(As filed with the Securities and Exchange Commission on June 3, 2002)
File No. 70-9965
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Amendment No. 2
to
APPLICATION-DECLARATION
ON
FORM U-1/A
UNDER THE
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
___________________________________________
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)
__________________________________________
Ameren Corporation
1901 Chouteau Avenue
St. Louis, Missouri 63103
(Name of top registered holding company,
parent of each applicant or declarant)
___________________________________________
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)
___________________________________________
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
2
The Application-Declaration filed in this proceeding on September 14,
2001, as amended and restated in its entirety by Amendment No. 1, filed on
February 5, 2002, is hereby further amended as follows:
1. Item 1 - Description of Proposed Transaction is amended and restated
in its entirety to read as follows:
"1.1 Introduction. Ameren Corporation ("Ameren"), a registered holding
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 for
tax credits under Section 42 of the Internal Revenue Code ("Code") or historic
building or other qualified rehabilitation projects that qualify for tax credits
under Section 47 of the Code, in each case located in the United States.
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, 2001, Ameren, through UEDC and CIC, held passive investments
totaling $8,380,273 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 (including
leasing activities, rent collection and property maintenance) resides in the
general partner or managing member of the venture (in the case of LLCs)(3) or in
an independent management company.
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(1) See Ameren Corporation, Holding Co. Act Release No. 26809 (Dec. 30, 1997).
(2) These investments are held through the St. Louis Equity Fund and the
Illinois Equity Fund.
(3) State LLC statutes typically allow the members of an LLC to provide for the
management of the LLC by a managing member. See, e.g., Delaware Limited
Liability Company Act, ss.18-402. As indicated below, Ameren and its
subsidiaries represent that they will invest in LLCs only as a non-managing
member, and that their rights (including consent rights) under the relevant
membership agreement will be no greater than the rights typically accorded
limited partners under a limited partnership statute.
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Attached hereto as Exhibit H (Revised) 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, 2001. Certain of the projects listed also
qualify for historic building rehabilitation credits.
1.2 Proposal to Invest in Additional Projects . Ameren, through UEDC
and CIC, or one or more other non-utility intermediate subsidiaries of Ameren
formed specifically for the purpose of investing in Tax Credit Projects (as
defined below),(4) requests authority to invest up to $125 million in total from
time to time through December 31, 2005 in existing or new low-income housing
projects or historic building or other qualified rehabilitated building projects
("Tax Credit Projects") that are located in the United States and qualify for
Federal tax credits under Section 42 and/or Section 47 of the Code. In many
cases these investments will also qualify for State tax credits. As in the past,
Ameren will not 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," as defined under Section 2(a)(11) of the Act, of Ameren.
Accordingly, Ameren will invest in such ventures as a limited partner in one or
more limited partnerships and/or as a non-managing member in one or more LLCs,
with rights that are substantially the same as rights typically accorded limited
partners under limited partnership statutes.(5) Further, in each case,
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(4) 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
Release No. 27053 (July 23, 1999).
(5) Under limited partnership statutes that have been adopted in most states,
limited partners may not participate in the control of the business of the
partnership without risking becoming liable to third parties for the
obligations of the partnership. See, e.g., Delaware Revised Uniform Limited
Partnership Act, as amended 2001 ("DRULPA"), ss.17-303(a). However, such
statutes typically provide that specified actions by a limited partner will
not constitute participation in the control of the business of the
partnership, such as consulting with the general partner, requesting
meetings of the partnership, or exercising the right to consent to limited
number of actions by the partnership that could affect the limited
partners' rights. See, e.g., DRULPA, ss.17-303(b). Consistent with consent
rights that may be exercised by limited partners under any applicable
limited partnership statute, Ameren and its subsidiaries anticipate that,
as a limited partner, they would typically have the right to approve all or
some of the following actions: the dissolution and winding up of the
partnership; any sale, exchange or mortgage of partnership assets; the
admission of new partners; the incurrence or renewal of any indebtedness of
the partnership; any change in the nature of the business of the
partnership; any amendment to the partnership agreement; a merger or
consolidation; indemnification of any partner; and any transaction
involving an actual or potential conflict of interest. Such approval rights
are necessary and appropriate in order to enable limited partners to
protect their interests in the partnership. Ameren and its subsidiaries
represent that their rights (including consent rights) as non-managing
members in any manager-managed LLC will be no greater that those of a
limited partner in a limited partnership.
