File No. 70-09985
United States Securities and Exchange Commission
Washington, D.C. 20549
________________________________________
Post-Effective Amendment No. 1
to
Form U-1
Application/Declaration
under the
Public Utility Holding Company Act of 1935
________________________________________
E.ON AG Powergen plc
E.ON-Platz 1 City Point
40479 Dusseldorf 1 Ropemaker Street
Germany London EC2Y 9HT
United Kingdom
(Names of companies filing this statement
and addresses of principal executive offices)
________________________________________
E.ON AG
(Name of top registered holding company)
________________________________________
Ulrich Hueppe Chris Salame
General Counsel, Executive Vice President Company Secretary
Dr. Guntram Wuerzberg Powergen plc
Vice President General Legal Affairs City Point
E.ON AG 1 Ropemaker Street
E.ON-Platz 1 London EC2Y 9HT
40479 Dusseldorf United Kingdom
Germany Telephone: 011-44-207-826-2742
Telephone: 011-49-211-4579-388 Facsimile: 011-44-207-826-2889
Facsimile: 011-49-211-4579-610
(Names and addresses of agents for service)
The Commission is also requested to send copies
of any communication in connection with this matter to:
Tia S. Barancik Markian M. W. Melnyk
LeBoeuf, Lamb, Greene & LeBoeuf, Lamb, Greene &
MacRae, L.L.P. MacRae, L.L.P.
125 West 55th Street 1875 Connecticut Ave., N.W.
New York, NY 10019-5389 Washington, D.C. 20009-5728
Telephone: (212) 424-8455 Telephone: (202) 986-8212
Facsimile: (212) 424-8500 Facsimile: (202) 986-8102
Item 1. Description of the Proposed Transaction
A. Introduction
By order dated June 14, 2002, (E.ON AG, et al, Holding Company Act Release
No. 27539), ("June Order"), the Securities and Exchange Commission
("Commission") authorized the acquisition of Powergen plc ("Powergen") by E.ON
AG ("E.ON") (the "Acquisition") and authorized terms of the financing of the
E.ON holding company system as well as certain related transactions. The June
Order granted the Form U-1 Application - Declaration, originally filed in File
No. 70-9961 on September 4, 2001, and subsequently amended by Amendment No. 1,
filed on October 23, 2001, Amendment No. 2, filed on December 21, 2001,
Amendment No. 3, filed on June 11, 2002, and Amendment No. 4, filed on June 14,
2002 (the "Acquisition Application"), and the Form U-1 Application -
Declaration, originally filed in File No. 70-9985 on October 2, 2001, and
subsequently amended by Amendment No. 1, filed on October 23, 2001, Amendment
No. 2, filed on March 13, 2002, and Amendment No. 3, filed on June 11, 2002 (the
"Financing Application").
E.ON, a registered holding company under the Public Utility Holding Company
Act of 1935 ("Act"), owns LG&E Energy Corp. ("LG&E Energy"), a public utility
holding company exempt by order under Section 3(a)(1) of the Act that in turn
owns two public utility companies, Louisville Gas and Electric Company ("LG&E")
and Kentucky Utilities Company ("KU"). E.ON's interest in LG&E Energy is held
indirectly through several intermediate holding companies organized in Germany,
the UK, Luxembourg and the US, including Powergen and Powergen US Investments
Corp. ("PUSIC").
The Financing Application requested that the Commission reserve its
jurisdiction over the issuance of a note by E.ON US Verwaltungs GmbH ("E.ON
US")1 in connection with the transfer of PUSIC to E.ON US (the "Transfer") until
a fair value study is complete and the record has been supplemented to indicate
the value assigned to PUSIC under the study and the amount and other terms of
the note. To simplify its corporate structure, E.ON proposed to transfer PUSIC
from the Powergen chain of companies to E.ON US, a German-organized registered
holding company and a direct subsidiary of E.ON.
This post-effective amendment to the Financing Application completes the
record with regard to the Transfer and seeks a release of jurisdiction so that
E.ON may effect the Transfer. The June Order described the transaction as
follows:
Powergen will continue to hold LG&E Energy through the Powergen
Intermediate Holding Companies, each of which is a registered holding
company, for a period of time not to exceed twelve months after the
Acquisition. This will allow time for E.ON to accomplish a
reorganization (the "Reorganization") in which the ownership of PUSIC,
(one of the Powergen Intermediate Holding Companies and the immediate
parent of LG&E Energy) will be transferred to E.ON US, a direct
subsidiary of E.ON. The
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1 E.ON US Verwaltungs GmbH is in the process of changing its name to E.ON US
Holding GmbH.
