Federal Register / Vol. 66, No. 250 / Monday, December 31, 2001 / Notices 67565

1 15 U.S.C. 78l(d).

2 17 CFR 240.12d2–2(d).

3 15 U.S.C. 78l(g).

4 17 CFR 200.30–3(a)(1).

Special Assistant to the Assistant

Secretary for Public and

Intergovernmental Affairs. Effective

October 24, 2001.

Export-Import Bank of the United States

Special Assistant to the Vice

President Congressional and External

Affairs. Effective October 1, 2001.

Federal Emergency Management Agency

Policy Advisor for Congressional and

Intergovernmental Affairs to the

Division Director, Congressional and

Intergovernmental Affairs Division.

Effective October 18, 2001.

Federal Trade Commission

Deputy Director to the Director, Office

of Public Affairs. Effective October 1,

2001.

General Services Administration

Congressional Relations Officer to the

Associate Administrator for

Congressional and Intergovernmental

Affairs. Effective October 2, 2001.

White House Liaison to the Chief of

Staff. Effective October 29, 2001.

Office of Personnel Management

Special Assistant to the Director,

Office of Communications. Effective

October 3, 2001.

Special Assistant to the Director,

Office of Congressional Relations.

Effective October 22, 2001.

Special Assistant to the Chief of Staff.

Effective October 22, 2001.

Scheduling and Briefing Coordinator

to the Chief of Staff. Effective October

22, 2001.

Special Assistant to the Director,

Office of Congressional Relations.

Effective October 26, 2001.

Office of the United States Trade

Representative

Confidential Assistant to the Deputy

U.S. Trade Representative. Effective

October 18, 2001.

Deputy Assistant U.S. Trade

Representative for Congressional Affairs

to the Assistant U.S. Trade

Representative for Congressional

Affairs. Effective October 31, 2001.

Confidential Assistant to the Chief of

Staff. Effective October 31, 2001.

Overseas Private Investment

Corporation

Confidential Assistant to the Chief of

Staff. Effective October 2, 2001.

Small Business Administration

Special Assistant to the

Administrator. Effective October 2,

2001.

Assistant Administrator for Public

Communications to the Associate

Administrator for Communications and

Public Liaison. Effective October 2,

2001.

Senior Advisor for International Trade

to the Assistant Administrator for

International Trade. Effective October 2,

2001.

Regional Administrator, Region IX,

San Francisco to the Administrator,

Small Business Administration.

Effective October 4, 2001.

Regional Administrator, Region V,

Chicago, IL to the Associate

Administrator for Field Operations.

Effective October 19, 2001.

Assistant Scheduler to the Scheduler

for the Administrator. Effective October

22, 2001.

Special Assistant to the Associate

Administrator for Communications and

Public Liaison. Effective October 22,

2001.

Authority: 5 U.S.C. 3301 and 3302; E.O.

10577, 3 CFR 1954–1958, Comp., p. 218

Kay Coles James,

Director, Office of Personnel Management.

[FR Doc. 01–31899 Filed 12–28–01; 8:45 am]

BILLING CODE 6325–01–M

SECURITIES AND EXCHANGE

COMMISSION

Issuer Delisting; Notice of Application

To Withdraw From Listing and

Registration on the American Stock

Exchange LLC (Plains Resources, Inc.,

Common Stock, $.10 Par Value), File

No. 1–10454

December 21, 2001.

Plains Resources, Inc. a Delaware

corporation (‘‘Issuer’’), has filed an

application with the Securities and

Exchange Commission (‘‘Commission’’),

pursuant to section 12(d) of the

Securities Exchange Act of 1934

(‘‘Act’’) 1 and rule 12d2–2(d)

thereunder,2 to withdraw its Common

Stock, $.10 par value (‘‘Security’’), from

listing and registration on the American

Stock Exchange LLC (‘‘Amex’’).

The Issuer has stated in its

application that it has complied with

the rules of the Amex by complying

with all applicable laws in effect in the

State of Delaware, in which it is

incorporated, and with the Amex’s rules

governing an issuer’s voluntary

withdrawal of a security from listing

and registration.

On November 6, 2001, the Board of

Directors of the Issuer unanimously

approved a resolution to withdraw its

Security from listing on the Amex and

to list it on the New York Stock

Exchange, Inc. (‘‘NYSE’’). In its

application, the Issuer stated that

trading in the Security on the Amex

ceased on December 20, 2001, and

trading in the Security is expected to

begin on the NYSE at the opening of

business on December 21, 2001. In

making the decision to withdraw the

Security from listing on the Exchange,

the Issuer represents that it seeks to

avoid the direct and indirect costs and

division of the market resulting from

dual listing on the Amex and the NYSE.

The Issuer’s application relates solely

to the Security withdrawal from listing

on the Amex and shall affect neither its

approval for trading on the NYSE nor its

obligation to be registered under section

12(g) of the Act.3

Any interested person may, on or

before January 16, 2002 submit by letter

to the Secretary of the Securities and

Exchange Commission, 450 Fifth Street,

NW., Washington, DC 20549–0609, facts

bearing upon whether the application

has been made in accordance with the

rules of the Amex and what terms, if

any, should be imposed by the

Commission for the protection of

investors. The Commission, based on

the information submitted to it, will

issue an order granting the application

after the date mentioned above, unless

the Commission determines to order a

hearing on the matter.

For the Commission, by the Division of

Market Regulation, pursuant to delegated

authority.4

Jonathan G. Katz,

Secretary.

[FR Doc. 01–32080 Filed 12–28–01; 8:45 am]

BILLING CODE 8010–01–M

SECURITIES AND EXCHANGE

COMMISSION

[Release No. 35–27482; International

Release Series No. 1253]

Filings Under the Public Utility Holding

Company Act of 1935, as Amended

(‘‘Act’’)

December 21, 2001.

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

67566 Federal Register / Vol. 66, No. 250 / Monday, December 31, 2001 / Notices

1E.ON has also filed a separate application with

the Commission for approval of its proposed

external financing program (File No. 70–9985,

‘‘Financing Application’’).

2The Commission authorized Powergen to

acquire LG&E Energy by order dated December 6,

2000. See PowerGen plc. Holding Co. Act Release

No. 27291 (‘‘Powergen Order’’).

3Through the Acquisition, E.ON would also

indirectly acquire the common stock that LG&E and

KU own (4.9% and 2.5%, respectively) of Ohio

Valley Electric Corp. (‘‘OVEC’’), an electric utility.

OVEC in turn has one wholly owned electric utility

subsidiary, Indiana-Kentucky Electric Corp.

(‘‘IKEC’’).

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

January 17, 2002, to the Secretary,

Securities and Exchange Commission,

Washington, DC 20549–0609, 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 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 January 17, 2002, the

application(s) and/or declaration(s), as

filed or as amended, may be granted

and/or permitted to become effective.

E.ON AG, et al. (70–9961)

E.ON AG (‘‘E.ON’’), a German holding

company exempt from registration by

rule 5 under the Act, located at E.ONPlatz 1, 40479 Du ̈ sseldorf, Germany, and

Powergen plc (‘‘Powergen’’), a U.K.

registered holding company located at

City Point, 1 Ropemaker Street, London

ECY 9HT, United Kingdom, together

with subsidiaries of Powergen listed

below, have filed a joint applicationdeclaration, as amended,

(‘‘Application’’) under sections 2(a)(8),

4, 5, 6(a), 7, 9(a)(2), 10, 13, 14, 15, 32

and 33 of the Act and rules 42, 45(a), 52,

53, 54, 80 through 91, 93 and 94 under

the Act.

The Application seeks authorizations

in connection with E.ON’s proposed

acquisition of the outstanding voting

securities of Powergen (the

‘‘Acquisition’’).1 Authorization is

required under sections 9(a)(2) and 10 of

the Act because the Acquisition would

result in E.ON’s indirect acquisition of

Powergen’s indirect subsidiary LG&E

Energy Corp. (‘‘LG&E Energy’’), a

Kentucky holding company exempt

from registration under section 3(a)(1) of

the Act, and LG&E Energy’s publicutility subsidiary companies, Louisville

Gas and Electric Company (‘‘LG&E’’)

and Kentucky Utilities Company

(‘‘KU’’).2 Following the Acquisition,

E.ON would register as a holding

company under the Act. The other

applicants, all registered holding

companies, are direct and indirect

wholly owned subsidiaries of Powergen:

Powergen US Holdings Limited,

Powergen US Investments, Powergen

Luxembourg sarl, Powergen

Luxembourg Holdings sarl, Powergen

Luxembourg Investments sarl, Powergen

US Investments Corp. (‘‘PUSIC’’)

(collectively, the ‘‘Powergen

Intermediate Holding Companies,’’ and,

together with E.ON and Powergen,

‘‘Applicants’’), all at City Point, 1

Ropemaker Street, London EC2Y 9HT,

United Kingdom.

I. Summary

E.ON seeks authorization to acquire

all of the issued and outstanding

common stock of Powergen. Through

the acquisition, E.ON would indirectly

acquire LG&E Energy and its direct and

indirect subsidiary companies,

including its electric utility subsidiary

companies, LG&E and KU.3 E.ON seeks

to retain LG&E Energy as a public-utility

holding company subsidiary exempt

from registration under section 3(a)(1) of

the Act. E.ON will register as a holding

company following the Acquisition.

