FILE NO.
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 3 TO FORM U-1 APPLICATION/DECLARATION
UNDER SECTION 3(b) AND
RULE 10 OF THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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DUKE ENERGY CORPORATION
526 S. Church Street
Charlotte, North Carolina 28202
(Name of the company filing this application and
address of its principal executive office)
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David L. Hauser
Senior Vice President and
Treasurer
Duke Energy Corporation
526 S. Church Street
Charlotte, North Carolina 28202
(Name and address of agent for service)
Please also submit copies of all correspondence to:
Adam Wenner, Esq.
Catherine O'Harra, Esq.
Vinson & Elkins L.L.P.
The Willard Office Building
1455 Pennsylvania Avenue, N.W.
Washington, DC 20004-1008
J. Curtis Moffatt, Esq.
Van Ness Feldman
A Professional Corporation
1050 Thomas Jefferson St.
Washington, D.C. 20007-3877
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ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION
Applicant Duke Energy Corporation ("Duke Energy"), a North Carolina
corporation, has entered into an Amended and Restated Combination Agreement with
Westcoast Energy Inc. ("Westcoast"), a corporation organized under the laws of
Canada, pursuant to which Duke Energy will acquire the stock of Westcoast in
exchange for $3.5 billion in cash and stock and the assumption of approximately
$5 billion in Westcoast debt (the "Acquisition"). Duke Energy hereby applies
under Section 3(b) of the Public Utility Holding Company Act of 1935, as amended
("1935 Act"), for an order exempting certain foreign companies that will be
acquired by Duke Energy in conjunction with the Acquisition.
Westcoast has three subsidiaries that are public-utility companies
operating exclusively outside the United States ("Non-U.S. Utilities"). None of
the Non-U.S. Utilities, either before or after the Acquisition, will serve
customers in the United States, nor will the Non-U.S. Utilities derive any
income directly or indirectly from sources within the United States. The
Non-U.S. Utilities are as follows:
1. Union Gas Limited ("Union Gas"), a wholly-owned, direct(1) subsidiary
of Westcoast, is engaged in the transportation and storage of natural gas and
the distribution of natural gas to residential, commercial and industrial
customers in Ontario, Canada;
2. Pacific Northern Gas Ltd. ("Pacific Northern"), a 40.04%-owned, direct
subsidiary company of Westcoast, is engaged in the transportation of natural gas
and the distribution of natural gas to residential, commercial, and industrial
customers in British Columbia, Canada; and
3. P.T. Puncakjaya Power ("PJP"), a 42.86%-owned, indirect subsidiary
company of Westcoast, is engaged in the generation and sale of electric power to
industrial customers in Irian Jaya, Indonesia.
Union Gas is a public company. Westcoast directly owns 100% of the voting
common shares of Union Gas stock. The public holds 100% of the Class A, Class B
and Class C preferred, non-voting shares of Union Gas stock. The preferred
shares of Union Gas trade on the Toronto Stock Exchange. The voting common
shares are not listed.
Pacific Northern is a public company and has Class A Non-Voting Common
Shares with a par value of $2.50 each and 6.75% Cumulative Redeemable Preferred
Shares with a par value of $25.00 each that trade on the Toronto Stock Exchange.
Westcoast directly owns 40.04% of the non-voting Class A Common shares of
Pacific Northern and 100% of the voting Class B Common shares, without
intermediate subsidiaries. The public owns the balance of the Class A Common
shares and all (200,000 shares) of the 6.75% Preferred shares.
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1 Union Gas is currently 100% owned by Centra Gas Utilities Inc., which is
100% owned by Centra Gas Holdings Inc., which is 100% owned by Westcoast Gas
Inc., which is 100% owned by Westcoast Gas Holdings Inc., which is 100% owned by
Westcoast. However, these four intermediate companies will be amalgamated into
Westcoast prior to closing.
