APPENDIX A

KANSAS CITY POWER & LIGHT COMPANY

Condensed Balance Sheets as of March 31, 1948, Per Books, and Pro Forma Giving Effect to the Proposed Issuance and Sale of $12,000,000 Principal Amount of--% First Mortgage Bonds, 80,000 shares of--% Preferred Stock ($100 par value) and the Prepayment of $3,860,000 of Short-Term Notes

APPENDIX B

KANSAS CITY POWER & LIGHT COMPANY

Condensed Income Statements for the Twelve Months Ending March 31, 1948, Per Books and Pro Forma Reflecting the Proposed Issuance and Sale of $12,000,000 Principal Amount of First Mortgage Bonds --% Series Due 1978 and 80,000 Shares of --% Preferred Stock ($100 par value) and the Prepayment of $3,860,000 of Short-Term Notes.

For the purposes of these statements the company assumed an interest rate of 3% on the new bonds.

bActual dividends declared or paid for the twelve months ending March 31, 1948, amounted to $443,333.33. The excess of $63,333.33 represents dividends for April and May, 1948 on the 3.80% preferred stock declared in March, 1948.

CFor the purposes of these statements the company assumed a dividend rate of 4-3/4% on the new preferred stock.

SOUTHERN NATURAL GAS COMPANY

File No. 70-1787. Promulgated June 10, 1948

(Public Utility Holding Company Act of 1935--Sections 6 (a) and 7)

ISSUE AND SALE OF SECURITIES BY REGISTERED HOLDING COMPANY

Declaration filed pursuant to Sections 6 (a) and 7 of the Act by a registered holding company which is also a natural gas pipe line company respecting the issuance and sale of $ 28,000,000 principal amount of bonds at competitive bidding pursuant to Rule U-50 and the issuance of $11,550,000 principal amount of 2-1/2% Serial Notes in exchange for a like principal amount of 2% Serial Notes presently outstanding, permitted to become effective, subject to certain

conditions.

ACQUISITION OF SECURITIES BY ISSUER

Declaration filed pursuant to Section 12 (c) of the Act by registered holding company respecting acquisition of presently outstanding notes in exchange for new notes, permitted to become effective, the Commission making no adverse findings.

APPEARANCES:

Frank Field and Harold J. Griffin, for the Division of Public Utilities of the Commission.

H. D. McHenry, Birmingham, Alabama, and Allen S. Hubbard, of Hughes, Hubbard & Ewing, New York, N. Y., for Southern Natural Gas Company.

Stanley Law Sabel, of Chadbourne, Hunt, Jaeckel & Brown for the purchasers of the bonds of Southern Natural Gas Company.

FINDINGS AND OPINION

Southern Natural Gas Company (Southern''), a registered holding company which is also a subsidiary of Federal Water and Gas Corporation (Federal"), a registered holding company, has filed an application-declaration, and an amendment thereto, with this Commission pursuant to Sections 6 (a), 7 and 12 (c) of the Public Utility Holding Company Act of 1935 ("Act") and Rules U-42 and U-50 thereunder regarding the issuance and sale by Southern at competitive bidding of $28,000,000 principal amount of First Mortgage Pipe Line Sinking Fund Bonds, --% Series Due 1968. Southern also proposes to issue $11,550,000 principal amount of 2-1/2% Serial Notes in exchange for a like principal amount of its presently outstanding 2% Serial Notes, such 2-1/2% Serial Notes to be in the same principal amounts and have the same maturities as the 2% Serial Notes to be retired.

A public hearing was held in respect of this matter after appropriate notice and, on the basis of the record therein, the Commission makes its findings.