In addition, E.ON requests

authorization:

(1) To issue loan notes and make

certain guarantees in connection with

the Acquisition;

(2) To own its existing utility

operations as foreign utility companies

(‘‘FUCOs’’), as defined in section 33 of

the Act, and certain nonutility

businesses and other businesses to be

acquired;

(3) To invest the proceeds from a

planned divestiture of certain of its

existing nonutility businesses, which

may total approximately $35 billion, in

exempt wholesale generators (‘‘EWGs’’),

as defined in section 32 of the Act, and

FUCOs;

(4) To obtain bridge loans to finance

those EWG and FUCO investments

pending receipt of divestiture proceeds;

(5) To issue securities in an amount

up to $25 billion for the purpose of

making additional investments in EWGs

and FUCOs;

(6) To invest up to $5.5 billion in the

nonutility businesses that E.ON plans to

divest during the three to five years over

which E.ON plans to effect their

divestiture;

(7) To retain, and continue to make,

investments held as reserves against

long-term liabilities regarding pensions

and nuclear plant decommissioning as

being ‘‘in the ordinary course of

business’’ under section 9(c)(3), in

accordance with German corporate

practice;

(8) For E.ON and its subsidiaries,

Powergen and its subsidiaries and LG&E

Energy and its subsidiaries to engage in

intrasystem service transactions, subject

to certain conditions;

(9) To exempt from the at-cost

requirements of section 13 of the Act

certain intrasystem service transactions;

and

(10) To make certain corporate

structure changes in a restructuring after

the Acquisition without having to seek

specific authority for each change,

subject to certain conditions.

In addition, Applicants request the

Commission:

(1) To issue an order under section

2(a)(8) of the Act declaring Ruhrgas AG,

a partially owned German subsidiary of

E.ON, not to be a subsidiary of a

registered holding company viz., E.ON;

(2) To disregard certain intermediate

holding companies for purposes of the

analysis under section 11(b)(2) of the

Act; and

(3) To grant an exemption from rule

26(a)(1) under the Act regarding the

maintenance of financial statements in

conformance with Regulation S–X for

any subsidiary of E.ON organized

outside the U.S.

II. Parties

A. E.ON

E.ON is an Aktiengesellschaft, the

equivalent of a U.S. stock corporation,

under the laws of the Federal Republic

of Germany. E.ON’s shares are traded on

all German stock exchanges, the Swiss

Stock Exchange and as American

Depository Receipts (‘‘ADRs’’) on the

New York Stock Exchange. E.ON was

formed in June 2000 as a result of the

merger of German conglomerates VEBA

AG (‘‘Veba’’) and VIAG AG (‘‘Viag’’),

which trace their roots to the 1920s. As

of December 31, 2000, E.ON was

Germany’s third largest industrial

group, with a market capitalization of

approximately Euro 39.5 billion

(approximately $35.7 billion) as of April

6, 2001, the last business day before the

announcement of the Acquisition.

For the nine months ended September

30, 2001, E.ON had revenues of Euro

64.3 billion ($58.7 billion) and net

income of Euro 1.0 billion ($0.9 billion).

As of September 30, 2001, E.ON had net

assets of Euro 23.2 billion ($21.2 billion)

and a market capitalization of

approximately Euro 43.4 billion ($39.6

billion).

Federal Register / Vol. 66, No. 250 / Monday, December 31, 2001 / Notices 67567

4These companies are identified in Exhibit G–1

to the Application.

5E.ON Energie’s power transmission grid is

located in the German states of Schleswig-Holstein,

Lower Saxony, North Rhine-Westphalia, Hesse,

Bavaria and Mecklenburg-Western Pomerania and

reaches from Scandinavia to the Alps. The grid is

interconnected with the western European power

grid with links to the Netherlands, Austria,

Switzerland and eastern Europe. With a system

length of over 37,000 km (23,000 miles) and a

coverage area of nearly 170,000 square km (66,000

square miles), the grid covers more than one-third

of the surface area of Germany.

E.ON Energie owns interests in and operates

electric power generation facilities with a total

installed capacity of more than 37,000 MW, its

attributable share of which is approximately 29,000

MW (not including mothballed, shut down or

inactive power plants). On July 12, 2001, E.ON

Energie and Verbund, an Austrian utility company,

signed a Memorandum of Understanding

concerning the establishment of a combined

company for hydroelectric power production. To

form European Hydro Power (‘‘EHP’’), E.ON Energie

will contribute its subsidiary, E.ON Wasserkraft

GmbH, and Verbund will contribute its stake in

Austrian Hydro Power. E.ON Energie will have a

40% share in EHP and Verbund will own the

remaining 60%. The new company will own some

200 hydroelectric power plants with a capacity of

9,600 MW. EHP is expected to commence

operations by January 1, 2002.

6E.ON will acquire Gelsenberg as part of a

transaction with BP plc by which E.ON will divest

its subsidiary Veba Oel, as described below.

7E.ON currently owns less than a 1% interest in

Ruhrgas. E.ON also indirectly holds an additional

18% interest in Ruhrgas through E.ON’s interest in

RAG AG, discussed below. E.ON’s indirect interests

in Ruhrgas participate in a voting pool that includes

59% of the voting power of Ruhrgas.

E.ON’s corporate subsidiaries are

currently organized into eight separate

business divisions: Energy, chemicals,

real estate, oil, telecommunications,

distribution/logistics, aluminum and

silicon wafers. E.ON and all its direct

and indirect subsidiaries are referred to

as the ‘‘E.ON Group.’’ Each business

division is responsible for managing its

own day-to-day business, while E.ON

provides strategic management for E.ON

Group members and coordinates E.ON

Group activities. E.ON also provides

centralized controller, treasury, risk

management and service functions to

group members, as well as functions

relating to communications, capital

markets and investor relations.

1. E.ON Energie (Proposed FUCO)

E.ON’s energy division, which

accounts for 54% of E.ON’s total

investments, is headed by its wholly

owned subsidiary, E.ON Energie AG

(‘‘E.ON Energie’’). E.ON Energie was

formed in July 2000, following

completion of the merger between

VEBA and VIAG, when E.ON merged

the two major energy divisions of those

companies. E.ON Energie’s core

business consists of the ownership and

operation of power generation facilities,

and the transmission and distribution of

electric power, gas and heat and energyrelated businesses, including the supply

of water and water-related services. At

the time of, or prior to, the Acquisition,

E.ON intends to qualify E.ON Energie as

a ‘‘foreign utility company’’ (‘‘FUCO’’)

as defined in section 33 of the Act.

E.ON Energie conducts its retail

energy business through a number of

mostly majority-owned subsidiaries and

its utility distribution and supply

business through a number of majorityowned subsidiaries in Germany.4 E.ON

Energie supplied about one-third of the

electricity consumed in Germany in

2000. In 2000, E.ON Energie sold 125.9

billion kWh of electricity in western

Germany and 24.1 billion kWh in

eastern Germany and exported 19.9

billion kWh.5 E.ON Energie also

conducts a marketing and energy

trading business through its wholly

owned subsidiary, E.ON Trading GmbH.

Applicants state that E.ON is

committed to retain and expand its

multi-utility business, which under

prevailing European industry practice,

includes not only electric and gas

service but also water, waste

management and other services.

Privatized utility functions that E.ON

has acquired from municipalities have

often included electric, gas, heat and

water as part of a bundled service.

E.ON Energie holds stakes in various

regional electricity and gas distributors

and in municipal utilities

(‘‘Stadtwerke’’). For historical and

political reasons, E.ON Energie rarely

owns 100% of the regional utilities or

Stadtwerke.

E.ON Energie’s principal waterrelated activities are centered in the

German stock exchange-listed company

Gelsenwasser, the largest privately held

water utility in Germany (based on

volume of water deliveries).

Gelsenwasser also provides gas utility

services. E.ON Energie holds an 80.5%

equity interest through its wholly

owned subsidiary E.ON Aqua GmbH.

In 2000, E.ON Energie had total

revenues of approximately Euro 11

billion ($9.7 billion). Gas and electricity

revenues (including district heating)

accounted for 89% of these revenues. Of

the remaining revenues, 2% were

attributable to water activities and 9%

were derived from other sales.

2. Gelsenberg AG (Proposed FUCO)

On July 16, 2001, E.ON and BP plc

announced that they had reached an

agreement to reorganize their oil and gas

business. As part of this reorganization

and the related transactions, British

Petroleum and E.ON have agreed that

E.ON will acquire, after January 1, 2002,

51% of Gelsenberg AG (‘‘Gelsenberg’’),

currently a wholly owned subsidiary of

British Petroleum, by means of a capital

increase.6 Beginning on January 1, 2002,

British Petroleum will have the option

to sell its remaining 49% interest in

Gelsenberg to E.ON.

Gelsenberg directly and indirectly

owns 25.5% of Ruhrgas AG (‘‘Ruhrgas’’),

Germany’s largest natural gas

transmission, storage, distribution and

import company, with total sales of

approximately 50 billion cubic meters of

gas.7 These operations account for 88%

of Ruhrgas’ total revenues of Euro 7.3

billion ($6.4 billion). Most of Ruhrgas’

remaining revenues of are generated by

activities that support the import and

transport of gas.

Ruhrgas owns a high-pressure grid

that covers nearly all of western

Germany. In addition, it owns stakes in

regional gas transmission companies,

local gas distributors and Stadtwerke in

Germany and elsewhere in Europe.

Stadtwerke frequently also sell

electricity, water and other services.

Ruhrgas owns minor stakes of 5% to 9%

in four gas fields and a 5% stake in its

main gas supplier, the Russian gas

company, Gazprom. Ruhrgas supplies

gas to E.ON, among others. Ruhrgas also

manufactures equipment for the gas

industry, such as meters, to assist its

customers in their use of Ruhrgas gas

and to strengthen its relationship with

those customers.

Ruhrgas owns a U.S. manufacturer of

metering equipment, American Meter

Company of Horsham, Pennsylvania.

