(As filed with the Securities and Exchange Commission on September 14, 2001)
File No. 70-[____]
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
APPLICATION-DECLARATION
ON
FORM U-1
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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AMEREN CORPORATION
UNION ELECTRIC DEVELOPMENT CORPORATION
CIPSCO INVESTMENT COMPANY
1901 Chouteau Avenue
St. Louis, Missouri 63103
(Names of companies filing this statement and
addresses of principal executive offices)
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AMEREN CORPORATION
1901 Chouteau Avenue
St. Louis, Missouri 63103
(Name of top registered holding company,
parent of each applicant or declarant)
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Steven R. Sullivan
Vice President and General Counsel
Ameren Services Company
1901 Chouteau Avenue
St. Louis, Missouri 63103
(Name and address of agent for service)
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The Commission is requested to send copies of all notices, orders and
other communications in connection with this Application-Declaration to:
Ronald S. Gieseke, Esq. William T. Baker, Jr., Esq.
Ameren Services Company Thelen Reid & Priest LLP
1901 Chouteau Avenue 40 West 57th Street, Suite 2500
St. Louis, Missouri 63103 New York, New York 10019
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ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION.
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1.1 Introduction. Ameren Corporation ("Ameren"), a registered holding
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company, owns all of the outstanding common stock of Union Electric Company
("Union Electric") and Central Illinois Public Service Company ("CIPS").
Together, Union Electric and CIPS serve approximately 1.5 million electric and
300,000 retail gas customers in portions of Missouri and Illinois, including St.
Louis. Ameren hereby requests authorization pursuant to Section 9(c)(3) of the
Public Utility Holding Company Act of 1935, as amended (the "Act") to invest
through subsidiaries in one or more low-income housing projects that qualify or
will qualify for tax credits under Section 42 of the Internal Revenue Code
("Code") and historic building or other qualified rehabilitation projects that
qualify or will qualify for tax credits under Section 47 of the Code
(collectively, "Tax Credit Projects").
In its order approving the combination of Union Electric and CIPS to form
Ameren,1 the Commission authorized Ameren to retain investments held by Union
Electric Development Corporation ("UEDC"), a wholly owned non-utility subsidiary
of Union Electric, and CIPSCO Investment Company ("CIC"), a direct non-utility
subsidiary of Ameren, in low income housing properties that qualify for Low
Income Housing Tax Credits ("LIHTC") under Section 42 of the Code. As of
December 31, 2000, Ameren, through UEDC and CIC, held passive investments
totaling $6,923,708 in various separate limited partnerships or limited
liability companies (LLCs) that own and manage low-income housing properties.2
These investments were made, or committed to, over a period of years since 1988.
Neither Ameren nor any of its subsidiaries participates actively in the
development, management, or operation of these properties. In each case,
responsibility for the day-to-day management of these ventures resides in the
general partner or managing member of the venture (in the case of LLCs) or in an
independent management company.
Attached hereto as Exhibit H is a list of the low-income housing projects
currently held by UEDC and CIC, and the aggregate investment in such projects as
of December 31, 2000. Certain of the projects listed also qualify for historic
building rehabilitation credits.
1.2 Proposal to Invest in Additional Projects. Ameren, through UEDC and
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CIC, or one or more other non-utility subsidiaries formed specifically for such
purpose,3 requests authority to invest up to $125 million in total from time
to time through December 31, 2006 in existing or new low-income housing
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1 See Ameren Corporation, Holding Co. Act Release No. 26809 (Dec. 30, 1997).
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2 These investments are held through the St. Louis Equity Fund and the
Illinois Equity Fund.
3 The Commission has previously authorized Ameren and its non-utility
subsidiaries to organize and acquire the equity securities of one or more
intermediate subsidiaries formed exclusively for the purpose of acquiring,
holding and/or financing the acquisition of other exempt or non-exempt
non-utility subsidiaries. See Ameren Corporation, et al., Holding Co. Act
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Release No. 27053 (July 23, 1999).
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projects, historic building or other qualified rehabilitated building projects,
and/or "brownfield remediation" projects (collectively, "Tax Credit Projects")
that qualify or are expected to qualify for the Federal and/or State tax
credits. As in the past, Ameren does not expect to take any active role in the
development, management or operation of any Tax Credit Project and will not
acquire any interest in any venture holding a Tax Credit Project if, as a result
thereof, such venture would become an "affiliate" of Ameren.
