ML20205C714
| ML20205C714 | |
| Person / Time | |
|---|---|
| Site: | Point Beach  |
| Issue date: | 08/05/1986 |
| From: | Fay C WISCONSIN ELECTRIC POWER CO. |
| To: | Harold Denton Office of Nuclear Reactor Regulation |
| References | |
| TAC-62213, TAC-62214, VPNPD-86-346, NUDOCS 8608120510 | |
| Download: ML20205C714 (126) | |
Text
r Wisconsin Electnc ece cowa 231 W. MICHIGAN, P.O. BOX 2046. MILWAUKEE, WI 53201 VPNPD-86-346 August 5, 1986 Mr. Harold Denton, Director Office of Nuclear Reactor Regulation U.S. Nuclear Regulatory Commission Washington, D.C.
20555
Dear Mr. Denton:
RE:
FACILITY OPERATING LICENSES POINT BEACH NUCLEAR PLANT UNITS 1 & 2 DOCKET NOS. 50-266 AND 50-301 Wisconsin Electric Power Company (Wisconsin Electric or the company), holder of Facility Operating Licenses DPR-24 and DPR-27 for the Point Beach Nuclear Plant Units 1 and 2, respectively (Point Beach), is in the process of implementing a corporate restructuring which will result in the creation of a holding company, Wisconsin Energy Corporation (Wisconsin Energy), which will own all of the outstanding common stock of Wisconsin Electric.
Under the restructuring Wisconsin Electric will continue to be the licensee of Point Beach and no transfer of the Operating Licenses will be effected.
The company has kept the commission staff informed about the restructuring plans and as recently as March, 1986, staff indi-cated that NRC approval or consent would not be required.
Staff's position at that time was consistent with the company's under-standing that the restructuring would not involve a transfer of licenses under the commission's rules.
The company was aware that in prior cases, parent holding companies of utility licensees had been established without commission consent.
Wisconsin Electric has recently become aware of an apparent change in policy by the commission staff regarding the necessity for licensees to obtain consent in connection with the creation of nonutility parent holding companies.
Wisconsin Electric believes that neither the Atomic Energy Act nor the commission rules require commission approval of the restructuring.
The formation of the holding company does not, we believe, involve transfer of the Operating Licenses.
Nevertheless, to the extent that, not-withstanding earlier advice, the staff now believes that consent to the proposed corporate restructuring is required, Wisconsin Electric hereby requests such consent.
M 8608120510 860805
-po eDR ooocx -Ox26e I
4 Mr. Hcrold Danton August 5, 1986 Page 2 In connection r*.th the company's request, enclosed for your information is a copy of the Form S-4, Registration Statement (S-4) filed by Wisconsin Energy on July 9, 1986, with the Securi-ties and Exchange Commission (SEC).
The S-4 includes the Notice of Special Meeting of Stockholders, Preliminary Prospectus and Proxy Statement and describes the restructuring transactions in detail.
The existing corporate structure of Wisconsin Electric and its subsidiaries, as well as the proposed corporate structure under the Wisconsin Energy holding company, is shown on page 7 of the S-4.
Under the restructuring the existing common stock of Wiscon-sin Electric will, upon the effectiveness of the restructuring, be deemed to be converted on a share-for-share basis into common stock of Wisconsin Energy.
Wisconsin Energy will own all of the common stock of Wisconsin Electric.
Wisconsin Electric's senior equity and debt securities will not be affected by the restructur-ing.
As part of the restructuring, Wisconsin Electric's existing utility and nonutility subsidiaries will be transferred to Wiscon-sin Energy through a dividend from Wisconsin Electric to Wisconsin Energy.
Following the restructuring, Wisconsin Electric will remain a public utility providing the same utility services as it did immediately prior to the restructuring.
Control of the Operating Licenses, which are now held by Wisconsin Electric, will remain with Wisconsin Electric and will not be affected by the restruc-turing.
Under recently enacted Wisconsin legislation (1985 Wisconsin Act 79, "the Wisconsin Holding Company Act"), a copy of which is attached, the approval of the Public Service Commission of Wiscon-sin (PSCW) is required prior to the formation of a public utility holding company.
PSCW approval was obtained on May 27, 1986, and a copy of the order of the PSCW is attached.
An Application is pending with the SEC seeking approval of the restructuring under the Public Utility Holding Company Act of 1935.
A special meeting of stockholders is scheduled for october 29, 1986, for approval of the restructuring.
Wisconsin Electric is aware that the commission has recently given its consent to a corporate restructuring proposed by Iowa Electric Light and Power (Iowa Electric) which is substantially similar to that proposed by Wisconsin Electric.
In connection with its review of the Iowa Electric corporate restructuring, the staff asked that company to respond to three questions.
In order to expedite your staff's review of this request, Wisconsin Electric herein provides responses to the substance of the three questions asked of Iowa Electric.
The questions and Wisconsin Electric's responses are as follows:
Mr. Harold Danton August 5, 1986 Page 3 1.
State whether the proposed restructuring might reduce the funds available to Wisconsin Electric to carry out activities under its Operating Licenses.
Please discuss the basis for your answer.
Wisconsin Electric believes that there will be essentially no impact on the funds available to it to carry out its activities under the Operating License.
Under the restructuring, Wisconsin Electric's debt and senior equity securities will remain with Wisconsin Electric.
Wisconsin Electric will retain the corporate capacity to issue future securities of these same classes by virtue of mortgagable assets and its earning power.
As explained in the S-4 (page 8) :
"The Board of Directors of the company intends that the utility operations of the company and Wisconsin Natural will continue to constitute the predominant activity of the holding company system for the fore-seeable future and that there be no capital impairment of the utilities and no adverse effect on their levels of service.
This intention accords with the limita-tions and other provisions in the Wisconsin Holding Company Act and with the positions taken by the PSCW in its order approving the restructuring."
The Wisconsin Holding Company Act contains a number of provisions designed to ensure that utilities which become members of utility holding company systems are able to provide adequate utility service.
Among the provisions contained in the Wisconsin Holding Company Act are the following:
Section 196.795(4), Wis. Stats. - CAPITAL IMPAIRMENT If the commission finds that the' capital of.any public utility affiliate will be impaired.by the payment of a dividend, the commission may, after an investigation and opportunity for hearing, order the public utility affiliate to limit or cease the payment of dividends to the holding company until the potential for impair-ment is eliminated.
Section 196.795 (5) (g), Wis. Stats.
No holding company system may be operated in any way which materially impairs the credit, ability to acquire capital on reasonable terms or ability to provide safe, reasonable, reliable and adequate utility service of any public utility affiliate in the holding company system.
m
e Mr. Harold Denton August 5, 1986 Page 4.
Section-196.795 (5) (j), Wis. Stats.
Every public utility affiliate is subject to every j
law, regulation and precedent applicable to the regulation of public utilities.
4
)
Section 196.795 (11), Wis. Stats. - CONSTRUCTION i
(a)
This section may not be deemed to diminish the l
commission's control and regulation over the i
operations and assets of any public utility.
I In addition, the Wisconsin Holding Company Act limits the amount I
of nonutility assets in a holding company system to approximately 20 percent of the total system assets.
The PSCW order approving the proposed corporate restructuring contains the following conditions relating.to funds available to Wisconsin Electric:
i "That WEPCo and WNG shall maintain a. balanced capital structure within a reasonable range to be established by the commission in appropriate proceedings.
4 i
That the directors of WEPCo and WNG shall set dividend i
policy based on the financial health of those utili-ties as if each utility were not part of a holding company system."
i l
By order dated December 5, 1985, in Docket No. 05-EI-14, the PSCW l
directed Wisconsin Electric to utilize an external sinking fund i
to accumulate money for decommissioning Point Beach.
The order provides at page 15 that:
"The amount required to fund the decommissioning l
expense shall be deposited with a fiduciary trustee.
The trustee shall not release any of the funds, in-cluding principal and earnings, except as provided by Internal Revenue Code s.
468A (e) (4), - or to reimburse the utility for any income taxes the utility has paid i-on behalf of the fiduciary trustee.
If the fund is not wholly depleted at the end of decommissioning, i
the trustee may release the surplus funds to be returned to the ratepayers."
(emphasis in original) i As of the date of this letter, Wisconsin Electric has' segregated
$85,250,000 for use in an external decommissioning trust fund.
I Transfer of the money to an external trustee is awaiting IRS confirmation of the tax status of trust contributions and PSCW staff comments regarding certain technical matters.
i
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i l
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Mr. Harold Danton August 5, 1986 Page 5 2.
State whether the proposed restructuring might affect manage-ment of Wisconsin Electric utility operations.
Include in your response a brief discussion of the reporting channels for senior management of the Point Beach Power Plant.
The proposed restructuring will have no effect on the management of Wisconsin Electric's utility operations.
No Wisconsin Electric officer or nuclear management positions will be changed by the restructuring.
The Vice President-Nuclear Power will retain responsibility for nuclear operations and will have no assigned holding company responsibilities.
Officer responsibilities at the holding company level will be administrative and financial in nature and will have no direct effect on the management of nuclear operations.
The reporting channels for the senior management of Point Beach will not be affected by the corporate restructuring and will remain as described in Section 15.6.2 of the Point Beach Technical Specifications.
The Vice President of Nuclear Power will continue to report to Wisconsin Electric's President and Chief Operating Officer, who in turn, will continue to report to the Chairman of the Board and Chief Executive Officer.
3.
State whether Wisconsin Electric, by virtue of the proposed restructuring, has, or will, become owned, controlled, or dominated by an alien, a foreign corporation, or a foreign government.
As explained above, on the effective date of the restructuring, Wisconsin Energy, a Wisconsin Corporation, will become the sole holder of Wisconsin Electric's common stock and the current holders of Wisconsin Electric's common stock will become holders of the common stock of Wisconsin Energy on a share-for-share basis.
Thus, immediately following the restructuring, the common stock of Wisconsin Energy will be owned by the previous holders of Wisconsin Electric's common stock in the same proportions in which they held Wisconsin Electric's common stock.
Based upon available information, foreign held shares of Wisconsin Electric represent less than one tenth of one percent of the total outstanding shares of Wisconsin Electric.
In addition, the Wisconsin Holding Company Act contains a provision requiring PSCW approval before any person I
can acquire more than 10 percent of the outstanding voting securi-ties of a holding company.
Based on the above, the proposed restructuring will not result in gisconsin Electric's becoming owned, controlled or dominated by 2oreign interests.
Wisconsin Electric trusts that the information contained in this letter and its attachments will be sufficient for the commission to grant its consent, to the extent required, to the proposed u
Mr. Harold Danton August 5, 1986 Page 6 corporate restructuring.
If you have any questions or desire additional information, please contact us.
Very truly yours, C. W. Fay, Vice Presi t
Nuclear Power Attachments Copy to Resident Inspector
As filed with th2 Securities and Exchange Commissi:n on July 9,1986 f
Registritios No. 33 7045 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form S-4 REGISTRATION STATEMENT i
under I
THE SECURITIES ACT OF 1933 Wisconsin Energy Corporation (Exact name of registrant as specified in its charter)
Wisconsin 4931 39-1391525 (State or other jurisdiction of (Primary Standard Industry (I.R.S. Employer incorporation ar organization)
Classification Code Number)
Identification Number) 231 West hiichigan Street P.O. Box 2046 hiilwaukee, Wisconsin 53201 (414) 277-2345 (Address, includir:g Zip Code, and telephone number, including area code, of registrant *s principal executive offices)
Charles S. SicNeer, President Wisconsin Energy Corporation 231 West hiichigan Street P.O. Box 2046 hiilwaukee, Wisconsin 53201 (414) 277-2345 (Name, address, including Zip Code, and telephone number,
(
including area code, of agent for service) l Copy to:
Norris Darrell, Jr., Esq.
Sullivan & Cromwell 125 Broad Street New York, New York 10004 (212) 558-3606 Approximate date of commencement of the proposed sale of the securities to the public: Promptly after the Registration Statement becomes effective.
If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.
CALCULATION OF REGISTRATION FEE Proposed Proposed Amount maximum maximum Amount of Title of each class of to be offering price aggregate registration securities to be registered registered (t) per unit (2) offering price (2) fee Common Stock, $.01 par value.
35,489,327 shs.
$54.9375
$1,949,694,902
$389,938.98 (1) Includes (a) 33,289,327 shares to be issued upon conversion of shares of Wisconsin Electric Power Company upon the effectiveness of the proposed restructuring referred to herein and (b) 1,400,000 shares and 800,000 shares in connection with the Automatic Dividend Reinvestment and Stock Purchase Plan and the Customer Stock Ownership Plan, respectively, of the registrant, which are to become effective upon the effectiveness of such restructuring, as provided herein. Prospectuses for such Plans will be included in ['ost-effective amendments hereto on Form S-3, to be effective promptly after the effectiveness of such restructuring.
(2) Estimated solely for the purpose of calculating the registration fee; and, pursuant to Rule 457(0(1), based on the average of the high and low sale prices for shares of Common Stock of Wisconsin Electric Power Company on the New York Stock Exchange consolidated tape on July 1,1986.
The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
WISCONSIN ENERGY CORPORATION Cross-reference sheet pursuant to Item 501(b) of Regulation S.K showing the location in the proxy statement of the responses to the items of Part I of Form S.4.
Form S-4 Item location in Prosy Statement 1.
Forepart of Registration Statement and Outside Cover Page of Prospectus.........
Outside front cover page 2.
Inside Front and Outside Back Cover Pages of Prospectus Available Information; Table of Contents 3.
Risk Factors, Ratio of Earnings to Fixed Charges and Other Information Summary 4.
Terms of the Transaction Summary; Proposed Corporate Restructuring; Description of Wisconsin Energy Common Stock 5.
Pro Forma Financial Information Proposed Corporate Restructuring; Financial Statements 6.
Material Contacts with the Company Being Acquired Proposed Corporate Restructuring 7.
Additional Information Required for Reoffering by Persons and Parties Deemed to be Underwriters.
8.
Interests of Named Experts and Counsel Legal Opinions: Experts 9.
Disclosure of Commission Position on Indemnification for Securities Act Liabilities
- 10. Information with Respect to S-3 Registrants
- 11. Incorporation of Certain Information by Reference Incorporation of Certain Documents by Reference
- 12. Information with Respect to S-2 or S-3 Registrants
- 13. Incorporation of Certain Information by Reference.
- 14. Information with Respect to Registrants Other Than S-3 or S-2 Summary; Proposed Corporate Registrants....
Restructuring; Financial Statements
- 15. Information with Respect to S-3 Companies Incorporation of Certain Information by Reference; Market Prices of Company Common Stock
- 16. Information with Respect to S-2 or S.3 Companies
- 17. Information with Respect to Companies Other than S-3 or S-2 Companies..........
- 18. Information if Proxies, Consents or Authorizations are to be Proxies; Voting Securities; Solicited Appraisal Rights for Certain Preferred Stock; Ownership of Equity Securities: Certain Beneficial Owners of Voting Securities; Other Matters; Cost of Solicitation 1
- 19. Information if Proxies, Consents or Authorizations are not to be Solicited or in an Exchange Offer
- Not applicable.
l
Notice of Special Meeting of Stockholders, and Proxy Statement l
Wisconsin Electnc u,.
JJfiffS L.,-,
Wisconsin l Electnc POnER COMPANY ni a micmcasi Po aos 204s uneaunts mi 6226 September,1986 NOTICE OF SPECIAL MEETING OF STOCKHOLDERS TO THE STOCKHOLDERS OF WISCONSIN ELECTRIC POWER COMPANY:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Wisconsin Electric Power Company (the " Company") will be held on Wednesday, October 29,1986 at 2:00 p.m. in the Grand Ballroom of the Red Carpet Hotel,4747 South Howell Avenue, Milwaukee, Wisconsin, for the following purposes:
- 1. to approve a proposed Plan of Merger, under which Wisconsin Energy Corporation (" Wisconsin Energy"), at present an inactive subsidiary of the Company, will become the parent holding company of the Company and all outstanding shares of Common Stock of the Company will be converted into an equal number of shares of Common Stock of Wisconsin Energy, all as provided in the accompanying proxy statement; and
- 2. to transact such other business as may properly come before the Special Meeting, or any adjournment or adjournments thereof.
Stockholders of record at the close of business on September 9,1986 will be entitled to vote at the Special Meeting.
As set forth under " Appraisal Rights for Certain Preferred Stock" in the proxy statement, any holder of shares of the Company's Six Per Cent. Preferred Stock or Serial Preferred Stock,8.80% Series, desiring, if the restructuring is completed, to be pdd the fair value of such shares pursuant to certain statrtory appraisal rights provisions, set forth in Exhibit D to the proxy statement, must file a written objection to the Plan of Merger at least 48 hours5.555556e-4 days <br />0.0133 hours <br />7.936508e-5 weeks <br />1.8264e-5 months <br /> prior to the Special Meeting and otherwise comply with such provisions.
By Order of the Board of Directors JOHN H. GOETSCH, Secretary YOUR VOTE IS IMPORTANT, TO ASSURE YOUR REPRESENTATION AT THE SPECIAL MEETING, PLEASE COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY.
PRELIAIINARY PROSPECTUS / PROXY STATEMENT DATED JULY 9,1986 W
Wisconsin Electric Power Company Th5r ei 8 231 West Michigan Street ua.
7., 2 p P.O. Box 2046
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Milwaukee, Wisconsin 53201
=2E A2e2 ho.E h,u"~q. E.5 0 2
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PROXY STATEMENT
" g ;5 September
,1986 o ~a c g 3 % "2 o E
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22 g:5 E*-@
e This proxy statement is furaished in connection with the solicitation of proxies by the Board of Directors
{ooo of Wisconsin Electric Pcwer Company (the " Company") to be used at the Special hieeting of Stockholders yyEo of the Company to be held at 2:00 p.m. on October 29,1986,in the Grand Ballroom of the Red Carpet Ilotel, 2 g j g 4747 South flowell Avenue, hiilwaukee, Wisconsin, and at all adjournments thereof, for the purposes listed g " a y, in the preceding Notice of Special hieeting of Stockholders.
ujs2 E.3 S At the Special hieeting the stockholders will be asked to approve the Plan of hierger attached as Exhibit A
.Eyg.lo hereto (the " Plan of hierger"). The approval is being requested by the Board of Directors in connection with
_'s c " o a proposed corporate restructuring. In the restructuring, Wisconsin Energy Corporation (" Wisconsin 8 Y~ 2 Energy"), which at present is an inactive subsidiary of the Company, will become the parent holding company 7 E y j of the Company and all outstanding shares of Common Stock of the Company will be converted into an equal 5$
5 number of shares of Wisconsin Energy Common Stock. In addition, Wisconsin Natural Gas Company E E E $ (" Wisconsin Natural") and the other subsidiaries of the Company willIv mme direct subsidiaries of Wisconsin guey u83i Energy.
$$N$
gyge The Board of Directors of the Company believes the restructuring will provide substantial benefits by ja 2 facilitating initiatives into new areas of business and permitting greater financial and organizational flexibility.
g 5 8 E The Board urges approval by the stockholders.
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- 5 5 ~m This proxy statement is also a prospectus relating to the Wisconsin Energy Common Stock to be issued j $,s { in the restructuring.
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2 E a t' E 5 $5 2Aj$
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- TIIESE SECURITIES IIAVE NOT IlEEN APPROVED OR DISAPPROVED BY TIIE SECURITIES 3
AND EXCilANGE COMMISSION NOR IIAS TIIE COMMISSION PASSED UPON Suc$
E.E
- Tile ACCURACY OR ADEQUACY OF TIIIS PROSPECTUS. ANY REPRE-580)%
3* $
SENTATION TO TIIE CONTRARY IS A CRIMINAL OFFENSE.
1
AVAILABLE INFORNIATION The Company is subject to the informational requirements of the Securities Exchange Act of 1934 and, in accordance with that Act, files reports, proxy statements and other information with the Securities and Exchange Commission. Reports, proxy statements and other information concerning the Company can be inspected and copied at the public reference facilities maintained by such Commission at 450 Fifth Street, N.W., Washington, D.C., and at the regional offices of such Commission at Room 1204, Everett hicKinley Dirksen Building,219 South
Dearborn Street,
Chicago, Illinois and Room i100, Federal Building,26 Federal Plaza, New York, New York, and copies can be obtained from the public reference section of such Commission at prescribed rates by writing to it at 450 Fifth Street, N.W., Washington, D.C. 20549.
The Common Stock of the Company is listed on the New York Stock Exchange. Reports, proxy material and other information concerning the Company may also be inspected at the offices of such Exchange at 20 Broad Street, New York, New York.
A Registration Statement, of which this proxy statement is a part, has been filed under the Securities Act of 1933 with the Securities and Exchange Commission with respect to the shares of Wisconsin Energy Common Stock to be issued in the proposed corporate restructuring. As permitted by the rules and regulations of such Commission, this proxy statement omita certain information that is contained in the Registration Statement.
INCORPORATION OF CERTAIN DOCUNIENTS BY REFERENCE This proxy statement incorporates documents by reference which are not presented herein or delivered herewith. These documents are available upon request from John II. Goetsch, Corporate Secretary, Wisconsin Electric Power Company, 231 West Niichigan Street, Atilwaukee, Wisconsin 53201 (telephone:
(414) 277-2345). In order to ensure timely delivery of the documents, any such request should be made by October 22,1986.
The following documents filed with the Securities and Exchange Commission are incorporated into this proxy statement by reference:
(1) the Company's Annual Report on Form 10-K for the year ended December 31,1985; and (2) the Company's Quarterly Report on Form 10-Q for the quarter endM Nfarch 31,1986.
All documents subsequently filed by the Company pursuant to Section 13(a),13(c),14 or 15(d) of the Securities Exchange Act of 1934, prior to the date on which the Special hfecting of Stockholders is held, shall be deemed to be incorporated by reference into this proxy statement and to be a part of this proxy statement from the date of filing of such documents.
No person has been authorized to give any information or to make any representations, other than those included in this proxy statement,in connection with the offer contained in this proxy statement and,if given or made, any such information or representations must not be relied upon as having been authorized. This proxy statement does not constitute an offer within any jurisdiction to any person to whom it is unlawful to make an offer. The delivery of this proxy statement at any time does not imply that the information in it is correct as of any time subsequent to its date, 2
TAllt.E OF CONTENTS Page Available Information.
2 Incorporation of Certain Documents by Reference.
2 4
Summary.
Proxies.
6 6
Voting Securities 6
Proposed Corporate Restructuring 6
General Outline Reasons for the Restructuring 7
9 Certain Pro Forma Financial Information Preferred Stock and Debt Securities 10 10 Wisconsin Public Utility IIolding Company Statute.
10 Listing.
10 Dividend Palicy 11 Federal Income Tax Consequences I1 Exchange of Stock Certificates Not Necessary II Continuance of Stock Plans Directors and Executise Officers 11 14 Regulation General 14 Wisconsin iloiding Company Statute 14 PSCW Order Approving Formation of the IIolding Company 15 Federal Public Utility lloiding Company Act.
15 Vote Required 16 Effective Date.
16 Restated Articles of Incorporation and flylaws of Wisconsin Energy 16 Authorized but Unissued Capital Stock 16 Indemnification of Directors and Officers.
17 Defensive Provisions 17 Prevention of "Greenmail" 17 18 Prosisions Regarding the lloard of Directors Preferred Stock Authorization and Authority to Fix Terms 18 "Supermajority" Prosisions 19 Certain Statutory Defensive Provhions.
19 Description of Wisconsin Energy Common Stock.
20 Appraisal Rights for Certain Preferred Stock 21 I
Market Prices of Company Common Stock.
22 Financial Statements 22 Ownership of Equity Securities 22 Certain Ileneficial Owners of Voting Securities 23 23 Legal Opinions.
23 Experts Other Matters -
23 Cost of Solicitation 23 Exhibit A-Plan of Merger Exhibit Il-Restated Articles of Incorporation of Wisconsin Energy Corporation Exhibit C-Indemnification Ilylaw of Wisconsin Energy and Wisconsin Indemnification Statute Exhibit D-Statutory Provisions Applicable to Appraisal Rights for Six Per Cent. Preferred Stock and Serial Preferred Stock. 8.807o Series 3
i l
SU.TlNiARY Thefollowing summary information is quahfied by reference to the more detailed information setforth elsewhere herein, including the Exhibits hereto and the documents incorporated herein by reference.
Wisconsin Electric Power Company The Company generates, transmits, distributes and sells electric energy in a territory in southeastern, east central and northern Wisconsin, including the hiilwaukee area, and in the Upper Peninsula of Afichigan.
The Company also distributes and sells steam supplied by certain ofits electric generating plants to space heating and processing customers in downtown hiilwaukee. Wisconsin Natural, the Company's principal subsidiary, purchases and distributes natural gas in two service areas, one largely west and south of hiilwaukee and the other in the Appleton, Wisconsin area.
The Company's principal executive offices are at 231 West htichigan Street, hiilwaukee, Wisconsin $3201 (telephone: (414) 277-2345).
Wisconsin Energy Corporation Wisconsin Energy, at present an inactive subsidiary of the Company, was organized for the purpose of becoming the new parent holding company in the restructuring. Wisconsin Energy has no significant assets or operations. Its executive offices are located at the Company's principal executive ollices set forth above.
Proposed Corporate Restructuring The lloard of Directors of the Company has authorized, subject to stockholder approval, a proposed corporate restructuring. In the restructuring, Wisconsin Energy will become the parent holding company of the Company, the outstanding Common Stock of the Company will be converted into an equal number of shares of Wisconsin Energy Common Stock, and Wisconsin Natural and the other subsidiaries of the Company will become direct subsidiaries of Wisconsin Energy.
The restructuring is to be accomplished in two steps. First, through a merger of an inactive subsidiary of Wisconsin Energy into the Company pursuant to the Plan of hierger, Wisconsin Energy will become the new parent holding company of the Company and the outstanding shares of the Company's Common Stock will be converted in'o shares of Common Stock of Wisconsin Energy. Then. immediately following the merger, a planned dividend by the Company to Wisconsin Energy of all the outstanding stock of the Company's subsidiaries is to result in their becoming direct subsidiaries of Wisconsin Energy. The Preferred Stock and debt securities of the Company and Wisconsin Natural will not be changed in the restructuring. It will not be necessary in the restructuring for holders of Company Common Stock to exchange their stock certificates for those of Wisconsin Energy.
Reasons for the Restructuring The principal reasons for the proposed restructuring are to create a structure which can facilitate diversification into certain nonutility businesses, atTord separation between the utility and nonutility businesses and provide additional flexibility for financing and for maintaining appropriate capital ratios in the two utility companies.
Federal Income Tax Consequences No gain or loss will be recognized for Federal income tax purposes to holders of Common Stock of the Company on the receipt of Wisconsin Energy Common Stock in the restructuring.
Regulatory Approvals The Public Service Commission of Wisconsin (the "PSCW") has approved formation of the holding company, subject to certain conditions. The Company has applied to the Securities and Exchange Commission (the "SEC") under the Public Utility llolding Company Act of 1935 for approval for the restructuring and an exemption under such Act for Wisconsin Energy and its subsidiaries upon completion of the restructuring.
Vote Required Approval of the Plan of hierger by vote of(a) a majority of the outstanding shares of the Company's Common Stock, voting separately as a class, and (b) a majority of the outstanding shares of the Company's Common Stock and Preferred Stock, voting together without regard to class or series, is required in order to effectuate the restructuring.
TIIE IlOARD OF DIRECI' ORS OF Tile CONIPANY RECONINfENDS APPROVAL OF TIIE PLAN OF NIERGER.
4
.-~
Effective Date if the Plan of hierger is approved by the stockholders as recommended herein and not terminated by the Board of Directors of the Company, the restructuring will become effective at midnight, hiilwaukee time, on December 31, 1986, or as soon thereafter as practicable.
Certain Wisconsin Energy Articles of Incorporation and Bylaw Provisions
)
The Restated Articles ofIncorporation and Bylaws of Wisconsin Energy contain certain provisions which its Board of Directors believes to be in the best interest of Wisconsin Energy and its stockholders after the restructuring, but which may have the effect of discouraging persons from acquiring large blocks of Wisconsin Energy Common Stock or delaying or preventing a change in control of Wisconsin Energy. The Bylaws also contain a provision mandating indemnification of directors and officers to the fullest extent permitted by law.
Appraisal Rights of Dissenting IIolders of Certain Preferred Stock Holders of Six Per Cent. Preferred Stock and Serial Preferred Stock,3.80% Series of the Company will, if the merger is consummated, be entitled to be paid the fair value of such shares pursuant to certain Wisconsin statutory appraisal rights provisions. Any such holder desiring to exercise such rights must file a written objection to the Plan of hierger at least 48 hours5.555556e-4 days <br />0.0133 hours <br />7.936508e-5 weeks <br />1.8264e-5 months <br /> prior to the Special hieeting and otherwise comply with such statutory prosisions. Under Wisconsin law, no other class of the Company's stock is accorded such i
appraisal rights.
Consolidated Financial Information The following table sets forth consolidated financial information with respect to the Company and its subsidiaries, derived in part from, and qualified by reference to, the financial statements contained in the documents incorporated by seference herein.
For Tuche Stonths 3,I2"d I
Results of Operations For Year Ended December 31
,,ch 31, 1981 1982 1983 1984 1985 19R6 (Unaudited)
(Thousands of dollars, execpt per share amounts)
Operating Revenues.
$1,152,383 $1,302,910 $1,417,564 $1,434,689 $1,440,850 $1,425,317 Operating income
$172,168
$197,081
$205,518
$200,304 5217,740 $216.299 Net Income.
$105,502
$131,645
$149,957
$162,548
$167,477 $161,959 Earnings per Share of Common Stock (l).
52.93
$3.60
$3.97
$4.35
$4.75
$4.63 Dividends declared per Share of Com-mon Stock (1).
$1.76
$1.902
$2.06
$2.235
$2.43
$2.48 Other Financial Information As of g
g 3g
%1 arch 31, 1981 1982 1983 1984 1985 1986 (Unaudited) tThousands of dollars, escept per share amounts)
Total Assets
$2,116,070 $2,131,298 $2,262,532 $2,226,323 $2,291,671 $2.323,508 fong-Term Debt (including amount due currently).
$791,750
$737,720
$735,677
$686,660
$7",*34
$752,222
]
Preferred Stock l
Redemption-not required 160,451 160,451 160,451 160,451 100,461 100,461 I
Redemption-required.
25,000 25,000 25,000 Common Stock Equity 690,186 775,173 868,406 919,012 986,431 1,019,421 Total Capitalization.
$1.667,387 $1.698,344 $1,789.534 $1,766,123 $1,840,326 $1,872,104 flook Value Per Share of Common Stock (1)
$21.75
$23.34
$25.19
$27.17
$29.63
$30.62 (1) The per share amounts for 1981 and 1982 have been restated to reflect the July 1982 3-for-2 Common Stock split.
5 l
PROXIES If the enclosed form of proxy is executed and returned, it may nevertheless be revoked at any time by notice to the Company's Corporate Secretary prior to the exercise of the proxy at the Special Meeting. Shares represented by properly executed proxies will be voted as specified by the stockholder. Unless the stockholder specifies otherwise, such proxies will be voted FOR the proposed Plan of Merger.
If you are a participant la the Company's Automatic Dividend Reimestment and Stock Purchase Plan, Customer Stock Ownership Plan or Tax Reduction Act Stock Ownership Plan, your shares registered in the Plan will be voted by the Trustee in the same manner as specified by you on your proxy. Your shares in the Tax Reduction Act Stock Ownership Plan cannot be voted unless you submit a proxy, properly signed. The Trustee for each of the other Pirns may vote your shares in the Plan at its discretion if you do not submit l
a proxy.
4 VOTING SECURITIES As ofJune 30,1986 the Company had outstanding 44,508 shar es of Six Per Cent. Preferred Stock; 960,102 shares of Serial Preferred Stock ($100 par value), consisting of 260,000 shares of 3.60% Series,333,325 shares of 8.909c Series, 225,810 shares of 7.757c Series and 140,967 shares of 8.80% Series; and 33,289,327 shares l
)
of Common Stock. Each such outstanding share is entitled to one vote, which may be given in person or by j
proxy authorized in writing. Stockholders of record at the close of business on September 9,1986 will be entitled j
to vote at the Special Meeting.