Applicants state that Ruhrgas is also

engaged in gas-related engineering

activities in the United States of the

type permitted to be acquired under rule

58(b)(1)(vii).

Applicants state that Gelsenberg will

certify as a FUCO after the completion

of the VEBA Oel divestiture transactions

discussed below.

3. Other Nonutility Interests Proposed

To Be Retained

a. Cellular Telephone Providers.

Through two intermediate holding

companies, E.ON Telecom GmbH

(formerly VEBA Telecom) and VIAG

Telecom Beteiligungs GmbH, E.ON

holds interests in telecommunications

and cellular phone providers in Austria

(50.1%) and France (17.5%). E.ON has

disposed of most of its

telecommunications business activities

during 1999 and 2000, but currently

intends to retain the cellular phone

providers. Exhibit G–1 to the

application states that these two

companies will apply to the Federal

Communications Commission for status

67568 Federal Register / Vol. 66, No. 250 / Monday, December 31, 2001 / Notices

8E.ON has a 37.1% direct interest in RAG; E.ON

also has a 2.1% indirect interest in RAG, through

its 21% interest in Montan-Verwaltungsgesellschaft

mbH, which owns 10% of RAG. RAG owns,

indirectly through a subsidiary, RAG Coal

International AG, certain coal mines in the

Appalachian, Midwestern, and Mountain western

regions of the United States that supply certain

electric generating units.

9Effective October 16, 2001, E.ON sold Klo ̈ckner

& Co. AG, a wholly owned subsidiary and leading

European metal distributor with locations

throughout Europe and North America to Balli

group of London. Effective November 13, 2001,

E.ON sold MEMC Electric Materials Inc., a 71.8%

U.S. based-owned subsidiary and a leading

worldwide manufacture of silicon wafers.

10As part of the reorganization of their oil and gas

businesses agreed to by E.ON and BP plc, BP plc

will become VEBA Oel’s majority shareholder

(51%) by subscribing to a capital increase after

January 1, 2002. Beginning April 1, 2002, E.ON will

have the option to sell its remaining interest in

VEBA Oel (49%) to BP plc. Upon completion of this

transaction (i.e., after exercising the put option),

E.ON will have divested its oil businesses

completely.

11Amounts originally in pounds were converted

at $1.4955:1 pound.

12A complete list of the subsidiaries of Powergen

and a description of their respective businesses are

contained in Exhibit G–2 to the Application.

13See Powergen Order, supra note 2. See also

LG&E Energy Corp., Holding Co. Act Release No.

26886 (Apr. 30, 1998) (confirming the exemption).

as ‘‘exempt telecommunications

companies’’ under section 34 of the Act.

b. RAG AG. E.ON directly and

indirectly owns 39.2 % of the shares of

RAG AG (‘‘RAG’’), a unique entity

created under the auspices of the

German government to own all

operating coal mines in Germany.8 RAG

owns 18% of Ruhrgas, described above.

E.ON proposes to retain its ownership

interest in RAG after becoming a

registered holding company and

requests an order of the Commission

under section 2(a)(8) of the Act

declaring RAG not to be a subsidiary

company of E.ON under the Act.

c. E.ON North America Inc. and

Fidelia Inc. E.ON North America Inc.

(‘‘E.ON NA’’), a wholly owned

subsidiary of E.ON, has served in the

past as the holding company for certain

of E.ON’s activities in North America,

handling certain finance, legal, tax and

other service functions. E.ON NA owns

Fidelia Inc. (‘‘Fidelia’’), a finance

company subsidiary organized under

Delaware law. Fidelia lends money

exclusively to E.ON Group companies

in the U.S., including the U.S.

subsidiaries of Degussa AG, one of

E.ON’s to-be-divested subsidiaries,

discussed below.

Applicants state that it would be

efficient from an operations, tax and

financing perspective to integrate E.ON

NA and Fidelia under the E.ON U.S.

corporate structure post-Acquisition.

The proposed restructuring is discussed

in section III, infra.

4. Nonutility Subsidiaries To Be

Divested (‘‘TBD Subsidiaries’’)

E.ON intends to divest certain

nonutility subsidiaries and their

respective subsidiaries following the

Acquisition as part of E.ON’s general

divestiture program. E.ON explains that

its goal is to become a leading global

integrated energy and utility company.

The TBD Subsidiaries are indicated in

E.ON’s list of subsidiaries included in

Exhibit G–1 to the Application. The

activities of the TBD Subsidiaries

include chemicals (Degussa AG), real

estate (Viterra AG), oil (VEBA Oel),

distribution and logistics (Stinnes AG)

and aluminum (VAW aluminium AG).9

The divestiture of such significant

components of E.ON’s current business

is a major undertaking. Consequently,

E.ON proposes to divest Degussa AG

and Viterra AG within five years of the

date of registration of E.ON as a holding

company, and VEB Oel, Stinnes AG and

VAW aluminium AG within three years

of that date.10

Pending divestiture, E.ON proposes to

continue to invest in the TBD

Subsidiaries to preserve and protect

shareholder value and to prevent any

diminution in the value or the prospects

of the business, until such time as a sale

or other exit strategy can be

implemented, consistent with the

requested order. Accordingly, E.ON

intends to redeploy the proceeds of the

divestitures in other TBD Subsidiaries

and in E.ON’s core utility business.

E.ON proposes to limit its investments

in the TBD Subsidiaries to up to $5.5

billion over the 3–5 year time frame for

the contemplated divestitures.

B. Powergen

Powergen is an international

integrated energy company with its

principal operations in the U.K. and the

U.S. Powergen’s ordinary shares are

listed on the London Stock Exchange

and its American Depositary Shares

(‘‘ADSs’’) are listed on the New York

Stock Exchange. Powergen, including its

predecessor company, has been a

reporting company under the Securities

Exchange Act of 1934, as amended (the

‘‘1934 Act’’), since 1995 and has filed

reports with the Commission in

accordance with the requirements of the

1934 Act applicable to foreign private

issuers.

For the year ended December 31,

2000, Powergen had revenues of *4,191

million ($6,268 million) and net income

under US GAAP of £430 million ($643

million). As at December 31, 2000,

Powergen had net assets of £2,286

million ($3,419 million) and a market

capitalization of approximately £4.6

billion ($6.9 billion). For the nine

months ended September 30, 2001,

Powergen had revenues of £4,230

million ($6,210 million) and net income

under U.S. GAAP of £152 million ($223

million). As at September 30, 2001,

Powergen had net assets of £2,332

million ($3,423 million) and a market

capitalization of approximately £4.8

billion ($7 billion).11 Powergen and all

of its direct and indirect subsidiary

companies are referred to below as the

Powergen Group.12

Powergen’s two principal subsidiaries

are Powergen Group Holdings and

Powergen US Holdings Ltd. (‘‘Powergen

US Holdings’’), both UK companies.

Powergen Group Holdings, a FUCO, is

the holding company for Powergen’s

U.K. and international businesses.

Powergen Group Holding’s wholly

owned subsidiary, Powergen UK plc

(‘‘Powergen UK’’) is one of the UK’s

leading integrated electricity and gas

businesses. As of March 31, 2001,

Powergen UK owned or operated

approximately 8,200 MW of core

generation capacity (of which

approximately 7,400 MW is wholly

owned and the balance held through

joint ventures), and served over three

million customer accounts. Powergen’s

operations in the UK include marketing

electricity, gas, telecommunications and

other essential services to domestic and

business customers; asset management

in electricity production and

distribution; and energy trading to

support those activities. Through

Powergen International Ltd, Powergen

holds interests in power projects in

India and the Asia Pacific Region.

Powergen US Holdings, a registered

holding company, is the holding

company for Powergen’s U.S. business,

and is the indirect parent, via the chain

of the Powergen Intermediate Holding

Companies, of LG&E Energy, which

Powergen acquired on December 11,

2000, in accordance with the Powergen

Order. PUSIC, one of the Powergen

Intermediate Holding Companies, holds

all of the outstanding voting securities

of LG&E Energy.

LG&E Energy is a holding company

exempt by order under section 3(a)(1) of

the Act.13 It is engaged, through its

subsidiaries, in power generation and

project development; retail gas and

electric utility services; and asset-based

energy marketing. Its public-utility

subsidiary companies, LG&E and KU

(the ‘‘Utility Subsidiaries’’), serve in the

aggregate approximately 857,000

electricity customers and 299,000 gas

customers over a transmission and

Federal Register / Vol. 66, No. 250 / Monday, December 31, 2001 / Notices 67569

14As noted previously, LG&E and KU own 4.9%

and 2.5%, respectively, of the common stock of

OVEC, which in turn has one wholly owned

subsidiary, IKEC. See supra note 2. LG&E and other

public utilities organized OVEC and IKEC in 1952

to supply the entire power requirements of the U.S.

Department of Energy’s gaseous diffusion plant in

Pike County, Ohio. All of the electricity sold by

OVEC and IKEC is sold either to the U.S.

Department of Energy or to the owners of the stock

of OVEC (or their subsidiaries, all of which are

utility companies). See Ohio Valley Electric Corp.,

34 S.E.C. 323 (Nov. 7, 1952). Applicants state that,

for each of the three years ended December 31,

1998–2000, LG&E and KU each derived less than

0.2% of net income from their share of the earnings

of OVEC.

15The Commission approved Powergen’s

ownership of LG&E Energy’s nonutility businesses

in the Powergen Order.

16The Commission approved Powergen’s

ownership of LG&E’s gas utility business in the

Powergen Order.

