Financing Dixon-Yates

The Dixon-Yates contract, which has already been raked over by the Joint Congressional Committee on Atomic Energy (TIME, Nov. 22), last week came up for a second currycombing. This time it was the turn of the Securities and Exchange Commission. SEC was not interested in the public v. private power debate that has raged around the contract. It was interested only in financing details of the null plant that Dixon-Yates has contracted to build at West Memphis, Ark. to provide power for the Atomic Energy Commission. Like any other new company planning a stock issue, Dixon-Yates needed to satisfy SEC that the costs and profits it expects are reasonable.

President Edgar H. Dixon of Middle South Utilities Inc. furnished the financing details of the $105 million project. The new company (official name: Mississippi Valley Generating Co.) expects to sell 79% of a $5.500.000 common stock issue to Middle South Utilities Inc., 21% to Southern Co., headed by Eugene A. Yates. The remaining $99,915,000 (95% of the plant's cost) would be borrowed in banknotes and bonds.*As for profits, said Dixon, the combine would collect a return of 8.98% on its $5,500,000 risk capital if construction costs are in line with the $104,115,000 construction estimate. But if costs run as much as 13% above estimate, said he. Dixon-Yates profits would be wiped out.

Counsel Objects. Chief objections to the deal came from the state of Tennessee and 37 municipalities and public power cooperatives, represented by onetime AEC Counsel Joseph Volpe Jr. Trying to show "interlocking relations" among utilities in violation of the Public Utility Holding Act, he cross-examined Dixon on how Dixon-Yates got the AEC job.

Testified Dixon: "Last December AEC Assistant General Manager Walter Williams wrote J. B. McAfee, president of Electric Energy, Inc., which built a $197 million power plant for AEC at Joppa, ILL. for suggestions on how AEC could get more power. McAfee wrote back that he thought Electric Energy should not build another plant, instead suggested that a new company handle it. McAfee then telephoned Dixon, a vice president of Electric Energy (which is 10% owned by Middle South) and told him of AEC's need. In January or February Dixon and

Yates opened serious discussions about "joining together on this venture."

Gentleman's Agreement. Volpe demanded that Dixon produce the written evidence of these first negotiations. Up to the time Dixon-Yates made its first proposal to AEC, said Dixon, "virtually nothing" was put on paper. All engineering consultations, cost estimates, etc., were made verbally, said Dixon, without minutes or memoranda, with only "some worksheets" filed for future reference.

When Volpe tried to question whether the plant was needed for national defense, SEC Chairman Ralph E. Demmler shut him off. Said he: "This commission is not ... an appellate court to review [AEC contracts]." At week's end SEC went into overtime sessions to hurry along the hearings, and the chances seemed good that SEC would okay the stock issue. Dixon-Yates must then file for approval of its $99,915,000 loan. After that stands the biggest hurdle of all: a Democratic Congress, which has already promised to give the contract a third going-over.

*From eight New York City banks, eighteen Southern banks.

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