As filed with the SEC on January 10, 2003.
File No. 70-9849
United States Securities and Exchange Commission
Washington, D.C. 20549
________________________________________
Post-Effective
Amendment No. 3
to an Application/Declaration on
Form U-1
under the
Public Utility Holding Company Act of 1935
________________________________________
National Grid Transco plc
1-3 Strand
London WC2N 5EH
United Kingdom
(Names of companies filing this statement
and addresses of principal executive offices)
________________________________________
National Grid Transco plc
(Name of top registered holding company)
________________________________________
James P. Meehan
Counsel
National Grid USA Service Company, Inc.
25 Research Drive
Westborough, Massachusetts 01582
Telephone: (508) 389-4684
Facsimile: (508) 389-3518
(Names and addresses of agents for service)
The Commission is also requested to send copies
of any communication in connection with this matter to:
Thomas B. Reems
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
1875 Connecticut Ave., N.W.
Suite 1200
Washington, D.C. 20009-5728
Telephone: (202) 986-8000
Facsimile: (202) 986-8102
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Item 1. Description of the Proposed Transaction
A. Background Information
On January 16, 2002, the U.S. Securities and Exchange Commission
("Commission") issued an order authorizing the acquisition of NM Holdings, Inc.
("NiMo"), by National Grid Group plc (now, National Grid Transco plc ("Grid
Transco")), a registered holding company under the Public Utility Holding
Company Act of 1935, as amended, (the "Act") and related transactions ("NiMo
Merger Order"). 1 In that order, the Commission granted the request of Grid
Transco and its registered holding company subsidiaries to retain many of the
non-utility subsidiaries and businesses of NiMo and reserved jurisdiction over
the retention of NM Properties, Inc. ("NM Properties"), its subsidiaries and
businesses. The NiMo Merger Order requires Grid Transco, by January 10, 2003, to
provide additional information regarding these companies and either justify
their retention or propose their divestiture.
Grid Transco now submits this post-effective amendment to File 70-9849 to
request that the Commission authorize the retention of NM Properties, its
subsidiaries, investments and their businesses.
B. NM Properties, Its Subsidiaries, Investments and Businesses.
NM Properties and its subsidiaries are engaged directly and indirectly in
various real estate activities, which are described in greater detail in Item 3.
In addition to its direct operations, NM Properties is also a holding company
for the subsidiaries described in Item 3. The real estate held by NM Properties
and its subsidiaries was acquired by Niagara Mohawk Power Corporation ("Niagara
Mohawk"), an indirect public utility subsidiary company of Grid Transco, and its
predecessor companies over the previous 150 years to support its utility
operations. These real estate holdings consist of land that was acquired for
construction of dams, transmission lines and other transmission facilities such
as substations; land formerly used for the generation of electricity in
connection with the operation of hydroelectric facilities; and land acquired for
planned but unrealized generation facilities and other facilities and
operations. The land is no longer used by or useful to Niagara Mohawk in its
utility operations. As discussed in the description of each subsidiary, NM
Properties and its subsidiaries are engaged in the disposal
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1 National Grid Group plc, Holding Co. Act Release No. 27490 (January 16, 2002).
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or retention of this real property. NM Properties, its subsidiaries and
companies in which they have invested often engage in basic development
activities such as subdividing, clearing or making basic improvements to
property in order to make it attractive for sale. Except as noted in Item 3,
they do not undertake to make major improvements to the properties. In a limited
number of situations described in Item 3, additional contiguous real estate was
acquired to enhance the value of the original Niagara Mohawk parcel.
Grid Transco does not intend to transfer additional real estate to NM
Properties and its subsidiaries, has no plans for these entities to otherwise
acquire additional real estate, and is looking for opportunities to dispose of
the real estate currently held by these companies. However, because the real
estate activities described in the application are retainable businesses under
the Act, Grid Transco has not proposed a fixed time frame to divest or dissolve
subsidiaries and investments other than those currently slated for dissolution.
It is anticipated that the current state of the upstate New York economy, the
impacts of former utility use on some of these real estate holdings, as well as
other factors will make sale of some of the properties difficult. The absence of
a fixed divestiture date gives Grid Transco maximum flexibility to dispose of
the property at an attractive price. In addition, while Grid Transco seeks
authority to retain the leases into which NM Properties, its subsidiaries and
investments have already entered, as described in Item 3, it does not intend for
NM Properties to enter into additional leases directly or indirectly.
