary, Securities and Exchange 
Commission, Washington, DC 20549-0609, and serve a copy on the relevant 
application(s) and/or declarant(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 November 10, 2000, the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

The Southern Company, et al. (70-9771)

    The Southern Company (``Southern''), 270 Peachtree Street, NW., 
Atlanta, Georgia 30303, a registered holding company, and its wholly 
owned subsidiaries, Mobile Energy Services Holdings, Inc. 
(``Holdings'') and Mobile Energy Services Company, L.L.C. (``Mobile 
Energy'') \1\ both located at 900 Ashwood Parkway, Suite 500, Atlanta 
Georgia 30338 (collectively, ``Applicants''), have filed an 
application-declaration (``Application'') under sections 6(a), 7, 
11(f), 11(g), 12(a), 12(b), 12(d), 12(e), 12(f) and rules 45, 54, 63 
and 64 of the Act.
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    \1\ Mobile Energy is wholly owned limited liability company 
subsidiary of Holdings to which Holdings transferred all of its 
assets other than its equity interest in Mobile Energy in July 1995. 
Mobile Energy is an electric utility company within the meaning of 
section 2(a)(3) of the Act.

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[[Page 63270]]

    Applicants propose that the Commission issue (1) an order under 
section 11(f) of the Act approving the amended Joint Plan or 
Reorganization (``Plan'') and certain related transactions under the 
Plan \2\ and (2) a report on the Plan under section 11(g) that may 
accompany a solicitation of creditors and any other interest holders 
for approval of the Plan in the bankruptcy proceedings.\3\
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    \2\ Section 11(f) of the Act provides, in relevant part, that 
``a reorganization plan for a registered holding company, or any 
subsidiary thereof, * * * shall not become effective unless such 
plan shall have been approved by the Commission after opportunity 
for hearing prior to its submission to the court.''
    \3\ Section 11(g)(2) of the Act provides, in relevant part, that 
any solicitation for consents to or authorization of any 
reorganization plan of a registered holding company or any 
subsidiary company thereof shall be ``accompanied or preceded by a 
copy of a report on the plan which shall be made by the Commission 
after an opportunity for a hearing on the plan and other plans 
submitted to it, or by an abstract of such report made or approved 
by the Commission.''
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    The Application includes the Plan and disclosure statement for 
Mobile Energy and Holdings. On January 14, 1999, Mobile Energy and 
Holdings (collectively, ``Debtors'') filed voluntary petitions in the 
Bankruptcy Court for the Southern District of Alabama (``Bankruptcy 
Court'') for protection under Chapter 11 of the Bankruptcy Code. Both 
entities filed as debtors in possession continuing their operations; as 
a result, no trustee or receiver has been appointed by the Bankruptcy 
Court. The original Plan was filed with the Bankruptcy Court on August 
4, 2000. The disclosure statement and the amended Plan were filed with 
the Bankruptcy Court on September 15, 2000. Under section 1125 of the 
Bankruptcy Code, the Debtors may not solicit votes for acceptances of 
the Plan until the Bankruptcy Court approves a disclosure statement 
that contains information of a kind, and in sufficient detail, adequate 
to enable creditors to make an informed judgment whether to vote for 
acceptance or rejection of the Plan. A hearing is scheduled with the 
Bankruptcy Court for October 19, 2000, to determine whether the 
disclosure statement filed on September 15, 2000, meets the 
requirements of section 1125 of the Bankruptcy Code. Applicants state 
notice of the October 19, 2000 hearing has been provided in accordance 
with the Bankruptcy Code and the applicable Federal Rules of Bankruptcy 
Procedure.
    Applicants state the purposes of the transactions described in the 
Plan are to: (1) Permit Mobile Energy and Holdings to reorganize and 
emerge from bankruptcy; (2) maximize the recovery of Mobile Energy's 
bondholders on their capital investment; (3) eliminate the direct and 
indirect equity ownership of Southern in Mobile Energy and Holdings; 
and (4) allow Mobile Energy to operate as a qualifying facility under 
the Public utility Regulatory Policies Act of 1978 after the effective 
date of the Plan, which will cause Mobile Energy and Holdings to no 
longer be subject to the Act. Certain transactions contemplated by the 
Plan require Commission authorization. The jurisdictional aspects of 
the Plan are summarized below.

