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Rule(s): |
802.2(b) |
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Staff: |
Michael Verne |
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Response / Comments: |
10/03/2011 – Agree – not reportable. |
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September 30, 2011
Via Email
Mr.
Michael Verne
Federal Trade Commission
Bureau of Competition
Premerger Notification Office
600 Pennsylvania Avenue, NW Room 303
Washington, DC 20580
Re: Request for Informal Interpretation
Dear Mr. Verne:
We are writing to seek confirmation of our conclusion that no HSR filing will be required with respect to the transactions outlined below because they are deemed to be exempt pursuant to § 802.2(b) of the premerger notification rules.
Background and the Proposed Transactions.
Buyer is an electric membership cooperative that provides wholesale electric power to its retail electric distribution cooperative members. In the 1980s a coal generation plant and related assets (the "Facility") was built under ownership and operating agreements with three other utilities, and the Buyer thereby became the owner of a 60% undivided interest in the first two units of the Facility and their output. One of the other utilities actually operates the Facility on behalf of the Buyer, itself, and the other two utilities under the operating agreement.
Buyer subsequently entered into several sale-leaseback transactions with respect to its interest in one of the two units of the Facility. Four separate grantor trusts were established for the benefit of four independent investors, and the trusts separately acquired the Buyer's undivided interest in this unit in various proportions and leased back these undivided interests to Buyer. These acquisitions were made for financing purposes in the ordinary course of the investors' businesses. Some of these trust interests have subsequently been conveyed to new financial investors.
Pursuant to the original leases, Buyer has the option to purchase the respective undivided interest held by each trust at a contractually determined price, and it now contemplates exercising such option with respect to some or all of the trusts.
Any such acquisition should be deemed exempted under 16 C.F.R. § 802.2(b). Under this section, the acquisition of a "used facility" is deemed exempt if:
· The lessor "has held title to the facility for financing purposes in the ordinary course of the lessor's business"; and
· The lessee "has had sole and continuous possession and use of the facility since it was first built as a new facility."
The first condition is satisfied because each of the grantor trusts holds its respective undivided interest in the Facility solely for financing purposes in the ordinary course of its business and in the ordinary course of the business of the beneficiary of the trust.
The second condition is also satisfied because Buyer has had continued possession and use of its interest in the relevant unit of the Facility that is subject to the sale/leaseback transaction and to its output since the Facility was constructed. The fact that three other utilities own minority positions in this unit is of no importance because the Buyer had sole possession and use of its 60% undivided interest in this unit. See the informal interpretation at http://www.ftc.gov/bc/hsr/informal/opinions/0911007.htm . Moreover, the fact that one of the other utilities actually operates the Facility is of no importance, because it operates the Buyer's interest on behalf of Buyer pursuant to an operating agreement, and Buyer has been the entity with the right of possession and use of its 60% undivided interest.