Merger Applicants state that the reorganized corporate structure will
take in to account international tax regulations and will clearly
separate the domestic utility operations of the Utility Subsidiaries
from the other businesses of E.ON and Powergen.
The Merger Applicants expect that the transfer of PUSIC will be made
in exchange for cash and/or a note. If issued, it is expected that the
note will be in an amount not to exceed the fair market value of PUSIC
and will bear interest at a market-based rate. The Merger Applicants
request the Commission to reserve jurisdiction over the transfer of
PUSIC and the issuance of the note until the record in this matter has
been supplemented to indicate the amount and other terms of the note.
June Order at 20. Details of the Transfer are provided below.
B. Description of the Transfer
1. Steps of the Transfer
Abbreviated corporate charts showing E.ON and its UK and US holding company
chains before and after the transfer are included as Exhibit A-1 and A-2 to this
post-effective amendment. Currently, E.ON holds LG&E Energy through several
intermediate registered holding companies. E.ON's first tier subsidiary is E.ON
UK Verwaltungs GmbH ("E.ON UK"),2 a German-organized company. E.ON UK owns E.ON
UK plc, a UK company, that in turn owns Powergen, also a UK company.3 Powergen
owns Powergen US Holdings Limited ("PUSHL"), a UK company, which in turn owns
Powergen US Investments ("PUSI"), also a UK company. PUSI owns Powergen
Luxembourg sarl ("PLS"), a Luxembourg company, which in turn holds PUSIC, a
Kentucky corporation.4 PUSIC owns LG&E Energy, also a Kentucky corporation.
The Transfer will be effected in several steps. First, PLS will transfer
99.5% of its 100% shareholding in PUSIC to E.ON US for market value
consideration. E.ON US proposes to pay $1,791,000,000 in cash to PLS as
consideration for approximately 99.5% of the outstanding equity of PUSIC.
PUSIC's value was established by reference to a valuation report prepared by
Standard & Poor's, which was based upon a fair value analysis it had performed
to value all of Powergen's assets for purposes of allocating the price paid by
E.ON for Powergen to its asset and goodwill accounts. A copy of the valuation
report is attached hereto as Exhibit B-1. To ensure that no Luxembourg tax is
payable on this transfer, PLS is required to retain a shareholding in PUSIC with
a value of at least Euro 6 million for more than 12 months.
--------------------------
2 E.ON UK Verwaltungs GmbH is in the process of changing its name to E.ON UK
Holding GmbH.
3 E.ON UK plc and Powergen plc also are in the process of changing to UK private
limited companies or "Ltd.s".
4 Since the acquisition of Powergen by E.ON, the following changes have
occurred. Ownership of PUSIC has been transferred from Powergen Luxembourg
Holdings sarl (10%) and Powergen Luxembourg Investments sarl (90%) to PLS.
Powergen Luxembourg Investments sarl (formerly a wholly-owned subsidiary of
Powergen Luxembourg Holdings sarl) has been liquidated. Under the June Order,
changes to the intermediate holding company chain may be made provided that no
change (i) will result in the introduction of any third party 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 LG&E Energy or its public utility
subsidiary companies.
PLS is expected to use the sale proceeds received on the disposal of its
PUSIC interest to subscribe for non-voting shares issued by Powergen UK
Securities ("PUKS"), a special purpose financing subsidiary held by Powergen.
PUKS will loan these funds to PUSHL, thereby making these funds available to
E.ON's UK group of companies.
In the next step, E.ON US contributes its shareholding in E.ON North
America Inc. ("E.ON NA") that it had acquired from E.ON and VEBA Electronics US
Holding GmbH, an indirect E.ON subsidiary, to PUSIC in exchange for PUSIC common
stock.5
In the last step, PLS transfers its residual 0.5% shareholding in PUSIC to
E.ON US for market value consideration in cash. PLS uses the sale proceeds to
acquire non-voting securities of PUKS as described above. The timing of this
last step will occur more than 12 months after the initial transfer of PUSIC to
E.ON US described in the first step above.