17 KU was formerly an exempt holding company

by reason of its partial ownership of Electric Energy

Inc. (‘‘EEI’’). On August 1, 2000, EEI was granted

EWG status. See 92 F.E.R.C. ¶ 62,079. Consequently,

under section 32(e) of the Act, EEI is no longer a

public-utility company and KU is no longer a

holding company under the Act. 18Applicants state that the City Code has no

statutory basis but is, in practice, adhered to by

parties to takeovers of U.K. public companies.

19Requisite approvals include:

(1) A decision by the European Commission not

to initiate proceedings under Article 6(1)(c) of the

Council Regulation (EEC) 4064/89 (as amended),

which governs market concentration and

competition in the European Economic Community,

or, if such proceedings are initiated, a finding that

the concentration is compatible with the common

market. (On November 26, 2001 theEuropean

Commission authorized the Acquisition.);

(2) An indication by the Director General of the

Office of Gas and Electricity Markets in the U.K.

that he will not seek modifications to any of the

Powergen Group’s licenses under the Electricity Act

1989 or the Gas Act 1986 as amended by the Gas

Act 1995 and subsequent legislation, including the

Utilities Act 2000; that he will not seek

undertakings or assurances from any member of the

E.ON Group or the Powergen Group except, in each

case, on terms acceptable to E.ON acting

reasonably; and that in connection with the

acquisition by E.ON of Powergen, he will give such

consents and/or directions (if any) and/or seek or

agree to such modifications (if any) as are, in the

reasonable opinion of E.ON, necessary in

connection with such licenses;

(3) The expiration of applicable waiting periods

under the Hart-Scott-Rodino Antitrust

Improvements Act of 1976;

(4) The termination of the review and

investigation of the offer under the Exon-Florio

Amendment to the Defense Production Act of 1950;

and

(5) The approval of the Kentucky Commission,

the Virginia Commission and the Tennessee

Commission under applicable state utility law, the

approval of the FERC under the Federal Power Act,

and the approval of this Commission under the Act.

(All three states and the FERC have approved the

Acquisition.).

distribution network covering some

27,000 square miles.14 LG&E Energy

also is engaged through subsidiaries in

a variety of nonutility businesses,

including independent power

generation, foreign utility operations,

energy services, and commercial and

industrial energy consulting.15 LG&E

Energy and all of its direct and indirect

subsidiary companies are referred to

below as the LG&E Energy Group.

LG&E engages in the generation,

transmission, and distribution of

electricity to approximately 364,000

customers in Louisville and 16

surrounding counties. LG&E also

purchases, distributes and sells natural

gas to approximately 299,000 customers

within this service area and in limited

additional areas.16 For the twelve

months ended December 31, 2000,

LG&E had electric operating revenues of

$711.0 million (net of provision for rate

refunds), gas operating revenues of

$272.5 million, electric operating

income of $131.5 million and gas

operating income of $17.4 million. For

the nine months ended September 30,

2001, LG&E had electric operating

revenues of $557.9 million (net of

provision for rate refunds), gas operating

revenues of $216.1 million, electric

operating income of $50.8 million and

a gas operating loss of $7.7 million.

LG&E is subject to regulation by the

Federal Energy Regulatory Commission

(‘‘FERC’’) and the Kentucky Public

Service Commission (the ‘‘Kentucky

Commission’’).

KU engages in the generation,

transmission, and distribution of

electricity to approximately 464,000

customers in over 600 communities and

adjacent suburban and rural areas in 77

counties in central, southeastern and

western Kentucky, and to approximately

29,000 customers in five counties in

southwestern Virginia.17 In Virginia, KU

operates under the name Old Dominion

Power Company. KU also sells electric

energy at wholesale for resale to twelve

Kentucky municipalities and one

Pennsylvania municipality. In addition,

KU owns and operates a small amount

of electric utility property in one county

in Tennessee. For the year ended

December 31, 2000, KU had electric

operating revenues of $851.9 million

and operating income of $128.1 million.

For the nine months ended September

30, 2001, KU had electric operating

revenues of $647.5 million and

operating income of $58.4 million. KU

is subject to regulation by the FERC, the

Kentucky Commission, the Virginia

State Corporation Commission (the

‘‘Virginia Commission’’) and the

Tennessee Regulatory Authority (the

‘‘Tennessee Commission’’).

III. The Proposed Acquisition

Applicants state that acquisitions of

U.K. public companies are normally

effected by way of tender offer. There is

no statutory merger concept in U.K. law.

Tender offers for U.K. public companies

are regulated by the U.K. City Code on

Takeovers and Mergers (the ‘‘City

Code’’) administered by the Panel on

Takeovers and Mergers (the ‘‘Panel’’).18

Although Applicants cannot satisfy the

timetable required for tender offers by

the City Code, the City Code provides

that the Panel may permit the offeror to

make a pre-conditional offer

announcement, under which the offeror

will commence its tender offer only if

and when specified conditions, such as

receipt of regulatory clearances, are met.

In this case, the Panel agreed to the

making of a pre-conditional offer

announcement by E.ON, under which

E.ON will commence its tender offer for

Powergen only if and when the relevant

United States, European Community

and U.K. regulatory approvals have been

obtained.19

E.ON has, in its announcement of the

Acquisition, reserved the right to elect,

with the agreement of the Board of

Powergen, to acquire the Powergen

shares under an alternative U.K. legal

procedure known as a ‘‘Scheme of

Arrangement.’’ This procedure would

involve the acquisition of all the

outstanding Powergen shares by virtue

of an order of the English court under

the Companies Act 1985 of the United

Kingdom (excluding Northern Ireland),

given following approval at a Powergen

shareholders’ meeting by a majority in

number, representing 75% or more in

value present and voting, either in

person or by proxy, of the Powergen

shares. The Scheme of Arrangement

would be implemented on the same

terms, as applicable, as those that apply

to the offer.

Although the timetable for a Scheme

of Arrangement is somewhat different

from that for a tender offer, Applicants

state that similar issues arise in relation

to the timing of the approval of the SEC:

The court will not grant its order if there

are significant conditions outstanding

and it may not sanction the Scheme of

Arrangement if there has been a

substantial passage of time between the

date of the shareholders’ meeting and

the date of the court hearing.

E.ON expects, therefore, that some

steps in the Acquisition process would

not occur until after an order by the SEC

authorizing the Application has been

issued. There would be no guarantee,

therefore, that the acquisition of

Powergen would be consummated

following the receipt of the requested

order of the Commission, as the

shareholders of Powergen may

determine that they will not accept the

67570 Federal Register / Vol. 66, No. 250 / Monday, December 31, 2001 / Notices

20Applicants request the Commission to issue an

order authorizing the Acquisition before Powergen’s

shareholders have indicated whether or not they

will accept E.ON’s tender offer. Applicants state

that they will provide prominent disclosure in the

relevant solicitation material distributed to

Powergen shareholders that the Commission’s

authorization of the Acquisition is not an

endorsement of the Acquisition or a

recommendation by the Commission that Powergen

shareholders accept the Tender offer or approve the

Scheme of Arrangement. 21 In connection with the offer, E.ON and

Powergen have entered into a letter agreement

dated April 8, 2001 (the ‘‘Agreement’’), which,

among other things, provides that Powergen will

not solicit competing proposals and describes the

steps that are to be taken to satisfy the

preconditions to the offer. Under the Agreement,

certain fees may be payable by either E.ON or

Powergen to the other in certain circumstances. The

Agreement will terminate (and the obligations of

the parties, including E.ON’s obligation to make the

offer, will lapse) if the preconditions are not

satisfied by July 9, 2002. 22Applicants state that the offer is subject to

various conditions (all set forth in Exhibit B–1 to

the Application) typical of acquisitions in Europe

and the U.S. The conditions include the receipt of

acceptances representing at least 90% (or such

lesser percentage as E.ON may decide in excess of

50%) in nominal value of the Powergen shares or,

in the event the offer is effected through a Scheme

of Arrangement, rather than a tender offer, approval

at a court-ordered meeting of the Powergen

shareholders by a majority in number, representing

75% or more in value present and voting, either in

person or by proxy, of the holders of the Powergen

shares. In addition, the offer contains standard

conditions restricting Powergen and its subsidiaries

from issuing additional securities, paying

dividends, bonuses or distributions, transferring

assets not in the ordinary course of business,

changing loan capital, making capital expenditures

and other transactions of a long-term, onerous or

unusual nature, changing director remuneration,

repurchasing shares, changing constitutive

documents, instituting bankruptcy and similar

proceedings or entering into agreements to effect

any of the above transactions, matters or events,

subject to certain conditions.

The conditions also contain standard provisions

regarding developments material to the Powergen

Group, taken as a whole, including adverse changes

in the assets, business, financial or trading position

or profits of the Powergen Group; legal proceedings

having been threatened, announced or instituted by

or against or remaining outstanding against any

member of the Powergen Group; contingent or other

liabilities having arisen; and steps having been

taken which are likely to result in the withdrawal,

cancellation, termination or modification of any

license held by any member of the Powergen Group

which is necessary for the proper carrying on of its

business.

23Applicants state that for U.K. tax purposes,

some shareholders of Powergen may prefer to

receive a loan note rather than cash from E.ON in

return for their Powergen shares. Under U.K. tax

law, such shareholders can defer recognition of any

capital gains from the sale of their Powergen shares

until they redeem the loan notes. In the event the

loan notes are used, accepting shareholders of

Powergen shares would receive £1 nominal of loan

notes for every £1 of cash consideration. The loan

notes would be unsecured, and would not exceed

in aggregate principal amount issued, $7.3 billion.

They have not been, and will not be, registered

under the Securities Act of 1933, and will not be

offered to U.S. investors. If E.ON elects to make the

offer through another member of the E.ON Group,

E.ON would guarantee the loan notes. E.ON

requests authorization to maintain the loan notes

and any associated guarantee in connection with

the Acquisition.