C. Request for Authority
Grid Transco requests that the Commission permit it to directly or
indirectly retain NM Properties and its subsidiaries, their investments and
their businesses.
Item 2. Fees, Commissions and Expenses
Grid Transco will estimate the fees, commissions, and expenses it expects
to incur in connection with this application in an amendment.
Item 3. Applicable Statutory Provisions
Section 11(b)(1) of the Act is applicable to Grid Transco's request to
retain NM Properties and its subsidiaries, their investments and their
businesses.
4
Section 11(b)(1) limits the non-utility businesses of a registered holding
company to those that are "reasonably incidental, or economically necessary or
appropriate to the operations of such integrated public-utility system," on a
finding by the Commission that such interests are "necessary or appropriate in
the public interest or for the protection of investors or consumers and not
detrimental to the proper functioning" of the integrated system. The Commission
has interpreted these provisions to require (i) the existence of an operating or
functional relationship between the utility operations of the registered holding
company and the non-utility activities sought to be retained2 and (ii) that the
retention be in the public interest3. A non-utility business may also be
retained if it evolved out of the system's utility business, the investment is
not significant in relation to the system's total financial resources and the
investment has the potential to produce benefits for investors and/or
consumers.4
NM Properties and its subsidiaries are engaged both directly and indirectly
through investments in other companies in various real estate activities. The
Commission has previously authorized retention of these types of businesses by
other registered holding companies, and pursuant to this precedent and for the
reasons set forth in the description of these companies, NM Properties, its
subsidiaries, their investments and their businesses are retainable. Except as
noted, all the real estate mentioned in these descriptions is the type of land
formerly owned by Niagara Mohawk as described in Item 1B.
a. NM Properties, Inc. is a New York corporation engaged in real estate
activities and holds the securities of several subsidiaries. NM Properties has
several distinct lines of direct businesses:
i. the development and sale of real estate.5
ii. the management of real estate which is difficult to sell due to the
necessary environmental indemnifications and which may be held indefinitely.6
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2 See generally, Michigan Consolidated Gas Co., Holding Co. Act Release No.
16763 (June 22, 1970), aff'd, 444 F.2d 913 (D.C. Cir. 1971).
3 See, e.g., id. quoting General Public Utilities Corp., Holding Co. Act Release
No. 10982 (Dec. 28, 1951); United Light and Railways Co., Holding Co. Act
Release No. 12317 (Jan. 22, 1954).
4 CSW Credit, Inc., Holding Co., Act Release No. 25995 (1994); Jersey Central
Power and Light Co., Holding Co. Act Release No. 24348 (March 18, 1987).
5 This business is retainable under Conectiv, Holding Co. Act Release No. 26832
(Feb. 25, 1998) (discussion of Delmarva Capital Investments, Inc.).
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iii. Management and harvesting of forest lands principally within the Adirondack
Park retained for long term silvaculture. These lands have been subjected to a
conservation and public recreation easement in favor of the New York State
Department of Environmental Conservation, which makes them unviable for any
other practical use.7
b. Hudson Pointe, Inc. ("Hudson Pointe") is a wholly owned subsidiary of NM
Properties and a New York corporation. It had previously owned and developed a
parcel of land surrounding a former hydroelectric station into a 91-lot
subdivision. All the lots have been sold and the company intends to wind-up its
affairs and dissolve within one year.8 In addition to the land acquired from
Niagara Mohawk, Hudson Pointe acquired contiguous land to guarantee access to a
roadway and obtain government approvals for the subdivision.
c. Land Management & Development, Inc. ("LM&D"), a wholly owned subsidiary of NM
properties, is a New York corporation engaged in the disposal of real property
formerly acquired by Niagara Mohawk that has a market value that is above its
book value.9 LM&D also leases real estate; LM&D has one such lease with rental
income of approximately $6,200 annually. LM&D is not actively engaged in the
management of property that it leases.10
d. Landwest, Inc. ("Landwest"), a wholly owned subsidiary of NM Properties, is a
New York corporation engaged in the development and sale of real estate.11
Landwest also leases real estate; Landwest has six such leases with rental
income aggregating $12,800 annually. Landwest is not actively engaged in the
management of property that it leases.12
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6 This business is retainable under WPL Holdings, Inc., Holding Co. Act Release
No. 26856 (April 14, 1998) (discussing retention of REAC, Inc. a subsidiary that
purchases and holds real property primarily for use in utility operations. The
company enabled the utility to purchase and maintain undeveloped real property
that is not subject to the mortgages that apply to utility assets of public
utility companies). NM Properties' business in similar in that it holds real
estate that was previously used for utility purposes but because of that prior
use will be difficult to sell.