4 i
PROPOSED CORPORATE RESTRUCTURING General Outline The Board of Directors of the Company has authorized, subject to stockholder approval, a proposed corporate restructuring. The restructuring will create a parent holding company, convert the Company's j
outstanding Common Stock into Common Stock of the new holding company, and make the Company's l
subsidiaries direct subsidiaries of the new holding company. The proposed new holding company, Wisconsin j
Energy, is at present an inactive subsidiary of the Company, j
The restructuring is provided for in an Agreement and Plan of Restructuring dated as of l
1986 among the Company, Wisconsin Energy and WEPCO Acquisitions, Inc. (" Acquisitions"). Acquisitions
]
is now an inactive subsidiary of Wisconsin Energy. The Agreement and Plan of Restructuring, which includes the Plan of Merger, is filed as an exhibit to the Registration Statement, of which this proxy statement is a part, and is incorporated herein by reference.
l The restructuring will be accomplished in two steps. First, pursuant to the Plan of Merger, Acquisitions will be merged into the Company with the result that Wisconsin Energy will become the new parent holding company and the shares of Company Common Stock held by each holder will automatically be converted into an equal number of shares of Wisconsin Energy Common Stock. Then, upon the effectiveness of t he merger, the Company will, by a non-cash dividend to Wisconsin Energy, transfer all the outstanding stock of Wisconsin Natural and the other subsidiaries of the Company so that they will become direct subsidiaries of Wisconsin 1
Energy.
i Upon completion of the restructuring, the Company and Wisconsin Natural, as direct subsidiaries of j
Wisconsin Energy, will remain as public utilities subject to the jurisdiction of various regulatory agencies.
The other direct subsidiaries of Wisconsin Energy will be Badger Service Company, WISVEST Corporation, i
WITECH Corporation, WISPARK Corporation and Wisconsin Michigan Investment Corporation, which are engaged or propose to engage in nonutility activities as indicated under " Proposed Corporate Restructuring-Reasons for the Restructuring" herein.
4 6
At present the corporate structure is as follows:
Wisconsin Electric Power Company I
I I
I I
I Wisconsin Badger WISVEST WITECil WISPARK Wisconsin Wisconsin Natural Ser ice Corporation Corporation Corporation Michigan Energy Gas Company Insestment Corporation Company Corporation WEPCO Acquisitions, Inc.
Upon completion of the restructuring, the corporate structure will be as follows:
Wisconsin Energy Corporation I
I I
I I
I l
Wisconsin Wisconsin Badger WISVEST WITECll WISPARK Wisconsin Electric Natural Service Corporation Corporation Corporation Michigan Power Gas Company insestment Company Company Corporation Reasons for the Restructuring The principal reasons for the proposed restructuring are to create a structure which can facilitate diversification into nonutility businesses, atTord separation between the utility and nonutility businesses, and provide additional flexibility for financing and for maintaining appropriate utility capital ratios.
Diversification under the proposed holding company structure is believed by the Board of Directors of the Company to be in the best interests of the Company and its stockholders, as well as its customers.
l In the Board's view, diversification may broaden investment appeal through a reduction of dependenw l
on the utility businesses and an increase in exposure to other businesses. Financing alternatives may also be l
enhanced as a result of engaging in a greater number of businesses. Also, diversification that succeeds in promoting employment and commerce in the service areas may benefit the utilities and their customers, as well as the stockholders, in other ways. Diversification does, however, involve risks, and there can be no assurance that the new businesses will be successful or, if unsuccessful, that they could not have an adverse effect on the holding company system as a whole despite the separations atTorded by the holding company structure.
The holding company structure is designed to atrord insulation of the customers of the utilities and the public holders of the utilities
- securities from the risks of the nonutility businesses by segregating the utility and nonutility businesses into separate corporations that will be subsidiaries of the holding company and not of either utility. The utilities' financial statements will not reflect the nonutility businesses.
The holding company structure is intended to afford additional flexibility for maintaining the capital ratios l
of the two utilities at appropriate levels, for the ratios would be subject to adjustment from time to time through dividends to, or equity investments from, the holding company.
1 l
l l
l 7
1 1
^
4 Financing alternatives are expected to be improved by the holding company structure in that the planning of financings best suited to the particular needs and circumstances of the separate businesses should be facilitated. It is contemplated that in the normal course Wisconsin Energy,in addition to receiving dividends from its subsidiaries, would obtain funds through Common Stock, Preferred Stock or debt financings, that the utility subsidiaries would obtain funds through their own financings (which could includ-issuance of First hfortgage Bonds or Preferred Stock), as well as from issuance of additional shares of their Common Stock to the holding company, and that the nonutility businesses would obtain funds from Wisconsin Energy or other nonutility affiliates or from their own outside financings. Any financings will, of course, depend on the financial and other conditions of the entities invohed and on market conditions.
The recently enacted Wisconsin iloiding Company Act, under which the PSCW has approved the proposed restructuring, declares that the maintenance of a financially healthy utility is contingent upon the maintenance of an economically healthy service area and that the public interest and the interest ofinvestors and consumers can be benefitted if publie utility holding companies, in the service territories of their public utility affiliates or in Wisconsin, conduct substantial business activities, attract new businesses, expand existing businesses, proside investment capital for new business ventures, and otherwise directly or indirectly promote employment and commerce. With a view to implementation of these goals and the other purposes indicated above, the Company has already organized three new subsidiaries, WISVEST Corporation, WITECil Corporation and WISPARK Corporation, for the respective purposes of engaging, after the restructming, in insesting in the development of commercial and industrial activities primarily in Wisconsin, in the development ofadvanced technology in energy and other fields principally in Wisconsin and in the development of industrial parks in the service areas of the Company and Wisconsin Natural or elsewhere in Wisconsin or the Upper Peninsula of Alichigan. The Company intends to transfer to WISPAR K Corporation, after PSCW approval, certain real properties that are not used in the utility operations.
Other than preliminary plans for an industrial park next to the Company's Pleasant Prairie Power Plant, no specilie disersification plans have yet been formulated.
The initial prmision of funds for diversification into nonutility businesses resulted from the adjustment of capital ratios for rate-making pmposes, in February 1986, when the Company, with PSCW approval, transferred $40 million to a subsidiary, Wisconsin hiichigan Investment Corporation, to be held and invested pending utilitation in disersification. The Company anticipates that, if the restructuring become3 etrective, an additional $30 million for diversification purposes will be made available to Wisconsin Energy in early 1987 through supplemental dividends by the Company and Wisconsin Natural, and that further supplemental disidends will be paid by them to Wisconsin Energy for similar or other purposes from time to time in subsequent years, subject to earnings, financial condition and other factors.
The Board of Directors of the Company intends that the utility operations of the Company and Wisconsin Natural will continue to constitute the predominant activity of the holding company system for the foreseeable future and that there be no capital impairment of the utilities and no adverse effect on their levels of sersice.
This intention accords with the limitations and other provisions in the Wisconsin llolding Company Act and with the positions taken by the PSCW in its order apprming the restructuring. See " Proposed Corporate Restructuring-Regulation."
8
Certain Pro Forma Financial Information The following table summarizes certain unaudited pro forma financial information related to the restructuring.
Misconsin Electric Wisconsin Power ReMeets Electric Hisconsin Company Transfer Power Other Adjustments Energy Consolidated, of
- Company, Subsidiaries and Corporat6on, as Reported Suinidiaries Pro Formath _ Pro Forma Eliminations Pro Forma (2)
Ghousands of dollars, escept per share amounts)
Condensed Balance Sheets As of Slarch 31,1986 Aswts:
Utility plant-net,
51,777,335 5 (162,801) 51.614,534 5162,801 5 -
51,777,335 Other property and investments.
24,441 (4,382) 20.059 4,369 24,428 Current assets,
509,464 (91,207) 418,257 116,618 (25,398) 509,477 Other.
12,268 (585) 11,683 585 12,268
$2,323,508 5 (258,975) 52,064,533 5284,373
$ (25,398) 52,323.508 Liabilities:
j Common stock equity Common stock,
5 332,893 5 5 332,893
$ 1.759
$(334,319) 5 333 i
)
Other paid in capital,
99,647 99,647 91,030 241,530 432,207 j
Retained earnings,
586.881 (131,260) 455.621 38,461 92.799 586,881
)
Total common equity.
I 019,421 (131,260) 888,161 131,250 10 1,019,421 J
Preferred stock,
100,461 100,461 100,461 l
Long-term debt (excluding amount due currently),
677,980 (38,956) 639,024 38,956 677,980 l
Total capitalization 1,797,862 (170,216)
I,627,646 170,206 10 1,797,862 Current liabilities,
313,977 (67,055) 246,922 92,463 (25,408) 313,977 Other.
211,669 (21,704) 189.965 21,7M 211,669 4
l 52,323,508 5 (258,975) 52,064,533 5284,373
$ (25,398) 52.323,508
-j Condensed Income Statements for Twelve Stonths Ended Starch 31,1986 l
Operating resenues.
51,425,317 5 (323,443) 51,101.874 5323,443 5 -
51,425.317 j
Operating expenws.
1,209.018 (306,114) 902,9N 305,694 420 I.209.018
)
Operating income.
216,299 (17,329) 198,970 17,749 (420) 216,299 j
Other income and deductions,
5,049 (355) 4,694 772 (417) 5/'49 i
Interest charges.
59,389 (3,384) 56,005 4.22I (837) 59 3A9 Income before preferred stock dividend 161,959 f
requirement of subsidiary Preferred stock dividend requirement of q
sutwidiary,
7,786 7,786 I
Net income.
161,959 (14,300) 147,659 14,300 (7,786) 154.173 Preferred stock dividend requirement 7,786 7,786 (7,786)
)
Earnings available for common shares 5 154,173 5 (14,300) 5 139,873 5 14,300 5 -
5 154,I73 l
Average common shares outstanding (thouunds),
33,289 33,289 33,289 l
Earnings per share of common stock
$4 63 54.20
$4.63 I
(1) Reflects the Company alone, after the merger and the transfer of stocks of the subsidiaries as a noncash dividend to Wisconsin Energy. The adjustments for the dividend are indicated in the second column.
(2) Reflects the new holding company consolidated, after the merger and the dividend of subsidiaries
- stock, The differences between the amounts of Common Stock and other paid in capital shown in the table for j
Wisconsin Electric and those shown for Wisconsin Energy reflect the difference in the par values of their respective Common Stocks. The adjustments and eliminations in consolidation are indicated in the fifth i
- column, j
9 l
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i Preferred Stock and Debt Securities The Preferred Stock of the Company and debt securities of the Company and Wisconsin Natural will not be changed in the restructuring. They will remain as Preferred Stock or debt securities of the Company or Wisconsin Natural, as the case may be.
The dividend by the Company to Wisconsin Energy of all the outstanding stock of Wisconsin Natural and the other subsidiaries as part of the restructuring will render the Company's insestment in these subsidiaries, and any earnings therefrom, no longer of potential benefit to the holders of the Company's Preferred Stock or debt securities, liowever, the Ikiard of Directors of the Company believes that such holders will not be affected materially thereby. The aggregate book value of the Company's investment in these subsidiaries was $131 milhon as of March 31,1986, representing approximately 12.9% of the consolidated I
common equity of the Company and its subsidiaries as of that date. For the tweise months ended March 31, 19F6, the Company's consolidated net income before Preferred Stock dividend requirements totalled $162 million; and, on a pro forma basis gising effect to the dividend as if made on March 31,1986, such amount would have totalled $148 million, as compared to an annual Preferred Stock dividend requirement for such period of less than $8 million.
After the restructuring, it is anticipated that in 1987 and later years, regular and supplemental dividends i
will be paid from time to time by the Company and Wisconsin Natural to Wisconsin Energy. See " Proposed Corporate Restructuring-Reasons far the Restructuring" above and " Proposed Corporate Restructuring-Regulation" below for information regarding certain anticipated supplemental dividends and the authority of the PSCW to limit dividends by the two utilities.
Upon the restrucitaing, the Company and Wisconsin Natural will continue to be reporting companies under the Securities Exchange Act of 1934. While annual meetings of the Company's stockholders are expected to continue to be held after the restructuring, the Company may decide not to solicit proxies from holders i
of the Preferred Stock for the election of directors and for other matters not requiring a class vote of such holders, since the shares of the Company's Common Stock to be held by Wisconsin Energy will alone have sutricient voting power to take action.
Wisconsin Public Utility llolding Company Statute A Wisconsin statute (Section 196.795) governing the formation of holding companies ofcertain Wisconsin public utilities, including the Company and Wisconsin Natural, and providing a comprehensive framework of regulation in respect of holding company system matters, became effective in late 1985. For an outline of s
certain provisions, including diversification limits, see " Proposed Corporate Restructuring-Regulation" j
herein.
1 l.isting l
Wisconsin Eneigy has applied for the listing ofits Common Stock on the New York Stock Exchange.
I The Company's Common Stock is now so lisad.
Dividend Policy it is anticipated that, following the restructuring, quarterly dividends on Wisconsin Energy Common Stock will be inaugurated at a rate at least equal to the most recent quarterly dividend declared by the Company on its Common Stock prior to the effective date of the restructuring and that the schedule for declaration and payment of quarterly dividends will be approximately the same as presently followed by the Company.
The most recent quarterly dividend declared by the Board of Directors of the Company on its Common Stock j
was 5 per share, payable on September 1,1986 to holders of record on August 7,1986.
The rates and timing of dividends on Wisconsin Energy Common Stock will depend, however, upon the earmngs and financial condition of Wisconsin Er.ergy and its subsidiaries and such other factors as may be i
deemed relevant by its Hoard of Directors.
As a holding company, Wisconsin Energy will be dependent as a practical matter on the ability ofits subsidiaries to pay dividends to it. Dividends by subsidiaries will, of course, depend upon their earnings and fmancial condition as well as other factors deemed relevant by their Boards of Directors. For information
]
regarding the authority of the PSCW to prohibit dividends by a utility subsidiary if the PSCW finds that the l
capital of the subsidiary will be impaired, see " Proposed Corporate Restructuring-Regulation." For information regarding indenture and other dividend limitations on dividends by the utility subsidiaries, see i
{
" Description of Wisconsin Energy Common Stock."
10 1
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Federal income Tax Consequences I'
The Company has received rulings from the Internal Revenue Service to the effect that for Federal income tax purposes:
(1) The merger will be viewed as an exchange, within the meaning of Section 351 of the Internal Revenue Code, of shares of Company Common Stock for shares of Wisconsin Energy Common Stock.
(2) No gain or loss will be recognized to a holder of shares of Company Common Stock upon such exchange of such shares for Wisconsin Energy Common Stock pursuant to the Plan of Merger.
(3) The basis of the Wisconsin Energy shares received by a holder in such exchange will be the same as the basis of the skares exchanged.
(4) The holding period of the Wisconsin Energy shares received by a holder in such exchange will melude the holding period of the holder's shares exchanged, provided that the latter were held as capital assets as of the date of the merger.
l (5) Where cash is received by a holder of Preferred Stock who is entitled to, and exercises, appraisal l
rights, the cash will be treated as having been received by such holder as a distribution in redemption of the Preferred Stock, subject to the provisions and limitations of Section 302 of the Internal Revenue Code. If the holder does not actually or constructively own stock of the Company, other than the shares
-f of Preferred Stock with respect to which such cash is received, the receipt of such cash will be treated as a distribution in full payment in exchange for the shares.
l (6) No gain or loss will be recognized to the Company or Acquisitions upon the merger.
l For purposes of the consolidated return regulations, Wisconsin Energy plans to treat the affiliated group j
of which the Company is now the common parent as remaining in existence after the merger, with Wisconsin
]
Energy as the common parent.
i The foregoing does not cover the tax consequences under state or other tax laws.
Exchange of Stock Certificates Not Necessary
}
if the proposed restructuring becomes effective, it will not be necessary in the restructuring for holders j
of Common Stock of the Company to exchange their existing stock certificates for stock certificates of j
Wisconsin Energy. The existing stock certificates will automatically represent shares of Wisconsin Energy l
Common Stock. In order to effect good delisery, however, on transfers of shares after the restructuring it j
may be necessary for the stockholder or his or her broker to obtain new certificates.
l Afler the restructuring, new certificates bearing the name " Wisconsin Energy Corporation" will be issued as outstanding certificates are presented for transfer. New certificates will also be issued for old certificates i
upon request of stockholders.
+
Continuance of Stock Plans The Company's Automatic Dividend Reinvestment and Stock Purchase Plan, its Customer Stock i
j Ownership Plan and its Tax Reduction Act Stock Ownership Plan will be assumed by Wisconsin Energy and amended so as to relate to Wisconsin Energy Common Stock rather than Company Common Stock. On the i
effectiveness of the merger, Company Common Stock held in the Plans will be converted automatically into j
Wisconsin Energy Common Stock.
I Directors and Executive Officers j-Wisconsin Energy l
Wisconsir. Energy's floard of Directors, upon the effectiveness of the restructuring,is to consist of nine j
directors divided into three classes, with one class (or one-third of the lloard) to be elected each year for a three-year term. The persons named in the tabulation set forth below are expected to constitute the Board j
upon such effectiveness, each having the term of office indicated with respect to him in the tabulation. Messrs.
j 11ritt, Hurstein and McNeer have already been elected and are now serving as Wisconsin Energy's present Hoard; the others are to be elected prior to the effectiveness of the restructuring. Any vacancies occurring j
before such effectiveness may be filled by the remaining Board. A vote for the Plan of Merger in effect approves the election of the persons indicated.
11 1
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Terms expiring in 1987-Russell W. Britt Mr. Britt, age 60, has been President and Chief Operating Officer of the Company and Wisconsin Natural since 1982. He had served as Executive Vice President of the Company and Vice President of Wisconsin Natural since 1975. lie also serves as a director of Wisconsin N tural,The h1arine Trust Company, N.A. and Stokely USA, Inc. lie has been a director of the Company since 1975, and is a member ofits Executive Ccmmittee.
51r. Britt, who resides in hiilwaukee, Wisconsin, is the beneficial owner of 4,461 shares of the Company's Common Stock.
Aforris W. Reid Afr. Reid, age 60, is an independent management consultant and corporate director. lie was, from 1972 to 1978, Chairman of the Board of Directors of J. I. Case Co., a manufacturer of construction and farm machinery and a subsidiary of Tenneco Corp. lie has been Chairman of the Board of Versa Technologies, Inc., a manufacturer of fluid power and silicone rubber products, since 1982. Afr. Reid has been a director of the Company since 1979 and is a member ofits Audit, Compensation and Executive Committees. Ile is also a director of The hlarine Corporation, Dickey-John Corporation and Stolper Industries, Inc. Afr.
Reid, who resides in Racine, Wisconsin, owns beneficially 1,091 shares of the Company's Common Stock.
Jon G. Udell Afr. Udell, age 51, has been Irwin hiaier Professor of Business at the University of Wisconsin-hfadison since 1975. Afr. Udell has been a director of the Company since 1977. lie is also Chairman of the Board i
of Directors of Federal Home Loan Bank of Chicago and a director of Research Products Corporation. IIe is a member of the Company's Audit 4
and Compensation Committees and is an alternate member of the Executive Committee. Afr. Udell, who resides in hfadison, Wisconsin, and members of his family are the beneficial owners of 1,297 shares of the Company's Common Stock. h1r. Udell disclaims beneficial ownership 1
of 605 of such shares.
Terms expinng m 1988-1 John F. Bergstrom Afr. Bergstrom, age 40, i.as been President and Chief Executive Officer of Bergstrom Enterprises, an operator of hotels and General Afotors Corporation automobile dealerships, since 1974. lie has been a director of the Company since 1985. lie is a member of the Company's Audit, Compensation and Nominating Committees and is,m alternate member of the Executive Committee. lie is also a director of First National Bank of Menasha. 51r. Bergstrom, who resides in Neenah, Wisconsin, owns beneficially 1,000 shares of the Company's Common Stock.
Sol Burstein.
Mr. Burstein, age 63, has been Vice Chairman of the Board cf the Company and of Wisconsin Natural since 1934. lie had served as Executive Vice President of the Company since 1973 and as Vice President of Wisconsin Natural since 1975. He has been a director of the Company since 1973 and is an alternate member of its Executive Committee. lie is also a director of Wisconsin Natural. Mr. Burstein, who resides in hfilwaukee, Wisconsin, owns beneficially 6,828 shares of j
the Company's Common Stock.
Joseph F. Ileil, Jr.
Alr. lieil, age 61, has been Chairman and Chief Executive Officer of The lleil Co., a manufacturer of solid waste systems and transportation equipment, since 1977. Ile had sersed as President and Chief Executive l
Officer ofThe IIcil Co. since 1968. lie has been a director of the Company since 1985 and is a member ofits Audit, Compensation, Executive and Nominating Committees. lie is also a director of The IIeil Co., First Wisconsin Corporation, First Wisconsin National Bank of hiilwaukee, Twin Disc, Inc. and Wehr Corporation. Afr. Ileil, who resides in hlilwaukee, Wisconsin, owns beneficially 100 shares of the Company's Common Stock.
t 12
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Terms expiring in 1989-Mr. McNeer, age 60, has been Chairman of the Board and Chief Charles S. McNeer Executive Officer of the Company and of Wisconsin Natural since 1982.
lie had served as President and Chief Executive Officer of both companies since 1975. Mr. McNeer has been a director of the Company since 1970 and is a member ofits Executive Committee. Ile also serves as a director of Wisconsin Natural, the Federal Reserve Bank of Chicago
(
and Milwaukee Forge Company. Mr. McNeer, who resides in Milwau-kee, Wisconsin, owns beneficially 12,171 shares of the Company's Common Stock.
i John L. Murray Mr. Murray, age 59, is Chairman of the Board and Chief Executive Officer of Universal Foods Corporation, a manufacturer and importer of specialty and gourmet foods. lie has been Chief Executive Officer of i
Universal Foods since 1979 and Chairman since 1984. lie had been President from 1976 to 1984. IIe has been a director of the Company since 1983 and is a member of its Audit, Compensation, Executive and Nominating Committees. lie is also a director of Universal Foods Corporation, First Wisconsin Corporation, First Wisconsin National Bank of Milwaukee, First Wisconsm Trust Company, Twin Disc, Inc.
and Becor Western, Inc. Mr. Murray, who resides in Milwaukee, Wisconsin, owns beneficially 1,000 shares of the Company's Common Stock.
Frederick P. Stratton, Jr.
Mr. Stratton, age 47, has been President ar.d Chief Executive Officer of Briggs & Stratton Corporation, a manufacturer of small gasoline engines and automotive locking devices, since 1977. Ile was elected a director of the Company in May 1986. lie is a member ofits Audit, Compensation and Nominating Committees and an alternate member ofits Executive Committee. lie is also a director of Briggs & Stratton Corporation, The Marine Corporation and Weyenberg Shoe Manufacturing Company. Mr.
Stratton, who resides in Milwaukee, Wisconsin, owns beneficially 200 shares of the Company's Common Stock.
Wisconsin Energy's executive officers are now and upon the effectiveness of the restructuring are expected i
to be:
Charles S. McNeer, President and Chief Executive Officer i
Russell W. Britt, Vice President Sol Burstein, Vice President Jerry G. Remmel, Treasurer j
John 11. Goetsch, Secretary Information with respect to Messrs. McNeer, Britt and Burstein is included in the foregoing tabulation of directors. Mr. Remmel,55, has been Vice President and Treasurer of the Company since 1983, havmg served as Treasurer of the Company from 1973 to 1983, and has been Treasurer of Wisconsin Natural since 1974.
Mr. Goetsch,53, has been Secretary of the Company and Wisconsin Natural since 1979.
The executive officers are elected annually. Any vacancies occurring prior to the effective date of the restructuring may be filled by Wisconsin Energy's Board of Directors.
The Company The persons named in the foregoing tabulation of those who are expected to constitute the Wisconsin Energy Board upon effectiveness of the restructuring also constitute the present Board of Directors of the Company, each having the term of office indicated with respect to him in the tabulation. The persons who are the Company's directors at the effective time of the merger will, upon the restructuring, continue to be the directors of the Company for the remainder of their terms.
Information regarding the executive officers of the Company is set forth in the Company's Annual Report on Form 10-K for the year ended December 31,1985, which is incorporated herein by reference.The persons who are the executive officers of the Company at the effective date of the restructuring will, upon the restructuring, continue to be the executive officers of the Company.
1 13
Regulation '
General The Company and Wisconsin Natural will continue to be subject to the jurisdiction of the PSCW as to electric, gas and steam rates, standards of service, issuance of securities, construction of new facilities, levels I
of short-term debt obligations, accounting, billing practices, certain transactions with nonutility affiliates, and various other matters. The Company will also continue to be subject to thejurisdiction of the Michigan Public j
Service Commission as to the various matters noted above except as to construction of new facilities, levels of short-term debt obligations, and transactions with nonutility affiliates. In addition, the Company will
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i continue,in respect ofaccounting and wholesale rates, to be subject to Federal Energy Regulatory Commission jurisdiction;in respect of construction and operation of nuclear facilities, to be subject to regulation by the J
Nuclear Regulatory Commission; and, in respect of various matters, to be subject to regulation by the Environmental Protection Agency and the Wisconsin Department of Natural Resources. The Company is j
i presently exempt from all provisions of the Public Utility Ifolding Company Act of 1935 except provisions thereof relating to the acquisition of securities of other public utility companies.
i Wiwonsin Holding Company Statute in late 1985, Section 196.795 of the Wisconsin Statutes (the " Wisconsin Ifolding Company Act") was created to provide for the regulation by the PSCW of the formation of holding companies, and of various matters with respect to resulting holding company systems. "flolding company" is defined as including, in l
general, any company, directly or indirectly, as beneficial owner, owning, controlling or holding 5% or more 4
of the outstanding voting securities of a public utility, with the unconditional power to vote such securities.
" Form a holding company" is defined to include "as a beneficial owner, to take, hold or acquire 5% or more of the outstanding voting securities of a public utility with the unconditional power to vote those securities" j
Among the provisions of the Wisconsin IIolding Company Act are provisions briefly summarized as i
follows: (a) prohibition on any person forming a holding company or acquiring or holding more than 10%
of the outstanding voting securities of a holding company, without PSCW approval;(b) authorization for the PSCW, ifit finds the capital of any public utility affiliate will be impaired by payment of a dividend, to order the affiliate to limit or cease payment of dividends to the holding company;(c) provision that, while a holding company or a r.onutility affiliate is not subject to the general regulatoryjurisdiction of the PSCW, the PSCW has full access to any document or other information to the extent relevant to the PSCW's performance of its duties in respect of public utility affiliates;(d) prohibition on various transactions by a public utility affiliate with others in the holding company system, including lending money, guaranteeing obligations, combined advertising, providing utility service on terms different from those for other consumers in the same class, and, without PSCW approval after establishment that the utility affiliate will be paid at fair market value, certain sales or leases of real property and use of services of utility employees; (e) prohibitions against (i) any public I
utility afliliate providing any nonutility product or service in a manner or at a price that unfairly discriminates against any competing provider, (ii) any nonutility activity being subsidized materially by the customers of l
any public utility in the system, (iii) the operation of the system in any way which materially impairs the i
credit, ability to acquire capital on reasonable terms or ability to provide safe, reasonable, reliable and adequate utility service of any public utility affiliate in the system, (iv) any transfer by a public utility affiliate to any q
other system company of any cc,nfidential public utility information, including customer lists, for use for any nonutility purpo'e, unless the PSCW has approved the transfer, and (v) any termination of the system's interest in a public utility affiliate wi hout PSCW approval; and (f) limitations on the sale, lease, installation or t
6, maintenance by nonutility and utility affiliates of certain appliances without PSCW approval. Other statutory provisions which pre-exis;ed the Wisconsin Ild ?ing Company Act include requirements for submission to the
- SCW for approval of certam contracts or othe. orrangements for furnishing property or services hetween a public utility and an affiliate.
The Wisconsin iloiding Company Act limits diversification, in that (in summary) the net book value
?
i of the assets (other than investment in system affiliates) of all nonutility affiliates may not exceed the sum of 25% of the net book value of all electric utility affiliates and a percentage, to be determined by the PSCW i
1 (but not less than 25%), of the net book value of all other public utility affiliates, provided that for the first 36 months after the holding company formation nonutility assets are limited to 40% of the maximum amount 3
l allowed under the foregoing provisions.
14 i
Further, the Act requires the PSCW, no sooner than 36 months after holding company formation, and at least once every three years thereafter, to investigate the impact of the operation of every holding company system formed after November 28,1985 on every public atility affiliate in the system and to determine whether
(
each nonutility affiliate does, or can reasonably be expected to do, at least one of the following: (a) substantially l
retain, attract or promote business activity or employment or provide capital to businesses within the service territory of any public utility affiliate or certain others,(b) increase or promote energy conservation or develop, produce or sell renewable energy products or equipment, (c) conduct a business that is functionally related to the provision of utility service or to the development or acquisition of energy resources, and (d) develop or operate commercial or industrial parks in the ser ice territory of any public utility affiliate.
Following approval of a holding company, the PSCW is authorized under the Wisconsin iloiding Company Act to modify any terms of, or add terms to, the approval. Furthermore, the PSCW is authorized to order a holding company to terminate its interest in a public utility affiliate if the PSCW finds that, based upon clear and convincing evidence, termination of the interest is necessary to protect the interests of utility investors in a financially healthy utility and consumers in reasonably adequate utility service at a just and reasonable price.
PSCil' Order Approving Formation of the Holding Company By order dated May 27,1986, the PSCW, under the Wisconsin llolding Company Act, approved the l
formation of the holding company in the proposed corporate restructuring. The approval is subject to certain conditions, which are outlined generally as follows: that no affiliated interest transactions including the sharing of officers, directors or employees or transfer of any item of value may occur after formation of the holding company prior to approval of an affiliated interest agreement; that the Company and Wisconsin Natural shall maintain a balanced capital structure within a reasonable range to be established by the PSCW in appropriate proceedings; that the directors of the Company and Wisconsin Natual shall set dividend policy based on the financial health of those utilities as if each were not part of a holding company system; that the Company and Wisconsin Natural shall submit specified forecasts in rate cases and other appropriate proceedings; that the percentage of steam assets of the Company and the percentage of the assets of Wisconsin Natural for purposes of the limitation on diversification is fixed at 25%; tha: Wisconsin Enesgy shall provide full access to the records of the holding company and nonutility affiliates for any document which the PSCW staff determines is relevant to fulfill its statutory duties, with the burden to be on Wisconsin Energy to prove that a document is not relevant or is protected by confidentiality; that Wisconsin Energy shall submit for PSCW staff review specific procedures for accounting for affiliated transactions; that the Company and Wisconsin Energy shall submit management plans for maximum possible separation of officers and employees between utility and nonutility affiliates; that certain reports shall be submitted; and that jurisdiction is retained by the PSCW.
In June 1986, Wisconsin's Environmental Decade, Inc. ("WED"), an environmental organization, was reported in the press as having requested that the Urban Affairs, Utilities and Elections Committee of the Wisconsin Senate hold hearings to determine whether the PSCW " abdicated its statutory responsibility to protect the consuming public" by not including additional restrictions in the May 27,1986 order. The Company
)
does not know whether the Committee will hold hearings as so requested. Also, a petition for review dated j
June 27,1986 has been filed by WED with the Circuit Court for Dane County, Wisconsin, requesting review and reversal of the May 27,1986 order and such other relief as may be appropriate. The petition alleges, among other things, that the PSCW proceedings were conducted without due process and involved irregularities and that the order was not supported by substantial evidence and is outside the PSCW's range of discretion, and t laims that as a result the order is in violation of constitutional and statutory provisions. The Company believes the petition is without merit and intends to participate in the review proceedings.
Federal Public Utility Holding Company Act In addition, the Company has applied to the SEC under the Public Utility lloiding Company Act of 1935, for an approval necessary for the restructuring and an exemption under Section 3(a)(1) of that Act.
That exemption would exempt Wisconsin Energy and its subsidiaries, upon completion of the restructuring, from all the provisions of the 1935 Act except Section 9(a)(2) thereof, which relates to the acquisition of securities of public utility companies. The basis of the exemption would be that Wisconsin Energy and its public utility subsidiaries are predominantly intrastate in character and carry on their business substantially in a single state (Wisconsin) in which they are organized. Such exemption may be revoked on a finding by 15
the SEC that such exemption "may be detrimental to the public interest or the interest of investors or consumers". There may be limits on the extent to which Wisconsin Energy and its subsidiaries could diversify without raising a possibility that the SEC might find that such diversification may be detrimental to the public interest or the interest of investors or consumers. Wisconsin Energy has no present intention, however, of becoming a registered holding company subject to the regula; ion of the SEC under the 1935 Act.
Vote Required Appwval of the Plan of hierger by vote of(a) a majority of the outstanding shares of the Company's Common Stock, voting separately as a class, and (b) a majority of the outstanding shares of the Company's Common Stock and Preferred Stock, voting together without regard to class or series, is required in order to effectuate the restructuring.
