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are members of the 17 active systems listed in the table above, and 22 are members of systems excluded from the active list.

Of the above-mentioned 2,235 companies, 928 with assets aggregating approximately $13 billion at their respective dates of divestment have been divested by their respective parents and are no longer subject to the Act as components of registered systems. The balance of 1,307 companies consists of 793 which were released from the regulatory jurisdiction of the Act as a result of dissolutions, mergers and consolidations and 514 which ceased to be subject to the Act as components of registered systems as a result of exemptions granted under Sections 2 and 3 of the Act or orders pursuant to Section 5(d) of the Act finding that such companies had ceased to be holding companies.

SECTION 11 MATTERS AND OTHER SIGNIFICANT DEVELOPMENTS

IN ACTIVE REGISTERED HOLDING COMPANY SYSTEMS

Section 11 Matters

At the close of fiscal year 1961, there was pending before the Commission a plan filed by Middle South Utilities, Inc. under Section 11(e) providing for the exchange of its common stock for the 3.18 percent publicly held shares of common stock of New Orleans Public Service Inc., a public utility subsidiary of Middle South. The plan provided for the exchange of each share of common stock of New Orleans for 2% shares of common stock of Middle South. During the current fiscal year the Commission approved the plan and it was ordered enforced and carried out by a Federal Court.2

Also at the close of the previous fiscal year there was pending before the Commission a plan filed by National Fuel Gas Co. for the elimination of the 5.95% minority interest in its subsidiary, Pennsylvania Gas Company. On February 19, 1962, the Commission approved the plan, and in April 1962, an order was entered by a Federal court enforcing the plan.*

During this fiscal year Granite City Generating Company (Voting Trustees) filed a plan under Section 11(e) of the Act with respect to distribution of the cash remaining from the sale of Granite City's assets, after retirement of mortgage bonds. The plan proposed that, after the payment of fees of the Voting Trustees and all liquidating and other expenses, the balance would be distributed to the holders of the voting trust certificates of the electric utility company. Subsequent to the close of the fiscal year, the Commission approved the plan and in December 1962 it was ordered enforced and carried out

: Holding Company Act Release No. 14533 (October 19, 1961), enforced by order of District Court, E.D, La., December 1, 1961 (Civ. No. 11646).

? Holding Company Act Release No. 14575.
*W.D. Pa., Civ. No. 62-140.
6 Holding Company Act Release No. 14739 (November 5, 1962).

by a Federal court. Prior proceedings in this matter are reported at page 110 of the 27th Annual Report.

During the fiscal year C. E. Burlingame Corporation, a registered holding company, filed a plan of dissolution purusant to Section 11(e) of the Act. Subsequent to the close of the fiscal year, the Commission approved the plan and issued an order under Section 5(d) declaring that Burlingame would cease to be a holding company and that its registration would no longer be in effect upon the consummation of specified transactions.?

Just before the close of the fiscal year, Eastern Utilities Associates filed Step 2 of a Section 11(e) plan which contemplates the sale of the common stock of Valley Gas Co. to the public common stockholders of Blackstone Gas & Electric Co. and the shareholders of Eastern Utilities Associates. This is the final step to be taken to divest the gas properties from the System. Prior proceedings are discussed at page 109 of the 27th Annual Report.

On February 20, 1958, the Commission issued its Findings, Opinion and Order pursuant to Section 11(b) (1) permitting the retention of all of the New England Electric System's electric properties. Jurisdiction was reserved to consider at later hearings the retainability of the gas properties. During the present fiscal year briefs were filed and exchanged by New England Electric System and the Commission's Division of Corporate Regulation. Oral argument was heard by the Commission on June 12, 1962, and at the close of the fiscal year the matter was under advisement.

There exists a problem under Section 11(b) (1) in the Middle South Utilities system relating to the retainability of gas and transportation properties together with electric properties by New Orleans Public Service Inc. On March 21 and 22, 1962, two bills were introduced in the Congress (H.R. 10872 and H.R. 10898, 87th Cong., 2d Sess.) which provided generally that no law of the United States shall be held to require or to authorize any department or agency of the Federal Government to require New Orleans Public Service Inc. to divest itself of control of, or any interests in, its facilities for the transportation of passengers and the distribution of gas in the City of New Orleans. No action was taken on these bills by the Congress and no proceedings have been instituted by the Commission.'

On December 20, 1961, the Commission issued its order approving a substantial number of the fees and expenses incurred in connection

& S.D. III. Civil Action No. 3234.
* Holding Company Act Release No. 14676 (July 30, 1962).
• 38 S.E.C. 193.

. No further action was taken during this fiscal year with respect to certain Section 11(b) problems of several other registered holding company systems noted at pages 104, 105 and 108 of the 27th Annual Report.

with a Section 11(d) proceeding resulting in approval of a plan requiring the elimination of the minority interest in Arkansas Fuel Oil Corporation, a subsidiary of Cities Service Co.10 Hearings were held with respect to the remaining fees and expenses, briefs were filed, and the Commission heard oral argument. At the close of the fiscal year, the matter was under advisement.

