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As filed with the Securities and Exchange Commission on
August 12, 2005
File No. 70-10310
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________________________________
PRE-EFFECTIVE AMENDMENT NO. 3
TO THE APPLICATION-DECLARATION
ON FORM U-1 UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
_________________________________________________
UNITIL CORPORATION
FITCHBURG GAS AND ELECTRIC LIGHT COMPANY
UNITIL ENERGY SYSTEMS, INC.
UNITIL POWER CORP.
UNITIL REALTY CORP.
UNITIL RESOURCES INC.
UNITIL SERVICE CORP.
6 Liberty Lane West
Hampton, New Hampshire 03842-1720
________________________________________________
(Name of companies filing this statement and
address of principal executive offices)
UNITIL CORPORATION
6 Liberty Lane West
Hampton, New Hampshire 03842-1720
_________________________________________________
(Name of top registered holding company parent)
Mark H. Collin
Senior Vice President, Chief Financial Officer & Treasurer
UNITIL CORPORATION
6 Liberty Lane West
Hampton, New Hampshire 03842-1720
_________________________________________________
(Name and address of agent for service)
The Commission is requested to mail copies of
all orders, notices and communications to:
Sheri E. Bloomberg, Esq.
LeBoeuf, Lamb, Greene & MacRae LLP
125 West 55th Street
New York, New York 10019
The Application-Declaration (File No. 70-10310) previously filed on
June 1, 2005 and amended on June 29, 2005 and July 6, 2005, is hereby amended
and restated as follows:
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTIONS
Unitil Corporation, a New Hampshire corporation ("Unitil") and a
registered holding company under the Public Utility Holding Company Act of 1935,
as amended (the "Act"), and its wholly owned subsidiary companies, Fitchburg Gas
and Electric Light Company ("Fitchburg"), Unitil Energy Systems, Inc. ("Unitil
Energy"), Unitil Power Corp. ("Unitil Power"), Unitil Realty Corp. ("Unitil
Realty"), Unitil Resources, Inc. ("Unitil Resources") and Unitil Service Corp.
("Unitil Service" and, together with Fitchburg, Unitil Energy, Unitil Power,
Unitil Realty and Unitil Resources, the "Subsidiaries"),/1 hereby submit this
application-declaration on Form U-1 (the "Application-Declaration") with the
Securities and Exchange Commission (the "Commission") for the authorization and
approval under Sections 6(a), 7 and 12(b) of the Act and the Rules 45 and 52
thereunder for certain hedging transactions with respect to existing
indebtedness of Unitil or the Subsidiaries in order to manage and minimize
interest rate costs, and certain hedging transactions with respect to
anticipatory debt issuances in order to lock-in current interest rates and/or
manage interest rate risk exposure.
Through its two subsidiaries that are "public utility companies"
within the meaning of Section 2(a)(5) of the Act (Fitchburg and Unitil Energy),
the Unitil system distributes electricity in the southeastern seacoast and
capital city areas of New Hampshire and distributes both electricity and natural
gas in the greater Fitchburg area of north central Massachusetts. Unitil's
public utilities serve approximately 97,500 electric customers and 15,000
natural gas customers in their franchise areas. Unitil Service provides, at
cost, a variety of administrative and professional services on a centralized
basis to its affiliated Unitil companies in accordance with a service agreement
approved by the Commission. Unitil Realty owns and manages the Unitil's
corporate office in Hampton, New Hampshire and leases this facility to Unitil
Service under a long-term lease arrangement. Unitil Resources provides energy
related consulting and management services to customers outside of the Unitil
system of affiliates. Unitil Power formerly functioned as the full requirements
wholesale power supply provider for Unitil Energy. In connection with the
implementation of electric industry restructuring in New Hampshire, Unitil Power
ceased being the wholesale supplier of Unitil Energy on May 1, 2003 and divested
of its long-term power supply contracts through the sale of the entitlements to
the electricity associated with those contracts.
(a) Interest Rate Hedges. Unitil, and to the extent not exempt
pursuant to Rule 52/2, the Subsidiaries, request authorization to enter into
interest rate hedging transactions with respect to existing indebtedness
("Interest Rate Hedges"), subject to certain limitations and
_________________________
/1 For purposes of this Application-Declaration, Unitil and the Subsidiaries
are collectively referred to as the "Applicants." Among the Applicants, Unitil
Energy and Fitchburg are the only "public utility companies" within the meaning
of Section 2(a)(5) of the Act.