Effective Date If the merger is approved by the stockholders as recommended herein and not terminated by the Board of Directors of the Company, the restructuring will become effective at midnight, hiilwaukee time, on December 31,1986, or as soon thereafter as practicable. At any time prior to the effectiseness of the merger, the Plan of hierger may be terminated and the restructuring abandoned by the Board of Directors of the Company for any reason in the Board's sole discretion.
RESTATED ARTICLES OF INCORPORATION AND BYLAWS OF WISCONSIN ENERGY Wisconsin Energy's Restated Articles of Incorporation and Bylaws differ from those of the Company in certain respects, including provision for increased amounts of authorized but unissued Common Stock and Preferred Stock, expanded indemnification of directors and officers, broader Board authority to fix the terms of Preferred Stock, and new " anti-greenmail" and other antitakeover provisions.
The Restatad Articles of Incorporation of Wisconsin Energy are attached as Exhibit B. Exhibit C sets forth the indem iification Bylaw and Wisconsin Statute. The Restated Articles ofIncorporation of the Company and the Bylaws of both companies are filed, or incorporated by reference, as exhibits to the Registration Statement of which this proxy statement is a part. The following statements with respect to such documents are qualified by reference thereto.
Authorized But Unissued Capital Stock 1
Wisconsin Energy's authorized capital stock is as follows: 150,000,000 shares of Common Stock (5.01 par value per share), cf which 1,000 c.re outstanding; and 15,000,000 shares of Preferred Stock (5.01 par value per share), of which none is outstanding. Assuming that there is no change in the number of outstanding shares of Common Stock of the Company between h1 arch 31,1986 and the effectiveness of the merger, an aggregate of 33,289,327 shares of Common Stock of Wisconsin Energy will be outstanding upon completion of the restructuring.
The Company's authorized capital stock is as follows: 65,000,000 shares of Common Stock ($10 par value per share), of which 33,289,327 shares are outstanding as of Alarch 31,1986; 45,000 shares of Six Per Cent.
Preferred Stock ($100 par value per share), of which 44,508 shares are outstanding as of that date; 2,360,000 shares of Serial Preferred Stock ($100 par value per share), of which 960,102 shares are outstanding as of that date; and 5,000,000 shares of Serial Preferred Stock ($25 par value per share), none of which is outstanding.
These amounts of authorized and outstanding shares of the Company will not be changed by the restructuring.
Accordingly, upon the restructuring, Wisconsin Energy will have 85,000,000 more authorized but unissued shares of Common Stock than the Company has, or an aggregate of 116,710,673 authorized but unissued shares (assuming no change in the number of shares ofoutstanding Company Common Stock between hlarch 31,1986 and the effectiveness of the merger). With respect to Preferred Stock, upon the restructuring, the Company will continue to have its 6,400,390 shares of authorized but unissued Preferred Stock, and Wisconsin Energy will have its 15,000,000 shares of authorized but unissued Preferred Stock.
Although there are at present no plans for issuance of additional Wisconsin Energy Common Stock or Preferred Stock (except for the issuance of Common Stock in the restructuring), the Board of Directors of Wisconsin Energy believes it in the best interests of the companies to have the additional shares available for issuance without further stockholder action in the event issuance should at some time be deemed desirable.
Issuance could be for financing, for acquisitions, for stock splits or for other purposes.
16
Indemnification of Directors and Officers Wisconsin Energy's Bylaw IV includes a provision mandating to the fullest extent permitted by law indemnification of any person w ho is or was a party, or threatened to be made a party, to any legal proceeding by reason of the fact that such grson is or was a director or officer of Wisconsin Energy, or is or was serving at the request of Wisconsin Energy as a director or ollicer of another enterprise, against expenses (including attorney fees), judgments, fines 2nd amounts paid in settlement actually and reasonably incurred by the person in connection with such legal proceeding. The term " fullest extent permitted by law" is defined to mean the fullest extent to which indemnity may lawfully be provided by, pursuant to or consistently with, the non-exclusive, permissive prosisions of the Wisconsin Statute on indemnification, a bylaw under another provision of that Statute permitting further indemnification, or any other applicable law, whether statutory or otherwise. Copies of Bylaw IV and those statutory provisions are included in Exhibit C hereto, to which reference should be rw.de for the complete provisions.
The maximum indemnification intended to be afibrded by the Bylaw is believed to be in the best interests of Wisconsin Energy, as an appropriate response to legitimate concerns of persons asked to sers e in capacities covered by the Bylaw. The formulation of the Bylaw as a general statement of mandatory indemnification insofar as legally permissible is designed to cover the multiplicity of situations that might occur, as well as to deal with the present legal uncertainties regarding permissible scope.
Rather than limiting itself to making mandatory the non-exclusive, permissise provisions of the Statute, as does for the most part the indemnification By law of the Company, Bylaw IV by its terms,in addition, requires such further indemnification as may legally be provided. Accordingly, while, for example, the Statute specifically allows indemnification under certain conditions for expenses arising out of derivative actions (actions in the name of the corporation), the llylaw would encompass indemnification ihr a judgment, as well, in the event it were legally permissible under the special circumstances invohed. Further, in the light of the possible need m particular circumstances for legal proceedings to establish indemnification rights, Bylaw IV requires adsancement of expenses to the fullest extent authorized by law, against an appropriate repayment undertaking, and cosers expenses, if any, in the enforcement of rights under the Bylaw.
The Bylaw extends also to persons serving in various capacities with Wisconsin Energy's dividend reinsestment and other stock plans. It does not impair Wisconsin Energy's power and authority, to the extent legally permissible without regard to the Bylaw, in its discretion to indemnify or to purchase insurance indemnifying employees, agents or others. The rights under the Bylaw are to be legally enforceable and may not be modified or amended so as to impair any rights arising out of presious events. Under another Bylaw, 4
an 809 stockholder vote is needed to amend Bylaw IV.
Defensive Provisions Wisconsin Energy's Restated Articles of Incorporation contain certain prosisions which its Board of Directors believes are in the best interests of Wisconsin Energy and its stockholders after the restructuring, but which may have the etTect of discouraging persons from acquiring large bhicks of Wisconsin Energy stock or delaying or preventing a change in control of Wisconsin Energy. Such provisions may also tend to preserve the position of incumbent management. The Board is not aware of any existing situation or proposal that would be emered by the provisions. A discussion of the provisions, as well as certain Wisconsin statutory prmisions of potentially similar effect, follows.
Prevention of "Greenmail" The Restated Articles of Incorporation contain a restriction on certain repurchases of Common Stock at a market premium. This prmision is designed to present a purchaser or group of purchasers from accumulating a significant bk)ck of Wisconsin Energy Common Stock and then attempting to extract from Wisconsin Energy a premium price for the block of shares by threatening to make a tender otter, launching a proxy contest or instigating some other corporate disruption. This tactie has become known as "greenmail" The premium is paid at the expense of the remaining stockholders, who do not have the same opportunity to sell their shares at the above-the-market price and who also have the value of their shares diluted by the use of corporate assets to pay the premium. The unfairness of this technique may be accentuated if the seller has only recently acquired his or her shares with no intention of remaining an investor and without hasing undergone for any significant period the market risk of continuing ownership.
17
This provision would prohibit any purchase by Wisconsin Energy of shares ofits Common Stock from any person (or group of persons) or other entity believed by the Board of Directors to be a holder of 5%
or more of the Common Stock at the time the purchase is authorized by the Board, at a price, as determined by the Heard, significantly in excess of the then current market price. The prohibition would not, however, l
apply to any purchase of shares believed by the Board to have been beneficially owned by the seller for at least two years prior to the date of purchase, to any purchase which has been approsed by the affirmative vote of a majority of the aggregate number of shares of Common and Preferred Stock then entitled to vote, or to any purchase pursuant to a tender otter to all holders of Common Stock on the same terms.
This provision is intended to deter any persons w ho might be tempted to acquire a share position in the corporation for purposes of achieving a "greenmail" buyout by pressuring management with threats of 1
disruption. In addition, transfer to the stockholders of the decision-making power for such purchases which reach or exceed the 5% threshold puts the decision for this use of corporate assets properly in the hands of those especially afTected by a repurchase decision. The exception for repurchase of shares which have been beneficially owned for more than two years is believed to be in keeping with the purpose of the prosision; I
persons uho have held the shares for that period of time have been subject to the same market risks as many other stockholders and are unlikely to have acquired the shares for the purpose of "greenmail". Otherwise, under the provision, repurchases of substantial blocks of the Common Stock could be made at such premium price only if a majority of the outstanding voting shares approve the transaction at a meeting duty convened for such purpose or pursuant to a tender otter which would proside all holders of Common Stock the opportunity to receise the same terms.
While the provision, ifit discourages certain purchases of large blocks of Common Stock, might asoid any otherwise resulting market price increases, the Board believes nevertheless that esenhanded treatment of stockholders is a more important concern and that on balance the provision is to be recommended.
I'rorisions Regarding the Board of Directors Wisconsin Energy's Hylaws provide that the number of directors shall be determined from time to time by unanimous resolution of the Board but in no event shall be less than three. Currently the number stands at three. It is intended, however, that effectise at the time of restructuring the Board will be increased to nine directors. In addition, the Board is divided into three classes, which are to be as equal in number as possible, with the term cf one class expiring each year. Each class has a term of three years. The Company's Hylaws contain an identical provision for a classified Board.
Under Wisconsin hw, any director or the entire Board may be removed from office with or without cause by affirmative sote of a majority of the outstanding shares entitled to vote for the election of such director or directon, unless such power of removal is modified by the corporation's articles ofincorporation or bylaws.
Wisconsin Energy's Hylaws provide that a director may be remosed from oflice by majority vote of the outstanding voting shares if the remosal is for cause, but only by at least an 80% sote of the outstanding soting shares if the removal is without cause.
The combination of the classified Board and the requirement of an 80% vote for removal of a director without cause may make it more ditlicult for a substantial stockholder to etreet a rapid change in the Board of Directors without the cooperation of the incumbent Board. Since the terms of only one-third of the ircumbent directors would expire each year, a person acquiring a majority of the outstanding voting stock ot' Wisconsin Energy would need two annual meetings of stockholders to replace a majority of the directors.
O herwise, an acquiring entity would have to purchase at least 80% of the outstanding shares entitled to so sote, after w hich it could proceed to remove the entire Board without cause.
1 These provisions could have the effect of discouraging a person from becoming a majority stockholder or engaging u a proxy contest w here the ability to make rapid changes in the Board of Directors is an important element to the strategy of such person. This could eliminate any market price increases that might occur in connection with an attempt to gain control. Further, the "supermajority" vote is required even when the only reason for remosal is the stockholders' views on the director's performance. The Board belieses, however, that these considerations are outweighed by the potential benefits of continuity and stability of management.
Prefermt htock <tuthori:ation and.luthority to Fix Terms Under the Restated Articles of both Wisconsin Energy and the Company, the Board is authorized tc-issue Preferred Stock in series and to fix the rights and preferences of the series, to the extent not fixed i, 18 s
the Restated Articles or Ilylaws. The voting rights and certain preferences of Company Preferred Stock are determined in the Company's Restated Articles. Wisconsin Energy's Restated Articles do not, however, tix voting rights or preferences of Wisconsin Energy Preferred Stock. The Wisconsin Energy lloard may determine whether or not any series will hase soting rights and, if so, the extent thereof. The floard is also given full authority to determine the preferences of the Wisconsin Energy Preferred Stock.
An eiTect of the existence of unissued Preferred Stock may be to enable the lloard of Directors to render more ditlicult or to discourage an attempt to obtain control of the corporation by means of a merger, tender otter, proxy contest or otherwise. Such shares might be issued by the lloard of Directors without stockholder approsal in transactions that might prevent or render more difficult or costly the completion of the takeoser transaction, as by diluting voting or other rights of the proposed acquirer. In this regard, the Restated Articles of Incorporation grant the Board of Directors broad power to establish the rights and preferences of the authorized and unissued Preferred Stock, one or more series of which could be issued entitling holders to s ote separately as a class on any proposed merger or consolidation, to cast a proportionately larger s ote together with the Common Stock on any such transaction or for all purposes, to consert Preferred Stock into a large number of shares of Common Stock or other securities, to demand redemption at a specified price under prescribed circumstances related to a change of control, or to exercise other rights designed to impede a takeover.
"Supermajority " l'rorision s Article VII of the Restated Articles of Incorporation prosides that any lawful amendment may be made to m.e Restated Articles of Incorporation by a sote of the stockholders. The percentage of aflirmatise sotes necessary to etrectuate such amendment is normally 50% of the soting power of the outstanding shares.
Ilowever, for any amendment to Section C of Article 111 (authorization of Preferred Stock), Section D (1) of such Article (" anti-greenmail"), any amendment rendering the " fair price" prosisions in Section 180.725 of the Wisconsin Statutes inapplicable to the corporation, and any amendment to the 809 sote requirement prosisions, the required at!irmatise vote must be 809 of the voting power of the outstanding shares. The ll> law s contain a similar 809 requirement with regard to amendments to sections of the Ilylaws providing for unanimous consent for action to be taken by stockholders without a meeting, classified Board, remosal of directors notice of directors' meetings, and indemnitication of directors and ofTicers.
The "supermajority" requirements could present the purchaser of a majority of the soting stock of Wisconsin Energy from eliminating the stockholder safeguards prosided by the abose-mentioned provisions.
In this sense, the "supermajority" requirement is beliesed to be an important corollary to such prosisions.
Certain Statutory Defensise Prmisions
.lcquisition of Alore Than 10% of if'isconsin Energy Sharn The Wisconsin iloiding Company Act, discussed above under " Proposed Corporate Restructuring-Regulation", requires PSCW apprmal for any acquisition or holding of more than 10% of the outstanding soting shares of Wisconsin Energy after the effectiseness of the restructuring.
" Fair l' rice"[*rovision for the ifcctivenns of the Restructuring Wisconsin Energy is subject to Section 180.725 of the Wisconsin Statutes, which provides, in summary, that in the case of a business combination (as defined) insolsing a significant stockholder (as defined) the combination must, among other things, be recommended by the lloard of Directors of Wisconsin Energy and approsed by the atTirmatise vote of at least SOG of the sores entitled to be cast by its outstanding voting shares, and 662a9 of the votes entitled to be cast by holders of soting shares other than voting shares held by the significant stockholder. Such a sote is not required, howeser, if the aggregate cash and other consideration to be received in the business combination by Wisconsin Energy stockholders is at least equal to the higher of (a) the highest price per share paid by the significant stockholder for shares within the two-year period immediately before the date of commencement of a tender offer by the significant stockholder, or in the transaction in w hich such stockholder became a significant stockholder, w hicheser is higher, or (b) the mai ket value per share of the same class of shares on the date of commencement of such a tender otter, or on the date such stockholder became a significant stockholder, or on the date of the first public announcement of the proposed business combination, w hicheser is highest.
19
DESCRIPTION OF WISCONSIN ENERGY CONIN10N STOCK The authorized and outstanding capital stock of Wisconsin Energy is set forth under " Restated Articles of Incorporation and Bylaws of Wisconsin Energy" above.
The holders of Common Stock of Wisconsin Energy are entitled to receive such dividends as the lloard of Directors may from time to time declare, subject to any rights of holders of Wisconsin Energy Preferred Stock, if any. Each holder of Common Stock is entitled to one vote per share on each matter submitted to a vote at a meeting of stockholders, subject to any class or series voting rights of holders of Preferred Stock.
In the event of any liquidation, dissolution or winding-up of Wisconsin Energy, the holders of Common Stock, subject to any rights of holders of Preferred Stock, will be entitled to receive the net balance of any remaining assets of the corporation. liolders of Common Stock are not entitled to preemptive rights to subscribe for or purchase any part of any new or additional issue of stock or securities convertible into stock.
The shares of Common Stock issued in the restructuring will be duly authorized, fully paid and non-assessable. Ilowever, a Wisconsin Statute imposes on stockholders a liability equal to the par value of their stock for all debts which may be due to the employees of Wisconsin Energy for services performed for Wisconsin Energy, but not to exceed six months' service in any one case.
Because Wisconsin Energy will, at least initially, be a holding company rather than an operating company, its ability to pay dividends on its Common Stock will depend primarily upon the ability ofits subsidiaries j
to pay dividends to it.
So long as any of the Company's First Nfortgage Ilonds 6.507c Serial Series 1979 C due August 1,2009 are outstanding, the Company may not declare any dividend on its Common Stock (other than in Common Stock), or make any other distribution on, or acquire for value any shares of, its Common Stock (except in exchange for Common Stock), if after gising effect thereto the aggregate of all such dividends, distributions or acquisitions between December 31,1978 an.1 the last day of the third month preceding the month in which any such dividend, distribution or acquisition is paid or made exceeds the sum of $201,539,152 and the net income of the Company (including dividends from subsidiary companies but excluding undistributed earnings of subsidiaries) during such period applicable to its Common Stock. The Company's outstanding First N1ortgage Ilonds of other series contain similar or less restrictive dividend restrictions.
So long as any of the Company's Debentures of the 1993 Series are outstanding, when consolidated Stockholders' Equity in the Company and its subsidiaries is (or would become) less then 33 b G (but not less than 259 ) ofconsolidated Total Capitalization of the Company and its subsidiaries, the aggregate of disidends (other than stock dividends) and distributions on or purchases of the Company's Common Stock made during the year ending with the declaration of such dividends, or with such distribution or purchase, is limited to 750 of Consolidated Net Income Available for Common Stock for the twelve months next preceding 30 days prior thereto. When Stockholders Equity is (or would become) less than 259, the corresponding limitation is 50G. As of N1 arch 31,1986 the actual percentage was 59%. On a pro forma basis as of N1 arch 31,1986, after giving etTect to the proposed corporate restructuring, such percentage would hase been 58%. A simihr but less restrictive prosision applies so long as any of the Company's Serial Preferred Stock,3.60% Series remains outstanding.
So long as any of Wisconsin Natural's outstanding First Niortgage Honds,8%% Series due July 1,1996 are outstanding, Wisconsin Natural may not declare any dividend on its Common Stock (other than in Common Stock), or make any other distribution on, or acquire for value any shares of its Common Stock I
(except in exchange for Common Stock), if after giving effect thereto, the aggregate of all such disidends, l
distributions or acquisitions between April I,1971 and the last day of the third month preceding the month in which any such dividend, distribution or acquisition is paid or made exceeds the sum of $5,381,983 and the net income of Wisconsin Natural during such period applicable to its Common Stock.
The dividend restrictions referred to above do not, and are not expected to, impair the ability of the Company or Wisconsin Natural to maintain their consistent records of dividend payments. Under these restrictions, as of N1 arch 31,1986, after gising etTect to the proposed corporate restructuring as if it had occurred on that date, an aggregate of approsimately $431 million of retained earnings of the Company and Wisconsin Natural would have been unrestricted.
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lt is anticipated that, upon the effectiveness of the restructuring, the transfer agents for the Wisconsin Energy Common Stock will be Peter Sirko (an employee), 231 West hiichigan Street, P.O. Box 2046, 51ilwaukee, Wisconsin 53201 and Nianufacturers llanover Trust Company,450 West 33rd Street-8th Fh3or, l
New York, New York 1000), and that the registrars will be First Wisconsin Trust Company,777 E. Wisconsin l
Avenue, N1ilwaukee, Wisconsin 53202 and hianufacturers llanover Trust Company.
APPRAISAL RIGHTS FOR CERTAIN PREFERRED STOCKS The following discussion is qualified in its entirety by reference to Section 180.72 of the Wisconsin Statutes, a copy of which is attached hereto as Exhibit D.
Under Wisconsin law, holders of shares of any class or series of the Company's stock dissenting from the merger will not be entitled to appraisal rights if the shares of such class or series are registered on a national securities exchange or quoted on the National Association of Securities Dealers Automated Quotation System on the record date for the stockholders' meeting at which the merger will be acted upon. At such date all outstanding Common Stock and Preferred Stock of the Company, with the exception of the Six Per Cent.
Preferred Stock and Serial Preferred Stock,8.80% Series, were so listed or quoted. A holder of the Con pany's Six Per Cent. Preferred Stock or Serial Preferred Stock,8.80% Series (together, the " Eligible Preferred Stock"),
who follows the procedures set forth in Section 180.72 of the Wisconsin Statutes will be entitled, if the merger
]
is consummated, to payment, in cash, of the fair value of his or her shares. The fair value of such shares would
{
be determined as of the day prior to the date on which the stockholder vote was taken approving the Plan L
of hierger, excluding ary appreciation or deprecietion in anticipation of such corporate action. As described below, the fair value of such shares would be arrived at by agreement betw een the Company and the stockholder or, failing agreement, by a court in a special proceeding.
To be entitled to such appraisal rights, a holder of Eligible Preferred Stock must, (a) at least 48 hours5.555556e-4 days <br />0.0133 hours <br />7.936508e-5 weeks <br />1.8264e-5 months <br /> prior to the meeting of stockholders at which the Plan of hierger is proposed to be voted upon, file a written objection to the Plan of hierger,(b) not vote the shares of Eligible Preferred Stock as to which he or she is objecting in favor of the Plan of hierger, and (c) within 10 days after the date on which the stockholders' vote on the Plan of hierger was taken, make a written demand on the Company for payment of the fair value of the number of his or her shares of Eligible Preferred Stock as to which he or she has objected. Any holder who satisfies the foregoing statutory requirements may also vote against the Plan of hierger, but a vote against the Plan of hierger will not by itself satisfy the foregoing statutory requirements. A holder of Eligible Preferred Stock may object as to less than all of the shares of Eligible Preferred Stock registered in his or her name, and in that event, his or her rights are to be determined as if the shares as to which he or she has objected I
and his or her other shares are registered in the names of ditTerent stockholders. Any holder of Eligible Preferred l
Stock making such demand shall thereafter be entitled only to payment as provided in Section 180.72 and shall not be entitled to sote, or to any other rights of a stockholder in respect of, the shares as to which he or she is objecting. Under Section 180.72, no such demand may be withdrawn unless the Company shall consent thereto.
Pursuant to Section 180.72, within 20 days after demanding payment for his or her shares, each holder of Eligible Preferred Stock demanding payment is to submit the certificate or certificates representing his or her shares to the Company for notation thereon that such demand has been made. Failure to do so will, at the option of the Company, terminate a holder's rights under Section 180.72 unless a court of competent jurisdiction, for good and sullicient cause shown, otherwise directs.
Under Section 180.72, within 10 days after the effective date of the merger, the Company is to give written notice thereof to each objecting Eligible Preferred Stockholder who has made demand as provided in Section 180.72 and is to make a w ritten ofter to each such stockholder to pay for such shares at a specified price deemed t j the Conpany to be the fair value thereof. If, within 30 days after the etTective date of the merger, the fair value of su;h snares is agreed upon between any such objecting stockholder and the Company, payment therefor is to be made within 90 days after such effective date upon surrender of the certificate or certificates representing such shares. Upon payment of the agreed salue such stockholder shall cease to hase any interest in such shnes.
If within such 30-day period an objecting Eligible Preferred Stockholder and the Company do not so agree, then the Company, within 30 days of receipt of w ritten demand from any such stockholder gisen within 60 days after the effective date of the merger, is to, or at its election at any time within such period of 60 21
days may, commence a special proceeding by serving and filing a petition in any court of competent jurisdiction in hiilwaukee County, Wisconsin, requesting that the fair value of such shares be found and determined. Ir the Company should fail to institute such proceeding, any objecting Eligible Preferred Stockholder may do so in the name of the Company. All objecting stockholders, wherever residing, who have made demands as provided in Section 180.72 and w hose rights to payment have not otherwise terminated, are to be made parties to the special proceeding. All stockholders who are parties to the sp vial proceeding are entitled tojudgment against the Company for the amount of the fair value of their shares. Thejudgment will be payable only upon and concurrently with the surrender to the Company of the certificate or certificates representing such shares.
Upon payment of the judgment, the objecting stockholder shall cease to have any interest in such shares.
Certain of the costs and expenses of any such special proceeding are to be determined by the court and 1
may be assessed against the Company, but all or any part of such costs and expenses may be apportioned and assessed as the court may deem equitable against any or all of the objecting stockholders who are parties to the pioceeding to whom the Company shall have made an offer to pay for the shares if the court shall fmd that the action of such stockholders in failing to accept such offer was arbitrary or vexatious or not in good faith.
Written objections and written demands for payment from holders of Eligible Preferred Stock should be sent by mail or delivered in person to John II. Goetsch, Corporate Secretary, Wisconsin Electric Power Company,231 West hiichigan Street, P.O. Ilox 2046, hiilwaukee, Wisconsin 53201.
SIARKFT PRICES OF CO.hlPANY CONINION STOCK The following table sets forth the h gh and low sales prices, as reported on the New York Stock Exchange consolidated tape, for the Company's Common Stock for the penods indicated:
liigh Im s
s 1984 First Quarter 28th 2514 Second Quarter 28 25 %
Third Quarter 31M 27 %
Fourth Quarter 33 %
30 4 1985 First Quarter 32 %
30M Second Quarter 38 %
32 %
Third Quarter 40 %
33 %
Fourth Quarter 40 %
35 1986 First Quarter 49 %
38 %
Second Quarter 55 %
46 %
Third Quarter (through
).
The last reported sales price on September
,1986 was $
FINANCIAL STATE 51ENTS Financial statements of Wisconsin Energy are not presented in this proxy statement since Wisconsin Energy has since its incorporation been an inactive subsidiary, without material assets or liabilities. Pro forma consolidated fmancial information for the Company and Wisconsin Energy are shown under " Proposed Corporate Restructuring-Certain Pro Forma Financial Information" OWNERSillP OF EQUITY SECURITIES The directors and oflicers of the Company owned beneficially at Niay 31,1986 an aggregate of 62,296 shares of Common Stock and 13 shares of Serial Preferred Stock of the Company representing, with respect to each class, less than 0.2% of the outstanding shares of such class.
22
CERTAIN IlENEFICIAI. OWNERS OF VOTING SECURITIFS As of June 30,1986, there were no beneficial owners of more than 5% of any class of voting securities, according to information available to the Company.
Upon the etTectiveness of the restructuring, all of the outstanding Common Stock of the Company will be owned by Wisconsin Energy. Assuming no change in the number of outst:mding shares of Common Stock of the Company between June 30,1986 and the etTectiseness of the restructuring, an aggregate of 33,289,327 shares of Common Stock of the Company will be owned by Wisconsin Energy upon such effectiseness.
All of Wisconsin Energy's outstanding Common Stock is at present owned by the Company. Upon the etTectiveness of the merger, the holders of Wisconsin Energy's Con mon Stock will be the same as the holders of the Company's Common Stock immediately prior to such etTectiveness, each holding the same number of shares of Wisconsin Energy Common Stock as such holder held of the Company's Common Stock.
I.EGAL OPfNIONS The validity of the Common Stock of Wisconsin Energy to be issued in the restructuring will be passed upon by Robert II. Gorske. Esq., General Counsel of the Company and of Wisconsin Energy, or A. William Finke, Senior Attorney of the Company, and by Sullivan & Cromwell,125 Ilroad Street, New York, New York 100N. Sullisan & Cromwell will rely as to all matters of Wisconsin law upon the opinion of N!r. Gorske or Nir. Finke. As of Stay 31,1986, NIr. Gorske and NIr. Finke ow ned beneficially 4,218 shares and 2,775 shares of the Company's Common Stock, respectively.
EXPERTS The financial statements and schedules included or incorporated in this proxy statement by reference to the Annual Report on Form 10-K of Wisconsin Electric Power Company for the year ended December 31, 1985 hase been examined by Price Waterhouse, independent accountants, whose reports thereon are included or so incorporated by reference therein. Such tinancial statements and schedules have been incorporated by reference herein in reliance upon such reports of Price Waterhouse, independent accountants, gisen on the authonty of said firm as experts in auditing and accounting.
The statements as to matters of law and legal conclusions under " Proposed Corporate Restructuring-Regulation" have been prepared under t he supers ision of, and review ed by, Robert 11. Gorske, General Counsel of the Company and of Wisconsin Energy, and are made on his authority. See " Legal Opinions."
OTilER NIATTERS The Iloard of Directors is not aware of any matters other than the proposed Plan of Nierger which are proper subjects for action by security holders which may come before the Special Nfecting. Iloweser, if any other matter shall be properly brought before the Special Niceting, it is the intention of the persons named in the accompanying form of proxy to vote the proxy in accordance with their judgment on such matters.
COST OF SOLICITATION The Company will bear the cost of the solicitation of proxies, including the charges and expenses of brokerage firms and others for forwarding solicitation material to beneficial owners ofits stock. In addition to the use of the mails, certain ollicers and employees ofIhe Company may solicit proxies by personal interview, telephone, telegraph or other similar communications media. It is not anticipated that any other persons will be engaged to solicit proxies or that special compensation will be paid for that purpose, flowever, the Company may seck the sersices of an outside proxy solicitor at a fee, which would be negotiated between the solicitor and the Company, in the esent such services are believed to become necessary or desirable in order to obtain a sutlicient vote at the Special Nfecting.
23
EXillHIT A PLAN OF NIERGER ARTICLE L pA R I llS.
1.1.
Wisconsin Electric Power Company (" Wisconsin Electric") is a corporation duly organized and existing under the laws of the State of Wisconsin. It was incorporated under the name The N1ilwaukee Electric Railway and Light Company by Articles of Incorporation filed with the Secretary of State of Wisconsin on January 30,1896, and its name was changed to its present name by articles of merger filed on October 21,
\\
1938. The address ofits registered office is 231 West Niichigan Street, N1ilwaukee, Wisconsin 53201. The name of its registered agent at such address is J. II. Goetsch.
1.2.
WEPCO Acquisitions, Inc. (" Acquisitions") is a corporation duly organized and existing under the laws of the State of Wisconsin. It was incorporated by Articles of Incorporation filed with the Secretary of State of Wisconsin on June 26, 1981. The address of its registered office is 231 West Niichigan Street, N1ilwaukee, Wisconsin 53201. The name ofits registered agent at such address is J.11. Goetsch. All outstanding snares of Acquisitions are owned by Wisconsin Energy Corporation, a Wisconsin corporation (the t
"Com pany").
ARTICLE IL N11 RGi:R.
2.1.
On the etTeethe date of the merger, Acquisitions shall be merged into Wisconsin Electric, with Wisconsin Electric the sunising corporation.
2.2.
Wisconsin Electric's Restated Articles of Incorporation and its Hy-Laws, each as in effect on the effectise date of the merger, shall upon the merger continue as the Restated Articles of Incorporation and H -Laws of Wisconsin Electrie.
3 2.3.
The oflieers and directors of Wisconsin Electric on the effectise date of the merger shall upon the merger continue to be the otlieers and directors of Wisconsm Flectric, each to hold office for the remainder of his term of otlice and until his successor shall hase been elected or appointed and shall hase qualified.
2.4.
At the etTective date of the merger:
(a) Each then outstanding share of Common Stock, par salue $ 10.00 per share, of Wisconsin Electrie
(" Wisconsin Electric Common Stock"), which shall not be deemed to include any shares then held in its treasury, shall, by virtue of the merger and without any action on the part of the holder thereof, he conserted into one outstanding share of Common Stock, par value 5.01 per share, of the Company
(" Company Common Stock"), wherei.pon each such share of Wisconsin Electric Common Stock so conserted shall be deemed to be a share acquired by Wisconsin Electric and held in its treasury. Each such share of Company Common Stock sh issued shall thereupon be fully paid and nonassessable, except as prosided under Section 180.40(6) of the Wisconsin Business Corporation Law.
(b) The then outstandmg shares of Common Stock, par value $1.00 per share, of Acquisitions shall, by sirtue of the merger and without any actian on the part of the Company, be converted mto a number of shares of Wisconsin Electric Common Stock, trarsferred from those deemed acquired by Wisconsin Electric and held in its treasury pursuant to Sectiou 2.4(a) abose, equal to the number of shares of Company Common Stock issued pursuant to Section 2.4(a)abose. Each such share of Wisconsin Electric Common Stock shall thereupon be fully paid and nonassessable, except as provided under Section 180.40(6) l of the Wisconsin Husiness Corporation Law.
(c) All shares of Wisconsin Electric Common Stock thereafter remaining in its treasury shall be cancelled.
(d) The 1,000 shares of Company Common Stock owned by Wisconsin Electric immediately prior to the merger shall, by sirt.c of the merger, be deemed to be transferred to the Company's treasury and cancelled A-1
(e) The shares of Wisconsin Electric's Preferred Stocks shall not be comerted or otherwise affected by the merger and each such share then outstanding shall continue to be an outstanding share after the merger.