24Before taking into account future dividends

payable to Powergen shareholders, the offer

represents a premium of 8.4% over the price of

Powergen shares as at the close of business on April

6, 2001 (the last trading day prior to the

announcement of the Acquisition); 25.8% over the

closing price of Powergen shares on January 16,

2001, the last business day before the

announcement of preliminary talks between E.ON

and Powergen in relation to the offer) and 35.2%

over the average price of Powergen shares over the

6 months ended January 16, 2001.

25Applicants state that the German and European

utility regulations that affect the E.ON Group apply

only to its German and European operating

companies and not to the parent holding company,

which will register; therefore, there is no conflict

between the regulatory scheme under the Act and

German or European regulation. Similarly, U.K.

utility regulation affecting Powergen (and E.ON

following its acquisition of Powergen) would apply

only to the U.K. operating companies and not

directly to the parent registered holding company.

Therefore, there also will be no conflict between the

regulatory scheme under the Act and U.K.

regulation. As noted previously, in addition to the

U.S. Federal and state approvals, the transaction

has been reviewed by the European Commission

and will be reviewed by the U.K. Office of Gas and

Electricity Markets.

terms offered by E.ON.20 Applicants

state, however, that it is extremely rare

for shareholders of a U.K. public

company not to accept an offer that has

been recommended by their board.

The Boards of E.ON and Powergen

have agreed to the terms of a

recommended pre-conditional cash offer

to be made by Goldman Sachs

International on behalf of E.ON for the

capital stock of Powergen.21 Applicants

state that the Board of Powergen intends

to recommend to Powergen’s

shareholders that they accept the offer.

There are a number of conditions

precedent to the offer.22

E.ON proposes to offer £7.65 for each

Powergen share and £30.60 for each

Powergen ADS (representing four

Powergen shares).23 The offer values the

whole of Powergen’s capital stock at

approximately £5.1 billion ($7.3 billion)

(assuming the exercise in full of all

outstanding options under Powergen’s

employee benefit plans). E.ON will

acquire Powergen, including its

outstanding debt, as at closing. On the

basis of the Powergen debt outstanding

as at December 31, 2000 of £4.5 billion

($6.4 billion) adjusted for divestitures

and announced by Powergen prior to

the date of the Agreement, the total

value of the proposed acquisition would

be £9.6 billion ($13.7 billion).24

The offer will extend to all existing

issued Powergen shares and to any

Powergen shares which are

unconditionally allotted or issued prior

to the date on which the offer closes (or

such earlier date as E.ON may, subject

to the City Code, decide), including

Powergen shares issued in accordance

with the exercise of options under

Powergen’s employee benefit plans or

otherwise. In conjunction with the offer

for the Powergen shares, an offer will be

made to holders of Powergen ADSs to

tender the Powergen shares underlying

their ADSs into the offer.

If more than 90% of Powergen shares

and Powergen ADSs are tendered or

otherwise acquired, E.ON would be able

to rely on applicable U.K. law to acquire

compulsorily any remaining shares,

thus enabling E.ON to acquire 100% of

Powergen. If more than 50% of

Powergen shares and Powergen ADS,

are tendered or otherwise acquired, it

would be E.ON’s option to declare the

offer unconditional, even if E.ON had

not acquired the 90% tender that is

necessary to implement compulsory

acquisition of the dissenting minority.

When the offer becomes

unconditional in all respects, Powergen

will apply to the London and New York

stock exchanges for the Powergen

securities to be de-listed. It is

anticipated that the cancellation of

Powergen’s listing on the London Stock

Exchange will take effect no earlier than

20 business days after the offer becomes

or is declared unconditional in all

respects.

To effect the Acquisition, E.ON has

established a wholly owned subsidiary,

E.ON UK Verwaltungs GmbH (‘‘E.ON

UK’’), a corporation organized under

German law. E.ON UK in turn owns all

the outstanding shares of an acquisition

vehicle, E.ON UK plc, a corporation

organized under the laws of England

and Wales, that will acquire all of the

outstanding Powergen shares either by

tender offer or Scheme of Arrangement,

as discussed previously. E.ON UK plc

would survive the Acquisition. E.ON

would register as a holding company.

Powergen would remain a registered

holding company, and E.ON UK and

E.ON UK plc would also register as

holding companies.25 LG&E and KU

would remain first-tier subsidiaries of

LG&E Energy and keep their names and

headquarters locations. Applicants state

that this corporate structure will take

into account international tax

regulations and clearly separate the

domestic utility operations of LG&E and

KU from the other businesses of E.ON

and Powergen.

As a subsidiary of E.ON UK and E.ON

UK plc, Powergen will remain the

immediate parent company of Powergen

Group Holdings Ltd., the current

‘‘umbrella’’ FUCO in the Powergen

Group. Powergen will remain

responsible for the development and

operation of LG&E Energy, LG&E and

KU and, in this manner, develop E.ON’s

Anglo-American energy and utility

Federal Register / Vol. 66, No. 250 / Monday, December 31, 2001 / Notices 67571

26As a result of Powergen’s acquisition of LG&E

Energy, Powergen and the Powergen Intermediate

Holding Companies registered as public-utility

holding companies under Section 5 of the Act. The

Powergen Intermediate Holding Companies are

Powergen US Holdings Limited and Powergen US

Investments, corporations organized under the laws

of England and Wales, Powergen Luxembourg sarl

and Powergen Luxembourg Holdings sarl,

corporations organized under the laws of

Luxembourg, and Powergen US Investments Corp.,

a Delaware corporation (‘‘PUSIC’’). PUSIC currently

holds all of the outstanding voting securities of

LG&E Energy, and will continue to do so after the

Acquisition.

27Applicants state that this ownership structure

is preferable from a tax law perspective because it

avoids holding a U.S. asset through another foreign

jurisdiction. They state that current German tax

regulations with regard to controlled foreign

corporations discourage German corporations from

holding assets through multi-tier subsidiaries

located in multiple jurisdictions.

28Applicants’ filing in SEC File No. 70–9985 (the

‘‘Financing Application’’) describes the proposed

financing plan for the E.ON Group, including

Fidelia, in greater detail.

business in the context of E.ON’s overall

group strategy. Although Powergen will

cease to own any public-utility

companies, Powergen will remain a

registered holding company due to its

continuing role regarding the LG&E

Energy Group.

Powergen will continue to hold an

indirect voting equity interest in LG&E

Energy through the Powergen

Intermediate Holding Companies for a

short period of time, not to exceed six

months after the Acquisition.26 This

will allow time for E.ON to accomplish

a reorganization whereby the ownership

of PUSIC, the immediate parent of LG&E

Energy, will be transferred to E.ON US

Verwaltungs GmbH (‘‘E.ON US’’), a

wholly owned E.ON subsidiary

company. Applicants request

authorization to effect the

reorganization.

After the Acquisition and the

reorganization, E.ON will hold all the

outstanding voting stock of LG&E

Energy through PUSIC and E.ON U.S.

(the ‘‘Intermediate Companies’’).27

PUSIC will remain a registered holding

company under the Act and E.ON and

E.ON US will register as such. The

Powergen Intermediate Holding

Companies will cease to own voting

securities directly or indirectly in

PUSIC or LG&E Energy, although certain

arrangements made to finance

Powergen’s acquisition of LG&E Energy

and the operations of LG&E Energy, will

remain in place.

Because the Powergen Intermediate

Holding Companies will cease to hold

direct or indirect voting interests in

LG&E Energy, they request that the

Commission unconditionally approve

their deregistration under section 5(d) of

the Act. Applicants further request that

the Commission reserve jurisdiction

over the proposed deregistration until

after the reorganization has been

effected and the record is complete in

this regard.

Applicants state that maintaining an

efficient post-Acquisition structure may

require a rapid response to changes in

matters such as tax and accounting

rules, including by making appropriate

revisions after consummation of the

Acquisition to add or subtract an

intermediate holding company between

E.ON and LG&E Energy. They assert that

such changes to the ‘‘upper structure’’

would not have any material impact on

the financial condition or operations of

LG&E Energy or its subsidiaries.

Applicants request authorization to

make such changes after consummation

of the Acquisition, subject to the

condition that no change (i) will result

in the introduction of any third part

interests in the upper structure, (ii) will

introduce a non-European Union or

non-U.S. entity into the upper structure,

or (iii) will have any material impact on

the financial condition or operations of

E.ON or LG&E Energy and its

subsidiaries.

Applicants request that, for purposes

of the analysis under section 11(b)(2) of

the Act, the Commission disregard the

Intermediate Companies (PUSIC and

E.ON US), neither of which will issue

securities to third parties. Applicants

assert that these companies are special

purpose entities created for the sole

purpose of capturing economic

efficiencies that might otherwise be lost

in a cross-border transaction.

Applicants request that Powergen,

E.ON UK and E.ON UK plc also be

disregarded for the purposes of the

analysis under section 11(b)(2) of the

Act. As noted above, all three will be

registered holding companies under the

Act after the Acquisition. E.ON UK and

Powergen will not issue securities to

third parties, but will serve merely as

financial conduits. E.ON UK plc,

however, may issue and sell debt

securities, in particular, bonds, to third

parties to finance the authorized or

permitted activities of the Powergen

Group. Bonds issued by E.ON UK plc

may be guaranteed by E.ON. Applicants

state that financing the Powergen Group

through bonds issued by E.ON UK plc

is expected to be more cost effective due

to tax considerations than financing

capital needs through E.ON or another

E.ON subsidiary and then lending the

funds to E.ON UK plc.