Ameren and its subsidiaries will continue to undertake appropriate due
diligence activities in connection with such investments and manage such
investments in order to protect the tax credits that each Tax Credit Project is
entitled to and to assure that the physical properties are properly maintained.
These activities will include reviewing and analyzing financial statements
generated by the general partners, managing member or third-party property
manager against the approved budget for the investments and conducting due
diligence assessments to determine that the properties remain in compliance with
the provisions of all applicable Federal and State regulations. Investment
management in this context may also include on-site inspections to determine
that the physical structures and grounds are maintained as quality affordable
housing.
In general, a separate limited partnership or manager-managed LLC would be
established for each new qualifying Tax Credit Project. This structure will
allow for financing each Tax Credit Project on a stand-alone basis under the
control of an unaffiliated third party, insulate each investment property from
any liabilities that may arise in connection with the development or management
of any other Tax Credit Project, and facilitate compliance with the requirements
of Sections 42 of the Code (as applicable to low income housing properties) and
Section 47 of the Code (as applicable to certified historic structures and other
qualified rehabilitated buildings).
Opportunities to invest in a specific Tax Credit Project, directly or
through investments in syndicated funds, are evaluated by the Ameren's Treasury
Department in conjunction with the Tax Department on a case-by-case basis. The
financial analysis considers the future cash flows related to the capital
contribution made and the expected tax credits that will be earned by the
partnership or LLC over the term of the investment. Since each investment is
analyzed on a case-by-case basis, this economic analysis is modified to account
for differing assumptions.
As described above, this Application-Declaration does not seek approval to
invest in any specific partnership or LLC, but rather seeks general approval for
the investment of up to $125 million in total in Tax Credit Projects during the
period through December 31, 2006. The requested amount of investment authority
is consistent with Ameren's 5-year forecast as shown on Exhibit I.
1.3 Description LIHTC Program. The LIHTC program has provided Ameren (and
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Union Electric and CIPSCO Inc. before the formation of Ameren) a major incentive
to invest in low-income housing projects by generating a stream of tax credits
that reduce Ameren's federal and state income tax liability. Generally, the
owner of a qualified LIHTC property must agree to rent the units to persons with
sufficiently low incomes as defined in Section 42 of the Code for at least
fifteen years. In this way, the LIHTC program has resulted in the creation of a
substantial amount of affordable housing. Ameren believes that there is a
continuing need for affordable housing, in both Missouri and Illinois, as well
as in other regions of the country, and thus seeks authorization to make
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additional investments in LIHTC properties. Each state has an annual allocation
of federal tax credits under Section 42 of the Code in the amount of $1.25 per
capita. Tax credits are allocated annually in a competitive process, so there is
no way to predict which housing projects will be awarded credits in any given
year.
Under the LIHTC program, equal annual tax credits are available over a
ten-year period payable over eleven years, with the first and last years
prorated. Under Section 42(h)(6)(A) of the Code, no credit is allowed for any
taxable year unless an agreement between the housing project owner and the
applicable state housing credit agency is in effect as of the end of such
taxable year. Furthermore, pursuant to Sections 42(h)(6)(B)(i), 42(h)(6)(D) and
42(h)(6)(E)(ii) of the Code, such an agreement must prohibit any increase in
gross rent for a period ending on the later of (a) the date specified by such
agency in the agreement or (b) 15 years after the date when the building is
placed in service. Thus, even though the flow of tax credits for an LIHTC
property stops after ten years, the property remains subject to rent and income
restrictions for at least fifteen years.
Given these requirements of Section 42 of the Code and the limitations
imposed by state housing credit agencies on LIHTC properties, Ameren may need to
maintain its direct or indirect investment interest in each LIHTC project for a
period up to 15 years to protect its investment in the property.
1.4 Description of Historic Structures and Rehabilitated Buildings Tax
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Credit Program. Likewise, Ameren has earned tax credits under Section 47 of the
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Code through investments in "certified historic structures" (defined as
structures that are either listed in the National Register or located in a
registered historic district and certified by the Secretary of the Interior as
being of historic significance), as well as other types of "qualified
rehabilitated buildings" (which could include apartment and office buildings,
factories, warehouses, etc.) that were first placed in service before 1936. This
program was designed to rehabilitate and extend the usefulness of historic
structures in order to preserve a sense of history and retain our architectural
heritage and character (in the case of "certified historic structures") and to
materially extend the useful life and/or significantly upgrade the usefulness of
other types of buildings (in the case of "qualified rehabilitated buildings").