I j
2.5.
Each holder of a stock certificate or cedlicates representing outstanding shares of Wisconsin i
Electric Common Stock immediately prior to the merger, upon surrender of such certificate or certificates i
to the Com; v)y after the etrective date of the merger, shall be entitled to receive a certificate or certificates representing the same number of shares of Company Common Stock. Until so surrendered, each such stock certificate shall, by virtue of the merger, be deemed for all purposes to evidence ownership of the same number of shares of Company Common Stock as it formerly evidenced of Wisconsin Electric Common Stock.
2.6.
If any certificate representing Company Common Stock is to be issued in a name other than that i:t which the certificate theretofore representing Wisconsin Electric Common Stock surrendered is registered it shall be a condition of such issuance that the certificate so surrendered shall be properly endorsed or at herw ise in proper form for transkr and that the person requesting such issuance shall either pay to the Company or its transfer agents any transfer or other taxes required by reason of the issuance of certificates representing Company Common Stock in a name other than that of the registered holder of the certificate surrer.dered, or establish to the satisfaction of the Company or its transfer agents that such tax has been paid or is not applicable.
ARTICI.E III.
RI.I.ATrt) h1AT"I.RS.
3.1.
The officers of Wisconsin Electric and Acquis;tions, respectively, are authorized to make such I
applications for regulatory authorizations as they may deem necessary or desirable in connection with the merger.
l
- 32. This Plan of Nierger shall be submitted for the approval of the stockholders of Wisconsin Electric and Acquisitions as provided by Wisconsin Electric's Restated Articles ofIncorporation and by the applicabic laws of the State of Wisconsin.
3.3.
If this Plan of N1erger is duly adopted by the required sotes of such stockholders and the merger is not abandoned pursuant to Section 4.I hereof, Articles of hierger, setting forth this Plan of hierger, shall be executed and acknowledged in compliance with the prmisions of applicable law and shall be filed in the otlice of the Secretary of State of Wisconsin and recorded with the Register of Deeds of N!ilwaukee County, Wisconsin.
ARTICI.E IV.
A n A NI)ON Nti.NT.
4.1.
At any time prior to the filing of the Articles of hierger with the Secretary of State of Wisconsin pursuant to Section 3.3 hereof, the merger may be abandoned, and this Plan of hierger terminated, by the Iloerd of Directors of Wisconsin Electric for any reason whatsoever in such Iloard's sole discretion. Such action may be taken whether or not the stockholders of Wisconsin Electric and Acquisitiom shall hase presiously given their approval referred to in Section 3.2 hereof.
ARTICLE V.
Ei t errivt: D AT r..
5.1.
The merger shall become effectise at 12:00 midnight, hiilwaukee time, on Decemher 31,1986, except that if the filing of the Articles of hierger with the Secretary of State of Wisconsin, pursuant to Section 3.3 hereof, shall have been completed after December 31,1986. the merger sball become effective at 12:00 midnight, Niilwaukee time, on the day that said filing is so completed (such day and time being herein sometimes referred to as the " effective date of the merger").
A-2 i
U Exhibit H RESTATED ARTICLFS OF INCORPORATION OF i
WISCONSIN ENERGY CORPORATION As Amended and Restated Effective July 7,1986 These Restated Articles of incorporation supersede and take the place of the existing Articles of Incorporation and all prior amendments thereto and restatements thereof.
ARTICLE I.
NAME i
The name of the corporation is WISCONSIN ENERGY CORPORATION.
ARTICLE II. PURPOSE The corporation is organized for the purpose of engaging in any lawful activity within the purposes for which corporations may be organized under the Wisconsin Business Corporation Law.
l ARTICLE III. DESCRIPTION OF CAPITAL STOCK 1
A.
At.rTIIORil. tin NusinEn AND CEAssEs Or SHARES The aggregate number of shares which the corporation shall have authority to issue is One llundred and Sixty Five Million (165,000,000) shares, consisting of One flundred and Fifty Million
]
(150.000,000) shares of Common Stock of the par value of One Cent (5.01) per share (hereinafter j
called the " Common Stock") and Fifteen Million (15,000,000) shares of Preferred Stock of the par
}
value of One Cent (5.01) per share (i.ereinafter called the " Preferred Stock").
B.
COststON STOCK PROVISIONS (1) Dividends Subject to any rights of holders of Preferred Stock, such dividends (payable in cash, stock or otherwise) j as may be determined by the Board of Directors may be declared and paid on the Common Stock from time to time from any funds, property or shares legally available therefor.
(2) Voting Rights Subject to any rights of holders of Preferred Stock to vote on a matter as a class or series, each j
outstanding share of Common Stock shall be entitled to one vote on each matter submitted to a vote of holders of Common Stock at a meeting of stockholders.
(3) Liquidation. Dissolution or Winding Up In the event of any liquidation, dissolution or winding up of the corporation, the holders of Common I
Stock, subject to any rights of holders of Preferred Stock, shall be entitled to receive the net balance of any remaining assets of the corporation.
(4) No Preemptive Rights l
No holder of Common Stock shall be entitled as such, as a matter of right, to subscribe for or purchase or receive any part of any new or additional issue of stock, or securities convertible into stock, of any class whatever, whether now or hereafter authorized, or whether issued for cash, property or senices, by way of dividend, or in exchange for the stock of another corporation.
C.
PREI ERREp STOCK PROVISIONS The Board of Directors shall have authority to divide the Preferred Stock into series, to issue shares of any such series and, within the limitations set forth in these Articles ofIncor poration or prescribed by I sw, to fix and determine the relative rights and preferences of the shares of any series so established. Each such series shall be so designated as to distinguish the shares thereof from the shares of all other series and classes. All shares of Preferred Stock shall be identical except as to the following relative rights and i
9 references, as to which there may be variations between difTerent series:
4 B-1
(1) The rate of dividend; (2) The price at and the terms and conditions on which shares may be redeemed; (3) The amount payable upon shares in the event of voluntary or involuntary liquidation of the corporation; (4) Sinking fund provisions for the redemption or purchase of shares; (5) The terms and conditions on which shares may be converted, if shares are issued with the privilege of conversion; (6) Voting rights, if any; c.nd (7) Any other rights or preferences as to which the laws of the State of Wisconsin, as in effect at the time of the determination thereof, permit variations between ditrerent series of Preferred Stock.
Shares of Preferred Stock shall have only such voting rights, if any, preemptive rights, if any, and other rights as are fixed and determined by the Board of Directors in accordance with the foregoing provisions or as may be required by law.
D.
CERTAIN OTriER PROVISIONS AFFECTING STOCKIIOEDERS (1) Restriction on Certain Purchases of Common Stock at Market Premium (a) The corporation shall not purchase any shares of Common Stock from any person or other entity if more than 5'7c of the outstanding shares of Common Stock are believed by the Board of Directors to be Beneficially Owned by such person or other entity at the time the purchase is authorized by the Board, at a price exceeding significantly (as determined by the Board of Directors) the then current market price. This provision shall not apply, however, to (i) any purchase of shares believed by the Board to have been Beneficially Owned by the seller, or by the seller and any of the seller's Affiliates consecutively, for at least the two-year period ending with the date of purchase; (ii) any purchase of shares which has been approved by affirmative vote by a majority of the aggregate number of votes which the holders of the then outstanding shares of Common Stock and Preferred Stock are entitled to cast, voting together as a class, in the election of directors; or (iii) any purchase pursuant to a tender offer to all holders of Common Stock on the same terms.
(b) As used in this Subsection (1):
(i) " Affiliate", with respect to any person or other entity, means any other person or other entity that directly, or indirectly through one or more intermediary, controls, is controlled by, or is under common control with, such former person or other entity; (ii) " Beneficially Owned", as of any time, means Beneficially Owned within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as in effect on June 1,1986.
(2) Shares Not Subject to Statutory Vote Reduction Provisions Tne voting power of shares of Common Stock and Preferred Stock shall not at any time be subject to subsection (9) of Section 180.25 of the Wisconsin statutes or any successor provision.
ARTICLE IV. NUMBER OF DIRECTORS The Board of Directors shall consist of such number of directors as shall be fixed from time to time by or in the mar.ner provided in the Bylaws.
ARTICLE V.
EMERGENCY PROVISIONS The business and affairs of the corporation shall be managed by its Board of Directors, except as otherwise provided in this Article V after the occurrence and during the continuance of any Emergency. During any Emergency the provisions of this Article V shall apply to the maximum extent permitted by the Wisconsin Business Corporation Law, particularly Section 180.30 thereof, or any successor provision, as at the time in effect. The provisions of this Article V shall control during any Emergency, notwithstanding any contrary provisions of these Articles of Incorporation or the Bylaws of the corporation.
As used in this Article V, " Emergency" means a condition resulting from any cause, including but not limited to acts of war, attack or insurrection, or disasters caused by accident or the forces of nature, which either makes it impossible to notify and assemble a quorum of the entire Board of Directors for a meeting within the minimum notice period specified in the Bylaws, or which renders the chief executive officer or two B-2 1
_ ~.
or more of the other principal officers of the corporation unable to perform their duties in such capacities, whether through death, injury, illness, disappearance or inability to contact them.
During any Emergency which makes it impossible to assemble a quorum of directors at a duly noticed and constituted meeting, the business and affairs of the corporation shall be managed by an interim Board of Directors consisting of so many of the incumbent directors, if any, as are known to be alive and not incapacitated, and whom the corporation is able to contact by normal means of communication, together with provisional directors selected as hereinafter provided. The total number of directors on such interim Board of Directors shall be the lesser of the number determined in or pursuant to the Bylaws, or the number of f
eligible persons who are known to be alive, are not incapacitated and can be readily contacted by the usual l
means of communication. The Board of Directors by reso:ution may from time to time designate a list of j
provisional directors and the order of priority in which such persons shall become interim directors in the j
event of Emergency, which designation shall continue in effect until such resolution has been subsequently amended or rescinded or has by its terms ceased to have effect. Interim directors need not be stockholders l
of the corporation. In addition to the exercise, on a temporary basis, of all of the powers of the regular Board of Directors, the interim Board of Directors shall have the authority to declare vacancies in any positions
)
of the regular Board of Directors in cases where any incumbent director is incapacitated or missing or otherwise l
unable to be contacted within a reasonable time, and to fill such vacancies, as well as any vacancy resulting j
from the death of a director, by electing replacements to the regular Board of Directors to serve until the j
next succeeding annual meeting of stockholders.
I, During any Emergency which renders the chief executive officer or two or more of the other principal officers of the corporation unable to perform their duties, the functions and duties of the chief executive officer j
or such other principal officers, as the case may be, may be performed by such interim officers, selected as hereinafter provided, as are known to be alive and not incapacitated, and whom the corporation is able to contact by normal means of communication. The Board of Directors by resolution may from time to time designate one or more provisional successors to each principal office of the corporation and the order of priority
)
in which such persons shall succeed to such positions in the event of an Emergency, which designation shall continue in effect until such resolution has been subsequently amended or rescinded or has by its terms ceased to have effect. Any interim officer shall have, and may exercise, all of the duties and powers of the office to which he has succeeded on an interim basis until the Board of Directors has determined by affirmative action that the officer whom he succeeded is again able to perform his duties, or has elected a regular successor to such office.
1 l
When an Emergency has occurred, any director, principal officer or provisional director or officer named l
in any aforementioned resolution is empowered on behalf of the corporation to declare the provisions of this Article V to be in effect, and to call a meeting of either the regular or an interim Board of Directors on such notice, which may be shorter than the notice provided for in the Bylaws for special meetings of the Board i
I j
of Directors, as such person may determine to be advisable. In the case of a meeting of the interim Board
{
of Directors, reasonable efforts shall be made to give such notice to all persons who are or may be eligible i
to serve as interim directors. At the first meeting of any interim Board of Directors, three or more interim l
directors may act, notwithstanding any other quorum requirement provided by these Articles ofIncorporation i
or the Bylaws of the corporation, and notwithstanding any failure of other interim directors to receive notice i
of the meeting. Prior to any initial meeting of the interim Board of Directors three or more interim directors, and thereafter a majority of the interim directors who are deemed to be serving as such, may take action as the lloard of Directors by telephone poll, written instrument or other means which reasonably evidences the awent to the action of a majority of such number ofinterim directors, in lieu of action at a meeting.
1 ARTICLE VI. ACQUISITION OF OWN SilARES j
Subject to the provisions of Section D(1) of Article ill of these Articles ofIncorporation, the corporation is authorized to purchase, take, receive or otherwise acquire shares of Common Stock or Preferred Stock of i
the corporation, with the approval of the Board of Directors, with or without any vote or consent of l
stockholders.
i i
B3 i
i.
,, -.. - - - - -, - - -. - - - - - - - - - - -, ~
p -.,.,.
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,..e y.-,_-,,.-
-, - ~
,.w,..-._,--~..--
-,,,,., - - - - - ~ -
ARTICLE VII. AMENDMENTS TO THE ARTICLES Any lawful amendment of these Articles of Incorporation may be made by affirmative vote by at lost the proportion specified below of the aggregate number of votes which the holders of the then outstar. ding shares of Common Stock and Preferred Stock are entitled to cast on the amendment and, if the shares of
]
one or more classes or series are entitled under these Articles of Incorporation or otherwise by law to vote thereon as a class, affirmative vote by the same proportion of the aggregate number of votes which the holders of the then outstanding shares of such one or more classes or series are entitled to cast on the amendment.
4
'Ibe proportion referred to above in this Article VII shall be 80% in the case ofany amendment of the provisions j
set forth in Sections C and D(1) of Article III of these Articles of Incorporation, and in this Article VII, and any amendment rendering inapplicable to the corporation Section 180.725 of the Wisconsin llusiness 3
Corporation Law or any successor provision, and shall be a majority in all other cases.
4 l
ARTICLE VIII. EFFECT OF HEADINGS i
The descriptive headings in these Articles of Incorporation were formulated, used and inserted herein for convenience only and shall not be deemed to affect the meaning or construction of any of the provisions
]
hereof.
ARTICLE IX. REGISTERED OFFICE AND AGENT
]
The address of the registered office of the corporation is 231 West Michigan Street, Milwaukee, Wisconsin 53201 and the name ofits registered agent at such address is J. II. Goetsch. The county of such registered office is Milwaukee County.
1 4
11-4
EXIlllllT C INDEMNIFICATION BYLAW OF WISCONSIN ENERGY AND WISCONSIN INDEMNIFICATION STATUTE l
Indemnification Ilylaw of Wisconsin Energy llYLAW IV. INtmstNu icxrtoN i
I k
SrcrtoN 1.
Mandatory indemnificatwn l
The corporation shallindemnify to the fullest extent permitted by law any person who is or was a party or threatened to be made a party to any legal proceeding by reason of the fact that such person is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another enterprise, against expenses (including attorney fees), judgments, fmes and amounts paid in settlement actually and reasonably incurred by the person in connection with such legal proceeding.
Sectios 2.
Certain Definitions j
As used in this flylaw IV, (a) " indemnify" includes the advancement of expenses upon receipt of an undertaking to repay upon specified conditions,(b)" fullest extent permitted by law" means the fullest extent
)
to which indemnity may law fully be provided by, pursuant to or consistently with, the provisions of subsections (1) and (2) of Section 180.05 of the Wisconsin Statutes (or any successor provision), a bylaw under subsection (6) of that Section (or any successor provision) or any other applicable law, whether statutory or otherwise, j
(c) " person" includes the person's heirs, executors and administrators, (d) " legal proceeding" means any l
threatened, pending or completed action, suit or proceeding, whether or not by or in right of the corporation, 1
(e) "other enterprise" includes any corporation, partnership, joint venture, trust, dividend reinvestment plan, stock purchase plan, employee benefit plan or other plan or entity, (f) " expenses" include expenses in the enforcement of rights under this flylaw and any excise taxes assessed with respect to an employee benefit plan 1
and (g)in respect of any of such plans,(i)" serving at the request of the corporation as a director or officer" i
includes sersing at the request of the corporation in any capacity that involves services or duties with respect to the pbn or its participants or beneficiaries and (ii) action reasonably believed to be in the interest of such participants or beneticiaries shall be deemed reasonably believed to be in, or not opposed to, the best interests of the corporation.
St crsoN 3.
Legal Enjbrceability The rights provided to any person by the terms of this flylaw IV shall be legally enforceable against the l
corporation by such person, who shall be presumed to have relied on the provisions of this Ilylaw in undertaking or continuing any of the positions with the corporation or other enterprise referred to in Section I of this f
Ilylaw IV.
St.cito N 4.
Limitation on Modification or Termination i
No modification or termination of this ll> law IV shall be effected w hich w ould impair any rights hereunder
{
arising at any time out of events occurring prior to such modification or termination.
Ss crsus 5.
Non Exclusive Bylaw j
This flylaw IV is not intended to be exclusise and accordingly shall not be construed as impairing in any way the power and authority of the corporation, to the extent legally permissible without regard to this llylaw IV, in its discretion to indemnify or agree to indemnify, or to purchase insurance indemnifying, any i
employee, agent or other person.
Wisconsin Indemnification Statute Section 180.05 of the Wisconsin Statutes: Indemnification of officers, directors, employes and agents.
(1) A corporation may indemnify any person who was or is a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that be or l
she is or was a director, officer, employe or agent of the corporation, or is or was serving at the request of C1 J
4
_ _ _ _ _ _ _ _ _. _,.,. - - _ _ _ _.., _ - _ _ _ _ _ - - ___ ~ _-._.____ _ _ - --_ _.___,__ _ m _ _ _ _,. _, _ _
m
l.
l the corporation as a director, officer, employe or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorney fees, judgments, fines and amounts paid in settlement 4
actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with,espect to any criminal action or proceeding, had no reasonable cause to believe l
that his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of no contest or its equivalent, shall not, ofitself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, j
had reasonable cause to believe that his or her conduct was unlawful.
l (2) A corporation shall have power te indemnify any person who was or is a party or is threatened to be made a party to any threatened, pendit.g or completed action or suit by or in the right of the corporation i
to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employe or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employe or i
agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication ofliability but in s iew of all circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper.
(3) To the extent that a director, officer, employe or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in sub. (1) or (2), or in defense of any claim, issue or matter therein, he shall be indemnified against expenses, including attorneys' fees, actually and reasorably incurred by him in connection therewith.
(4) Any indemnification under sub. (1) or (2), unless ordered by a court, shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employe 3
1 or agent is proper in the circumstances because t.e has met the applicable standard of conduct set forth in l
sub. (1) or (2). Such determination shall be made:
(a) 13y the board of directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding:
(b) If such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors 4
so directs, by independent legal counsel in a written opinion; or l
(c) 13y the shareholders.
(5) Expenses, including attorneys' fees, incurred in defending a civil or criminal action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding as authorized in the manner provided in sub. (4) upon receipt of an undertaking by or on behalf of the directar,
)
officer, employe or agent to repay such amount unless it shall ultimately be determined that he is entit!cd to be indemnified by the corporation as authorized in this section.
(6) The indemnification provided by this section shall not be deemed exclusive of any other rights to which those indemnitied may be entitled under any bylaw, agreement, vote of shareholders or disinterested j
directors or otherwise, both as to action in hit olheial capacity and as to action in another capacity while holding such otlice, and shall continue as to a person who has ceased to be a director, officer, employe or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.
(7) A corporation shall hase power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employe or agent of the corporation, or is or was serving at the request of the j
corporation as a director, officer, employe or agent of another corporation, partnership, joint senture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity or arising out of his status as such, w hether or not the corporation would have the power to indemnify him against i
such liability under this section.
C2 i
1 EXIllillT D i
STATUTORY PROVISIONS APPLICABLE TO i
APPRAISAL RIGHTS FOR SIX PER CENT. PREFERRED STOCK AND SERIAL PREFERRED STOCK,8,80% SERIES Wisconsin Statutes Section 180.72 Rights of Objecting Shareholders 180.72 Rights of objecting shareholders (1) Any shareholder of a corporation shall have the right to file with the corporation a w ritten objection, at least 48 hours5.555556e-4 days <br />0.0133 hours <br />7.936508e-5 weeks <br />1.8264e-5 months <br /> prior to the meeting of shareholders at which any of the following corporate actions are proposed to be voted upon: a) Any plan of merger or consolidation to which the corporation is a party; or b) Any sale or exchange of all or substantially all of the property and assets of the corporation not made in the usual and regular course ofits business, including a sale in dissolution, but not including a sale pursuant to an order of a court hasing jurisdiction in the premises or a sale for cash, with or without an assumption ofliabilities of the seller, on terms requiring that all or substantially all of the net proceeds of sale be distributed to the shareholders in accordance with their respective interests within one year after the date of sale. A shareholder may object as to less than all of the shares registered in his name; and in that event, his rights shall be determined as if the shares as to which he has objected and his other shares were registered in the names of different shareholders. A shareholder in a statutory close corporation formed under s. 180.995 need not file a written objection prior to a meeting of shareholders or the corporate action in order to preserve his or her right to receive the fair value of his or her shares. This subsection shall not apply to the shareholders of the sursising corporation in a merger if a vote of the shareholders of such corporation is not necessary to authorize such merger. Except in a business combination, as defined in s. 180.725 (1) (d), which is subject to t 180.725 (2) or exempt under s. 180.725 (3), this subsection shall not apply to the holders of sharts of any class or series if the shares of such class or series were registered on a national securities exchange or quoted on the national association of securities dealers, inc., automated quotations system on the date fixed to determine the shareholders entitled to sote at the meeting of shareholders at which a plan of merger or consolidation or a proposed sale or exchange of property and assets is to be acted upon unless the articles of incorporation of the corporation shall otherwise provide.
(2) If such written objection by a shareholder to such proposed rporate action has been filed, and if I
such proposed corporate action be approved by the required vote and sah shareholder shall not have voted in fasor thereof, such shareholder may, within 10 days after the date e r which the vote was taken, or if a corporation is to be merged without a sote ofits shareholders into anoth ~ corporation any ofits shareholders may, within 20 days after the plan of such merger shall have been maih c to such shareholders, make written demand on the corporation, or,in the case of a merger or consolidation, on the surviving or new corporation, domestic or foreign, for payment of the fair value of such shareholder *s shares, and, if such proposed corporate action is efrected, such corporation shall pay Io such shareholder, upon surrender of the certificate or certificates l
representing such shares, the fair salue thereof as of the day prior to the date on which the vote was taken approsing the proposed corporate action, excluding any appreciation or depreciation in anticipation of such corporate action, except as prosided in 3. 180.725. In a business combination, as defined m s. 180.725 (1) (d),
the fair salue shall be the market value determined under s. 180.725 (1)(k) 1. a to d. Any shareholder failing to make demand within the applicable 10-day or 20-day period shall be bound by the terms of the proposed corporate action. Any shareholder making such demand shall thereafter be entitled only to payment as in this section prosided and shall not be entitled to sote or to any other rights of a shareholder.
(3) No such demand may be withdrawn unless the corporation shall consent thereto. If, however, such demand shall be withdraw n upon consent, or if the proposed corporate action shall be abandoned or rescinded or t he shareholders shall resoke the authority to effect such action, or if, in the case of a merger, at the effectise time ofIhe merger ihe survis ing corporation is the ow ner of all the outstanding shares of the other corporations, domestic and foreign, that are parties to the merger, or if no demand or petition for the determination of fair value by a court shall have been made or filed within the time prosided in this section, or if a court of D-1
competent jurisdiction shall determine that such shareholder is not entitled to the relief provided by this section, then the right of such shareholder to be paid the fair value of his shares shall cease and his status as a shareholder shall be restored, without prejudice to any corporate proceedings which may have been taken during the interim.
(4) Within 10 days after such corporate action is effected, the corporation or, in the case of a merger or consolidation, the surviving or new corporation, domestic or foreign, shall give written notice thereof to each objecting shareholder who has made demand as herein provided, and shall make a written offer to each such shareholder to pay for such shares at a specified price deemed by such corporation to be the fair value 4
thereof. Such notice and offer shall be accompanied by a bslance sheet of the corporation the shares of which i
the objecting shareholder holds, as of the latest available date and not more than 12 months prior to the making 1
of such offer, and a profit and loss statement of such corporation for the 12-month period ended on the date of such balance sheet.
(5) If within 30 days after the date on which such corporate action was effected the fair value of such shares is agreed upon between any such objecting shareholder and the corporation, payment therefor shall i
be made within 90 days after the date on which such corporate action was effected, upon surrender of the certificate or certificates representing such shares. Upon payment of the agreed value the objecting shareholder shall cease to have any interest in such shares.
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(6) If within such period of 30 days an objecting shareholder and the corporation do not so agree, then the corporation, within 30 days after receipt of written demand from any objecting shareholder given within 60 days after the date on which such corporate action was effected, shall, or at its election at any time within such period of 60 days may, commence a special proceeding by serving and filing a petition in any court of competent jurisdiction in the county in this state where the registered office of the corporation is k)cated requesting that the fair value of such shares be found and determined. If, in the case of a merger or j
consolidation, the surviving or new corporation is a foreign corporation without a registered office in this state, such petition shall be filed in the county w here the registered office of the domestic corporation w as last k)cated.
If the corporation shall fail to institute the proceeding as herein provided, any objecting shareholder may do so in the name of the corporation. All objecting shareholders, wherever residing, who have made demands as herein provided and whose rights to payment have not otherwise terminated, shall be made parties to the special proceeding. A copy of the petition and any process or notice shall be served on each such objecting shareholder, whether a resident or nonresident of this state, as provided in ch. 801. The jurisdiction of the court shall be plenary and exclusive. All shareholders who are parta to the proceeding shall be entitled to judgment against the corporation for the amount of the fair value of the r shares. The court may,ifit so elects, appoint one or more persons as appraisers to receive evidence and rei ommend a fmding of fair value. The appraisers shall have such power and authority as shall be specified u the order of their appointmcrt or an amendment thereof. The judgment shall be payable only upon and c ancurrently with the surrender to the corporation of the certificate or certificates representing such shares. Upon payment of the judgmert, the objecting shareholder shall cease to have any interest in such shares.
(7) The judgment may include an allowance for interest at such rate as the court may find to oc fair and equitable in all the circumstances, from the date on which the vote was taken on the proposed corporate
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action to the date of payment.
(8) The costs and expenses of any such proceeding shall be determined by the court and may be assessed i
against the corporation, but all or any part of such costs and expenses may be apportioned and assessed as the court may deem equitable against any or all of the objecting shareholders who are parties to the proceeding to whom the corporation shall have made an offer to pay for the shares if the court shall find that the action of such sharehoklers in failing to accept such ofter was arbitrary or vexatious or not in good faith Such expenses shall include reasonable compensation for and reaumable expenses of the appraisers, but shall exclude the fees and expenses of counsel for and experts employed by any party; but if the fair value of the shares as i
i determined materially exceeds the amount which the corporation ofrered to pay therefor, or if no offer was made, the court in its discretion may award to any shareholder who is a party to the proceeding such sum as Ihe court may determine to be reasonable compensation to any expert or experts employed by the shareholder in the proceeding.
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I (9) Within 20 days after demanding payment for his shares, each shareholder demanding payment shall submit the certificate or certificates representing his shares to the corporation for notation thereon that such demand has been made. llis failure to do so shall, at the option of the corporation, terminate his rights under
.i this section unless a court of competent jurisdiction, for good and sufficient cause shown, shall otherwise direct.
If shares represented by a certificate on which notation has been so made shall be transferred, each new certificate issued therefor shall bear similar notation together wi;h the name of the original objecting holder of such shares, and a transferee of such shares shall acquire by such transfer no rights in the corporation other than those which the original objecting shareholder had after making demand for payment of the fair value thereof.
(10) Shares acquired by a corporation pursuant to payment of the agreed value therefor or to payment of the judgment entered therefor, as in this section prosided, may be held and disposed of by such corporation as in the case of other treasury shares, except that,in the case of a merger or consolidation, they may be held and disposed of as the plan of merger or consolidation may otherwise proside.
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PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS Item 20. Indemnification of Directors and Officers Section 180.05 of the Wisconsm Statutes, which provides for indemnification of directors and officers, is set forth in Exhibit C to the Proxy Statement included in Part I of this Registration Statement.
The registrant's Bylaw IV provides, in general, foi mandatory indemnification of directors and officers by the registrant to the fullest extent permitted by law. Bylaw IV is discussed in, and set forth on Exhibit C i
to, the Proxy Statement included in Part I of this Registration Statement-l The Customer Stock Ownership Plan, Automatic Dividend Reinvestment and Stock Purchase Plan and I
Tax Reduction Act Stock Ownership Plan of the registrant's ubsidiary, Wisconsin Electric Power Company, i
contain, and it is anticipated that such Plans as assumed by the registrant in the restructuring will contain, provisions indemnifying directors, officers and employees against claims in connection with any action or failure to act regarding such Plans, except when liability may be based on willful misconduct.
i Officers and directors of the registrant are covered by insurance policies purchased by the registrant or an af'iliate under which they are in,ured (subject to exceptions and limitations specified in the policies) against
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expenses and liabilities arising out of actions, suits or proceedings to which they are parties by reason of being i
or having been such directors or officers.
Item 21. Exhibits and Financial Statement Schedules The following exhibits are filed as part of this Registration Statement:
Exhibit Numhee
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-Agreement and Plan of Restructuring, dated as of 1986, including Plan of Merger.
i 3(a) -Restated Articles ofIncorporation of Registrant (set forth as Exhibit H to the Proxy Statement l
included in Part I of this Registration Statement)-
i (b) -Dylaws of Registrant.
Niortgage et Supplemental Under IrJenture Comoany Date Exhibit File No.
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-1 Mortgage Wncomin 10/28/38 B-l 2 4340 and Deed Electne l
of Trust Power Company (WE) 2 Second WE 6/1/46 7-C 2 6422 3 Tiurd WE 3/l/49 7-C 2-8456 4 Fourth WE 6/1/$0 7D 2 8456
$ Fifth WE
$/l/$2 4-0 2 9588 6 Sisth WE
$/1/$4 4 11 2 10846 7 Seventh WE 4/l$/$6 4-I 2 12400 l
8 Eighth WE 4/1/$8 2I 2 13937 9 Ninth WE 11/15/60 24 2 17087 10 Tenth WE 11/1/66 2K 2-25$93 11 Flesenth WE 11/15/67 2L 2-27504 j
12 Twelfth WE
$/15/68 241 2-28799 13 Thirteenth WE
$/l$/69 2N 2 32629 14 Fourteenth WE 11/l/69 2-0 2 34942 f$ Fifteenth WE 7/l$/76 2P 2-$4211 16 Sinteenth WE 1/in8 2-Q 2 61220 17 Scunteenth WE
$/IM8 2R 2 61220 18 Eighteenth WE
$/1$n8 2S 2 4 1220 19 Nineteenth WE 8/IM9 (a)2 11245 (9/3049 Form 10-Q) 20 Twentieth WE ll/l$n9 (a)2(a) 11245 (12/31/79 Form 10.K) 21 Twenty Fint WE 4/15/80 (4) 21 2 69488 22 1 m ent> 4econd WE 12/1/80 (4)-I l 1245 (12/31/80 Form 10 K) 23 Twenty-Third WE 9/15/8$
(4) l 11245 (9/30/85 Form 10-Q) 24 Twenty Fourth WE 9/15/85 (4)-2 11245 (9no/83 Form 10-Q)
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Eshibit t
Number i
4 (continued $
Mortasse or Supplemental Under Indenenre Company Dene Eskibit File No.
g25 Mortgage Wisconsin 7/l5/36 2 Al 2 61220 and Deed Mwhigan of Trust Power l
Company (VM) 26 Supplemental WM 12/15/37 2-Cl 2 61220 l
i Indenture I
27 Third WM 4/1/48 2 Di 2 61220 4
28 Fourth WM 2/1/50 2 El 2 61220 i
29 Fifth WM 10/1/51 2-Fi 2 61220 30 Sixth WM 10/1$/54 2-GI 2 61220 31 Seventh WM 11/1/$9 2 HI 2-61220 32 Eighth WM 11/15/61 2-11 2-61220 33 Ninth WM 4/1/63 241 2-61220 34 Tenth WM 8/l/66 2 K1 2 41220 35 Eleventh WM 8/15/67 211 2 61220 36 Twelfth WM 10/1/68 2 MI 2-61220 37 Thirteenth WM 9/IS/69 2 NI 2-61220 38 Fourteenth WM 10/15/70 2-01 2-61220 I
39 Fificenth WM 11/15/77 2 Pl 2 61220 40 Sixteenth WM 12/31/77 2-QI 2-61220 j
The exhibits listed above under item 4 were filed as exhibits to Registration Statements and Reports previously filed with the Commission under the Exhibit and File Number as shown after each such exhibit, and they are hereby incorporated herein by reference.