28 S.E.C.--35--8252

114

Southern, a corporation organized under the laws of Delaware, owns and operates a natural gas pipe line system extending from gas fields in eastern Texas and Louisiana to its markets in Mississippi, Alabama and Georgia. It sells natural gas at wholesale to 7 distributing companies and 3 municipalities and directly to certain industrial consumers and other pipe line companies. Among the distributing companies served by Southern are its subsidiary companies, Alabama Gas Company, Birmingham Gas Company, and Mississippi Gas Company which subsidiaries purchase all their natural gas requirements from Southern.1

Federal owns 765,022 shares (approximately 54%) of the outstanding common stock of Southern. Federal has pending a plan pursuant to Section 11 (e) of the Act, which provides, among other things, for the distribution of these shares to Federal's stockholders and the liquidation and dissolution of Federal. In connection with this liquidation proceeding, certain officers, directors, and stockholders of Federal and predecessor companies of Federal have applied to intervene and have requested the Commission to consider certain claims they assert against Federal. In addition, New York Water Service Corporation, a former subsidiary of Federal, has filed a petition in such proceeding, requesting the Commission to order a hearing on certain claims it asserts against Federal and, pending such hearing, to set up a reserve to cover said asserted claims. These matters are now pending before the Commission. Southern owns certain production properties and controls others through leases and purchase contracts. At the present time it does not produce any substantial amount of its requirements. In the twelve months ended March 31, 1948, Southern purchased approximately 87% of its gas requirements from non-affiliated producers and 13% from Southern Production Company, formerly a subsidiary of Southern and now a subsidiary of Federal.

The present rated delivery capacity of the Southern pipe line system is 294,500 mcf per day. Southern has received authorization from the Federal Power Commission to increase its delivery capacity to its present markets (with certain minor extensions) to 384,500 mcf per day and has pending before that Commission an application to increase such capacity to 420,000 mcf per day and to serve ten additional small communities located near its principal lines.'

1 Southern has two other subsidiaries, Apex Gas Company, which is a small separate natural gas pipe line company supplying gas to two non-affiliated distributing companies, and Chattanooga Gas Company, which distributed by-product gas, purchased from a non-affiliated company, in Chattanooga and environs. In an opinion dated June 25, 1946 permitting the acquisition of Chattanooga by Southern we made no finding as to the ultimate retainability of Chattanooga by Southern under the provisions of Section 11 (b) (1) of the Act. The record contains a statement that Southern is prepared to give consideration to the sale of Chattanooga in the event it receives a satisfactory offer for its purchase.

The record indicates that, as of the date of the hearing herein, the company had no knowledge of any person proposing to oppose the granting of the application to increase the delivery capacity to 420,000 mcf.

302972 O-55 - 9

The record contains an estimate made by Ralph E. Davis, a non-affiliated petroleum engineer, that the economically recoverable gas reserves of the company from properties owned or controlled through leases or gas purchase contracts exceed 3 trillion cubic feet. On the basis of a system capacity of 420,000 mcf per day he estimated that these reserves would be adequate to meet the system requirements for a period of about 20 years. It is Davis' opinion that new discoveries in areas close to the Southern system should enable Southern, in competition with others, to secure gas supplies which, with those presently controlled, would be adequate to meet these requirements for a period of more than 25 years.'

Southern proposes to use $14,000,000 of the net proceeds from the sale of the bonds to retire the $5,000,000 principal amount of its 1-3/4% Notes, due September 17, 1949, and the $9,000,000 principal amount of its 2-3/16% Notes, due May 1, 1956. The balance of the proceeds together with cash resources of the company aggregating approximately $18,000,000 will be used in the years 1948 and 1949 to construct additions to its properties, including the facilities to increase the delivery capacity of its system as outlined above.

Attached hereto as Appendix A are condensed corporate and consolidated balance sheets of Southern as at April 30, 1948, per books and pro forma giving effect to the proposed transactions. Based on these balance sheets, the corporate and consolidated capitalization and surplus of Southern and its subsidiaries are as follows:

3 Material introduced into the record from files of the Federal Power Commission contains opinions of another non-affiliated engineer and a company engineer that the gas reserves in place owned or controlled by the company are in excess of the estimate of the company's economically recoverable reserves made by Davis.