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Westcoast indirectly owns, through Westcoast (PJP) Holdings, Inc., a
corporation organized under the laws of Canada, a 42.86% share of PJP. Duke
Energy currently indirectly owns, through Duke Energy International PJP Holdings
(Maruritius), Ltd., an Indonesian company, a 42.86% share of PJP. The remaining
14.28% interest in PJP is owned by P.T. Austindo Nusantara Jaya, a limited
liability company established under the laws of the Republic of Indonesia. Upon
and after the effective date of the Acquisition, Duke Energy may, for tax,
legal, regulatory or administrative reasons, restructure the corporate
organization described above.
APPLICANT'S STATEMENTS IN SUPPORT OF APPLICATION
In support hereof, the Applicant states:
(1) Duke Energy is a publicly held corporation organized under North
Carolina law with its principal offices located at 526 S. Church Street,
Charlotte, North Carolina 28202. Duke Energy engages directly and indirectly in
the generation, transmission, distribution and sale of electric energy to retail
and wholesale customers in the States of North Carolina and South Carolina. Duke
Energy is an electric utility company and a public-utility company as such terms
are defined in the 1935 Act.
(2) Union Gas is organized under the laws of Ontario, Canada. Pacific
Northern is organized under the laws of British Columbia, Canada. PJP is
organized under the laws of the Republic of Indonesia. The Non-U.S. Utilities
will not engage in any business other than the acquisition of Canadian or
Indonesian public-utility companies, the supervision of Duke Energy's
investments in Canada and Indonesia, and the participation in the management and
operation of Canadian and Indonesian public-utility companies.
(3) The Non-U.S. Utilities derive no income, either directly or
indirectly, from sources within the United States. The Non-U.S. Utilities are
not qualified to do business in any state of the United States, nor is any
Non-U.S. Utility a public-utility company operating in the United States. The
Non-U.S. Utilities have no plan to derive any income from United States
operations, from any company qualified to do business in any state of the United
States, or from any public-utility company operating in the United States.
(4) Section 3(b) of the 1935 Act provides that the Commission "shall
exempt any subsidiary company, as such, from any provision or provisions of [the
1935 Act] if such subsidiary company derives no material part of its income,
directly or indirectly, from sources within the United States, and neither it
nor any of its subsidiary companies is a public-utility company operating in the
United States," provided that the Commission finds that the application of the
1935 Act to such subsidiary company is "not necessary in the public interest or
for the protection of investors."
(5) None of the Non-U.S. Utilities is a public-utility company
operating in the United States. The proposed investment will not affect the
Non-U.S. Utilities' status as public utility companies subject to regulation by
the laws of the jurisdiction in which the Non-U.S. Utilities are organized and
operate. The Non-U.S. Utilities do not derive any income from United States
operations or sources within the United States. As explained below, regulation
of the Non-U.S.
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Utilities under the 1935 Act is not necessary in the public interest, or for the
protection of investors or consumers. Therefore, as in the following cases, each
of the Non-U.S. Utilities satisfies the standards of section 3(b) and should be
accorded an unqualified exemption, as a subsidiary company, from all provisions
of the 1935 Act. See Public Service Company of Colorado, HCAR No. 26671 (Feb.
19, 1997) ("PSC Colorado"); UtiliCorp United, Inc., HCAR No. 26353 (Aug. 7,
1995) ("UtiliCorp 1995"); UtiliCorp United, Inc., HCAR No. 26918 (Sept. 28,
1998) ("UtiliCorp 1998").
(6) Although the Non-U.S. Utilities would satisfy the requirements under
section 33(a)(3) of the 1935 Act and become a "foreign utility company" ("FUCO")
as defined therein upon the filing of a notice on Form U-57, the capitalization
limits established by section 33(f) would restrict the ability of Duke Energy to
finance the acquisition of the Non-U.S. Utilities as FUCOs(2). The Commission
has previously recognized that section 3(b) provides an alternative route for
foreign acquisitions in identical circumstances. See PSC Colorado, UtiliCorp
1995; UtiliCorp 1998. (These opinions were issued after October 24, 1992, the
date upon which section 33 was added to the 1935 Act.)