I. Overview of the Plan

    Applicants request authorization for the solicitation regarding the 
Plan under sections 11(g) and 11(f) of the Act, and authorization under 
section 12(e) to solicit consents and approvals from the holders of the 
securities of Mobile Energy and Holdings, along with other ancillary 
and related authorizations to implement the Plan. The pre-petition 
shares of common stock issued by Holdings and held by Southern will not 
receive any distributions under the Plan, and the shares will be 
cancelled and extinguished on the effective date of the Plan. The 
entire equity interest in the reorganized Holdings will then be held by 
the existing bondholders.
    Upon implementation of the Plan, the ownership interests of 
Southern and its affiliates in the Debtors will terminate. Applicants 
state Southern and its affiliates will have substantially reduced 
obligations going forward with respect to Mobile Energy and Holdings. 
Southern Energy Resources, Inc. (``SERI'') will continue to operate 
Mobile Energy's facilities through March 31, 2001 at the latest. 
Southern guaranteed certain of Mobile Energy's obligations to its 
existing customers in 1995, and these guarantees will remain in place 
but Mobile Energy will indemnify Southern against any liability under 
those guarantees. Southern Energy, Inc. (``Southern Energy'') will 
assign certain contract rights and obligations to Mobile Energy related 
to a combustion turbine being manufactured for it by general Electric 
Company (``GE'') and under a long term services agreement related to 
that turbine by General Electric International Inc. (``GEII''). 
Southern Energy will remain liable if Mobile Energy does not meet those 
obligations and Mobile Energy will indemnify Southern Energy against 
any of these costs.
    The proponents of the Plan include a Bondholder Steering Committee 
which represents more than 70% of the current outstanding bondholders 
of the Debtors.\4\ The Bondholder Steering Committee includes First 
Union National Bank as the indenture trustees for each of the two bond 
issuances as an ex officio member. The indenture trustees represent all 
of the bondholders.
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    \4\ Applicants state the Bondholder Steering Committee is 
currently composed of CS First Boston, Miller Anderson & Sherrerd, 
LLP; Pan American Life Insurance Company; Franklin Advisors, Inc.; 
Van Kampen Interest and Advisory Corp.; and First Union National 
Bank.
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    The facilities at issue are located inside a large pulp, paper and 
tissue manufacturing complex in Mobile, Alabama. Some of the facilities 
now owned by Mobile Energy were originally constructed by the Scott 
Paper Company (``Scott'') in the early 1960s. Scott sold the energy 
facilities, black liquor recovery equipment, and related assets, 
permits and agreements (``Energy Complex'') to Holdings.\5\ Mobile 
Energy was formed as a limited liability company on July 13, 1995. 
Mobile Energy acquired ownership from Holdings of the Energy Complex on 
July 14, 1995. Mobile Energy owns and operates the Energy Complex which 
was constructed specifically to serve the Scott mill operations. In 
late 1995 Scott was merged into a subsidiary of Kimberly Clark 
Corporation and the resulting entity was renamed Kimberly Clark Tissue 
Company (``KCTC''). In 1998, KCTC notified Mobile Energy that KCTC 
would close its pulp mill and terminate its contract to purchase energy 
services from Mobile Energy. The consequences from the anticipated loss 
of the KCTC pulp mill contract and operations triggered the filing by 
Mobile Energy and Holdings of cases under Chapter 11 of the Bankruptcy 
Code.
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    \5\ On Dec. 13, 1994 the Commission authorized Southern to 
organize Holdings as a new subsidiary and acquire all of its common 
stock. HCAR No. 26815.
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II. Key Elements of the Plan