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responsibility for the day-to-day management of these ventures (including
leasing activities, rent collection and property maintenance) will reside in the
general partner or managing member of the venture (in the case of LLCs) or in an
independent management company. Ameren commits that it will dispose of its
ownership interest in each Tax Credit Project upon becoming fully vested in the
tax credits, including any state credits.
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, 2005. 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 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
Credit Program. Likewise, Ameren has earned tax credits under Section 47 of the
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. Therefore, to avoid
recapture of the credits, Ameren would have to retain its investment for five
years after the in service date. 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 Rule 24 Certificates. Ameren proposes to file certificates
pursuant to Rule 24 within 45 days after the end of each six-month period,
commencing with the period ending December 31, 2002 (which initial report shall
include the required information for all activity authorized hereunder beginning
with the effective date of the order in this proceeding and ending December 31,
2002), which shall include:
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i. The consolidated balance sheet and twelve-month statement of income
for UEDC and CIC as of the end such six-month period;
ii. The amount of revenues and any other form of compensation received
by UEDC or CIC during each six-month period ending June 30 or December 31, as
applicable, from any and all Tax Credit Projects owned, directly or indirectly,
by UEDC or CIC;
iii. The name of each new Tax Credit Project company in which an
investment was made during such six-month period, and, upon request, a copy of
the applicable organizational document;
iv. The amounts of any investments by UEDC and CIC during the six-month
period in Tax Credit Projects and cumulative comparison with the authorization
received in this proceeding; and
v. The cumulative number of any and all Tax Credit Projects and any
other investment position in any form of non-utility assets by UEDC and CIC at
the end of each six-month period.
The same information would also be provided for any new intermediate
subsidiary that may be formed by Ameren for the purpose of investing in Tax
Credit Projects."
2. Item 3.2 -Rule 54 Analysis is amended and restated to read as
follows:
"Rule 54 provides that the Commission shall not 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 $535,939,525, or approximately 31.5% of Ameren's
"consolidated retained earnings" (also as defined in Rule 53(a)(1)) for the four
quarters ended March 31, 2002 ($1,699,880,250). 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.
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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."
3. Exhibit F, Opinion of Counsel and Exhibit H (Revised), Tax Credit
Investments at December 31, 2001, are filed herewith.
4. The following additional financial statements of Ameren are filed
herewith (by incorporation by reference):
FS-3 - Ameren Consolidated Balance Sheet as of December
31, 2001, and Consolidated Statement of Income and
Consolidated Statement of Cash Flows for the year
ended December 31, 2001 (Incorporated by reference to
Annual Report on Form 10-K for the year ended
December 31, 2001) (File No. 1-14756).
FS-4 - Ameren Consolidated Balance Sheet as of March 31,
2002, and Consolidated Statement of Income and
Consolidated Statement of Cash Flows for three months
then ended (Incorporated by reference to Quarterly
Report on Form 10-Q for the period ended March 31,
2002) (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 amendment
to be signed on their behalf by the undersigned thereunto duly authorized.
AMEREN CORPORATION
UNION ELECTRIC DEVELOPMENT CORPORATION
By: /s/ Steven R. Sullivan
Name: Steven R. Sullivan
Title: Vice President, General Counsel
and Secretary
CIPSCO INVESTMENT COMPANY
By: /s/ Steven R. Sullivan
Name: Steven R. Sullivan
Title: Secretary
Date: June 3, 2002