/2 In the case of Applicants that are public utility companies, hedging
transactions may not be exempt under Rule 52 because the relevant public utility
commissions may not have jurisdiction over the issuance. For example, the
Massachusetts Department of Telecommunications and Energy does not have
jurisdiction over short-term securities issuances by the public utilities.
restrictions. Interest Rate Hedges would be used as a means of prudently
managing the risk associated with outstanding debt issued pursuant to, and
subject to the limitations of, financing authority granted to the Applicants by
the Commission under the Act or an applicable exemption therefrom by, in effect,
synthetically (i) converting variable-rate debt to fixed-rate debt, (ii)
converting fixed-rate debt to variable-rate debt, and (iii) limiting the impact
of changes in interest rates resulting from variable-rate debt. In no case will
the notional principal amount of any interest rate hedge exceed the face value
of the underlying debt instrument and related interest rate exposure.
Transactions will be entered into for a fixed or determinable period. Thus, the
Applicants will not engage in leveraged or speculative derivative hedging
transactions. Interest Rate Hedges (other than exchange-traded Interest Rate
Hedges) would only be entered into with counterparties ("Approved
Counterparties") whose senior unsecured debt ratings, or the senior unsecured
debt ratings of the parent companies providing a guarantee of the
counterparties, as published by Standard & Poors Rating Services, are equal to
or greater than BBB, or an equivalent rating from Moody's Investors Service or
Fitch Inc.
Interest Rate Hedges will involve the use of financial instruments
commonly used in today's capital markets, such as exchange-traded interest rate
futures contracts and over-the-counter interest rate swaps, caps, collars,
floors, options, forwards, and structured notes (i.e., a debt instrument in
which the principal and/or interest payments are indirectly linked to the value
of an underlying asset or index), or transactions involving the purchase or
sale, including short sales, of U.S. Treasury Securities or U.S. government
agency (e.g., Fannie Mae) obligations, or LIBOR-based swap instruments and
similar products designed to manage interest rate or credit risks. The
transactions would be for fixed periods and stated notional amounts.
(b) Anticipatory Hedges. In addition, Unitil and the Subsidiaries
request authorization to enter into interest rate hedging transactions with
respect to anticipated debt offerings (the "Anticipatory Hedges"), subject to
certain limitations and restrictions. Such Anticipatory Hedges (other than
exchange-traded Anticipatory Hedges) would only be entered into with Approved
Counterparties, and would be utilized to fix and/or limit the interest rate risk
associated with any new issuance through (i) a forward sale of exchange-traded
U.S. Treasury futures contracts, U.S. Treasury Securities and/or a forward-dated
swap (each a "Forward Sale"), (ii) the purchase of put options on U.S. Treasury
Securities (a "Put Options Purchase"), (iii) a Put Options Purchase in
combination with the sale of call options on U.S. Treasury Securities (a "Zero
Cost Collar"), (iv) transactions involving the purchase or sale, including short
sales, of U.S. Treasury Securities, or (v) some combination of a Forward Sale,
Put Options Purchase, Zero Cost Collar and/or other derivative or cash
transactions, including, but not limited to structured notes, caps and collars,
appropriate for the Anticipatory Hedges.
Anticipatory Hedges may be executed on-exchange ("On-Exchange Trades")
with brokers through (i) the opening of futures and/or options positions traded
on the Chicago Board of Trade, the New York Mercantile Exchange or other
financial exchange, (ii) the opening of over-the-counter positions with one or
more counterparties ("Off-Exchange Trades"), or (iii) a combination of
On-Exchange Trades and Off-Exchange Trades. Unitil will determine the optimal
structure of each Anticipatory Hedge transaction at the time of execution.
2
(c) General. The Applicants will comply with Statement of Financial
Accounting Standards ("SFAS") 133 ("Accounting for Derivative Instruments and
Hedging Activities"), SFAS 138 ("Accounting for Certain Derivative Instruments
and Certain Hedging Activities") and SFAS 149 ("Amendment of Statement 133 on
Derivative Instruments and Hedging Activities") or other standards relating to
accounting for derivative transactions as are adopted and implemented by the
Financial Accounting Standards Board ("FASB"). The Applicants represent that
each Interest Rate Hedge and each Anticipatory Hedge will qualify for hedge
accounting treatment under the current FASB standards in effect and as
determined as of the date such Interest Rate Hedge or Anticipatory Hedge is
entered into. The Applicants will also comply with any future FASB financial
disclosure requirements associated with hedging transactions.
Fees, commissions and other amounts payable to the counterparty or
exchange (excluding, however, the swap or option payments) in connection with an
interest rate risk management arrangements will not exceed those generally
obtainable in competitive markets for parties of comparable credit quality.