Applicants state that any third party

debt issued by E.ON UK plc would be

consolidated into E.ON’s consolidated

financial statements and would count

against the financing limits for E.ON’s

external financing program set forth in

the application that E.ON has filed with

the Commission in File 70–9985 for

approval of its proposed financings (the

‘‘Financing Application’’). The debt

issued by E.ON UK plc would be

reflected in E.ON’s consolidated

financial statements, and in the

Financing Application. E.ON will

commit to a minimum 30% equity to

total capitalization level. Applicants

assert that in effect, especially in the

case where such debt is backed by an

E.ON guarantee, E.ON UK plc would

function as a financing subsidiary for

E.ON, and the debt of E.ON UK plc

should be treated as E.ON debt for

purposes of determining compliance

with section 11(b)(2) of the Act. In other

words, Applicants assert that E.ON UK

plc, together with E.ON UK and

Powergen, should be viewed as

financing conduits that may be ‘‘looked

through’’ for purposes of determining

compliance with section 11(b)(2).

As discussed in section II.A.3.c.,

supra, Applicants propose that,

following the Acquisition, E.ON NA and

Fidelia will be integrated under the

E.ON U.S. corporate structure. In

addition, Fidelia, which holds the cash

proceeds of certain divestitures of

E.ON’s nonutility businesses in the U.S.

will continue to hold such funds for use

in future U.S. acquisitions, as permitted

or authorized by the Commission.

Further, Fidelia may lend funds to other

companies in the E.ON Group, except as

prohibited under the Act. 28 This would

avoid repatriating the funds to Germany

and exposure to the risks of currency

value fluctuations. To effect the

restructuring, E.ON would transfer the

E.ON NA shares to E.ON U.S., which, in

turn, would transfer the shares to

PUSIC. For tax reasons, debt of E.ON

NA to E.ON may be cancelled, or E.ON

may contribute assets to E.ON NA, in

connection with the restructuring

transactions.

IV. Financing of the Acquisition

E.ON proposes to finance the

Acquisition with cash on hand, the

proceeds of liquidating certain readily

marketable assets, funds from E.ON’s

existing lines of credit or the issuance

and sale of long-term or short-term debt

securities or bank lines of credit.

Powergen, LG&E Energy and its

subsidiaries, including LG&E and KU,

will not borrow or issue any security,

incur any debt or pledge any assets to

finance any portion of the purchase

price paid by E.ON for Powergen shares.

67572 Federal Register / Vol. 66, No. 250 / Monday, December 31, 2001 / Notices

29For purposes of this discussion, ‘‘FUCOs’’ is

deemed to include all foreign businesses which

qualify for FUCO status but for the fact that the

appropriate notice has not yet been provided to the

Commission. E.ON states that it intends to provide

all such notices to the Commission at the time of

the consummation of the Acquisition.

30Although the proceeds of divestitures could be

invested in EWGs and FUCOs, they would not be

limited to such uses and could be used to finance

the activities of the E.ON Group generally, as

authorized or permitted under the Act.

31The specific types of financings are described

in the Financing Application.

32Currently, E.ON has no EWG investments and

its FUCO investment is in E.ON Energie only.

E.ON’s aggregate investment in E.ON Energie

reflects the book value of E.ON’s investment,

including loans, in E.ON Energie as of December 31,

2000. As of September 30, 2001, E.ON’s aggregate

investment in E.ON Energie was $6.147 billion.

33E.ON’s pro forma solidated retained earnings

would be $13.805 billion as of December 31, 2000.

As of September 30, 2001, E.ON’s pro forma

consolidated retained earnings would be $11.679

billion.

V. EWG/FUCO Financings and

Investments

Applicants seek authorization (i) to

retain existing investments in FUCOs 29

and energy-related businesses; (ii) to

invest the proceeds from divestitures

(including any divestitures occurring

since the June 2000 merger of Veba and

Viag, as well as future divestitures),

which may total approximately $35

billion, in exempt wholesale generator

(‘‘EWG’’) and FUCO activities without

including those investments in E.ON’s

Aggregate EWG/FUCO Financing

Limitation (as defined below);30 and (iii)

to enter into transactions to finance

additional investments in EWGs and

FUCOs in an amount up to $25 billion.

The authorization requested in (ii),

above, would also include authorization

for E.ON to issue and sell securities to

finance EWG and FUCO investments

pending the receipt of divestiture

proceeds (‘‘Bridge Loans’’); provided

that upon the receipt of such proceeds,

the Bridge Loans or securities with an

equivalent principal amount are retired,

redeemed or otherwise paid down such

that the aggregate EWG and FUCO

investment under the authorization

requested in (ii) does not exceed the

cash proceeds from divestitures. The

$35 billion Bridge Loan authorization,

plus the $25 billion additional

investment amount referred to in (iii)

above, are referred to in the aggregate as

the ‘‘Aggregate EWG/FUCO Financing

Limitation.’’

A. Reinvestment of Proceeds From

Divestitures

As discussed previously, E.ON

intends to divest significant nonutility

assets. E.ON requests authorization to

reinvest the proceeds of those

divestitures, estimated to be $35 billion

in eligible EWG and FUCO assets.

Applicants state that eligible FUCO

assets will include non-U.S. electric and

gas utilities as well as energy-related

and other related activities and assets.

Because the receipt of divestiture

proceeds will not always coincide with

the opportunity to invest in additional

EWG or FUCO assets, Applicants also

request authorization for E.ON to enter

into bridge financing arrangements and

to make Bridge Loans of up to $35

billion. In this way, attractive

investment opportunities can be

pursued pending the ultimate receipt of

divestiture proceeds. Upon receipt of

the divestiture proceeds, E.ON would

retire, redeem or otherwise pay down

the Bridge Loans or securities with an

equivalent principal amount, so that

E.ON’s aggregate EWG and FUCO

investment under the authorization to

reinvest divestiture proceeds does not,

in fact, exceed the proceeds from the

divestitures.

B. Additional Investment in EWGs and

FUCOs

In addition to retention of E.ON’s

existing FUCO and energy-related

investments and the reinvestment of the

proceeds of divestitures, Applicants

request authorization to finance

additional EWG/FUCO investments in

an aggregate amount of up to $25

billion. These financings may include

the issue or sale of a security for

purposes of financing the acquisition or

operations of an EWG or FUCO, or the

guarantee of a security of an EWG or

FUCO.31 Applicants state that E.ON will

not issue additional debt securities to

finance EWG or FUCO acquisitions if

upon original issuance E.ON’s senior

debt obligations are not rated

investment grade by at least two of the

major rating agencies (i.e., Standard &

Poor’s Corporation, Fitch Investor

Service and Moody’s Investor Service).

E.ON, LG&E and KU will also each

maintain a capital structure in which

common equity comprises at least 30%

of consolidated capitalization.

As of December 31, 2000, E.ON had

an ‘‘aggregate investment,’’ as the term

is defined in rule 53(a) under the Act,

in EWGs and FUCOs of $6.009 billion.32

This investment represents 44% of

E.ON’s pro forma consolidated retained

earnings of $13.805 billion as of

December 31, 2000, as adjusted for the

Acquisition and determined in

accordance with U.S. GAAP.33 In

addition, the combined LG&E Energy

Group and Powergen aggregate

investment in EWGs and FUCOs as of

December 31, 2000 is $1.048 billion.

The combined E.ON, Powergen and

LG&E Energy aggregate investment

($7.057 billion) represents

approximately 51% of E.ON’s pro forma

consolidated retained earnings.

On a pro forma basis to reflect the

Acquisition and the reinvestment of the

estimated proceeds of divestitures ($35

billion) in FUCO investments, E.ON’s

‘‘aggregate investment’’ in EWGs and

FUCOs as of December 30, 2000 would

be approximately $42.057 billion, or

approximately 305% of E.ON’s pro

forma consolidated retained earnings at

December 31, 2000, calculated in

accordance with U.S. GAAP. Additional

investments in EWGs and FUCOs in an

amount up to $25 billion, would result

in total aggregate investment of

approximately $67.057 billion, or 486%

of E.ON’s pro forma consolidated

retained earnings at December 31, 2000.

VI. Investments in Portfolio Securities

E.ON Group companies, particularly

E.ON Energie, hold significant

investments as reserves against longterm liabilities, specifically, pension

and, for E.ON Energie only, nuclear

decommissioning obligations. These

investments, which currently total

approximately Euro 9 billion ($7.9

billion), include publicly traded

common stocks of other companies.

Large parts of the investments are held

through investment funds. Applicants

request that the Commission authorize

E.ON and its FUCO and nonutility

subsidiaries located in Germany to

retain these investments under section

9(c)(3) of the Act as being ‘‘in the

ordinary course of business’’ of a

German company. The requested relief

would not apply to the Powergen Group

or the LG&E Energy Group.

Applicants state that German law

does not require, and German

companies, including E.ON, do not, in

practice, segregate the investments and

funds they hold with respect to these

kinds of liabilities. To ensure that the

relief requested is appropriately

matched to a continuing need in the

ordinary course of business, E.ON

proposes to make equity investments for

the purposes of funding future

employee benefit and nuclear

decommissioning expenditures only if,

at the time of investment, the actuarial

value of the prospective obligations

exceeds the aggregate amount of the

investments that will be held by E.ON

immediately after the investment has

been made. Further, E.ON will not

accumulate an affiliate interest in the

equity of any company purchased to

fund the reserves. During the year 2002,

E.ON will divest shares held in

companies in which E.ON holds an

affiliate interest to reduce E.ON’s

Federal Register / Vol. 66, No. 250 / Monday, December 31, 2001 / Notices 67573

34E.ON holds an interest above 5% in a company,

which it plans to divest in 2002 by either selling

the stock or issuing a bond that would be

exchangeable for the stock of the company or cash.