All agreements and instruments with respect to long term debt not exceeding 10% of the assets of the registrant and its subsidiaries on a pro forma consolidated basis have been omitted, pursuant to related i
instructions. The registrant agrees pursuant to item 601(b)(4) of Regulation S-K to furnish to the Commission, I
upon request, a copy of all such agreements and instruments.
5(a) -Opinicn of Robert H. Gorske (to be filed by amendment).
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(b) -Opinion of Sullivan & Cromwell (to be filed by amendment).
8(a) -Ruling, dated June 12,1986 of the Internal Revenue Service regarding Federal income tax consequences of the merger (filed by Form SE dated July 8,1986).
(b) -Letter dated June 27,1986 to the IRS from Sullivan & Cromwell, counsel to the registrant, 1
confirming a correction of a typographical error in its June 12,1986 ruling (filed by Form i
SE dated July 8,1986).
(c) -Letter dated June 27, 1986 to the Commissioner of Internal Revenue from Sullivan &
Cromwell, counsel to the registrant, requesting additional deletions to the June 12,1986 ruling (filed by Form SE dated July 8,1986).
t 24(a) -Consents of Counsel (to be included in Exhibits $(a) and (b) above).
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(b) -Consent of Price Waterhouse.
(c) -Consents of persons named to become directors.
28(a) -Form of Proxy (filed by Form SE dated July 8,1986).
(b) -Form of Brochure containing Chairman's Letter and Questions and Answers accompanying 4
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Proxy Statement.
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Item 22. Undertakings The undersigned registrant hereby undertakes as follows:
(a) That prior to any public reoffering of the securities registered hereunder through the use of a prospectus which is a part of this registration statement, by any person or party who is deemed to be an 1
1, underwriter within the meaning of Rule 145(c), the issuer undertakes that such reoffering prospectus will 11 2 i
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l contain the information called for by the applicable registration form with respect to reofrerings by persons who may be deemed underwriters,in addition to the information called for by the other items of the applicable form.
j (b) That every prospectus (i) that is filed pursuant to paragraph (a) immediately preceding, or (ii) that purports to meet the requirements of Section 10(a)(3) of the Act and is used in connection with an offering of securities subject to Rule 415, will be filed as a part of an amendment to the registration statement and will not be used until such amendment is effective, and that, for purposes of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(c) To respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4,10(b),11, or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request.
(d) To supply by means of a post effective amendment allinformation concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective.
(e) That, for purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in this registration statement shall be deemed to be a new registration statement relating to the securities offered herein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(f) To file, during any period in which offers or sales are being made, a post effectise amendment to this I
registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration i
statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, 1
j represent a fundamental change in the information set forth in the registration statement; j
(iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration i
statement; provided, however, that paragraphs (f)(i) and (f)(ii) do not apply if the registration statement is on Form S-3 or S 8, and the information required to be included in a post-effective amendment by those paragraphs is i
contained in periodic reports filed by the registrant pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the registration statement.
(g) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effectise amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
(h) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
Insofar as indemnification by the registrant for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions referred to in the first three paragraphs of item 20, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in that Act and is, therefore, unenforceable. In the event that a claim for indemnification by the registrant against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding)is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion ofits counsel Ihe matter has been settied by controlling precedent, submit to a court of appropriatejurisdiction Ihe question whether such indemnification by it is against public policy as expressed in that Act and will be gmerned by the final adjudication of such issue.
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SIGNATURES Pursuant to the requirements of the Securities Act, the registrant has duly caused this. registration statement to be signed on its behalf by the undersigned, thereunto duly authorized,in the City of Milwaukee, and State of Wisconsin, on the 9th day of July,1986.
WISCONSIN ENERGY CORPORATION By C. S. McNEER C. S. McNeer, President and Chief Executive Omcer Each person whose signature appears below hereby authorizes C. S. McNeer, R. W. Britt, J. G. Remmel and J, II. Goetsch, or any of them, as attorneys.in. fact with full power of substitution, to execute in the name and on behalf of such person, Individually, and in each capacity stated below or otherwise, and to file, any and all pre.cffectise or post. effective amendments to this registration statement.
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed below by the following persons in the capacities and on the date indicated.
Signature and Title Date C. S. McNtta July 9.1986 C. S. McNeer, President and Chief Executive Omcer (Principal Executive Omcer) and Director R. W. IlnITT July 9,1986 R. W. firitt, Vice President (Principal Financial and Accounting Omcer) and Director Sol liensTriN July 9,1986 Sol llurstein.
Vice President and Director 9
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E EXHIBIT 2 AGREEMENT AND PLAN OF RESTRUCTURING i
THIS AGREEMENT, dated as of
,1986, among Wisconsin l
Electric Power Company, a Wisconsin corporation (" Wisconsin Electric"), WEPCO Acquisitions, Inc., a Wisconsin corporation (" Acquisitions")(said two corporations being herein sometimes collectively called the
" Constituent Corporations"), and Wisconsin Energy Corporation, a Wisconsin corporation (the " Company"),
as a third party hereto.
WITNESSETil:
WilEREAS, Wisconsin Electric has an authorized capitalization consisting of (i) 65,000,000 shares of j
Common Stock, par value $10.00 per share (" Wisconsin Electric Common Stock"), of which 33,289,327 shares are issued and outstanding, (ii) 45,000 shares of Six Per Cent. Preferred Stock, par value $100 per share, of i
which 44,508 shares are issued and outstanding, (iii) 5,000,000 shares of Serial Preferred Stock, par value
$25.00 per share, of which no shares are issued and outstanding, and (iv) 2,360,000 shares of Serial Preferred Stock, $100 par value, of which 960,102 shares are issued and outstanding; and WHEREAs, the Company has an authorized capitalization consisting of(i) 150,000,000 shares of Common Stock, par value 5.01 per share (" Company Common Stock"), of which 1,000 shares are issued and outstanding and owned beneficially and of record by Wisconsin Electric, and (ii) 15,000,000 shares of Preferred Stock, par value 5.01 per share, of which no shares are issued and outstanding; and I
WHEREAS, Acquisitions has an authorized capitalization consisting of 1,000 ' hares of Common Stock, s
par value $1.00 per share (" Acquisitions Common Stock"), all of which such shares are issued and outstanding and owned beneficially and of record by the Company; and l
WilEREAS, the Boards of Directors of the parties hereto deem it desirable to effect a merger of Acquisitions I
into Wisconsin Electric in accordance with the Wisconsin Business Corporation Law, this Agreement and the Plan of Merger attached hereto as Exhibit A, whereby each holder of shares of Wisconsin Electric Common Stock outstanding immediately prior to the effective date of the merger will receive the same number of shares of Company Common Stock as such holders held of Wisconsin Electric Common Stock immediately prior to the effective date of the merger (as defined in Section 3.3 of the Plan of Merger);
a Now, TIIEREFORE, it is agreed as follows:
ARTICLE I.
l TERMS AND AGREEMENTS.
1.1.
On the effective date of the merger, Acquisitions shall be merged into Wisconsin Electric, with l
Wisconsin E!-ctric the surviving corporation, all as provided in the Plan of Merger.
I 1.2.
At the effective date of the merger, outstanding shares of Wisconsin Electric Common Stock, Acquisitions Common Stock and Company Common Stock shall be converted or cancelled, all as provided in Section 2.4 of the Plan of Merger.The Company agrees toissue such number of shares of Company Common l
Stock as may be required for purposes of Section 2.4(a) of the Plan of Merger.
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l.3.
Promptly after the effective date of the merger, Wisconsin Electric shall distribute to the Company, as a disidend, all of the outstanding shares of Common Stock of Wisconsin Natural Gas Company, Hadger
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Sersice Company, Wisconsin Michigan investment Corporation, WISVEST Corporation, WITECil Corpora-tion and WISPARK Corporation, Wisconsin corporations, then owned by Wisconsin Electric.
1 1.4, At the effectis e date of the merger, Wisconsin Electric's records concerning the owners of Wisconsin i
E!cetric Common Stock shall becom: the property of the Company.
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ARTICLE II.
TERMINATION.
2.1.
At any time prior to the filing of the articles of merger with the Secretary of State of Wisconsin.
pursuant to Section 3.3 of the Plan of Merger, the merger may be abandoned, and this Agreement, the Plan of Merger and such articles of merger terminated, by the Board of Directors of Wisconsin Electric for any reason whatsoever in such Board's sole discretion. notwithstanding favorable action on the merger by the stockholders of either or both of the Constituent Corporations.
ARTICLE III.
MISCELLANEOUS.
l 3.1.
This Agreement and the accompanying Plan of Merger may be amended by an agreement in writing.
before or after the approval of the stockholders of Wisconsin Electric and of the Company as sole stockholder 1
of Acquisitions. at any time prior to the effective date of the merger, w;th respect to any of the terms contained herein excer that after the stockholders of Wisconsin Electric have approved the Plan of Merger no amendment shall be made in the terms of conversion provided for in Section 2.4 of the Plan of Merger.
3.2. The headings for the Articles of this Agreement and for the Plan of Merger are inserted 'or convenience of reference only and shall not affect the interpretation or constitute a part hereof or the.cof.
3.3. This Agreement may be executed in one or more counterparts. each of which when so executed shall be deemed an original, and such counterparts shall together constitute one and the same instrument.
IN WITNr:55 WifEREOF, Wisconsin Electric, Acquisitions and the Company have each caused this Agreement to be executed by its Chairman of the Board and Chief Executive Officer, its President or any of its Vice Presidents and its corporate seal to be hereto affixed and attested by its Secretary or an Assistant I
Secretary, all as of the date first above written.
l Attest:
WISCONSIN ELECTRIC POWER COMPANY Secretary By:
[ Corporate Scal)
Chairman of the Board and i
Chief Executive Officer i
Attest:
WEPCO ACQUISITIONS, INC.
By:
Secretary President and l
[ Corporate Seal)
Chief Executive Officer I
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Attest:
WISCONSIN ENERGY CORPORATION By:...................................
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Secretary President and
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[ Corporate Seal)
Chief Executive Officer i
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EXilIBIT A l
TO AGREEh1ENT AND PLAN OF RESTRUC1'URING I
l PLAN OF MERGER ARTICLE I.
PA RTIES.
1.1.
Wisconsin Electric Power Company (" Wisconsin Electric") is a corporation duly organized and existing under the laws of the State of Wisconsin. It was incorporated under the name The hiilwaukee Electric Railway and Light Company by Articles of Incorporation filed with the Secretary of State of Wisconsin on January 30,1896, and its name was changed to its present name by articles of merger filed on October 21, 19.!8. The address ofits registered office is 231 West Michigan Street, hiilwaukee, Wisconsin 53201. The name of its registered agent at such address is J.11. Goetsch.
1.2.
WEPCO Acquisitions, Inc. (" Acquisitions") is a corporation duly organized and existing under the laws of the State of Wisconsin. It was incorporated by Articles of Incorporation filed with the Secretary of State of Wisconsin on June 26, 1981. The address of its registered office is 231 West hiichigan Street, hiilwaukee, Wisconsin $3201. The name ofits registered agent at such address is J. II. Joetsch. All outstanding shares of Acquisitions are owned by Wisconsin Energy Corporation, a Wisconsin corporation (the
" Company").
ARTICLE II.
h1ERGER.
2.1.
On the effective date of the merger, Acquisitions shall be merged into Wisconsin Electric, with Wisconsin Electric the surviving corporation.
2.2.
Wisconsin Electric's Restated Articles of Incorporation and its By-Laws, each as in effect on the effective date of the merger, shall upon the merger continue as the Restated Articles of Incorporation and By-Laws of Wisconsin Electric.
2.3.
The officers and directors of Wisconsin Electric on the effective date of the merger shall upon the merger continue to be the officers and directors of Wisconsin Electric, each to hold office for the remainder of his term of office and until his successor shall have been elected or appointed and shall have qualified.
2.4.
At the effective date of the merger:
(a) Each then outstanding share of Common Stock, par value 510.00 per share,of Wisconsin Electric
(" Wisconsin Electric Common Stock"), which shall not be deemed to include any shares then held in its treasury, shall, by virtue of the merger and without any action on the part of the holder thereof, be converted into one outstanding share of Common Stock, par value 5.01 per share, of the Company
(" Company Common Stock"), whereupon each such share of Wisconsin Electric Common Stock so converted shall be deemed to ba a share acquired by Wisconsin Electric and held in its treasury. Each such share of Company Common Stock so issued shall thereupon be fully paid and nonassessable, except as provided under Section 180.40(6) of the Wisconsin Business Corporation Law.
(b) The then outstanding shares of Common Stock, par value $1.00 per share, of Acquisitions shall, by virtue of the merger and without any action on the part of the Company, be converted into a number of shares of Wisconsin Electric Common Stock, transferred from those deemed acquired by Wisconsin Electric and held in its treasury pursuant to Section 2.4(a) above, equal to the number of shares of Company Common Stock issued pursuant to Section 2.4(a) above. Each such share of Wisconsin Electric Common Stock shall thereupon be fully paid and rionassessable, except as provided under Section 180.40(6) of the Wisconsin Business Corporation Law.
(c) All shares of Wisconsin Electric Common Stock thereafter remaining in its treasury shall be cancelled.
(d) The IJX)0 shares of Company Common Stock owned by Wisconsin Electric immediately prior to the merger shall, by sirtue of the merger, be deemed to be transferred to the Company's treasury and cancelled.
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(e) The shares of Wisconsin Electric's Preferred Stocks shall not be converted or otherwise affected by the merger and each such share then outstanding shall continue to be an outstanding share after the merger.
2.5.
Each holder of a stock certificate or certificates representing outstanding shares of Wisconsin Electric Common Stock immediately prior to the merger, upon surrender of such certificate or certificates to the Company after the effective date of the merger, shall be entitled to receive a certificate or certificates representing the same number of shares of Company Common Stock. Until so surrendered, each such stock certificate shall, by virtue of the merger, be deemed for a!i purposes to evidence ownership of the same number of shares of Company Common Stock as it formerly evidenced of Wisconsin Electric Common Stock.
2.6.
If any certificate representing Company Common Stock is to be issued in a name other than that in which the certificate theretofore representing Wisconsin Electric Common Stock surrendered is registered it shall be a condition of such issuanu that the certificate so surrendered shall be properly endorsed or otherwise in proper form for transfer and that the person requesting such issuance shall either pay to the Company or its transfer agents any transfer or other taxes required by reason of the issuance of certificates representing Company Common Stock in a name other than that of the registered holder of the certificate surrendered, or establish to the satisfaction of the Company or its transfer agents that such tax has been paid or is not applicable.
ARTICLE III.
RELATED h1ATTERS.
3.1.
The officers of Wisconsin Electric and Acquisitions, respectively, are authorized to make such applications for regulatory authorizations as they may deem necessary or desirable in connection with the merger.
3.2.
This Plan of hierger shall be subtr.itted for the approval of the stockholders of Wisconsin Electric and Acquisitions as provided by Wisconsin Electric's Restated Articles ofIncorporation and by the applicable laws of the State of Wisconsin.
3.3.
If this Plan of hierger is duly adopted by the required votes of such stockholders and the merger is not abandoned pursuant to Section 4.1 hereof, Articles of Merger, setting forth this Plan of Merger, shall be executed and acknowledged in compliance with the provisions of applicable law and shall be filed in the office of the Secretary of State of Wisconsin and recorded with the Register of Deeds of Milwaukee County, Wisconsin.
ARTICLE IV.
A R AN DON NIENT.
4.1.
At any time prior to the filing of the Articles of Merger with the Secretary of State of Wisconsin pursuant to Section 3.3 hereof, the merger may be abandoned, and this Plan of Merger terminated, by the Board of Directors of Wisconsin Electric for any reason whatsoever in such Board's sol: discretion. Such action may be taken whether or not the stockholders of Wisconsin Electric and Acquisitians shall have previously given their approval referred to in Section 3.2 hereof.
ARTICLE V.
ErrECTIVE DATE.
5.1.
The merger shall become effective at 12:00 midnight, Milwaukee time, on December 31,1986, except that if the filing of the Articles of Merger with the Secretary of State of Wisconsin, pursuant to Section 3.3 hereof, shall have been completed after Decer iber 31,1986, the merger shall become effective at 12:00 midnight, Milwaukee time, on the day that said filing is so completed (such day and time being herein sometimes referred to as the " effective date of the merger").
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Exhibit 3(b)
BYLAWS of WISCONSIN ENERGY CORPORATION As Amended to June 27,1986, Inclusive l
BYLAW I.
STOCKHOLDERS SECTION 1.
DATE OF ANNUAL h1EETING The annual meeting of the stockholders of the corporation shall be held on or before the first day of June of each year, on the date and at the time designated by the Board of Directors or the Chairman of the Board or the President, for the purposes of electing directors and of transacting such other business as may properly be brought before the meeting.
SECTION 2.
CALL OF SPECIAL hlEETINGS Special meetings of the stockholders may be held upon call of the Board of Directors, the Executive Committee, the Chairman of the Board or the President or the holders of not less than one-tenth (defined as provided in Section 5 of this Bylaw) of all shares of the corporation entitled to vote at the meeting at such time as may be stated in the call and notice.
SECTION 3.
PLACE OF h1E2 TINGS The Board of Directors may designate any place, either within or without the State of Wisconsin, as the place of meeting for any annual meeting or for any special meeting called by the Board of Directors. If no designation is made, or if a special meeting be otherwise called, the p! ace of meeting shall be the principal business office of the corporation in the State of Wisconsin or such other suitable place in the county of such principal office as may be designated by the person calling such meeting, but any meeting may be adjourned to reconvene at any place designated by vote of a majority (defined as provided in Section 5 of this Bylaw) of the shares represented thereat.
SECTION 4.
NOTICE OF hlEETINGS Notice of the time and place of every meeting of the stockholders, and in the case of a special meeting further stating the purposes for which such meeting is called, shall be delivered personally or mailed at least ten (10) days before the meeting to each stockholder of record entitled to vote at the meeting, at his address as it may appear on the books of the corporation. Such further notice shall be given by mail, publication or wherwise, as may be required by law. Whenever any notice whatever is required to be given to any stockholder of the corporation under the Articles of Incorporation, Bylaws or any provision oflaw, a waiver thereofin writing, signed at any time, whether before or after the time of meeting, by the stockholder entitled to such notice, shall be deemed equivalent to the giving of such notice.
SECTION 5.
VOTING AT hlEETINGS A.
Proxies Every stockholder entitled to vote at any meeting may so vote either in person or by proxy.
B.
Balloting and Inspectors of Election Voting at meetings of stockholders need not be by written ballot unless so determined in a resolution of the Board of Directors relating thereto. Voting at meetings of stockholders shall be conducted by one or more inspectors of election appointed by the Board of Directors. However, no director or person who is a candidate for the office of director shall be appointed as such inspector. The inspectors, or persons representing the inspector if the inspector is an institution, before entering upon the discharge of their duties, shall take and subscribe an oath faithfully to execute the duties ofinspector at such meeting with strict imparthlity and according to the best of their ability.
C.
Quorum Except as otherwise provided in the Articles of Incorporation, a majority (defined as provided below in this Section 5) of the shares entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of stockholders.
1
If a quorum is present, the affirmative vote of a majority (as so defined) of the shares represented at the i
meeting and entitled to vote on the subject matter shall be the act of the stockholders unless the vote of a greater number or voting by classes is required by law, the Articles of incorporation or any other provisions of the Bylaws. Though less than a quorum of the outstanding shares are represented at a meeting, a majority (as so defined) of the shares so represented may adjourn the meeting from time to time without further notice.
At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed.
1 D Majority, Etc., to be Based on Votes Entitled :o be Cast The references in Sections 2 and 3 and this Section 5 of Bylaw I to one-tenth or a majority of specified shares shall mean one-tenth or a majority, as the case may be, of the votes entitled to be cast by holders of such specified shares.
SECTION 6.
CONDUCT OF MEETINGS Meetings of the stockholders shall be presided over by the Chairman of the Board if there be an incumbent in that office, or in his absence or at his request, by the President, or if he is not present, by a Vice President, or if no Vice President is present, by a chairman to be chosen at the meeting. The Secretary of the corporation, or if he is not present, an Assistant Secretary of the corporation, or if no Assistant Secretary is present, a person appointed by the chairman of the meeting, shall act as secretary of the meeting.
SECTION 7.
CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE For the purposes of determining stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or stockholders entitled to receive payment of any dividend, or in order to make a determination of stockholders for any other proper purpose, the Board of Directors may provide ~that the stock transfer books shall be closed for a stated period but not to exceed, in any case, fifty days. If the stock
. transfer books shall be closed for the purpose of determining stockholders entitled to notice of or to vote at a meeting of stockholders, such books shall be closed for at least ten days immediately preceding such meeting.
In lieu of closing the stock transfer books, the Board of Directors may fix in advance a date as the record date for any such determination of stockholders, such date in any case to be not more than fifty days and, in case of a meeting of stockholders, not less :han ten days prior to the date on which the particular action, requiring such determinatten of stockholders, is to be taken. If the stock transfer books are not closed and no record date is fixed for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders, or stockholders entitled to receive payment of a dividend, the close of business on the date on which notice of the meeting is mailed or on the date on which the resolution of the Board of Directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of stockholders.
When a determination ofstockholders entitled to vote at any meeting ofstockholders has been made as provided in this Section 7, such determination shall apply to any adjournment thereof except where the determination has been made through the closing of the stock transfer books and the stated period of closing has expired.
SECTION 8.
UNANINtOUS CONSENT WITHOUT A MEETING Any action required by the Articles of Incorporation, Bylaws or any provision oflaw to be taken at a meeting of stockholders or any other action which may be taken at such a meeting may be taken without a meeting ifconsent in writing setting forth the action so taken shall be signed by all of the stockholders entitled to vote with respect to the subject matter thereof and such consent shall have the same force and effect as a unanimous vote.
BYLAW II. DIRECTORS SEcTros 1.
NUhlBER l
The number of directors constituting the whole Board of Directors shall be such number as shall be fixed from time to time by the affirmative vote of the whole Board but in no event shall the number be less than three. Until so fixed at a different number, the number shall be three. The number of directors at any time constituting the whole Board shall not be reduced so as to shorten the term of any director then in office.
The directors shall hold otlice until the next annual meeting of stockholders at which their respective terms of office shall expire and until their respective successors are duly elected and qualified.
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SECTION 2.
CLASSIFICATION The directors shall be divided into three classes as nearly equal in number as possible, with the term of one class expiring each year. Except for directors elected nursuant to Section 3 of this Bylaw, whose terms of office may be less than three years, directors shall be eled for three year terms. However, at any time when there shall be a complete vacancy of the Board, the directors of Class I shall be elected to hold office until the next succeeding annual meeting of stockholders; the directors of Class II until the second succeeding annual meeting of stockholders; and the directors of Class III until the third succeeding annual meeting of stockholders, and in each foregoing case, until their respective successors are duly elected and qualifed. If, at any meeting of stockholders, directors of more than one class are to be elected, whether due to a vacancy or vacancies on the Board of Directors, or otherwise, each class of directors to be elected at the meeting shall be nominated and voted for in a separate election.
SECTION 3.
VACANCIES Any vacancy occurring among the directors, including a vacancy created by an increase in the number of directors shall be filled by the affirmative vote of a majority of the remaining directors and each director so elected shall hold office until the next annual meeting of stockholders.
SECTION 4.
REMOVAL A director may be removed from office only by affirmative vote by a majority if for cause, or at ledst 80% if witho_ut cause, of the aggregate number of votes which the holders of the then outstanding shares of Common Stock and Preferred Stock are entitled to cast, voting together as a class, in the election of directors.
SECTION 5.
REGULAR hlEETINGS Regular meetings of the Board of Directors shall be held at such time and place within or without the State of Wisconsin as may from time to time be fixed by the Board without notice other than the resolution or other action of the Board establishing the time and place of such regular meetings.
SECTION 6.
SPECIAL h1EETINGS Special meetings of the Board of Directors may be called by or at the request of the Board of Directors, the Executive Committee, the Chairman of the Board, the President, or any two directors. The persons calling any special meeting of the Board of Directors may fix any place either within or without the State of Wisconsin, as the place for holding any special meeting of the Board of Directors called by them, and if no other place is fixed, the place of meeting shall be the principal business office of the corporation.
SECTION 7.
NOTICE OF hfEETINGS Notice of each meeting of the Board of Directors (unless otherwise provided in or pursuant to Section 5 of this Bylaw) shall be given by written notice delivered personally or mailed or given by telephone or telegram to each director at his business address or at such other address as such director shall have designated in writing filed with the Secretary,in each case not less than 6 hours6.944444e-5 days <br />0.00167 hours <br />9.920635e-6 weeks <br />2.283e-6 months <br /> prior thereto. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail so addressed, with postage thereon prepaid.
If notice be given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegraph company; if by telephone, at the time the call is completed. Whenever any notice whatever is required to be given to any director of the corporation under the Articles of Incorporation, Bylaws or any provision oflaw, a waiver thereofin writing, signed at any time, whether before or after the time of meeting, by the director entitled to such notice, shall be deemed equivalent to the giving of such notice. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting and objects thereat to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board need be specified in the notice or waiver of notice of such meeting.
SECTION 8.
QUORUM A majority of the members of the Board shall constitute a quorum for the transaction of business, but if at any meeting of the Board there shall be less than a quorum present, a majority of the directors present may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall have been obtained, when any business may be transacted which might have been transacted at the meeting as first convened had there been a quorum.
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SECTION 9.
MANNER OF ACTING The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors, unless the act of a greater number is required by the Articles of Incorporation, Bylaws or any provision oflaw.
SECTION 10. EXECUTIVE CONINtiTTEE The Board of Directors,by the affirmative vote of a majority of the whole Board, may appoint an Executive Committee, to consist of not less than three directors, as the Board may from time to time determine. The Executive Committee shall have and may exercise, when the Board is not in session, all of the powers vested in the Board, except action in respect of dividends to stockholders, election of officers or the filling of vacancies in the Board or the Executive Committee. The Board shall have the power at any time to fill vacancies in, to change the membership of, or to dissolve, the Executive Committee. The Executive Committee may make rules for the conduct ofits business and may appoint such committees and assistants as it shall from time to time deem necessary. A majority of the Executive Committee shall constitute a quorum.
SECTION 11. OTilER CO51%1ITTEES The Board of Directors may also appoint one or more other committees to consist of such number of the directors of the corporation and to perform such functions as the Board may from time to time determine, except that no committee created under authority of this Section 11 shall exercise the powers of the Board of Directors in the management of the business and affairs of the corporation. The Board shall have power at any time to fill vacancies in, to change the membership of, or to dissolve, any such committee. A majority of any such committee may determine its action and fix the time and place ofits meetings, unless the Board shall otherwise provide.
SECTION 12. CON 1PENSATIO,N The Board of Directors, by affirmative vote of a majority of the directors then in office, and irrespective of any personal interest of any ofits members, may (a) establish reasonable compensation of all directors for services to the corporation as directors, officers or otherwise, and the manner and time and payment thereof, and (b) provide for reasonable pensions, disability or death benefits, and other benefits or payments, to directors, officers and employees and to their estates, families, dependents or beneficiaries on account of prior ser ices rendered by such directors, officers and employees to the corporation.
SECTION 13. PRESUht!"rION OF ASSENT A director who is present at a meeting of the Board of Directors or a committee thereof of which he is a member at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action.
SECTION 14. UNANIN1011S CONSENT WITiiOUT A MEETING Any action required by the Articles of Incorporation, Bylaws or any provision of law to be taken at a meeting of directors or any other action which may be taken at such a meeting may be taken without a meeting if a consent in writing setting forth the action so taken shall be signed by all of the directors or members of a committee thereof entitled to vote with respect to the subject matter thereof and such consent shall have the same force and effect as a unanimous vote.
BYLAW III. OFFICERS SECTION I.
POSITIONS The Board of Directors, as soon as may be after the election of directors held in each year, shall elect one of its number Chairman of the Board unless it determines not to fill such office, and shall elect one of its number President of the corporation, and shall elect one or more Vice Presidents, a Secretary and a Treasurer and from time to time shall appoint such Assistant Secretaries, Assistant Treasurers and other officers as it may deem proper. Any two or more offices may be held by the same person, except the offices of President and Secretary and the offices of President and Vice President.
4
t SECTION 2.
TERN 1 OF OFFICE The term of office of all omeers shall be one year or until their respective successors e f uly chosen or until their prior death, resignation or removal. Any officer may be remosed from office at any time by the affirmative vote of a majoric of the whole Board.
SECTION 3.
POWERS AND DUTIES Subject to such limitatio is as the Board of Directors may from time to time prescribe, the officers of the corporation shall each have such powers and duties as generally pertain to their respectise offices, as well as such powers and duties as from time to time may be conferred by the Board of Directors or the Executive Committee. The Treasurer and the Assistant Treasurers may be required to give bond for the faithful discharge of their duties, in such sum and of such character as the Board may from time to time prescribe.
BYLAW IV. INDEh1NIFICATION SECTION 1.
hlANDATORY INDEAtNIFICATION The corporation shall indemnify to the fullest extent permitted by law any person who is or was a party or threatened to be made a party to any legal proceeding by reason of the fact that such person is or was a director or officer of the corporation, or is or was serving at the request of the corporation as a director or officer of another enterprise, against expenses (including attorney fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such legal proceeding.
SECTION 2.
CERTAIN DEFINITIONS As used in this Bylaw IV, (a) " indemnify" includes the advancement of expenses upon receipt of an undertaking to repay upon specified conditions, (b)" fullest extent permitted by law" means the fullest extent to which indemnity may lawfully be provided by, pursuant to or consistently with, the provisions of subsections (1) and (2) of Section 180.05 of the Wisconsin Statutes (or any successor provision), a bylaw under subsection (6) of that Section (or any successor provision) or any other applicable law, whether statutory or otherwise, (c) " person" includes the person's heirs, executors and administrators, (d) " legal proceeding" means any threatened, pending or completed action, suit or proceeding, whether or not by or in right of the corporation, (e) "other enterprise" includes any corporation, partnership, joint venture, trust, dividend reinvestment plan, stock purchase plan, employee benefit plan or other plan or entity, (f) " expenses" include expenses in the enforcement of rights under this Bylaw and any excise taxes assessed with respect to an employee benefit plan and (g) in respect of any of such plans, (i) " serving at the request of the corporation as a director or officer" includes serving at the request of the corporation in any capacity that involves services or duties with respect to the plan or its participants or beneficiaries and (ii) action reasonably believed to be in the interest of such participants or beneficiaries shall be deemed reasonably believed to be in, or not opposed to, the best interests of the corporation.
SECTION 3.
LEGAL ENFORCEABILITY The rights provided to any person by the terms of this Bylaw IV shall be legally enforceable against the corporation by such person, who shall be presumed to have relied on the provisions of this Bylaw in undertaking or continuing any of the positions with the corporation or other enterprise referred to in Section 1 of this Bylaw IV.
SECTION 4.
LINilTATION ON hf0DIFICATION OR TERhtlNATION No modification or termination of this Bylaw IV shall be effected which would impair any rights hereunder arising at any time out of events occurring prior to such modification or termination.
SECTION 5.
NON-EXCLUSIVE BYLAW This Bylaw IV is not intended to be exclusive and accordingly shall not be construed as impairing in any way the power and authority of the corporation, to the extent legally permissible without regard to this Bylaw IV, in its discretion to indemnify or agree to indemnify, or to purchase insurance inde'nnifying, any employee, agent or other person.
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BYLAW V.
STOCK CERTIFICATES AND TRANSFER SECTION 1.
STOCK CERTirlCATLS AND FACSIMILE SIGNATURES The interest of each stockholder in the corporation shall be evidenced by certificates for shares of stock of the corporation in such form as the Board of Directors may from time to time prescribe. The certificates for shares of stock of the corporation shall be signed by the President or a Vice President, and by the Secretary or an Assistant Secretary of the corporation and may be sealed with the seal of the corporation (which may be a facsimile, engraved or printed), and shall be countersigned and registered in such manner, if any, as the Board of Directors may from time to time prescribe. Whenever any such certificate is manually signed by a transfer agent or a registrar, other than the corporation itself or an employee of the corporation, the signature of the transfer agent or registrar, whichever did not sign manually, and the signatures of the aforesaid officers of the corporation upon such certificate may be facsimiles. The transfer agent and the registrar may hut need not be the same person or agency. In case any such person acting as an officer, transfer agent or registrar, who has signed, or whose facsimile signature has been placed upon such certificate, shall have ceased to be such officer, transfer agent or registrar, before such certificate is issued, it may be used by the corporation with the same effect as if such person had not ceased to be such at the date of its issue.