By order dated June 30, 2003 (Holding Co. Act Release No. 27691, (the
"Short Term Debt Order")), the Applicants are currently authorized to make
unsecured short-term borrowings in the amount of $55 million for Unitil and $35
million for Fitchburg and to operate a Money Pool. Assuming the requested
authority to enter into Interest Rate Hedges and Anticipatory Hedges is granted,
Applicants may enter into Interest Rate Hedges and/or Anticipatory Hedges with
respect to borrowings under the bank lines authorized in the Short Term Debt
Order or any future order issued by the Commission with respect to debt
financing by the Applicants. To the extent that the borrowed funds subject to
the relevant authorized hedging instrument are contributed to the Money Pool,
the related benefits of the hedging instrument will be passed through to the
Subsidiary borrowing the funds through the Money Pool. Similarly, in such cases,
the costs and fees of the hedging instrument will be allocated to the borrowers
of the funds from the Money Pool as part of, and pursuant to the same allocation
formula as, interest charges under the existing Cash Pooling and Loan Agreement.
Following the issuance by the Commission of any approval pursuant to this
Application-Declaration, Applicants intend to amend the Cash Pooling and Loan
Agreement to provide for the allocation of hedging instrument costs and fees as
described above. Applicants request that the Commission grant authority to enter
into hedging transactions for a period of time to run concurrent with the Short
Term Debt Order (currently through June 30, 2006).
Applicants are requesting the proposed authority in order to be able
to more efficiently and flexibly manage their financial risk using techniques
commonly used by utility holding company systems. Indeed, the proposed terms and
conditions of the Interest Rate Hedges and Anticipatory Hedges are substantially
the same as the Commission has approved in other cases (see, PNM Resources,
Inc., Holding Co. Act Release No. 27934 (Dec. 30, 2004); Black Hills Corporation
Holding Co. Act Release No. 27933 (Dec. 29, 2004); Alliant Energy Corporation,
Holding Co. Act Release No. 27930 (Dec. 28, 2004); Ameren Corporation, Holding
Co. Act Release No. 27860 (June 18, 2004), NiSource Inc., Holding Co. Act
Release No. 27789 (Dec. 30, 2003)).
3
The proposed transactions are subject to Rule 54 under the Act, which
refers to Rule 53. Rule 54 under the Act provides that in determining whether to
approve certain transactions other than those involving exempt wholesale
generators ("EWGs") or foreign utility companies ("FUCOs"), as defined in the
Act, the Commission will not consider the effect of the capitalization or
earnings of any subsidiary company which is an EWG or FUCO if Rule 53(a), (b)
and (c) under the Act are satisfied. Unitil represents that it has no "aggregate
investment" in an EWG or a FUCO, as that term is defined in Rule 53(a)(1)(i)
and, therefore, as of March 31, 2005, Unitil's "aggregate investment" did not
exceed the retained earnings limit of Rule 53(a)(1). To the extent applicable,
Unitil will comply with the record-keeping requirements with respect to EWGs and
FUCOs of Rule 53(a)(2) of the Act, the limitation under Rule 53(a)(3) of the Act
on the use of domestic public-utility company personnel to render services to
EWGs and FUCOs, and the requirements of Rule 53(a)(4) of the Act concerning the
submission of copies of certain filings relating to EWGs and FUCOs under the Act
to retail regulatory commissions. Further, none of the circumstances described
in Rule 53(b) under the Act has occurred or is continuing. Rule 53(c) under the
Act is by its terms inapplicable to the transactions proposed herein that do not
involve the issue and sale of securities (including guarantees) to finance an
acquisition of an EWG or FUCO.
The authorization sought herein shall be conditioned on Unitil, Unitil
Energy and Fitchburg maintaining a common equity level (as reflected in the most
recent 10-K or 10-Q filed with the Commission under the Securities and Exchange
Act of 1934, as amended, ("1934 Act") adjusted to reflect changes in
capitalization since the balance sheet date therein) of at least 30% of its
consolidated capitalization during the period of authorization. For purposes of
this test, consolidated capitalization is defined to include, where applicable,
all common stock equity (comprised of common stock, additional paid in capital,
retained earnings, treasury stock and other comprehensive income), minority
interests, preferred stock, preferred securities, equity linked securities, long
term debt, short term debt and current maturities. As of March 31, 2005, 40% of
Unitil's consolidated capitalization was common equity; 42% of Unitil Energy's
capitalization was common equity; and 35% of Fitchburg's consolidated
capitalization was common equity, in each case calculated as set forth above.
