Cinergy Corp. Thursday asked the Securities and Exchange Commission (SEC) to increase the limit on the amount it may spend on unregulated businesses, including cogeneration services and natural gas marketing, by $2 billion, saying the “need for greater investment capacity is driven largely by the success” of the two businesses.
As a registered holding company under the Public Utility Holding Company Act (PUHCA), Cinergy must abide by limits set by the SEC on its unregulated activities. The cap on investment currently is set at $1,345 million or 15% of Cinergy’s consolidated capitalization. Unregulated investment totals of $1,041 million currently are “coming very close to the cap. This would give us room to grow,” Steve Brash, a Cinergy spokesman said.
The bulk of the current total of unregulated investment is in Cinergy Solutions, a cogeneration services unit, and Cinergy Marketing and Trading (CM&T), its natural gas marketing arm. Since guarantees related to gas trades are included in the investment total, raising the cap on that total will allow CM&T to increase the amount of trading. Likewise guarantees related to cogeneration commitments could be expanded.
“We would continue to expand the business of trading,” Brash said, adding that the action is not aimed at mergers or acquisitions. The company is concerned that by this fall it will be coming “too tightly up against the current cap and would have no flexibility if a good deal comes along.” Cinergy has asked for a ruling from the SEC by Oct. 15.
CM&T, initially acquired as Producers Energy Marketing in 1998, has more than tripled in size in the last three years, the company told the SEC. “At year-end 2003, CM&T ranked fifth among U.S. gas marketers based on volumes, managing the purchase,storage, transportation and sale of 4.5 Bcf/d of natural gas. Cinergy’s investment in the trading unit as of June 30, totaled $519 million, including guarantees valued at $447 million.”
Cinergy’s principal regulated businesses are PSI Energy, Inc. and The Cincinnati Gas &Electric Co. PSI is a vertically integrated electric utility operating in Indiana, serving more than 700,000 customers. CG&E is a combination electric and gas public utility holding company that provides electric and gas service in the southwestern portion of Ohio and nearby areas of Kentucky.
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