7 This business is retainable under Pennsylvania Electric Company, Holding Co.
Act Release No. 24716 (Sept. 15, 1988).
8 If this business were active, it would be retainable under Conectiv, Holding
Co. Act Release No. 26832 (Feb. 25, 1998).
9 This business is retainable under Conectiv, Holding Co. Act Release No. 26832
(Feb. 25, 1998).
10 While technically distinct from the sale of real estate, leasing real estate
is not functionally different from sales.
11 This business is retainable under Conectiv, Holding Co. Act Release No. 26832
(Feb. 25, 1998).
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e. Moreau Park, Inc., a wholly owned subsidiary of NM Properties, is a New York
corporation engaged in the development and sale of real property previously
acquired by Niagara Mohawk in the Town of Moreau, New York adjacent to the
Mohican substation.13
f. Riverview, Inc. ("Riverview"), a wholly owned subsidiary of NM Properties, is
a New York corporation engaged in the development and sale of real estate.14
g. Salmon Shores, Inc., a wholly owned subsidiary of NM Properties, is a New
York corporation engaged in the disposal of lands along the Salmon Reservoir in
Oswego County, New York. All the parcels owned by Salmon Shores, Inc. and Salmon
Shores Partnership (see item "n") have been sold and the company intends to
wind-up its affairs and dissolve within one year.15
h. Upper Hudson Development, Inc. ("Upper Hudson"), a wholly owned subsidiary of
NM Properties, is a New York corporation engaged in the development and sale of
real estate. The land is subject to regulation by the Adirondack Park Agency,
which impacts the development and sale of real property within the Adirondack
Park.16
i. Arbuckle Acres, Inc., a wholly owned subsidiary of LM&D, is a New York
corporation engaged in the development and sale of a seasonal home development.
All the lots have been sold and the company is winding up its affairs and the
corporation plans to dissolve within one year.17
j. OPROP CO Inc. ("OPROP CO"), a wholly owned subsidiary of NM Properties, is a
New York corporation engaged in the disposal of real property that is valued
below book value or taxed at a rate that makes it more economical to dispose of
the property.18
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12 While technically distinct from the sale of real estate, leasing real estate
is not functionally different from sales.
13 This business is retainable under Conectiv, Holding Co. Act Release No. 26832
(Feb. 25, 1998).
14 This business is retainable under Conectiv, Holding Co. Act Release No. 26832
(Feb. 25, 1998).
15 If this business were active, it would be retainable under Conectiv, Holding
Co. Act Release No. 26832 (Feb. 25, 1998).
16 This business is retainable under Conectiv, Holding Co. Act Release No. 26832
(Feb. 25, 1998).
17 If this business were active, it would be retainable under Conectiv, Holding
Co. Act Release No. 26832 (Feb. 25, 1998).
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k. Minoa Farms Development Co., LLC ("Minoa Farms"). LM&D owns a 50% interest in
Minoa Farms, a New York limited liability company engaged in the development and
sale of a 240 lot residential subdivision surrounding a Niagara Mohawk
substation in the Town of Manlius, Village of Minoa, New York. LM&D received its
interest in Minoa Farms in exchange for contributing real estate to the company.
The other member in the company is a real estate developer, and LM&D does not
play an active role in the development and sale of the property.19 In addition
to contributing the lands acquired from Niagara Mohawk, LM&D purchased a one
acre parcel to assure access to a roadway, and Minoa Farms acquired 50 acres of
adjacent land that was integrated into the development.
l. Riverview Galusha LLC ("Galusha"). Riverview owns a 50% interest in Galusha,
a New York limited liability company engaged in development and sale of a 47 lot
residential subdivision in the Town of Moreau, New York. Riverview received its
interest in Galusha in exchange for contributing real estate to the company. The
other member in the company is a real estate developer, and Riverview does not
play an active role in the development and sale of the property.20
m. Salmon Hills Cross Country Ski Resort LLC ("Salmon Hills"). LM&D owns a 15%
interest in Salmon Hills, a New York limited liability company engaged in the
ownership and management of a ski resort built in an economically depressed area
of Niagara Mohawk's service territory. In addition, LM&D leases land to Salmon
Hills for use in its operations. LM&D does not play an active role in the
management of Salmon Hills.21
n. Salmon Shores Partnership is a New York partnership in which Salmon Shores,
Inc. and LM&D each own a 50% interest. All the real estate owned by the
partnership has been sold and the affairs of the partnership are being concluded
and the partnership plans to dissolve within one year.22
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18 This business is retainable under Conectiv, Holding Co. Act Release No. 26832
(Feb. 25, 1998).