SECTION 2.
TRANsrER OF STOCK The shares of stock of the corporation shall be transferable on the books of the corporation upon request by the holders thereof or by duly authorized attorney, upon surrender and cancellation of certificates for a like number of shares of the same class of stock, with duly executed assignment and power of transfer endorsed thereon or attached thereto, and with such proof of the authenticity of the signature as the corporation or its agents may reasonably require.
Prior to due presentment of a certificate for shares for registration of transfer the corporation may treat the registered owner of such shares as the person exclusively entitled to vote, to receive notifications and otherwise to have and exercise all the rights and powers of an owner. Where a certificate for shares is presented to the corporatio'n with a request to register for transfer, the corporation shall not be liable to the owner or any other person suffering loss as a result of such registration of transfer if(a) there were on or with the certificate the necessary endorsements, and (b) the corporation had no duty to inquire into adverse claims or has discharged any such duty. The corporation may require reasonable assurance that said endorsements are genuine and effective and in compliance with such other regulations as may be prescribed by or under the authority of the Board of Directors.
SECTION 3.
LOST, DrSTROYED OR' STOLEN CERTIFICATES Where the owner claims that his certificate for shares has been lost, destroyed or wrongfully taken, a new certificate shall be issued in place thereofif the owner (a) so requests before the corporation has notice that such shares have been acquired by a bona fide purchaser,(b) files with the corporation a sufficient indemnity bond and (c) satisfies such other reasonable requirements as may be prescribed by or under the authority of the Board of Directors.
BYLAW VI. CONTRACTS, CHECKS, NOTES, BONDS, ETC.
SECTION 1.
CONTRACTS The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute or deliver any document or instrument, whether of conveyance or otherwise, in the name of and on behalf of the corporation, and such authorization may be general or confined to specific instances.
SEcrtON 2.
CHECKS, DRAFTS, ETC.
All checks and drafts on the corporation's bank accounts and all bills of exchange and promissory notes, and all acceptances, obligations and other instruments for the payment of money, shall be signed or, in the case of wire transfers, shall be authorized by such officer or officers, employee or employees or agent or agents as shall be thereunto authorized from time to time by the Board of Directors; provided that checks drawn on the corporation's bank accounts may bear the facsimile signature of such officer or officers, employee or employees, or agent or agents as the Board of Directors shall authorize; and provided further that in the case of notes, bonds or debentures issued under a trust instrument of the corporation and required to be signed 6
by two omcers ol'he corporation, the signatures of either or both of such omcers may be in facsimile if specifically authorized and directed by the Board of Dir:ctors of the corporation and if such notes, txmds or debentures are required to be authenticated by a corporate trustee which is a party to the trust instrument.
In case any such omeer who has signed or whose facsimile signature has been placed upon such instrument shall have ceased to be such omeer before such instrument is issued, it may be issued by the corporation with the same ef ect as if such omeer had not ceased to be such at the date ofits issue.
BYLAW VIL FISCAL YEAR I
The fiscal year of the corporation shall begin on the first day of January in each year and shall end on the thirty-first day of December following.
BYLAW.VIII. CORPORATE SEAL The corporate seal shall have inscribed thereon the name of the corporation and the words " Corporate Seal, June 26, 1981."
BYLAW IX. EFFECT OF HEADINGS The descriptive headings in these Bylaws were formulated, used and inserted herein for convenience only and shall not be deemed to affect the meaning or construction of any of the provisions hereof.
BYLAW X.
AMENDMENTS SECTION 1.
The Bylaws of the corporation may be altered, amended, added to, rescinded or repealed and new bylaws may be adopted at any meeting of the stocholders, provided notice of the proposed change is given in the notice of the meeting.
SECTION 2.
Subject to the power of the stockholders to alter, amend, or repeal any Bylaws made by the Board of Directors, the Board nay make additional bylaws for the corporation and may from time to time alter and amend any of these B %ws.
SECTION 3.
Notwirhstanding anything in these Bylaws to the contrary, the provisions of Section 8 of Bylaw I, Sections 1,2,4 and 7 of Bylaw II, Bylaw IV and this Section 3 of Bylaw X, may be amended only by the amrmative vote of at least 809c of the aggregate number of votes which the holders of the then outstanding shares of Common Stock and Preferred Stock, voting together as a class, are entitled to cast in an election of directors.
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EXHIBIT 8(a)
EXHIBIT 8(a)
Internal Revenue Service Department of the Treasury RICUY[0 l
was not n,0C 20224 Index Number:
0351.00-00 JUN 2 01986 Person to Contact; j _',.}...
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J.H. Goetsch, Secretary Bruce E. Kipnis Wisconsin Electric Telephone Number:
Power Company (202) 566-6438 231 West Michigan Street, Refer Reply to:
Milwaukee, WI 53201 CC:C:R:2:4-TR-31-23900-86 JUN I 2 ges Date:
Wisconsin Energy Corporation Holding
=
a Wisconsin corporation EIN:
39-1391525 Wisconsin Electric Power Company Company
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a Wisconsin corporation EIN:
39-0476280 WEPCO Acquisitions, Inc.
Acquisition
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a Wisconsin corporation EIN:
39-1391521 Wisconsin Natural Gas Company Sub-1
=
a Wisconsin corporation EIN:
39-0713260 Badger Service Company Sub-2
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a Wisconsin corporation EIN:
39-0142180 Wisconsin Michigan Investment Corporation Sub-3
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a Wisconsin corporation EIN: 39-1328712 (formerly known as Wisconsin Michigan Power Company, Inc.)
WISPARK Corporation Sub-4
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a Wisconsin corporation EIN:
39-1499629 WISVEST Corporation Sub-5
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a Wisconsin corporation EIN:
39-1494696 o
TR-31-23900-86 Page 2 Sub-6 WITECH Corporation
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a Wisconsin corporation EIN:
39-1494697 State X Wisconsin
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State Y Michigan
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Prior Letter PLR 8205069, November 6, 1981, T:C:R:2:4
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Dear Mr. Goetsch:
This is in reply to a letter dated February 20, 1986, from your authorized representatives requesting rulings as to the
(
federal income tax consequences of a proposed transaction.
Additional information was submitted in letters dated March 31 and June 6, 1986.
The information submitted for consideration is summarized below.
Company, a State X corporation, is angaged, with and through its subsidiaries in an ongoing business.
As of December 31, 1985, Company had issued and outstanding voting common stock, 6 percent voting preferred stock and voting serial preferred stock.
The common stock of Company is widely held and publicly traded.
Sub-1, Sub-2, sub-3, Sub-4, Sub-5, and Sub-6 are wholly-owned subsidiaries of Company.
Company and its affiliates file consolidated returns.
Holding was incorporated under State X law in 1981 for the purpose participating in the proposed transaction.
Immediately before tne transaction, 1,000 shares of Holding voting common
. stock will be outstanding and held by Company.
Acquisition is a State X corporation that was formed in 1981 solely for the purpose of merging into Company as described below.
Acquisition has outstanding 1,000 shares of voting common stock outstanding that is owned by Holding.
The management of Company believes that a holding company structure will facilitate diverisification into other businesses, afford separation between businesses, and provide flexibility for financing and for maintaining capital ratios.
The Internal Revenue Service issued f avorable rulings in a Prior Letter with respect to the transaction as initially proposed which is substantially identical to the transaction described below.
That transaction
TR-31-23900-86 Page 3 was not consummated on the schedule originally contemplated, pending consideration by State X.
The State X legislature recently enacted legislation allowing the proposed transaction.
Therefore, pursuant to an Agreement and Plan of Restructuring, the following transaction is now proposed:
(i)
Acquisition will be merged with and into Company pursuant to State X law.
Company will be the surviving corporation and the separate corporate existence of Acquisition p
will cease.
t (ii)
Each outstanding share of Company common stock will be converted into one share of Holding common stock.
(iii)
All of the outstanding shares of Acquisition will be converted into a number of shares of Company common stock equal to the number of
{
shares of Holding stock issued, as described in (ii), above.
As a result of the above transaction, the Company common shareholders will own all of the outstanding stock of Holding and Holding will own all of the outstanding common stock of Company.
The Company preferred stock will not be converted and will con-tinue to be held by the holders thereof before the transaction.
The bonds and debentures of Company currently outstanding will be unaffected by the merger.
Under State X law, only holders of a class or series of stock not listed on a national securities exchange or quoted on the National Association of Securities Dealers Automated Quotation System are not entitled to appraisal rights.
Therefore, Company common shareholders and certain of the Company preferred share-holders are not entitled to appraisal rights.
Company preferred shareholders who are entitled to appraisal rights and who dissent to the proposed transaction, upon complying with the procedural reguirements of State X law, will be entitled to receive payment of cash equal to the fair market value of their shares surrendered.
Company will pay the dissenting shareholders the appraisal value from its funds upon surrender of the shares.
Upon the consummation of the proposed transaction, Company will transfer to Holding all of the stock of Sub-1, Sub-2, sub-3, Sub-4,'Sub-5 and Sub-6.
The stock of those subsidiaries does not constitute 90 percent or more of the fair market value of the net
TR-31-23960-86 Page 4 assets or 70 percent or more of the fair market value of the gross assets of Company.
Company will retain all of its operating assets.
Also, in connection with th'e transaction, Company and SQb-1 will transfer certain real property, with a value of less than one percent of the combined total value of Company and Sub-1, to Holding or its affiliates.
Company currently maintains a Tax Reduction Act Stock Ownership Plan (TRASOP), a dividend reinvestment plan, and a customer stock ownership plan.
Upon consummation of the proposed transaction it
{
is contemplated by the parties that Holding will assume or adopt such plans, or substantially similar plans, under which stock of Holding, rather than stock of Company, either purchased on the open market or newly-issued, will be offered.
In connection with the proposed transaction, the following representations have been made:
(a)
Each shareholder of Company common stock
("transferor") will receive Holding common stock approximately equal to the fair market value of the property transferred to Holding.
(b)
Except for the transfer by Company of its stock of Sub-1, Sub-2, Sub-3, Sub-4, sub-5, and Sub-6 and the transfer of the assets as described above, Holding has no plan or intention to sell or otherwise dispose of any Company stock or to sell or othewise dispose of any of the assets of Company other than in the ordinary course of business.
(c)
With the exception of incorporation shares issued to Company which will be cancelled upon consummation of the transaction, there is no plan or intention on the part of Holding to redeem or otherwise reacquire stock or indebtedness to be issued in the proposed transaction.
(d)
After the transaction, Holding may issue additional shares of Holding stock to its shareholders, customers, and employees persuant to various plans, as described above.
Taking into account any issuance
TR-31-23900-86 Page 5 I
l of additional shares of Holding stock, any issuance for services, the exercise of any Holding rights, warrants, subscriptions, or options, a public offering of Holding stock, and (as far as is known to the management of Company) the sale, exchange, transfer by gift, or other disposition of any of the stock of Holding to be received in the exchange, the'transferors will be in " control" of Holding within the meaning of section 368(c) of the Internal Revenue Code.
(e)
No stock or securities will be issued for services rendered to or for the benefit of Holding in connection with the proposed transaction and no stock or securities will be issued for indebtedness of Holding.
(f)
To the best of the knowledge of the manage-ment of Company, none of the Company common stock to be transferred to Holding was received in the liquidation of another corporation or in a tax free reorganization within the past three years.
(g)
No liabilities of the transferors will be assumed by Holding and the shares of Company common stock to be transferred will not be subject to any liabilities.
(h)
Each of the parties to the transaction will pay their own expenses, if any, incurred in connection with the proposed transaction.
(i)
Holding will not be an investment company within the meaning of section 351(e)(1) of the Code and section 1.351-1(c)(1)(ii) of the Income Tax Regulations.
(j)
The transfer is not the result of the solicitation by a promoter, broker or in investment house.
(k)
The transferors will not retain any rights in the property transferred to Holding.
TR-31-23900-86 Page 6 (1)
There is no indebtedness between Holding and any transfergr, other than that created '
by arm's-length sales, purchases, etc. in the normal course of business and there will be no indebtedness created in favor of any transferor as a result of the transaction.
(m)
The transfer and exchanges will occur under a plan agreed upon before the transaction
{
in which the rights of the parties are defined.
(n)
All exchanges will occur approximately on the same date.
(o)
Holding will remain in existence and retain
{
and use the property tranferred to it in a trade or business.
(p)
Holding will not be a " personal service corporation" within the meaning of section 269A of the Code.
(q)
To the best of the knowledge of the manage-ment of Company none of its shareholders is under the jurisdiction of a court in a Title 11 or similar case (within the meaning of section 368(a)(3)(A) of the Code), and stock or secrurites received in the exchange will not be used to satisfy the indebtedness of such debtor.
Based solely on the information submitted and on the repre-sentations set forth above, it is held as follows:
(1)
The formation of Acquisition and its merger into Company, as described above, will be disregarded for federal income tax purposes, and the transaction will be viewed as a transfer by the Company common stock share-holders of their Company common stock to Holding in exchange for all of the out-standing Holding common stock (Rev. Rul.67-448, 1967-2C.B. 144).
TR 23 9 0 0-8 6 Page 7 (2)
No gain or loss will be recognized to the common stock shareholders of Company upon the transfer of their Company common stock for all of the common stock of Holding (section 351(a) of the Internal Revenue Code).
(3)
The basis of the Holding common stock received by the Company common stock share-holders will be the same as the basis of the Company common stock surrendered in exchange the therefor (section 358(a)(1)).
(4)
The holding period of the Holding common stock to be received by the Company common stock shareholders in exchange for their Company common stock will include the holding period of the Company common stock surrendered in exchange therefor provided that the Company common stock is held as capital a asset on the~date of the exchange (section 1223(1)).
(5)
No gain or loss will be recognized to Holding upon receipt of the Company common stock in exchange for Holding common stock (section 1032(a)).
(6)
The basis of the Company common stock to be received by Holding will be the same as the basis of the Company common stock in the hands of the Company common stock share-holders immediately prior to the transfer (section 362(a)).
(7)
The holding period of the Company common stock to be received by Holding will include the period during which such stock was held by the Company common stock shareholders (1223(2)).
(8)
Where cash is received by a holder of Company preferred stock who is entitled to and ex-ercises disenters' rights, the cash will be treated as having been received by such holder as a distribution in redemption of his or her Company preferred stock, subject.
TR-31-23900-86 Page 8 to the provisions and limitations of section 302 of the Code.,Those holders who receive '
solely cash and as a result hold no Company stock, directly or through the application of section 318(a) of the Code, will be treated as having a complete termination of interest within the meaning of section 302(b)
(3), and the cash will be treated as a dis-tribution in full payment in exchange for Company preferred stock, as provided in section 302(a).
(9)
For purposes of the consolidated return regulations, the affiliated' group of which Company is the common parent before the merger will not close its taxable year merely because of the pro-posed transaction and will be treated as remaining in existence, with Holding becoming the commo.n parent of the affiliated group.
The representation that Company will be the owner of the stock of Holding prior to the merger is a material representation that was relied upon in the formulation of ruling (9) above.
If this repre-sentation is found to be incorrect, then ruling (9), above, will have no force or effect.
In such a case, the transaction shall be tested under the criteria of section 1.1502-75(d)(3) of the regulations.
No opinion is expressed as to the federal income tax consequences of the distribution by Company to Holding of the stock of Sub-1, Sub-2, Sub-3, Sub-4, Sub-5, and Sub-6 and the assets, as described above.
Specifically, no opinion is expressed as to the application of section 311(d) of the Code to such distributions.
Further, no opinion is expressed as to the effect of the above described transaction on the dividend reinvestment plan, the TRASOP, or the customer stock ownership plan of Company.
Furthermore, no opinion is expressed as to the tax treatment of the transaction under other provisions of the Code and regulations or about the tax treatment of any condition existing at the time of, or effects resulting from, the transaction that are not specifically covered by the above rulings.
The above rulings are directed to the taxpayer who requested them.
Section 6110(j)(3) of the Code provides that it may not be used or cited as precedent.
TR-31-2390086 Page 9 A copy of this letter should be attached to the federal inccme tax returns of the ta.<payerp involved, for the taxablo year in which the transaction covered by this ruling letter is consummated.
Pursuant to the power of attorney on file in this office, a co.py of this letter has been sent to your authorized representative.
Sincerely yours, Acting Chief, Reorganization Branch
um EXHIBIT 8(b)
EXHIBIT 6(b)
SULLIVAN & CROMWELL
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June 27, 1986 1
Internal evenue Service, 1111 Co titution Avenue, N.W.,
. 20224.
Attention:
Rie Lainof Roo 5141 CC:
R:2:4 Re:
Wisconsin Elp tric Power Company
Dear Ms. Lainoff:
[
Pursuant to our te e ohte conversation yesterday, I am sending you this letter to co irm our unders.tanding that on page 3 of the ruling issue to us June 12, 1986, the first sentence of the second fu a q ph should read as follows:
"Under State X law, only holders of a class or series of stock listed on a national securities exchange or quoted on the National Association of Securities Dealers Automated Quotation Systems are not entitled to appraisal rights."
I understand that this letter will become part of the background file to this ruling.
8 Very truly yours, Karen L.
Halby
EXHIBIT 8(c)
E 4
EXHIBIT 8(c)
SULLIVAN & CROMWELL
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June 27, 1986 Commission " of Internal Revenue, Ben Franklin Sta*
n, Post Office x7 4,
Washingto,
D.C.
0044.
Attention:
CC:
D:S
Dear Sir or Madam:
I refer to g r ett r of June 12, 1986 addressed to Wisconsin Electric Power om any (bearing the symbols CC:C:R:2:4-TR-31-23900-86) and here y request, pur,suant to Section 6110(c) of the Internal Re enue Code, the additional deletions from the copy of the Q be made available for public inspection that are indicated in brackets on the enclosed copy of the ruling.
All of the requested deletions involve identifying details within the meaning of Section 6110 (c).
They include dates of incorporation, numbers of shares of stock and type of preferred stock which could be identified with both the prior ruling received and the taxpayer.
Commissioner of Internal Revenue Please call if you have any questions or need any additional information.
My telephone number is 212-558-3684.
Very truly yours, Karen L. Halby (Enclosure
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EXHIBIT 24(b)
Exhibit 24(b)
CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the proxy statement / prospectus constituting part of this Registration Statement on Form S-4 of Wisconsin Energy Corporation of our report dated January 22, 1986 appearing on page 29 of Wisconsin Electric Power Company's 1985 Annual Report to Stockholders which is incorporated by reference in its Annual Report on Form 10-K for the year ended December 31,1985.
We also consent to the incorporation by reference of our report on the fmancial statement schedules which appears on page 36 of sue;i Annual Report on Form 10-K. We also consent to the reference to us under the heading " Experts"in such prosy statement / prospectus.
PRICE WATERiiOUSE Milwaukee, Wisconsin July 9,1986 C
EXHIBIT 24(c)
O e
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EXillBIT 24(e)
CONSENT Each o ;iie undersigned does hereby consent to the reference to him in the Registration Statement on r
Form S-4 of Wisconsin Energy Corporation dated July 9,1986 as a person to be elected as a director of Wisconsin Energy Corporation.
J. F. BERGSTROM M. W. REID J. F. Bergstrom M. W. Reid J. F. HEIL, JR.
F. P. STRATTON, JR.
J. F. Heil, Jr.
F. P. Stratton, Jr.
J. L. MURRAY J. G. UDELL J. L. Murray J. G. Udell Date: June 26,1986
EXHIBIT 28(a) t
EXHIBIT 26(a)
(FRONT)
PROXY sconsrl EhCfnc ro.re cow =, 231 w MICHIGAN.P O. BOX 606. MILWAUKEE.WI 53201 IH m s,,oxyis oiici..a sy.s. so., or oi,.c o, C.S. McNeer and J.H. Goetsch, or either of them, with full power of substitution, are hereby O
appointed proxies, to attend and vote the shares of the undersigned in the company at the special I plan no saems the meeung of stockholders on October 29,1986, and all adjournments thereof, with the same force speaar memme on and effect as if the undersigned were personally present, upon all matters that may properly 0"EI" come before the meeting. including the matters described in the proxy statement furmshed herewith.
The board of directors recommends a vote FOR the foBowing niatter:
Approval of a Plan of Merger under which Wisconsm Energy Corporation will become the parent holding company of Wisconsin Electric Power Company and all outstanding shares of Common Stock of Wisconsin Electric will be converted into an equal number of shares of Wisconan Energy Corporation.
O FOR O AGAINST C ABSTAIN (PLEASE SiON oN THE REVERSE SIDE)
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(BACK)
\\%sconsIn BBCinC rew coum, If you are a paruapant a the company's Automauc Dwdend Remvauneet and Stock Purchase Na.Cunomer Seck ownerstup Plaa or Tan Ra$uchon Act Stock Ownership Plan. your shares restsiered a such plans will be voud by the trunes of such plans a the same manner as indacated herton Your starts in the Tas Reducuon Act Sacck Ownerslup Plan cannot be voico unless you subaut a prony.
property signai The trusiec for each ofibe other plans may voie your shares is such plans at ics sole duaccon if you do not subaut a prony.
PLEASE COMPLETE THE OTH ER SIDE AND RETURN PROMPTLY SO THAT YOUR SHARES CAN BE REPRESLSTED AT THE MEETING. THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED BY THE UNDERSIGNED. IF NOT OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" THE PROPOSAL AS RECOMMLST)ED BY THE BOARD OF DIRECTORS.
The undersigned hereby acknowledges receipt of the couce of spasal meetmg of mockholders and the proxy noticatation masenah for the 1986 spenal sneeung of amers.
Dated Signature (s)
Please sign as your namet sa appear bereon. Joint owners should each age personaDy. Rhee signing as esecutor admuvumrator.corporatice of5cer, estorney, agent, Cmassee, guarthan or mi other representati,e capadry, please sense year tsB talle as sedL Please sote, sign, date and return thss prosy in the -ir=*d envelope.
9
EXHIBIT 28(b) i 1
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Exhibit 28(b) l l EAecinc POWER COMPMY m a ucmr.a= to so 204s uiteaunts sium September,1986 1
Dear Stockholder,
)
l The directors and officers of Wisconsin Electricjoin me in inviting you to a special meeting ofstockholders I
on Wednesday, October 29,1986 at 2:00 p.m. The meeting will be held in the Grand Ballroom of the Red Carpet Hotel,4747 South Howell Avenue in Milwaukee.
The purpose of the special meeting is to vote on a proposed corporate restructuring. When finalized, this restructuring will establish a new holding company, Wisconsin Energy Corporation, as the parent of Wisconsin Electric. Upon ecmpletion of the restructuring, the electric and gas utilities will continue to be the holding company system's principal businesses. The proposal is summarized in this brochure and fully explained in the enclosed proxy statement.
Under the proposed restructuring, Wisconsin Electric Common Stock would automatically become Wisconsin Energy Corporation Common Stock on a share-for-share basis. An exchange ofstock certyicates willnot be required. Wisconsin Electric's Preferred Stock will remain the Preferred Stock of Wisconsin Electric after the restructuring. Wisconsin Energy's Board of Directors expects that quarterly dividends on Wisconsin Energy Corporation Common Stock will initially be paid at a rate at least equal to the rate most recently paid on Wisconsin Electric Common Stock.
Your management and thd Board of Directors believe the proposed restructuring plan is in the best interest of stockholders. It will create a structure which can facilitate diversification into nonutility businesses, afford separation between the utility and nonutility businesses and provide additional financial and organizational flexibility necessary to meet the changing economic environment in the area served by the utilities. It is also expected to improve our prospects of maintaining a sound financial condition in the years ahead. WE STRONGLY RECOMMEND YOU VOTE "FOR" THIS PROPOSAL.
Please take a moment now to vote, sign and return your proxy card in the enclosed postage-paid envelope.
Your early response will be appreciated.
If you plan to attend the meeting, please check the special box on the proxy card. An admittance card will be sent to you shortly before the meeting. Please bring it with you to eliminate the need to register at the meeting.
1 Sincerely, Charles S. McNeer Chairman of the Board and Chief Executive Officer
FACTS ABOUT THE PROPOSED HOLDING CON 1PANY:
WISCONSIN ENERGY CORPORATION l
- 1. Why is Wisconsin Electric proposing to form a parent holding company?
l Wisconsin Electric recognizes that the changing economic environment will present new challenges to i
the company in the future. Diversification into unregulated nonutility businesses through the holding company structure will help to meet those challenges. The Board of Directors and management of Wisconsin Electric believe that diversification will broaden investment appeal, permit greater financial and organizational flexibility and help stimulate desirable economic activity for the utility service areas of Wisconsin Electric and Wisconsin Natural Gas Company.
- 2. What will the new company structure look like?
Upon completion of the proposed restructuring, Wisconsin Energy Corporation will become the parent company of Wisconsin Electric, Wisconsin Natural, and five nonutility subsidiaries: Badger Service Company, WISVEST Corp., WITECH Corp., WISPARK Corp. and Wisconsin hiichigan Investment Corp.
Wisconsin Electric and Wisconsin Natural will remain public utilities and their assets will initially constitute nearly all of the assets of the holding company group.
Wisconsin Energy Corporation l
I I
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I Wisconsin Wisconsin Badger WISVEST WITECH WISPARK Wisconsin Electric Natural Service Corporation Corporation Corporatbn Michigan Power Gas Company Investment Company Company Corporation WISVEST Corp. will provide capital to help existing businesses in Wisconsin expand, to help reduce dependence on financing from out-of-state sources, and to work on brii.ging new businesses to Wisconsin.
WITECH Corp. will help bring new technologies, especially those developed by local companies, into commercial operation. WISPARK Corp. will engage in developing industrial parks in Wisconsin Electric's service territory. Wisconsin hiichigan Investment Corp. will continue to invest funds that aren't needed in the utility business in certajii financial instruments until they can be used by the other subsidiaries. Badger Service Company owns certain coal rights in Indiana.
- 3. Who must approve the restructuring?
The restructuring requires the approval of the Public Service Commission of Wisconsin ("PSCW"), the Securities and Exchange Commission ("SEC"), and Wisconsin Electric's stockholders. The PSCW granted its approval for the restructuring on hiay 27,1986. The SEC granted its approval under the Public Utility Holding Company Act in September 1986.
Stockholders will vote on the restructuring at a special meeting of stockholders on October 29, 1986.
Approval will require a favorable vote of a majority of the outstanding shares of Wisconsin Electric's Common Stock, voting separately, and a majority of the outstanding shares of Wisconsin Electric's Common and Preferred Stock, voting together.
- 4. What will be the effective date of the restructuring?
If the stockholders approve the restructuring, it is scheduled to become effective at midnight, hiilwaukee time, on December 31,1986.
- 5. Will stockholders have to exchange their Common Stock certificates?
As part of the restructuring, Wisconsin Electric Common Stock will automatically become Wisconsin Energy Corporation Common Stock on a share-for-share basis. It will not be necessary in the restructuring for holders of Common Stock of Wisconsin Electric to exchange their stock certificates.
2 w
- 6. What Federal tax consequences will the restructuring have on Wisconsin Electric Common Stockholders?
Wisconsin Electric has received rulings from the Internal Revenue Senice regarding Federal income tax consequences on the restructuring. Under the rulings no gain or loss will be recognized by holders of shares of Wisconsin Electric Common Stock as a result of the conversion to shares of Wisconsin Energy Corporation Common Stock. In addition, the cost basis of Wisconsin Energy Corporation shares will be the same as the cost basis of Wisconsin Electric shares. The holding period of Wisconsin Energy Corporation shares will be the same as the holding period of Wisconsin Electric shares, provided the Wisconsin Electric shares were held as capital assets at the date of the restructuring.
- 7. Where will the stock be traded and what is the ticker symbol?
Wisconsin Energy Corporation Commen Stock is expected to be traded on the New York Stock Exchange under ticker symbol "WEC."
- 8. 'How will dividends be affected?
It is expected that quarterly dividends on Wisconsin Energy Corporation Common Stock will commence after the restructuring at a rate at least equal to the rate most recently paid on Wisconsin Electric Common Stock. Dividends on Wisconsin Energy Corporation Common Stock will depend upon earnings, financial conditions and other factors.
- 9. Will the restructuring affect the preferred stock and debt securities?
The preferred stock and debt securities of Wisconsin Electric and Wisconsin Natural will not be changed in the restructuring. They will remain as preferred stock or debt securities of Wisconsin Electric or Wisconsin Natural.
- 10. How will the stock plans be affected?
Wisconsin Electric's Automatic Dividend Reinvestment and Stock Purchase Plan, Customer Stock Ownership Plan, and Tax Reduction Act Stock Ownership Plan will be assumed by Wisconsin Energy. The participants in the Wisconsin Electric plans will automatically become participants in the corresponding Wisconsin Energy plans. Holders of Wisconsin Electric Preferred Stock will be able to continue to participate
(
in Wisconsin Energy Corporation's Automatic Dividend Reinvestment and Stock Purchase Plan. After the
)
restructuring, Wisconsin Energy Corporation Common Stock will be purchased under the plans.
- 11. Who will manage the holding company after the restructuring?
The principal executive officers and the Board of Directors of Wisconsin Electric are expected to sene also as the principal executive officers and the Board of Directors of Wisconsin Energy Corporation upon completion of the restructuring. However, the day-to-day management of the new nonutility businesses, (WISVEST, WITECH and WISPARK), will be carried out by persons hired for their experience and expertise.
Those persons will not be involved in utility operations.
I'2. Will there be a limit to the investment in nonutility businesses by the proposed holding company?
The legislation allowing Wisconsin utilities to diversify into nonutility businesses under a holding company structure and the PSCW Order limit the amount of nonutility business assets to an ultimate maximum of
, 25 percent of the assets of the public utilities in the holding company system. The principal business of the holding company system will continue to be providing safe and reliable electric and gas service to utility customers.
l
- 13. Will the rights of Common Stockholders of Wisconsin Energy Corporation be the same as the rights of Common Stockholders of Wisconsin Electric?
The rights of Common Stockholders of Wisconsin Energy Corporation will generally be the same as the rights of Common Stockholders of Wisconsin Electric. However, certain new provisions are included in Wisconsin Energy Corporation's Restated Articles of Incorporation and Bylaws which do not appear in the articles and bylaws of Wisconsin Electric. The Wisconsin Energy and Wisconsin Electric Boards of Directors believe these new provisions are needed to protect Wisconsin Energy Corporation and its stockholders from the possible adverse consequences of a hostile business takeover.
3
Your vote is important. Please read the proxy statement, and sign, date and mail the proxy card in the prepaid envelope without delay, whether or not you plan to attend the meeting.
You may revoke your proxy prior to or at the meeting and vote in person if you wish, if your shares are held by a brc2.r, bank or nominee, it is important that they receive your voting instructions.
A summary of the key elements of the restructuring is presented in the proxy statement. Please refer to the Table of Contents in the proxy statement to locate detailed discussion of specific topics. If you have additional questions after reading the proxy statement, please call the toll-free Stockho; der Hotline at one of the following telephone numbers:
i 2212100 in the metro Milwaukee area 1 800-242-9686 in Wisconsin 1-800-558-9663 outside Wisconsin 4
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STATE OF WISCONSIN September 1985 Specia/Sess3m Date ofenactment:NC)vad)er 19,1985 Senate Bill 14 Date of publication *:it)Veter 27,1985 1985 Wisconsin Act 79 AN ACT to amend 184.01 (2) and 196.01 (5); and to create 20.155 (1) (h),196.795 and 196.84 of the statutes, relating to the formation of holding companies by certain public utilities and the regulation of certain hold-ing companies by the public service commission, granting rule-making authority and making an appropriation.
The people of the state of Wisconsin, representedin sen-(d) Provide investment capital for new business are and assembly, do enact asfollows:
ventures.
SECTION 1. Findings and purpose. The legislature (e)
Otherwise directly or indirectly promote l
finds that:
employment and commerce.
(1) The managements of severallarge nontelecom-(6) Utility consumers and investors benefit when a munications public utilities operating within this state nontelecommunications public utility reduces the cost have indicated an intent to reorganize the public utili-or increases the reliability of utility service through ties into public utility holding companies,in which the such means as conservation and renewable energy or public utilities would be subsidiaries, for the purpose businesses functionally rela ed to the provision of util-o' acquiring and investing in nonutility business ity service.
activities.