The Commission has held with court approval that the existence of a public minority interest in the common stock of a subsidiary of an integrated registered public utility holding company system constitutes an inequitable distribution of voting power within the meaning of Section 11(b) (2). Such minority interests have been eliminated in several systems by plans filed under Section 11(e). There still remain several systems where minority interests exist as to which no proceedings have been instituted by the Commission or proposed by holding company systems. These include one or more subsidiaries of Allegheny Power System, Columbia Gas System and Eastern Utilities Associates. New England Electric System has minority interests in several of its gas utility subsidiaries. As noted above, the retainability of the gas properties is under advisement by the Commission. Other Developments

Reargument was heard on January 9, 1962 on an application by Union Electric Company for exemption from the Holding Company Act pursuant to Section 3(a) (2), and on April 2, 1962, the Commission issued its Findings, Opinion and Order granting the application.

On January 3, 1962, the Commission approved the proposed acquisition by General Public Utilities of $52,500,000 face amount of letters of credit issued through a group of banks as consideration for the sale by that company of its entire holdings of securities in Manila Electric Company to Philippine private interests.12 As a result, the operations of the General Public Utilities are now confined to the States of Pennsylvania and New Jersey.

On April 2, 1962, New England Electric System filed a declaration regarding the issuance and sale of 872,786 of its common shares pursuant to a rights offering on the basis of one new share for each 15

11

10 Holding Company Act Release No. 14551. For the previous history of the proceeding, see the Commission's 27th Annual Report, page 107, and the 26th Annual Report at pages 134-135.

11 Holding Company Act Release No. 14615. 13 Holding Company Act Release No. 14566.

shares held. It proposed that bids be invited pursuant to Rule 50 promulgated under the Act for standby compensation during the subscription period. The Commission permitted the declaration to become effective,13 and bids were invited, the subscription price being set at $21 a share. A bid was submitted for standby compensation of $1,658,293 or $1.90 per share to purchase the unsubscribed shares at the subscription price. The company rejected the bid and filed an amended declaration proposing to proceed with the rights offering at the same subscription price but without any underwriting, which the Commission authorized.14 Subscriptions were received for 612,440 of the 872,786 shares offered, or approximately 70%. On August 1, 1962, a further amendment proposing to offer the remaining 260,346 shares to the public at competitive bidding was filed and was approved by the Commission.15 Under this proposal 4 bids were received, the highest bid specifying a price of $22.97 to the company and an offering price to the public of $23.50 per share. The company accepted this bid and thereby completed the marketing of the offering.

FINANCING OF ACTIVE REGISTERED PUBLIC UTILITY HOLDING

COMPANIES AND THEIR SUBSIDIARIES

During the fiscal year 1962, 11 of the active registered holding company systems issued and sold for cash, by public distribution or directly to stockholders, 17 issues of long-term debt and capital stocks aggregating $295 million 16 pursuant to authorizations granted by the Commission under Sections 6 and 7 of the Act.17 All of the financing in 1962 was for the purpose of raising additional capital, except that in one case a portion of the funds obtained was used to refund a $3 million issue of preferred stock having a higher dividend rate.

The following table shows the amounts and types of securities issued and sold by registered holding companies and their subsidiaries during 1962:

13 Holding Company Act Release No. 14639 (May 16, 1962).
14 Holding Company Act Release No. 14653 (June 14, 1962).
15 Holding Company Act Release No. 14679 (August 3, 1962).

16 Dollar amounts of all securities are computed at gross proceeds (the amounts paid for the securities by investors).

17 The systems which did not sell stock or long-term debt securities to the public are : Central & South West Corp. ; Delaware Power & Light Co.; General Public Utilities Corp.; Granite City Generating Co.; National Fuel Gas Co.; Ohio Edison Co.; and Philadelphia Electric Power Co.

Securities issued and sold for cash to the public and financial institutions by active registered holding companies and their subsidiaries, fiscal year 1962

[In millions)

[blocks in formation]

• These securities were sold on July 25, 1961, at which time Union Electric Co. was subject to the Act as a registered holding company. On Apr. 2, 1962, the Commission granted the company an exemption from the provisions of the Act pursuant to Section 3(a)(2) thereof. Holding Company Act Release No. 14615.

The table does not include securities issued and sold by subsidiaries to their respective parent holding companies, issuance of short-term notes to banks, portfolio sales by any of the system companies, or securities issued for stock or assets of non-affiliated companies. These issuances and sales also required authorization by the Commission except in the case of the issuance of notes having a maturity of less than 9 months where the aggregate amount does not exceed 5% of the total capitalization of the company. The issuance of such securities is exempt by the provisions of Section 6(b) of the Act. Competitive Bidding

All of the 17 issues of securities sold for cash in 1962, as shown in the preceding table, were offered for competitive bidding pursuant to the requirements of Rule 50 promulgated under the Act, although one of such issues ultimately was sold by other means.18

As described at pages 109–110 of the 27th Annual Report, Valley Gas Company was organized for the purpose of acquiring and operating the gas properties formerly owned by Blackstone Valley Gas and Electric Company, a subsidiary of Eastern Utilities Associates, a registered holding company. In payment for the gas properties, Valley issued $4.5 million of its first mortgage bonds and $1.5 million of its long-term promissory notes to Blackstone. At that time the Commission granted an exception from the competitive bidding

18 This one issue was that of the common shares of New England Electric System as to which see page 86–87, supra.

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