It is notable that PUSIC is transferred for cash consideration only.
Consequently, the issue for consideration in connection with the release of
jurisdiction is limited to whether the Transfer results in an appropriate
corporate structure under the Act, not whether any financing in connection with
the Transfer is appropriate.
2. Resulting Corporate Structure
After the consummation of the Transfer, E.ON will indirectly own LG&E
Energy through two intermediate holding companies that are wholly owned directly
or indirectly and fully controlled by E.ON: E.ON US and PUSIC. LG&E and KU will
remain first-tier subsidiaries of LG&E Energy and will keep their names and
headquarters locations. This corporate structure has the advantage of creating a
clear separation between the U.S. utility operations in the E.ON group of
companies and E.ON's UK businesses. It also involves only German and US
corporations as holding companies with respect to the LG&E Energy group. A chart
depicting the corporate structure of E.ON and the US and UK corporate chains
after the Transfer is included in Exhibit A-2 to this post-effective amendment.
In connection with the Transfer, E.ON also expects to conduct a minor
reorganization of E.ON NA under the authorization to reorganize certain
nonutility companies granted in the June Order. See June Order at 88. E.ON NA, a
Delaware corporation, has served in the past as the holding company for certain
of E.ON's activities in North America, handling finance, legal, tax and other
service functions. E.ON NA owns Fidelia Inc. ("Fidelia"), a finance company
subsidiary organized under Delaware law.
As noted above, E.ON US will contribute its shareholding in E.ON NA to
PUSIC in exchange for additional shares to be issued by PUSIC. Upon completion
of this contribution, E.ON NA may distribute its shareholding of Fidelia Inc.
("Fidelia"), to PUSIC. The resulting flatter corporate structure achieves tax
efficiencies through the formation of a single US consolidated tax group, and
simplifies the overall corporate structure of the E.ON group.
--------------------------
5 At or about this point PUSIC will change its name to E.ON US Investments Corp.
The Transfer will not affect the subscription agreement that is currently
in place between PUSIC and Powergen US Securities Ltd. ("PUSSL"). Under the
subscription agreement, PUSIC subscribed for $10,000 of ordinary stock of PUSSL
and a company that subsequently merged into PUSIC made an initial subscription
of $5 million for 5 different classes of non-voting stock issued by PUSSL. The
terms of the non-voting stock permit PUSSL to make calls for future
subscriptions in respect of those shares of predefined amounts on future dates
specified in the Subscription Agreement. PUSIC then sold the ordinary and
non-voting PUSSL stock to Powergen Luxembourg Holdings sarl ("PLHS"), a
subsidiary of PLS, but under the terms of the Sale and Purchase Agreement
retained the obligation to meet the future calls on the non-voting stock. The
price paid by PLHS for the non-voting stock ($3.1 billion) therefore amounted to
the net present value ("NPV") of the future calls (i.e., effectively their
market value on a discounted cash flow basis). The $3.1 billion consideration
was used to repay the outstanding liabilities owing by Powergen USA (the former
ultimate U.S. parent of LG&E Energy and formerly an intermediate holding company
in the Powergen chain) to the intermediate Luxembourg holding companies under
the loan notes put in place on the initial acquisition of LG&E Energy by
Powergen.
PUSIC therefore has the ongoing commitment to make the calls. The timing
and amounts of the calls (and related security arrangements) are very similar to
those arising under a debt instrument. As a result, under US GAAP (and for the
purposes of determining US taxable income) the payments under the calls (other
than the final payment in respect of each class which is treated as a repayment
of loan principal) are regarded as interest and the NPV of the obligation to
make the future payments is recorded as debt.6
Item 2. Fees, Commissions and Expenses
The total fees, commissions, and expenses expected to be incurred in
connection with the preparation of this post-effective amendment and the
Transfer will be filed by amendment.
Item 3. Applicable Statutory Provisions
The following sections of the Act and the Commission's rules thereunder are
applicable to the proposed transaction:
Sections of the Act Transactions to which section or rule is
applicable:
9(a)(2), 10 Acquisition by E.ON US of the common
stock of PUSIC.
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6 The Acquisition Application noted at 32, n. 27, that "in the event of the E.ON
reorganization [i.e., the Transfer], the stock of PUSIC will be transferred from
the Powergen Intermediate Holding Companies to E.ON US for value payable in the
form of cash or a loan note. PUSIC's obligation in respect of the capital call
described above will remain a continuing obligation of PUSIC."