(7) The legislative history of the Energy Policy Act of 1992, through
which section 33 became law, makes clear that section 33 was to be read in a
permissive-not a restrictive-manner. Senator Donald Riegle, the Chairman of the
Senate Banking Committee and a primary Senate proponent of the section 33
legislation, stated that "[w]hile section 33 is important, we must remember that
international activities by utilities is permitted by current law. Specifically,
under current law, the Securities and Exchange Commission has the authority to
permit, on a case-by-case basis, utility functions outside the United States
.The provisions of section 33 supplement these foreign options for utility
operations and do not in any way limit the ability to pursue the SEC approval
under current law .We must remember that the purpose of section 33 is to
facilitate foreign investment, not burden it. Congressional Record, 102nd Cong.,
Oct. 8, 1992, 138 Cong. Rec. S. 17625 (emphasis supplied). See also Energy
Policy Act of 1992, H.R. Conf. Report No. 102-1018 at 388, 1992 U.S.C.C.A.N.
2472, 2479 (1992); Entergy Corp., HCAR No. 25706 (Dec. 14, 1992).
(8) Duke Energy will not seek recovery through higher rates to its
domestic regulated utility customers for any possible loss it might sustain by
reason of the proposed investment in the Non-U.S. Utilities or for any
inadequate returns on that investment. Duke Energy's domestic utility customers
will not be put at risk of any adverse financial effects resulting from the
operations of the Non-U.S. Utilities, nor will the ability of the state public
utility commissions of North Carolina and South Carolina, which have regulatory
jurisdiction over Duke Energy's retail rates, to protect the interests of
consumers in their respective states be adversely affected.
(9) Duke Energy has filed herewith, as Exhibits 3 and 4, respectively, its
October 10, 2001 application to the North Carolina Utilities Commission and its
October 12, 2001
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2 In 1994, Duke Energy submitted a Notification of Foreign Utility Company
Status on behalf of PJP. Form U-57, December 16, 1994. Upon obtaining the
exemption requested herein and prior to acquiring the stock of Westcoast, Duke
Energy will withdraw the Notification of Foreign Utility Company Status and PJP
will no longer be a FUCO.
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application to the Public Service Commission of South Carolina (the "State
Commissions"), as amended. Both applications seek approval of the Acquisition
and the issuance of Duke Energy stock in connection with the Acquisition. Among
other things, these applications seek (i) approval of Duke Energy's indirect
acquisition of the Non-U.S. Utilities, and (ii) a determination by the State
Commissions that Duke Energy's stock issuance will be compatible with the public
interest, will be necessary and appropriate for, and consistent with, the proper
performance by Duke Energy of its service to the public as a utility, will not
impair its ability to perform that service, and will be reasonably necessary and
appropriate for such purpose. Duke Energy will supplement this
Application/Declaration with the State Commissions' rulings once they are
issued. Duke Energy has also filed herewith its December 14, 2001 application to
the Federal Energy Regulatory Commission ("FERC") for approval, pursuant to
Section 203 of the Federal Power Act, for its proposed change in control over
Engage Energy America LLC and Frederickson Power L.P., both of which are
subsidiary companies of Westcoast. A copy of the application is filed herewith
as Exhibit 10. On December 20, 2001, the FERC issued public notice of the
filing, with the period for filing comments, protests or interventions closing
on January 11, 2002. Duke Energy has requested that the FERC act on its
application on or before its meeting scheduled for February 27, 2002. Duke
Energy will supplement this Application/Declaration with the FERC's ruling when
it is issued.
(10) Both the North Carolina and South Carolina Public Service
Commissions have previously issued letters to the SEC with regard to Duke
Energy, stating that each Commission "has the authority and resources to protect
ratepayers subject to its jurisdiction and that it intends to exercise its
authority."(3) The Commission has relied on similar certifications granting
exemptions under section 3(b) of the 1935 Act. See, e.g., PSC Colorado.