The tax credit is based on the qualified rehabilitation expenditures, as defined
under the Code and regulations. It is equal to 20% in the case of "certified
historic structures" and 10% in the case of other rehabilitated buildings. These
credits are subject to possible recapture if the rehabilitated property is
transferred before five years after it is placed in service. In addition to the
federal tax credits, Ameren may also qualify for tax credits that are available
under state law (including in Missouri) with respect to investments in historic
building rehabilitation projects.
1.5 Description of "Brownfield" Environmental Remediation Tax Credit
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Program. Ameren also may obtain state income tax credits under Section 447 of
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the Missouri State Tax Code through qualified investments in so-called
"brownfield" sites that require environmental remediation in order to extend the
useful life of a business property. The tax credit is based on a combination of
qualified expenditures for environmental remediation and job creation by the
businesses that occupy the renovated properties, as defined in the tax
regulations. The credit is equal to 2.1% of the qualified investment in
purchased or leased real estate or purchased or leased equipment per year, and
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is cumulative. Ameren requests authority to make passive investments in projects
qualifying for these tax credits in Missouri or similar credits that may be
available from time to time under the laws of other states in which Ameren or
its subsidiaries have a state income tax liability.
ITEM 2. FEES, COMMISSIONS AND EXPENSES.
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The estimated fees, commissions and expenses incurred or to be incurred in
connection with filing this Application-Declaration will not exceed $10,000.
Transactional costs incurred in connection with making any particular investment
authorized herein will vary depending upon, among other things, the size and
complexity of any particular transaction. In general, these costs would be
incurred primarily in connection with performing due diligence and investigation
and negotiating the transactional documents to which UEDC, CIC or other Ameren
subsidiary would become a party.
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
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In this Application-Declaration, Ameren is seeking authorization pursuant
to Section 9(c)(3) of the Act to invest, through UEDC, CIC or one or more
subsidiaries formed specifically for such purpose, in additional Tax Credit
Projects through the acquisition of interests in limited partnerships and
manager-managed LLCs from time to time through December 31, 2006. These
investments will be substantially identical to those in which Ameren already
holds an interest. Most importantly, Ameren is not seeking authorization to
change its current role as a passive investor in such projects. Ameren's
activities would be limited to managing its investments in Tax Credit Projects,
review and analysis of the financial statements generated by third-party
property management firms, and the conduct of due diligence in order to ensure
that Tax Credit Projects remain eligible for the tax credits.
As indicated, under the 1997 merger order, as recently modified,4 the
Commission allowed Ameren to retain the existing investments of UEDC and CIC in
LIHTC properties. Other new registered holding companies have also been
authorized to retain preexisting passive investments in LIHTC properties, as
well as historic structures and other rehabilitated buildings that qualify for
tax credit projects. See e.g., WPL Holdings, Inc., Holding Co. Act Release
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No. 26856 (Apr. 14, 1998); Exelon Corporation, Holding Co. Act Release No. 27256
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(Oct. 19, 2000); and CP&L Energy, Inc., Holding Co. Act Release No. 27284
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(Nov. 27, 2000). In Exelon Corp., the Commission stated that such interests are
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retainable if they are "passive," are made for the purpose of obtaining the tax
credits, and are "self-liquidating," i.e., the assets wind down as the tax
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credits expire. The Commission has also authorized, on a programmatic basis
similar to that proposed in this Application-Declaration, new investments of
this type by registered holding companies, subject, generally, to the limitation
that no affiliation is created between a holding company and any venture owning
or operating a Tax Credit Project. See e.g., Georgia Power Company, Holding Co.
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Act Release No. 26220 (Jan. 24, 1995); and Alliant Energy Corporation, et al.,
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4 In the 1997 merger order, the Commission directed Ameren to sell or reduce
its ownership in certain LIHTC properties held through investments in
manager-managed LLCs to below 5%. The Commission subsequently eliminated
this requirement. See Ameren Corporation, Holding Co. Act Release No. 27421
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(June 27, 2001).
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Holding Co. Act Release No. 27060 (Aug. 13, 1999) and Holding Co. Act Release
No. 27418 (June 11, 2001) (eliminating service territory restriction contained
in prior order).