A. Legal Analysis of the Transfer
Under Section 9(a)(2) of the Act, it is unlawful, without approval of the
Commission under Section 10 of the Act, "for any person . . . to acquire,
directly or indirectly, any securities of any public utility company, if such
person is an affiliate . . . of such company and of any other public utility or
holding company, or will by virtue of such acquisition become such an
affiliate." Under the definition set forth in Section 2(a)(11)(A) of the Act, an
"affiliate" of a specified company means "any person that directly or indirectly
owns, controls, or holds with power to vote, 5 per cent or more of the
outstanding voting securities of such specified company."
Because E.ON US will acquire 100% of the voting securities of PUSIC and,
indirectly, LG&E and KU, E.ON must demonstrate that the Transfer meets the
criteria of Section 10 of the Act and must obtain the Commission's authorization
prior to completing the Transfer. In the June Order the Commission stated that
all of the criteria of Section 10 of the Act were met with respect to E.ON's
acquisition of Powergen and E.ON's indirect acquisition of LG&E and KU. In
addition, the June Order clearly takes notice of the Transfer and the resulting
corporate structure whereby E.ON US acquires ownership of PUSIC and its indirect
public utility subsidiary companies. In particular, the Applicants have already
demonstrated that:
- the Acquisition does not tend towards interlocking relations or
the concentration of control of public utility companies to the
detriment of the public interest or the interest of investors or
consumers;
- the consideration to be paid by E.ON in connection with the
Acquisition is reasonable and fair in relation to the utility
assets underlying the Powergen securities to be acquired;
- the Acquisition will not result in an unduly complicated capital
or corporate structure for the E.ON system;
- the Acquisition will comply with all applicable state laws,
including state laws applicable to combination electric and gas
utilities;
- the Acquisition tends towards the economical and efficient
development of an integrated public utility system and the
additional gas system of LG&E may be retained; and
- the Acquisition is consistent with Sections 8 and 11 of the Act.
The Transfer is merely a subset of the Acquisition and, except to the
extent the Commission reserved jurisdiction over the issuance of a note in
respect of the Transfer and any other relevant aspects of that transaction, the
Transfer therefore also meets all of the above criteria under Section 10 of the
Act. Because no note will be issued as consideration for the Transfer the
discussion below is limited to whether the consideration for the transfer of
PUSIC is fair in relation to the utility assets acquired and whether undue
complication to E.ON's corporate structure or capital structure is caused by the
Transfer.
B. Reasonableness of Consideration
The Consideration to be Paid by E.ON US in Connection with the
Transfer is Reasonable and Fair in Relation to the Utility Assets
Underlying the PUSIC Securities to be Acquired.
Section 10(b)(2) of the Act requires the Commission to determine whether
the consideration to be given by E.ON US to the holders of PUSIC's common stock
in connection with the Transfer is reasonable and whether it bears a fair
relation to the investment in and earning capacity of the utility assets
underlying the securities being acquired.7 The consideration to be paid by E.ON
US has been determined through a valuation study prepared by Standard & Poor's,
an independent third party with a reputation for expertise in the field of
corporate financial analysis.
C. Capital Structure and Corporate Structure Complication
The Transfer Does Not Cause the E.ON System to Have an Unduly
Complicated Capital Structure or Corporate Structure.
Sections 10(b)(3), 11(a) and 11(b)(2) of the Act impose various
requirements as to the corporate and capital structure of the E.ON system
subsequent to the Acquisition.8
E.ON's corporate structure after the Transfer will not be detrimental to
the public interest or the interest of investors or consumers or the proper
functioning of the resulting holding company system. Indeed, the Transfer would
simplify the corporate structure by reducing the number of holding companies
that own a direct or indirect interest in the public utility subsidiaries and
reducing the number of jurisdictions in which those interests are held.
The Transfer also does not adversely affect the capital structure of the
E.ON group because it is a cash transaction. No additional debt is issued that
could increase the leverage of the E.ON group or lead to a decrease in financial
soundness.
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7 Under Section 10(b)(2) of the Act the Commission shall approve an acquisition
unless it finds that "in the case of the acquisition of securities or utility
assets, the consideration, including all fees, commissions, and other
remuneration, to whomsoever paid, to be given, directly or indirectly, in
connection with such acquisition is not reasonable or does not bear a fair
relation to the sums invested in or the earning capacity of the utility assets
to be acquired or the utility assets underlying the securities to be acquired."