In accordance with the terms of the Short Term Debt Order, the
Applicants file, and will continue to file, with the Commission reports on
short-term borrowings and Money Pool transactions on a quarterly basis within 30
days after the end of each calendar quarter, which contain, for each company,
(i) the maximum principal amount of short-term borrowings outstanding, (ii) the
average interest rate for the Money Pool borrowings for the period, (iii) the
maximum amount outstanding during the period for each source of outside
borrowings and (iv) the common equity capital as a percent of total
capitalization (composed of common equity, preferred stock, long-term and
short-term debt) for each of Unitil (on a consolidated basis), and Fitchburg and
Unitil Energy . Following the issuance by the Commission of any approval
pursuant to this Application-Declaration, the Applicants undertake to also
include in such rule 24 certificates information as to the notional amount and
principal terms of any Interest Rate Hedges or Anticipatory Hedges entered into
during the quarter and the identify of the other parties to the transaction
which shall also separately show the outstanding amount of Interest Rate Hedges
or Anticipatory Hedges previously reported.
4
ITEM 2. FEES, COMMISSIONS AND EXPENSES
The fees, commissions and expenses of the Applicants expected to be
paid or incurred, directly or indirectly, in connection with the transactions
described above are estimated as follows:
Legal fees........................................ $6,000
Miscellaneous..................................... $2,000
Total.................................... $8,000
ITEM 3. APPLICABLE STATUTORY PROVISIONS
Sections 6(a), 7, and 12(b) of the Act, and Rules 45 and 52
thereunder, are directly applicable to this Application-Declaration.
ITEM 4. REGULATORY APPROVALS
The entry into Interest Rate Hedges and Anticipatory Hedges by Unitil
Energy Services, Inc. will require approval of the New Hampshire Public Service
Commission and therefore may be exempt from Commission approval under Rule 52.
No state or federal agency other than the Commission has jurisdiction with
respect to any of the proposed transactions other than as described in this
item.
ITEM 5. PROCEDURE
The Commission issued and published on July 8, 2005 the requisite
notice under Rule 23 with respect to this Application-Declaration; and such
notice specified a date of August 1, 2005 as the date after which an order
granting and permitting this Application-Declaration to become effective may be
entered by the Commission. Applicants are unaware of any comments having been
timely filed with the Commission regarding this Application-Declaration.
Applicants request that the Commission enter not later than August 12, 2005, an
appropriate order granting and permitting this Application-Declaration to become
effective.
No recommended decision by a hearing officer or other responsible
officer of the Commission is necessary or required in this matter. The Division
of Investment Management of the Commission may assist in the preparation of the
Commission's decision in this matter. There should be no thirty-day waiting
period between the issuance and effective date of any order issued by the
Commission in this matter, and it is respectfully requested that any such order
be made effective immediately upon the entry thereof.
5
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS
(a) Exhibits
Exhibit No. Description of Exhibit
----------- ----------------------
F-1 Opinion of Counsel
F-2 "Past Tense" Opinion of Counsel (To be filed by
Amendment).
G-1 Proposed Form of Notice (previously filed)
(b) Financial Statements
No. Description of Financial Statement
--- ----------------------------------
FS-1 Unitil Corporation and Subsidiary Companies
Consolidated Actual Balance Sheet and Statement of
Earnings, December 31, 2004 and Unaudited
Actual Balance Sheet and Statement of Earnings,
June 30, 2005 (Filed with the Commission with
Unitil's 10-K for the year ended December 31, 2004
and 10-Q for the quarter ended June 30,
2005, and incorporated by reference herein).
6
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS
None of the matters that are the subject of this
Application-Declaration involve a "major federal action" nor do they
"significantly affect the quality of the human environment" as those terms are
used in Section 102(2)(C) of the National Environmental Policy Act. None of the
proposed transactions that are the subject of this Application-Declaration will
result in changes in the operation of the Applicants that will have an impact on
the environment. The Applicants are not aware of any federal agency which has
prepared or is preparing an environmental impact statement with respect to the
transactions proposed herein.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the Applicants have duly caused this Pre-Effective Amendment No. 3 to
the Application-Declaration to be signed on their behalf by the undersigned
thereunto duly authorized.
Dated: August 12, 2005
UNITIL CORPORATION
By: /s/ Mark H. Collin
----------------------------------------------
Name: Mark H. Collin
Title: Senior Vice President, Chief Financial
Officer & Treasurer
7
LEBOEUF, LAMB, GREEN & MACRAE
L.L.P.