(7) The public interest and the interest ofinvestors (2) The opportunity for nontelecommunications and consumers can be protected if:
public utilities to reorganize to form holding compa-(a) Transactions between a public utility in a public mes to conduct nonutility business activities currently utility holding company system and the holding com-exists because of hmited future utility reinvestment pany or its nonutility affiliates are subject to public requirements and the need to achieve an appropriate service commission approval and regulation to assure level of common equity in utihty capital structures t that reasonable prices are charged and costs properly ensure reasonable rates for consumers.
allocated.
(3) The state has a legitimate interest in regulating (b) The nonutility activities of the public utility the structure of nontelecommunicattons pubhc utih-holding company system do not substantially lessen ties and their holding companies to ensure the abihty competition, do not tend to create a monopoly or of the pubhc utilities to continue to provide safe, reh,-
restrain trade and do not constitute an unfair business able and reasonably priced service to consumers.
practice.
(4) The maintenance of a financially healthy (c) The public utility activities of a nontelecom-nontelecommunications public utility is contingent munications public utility.in a public utility holding upon the maintenance of an economically healthy ser-company system remain subject to public service com-mission jurisdiction and regulation.
vtce area.
(5) The public interes. and the interest ofinvestors (d) The activities of the public utility holding com-and consumers can be benefited if pubhc utility hold-pany system do not cause any materially detrimental ing companies,in the service territories of thetr pubhc effect on the public utility's rates for or reliability of utility affiliates or in this state:
utility service to the public, cost of capital or ability to (a) Conduct substantial business activities.
raise capital.
(b) Attract new businesses.
(e) The public service commission has access to the (c) Expand existing businesses.
books and records of the public utility ho' ding com-l
- Section 991.11, Wiscossm STATtms 1983-84: Ettecthe date of sets. "Every act and every portion of an act enacted by th:leinslature oser l
the governor's partial veto which does not expressly prescnbe the time when it takes effect shall take effect on the day after its date of l
pubhcation as designated" by the secretary of state [the date of publication may not be more than 10 working days after the date of enactment]
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1 September 1985 Special Session - Senate Bill 14 4
i pany system to the extent relevant for the commission heat, light, power or water to its members only. " Pub-
}
to regulate any public utility in the system.
lic utility" includes any person engaged in the trans-(f) The provision of reliable and reasonably priced mission or delivery of natural gas for compensation public utility service remains the predominant busi-within this state by means of pipes or mains and any l
ness of a public utility holding company system.
person, except a governmental unit, who furnishes ser-(8) It is appropriate for this state,in its regulation vices by means of a sewerage system either directly or l
of pubhc utilities which participate in holding compa-indirectly to or for the public. "Public utility" does I
nies, to recognize the differences between utilities not include a holdma company. as defined in s.
I according to the type of service provided.
1%.795 (1)(h). unless the holding company furnishes.
SECTION 2. 20.155 (1)(h) of the statutes is created directly to the public. telephone. telearaDh or sewer service. heat. liaht. water or power or. by means of to read:
pipes or mains, natural nas. "Public utility" does not 20.155 (1) (h) Holding company regulation. All include any company. as defined in s.1%.795 (1)(f).
moneys received by the commission under s.19&84, which owns. operates. mananes or controls a telecom-for the regulation of holding companies under s.
munications Dublic utility. as defined in s.1%.795 (1) 196 795.
(p). unless the company furnishes. directly to the pub-SECTION 3.184.01 (2) of the statutes is amended lie. telephone, telearaoh or sewer service heat. light.
to read:
water or power or. by means of pipes or mains. natu-184.01 (2) "Public service corporation" means and ralEas.
g l
embraces every corporation, except municipalities and SECTION 5.196 795 of the statutes is created to other political subdivisions, which is a public utility as read:
defined in s.196 01, and every corporation which is a 196.795 Publie utility holding c-r=8 = (1) DEH-railroad as defined m s.195.02, but shall not include a NmONS. In this seClion:
pubhc utility corporation receiving an annual gross t
revenue ofless than 51,000 for the calendar year next W " Affiliated interest" has the meaning given preceding the issuance of any securities by it. "Public under s.1%.52 (1).
service corporation" includes a holdina company. as
.(b)
"Apph,ance" means any equipment used i
def med under s.1%.795 (1) (h). which is a public util-directly f r cooking, drying, water tempering, space ity, as defined under s. 196.01 (5). "Pubhc service cor-heating, space cooling or space ventilation. "Apph-poration" does not include any other holdina ance" does not include equipment or devices which company unless the holding company was formed monitor or control the pnmary energy supply or i
after the effective date of this act.. Irevisor inserts source for any equipment used directly for cookm, g, i
datel. and unless the commission has determined.
drying, water tempenng, space heatmg, space coohng under s. 196.795 (7)(a), that each nonutility affiliate.
of space ventilation.
as defined under s. 196.795 (1)(i).does not and cannot (c) " Beneficial owner" means, with respect to a reasonably be expected to do at least one of the items security, any person who in any way has the uncondi-specified in s.1%.795 (7)(a) "Public service corpora.
tional power to vote or receive the economic gains or tion" does not include a company, as defined in s.
losses of the security. " Beneficial owner" does not 196 795 (1)(f). which owns, operates. mananes or con.
mean, with respect to a security, any person, including trols a telecommunications public utility. as defined in but not limited to any of the following, holding the s.1%.795 (1) (p). unless such company also owns.
security for another person:
operates. mananes or controls a public utility which is
- 1. The trustee of a qualified employe plan.
not a telecommunications public utility or unless such
- 2. The trustee of a stock purchase plan or a divi-company is a telecommunications Dublic utility, dend reinvestment plan.
SECTION 4.196.01 (5) of the statutes is amended
- 3. A pledgee.
to read:
- 4. A nominee.
196 01 (5) "Public utility" means every corpora.
- 5. A broker or an agent.
tion, company, individual, association, their lessees,
- 6. An underwriter for the first 40 days following trustees or receivers appointed by any court, and every acquisition of securities from an issuer if the securities sanitary district, town, village or city that may own, are held in the underwriter's own account.
i operate, manage or control any toll bridge or all or (e) " Commercial building" means any building l
any part of a plant or equipment, within the state, for which is used primarily for carrying out any business, the conveyance of telephone messages, for the receiv-including but not limited to a nonprofit business, and ing, transmitting or delivery of messages by telegraph, any building which is used primarily for the manufac-or for the production, transmission, delivery or fur-ture or production of products, raw materials or agri-nishing of heat, light, water or power either directly or cultural commodities.
)
indirectly to or for the public. "Public utility" does (f) " Company" means any partnership. corpora-not include a cooperative association organized under tion, joint-stock company, business trust or organized i
ch.185 for the purpose of producing or furnishing group of persons, whether incorporated or not, and i
j
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i Septemiser 1985 Special Sesswn 1
(
Senate Bill 14 any receiver, trustee or other liquidator of a partner-ity affiliate's organizational structure to perform such ship, association, joint-stock company, business trust functions as accounting consolidation.
or organized group of persons. " Company" does not (m) " Sell at retail" means to sell an appliance to a include a municipality or other political subdivision.
person who is the consumer or user of the appliance.
(g) " Form a holding company" means any of the (o) " Subsidiary" has the meaning given under s.
following:
180.725 (1) (m).
I
- 1. As a beneficial owner, to take, hold or acquire (p) " Telecommunications public utility" means any j
5% or more of the outstanding voting securities of a company, including any company appointed by a public utility with the unconditional power to vote court, which owns, operates, manages or controls all those securities.
or any part of a plant or equipment in this state for the
- 2. To exchange or convert 50% or more of the out-conveyance of telephone messages or for the receiving, standing voting securities of a public utility, other transmitting or delivery of messages by telegraph.
than a municipality or other political subdivision, for (2) HOL, DING COMPANY FORMATION. (a) No person or into the voting securities of a company organized, may form a holding company unless the person has created, appointed or formed by or at the direction of received a certificate of approval from the commission the public utility or of a subsidiary of such company.
under this subsection.
(h) 1.
" Holding company" means any of the (b) An application for a certificate of approval to following:
form a holding company is complete if it contains all
- a. Any company which,in any chain of successive of the following information:
ownership, directly or indirectly as a beneficial owner, I. The names and corporate relationships of all owns, controls or holds 5% or more of the outstand-companies which will be in the holding company sys-ing voting securities of a public utility, with the uncon-tem with the applicant when the applicant forms the ditional power to vote such securities.
holding company and the name of the applicant and
- b. Any person which the commission determines, any parent or subsidiary corporation of the applicant.
l after investigation and hearing, directly or indirectly,
- 2. A description of how the applicant plans to form exercises, alone or under an arrangement or under-thc holding company including, if available at the time standing with one or more persons, such a controlling of application:
i interest over the management or policies of a public
- a. Copies of the organizational documents associ-utility as to make it necessary or appropriate in the ated with the holding company formation, including public interest or for the protection of the utility's con-articles ofincorporation or amendments to the articles sumers or investors that such person be subject to this ofincorporation of all companies which will be in the section.
holding company system with the applicant when the
- 2. " Holding company", except for purposes of s.
applicant forms the holding company.
1%.795 (11)(b), does not mean any company which
- b. Copies of any filings, including securities filings, owns, operates, manages or controls a telecommuni-related to the formation of the holding company made cations public utility, unless such company also owns, with any agency of this state or the federal operates, manages or controls a public utility which is government.
not a telecommunications public utility.
- 3. The costs and fees attributable to the formation (i) " Holding company system" means a holding of the holding company.
company and any public utility with which the hold-
- 4. The method by which management, personnel, ing company is an amliated interest and any company property, income, losses, costs and expenses will be which is an affiliated interest with such public utility allocated within the holding company system between and any other company more than 5% of whose public utility affiliates and nonutility affiliates.
ownership interest i,s owned directly or indirectly in
- 5. A copy of any proposed agreement between a any cham of successive ownership by such pubhc util*
public utility affiliate and any person with which it will ity or by such company which is an affiliated interest be an affiliated interest at the time the holding com-with such public utility.
pany is formed.
(j) "Nonutility affiliate" means a company in a
- 6. An identification of all public utility assets or holding company system which is not a public utility.
information in existence at the time of formation of (k) " Person" means an individual or company.
the holding company, such as customer lists, which (L) "Public utility afTiliate" means a company the applicant plans to transfer to or permit a nonutil-which is in a holding company system and which is a ity affiliate, with which it is in the holding company q
public utility.
system, to use. The identification shall include a (Lm) "Public utility affiliate employe" means any description of the proposed terms and conditions individual who is in the regular employ of a public under which the assets or information will be trans-utility affiliate, except any officer or director and any ferred or used.
officer's or director's incidental supporting staff and
- 7. A copy of a financial forecast showing the capital except such personnel as is required by the public util-requirements of every public utility affiliate which at I
September 1985 Special Session Seeste Bill 14 j
the time of the formation of the holding company will tation or condition modified or added under this be within the holding company system. The financial paragraph shall be consistent with and necessary to forecast shallinclude for each public utility affiliate on satisfy the requirements of sub. (5)(b) to (s).
an annual basis for 10 years following the year of (3) TAKEOVERS. No person may take, hold or application:
acquire, directly or indirectly, more than 10% of the
- a. Projected capital requirements.
outstanding voting securities of a holding company,
- b. Sources of capital.
with the unconditional power to vote those securities,
- c. An itemization of major capital expenditures.
unless the commission has determined, after investiga-
- d. Projected capital structure.
ti n and an opportunity for hearing, that the taking, holdmg or acquinns is m the best interests of utility
- c. An estimated amount of retained earnings avail-c nsumers, investors and the public. This subsection able for nonutility purposes.
does not apply to the taking, holding or acqmnng of
, f.
The assumptions underlying the m. formation the voting securities of any holding company existing j
included in the financial forecast under subd. 7. a to e.
before the effective date of this subsection.. (revisor (c) No later than 30 days after the commission inserts date), if such holding company is a company receives an application for a certificate of approval to which provides public utility service.
form a holding company under this subsection, the (4) CAPITAL IMPAIRMENT. If the commission finds commission shall determine whether such application that the capital of any public utility afliliate will bc is complete as specified under par. (b). If the commis-impaired by the payment of a dividend, the commis-sion determmes that the application is complete, the sion may, after an investigation and opportunity for commission shall docket the application for a determi-hearing, order the public utility afTiliate to limit or nation under this paragraph. If the commission deter-cease the payment of dividends to the holding com-
,,e application to be incomplete, the th nunes pany until the potential for impairment is eliminated.
commission shall notify the applicant in writing ofits determination, identify any part of the application (5) REGULATION OF HOLDING COMPANY SYSTEMS. (a) which the commission has determined to be incom-No holding company which is not a public utility and n n nutility affihate is subject to any regulatory plete and state the reasons for such determination. An i
applicant may supplement and refile an application power of the commission except under this section, ss.
which the commission has determined to be incom-196.52,196.525 and 196 84 and except under ch.184 if the commission has made a determination under sub.
plete under this paragraph. There is no limit on the number of times an applicant may refile an applica-(7) (a) which makes such holding company a pubhc 3
tion under this paragraph prior to a determination service c rporation, as defined under s. 184.01 (2).
i under par. (e). If the commission fails to make a deter.
(b) The commission has full access to any book, mination regarding the completeness of an application record, document or other information relating to a j
within 30 days after the application has been filed, the holding company system to the extent that such infor-application shall be deemed to be complete.
mation is relevant to the performance of the commis-(d) The commission shall hold a hearing concern-sion's duties under ch.184, this chapter or any other i
ing an application for a certificate of approval to form statute applicable to the public utility affiliate. The s
a holding company under this subsection. The hearing - commission may require a holding company to keep may not be a hearing under s. 227.064 or 227.07.
any recoyd or document which is necessary for the c rnnussi n to pedonn its duties under this section (c) No later than 120 days after an application has and which is consistent with generally accepted been docketed under par. (c), the commission shall issue its findings of fact, conclusions oflaw and special acc unting and recordkeeping practices o,f the partic-order approving or rejecting the application. The "I*'. type of business involved. Any information btained under this paragraph is subject to sub. (9),
commission shall issue a certificate of approval to when applicable.
form a holding company unless it finds that the for-mation of the holding company would materially (c) No public utility affiliate may lend money to i
harm the interests of utility consumers or investors.
any holdmg company which is not a public utility or The commission, in issuing a certificate of approval to any nonutility affiliate with which it is in the hold-under this subsection, may only impose terms, limita, mg company system.
1 tions or conditions on such approval which are con-(d) No public utility afliliate may guarantee the sistent with and necessary to satisfy the requirements obligations of any nonutility affiliate with which it is o sub. (5) (bi to (s).
in a holding company system.
r At any time subsequent to the time the commis-(dm) No public utility affiliate may provide utility sion approves the formation of a holding company service to any consumer of such public utility service I
under par. (c), the commission may, after notice and or to any nonutility affiliate with which the public util-opportunity for hearing, modify any term, limitation ity affiliate is in a holding company system except on or condition imposed under par. (e) or add any limita-the same terms or conditions that it provides such util-tion, term or condition under par. (e). Any term,limi-ity service to consumers in the same class.
1 September 1985 Special Session i.(
Seeste 88114 (dr) No public utility affiliate may provide any held or used for provision of utility service except by s
nonutility product or service in a manner or at a price public sale or offering to the highest qualified bidder.
that unfairly discriminates against any competing pro-
- 2. A public utility affiliate may lease or rent office vider of the product or service.
space to a holding company or any nonutility affiliate (f) No nonutility activity of any holding company with which it is in a holding company system at not or nonutility affiliate may be subsidized materially by less than fair market value. A public utility affiliate the consumers of any public utility affiliate with which may transfer real property which is contiguous to and the holding company or nonutility affiliate is in the used by the public utility affiliate for providing public holding company system. No public utility activity of access to a federally licensed hydroelectric project to a any holding company or public utility affiliate may be nonutility affiliate.
subsidized materially by the nonutility activities of the (L) Any holding company which is incorporated holding company or any ofits nonutility affiliates.
shall be incorporated under ch.180.
(g) No holding company system may be operated in (m) 1. No holding company system may take any
]
any way which materially impairs the credit, ability to action to terminate its interest in a public utility affili-acquire capital on reasonable terms or ability to pro-ate without notice to and approval of the commission.
vide safe, reasonable, reliable and adequate utility ser-If the commission grants approval,it may impose con-vice of any public utility affiliate in the holding ditions with respect to the division and allocation of company system.
plant, equipment, resources and any other asset neces-(h) No public utility affiliate may transfer to any sary to protect the interests of utility consumers and company with which it is in a holding company any investors and the public.
confidential public utility information, including but
- 2. If a holding company system terminates its inter-not limited to customer lists, which will be transferred est under subd. I in all public utility affiliates with or used for any nonutility purpose by any holding which it is in a holding company system, no company t
company or nonutility affiliate unless the public utility remainingin the holding company system is subject to affiliate has applied for and received the written any regulatory power of the commission.
i approval of the commission for the transfer. The (n) A public utility affiliate may not engage in any j
commission shall condition approval of such a trans-combined advertising, directly or indirectly, with any fer upon the applicant's providmg adequate notice of nonutility affiliate with which it is in a holding com'-
the availability of such information to the public and pany system within this state except for purposes of making the mformation available to any person at a corporate identification and noncompetitive i
cost not to exceed the cost of reproduction. The com-purposes j
mission may not approve any transfer which would (o) The assets of every company in a holding com-foster unfair or discriminatory business practices, or pany system shall be as recorded on the books of which would destroy or hamper competition through accounting record of the company, net of any applica-j conduct which violates ch.133 or any other applicable ble valuation axounts, including but not limited to
]
state or federal antitrust law.
accumulated depreciation and allowance for un:ol-(i) in its determination of any rate change proposed lectible accounts, as of the end of the prior year.
by a public utility affiliate under s.1%.20, the (p) 1. The sum of the assets of all nonutility affili-l comnuson:
ates in a holding company system of any holding com-
- 1. Shall consider the public utility affiliate as a pany formed on or after the effective date of this wholly independent corporation; subdivision.... [ revisor inserts date), may not exceed
- 2. May not attribute to that public utility affiliate the sum of the following:
i i
any tax benefit or other benefit or tax liability or other
- a. Twenty-five perant of the assets of all public l
liability resulting from the operations of the holding utility affiliates in the holding company system company or of any subsidiary of the holding com-engaged in the gevieration, transmission or distribu-pany; and tion of electric power.
- 3. May not attribute to the holding company or to
- b. A percentage of the assets, as determined by the any subsidiary of the holding company any tax benefit commission, which may be more, but may not be less, or other benefit or tax liability or other liability result-than 25% of all public utility affiliates in the holding ing from the operations of that public utility affiliate.
company system engaged in providing utility service (j) Every public utility affiliate is subject to every other than the generation, transmission or distribu-law, regulation and precedent applicable to the regula-tion of electric power.
i tion of public utilities.
- c. For any public utility affiliate which is in the (k) 1. Except as provided under subd. 2, no public holding company system and which engages in the i '\\
utility affiliate may transfer, sell or lease to any non-provision of more than one type of utility service, a utility affiliate with which it is in a holding company percentage of assets equal to the amount of the public system any real property which, on or after the effec-utility affiliate's assets devoted to public utility ser-tive date of this subdivision... [ revisor inserts date], is vice, other than the generation, transmission and dis-i
September 1985 Special Session
- Senate Bill 14
\\
tribution of electric power, multiplied by a percentage,
- b. Make use of any customer list, other confidential as determined by the commission, which may be more, information, logo or trademark obtained from a pub-but may not be less, than 25%, plus 25% of all lic utility afTiliate in a manner unfair to competitors.
remaining assets of such public utility affiliate.
- 2. Except as provided under subd. 3, no public util-
- 2. For purposes of subd. I, the assets of each non-ity affiliate or its subsidiary or joint venture or part-utility affiliate shall be determined by doing all of the nership having a utility affiliate or its subsidiary as a j
following:
member or partner may,in the service territory of the i
- a. Subtracting from the nonutility affiliate's total public utility affiliate, sell at retail, lease, install, main-assets the amount of the nonutility affiliate's invest.
tain or service any appliance that uses as its primary l
ment in other utility and nonutility affiliates with energy source energy supplied by that public utility 1
which the nonutility affiliate is in a holding company affiliate under rates and tariffs approved by the com-mission, unless the appliance is located in facilities i
system.
owned or operated by that public utility affiliate or its I
- b. Multiplying the amount derived under subd. 2. a i
by the quotient of the amount of the direct ownership subsidiary or unless the apphance is sold, leased, installed, maintained or ser iced:
interest in such nonutility affiliate owned by persons who are not with the nonutility affiliate in the holding
- a. In response to circumstances which reasonably company system, if such ownership by such persons is appear to the public utility affiliate or its subsidiary to greater than one-half of the total ownership interest in endanger human health or life or property; such nonutility affiliate, divided by the total owner-
- b. Under any appliance sale or ser ice plan or pro-ship interest in such nonutility affiliate.
gram in efTect on March 1,1985; or
- c. Subtracting the amount derived under subd. 2. b
- c. Under any energy conservation or other program from the amount derived under subd. 2. a.
which a state law, state agency, federal law or federal
- 3. Within 36 months after it is formed, a holding agency requires the public utility or public utility affil-company formed on or after the effective date of this iate to perform.
subdivision.. [ revisor inserts date), may not have
- 3. Notwithstanding subd. 2, a public utility aliiliate nonutility affiliate assets exceeding 40% of the maxi-or its subsidiary may sell, lease, install, maintain or mum amount allowed under subd.1.
service an appliance which is in its public utility ser-I 4.
If the commission establishes a percentage of vice territory and which uses as its prin ary energy assets under subd.1. b or c which is greater than 25%,
source energy supplied by the public utility affiliate any subsequent reduction of such percentage by the under rates and tariffs approved by the commission if:
commission may not take effect until the last day of
- a. The installation, maintenance or service of the the 12th month following issuance of the order estab-appliance is performed by an independent contractor lishing the reduction or until a later date which the which is not in the holding company system of the commission sets and which the commission deter-public utility affiliate and which is regularly engaged mines to be reasonable after considering the size of the in, qualified and, if required by any state or local gov-reduction and which is no later than 36 months foi-ernmental unit, licensed to perform heating, ventila-lowing issuance of the order establishing the tion, air conditioning, electrical or plumbing work; or reduction.
- b. The commission determines, after notice and (q)1. No nonutility affiliate or joint venture or hearing, that the sale, lease, installation, maintenance partnership with a nonutility affiliate as a member or or service of the appliance, if conducted by the public partner may,in the service territory of a public utility utility affiliate's employes or by the employes of the affiliate with which it is in a holding company system, public utility affiliate's subsidiary, will not, so as to l
sell at retail, lease, install, maintain or service any violate ch.133 or any other applicable state or federal j
appliance that uses as its primary energy source antitrust law, lessen competition, tend to create a energy supplied by that public utility affiliate under monopoly, restrain trade or constitute an unfair busi-rates and tariffs approved by the commission, if the ness practice.
appliance is, or is intended to be, located in any build-
- 4. No nonutility affiliate may sell at wholesale to j
ing used primarily for residential occupancy or in any any person any appliance, except a swimming pool or commercial building unless the building is owned or spa heater, for delivery in this state unless the nonutil-operated by the holding company or by its nonutility ity affiliate is engaged in the production, manufacture, affiliates or unless the commission determines, after fabrication or assembly of any component part of the not;ce and hearing, that the selling at retail, leasing, appliance.
installing, maintaining or servicing of the appliance (r) No public utility affiliate may permit the use of i
will not do any of the following:
any public utility affiliate employe's senices by any i
- a. So as to violate ch.133 or any other applicable nonutility affiliate with which it is in a holding com.
I state or federal antitrust law, lessen competition or pany system except by contract or arrangement. Any tend to create a monopoly, restrain trade or constitute such contract or arrangement made or entered into on an unfair business practice.
or after the elTective date of this paragraph.. [ revisor I
t
September 1985 Special Session Senate Bill 14 '
inserts date), for the use of any public utility alTiliate transferring to or exchanging with nonutility affiliates employe's services by a nonutility affiliate shall have in the holding company system such property. Any i
prior written approval of the commis: ion before it is contract or arrangement which is in effect on the efTec-elTective. The commission shall approve such con-tive date of this paragraph.. (revisor inserts datel, for tract or arrangement ifit is established upon investiga-a public utility affiliate to sell, lease, transfer to or i
tion that the nonutility affiliate will compensate the exchange with a nonutility affiliate, on a continuing public utility alTiliate for the use of the employe's ser-basis or in the future, the public utility affiliate's prop-vices at the fair market value of the employe's service erty and which is approved under s.1%.52 shall be and that the nonutility affiliate's use of the employe's resubmitted for approval by the commission under services will not result in unjust discrimination this paragraph within 90 days after the effective date against, or have an anticompetitive impact on, any of this paragraph.. [ revisor inserts date]. Such con-competitor of the nonutility affiliate. The commission tract or arrangement, if approved by the commission, may not approve any such contract or arrangement if shall take effect within 60 days after approval.
it determines that the potential burden of administer-(6) REPORTING REQUIREMENTS No more than 10 ing such contract or arrangement is greater than the business days after a holding company forms, potential benefits to the public utility affiliate's cus-organizes or acquires a nonutility affiliate, the holding tomers or if it determines that the public utility alTili-company shall notify the commission of the forma-ate has not minimized the use of such employes by tion, organization or acquisition and shall provide the nonutility affiliates in the holding company system.
commission with the following information:
Any contract or arrangement in efTect on the effective date of this paragraph.. (revisor inserts date], for the (a) The name, identification of ofTicers and corpo-continued or future use of any public utility affiliate rate relationship of the nonutility affiliate to the hold-employe's services by a nonutility affiliate approved ing company and utility affiliate.
under s.196 52 shall be resubmitted for approval by (b) A copy of any proposed agreement or arrange-the commission under this paragraph within 90 days ment between the nonutility affiliate and the public after the effective date of this paragraph.. (revisor utility affiliate-inserts date]. Such contract or arrangement, if (c) A briefdescription of the nature of the business
[
approved by the commission, shall take effect within of the nonutility affiliate, including its most recent I
60 days after the date of approval.
pubhc annual financial statement.
(s) In this paragraph," property" means any equip-(d) As of the last day of the calendar year immedi-ment, facihties, property or other nonmonetary item ately preceding the date of the notification under this of value except real property and utility servia which subsection, the total amount of assets held by the non-is provided by the public utility affiliate on the same utility affiliate, the amount of such assets located terms or conditions to all consumers m the same class.
w thin this state, the total number of employes and the No pubh,c utility affiliate may sell lease, transfer to or total number of employes located in this state. The holding company shall report the information exchange with any nonutility affih. ate with which it is m a holding company system any property except by required under this paragraph to the commission contract or arrangement. Any such contract or annually no later than March 31. The information arrangement made or entered into on or after the shall be available to the public upon filing.
effective date of this paragraph. (revisor inserts (7) COMMISBON INVESMGAMONs. (a) No sooner date], for the sale, use, transfer or exchange of any than the first day of the 36th month after the forma-pubhc utility affiliate s property by a nonutility affih-tion of a holding company and at least once every 3 ate shall have the pn,or wntten approval of the com-years thereafter, the commission shall investigate the mission before it is effective. The commission shall impact of the operation of every holding company sys-approve such contract or arrangement ifit is estab-tem formed on or after the effective date of this para-lished upon investigation that the nonutility affiliate graph.... [ revisor inserts date], on every public utility will compensate the pubh,c utility affiliate for selhng, affiliate in the holding company system and shall leasing, transfernng to or exchangmg with the non-determine whether each nonutility affiliate does, or utility afliliate any property at the fair market value of can reasonably be expected to do, at least one of the the property and that the nonutility affiliate's acquisi-
- I"8 tion or lease of the property will not result in unjust
- 1. Substantially retain, substantially attract or sub-discrimination against, or have an anticompetitive stantially promote business activity or employment or impact on, any competitor of the nonutility affiliate.
provide capital to businesses bemg formed or operat-The commission may not approve any such contract ing within the wholesale or retail service territory, or arrangement if it determines that the potential bur-withm or outside this state, of:
l den of administering such contract or arrangement is
- a. Any public utility affiliate.
g greater than the potential benefits to the public utility
- b. Any public utility or member of a cooperatise
+
j afliliate's customers or ifit determines that the public association organized under ch.185 which files or has utility affiliate has not minimized selling, leasing, filed a plan under s. 196.491 (2).
-y
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September 1985 Special Session
- Seeste Bill 14
)
2.
Increnc os promote energy conservation or county may enforce by appropriate process an order develop, produce or sell renewable energy products or establishing a plan of reorganization to terminate a equipment.
holding company system's interest in a public utility l
- 3. Conduct a business that is functionally related to afliliate. Any such order of the commission issued the provision of utility service or to the de'velopment under this paragraph may be reviewed under ch. 227.
or acquisition of energy resources.
(8) EXEMPTIONS. (a) This section does not apply to 4
4.
Develop or operate commercial or industrial any holding company which was organized or created parks in the wholesale or retail service territory of any before the effective date of this paragraph... [ revisor l
public utility affiliate.
inserts date], and which was not organized or created (am) Funds utilized by a nonutility affiliate for any by or at the direction of a public utility.
(b) This sectionjoes not apply to any telecommu-of the following may not be considered by the com-2 mission in making any determination under par. (a):
nications pubhc utihty.
l
- 1. The purchase or sale of securities or other appro.
(9) PROTECTION OF BUSINESS INFORMATION. Not-priate cash management practices.
withstanding s.19.35 or 19614, if the commission i
2.
The establishment and maintenance of cash obtains business information from a holding company i
accounts in banks or other financial institutions.
system which,if disclosed to the pubhc, would put any (ar) Three years after the formation of a holding part of th Wng company system at a matedal j
company under this section, the ccmmission shall competitive disadvantage, the commission shall pro-report its findmgs under par. (a) to the legislature.
tect such information from public disclosure as if it were a trade secret.
Thereafter the commission shall, based on its existing 1
investigative findings, rate reviews and other relevant -
(9m) PRIVATE CAUSE OF ACTION. Any company in a information, submit to the legislature a report on the holding company system which does, causes or per-impact of the holding company, including the benefits mits to be done any prohibited action under sub. (5) and adverse efTects on every public utility afYiliate in (c) to (dr), (f), (h), (k), (n), (q), (r) or (s), or fails to the holding company system and on the investors and comply with any term, limitation or condition consumers of such public utility affiliates, at least once imp sed under sub. (2) (c) or (f) consistent with sub.
every 2 years. The report shall include any recommen-(5) (c) to (dr), (f), (h), (k), (n), (q), (r) or (s), is liable to.
dations for legislation relating to the regulation of any any person injured thereby m treble the amount of I
i part of a holding company system.
damages sustained m, consequence of the prohibited action or faHum to act.
(b) The commission, on its own motion, or, at its discretion, upon the complaint of any person, may, (10) ComimON DMRVENOR AUmORITY. The i
after reasonable notice and an opportunity for hear-c mmission may intervene on behalf of this state in 1
ing, conduct an investigation to determine if any prac-any proceedmg before any state or federal agency or tice of a holding company system violates any court before which an application or issue related to I
provision of sub. (5) (b) to (s) or any limitation, term this section is pendmg. The commission may enter or condition imposed under sub. (2) (e) or (f). If the
!nto any binding settlement I,: lated to any proceeding i
commission finds after investigation, notice and in which the commission has mtervened and may exer-1 opportunity for hearing that any practice of any com-. cise any power or right necessary to accomplish the pany in a holding company system violates any provi.
intervenuon.
sion of sub. (5) (b) to (s) or any term, limitation or (10m) ShtAI.I. BUSINESS PROTECTION. In this subsec-condition imposed under sub. (2) (e) or (f), the com.
tion,"small business"means a busiress which has had mission, by order or otherwise, shall direct the com.
less than 55,000,000 in gross annual sales in the most pany to modify or cease the practice. Such order is recent calendar year or fiscal year and which has less reviewable under ch. 227. The circuit court of Dane than 150 employes. The commission shall provide county, by appropriate process including the issuance assistance, monitoring and advocacy in protecting 1
of a preliminary injunction by suit of the commission, small business interests under s.196 795 in any action may enforce an order to cease or modify a practice or proceedings before the commission.
under this paragraph.
(1!) CONSTRUCTION. (a) This section may not be (c) The commission, after investigation and a hear.
deemed to diminish the commission's control and reg-ing, may order a holding company to terminate its ulation over the operations and assets of any public l
interest in a public utility affiliate on terms adequate utility.