8 Under Section 10(b)(3) of the Act the Commission shall approve an acquisition
unless it finds that "such acquisition will unduly complicate the capital
structure of the holding-company system of the applicant or will be detrimental
to the public interest or the interest of investors or consumers or the proper
functioning of such holding company system." Section 11(a) of the Act requires
the Commission to examine the corporate structure of a registered holding
company system "to determine the extent to which the corporate structure of such
holding-company system and the companies therein may be simplified, unnecessary
complexities therein eliminated, voting power fairly and equitably distributed
among the holders of securities thereof, and the properties and business thereof
confined to those necessary or appropriate to the operations of an integrated
public-utility system." Section 11(b)(2) requires the Commission to guard
against complicated corporate structures and the unfair distribution of voting
power among holding company security holders and, in that connection, to take
action as necessary to cause a holding company to "cease to be a holding company
with respect to each of its subsidiary companies which itself has a subsidiary
company which is a holding company."
Item 4. Regulatory Approvals
No U.S. federal or state regulatory approvals, other than the authorization
of this Commission, are required in connection with the Transfer.
Item 5. Procedure
Applicants respectfully request the Commission to issue on order releasing
jurisdiction and permitting the Transfer to proceed as described in this
post-effective amendment as soon as possible and not later than January 31,
2003. The Transfer was described extensively in E.ON's Financing Application (at
41) and Acquisition Application (at 31). A notice of the Financing Application
was issued by the Commission on March 12, 2002 (Holding Co. Act Release No.
27497) and the Acquisition Application notice was issued on December 21, 2001
(Holding Co. Act Release No. 27482). No public comments were received on the
Financing Application and the Acquisition Application drew comments from two
individuals that were unrelated to the Transfer. The request for reservation of
jurisdiction over the Transfer was made in the Financing Application and,
accordingly, Applicants request that the Commission deem that adequate notice of
the Transfer has been provided and no comments were received with respect
thereto. Based on the prior notice of the Financing Application the Commission
may proceed to issue an order releasing jurisdiction and authorizing the
Transfer forthwith.
A recommended decision by a hearing or other responsible officer of the
Commission is not needed to authorize the Transfer. The Division of Investment
Management may assist in the preparation of the Commission's decision. There
should be no waiting period between the issuance of the Commission's order and
the date on which it is to become effective.
Item 6. Exhibits and Financial Statements
Exhibit List
A. Exhibits
A-1 Corporate Chart of the E.ON US and UK Chains Prior to the Transfer (to be
filed under Form SE).
A-2 Corporate Chart of the E.ON US and UK Chains After the Transfer (to be
filed under Form SE).
B-1 Valuation Report Prepared by Standard & Poor's.*
C-1 Opinion of Counsel.*
D-1 Past-Tense Opinion of Counsel.*
(*) To be filed by amendment.
B. Financial Statements
None.
Item 7. Information as to Environmental Effects
The transaction proposed herein neither involves a "major federal action"
nor "significantly affects the quality of the human environment" as those terms
are used in Section 102(2)(C) of the National Environmental Policy Act, 42
U.S.C. Sec. 4321 et seq. Consummation of the transaction will not result in
changes in the operations of E.ON and its subsidiaries that would have any
impact on the environment. No federal agency is preparing an environmental
impact statement with respect to this matter.
SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, the Applicants have duly caused this Amendment to be signed on their
behalf by the undersigned thereunto duly authorized on the dates indicated. The
signature of the Applicants and of the persons on their behalf are restricted to
the information contained in this application which is pertinent to the
application of the respective companies.
E.ON AG
By: /s/ Dr. Guntram Wurzberg By: /s/ Dr. Patrick Wolff
------------------------ ---------------------
Name: Dr. Guntram Wurzberg Name: Dr. Patrick Wolff
Title: Vice President General Legal Affairs Title: General Legal Affairs
Date: December 30, 2002 Date: December 30, 2002
Powergen plc
By: /s/ Dr. Guntram Wurzberg
------------------------
Name: Dr. Guntram Wurzberg
Title: Vice President General Legal Affairs,
E.ON AG
Date: December 30, 2002