3.2 Rule 54 Analysis. Rule 54 provides that the Commission shall not
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consider the effect of the capitalization or earnings of any "exempt wholesale
generator" ("EWG") or "foreign utility company" ("FUCO"), as defined in
Sections 32 and 33, respectively, in which a registered holding company holds an
interest in determining whether to approve any transaction unrelated to any EWG
or FUCO if the requirements of Rule 53 (a), (b) and (c) are satisfied. These
standards are met.
Rule 53(a)(1): Ameren's "aggregate investment" (as defined in
Rule 53(a)(1)) in EWGs is currently $430,981,000, or approximately 26.7% of
Ameren's "consolidated retained earnings" (also as defined in Rule 53(a)(1)) for
the four quarters ended June 30, 2001 ($1,616,777,000). Ameren does not
currently hold an interest in any FUCO.
Rule 53(a)(2): Ameren will maintain books and records enabling it to
identify investments in and earnings from each such EWG and FUCO in which it
directly or indirectly acquires and holds an interest. Ameren will cause each
domestic EWG in which it acquires and holds an interest, and each foreign EWG
and FUCO that is a majority-owned subsidiary, to maintain its books and records
and prepare its financial statements in conformity with U.S. generally accepted
accounting principles ("GAAP"). All of such books and records and financial
statements will be made available to the Commission, in English, upon request.
Rule 53(a)(3): No more than 2% of the employees of Ameren's domestic
public utility subsidiaries will, at any one time, directly or indirectly,
render services to EWGs and FUCOs.
Rule 53(a)(4): Ameren will submit a copy of each Application or
Declaration, and each amendment thereto, relating to any EWG or FUCO, and will
submit copies of any Rule 24 certificates required thereunder, as well as a copy
of the relevant portions of Ameren's Form U5S, to each of the public service
commissions having jurisdiction over the retail rates of Ameren's domestic
public utility subsidiaries.
In addition, Ameren states that the provisions of Rule 53(a) are not made
inapplicable to the authorization herein requested by reason of the occurrence
or continuance of any of the circumstances specified in Rule 53(b). Rule 53 (c)
is inapplicable by its terms.
ITEM 4. REGULATORY APPROVAL.
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No state commission and no federal commission, other than this Commission,
will have jurisdiction over the transactions proposed herein.
ITEM 5. PROCEDURE.
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The applicants request that the Commission issue a notice under Rule 23
with respect to the filing of this Application-Declaration as soon as
practicable. It is further requested that the Commission issue an appropriate
order granting and permitting this Application-Declaration to become effective
as soon as practicable following the end of the required notice period, and that
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there should be no thirty-day waiting period between the issuance and the
effective date of any order issued by the Commission in this matter.
The applicants hereby waive a recommended decision by a hearing officer or
other responsible officer of the Commission and hereby consent that the Division
of Investment Management of the Commission may assist in the preparation of the
Commission's decision in this matter, unless said Division opposes the matters
proposed herein.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.
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(a) Exhibits.
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A - None.
B - None.
C - None.
D - None.
E - None.
F - Opinion of Counsel. (To be filed by amendment).
G - Form of Federal Register Notice.
H - List of Ameren's Current LIHTC Investments.
I - Tax Credit Pro Forma. (Filed confidentially pursuant
to Rule 104).
(b) Financial Statements.
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FS-1 - Ameren Consolidated Balance Sheet as of
December 31, 2000, and Consolidated Statements of
Income and Consolidated Condensed Statement of Cash
Flows for the year ended December 31, 2000
(Incorporated by reference to Ameren Form 10-K for
the period ended December 31, 2000) (File No. 1-14756).
FS-2 - Ameren Consolidated Balance Sheet as of June 30, 2001,
and Consolidated Statements of Income and Consolidated
Condensed Statement of Cash Flows for the period ended
June 30, 2001 (Incorporated by reference to Ameren
Form 10-Q for the period ended June 30, 2001
(File No. 1-14756).
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SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, as amended, the undersigned companies have duly caused this
Application-Declaration to be signed on its behalf by the undersigned thereunto
duly authorized.
AMEREN CORPORATION
UNION ELECTRIC DEVELOPMENT CORPORATION
By: /s/ Steven R. Sullivan
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Name: Steven R. Sullivan
Title: Vice President, General Counsel
and Secretary
CIPSCO INVESTMENT COMPANY
By: /s/ Steven R. Sullivan
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Name: Steven R. Sullivan
Title: Secretary
Date: September 14, 2001
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