(11) Duke Energy's domestic utility operations are, and will continue
to be, fully separated from Duke Energy's foreign operations. Moreover, since
Duke Energy is a publicly-traded company subject to the continuous disclosure
requirements of the Securities Exchange Act of 1934, as amended, regulation
under the federal securities laws offers significant additional protections for
the interest of investors. Hence, regulation of the Non-U.S. Utilities as
subsidiaries of a holding company is not necessary for either the public
interest or for the protection of investors.
(12) Duke Energy will maintain separate books of account for the Non-U.S.
Utilities and any of its subsidiaries that may control the Non-U.S. Utilities
and will commit to provide access to those books and records to each State
Commission with retail rate jurisdiction to the extent not already required
under state law. Duke Energy commits that it will maintain corporate separation
from the Non-U.S. Utilities.
(13) On the basis of the facts set forth in this Application/Declaration,
the Commission should grant the Non-U.S. Utilities the exemption without
qualification provided for by section 3(b) of the 1935 Act.
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3 See Duke Energy Form U-57, Notification of Foreign Utility Company Status,
July 15, 1998, adopted by reference in subsequent Duke Energy Form U-57 filings
and filed herewith as Exhibit 6.
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(14) If the Non-U.S. Utilities are exempt without qualification under
Section 3(b) of the 1935 Act, then Duke Energy and Duke Energy's subsidiary
companies that directly or indirectly hold interests in the Non-U.S. Utilities
(the "Intermediate Subsidiary Companies") would be entitled to the exemption
provided for by Rule 10 of the 1935 Act. Duke Energy and the Intermediate
Subsidiary Companies will rely upon Rule 10(a)(1) to provide an exemption
insofar as each is a holding company. Duke Energy and the Intermediate
Subsidiary Companies will rely upon Rule 11(b)(1) to provide an exemption from
the approval requirements of sections 9(a)(2) and 10 to which they would
otherwise be subject.
(15) In addition, if the Non-U.S. Utilities are exempt under Section 3(b)
of the 1935 Act, then Duke Energy and Duke Energy's intermediate subsidiaries
would be entitled under Rule 11(b)(1) to an exemption from Section 9(a)(2) of
the Act.
(16) Duke Energy hereby consents to include, in its annual report on Form
U-33-S, all relevant and appropriate information regarding the Non-U.S.
Utilities.
ITEM 2. FEES, COMMISSIONS AND EXPENSES
An estimate of the fees and expenses to be paid or incurred by the
Applicants in connection with the proposed transaction is set forth below:
Counsel Fees . . . . . . . . . . . . . . . . . . . $10,000
Total . . . . . . . . . . . . . . . . . . . . . . .$10,000
ITEM 3. APPLICABLE STATUTORY PROVISIONS
Sections 3(b), 9(a)(2), and 10(a)(1) and Rules 10 and 11(b)(1) of the 1935
Act are or may be applicable to the proposed transaction described herein. To
the extent any other sections of the 1935 Act may be applicable to the proposed
transaction, Applicant hereby requests appropriate orders thereunder.
ITEM 4. REGULATORY APPROVAL
In addition to the approval of the Commission under Section 3(b) requested
in this Application/Declaration, Duke Energy has sought approval by the State
Commissions for Duke Energy's acquisition of Westcoast, its indirect acquisition
of the Non-U.S. Utilities and its issuance of stock in order to carry out the
Acquisition. Duke Energy's applications to the State Commissions are provided
at Exhibits 3 and 4. In addition, Applicant has received approval from the New
York Public Service Commission for approval of the indirect acquisition by Duke
Energy of Westcoast's subsidiary Empire State Pipeline, an intrastate natural
gas pipeline located in New York State that does not serve any retail
distribution customer (see Exhibit 5).