A LIMITED LIABILITY PARTNERSHIP INCLUDING PROFESSIONAL CORPORATIONS
260 Franklin Street
Boston, MA 02110-3173
(617) 748-6800
FACSIMILE: (617) 439-0341
August 12 , 2005
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: Unitil Corporation, et al. (File No. 70-10310)
----------------------------------------------
Ladies and Gentlemen:
This opinion is furnished to the Securities and Exchange Commission
(the "Commission") in connection with the Application-Declaration on Form U-1
(File No. 70-10310) (the "Application-Declaration") of Unitil Corporation (the
"Company" or "Unitil"), a New Hampshire corporation and a registered public
utility holding company under the Public Utility Holding Company Act of 1935, as
amended (the "Act"), and its wholly owned subsidiary companies, Fitchburg Gas
and Electric Light Company ("Fitchburg"), Unitil Energy Systems, Inc. ("Unitil
Energy"), Unitil Power Corp. ("Unitil Power"), Unitil Realty Corp. ("Unitil
Realty"), Unitil Resources, Inc. ("Unitil Resources") and Unitil Service Corp.
("Unitil Service" and, together with Fitchburg, Unitil Energy, Unitil Power,
Unitil Realty and Unitil Resources, the "Subsidiaries"). In the
Application-Declaration the Company and the Subsidiaries requested authorization
and approval under Sections 6(a) and 7 of the Act for certain hedging
transactions with respect to existing indebtedness of Unitil or the Subsidiaries
in order to manage and minimize interest rate costs, and certain hedging
transactions with respect to anticipatory debt issuances in order to lock-in
current interest rates and/or manage interest rate risk exposure.
In connection with this opinion, we have examined originals, or copies
certified to our satisfaction, of the Application-Declaration, the order of the
Securities and Exchange Commission (the "SEC") dated June 30, 2003 (Holding
Company Act Release No. 27691) granting the Company and the Subsidiaries
authority under the Act to issue short-term indebtedness, such corporate records
of the Company and the Subsidiaries, certificates of public officials,
certificates of officers and representatives of the Company, and such other
exhibits, documents, agreements, instruments, and other materials as we
considered necessary or advisable in order to render the opinions set forth
below. In such examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures on all documents
Securities and Exchange Commission
August 12, 2005
Page 2
examined by us, the authenticity of all documents submitted to us as originals,
the conformity to the original documents of all such documents submitted to us
as copies and the authenticity of the originals of such latter documents. As to
any facts material to our opinion, we have, when relevant facts were not
independently established, relied upon the aforesaid records, certificates,
exhibits, documents, agreements, instruments, and other materials. In addition,
we have examined such questions of law as we considered necessary or appropriate
for the purpose of rendering this opinion.
Based on the foregoing, and subject to the final paragraph hereof, we
are of the opinion that when the Commission has taken the action requested by
the Application-Declaration:
(1) All state laws applicable to the transactions described in the
Application-Declaration will have been complied with.
(2) The Company and Unitil Energy are validly organized and duly
existing under the laws of the State of New Hampshire. Fitchburg
is validly organized and duly existing under the laws of the
Commonwealth of Massachusetts.
(3) The debt securities to be issued by the Company and Fitchburg
that underlie hedging transactions authorized by the
Application-Declaration will be valid and binding obligations of
the issuer in accordance with their terms.
(4) The consummation of the proposed hedging transactions will not
violate the legal rights of the holders of any securities issued
by the Company, Unitil Energy or Fitchburg.
The opinions expressed above are subject to the following assumptions
or conditions:
a. The Commission shall have duly entered an appropriate order or
orders granting and permitting the Application-Declaration to be
effective with respect to the hedging transactions described
therein.
b. The Applicants shall be in compliance with the terms of the order
issued by the Commission with respect to the
Application-Declaration.
c. No act or event other than as described herein shall have
occurred subsequent to the date hereof, which would change the
opinions expressed above.
Securities and Exchange Commission
August 12, 2005
Page 3
This opinion is intended solely for the use of the Commission and may
not be relied upon by any other person or used for any other purpose. We are
not, in this opinion, opining on laws other than the federal laws of the United
States and the New Hampshire Business Corporation Act and Title XXXIV (Public
Utilities) of the New Hampshire Revised Statutes. We hereby consent to the use
of this opinion as an exhibit to the Application-Declaration.
Very truly yours,
/s/ LeBoeuf. Lamb, Greene & MacRae LLP