A. KCTC Settlement Agreement
    The settlement agreement between the Debtors and KCTC (``KCTC 
Settlement Agreement'') encompasses certain transactions, some of which 
occurred soon after the Bankruptcy Court approved the settlement, and 
other transactions that will occur later if certain conditions are met. 
Particularly, on February 8, 2000, Mobile Energy and KCTC executed: (1) 
The New Tissue Mill ESA,\6\ which provides for electricity and steam 
processing services to be supplied by Mobile Energy to KCTC's tissue 
mill at market prices; and

[[Page 63271]]

(2) an Option Agreement for Mobile Energy or its assignee to purchase 
KCTC's pulp mill and related assets to be used for a new 800 short ton 
per day pulp mill. On the closing date, if certain conditions are met, 
KCTC will pay Mobile Energy approximately $30.12 million, KCTC will 
transfer certain assets to Mobile Energy and Mobile Energy will 
transfer certain other assets to KCTC. KCTC and Mobile Energy will also 
enter into an agreement which will set out the respective rights and 
obligations of Mobile Energy and KCTC to operate and maintain the No. 6 
Power Boiler and related facilities.
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    \6\ As part of the settlement with KCTC a new contract to 
provide electric power and steam processing services, the ``New 
Tissue Mill ESA,'' was entered into between KCTC Mobile Energy.
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B. Cogen Project
    The Plan contemplates resumption, on a reduced scale, of pulp mill 
operations under different ownership, a more efficient use of resources 
(e.g., recovery boiler), the possible expansion of electric generating 
capacity by purchasing a combustion turbine and developing a 165 
megawatt facility (``Cogen Project'') \7\ and a revised agreement to 
provide energy services to the tissue mill within the industrial 
complex. The development of the Cogen Project will occur under the MESC 
Cogeneration Development Agreement dated February 9, 2000, between 
Mobile Energy, Holdings, Southern Energy, and SERI, as amended by 
Amendment No. 1 dated August 11, 2000 (``Development Agreement''). The 
Development Agreement provides, among other things, that: (1) Mobile 
Energy has an option to purchase from Southern Energy a combustion 
turbine being manufactured for Southern Energy by GE to be used to 
develop the Cogen Project at Southern Energy's cost and pay Southern 
Energy $2.9 million as an option fee; (2) Southern Energy will assign 
its rights under a long term services agreement related to that turbine 
with GEII to Mobile Energy; (3) Mobile Energy will terminate the Mobile 
Energy Operating Agreement no later than March 31, 2001; (4) Mobile 
Energy will pay one-half the actual cost of a retention and severance 
program implemented by SERI for its workers at Mobile Energy's 
facilities, up to a total of $2 million; (5) Southern, Southern Energy, 
SERI, Mobile Energy, Holdings, the indenture trustee and the collateral 
agent will exchange releases of claims; (6) Southern, Southern Energy, 
SERI, Mobile Energy and Holdings will provide certain indemnities to 
each other; and (7) Southern, Southern Energy and SERI will hold a 
first priority lien on the Debtor's assets and those of any affiliate 
set up to own the Cogen Project to secure performance of all 
obligations which may be owed to Southern, Southern Energy and SERI 
under the Development Agreement.
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    \7\ Applicants note the Cogen Project will be owned either by 
Mobile Energy or an affiliate which is an exempt wholesale generator 
as defined in section 32 of the Act.
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    Applicants state the Doctors will use the $30.12 million to be 
received from KCTC in part for the development of the Cogen Project. 
The balance of the cost of the Cogen Project will be funded through 
debt and/or equity financing in addition to the funds otherwise 
available to the Debtors.
C. The New Pulp Mill
    The Plan contemplates that a new 800 short ton per day pulp mill 
will be developed at the Mobile facility under a term sheet agreed to 
by Jubilee Pulp, Inc. and Mobile Energy (``New Pulp Mill''). The 
transactions necessary to develop the New Pulp Mill include: (1) 
Consummation of the KCTC Settlement Agreement; (2) consummation of 
certain agreements with the Debtors to effect the distribution of the 
No. 8 Recovery Boiler by Mobile Energy to Holdings and its contribution 
by Holdings to a new limited liability company; \8\ and (3) new energy 
services agreements between Mobile Energy and the developer of the New 
Pulp Mill. Jubilee Pulp, Inc. and Mobile Energy also intend to execute 
the New Pulp Mill ESA under which Mobile Energy will provide electric 
power processing services, steam processing services and steam 
conditioning services to Jubilee Pulp, Inc.
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    \8\ The No. 8 Recovery Boiler will be distributed by Mobile 
Energy to Holdings and then contributed by Holdings to Pulpco LLC 
whose members will be holdings and Jubilee Pulp, Inc. The original 
cost to Mobile Energy of the recovery boiler was $11,852,824, which 
has been amortized in part over the intervening years, an the net 
book value as of December 31, 2000 will be approximately 
$86,241,000.
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III. Treatment of Claims Under the Plan