ITEM 5. PROCEDURE
It is requested that the Commission issue and publish no later than
February 1, 2002 the requisite notice under Rule 23 with respect to the filing
of this Application/Declaration, such notice to specify a date not later than
February 25, 2002 as the date after which an order granting
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and permitting this Application/Declaration to become effective may be entered
by the Commission, and that, in order not to delay the closing date for the
Transaction, the Commission enter not later than February 28, 2002 an
appropriate order granting and permitting this Application/Declaration to become
effective.
Duke Energy hereby waives a hearing with respect to this
Application/Declaration and requests that there be no 30-day waiting period
between the issuance of the Commission's order and the date on which it is to
become effective. Duke Energy hereby waives a recommended decision by a hearing
officer or other responsible officer of the Commission and hereby consents that
the Division of Investment Management may assist in the preparation of the
Commission's decision and/or order.
ITEM 6. EXHIBITS
The following exhibits are hereby filed as a part of this
Application/Declaration:
EXHIBIT 1 Form of Notice.
EXHIBIT 2 Opinion of Counsel [to be filed with the certificate of
notification].
EXHIBIT 3 Application of Duke Energy to the North Carolina Utilities
Commission, dated October 10, 2001, as amended.
EXHIBIT 4 Application of Duke Energy to the Public Service Commission of
South Carolina, dated October 12, 2001, as amended.
EXHIBIT 5 Joint Petition of Duke Energy, Westcoast and 3946509 Canada Inc.
for Approval of Stock Acquisition to the New York State Public
Service Commission, filed October 16, 2001.
EXHIBIT 6 Duke Energy Form U-57, Notification of Foreign Utility Company
Status, July 15, 1998.
EXHIBIT 7 Order of the North Carolina Utilities Commission (to be filed by
amendment).
EXHIBIT 8 Order of the Public Service Commission of South Carolina (to be
filed by amendment).
EXHIBIT 9 Order of the New York State Public Service Commission (to be
filed by amendment).
EXHIBIT 10 Application of Engage Energy America LLC and Frederickson Power
L.P. and Duke Energy Corporation for Approval of Change in
Upstream Control and Resulting Disposition of Jurisdictional
Facilities Pursuant to Section 203 of the Federal Power Act,
dated December 14, 2001.
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EXHIBIT 11 Order of the Federal Energy Regulatory Commission (to be filed
by amendment).
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
The proposed transaction does not involve major federal action having a
significant effect on the environment and to the best of the Applicant's
knowledge, no federal agency has prepared or is preparing an environmental
impact statement with respect to the proposed transaction.
It is requested that copies of all orders, notices and communications with
respect to the above Application/Declaration be served as follows:
David L. Hauser
Vice President and
Treasurer
Duke Energy Corporation
526 S. Church Street
Charlotte, North Carolina 28202
Adam Wenner, Esq.
Catherine O'Harra, Esq.
Vinson & Elkins L.L.P. J. Curtis Moffatt, Esq.
The Willard Office Building Van Ness Feldman
1455 Pennsylvania Avenue, N.W. 1050 Thomas Jefferson St.
Washington, DC 20004-1008 Washington, D.C. 20007-3877
WHEREFORE, Duke Energy respectfully requests that the Commission issue an
order herein determining (i) that the Non-U.S. Utilities are entitled to the
exemption without qualification provided for by Section 3(b) of the 1935 Act and
(ii) that Duke Energy and its intermediate subsidiaries that directly or
indirectly own voting securities of the Non-U.S. Utilities are entitled to the
exemption provided by Rules 10 and 11(b)(1) of the 1935 Act.
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SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, the undersigned company has duly caused this Application/Declaration to be
signed on its behalf by the undersigned thereunto duly authorized.
Respectfully submitted,
DUKE ENERGY CORPORATION
By:
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David L. Hauser
Vice President and
Treasurer
Dated: January , 2002
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