19 This business is retainable under Conectiv, Holding Co. Act Release No. 26832
(Feb. 25, 1998).
20 This business is retainable under Conectiv, Holding Co. Act Release No. 26832
(Feb. 25, 1998).
21 The Salmon Hills investment is similar to other investments in local
enterprises, which the Commission has found retainable. See Ameren Corp.,
Holding Co. Act Release No. 26809 (Dec. 30, 1997).
8
o. Second Street Associates, LLC ("Second Street"). LM&D owns a 50% interest in
Second Street, a New York limited liability company engaged in the leasing and
management of an office building in the City of Fulton that was a former
commercial office of Niagara Mohawk. The office building was no longer needed by
Niagara Mohawk.23 Second Street also acquired a contiguous parcel of land to
provide additional parking for the building.
p. Purchase Money Mortgages. Five companies, LM&D, Upper Hudson, Landwest,
Riverview and OPROP CO have entered into a total of seventeen purchase money
mortgages; these seventeen mortgages have an aggregate current principal balance
of approximately $2.3 Million. It was necessary or desirable that these
companies enter into these mortgages in order to facilitate the sale of the land
that serves as the collateral for the mortgage. Banks will often not issue
mortgages for undeveloped land, making it difficult to sell. But sellers can
improve the market for their real estate by offering financing to buyers. The
mortgages held by these companies were issued by entities purchasing land from
subsidiaries of NM Properties. Grid Transco does not intend to enter into
additional purchase money mortgages except where doing so is necessary to
dispose of a particular piece of real property.24
Item 4. Regulatory Approvals
No federal or state regulatory approval, other than the authorization of
the Commission, is required in connection with retention of NM Properties and
its subsidiaries, their investments and their businesses.
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22 If this business were active, it would be retainable under Conectiv, Holding
Co. Act Release No. 26832 (Feb. 25, 1998).
23 This subsidiary is retainable under Jersey Central Power & Light Co., Holding
Co. Act Release No. 23963 (Dec. 26, 1985).
24 The business of acquiring purchase money mortgages from purchasers of real
estate offered by sale by the mortgagee is necessary and related to the disposal
of real estate and should be retainable. The Commission has adopted rules
permitting the acquisition of similar securities related to utility products.
See Rules 40(a)(4) and 48(a)(1).
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Item 5. Procedure
Grid Transco respectfully requests that the Commission issue on order as
soon as practicable granting the relief requested herein and permitting the
retention of NM Properties, its subsidiaries, their investments and their
businesses.
A recommended decision by a hearing or other responsible officer of the
Commission is not needed to authorize the retention of the non-utility
subsidiaries, investments and lines of business. 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
A. Exhibits
H, Draft Form of Notice (to be filed by amendment).
B. Financial Statements
FS-1, Balance sheet for National Grid Transco plc as of March 31, 2002,
incorporated by reference to Form 20-F filed on June 21, 2002.
FS-2, Consolidated Statement of Income for National Grid Transco plc for the
fiscal year ending March 31, 2002, incorporated by reference to Form 20-F filed
on June 21, 2002.
Item 7. Information as to Environmental Effects
The retention of NM Properties, its subsidiaries, their investments and
their businesses as 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. No federal agency is preparing an environmental impact
statement with respect to the retention of these subsidiaries, their investments
and their businesses by Grid Transco. Federal and/or state environmental
agencies, may however, have jurisdiction over the sale of certain parcels of
real estate.
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SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act of
1935, the Applicant has duly caused this post-effective Amendment to be signed
on its behalf by the undersigned thereunto duly authorized.
Date: January 10, 2003 National Grid Transco plc
By: /s/ Kirk L. Ramsauer
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Kirk L. Ramsauer
Deputy General Counsel
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