A. Unsecured Creditors; Others
    Under the Plan, the claims of the general unsecured creditors and 
the claims of all other creditors, except Southern and its affiliates 
will be paid in full.
B. First Mortgage Bonds
    The first mortgage bonds were issued by Mobile Energy on August 1, 
1995, in the principal amount of $255,210,000 due January 1, 2017 and 
bearing annual interest at 8.665%. Under the Plan, the first mortgage 
bonds will be exchanged for new taxable bonds in an aggregate principal 
amount of $51,535,000 and bearing annual interest at 10%. In addition, 
the Plan contemplates 7,259,400 shares of new common stock of Holdings 
will be distributed to the holders of the first mortgage bonds. Each 
share of new common stock will be entitled to one vote per share. 
Certain holders of the first mortgage bonds will be entitled to 
registration rights.
C. Tax Exempt Bonds
    In December 1983, the Industrial Development Board of Mobile, 
Alabama (``IDB'') issued tax-exempt bonds (``1983 Tax Exempt Bonds'') 
to finance the construction of the No. 7 Power Boiler and certain 
auxiliary systems. In December 1994 (``1984 Tax Exempt Bonds''), the 
IDB issued tax-exempt bonds to refund the 1983 Tax Exempt Bonds.
    Refunding of the 1984 Tax Exempt Bonds occurred in 1995 by means of 
tax-exempt bonds in the original principal amount of $85,000,000 
scheduled to mature January 1, 2000. Under the Plan, the tax-exempt 
bonds will be exchanged for new tax-exempt bonds in an aggregate 
principal amount of $20,035,000 (subject to increase of up to an 
additional $2,003,500 aggregate principal amount of new tax-exempt 
bonds if each holder of allowed tax-exempt bondholder receives 
additional new tax-exempt bonds rather than common stock of Holdings as 
described below) and bear interest at the rate of 8% per annum.
    In addition, the Plan contemplates up to an aggregate of 2,740,600 
shares of new common stock will be issued to the tax-exempt bondholders 
(based on the number of tax-exempt bondholders that elect to receive 
new common stock). Each share of new common stock will be entitled to 
one vote per share. Certain holders will be entitled to registration 
rights. Each of the tax-exempt bondholders may elect, in lieu of 
receiving any common stock in Holdings, to receive additional new tax-
exempt bonds equal to 10% of the new bonds to be received by the holder 
from $20,035,000 principal amount of new tax-exempt bonds to be 
distributed to all these holders.
D. Southern's and Its Affiliates' Claims
    Under the Plan, Southern and its affiliates will receive the 
treatment provided in the Development Agreement, described above, in 
full satisfaction of their claims.


[[Page 63272]]


    For the Commission, by the Division of Investment Management, 
under delegated authority.
Jonathan G. Katz,
Secretary.
[FR Doc. 00-27132 Filed 10-20-00; 8:45 am]
BILLING CODE 8010-01-M