Applicants state that the terms of the exchange

offer, including when the exchange would be

triggered, have not yet been determined.

35This limit will be applied over the course of

E.ON’s fiscal year and will be based on the value

of the investments at the time they were made.

36Applicants do not expect that significant

services or goods would be provided by members

of the E.ON Group other than E.ON and E.ON

Energie to LG&E Services or other companies in the

LG&E Energy Group.

37Applicants state that, if in the future E.ON

seeks to charge its costs for general administrative

services relating to its corporate-wide objectives,

policies and activities, including costs of senior

management, shareholder services, investor

relations, corporate affairs, strategic planning and

business development, E.ON will file an application

setting forth allocation methods and describing the

proposed transactions in further detail.

interest below 5%.34 Furthermore, on a

going forward basis, E.ON’s additional

net investments in its reserves will be

limited to 25% common stocks.35

E.ON’s annual report on Form U5S will

include a statement reconciling the

reserve investments with the related

long-term liabilities. The statement will

indicate the asset class breakdown of

the reserves.

VII. Intrasystem Provision of Services

A. LG&E Services and the LG&E Energy

Group

In the Powergen Order, the

Commission found that LG&E Services,

Inc.(‘‘LG&E Services’’) met the

requirements of section 13(b) of the Act.

LG&E Services will remain a first-tier

wholly owned subsidiary of LG&E

Energy, will become the service

company under section 13 of the Act for

the E.ON Group upon completion of the

Acquisition, and will continue to

provide services to the members of the

LG&E Energy Group. Except as

otherwise authorized, the operation of

LG&E Services will conform to the

authorization granted in the Powergen

Order.

B. Services Provided by Members of the

Powergen Group and Members of the

E.ON Group

Applicants state that, after the

Acquisition, Powergen and other

members of the Powergen UK Group

(Powergen Group Holdings and all of its

direct and indirect subsidiaries) will

continue to provide services to the

LG&E Energy Group. For example,

members of the Powergen UK Group

will provide management services in the

areas of internal audit, tax and treasury;

and consultation regarding engineering,

research and development projects and

transmission best practices. Applicants

also expect that E.ON and other

members of the E.ON Group, especially

E.ON Energie, will provide services to

LG&E Services and other members of

the LG&E Energy Group after the

Acquisition.36 Those services would

generally be limited to high-level

management, administrative and

technical services.

Applicants state that E.ON does not

intend to render services to its

subsidiaries at a charge and will not

allocate to the LG&E Energy Group

companies, or charge them for, any

general overhead costs incurred at the

E.ON or Powergen level.37 Applicants

state that, to the extent that costs for

services provided by members of the

Powergen UK Group or the E.ON Group

(other than E.ON and Powergen) can be

attributed to a specific member of the

LG&E Energy Group, that member will

be charged such cost directly. Billing

and coordination of services would be

performed by LG&E Services, as

described below. The costs for the

service will be directly assigned,

distributed or allocated by activity,

project, program, work order or other

appropriate basis. The service provider

will use appropriate policies and

procedures to assure that all costs are

identified and attributed to particular

projects, programs or work orders for

purposes of direct cost allocation. As

required by rule 91 under the Act, the

costs allocated across the businesses

served by any service provider will

represent the total true cost of providing

the corporate service. The costs

considered in the allocation will

include: (1) Total payroll and associated

costs; (2) materials and consumable

costs; (3) building and facilities costs;

(4) information systems infrastructure

costs; and (5) other departmental costs.

Records related to services provided by

any service provider to the LG&E Energy

Group companies will be made

available to the Commission staff for

review.

Applicants state that, to the extent

that any services cannot be directly

attributed to a specific LG&E Energy

Group company, members of the LG&E

Energy Group will pay a share of the

costs of services that benefit them. The

portion of the costs attributable to the

LG&E Energy Group companies will be

determined using measures that reflect

the relevant contribution and size of the

individual businesses. With respect to

costs incurred at the Powergen Group

level, allocation of group costs will by

done using four measures (revenues,

operating profit, employee numbers and

net assets) and group costs will be

allocated equally across the four

measures. Revenues are adjusted to

exclude the income resulting from sales

of purchased power within the LG&E

Energy Group. Powergen will use

figures from the latest published

accounts to calculate the percentage of

revenues, operating profit, employee

numbers and net assets on an

annualized basis, and these four

percentages will be averaged to

calculate the group allocation.

Applicants state that LG&E Services

will generally act as the gatekeeper or

coordinator for services flowing to and

from the LG&E Energy Group.

Applicants expect that the majority of

costs billed by members of the

Powergen Group to the LG&E Energy

Group will be paid initially by LG&E

Services, which will then charge the

appropriate service recipient. LG&E

Services will allocate the costs of

service among the LG&E Energy Group

using one of several methods. The

method of cost allocation varies based

on the department rendering the service.

The cost allocation methods used by

LG&E Energy Services are described in

Exhibit J–1 to the Application.

Applicants state that, except as

otherwise authorized by the

Commission, all services provided by

members of the E.ON Group and/or the

Powergen Group to LG&E Services and

the other members of the LG&E Energy

Group will be billed at cost and in

accordance with fair allocation

methods, in accordance with section 13

of the Act and the related rules. If a

service provider provides services for

the benefit of a specific LG&E Energy

Group company, the charge applicable

to that company will be specifically

identified in the invoice. Otherwise, the

service provider’s charges will be

allocated to individual LG&E Energy

Group companies through LG&E

Services’ allocation procedures.

C. Exemptions for Transactions with

Nonutility Companies

Each member of the E.ON Group, the

Powergen Group and the LG&E Energy

Group (including LG&E Services)

requests authorization under section

13(b) of the Act to provide services and

sell goods to nonutility companies in

the LG&E Energy Group, the Powergen

Group and the E.ON Group, at fair

market prices determined without

regard to cost, and requests an

exemption under section 13(b) of the

Act from the cost standards of rules 90

and 91 as applicable to these

transactions, in any case in which the

nonutility subsidiary purchasing these

goods or services is:

67574 Federal Register / Vol. 66, No. 250 / Monday, December 31, 2001 / Notices

(1) A FUCO or foreign EWG which

derives no part of its income, directly or

indirectly, from the generation,

transmission, or distribution of electric

energy for sale within the United States;

(2) An EWG which sells electricity at

market-based rates which have been

approved by the FERC, provided that

the purchaser is not a public-utility

company in the LG&E Energy Group;

(3) A ‘‘qualifying facility’’ (‘‘QF’’)

within the meaning of the Public Utility

Regulatory Policies Act of 1978, as

amended (‘‘PURPA’’), that sells

electricity exclusively (a) at rates

negotiated at arms’’ length to one or

more industrial or commercial

customers purchasing the electricity for

their own use and not directly for resale,

and/or (b) to an electric utility company

other than a public utility in the LG&E

Energy Group at the purchaser’s

‘‘avoided cost’’ as determined in

accordance with PURPA regulations;

(4) A domestic EWG or QF that sells

electricity at rates based upon its cost of

service, as approved by FERC or any

state public utility commission having

jurisdiction, provided that the purchaser

is not a public-utility company in the

LG&E Energy Group; or

(5) A subsidiary engaged in rule 58

activities or any other nonutility

subsidiary that (a) is partially owned by

a member of the LG&E Energy Group,

the Powergen UK Group or the E.ON

Group, (b) is engaged solely in the

business of developing, owning,

operating and/or providing services or

goods to the non-utility subsidiaries

described in clauses (1) through (4)

immediately above, or (c) does not

derive any part of its income from a

public-utility company within the LG&E

Energy Group.

VIII. Reporting

Applicants state that under German

law, E.ON must prepare and publish

consolidated financial information at

least semi-annually. Applicants propose

to provide rule 24 certificates on a

semiannual basis, consistent with the

frequency of financial reporting

required in Germany. The rule 24

certificates will be provided to the

Commission within 180 days after the

end of E.ON’s fiscal year and within 60

days of the end of its second fiscal

quarter and will contain paper copies of

E.ON’s filings of Form 20–F and reports

to shareholders. The semiannual reports

provided to the Commission in rule 24

filings under this Application will be

organized so that all columns showing

amounts in Euros in financial

statements or tables are accompanied by

parallel columns showing U.S. dollar

amounts.

Applicants state that they will file

Form U5S annually within 180 days of

the close of E.ON’s fiscal year. In

addition, as required by the 1934 Act,

and the Securities Act of 1933, as

amended, respectively, E.ON will file

Form 20–F and reports on Form 6–K

containing material announcements as

made. To maintain a consistent

presentation of financial information,

the Applicants propose that the Form

U5S filing will contain: (1) U.S. GAAP

financial statements for all the LG&E

Energy Group companies; and (2) U.S.

GAAP financial statements or financial

statements in the format required by

Form 20–F for (a) E.ON, on a

consolidated basis, and (b) any

intermediate holding companies. The

reporting requirements imposed by the

Commission will enable the

Commission to oversee the operations of

the E.ON companies, including

intrasystem transactions. All amounts

expressed in Euros shall be converted to

U.S. dollars. Form U5S filings will state

amounts in U.S. dollars.

E.ON also will report annually, as a

supplement to the Form U5S, service

transactions among the E.ON system

companies. That report will contain the

following information:

(1) A narrative description of the

services rendered by members of the

E.ON Group or the Powergen Group for

the LG&E Energy Group, by the

members of the LG&E Group for the

E.ON Group or the Powergen Group,

and by the members of the LG&E Energy

Group for each other (other than as

reported on Form U–13–60);

(2) Disclosure of the dollar amount of

services rendered according to category

or department;

(3) Identification of companies

rendering services and recipient

companies; and

(4) Disclosure of the number of LG&E

Energy Group employees engaged in

rendering services to other E.ON system

companies on an annual basis, stated as

an absolute and as a percentage of total

employees.