I to protect the interests of utility investors and con-(b) This section shall be deemed to legalize and con-j sumers and the public, if the commission finds that, firm the formation, prior to the effective date of this based upon clear and convincing evidence, termina-paragraph. [ revisor inserts date], of any holding tion of the interest is necessary to protect the interests company, which is not itself a public utility, and shall I
of utility inve,stors in a financially healthy utility and be deemed to legalize and confirm the operations and consumers irureasonably adequate utility service at a issuances of securities of the holding company, except just and reaso'nable price. The circuit court of Dane that nothing in this section shall be deemed to prevent l
i
?
g
September 1985 Special Session
[
Senate Bill 14 '
the commission from imposing reasonable terms,limi-tion. No assessment may be made under this section tations or corditions on any holding company which against any holding company or nonutility affiliate are consistent with and necessary to satisfy the for any time worked by any person under s. 196.795 requirements of sub. (5) (b) to (o) and (q) to (s) or (10m)if the time is properly assessable for utihty regu-which relate to future investments by the holding com-lation under s.196.85.
pany unless the holding company owns, operates, SECTION 7.
Nonstatutory provisions; position manages or controls a telecommunications pubhc util-ity and does not also own, operate, manage or control authorization. The authorized l~fE positions for the a
blic utility which is not a telecommunications public service commission are increased by 6.0 PRO professional positions and 2.0 PRO clerical positions n the effective date of this SECTION, to be funded SECTIO ' 6. 196.84 of the statutes is created to from the appropriation under section 20.155 (1)(h) of read..
the statutes, as created by this act, the purpose of 1%.84 Payment of commission's holding company ensuring that any transaction between a public utility regulation costs. Under rules promulgated by the amliate, as defined in section 196.795 (1) (L) of the commission, a holding company, as defined in s.
statutes, as created by this act, and any nonutility 196.795 (1) (h) or a nonutility amliate, as defined amliate, as defined in section 196 795 (1) (j) of the
~
under s. 196.795 (1)(j) shall compensate the commis-statutes, as created by this act, with which it is in a sion for the cost of any increase in regulation of any holding company system does not materially public utility affiliate, as defined under s. 196.795 (1) adversely affect the public utility amliate or any com-(L), which is with the holdmg company or nonutility petitor of the holding company system, as dermed in affiliate in a holding company system as defined m s.
section 196.795 (1)(i) of the statutes, as created by this 196.795 (1)(i), if the commission determines that the act, and for the purpose of section 196.795 (10m) of increase is reasonably required in order for the com-the statutes, as created by this act. The cost of the mission to implement and enforce s. 196.795. Such positions shall be deemed reasonably required in compensation may not be recovered directly or mdi-order for the commission to implement and enforce rectly from any pubhc utility affiliate. The commis-section 196.795 of the statutes, as created by this act sion shall assess such compensation using the and shall be assessed under section 196.84. as created procedure prescribed in 3. 196.85, except that n by this act.
advance payment of a remainder assessment under s.
196.85 (2) may be required for the first 2 fiscal years SECTION 8. laitial applicability.The treatment of after the effective date of this section. (revisor section 196.795 of the statutes by this act first applies inserts date]. No assessment for costs which are not to any activity of a holding company system, as reasonably required for the implementation or defmed in section 196.795 (1)(i) of the statutes, as cre-enforcement of s. 106.795 may be assessed against a ated by this act, which occurs on the effective date of holding company or nonutility afliliate under this sec-this SEC110N.
(
4
/
f ggg COMPARED WITH AND CELTIFIED BY M e
w g T E E#
TO BE A Fult.TRUE AND CORRECT COP)
[
OF THE OttGINAL ON FILE IN MY OFFICE DATE MAILED MAY 30 G3G f.1AY 3 71986 uAv 281986 LGGAL DEPT.
3:,
BEFORE THE secc w to n.c e - ~c-m suce C-cum-PUBLIC SERVICE COMMISSION OF WISCONSIN Application of Wisconsin Electric Power
)
Company and Wisconsin Energy Corporation
)
for a Certificate of Approval to Form a
)
9402-YO-100 Holding Company
)
FINDINGS OF FACT, CERTIFICATE AND ORDER Wisconsin Electric Power Company and its wholly-owned subsidiary, Wisconsin Energy Corporation, filed an application to form a holding company under sec. 196.795, Wis. Stats., with the commission on December 20, 1985.
By letter of January 28, 1986, the commission accepted the supplemented application as complete under sec. 196.795(2)(c), Wis. Stats.
Wisconsin Electric Power Company is a Wisconsin corporation engaged in rendering electric utility service to the public in southeast, east, and east central Wisconsin and is a public utility as defined in s.
196.01, Wis. Stats.
Wisconsin Electric Power Company owns several subsidiary corporations, including Wisconsin Energy Corporation and Wisconsin Natural Gas Company.
Wisconsin Energy Corporation is a 1
co-applicant herein, and, after the proposed restructuring, would become the direct owner of all the outstanding shares of Wisconsin Electric Company and each of its subsidiaries, including Wisconsin u
i Natural Gas.
Wisconsin Natural Gas Company distributes natural gas in southeastern Wisconsin and a portion of the Fox River Valley and is a public utility under sec. 196.01, Wis. Stats.
This application is the first one filed pursuant to section 196.795, Wis. Stats., as created by 1985 Wisconsin Act 79, the Utility Holding Company Act.
That statute provides 120 days for review of such an application, provides that the commission shall issue a certificate of approval unless it finds that the interests of utility consumers or investors will be materially harmed, and lists requirements for any terms or conditions the commission may impose on such a certificate.
Pursuant to due notice, a hearing was held pursuant to sec. 196.795(2), Wis. Stats., at Madison on April 21 and 22, 1986, before Chairperson Mary Lou Munts and Examiner Clarence B.
Sorensen.
A notice of appeal rights appears in the attached Appendix A.
The appearances are listed in the attached Appendix B.
Application Granted Subject to Conditions.
This application is the first one brought under sec. 196.795, Wis. Stats., which was created by Wisconsin Act 79, which became law on November 27, 1985.
Wisconsin Electric Company, t
under this new statute, proposes to reorganize so that its subsidiary, Wisconsin Energy Corporation (WEC) will become the.
i i0 s.
i I
parent holding company, owning all the stock of Wisconsin Electric Power Company (WEPCO) as well as the stock of WEPCO's present subsidiaries, including Wisconsin Natural Gas Company (WNG).
Each j
utility would issue its own debt.
WEC may acquire or form other non-utility subsidiaries in the future.
If the proposal is
)
approved by this commission and the Federal Securities and 1
Exchange Commission and WEPCO's shareholders (who would become 2
shareholders of WEC,) the reorganization will take place on or about January 1, 1987.
The current approved interim affiliated agreements among the entities will also expire on that date.
The commission is guided by the following principles which were incorporated by the legislature in the holding company bill and endorsed by all of the participants in the drafting of that legislation, including WEPCO.
I 1.
Utility ratepayers shall not be made worse off by the formation and operation of the holding company in l
any way:
J 2.
Utility ratepayers should benefit from the activities of the holding company, at least indirectly, as taxpayers and community members:
3.
Non-utility operations of the holding company or its non-utility subsidiaries should not be regulated:
] !_.-_-...~_._-___._,_._____._--____._____._____._.._.._--_.____.-.-,_-_~___-._
4.
The formation and operation of the holding company shall in no way diminish the Public Service Commission's authority over the utilities.
These principles are directly related to the purpose of the holding company bill, but specifically are identified in Section 1 of the bill as well as sections 196.795(4), s. 196.795(5)(a),
196.795(5)(g),
s.
196.795(5)(j) and s. 196.792(11)(a).
The legislature in the drafting of the holding company bill specifically provided that the commission could impose
" terms, limitations or conditions" which are consistent with and necessary to satisfy the terms of s. 196.795(5)(b) to (s) at the time of approval of the formation of a holding company as well as after its formation.
The legislature has clearly given the commission the discretion to ensure adequate protection of the ratepayer, where such protections are necessary and are not specifically provided for in the statute.
The commission has applied its discretion in this case, but only where it has been necessary to assure the protection of the racepayer and is consistent with the intent and provisions of the act.
(See
- s. 196.795(2)(e) and (f)).
In this proceeding, concerns were expressed that further racepayer protection was needed beyond the statutory framework in three areas, financial, cost allocation and accounting, and system maintenance and improvement.
The commission has applied the principles set forth above to each of these areac of concern, and makes the following findings: _.
Findings of Fact THE COMMISSION FINDS:
Financial Aspects The financial requirements of a public utility differ from those of an unregulated firm in that a utility has an ongoing obligation to continue to supply adequate service at reasonable
]
rates.
The fundamental requircment to meet this obligation is J
l continuing financial health.
WEPC0 and WNG are, at this time, by any standard, very financially healthy utilities.
Regulators and utility management have traditionally used three elements of utility finance to insure that utilities are healthy enough to provide reliable, low cost service into the future.
These are:
1.
a reasonable and balanced capital structures 2.
a dividend policy based on the utility's needs, and 3.
a commitment to fund capital construction needed to provide reliable and safe service.
These elements are interactive and overlap.
A dividend policy which addresses the utility's needs is based on the assessment and commitment of investment necessary for provision of I
adequate utility service.
It also affects the balance of the capital structure.
A financially healthy utility is not only able to l
provide adequate service at reasonable rates on an ongoing basis, it also has the flexibility and strength to be able to select innovative options for providing that service into the future.
Financial health is based, among other things, on l
adequate return, which is a cost borne by ratepayers.
In order for WEPCO to attain and maintain its current high financial ratings, the commission has required ratepayers to support attractive returns.
Inasmuch as the ratepayers have paid for this ongoing financial strength, it is imperative that the financial flexibility and low borrowing costs that are associated with it continue to be used for the racepayers' i
benefit.
]
The commission specifically rejects the applicant's argument that bond ratings would have to drop below investment grade before the utility's credit would be " materially impaired" by actions of the holding company system.
(See s.
196.795(5)(g)).
While " materially" means that an effect is one of substance or significance, it is for the commission, not the applicant, to l
determine whether any adverse impacts on the utility's credit or its ability to raise capital due to the operation of the holding company reach this threshold standard.
It is inconsistent for WEPCO to have argued for years to be allowed to increase its financial strength, which as noted has been paid for by ratepayers, and now to say that bond ratings z.
could drop several levels and the commission could do nothing to protect ratepayers from the consequences of such a drop because it would not " materially" impair credit.
The legislature as noted in various sections of the bill did not intend to allow the holding company to impact the existing or future financial health of the 4
utility adversely (see e.g. s.
196.795(5)(c), (d) and (g) as well as s. 196.795(4)).
A balanced capital structure refers to the percentages of common stock, preferred stock and debt to the total capital invested.
These percentages are balanced if they are within a reasonable range for financial health and flexibility.
A balanced utility capital structure provides protection to both the ratepayers and investors of a public utility.
The debt investor or bond holder is protected because a balanced utility capital structure provides adequate interest coverages at a reasonable return on common equity.
It allows variations in the revenue stream without jeopardizing the interest l
payments of bond holders.
The equity investor is protected by a balanced capital structure because it reduces the risk of default in light of variations in the revenue stream.
As the portion of a company's capital structure represented by debt increases, the financial risk increases.
i.
1 1
The utility racepayer is protected because a balanced capital structure will enable a utility to attract capital at reasonable rates to provide the necessary utility service.
In addition, a balanced capital structure will attract capital from investors at reasonable cost to the racepayer.
i i
A high proportion of common equity in a utility capital structure decreases financial risk and provides interest coverage.
The high proportion of common stock also generates an increased cost of capital to the racepayer.
A balanced capital structure is one which contains the proper ranges of debt and equity to minimize financial risk without increasing the cost of capital to unreasonable levels.
A balanced capital structure, in addition to affecting i
risk and cost, also helps provide financial flexibility.
Financial flexibility is the ability to issue various types of i
securities (debt or equity) in any type of market condition.
This is critical for a public utility because it is required to provide l
adequate service at reasonable cost and cannot tailor its needs to I
market conditions if service will be jeopardized.
WEPCO is j
1 presently restricted from transferring funds to WEC or any other
)
subsidiary without commission approval which are not in excess of
{
the level of equity that the commission by order of December 23, l
t I
i 1985 in docket 6630-ER-100 determined to be appropriate for the i
i utility's capital structure.
See sec. 196.52(8), Wis. Stats.
1
- i l
i l
l 8
)
l In order to maintain a balanced capital structure which addresses the utility's needs for capital in a responsible way, it is necessary to establish utility dividend policy based on the utility's interests, rather than the interests of any other entity.
The dividend policy adopted by a utility which is a subsidiary of a holding company should be no different than a policy adopted by a " stand-alone" utility which is not part of a holding company.
The dividend policy for the utility should be formulated by the board of directors of the utility, not the l
holding company.
A reasonable dividend policy for WEPCO and WNG should be consistent with the dividend policy of comparable utilities and should be geared to attracting and maintaining investors, to maintaining a reasonable utility capital structure j
and to ensuring available funds foi utility capital requirements.
This order will require the dividend policy for the utility to be set by the directors of the utility based on their best independent judgment, pursuant to sec. 182.0135, Wis. Stats.,
as to what dividend policy will be most beneficial to the utility in achieving the goals mentioned above.
In setting this dividend policy, and in maintenance of a i
balanced capital structure, the overriding concern must be to continue to provide adequate, safe and reliable utility serv. ice, including consideration of the increasing cost of replacing
.l
/
e existing plant as it wears out.
WEPCO representatives have repeatedly assured both the legislature and this commission that the first priority for the use of capital under the holding company will be the needs of the utilities, exactly als it has been without a holding company.
This is entirely proper, and the commission will monitor on behalf of ratepayers to ensure that these promises are kept.
The primary and proper use of funds generated by the i
utility is to fund utility capital and operating requirements.
Within the constraints of the range of a balanced capital structure, internally generated funds, after normal dividend payments, should ordinarily be used for utility capital requirements.
There may be periods where the' funds generated internally would have to be removed from the utility to balance the capital structure.
The levels of equity and debt in the i
utility capital structure should remain within the ranges found to be reasonable for a balanced capital structure.
The essential principle is that these determinations will be made from the utilities' standpoint, rather than from the holding company's, and should be aimed at ensuring the utilities' financial health and its ability to provide safe and reliable service at reasonable l
cost.
It is necessary for WEPCO and WNG, as for any utility, i
to maintain their investment in utility operations in order to l
l remain strong ongoing utilities.
This is a requirement of their 1
i franchise as regulated monopolies, and is fully consonant with WEPCO's expressed intentions.
These utility investments can inci.de (but need not be limited to) needed new construction, system maintenance and upgrading, loss reduction, conservation, SO /NO reduction, and other environmental considerations.
The 2
X commission will monitor, review, and approve these utility investments in construction cases, rate cases, and other appropriate proceedings to ensure that the needed work is being performed and that it is being considered as part of the future capital needs of the utility including the development of adequate capital structures.
The commission will monitor the appropriateness of the evel of these investments directly and also by relating performance to approved utility system plans, maintenance and improvement policies, and prior investment history, in appropriate i
l cases, such as rate cases and service complaints.
Regulatory strategic planning is a useful tool that t
increases the commission's ability to regulate a utility effectively, particularly a utility that is part of a holding I
company structure.
The main advantages of this tool are that it is forward looking and integrative.
The forward looking aspect allows the commission to anticipate and forecast utility problems before they happen.
This reduces reactive decision making by the commission.
The integrative aspect allows the commission to simultaneously consider the financial effect of both short-term
ll l
and long-term decisions made in rate cases, the Advance Plan and security issuance cases.
Regulatory strategic planning is the one i
tool that provides a general overview of the major trends j
associated with the company.
In order to monitor the financial conditions of a balanced capital structure, appropriate dividend policy and i
i utility capital requirements priority effectively, the commission needs the capability to analyze both short-term and long-term
)
financial issues in a regulatory strategic planning context.
Therefore, in rate cases, security issuance cases, and in the Advance Plan proceedings, Wisconsin Electric Power Company will be required to submit ten-year forecasts of key financial variables.
)
Wisconsin Natural Gas will also be required to submit at least I
five-year, and preferably ten-year, financial forecasts.
The i
forecasts should include sources and uses of funds, capitalization ratios and external financing disaggregated into long-term debt, j
short-term debt, preferred stock equity and common stock equity.
The commission determined that during the early periods 1
a cautious approach was reasonable and therefore determined that after the formation of the holding ccmpany, the percentage to be t
i used for purposes of sec. 196.795(5)(p) of the steam assets of j
WEPCO and the assets of WNG should be 25%.
This percentage can be reviewed in subsequent proceedings.
Access to Records l
Effective regulation of public utilities is dependent upon this commission's ability to obtain and evaluate information.
[
t' __.. _ __ _ _ __
t i
i Section 196.795(5)(b) of the Wisconsin Statutes provides that the commission has full access to any book, record, document or other l
information relating to a holding company system to the extent i
that such information is relevant to the. performance of the commission's statutory duties.
This section is ambiguous to the extent that it does not specify who is to decide what books and records are relevant to the commission's duties.
Without a provision which defines what the term relevant means in regard to i
access to information, there exists a strong possibility that there will be future disputes as to what records are relevant.
The lack of definition of the term relevant also has the potential of preventing this commission from obtaining sufficient competent evidentiary material to fulfill its statutory duties.
The commission in this proceeding determines that full access to the records of the holding company and non-utility affiliate is required for any document which staff determines is relevant to fulfill its statutory duties.
These duties now include the monitoring of non-utility affiliates to insure against unfair competitive practices based on the utility affiliation.
For any objections to staff requests raised by applicant either due to the relevance of the document or confidentiality, the applicant must carry the burden of showing to the commission that such document is not relevant to the commission's oversight function or should be protected.
Access to records of the holding company and non-utility affiliates applies to issuance of i
securities of utility affiliates, proceedings concerning changes -
J in rates, affiliate transactions, and the commission's duties under section 196.795 of the Wisconsin Statutes.
Any costs charged from the holding company or non-utility affiliate to a t
l utility affiliate, for which the commission has insufficient I
information to make a decision, will not be reflected in rates.
l l
Form of Records ij' Section 196.795(5)(b) of the Wisconsin Statutes provides that the commission may require a holding company to keep any record or document which is necessary for the commission to i
perform its duties under this section and which is consistent with l
generally accepted accounting and record keeping practices of the particular type of business involved.
Due to the differences in the types of diversification activities currently proposed by the applicant it would be unreasonable to require a single form of accounting records which would meet the needs of each activity as well as accounting and reporting requirements for consolidated l
companies for the purposes of the Securities and Exchange l
Commission, and the New York Stock Exchange.
Current industry practices and generally accepted accounting principles can differ for different activities.
The concern of the commission regarding I
the form of records is that there be a clear and concise audit trail for those costs associated with affiliated transactions.
Without a clear audit trail, the applicant will'be unable to carry the burden of proof as to the appropriateness of affiliated l - -.
transactions.
Commission staff will be unable to perform an adequate review of such transactions in order to determine the reasonableness of costs charged to the utility by the holding company or non-utility affiliates.
In order to ensure that there is a clear and concise audit trail for costs associated with affiliated transactions which meet the needs of staff, the commission determines that the holding company and non-utility affiliates should submit for staff's review the specific procedures followed to account for affiliated transactions.
Failure to provide a clear and concise audit trail will prevent staff from properly reviewing the reasonableness of affiliated transactions and result in the commission's denying compensation for these transactions.
Shared Officers and Employees Two concerns have been expressed about shared officers and employees.
One is a concern that the success of non-utility affiliates will be placed ahead of utility service in management's attention.
There is the potential for utility officers and employees to pay more attention to new ventures and for managerial and technical talent to be diverted to new ventures.
A second concern is that the greater the number of overlapping employees and officers, the greater the problem of cost allocation.
The more overlapping employees and officers there are, the greater the administrative burden of allocating time and costs among the various companies in the holding company system. t
- I The application in this docket indicated that the utility does not plan for managers of the utility to be employees of a non-utility affiliate also, but that certain corporate officers may be officers of the utility and one or more non-utility affiliates.
After an initial transition period, the application indicated that it is expected that the use of utility personnel by non-utility affiliates will decrease substantially.
Applicant's witness, Mr. Abdoo, stated that the basic goal will be 4
to achieve functional and organizational separation between the utility subsidiaries and the non-utility subsidiaries and that once the non-utility subsidiaries are functional businesses, their needs will reach levels sufficient to justify their own i
independent staffs.
Section 196.795(5)(f) of the Wisconsin Statutes prohibits cross-subsidies between utilities and nonutility affiliates.
Section 196.795(5)(r) requires the minimization of 1
l the use of utility employees.
Therefore, the commission determined in this proceeding that the overlapping of officers and l
l employees between the utility affiliates, non-utility affiliates and the holding company should be minimized or eliminated where possible.
The applicant will be required to submit a plan before the formation of the holding company outlining the ways the applicant intends to achieve maximum possible separation and 1
i l
employees over a 3 year transition period.
In addition, the applicant will be required to submit a management plan within two years of the formation of the holding company providing for (1) the maximum possible separation of the officers of the utility and its non-utility affiliates excluding the holding company and (2) the maximum possible separation of the employees of the utility I
and its non-utility affiliates after three years from the formation of the holding company system.
The two plans should indicate any transfers of utility employees to the holding company or non-utility affiliates and any areas where there will be joint use and sharing of officers and employees.
The plan should also j
include a complete description of what the shared duties will be, l
why sharing is a benefit to the utility and the estimated percentage of time devoted to each function.
Further, the second plan should provide that development of new ventures in non-utility related functions should not use utility employees, including officers, after the three-year transition period, but should use employees of the holding company or non-utility affiliates..
i I
=
l i
Reporting Requirements The 1985 Wisconsin law relating to energy utility holding companies contains a number of conditions or restrictions to be placed on such holding comanies.
For commission staff to be able to review and monitor the holding company system for compliance with such conditions, the commission has determined that the following reporting requirements for holding companies are necessary:
1.
Upon completion of the formation of the holding company:
a.
the accounting and recording of that formation in journal entry form with adequate explanation and supporting documentation, and; b.
the accounting for the transfer of any assets from the utility to the holding company or non-utility affiliates.
2.
The holding company should submit an annual report to the PSCW including the following items:
a.
copy of the. annual report to stockholders; b.
explanation and description of all affiliates, the relationships to each other, and to utility, and the type of business each is involved in; '
c.
assets of utility holding company and non-utility affiliates and the percent of diversified activities d.
names of officers, and directors of utility affiliates, holding company and non-utility affiliates and any shared managers; e.
Audited financial statements of all non-utility affiliates and any other financial or operating reports required by other agencies, such as the Securities and Exchange Commission.
In addition to the above holding company reporting requirements, the commission will establish reporting requirements related to affiliated interest transactions.
In addition to the current rate case filing requirements and 10-year financial forecasts, all of the items required to be reported annually for the holding company and affiliated interest transactions should be filed in each rate case.
Affiliated Interest Recuirements As part of the holding company proceedings certain issues related to affiliated interest transactions were discussed.
The commission determines that these issues are appropriate to address in the review of the affiliated interest agreements.
Applicant should submit for commission approval amendments to the affiliated interest agreement which addresses the following issues:
1.
For all services provided, the applicant shall propose a method of pricing and valuing that service.
The method should give consideration to determining fair market value.
2.
For all common costs which must be allocated between the utility affiliates, non-utility affiliates and the holding company, the applicant is to submit proposed cost allocation methods for the commission's approval.
This suomission should include the method for accounting for and allocating officers' time.
This will minimize the chance for cross-subsidies by helping to ensure that all applicable costs are allocated and that the allocators are reasonable.
3.
The commission determined that the following reporting requrements related to affiliated interest transactions are appropriate:
a.
Every six months, a statement showing the specifics of affiliated transactions during that period; b.
An annual report detailing all affiliated transactions within that year along with the basis for valuation and allocation factors used.
The annual report will also detail all fees and costs related to diversification activities and any corporate restructuring.
No affiliated interest transactions including the sharing of officers, directors and employees or transfer of any item of value may occur after formation of the holding company prior to approval of an affiliated interest agreement.
This action is classified as a Type IV action according to PSC 2.90(4), Wis. Adm. Code.
No special circumstances have been brought to the commission's attention which would disturb-this presumption.
It is consequently presumed to require neither an environmental impact statement under s.
1.11, Wis. Stats., nor an environmental assessment.
Ultimate Findings of Fact THE COMMISSION THEREFORE FINDS:
1.
The commission does not find that the formation of the applicants' holding company as conditioned herein will materially harm the interests of utility consumers or investors.
2.
That the maintenance of.a balanced utility capital structure, continuation of a stand-alone utility dividend policy, commitment to the priority of utility needs for capital and filing.
of financial plans as described in the above findings of fact are necessary to ensure that the holding company system is not operated in a way which materially impairs the credit, ability to acquire capital on reasonable terms or ability to provide safe, reasonable and reliable service of Wisconsin Electric Company and Wisconsin Natural Gas Company.
3.
That it is necessary for the relevance of records of the holding company and its non-utility subsidiaries to the commission's function to be determined by the commission to insure that reasonable regulation is not impeded, that non-utility affiliates are not materially subsidized by WEPCO or WNG consumers, and that non-utility affiliates are not engaging in unfair competitive practices as described in sac. 196.795(5)(q),
Wis. Stats.
4.
That it is reasonable at this time to set the level of investment for the steam and gas utilities at 25% of their assets for purposes of sec. 196.795(5)(p), which is at the same level established by statute for the electric utility.
This level can be reviewed in future proceedings.
5.
That it is necessary for the commission to review the specific procedures followed by each non-utility affiliate to account for affiliated transactions in order to ensure that reasonable regulation of the utilities is not impeded and that non-utility affiliates are not materially subsidized by WEPCO and WNG consumers..
6.
That it is necessary for WEPCO and WEC to prepare and file with the commission for review staffing plans both for the interim period and for after a 3-year interval in order to ensure minimal overlap of management and employees between the 1
utilities and the non-utility affiliates, and to ensure that i
non-utility affiliates are not materially subsidized by WEPCO and WNG consumers.
7.
That reports as described above in the findings of fact are necessary to ensure that reasonable regulation is not impeded and that non-utility affiliates are not materially subsidized by WEPCO and WNG consumers.
1 Conclusion of Law THE COMMISSION CONCLUDES:
That it has the authority under sections 196.795, 196.395, and 196.52(8), Wis. Stats., to issue the following certificate and order, and that the following certificate and I
order should issue:
Certificate THE COMMISSION THEREFORE CERTIFIES:
That it approves the formation of a holding company by applicants WEPCO and WEC, subject to the following stated conditions, which are necessary to satisfy sections 196.795(5)(b) through (s), Wis. Stats. __
ORDER THE COMMISSION THEREFORE ORDERS:
1.
That no affiliated interest transactions including the sharing of officers, directors or employees or transfer of any item of value may occur after formation of the holding company prior to approval of an affiliated interest agreement.
2.
That WEPCO and WNG shall maintain a balanced capital structure within a reasonable range to be established by the commission in appropriate proceedings.
3.
That the directors of WEPCO and WNG shall set dividend policy based on the financial. health of those utilities as if each utility were not part of a h'olding company system.
4.
That WEPC0 shall continue to submit ten-year financial strategic plans in rate cases and other appropriate proceedings.
That WNG shall submit at least five-year and preferrably ten-year, financial forecasts in rate cases and other appropricte proceedings.
5.
That the investment in the holding company shc11 l
t be limited to 25% of the steam assets of WEPCO and 25% of the assets of Wisconsin Natural Gas for purposes of s. 196.795(5)(p) which is the level established by statute for the electric assets of WEPCO.
6.
That Wisconsin Energy Corporation shall provide full access to the records of the holding company and non-utility t
affiliates for any document which commission staff determines is.
relevant to fulfill its statutory duties.
The burden is on Wisconsin Energy Corporation to prove that a document is not relevant or is protected by confidentiality.
7.
That Wisconsin Energy Corporation shall submit for staff's review the specific procedures followed by or proposed to be followed by each non-utility affiliate to account for affiliated transaccions.
8.
That WEPCO and WEC shall submit preliminary and final management plans for the maximum possible separation of officers and a staffing plan for other employees as described in i
the Findings of Fact.
The plans should indicate any transfers of utility employees to the holding company or non-utility affiliates and any areas where there will be joint use and sharing of officers and employees.
9.
That Wisconsin Energy Corporation shall submit upon completion of the formation of the holding company:
a.
the accounting and recording of that formation in journal entry form with adequate explanation and supporting documentation, ands b.
the accounting for the transfer of any assets from the utility to the holding company or non-utility affiliates.
10.
That Wisconsin Energy Corporation shall submit an annual report to the commission including the following items:
i a.
copy of the annual report to stockholders:.
y-.---- ----..-,,p
.-.,...yy
.-m
- - - - -- - + - - - - = - +
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., -my
4 b.
explanation and description of all affiliates, the relationships to each other, and to utility, and the type of business each is involved in; c.
assets of utility, holding company and non-utility affiliates and the percent of diversified activities; d.
names of officers, and directors of utility affiliates, holding company and non-utility affiliates, and any shared managers.
e.
audited financial statements of all non-utility affiliates and any other financial or o'perating reports required by other agencies, such as the Securities and Exchange Commission.
11.
That jurisdiction ic retained.
27, /98b Dated at Madison, Wisconsin, u
By the Commission.
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a Jgc ueline K. ReynoFds Secre)hry to the Commission See attached Notice of Appeal Rights. -
i l
s.
l' l
APPENDIX A Notice of Appeal Rights 1
l To comply with the requirements of l
- s. 227.11(2), Wis. Stats., 1981, notice is hereby given that a party aggrieved by the foregoing decision has the right and option to file a petition for rehearing as provided in s.
227.12, Wis. Stats., within 20 days of the date of mailing of this decision as shown on the first page.
Notice is further given that a person aggrieved by the foregoing decision also has the right and option to file a petition for judicial review as provided in s. 227.16, Wis.
Stats., within 30 days after the mailing of this decision.
The Public Service Commission of Wisconsin shall be named as respondent in the petition for judicial review.
This general notification is for the purpose of ensuring compliance with s.
227.11(2), Wis.
Stats., 1981, and does not constitute a conclusion or admission that any particular party is necessarily adversely affected or that any particular decision is final or appealable.
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i APPENDIX B APPEARANCES:
i Wisconsin Electric Power Company and Wisconsin Energy Corporation, both by David E. Beckwith, Attorney Allen W. Williams, Jr.
777 East Wisconsin Avenue Milwaukee, WI 53202 and Walter E. Woelfle, Attorney 231 West Michigan Street Milwaukee, WI 53201 IN OPPOSITION:
Citizens Utility Board of Wisconsin, by Kathleen F. O'Reilly David Iliff Nick Linden 16 North Carroll Street Madison, WI 53703 Wisconsin's Environmental Decade, Inc., by Peter Anderson, President 14 West Mifflin Street, Suite 5 Madison, WI 53703 AS INTEREST MAY APPEAR:
The Cedarburg Group, by Michael G.
Stuart, Attorney P.O. Box 927 Madison, WI 53701 Wisconsin Power and Light Company, by Eugene O'Gehl, Attorney James Christenson P.O. Box 192 Madison, WI 53701 l
Those listed above appeared before the agency and are l
considered parties for purposes of review under s.
227.16, Wis.
Stats.
See s.
227.10, Wis. Stats. l
i OTHER APPEARANCES:
IN SUPPORT:
Patrick J. Lucey 1015 Farwell Court Madison, WI 53704 James T. Flynn Lt. Governor / Secretary Department of Development 123 West Washington Avenue, 9th Floor P.O. Box 7970 Madison, WI 53707 Pat LeSage President of Forward Wisconsin 5267 South Meadow Lark Lane Hales Corners, WI 53130 Wisconsin Utility Investors, Inc., by David Schachtner and Herb Walsh.
161 West Wisconsin Avenue Milwaukee, WI 53203 Elynor Hansen 111 West Wilson Madison, WI 53703
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Nancy Lee Tapper 5435 North 39th Street Milwaukee, WI 53209 Howard A. Tapper 5435 North 39th Street Milwaukee, WI 53209 John C. Hansen 4834 West Calumet Road Brown Deer, WI 53223 Elmer F. Buehler 517 Torree Drive Port Washington, WI 53074 M.F. Kelly 1
P.O. Box 146 Cottage Grove, WI 53527
-ii-I
t In Support:
continued Howard Warhanek 13200 Oakhurst Drive Klm Grove, WI 53122 Milton E. Sorensen 472 Presidential Lane Madison, WI 53711 OF THE COMMISSION STAFF:
Barbara James Assistant Chief Counsel J.
Robert Malko and Steven Kihm Office of The Chief Economist Jack Parrino and Thomas Ferris Accounts and Finance Division Daniel Dasho Engineering Division Michael Arny and David Schoengold SPERCA
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