Applicants also request an exemption

from rule 26(a)(1) under the Act,

regarding the maintenance of financial

statements in conformance with

Regulation S–X, for any subsidiary of

E.ON organized outside the U.S.

Applicants state that E.ON will comply

with Rule 53(a)(2)(ii), which requires

each majority-owned FUCO subsidiary

of a registered holding company to

maintain its books, records and

financial statements in conformity with

U.S. GAAP and requires the registered

holding company to provide the

Commission with access to such books

and records. For each non-majority

owned FUCO subsidiary, Applicants

state that E.ON will endeavor to comply

with Rule 53(a)(2)(iii), which requires

either U.S. GAAP books, records and

financial statements or, upon request,

for E.ON to provide a description and

quantification of material variations

from U.S. GAAP if another

comprehensive body of accounting

principles is followed.

Applicants also will report annually,

as a supplement to the Form U–13–60

filed by LG&E Services, service

transactions among E.ON system

companies (excepting the LG&E Energy

Group) and the LG&E Energy Group.

The report will contain the following

information:

(1) A narrative description of the

services rendered by individual E.ON

system companies (excepting the LG&E

Energy Group) to the LG&E Energy

Group and by the LG&E Energy Group

to other E.ON system companies

(2) Disclosure of dollar amount of

services rendered according to category

or department;

(3) Identification of companies

rendering service and recipient

companies, including disclosure of the

allocation of services costs among the

companies of the LG&E Energy Group;

and

(4) Disclosure of the number of LG&E

Energy Group employees engaged in

rendering services to other E.ON system

companies on an annual basis, stated as

an absolute and as a percentage of total

employees.

With regard to its investments in

EWGs and FUCOs, E.ON proposes to

report the following information in its

semiannual rule 24 certificates:

(1) A calculation of the ratio of E.ON’s

aggregate investment in EWGs and

FUCOs to E.ON’s average consolidated

retained earnings (both as determined in

accordance with Rule 53(a));

(2) A statement of aggregate

investment as a percentage of the

following: total capitalization, net utility

plant, total consolidated assets and

market value of common equity, all as

of the end of that semiannual period;

(3) A statement of E.ON’s authorized

EWG and FUCO investment limit and

the amount of unused investment

authority based on the aggregate

investment as of the date of the report;

(4) Consolidated capitalization ratios

as of the end of that semiannual period;

(5) The market-to-book ratio of E.ON’s

common stock at the end of that

semiannual period;

(6) An analysis of the growth in

consolidated retained earnings, which

segregates total earnings growth

attributable to EWGs and FUCOs from

Federal Register / Vol. 66, No. 250 / Monday, December 31, 2001 / Notices 67575

that attributable to other E.ON

subsidiaries; and

(7) A statement of revenues and net

income of each of E.ON’s EWGs and

FUCOs for the twelve months ended as

of the end of that semiannual period,

with an indication of which EWGs and

FUCOs were acquired during the

reporting period.

For the Commission, by the Division of

Investment Management, pursuant to

delegated authority.

Margaret H. McFarland,

Deputy Secretary.

[FR Doc. 01–32074 Filed 12–28–01; 8:45 am]

BILLING CODE 8010–01–P

SECURITIES AND EXCHANGE

COMMISSION

[Investment Company Act Release No.

25324; 813–202]

Greenwich Street Employees Fund,

L.P., et al.; Notice of Application

December 21, 2001.

AGENCY: Securities and Exchange

Commission (‘‘Commission’’).

ACTION: Notice of application for an

order under sections 6(b) and 6(e) of the

Investment Company Act of 1940

(‘‘Act’’) exempting applicants from all

provisions of the Act and the rules and

regulations under the Act, except

section 9, section 17 (other than certain

provisions of paragraphs (a), (d), (e), (f),

(g), and (j)), section 30 (except for

certain provisions of paragraphs (a), (b),

(e), and (h)), and section 36 through 53,

and the rules and regulations under

those sections.

SUMMARY OF APPLICATION: Applicants

request an order to exempt certain

limited partnerships and other entities

(each a ‘‘Partnership’’) formed for the

benefit of key employees of Citigroup

Inc. and its affiliates from certain

provisions of the Act. Each Partnership

will be an ‘‘employees’’ securities

company’’ within the meaning of

section 2(a)(13) of the Act.

Applicants: Greenwich Street

Employees Fund, LP (‘‘Initial

Partnership’’); Citigroup Inc.; Citigroup

Employee Fund of Funds I, LP;

Citigroup Employee Fund of Funds

(US–UK) I, LP; Citigroup Employee

Fund of Funds (Cayman) I, LP;

Citigroup Employee Fund of Funds

(DE–UK) I, LP; SSB Capital Partners I,

LP; SSB Capital Partners (US–UK) I, LP;

SSB Capital Partners (Cayman) I, LP;

and SSB Capital Partners (DE–UK) I, LP.

FILING DATES: The application was filed

on February 10, 1999 and amended on

August 18, 1999, October 31, 2000,

April 16, 2001 and December 20, 2001.

Hearing or Notification of Hearing: An

order granting the application will be

issued unless the Commission orders a

hearing. Interested persons may request

a hearing by writing to the

Commission’s Secretary and serving

applicants with a copy of the request,

personally or by mail. Hearing requests

should be received by the Commission

by 5:30 p.m. on January 15, 2002, and

should be accompanied by proof of

service on applicants, in the form of an

affidavit or, for lawyers, a certificate of

service. Hearing requests should state

the nature of the writer’s interest, the

reason for the request, and the issues

contested. Persons who wish to be

notified of a hearing may request

notification by writing to the

Commission’s Secretary.

ADDRESSES: Secretary, Commission, 450

Fifth Street, NW., Washington, DC

20549–0609. Applicants, 399 Park

Avenue, New York, New York 10043.

FOR FURTHER INFORMATION CONTACT: John

L. Sullivan, Senior Counsel, at (202)

942–0681, or Nadya B. Roytblat,

Assistant Director, at (202) 942–0564

(Division of Investment Management,

Office of Investment Company

Regulation).

SUPPLEMENTARY INFORMATION: The

following is a summary of the

application. The complete application

may be obtained for a fee at the

Commission’s Public Reference Branch,

450 Fifth Street, NW, Washington, DC

20549–0102 (tel. 202–942–8090).

Applicants’ Representations

1. Citigroup Inc. is a financial holding

company whose businesses provide a

broad range of financial services.

Citigroup Inc. and its affiliates (as

defined under rule 12b–2 under the

Securities Exchange Act of 1934

(‘‘Exchange Act’’)) (‘‘Citigroup’’) have

organized and will organize

Partnerships primarily for the benefit of

eligible current and former employees,

officers, directors, and persons on

retainer of Citigroup (an ‘‘Eligible

Employee’’). The Partnerships are part

of a program designed to create capital

building opportunities that are

competitive with those at other financial

services firms and to facilitate the

recruitment of high caliber

professionals. Participation in a

Partnership is voluntary.

2. A Partnership will be a limited

partnership, a limited liability company,

business trust or other entity organized

under the laws of Delaware or another

state. Citigroup also will form

Partnerships organized under the laws

of jurisdictions outside the United

States to create the same investment

opportunities for Eligible Employees

who are not U.S. residents. The

Partnerships will be operated in

accordance with their respective limited

partnership agreements or other

organizational documents (each, a

‘‘Partnership Agreement’’). Each

Partnership will be formed as an

‘‘employees’ securities company’’

within the meaning of section 2(a)(13) of

the Act and will operate as a closed-end

management investment company,

which may be diversified or nondiversified.

3. Each Partnership will be managed,

operated and controlled by its general

partner, managing member or other

similar entity (‘‘General Partner’’). Each

General Partner, with the exception of

the Initial General Partner (as defined

below), will be a Citigroup entity. The

General Partner or another entity will

serve as investment adviser

(‘‘Investment Adviser’’) to a Partnership.

The Investment Adviser will be (a)

registered as an investment adviser

under the Investment Advisers Act of

1940 (‘‘Advisers Act’’), (b) exempt from

Advisers Act registration requirements

by virtue of section 203(b)(3) of the

Advisers Act, or (c) excluded from the

definition of investment adviser under

the Advisers Act because it is a bank or

a bank holding company (as defined in

the Bank Holding Company Act of

1956). Any entity serving as Investment

Adviser to any Partnership (other than

the Initial Partnership as described

below) will be a Citigroup entity.

4. The Initial Partnership is a limited

partnership that first offered Interests

(as defined below) in Feburary 1999.

The Initial Partnership invests

concurrently with Greenwich Street

Capital Partners II, LP (‘‘Fund II’’) and

other investors organized or managed by

Citigroup or its designees that generally

co-invest with Fund II (‘‘Fund II CoInvestors’’). Pursuant to their respective

limited partnership agreements, the

Initial Partnership, Fund II and Fund II

Co-Investors must each, to the extent

possible, make investments in securities

of portfolio companies on a pari passu

basis with each other on the same terms

and at the same times and dispose of

such securities at the same time, on the

terms and conditions no more favorable

than the terms and conditions of any

other such disposition by any other

such party. Both the Initial Partnership

and Fund II are advised by GSCP (NJ),

LP (‘‘Initial Investment Adviser’’). The

Initial Investment Adviser is wholly

owned by individuals who are

managing members of Greenwich Street

Investments II, L.L.C., which is the

general partner of the Initial Partnership

(‘‘Initial General Partner’’) and the