SECURITIES AND EXCHANGE COMMISSION

(Release No. 35-27690; 70-10117)

Gulf Power Company

Order Authorizing the Issuance and Sale of Pollution Control Revenue Bonds; Issuance of Senior Debt, Mortgage Bonds and Preferred Stock

June 27, 2003

Gulf Power Company ("Gulf"), Pensacola, Florida, a wholly owned electric utility subsidiary of The Southern Company ("Southern"), a registered holding company under the Public Utility Holding Company Act of 1935, as amended ("Act"), has filed with the Securities and Exchange Commission ("Commission") an application-declaration ("Application") under sections 6(a), 7, 9(a), 10, 12(b), and 12(d) of the Act and rules 45 and 54. The Commission issued a notice of the filing of the Application on March 28, 2003 (HCAR No. 27661).

Gulf proposes to incur, from time to time or at any time on or before March 31, 2006 ("Authorization Period"), obligations in connection with the issuance and sale by public instrumentalities of one or more series of pollution control revenue bonds ("Revenue Bonds") in an aggregate principal amount of up to $180 million. Gulf further proposes to issue and sell, from time to time or at any time on or before March 31, 2006, one or more series of its senior debentures, senior promissory notes or other senior debt instruments (individually, "Senior Note" and collectively, "Senior Notes"), one or more series of its first mortgage bonds and one or more series of its preferred stock in an aggregate amount of up to $450 million in any combination of issuance.

The Revenue Bonds will be issued for the benefit of Gulf to finance or refinance the costs of certain air and water pollution control facilities and sewage and solid waste disposal facilities at one or more of Gulf's electric generating plants or other facilities located in various counties. It is proposed that each county or the otherwise appropriate public body or instrumentality ("County") will issue Revenue Bonds to finance or refinance the costs of the acquisition, construction, installation and equipping of said facilities at the plant or other facility located in its jurisdiction ("Project"). It is proposed that the Revenue Bonds will mature not more than 40 years from the first day of the month in which they are initially issued and may, if it is deemed advisable for purposes of the marketability of the Revenue Bonds, be entitled to the benefit of a mandatory redemption sinking fund calculated to retire a portion of the aggregate principal amount of the Revenue Bonds prior to maturity.

Gulf proposes to enter into a Loan or Installment Sale Agreement with each County ("Agreement"), issuing the Revenue Bonds. Under the Agreement, the issuing County will loan to Gulf the proceeds of the sale of the County's Revenue Bonds, and Gulf may issue a non-negotiable promissory note ("Note"), or the County will undertake to purchase and sell the related Project to Gulf. The proceeds from the sale of the Revenue Bonds will be deposited with a Trustee ("Trustee") under an indenture to be entered into between the County and the Trustee ("Trust Indenture"), under which the Revenue Bonds are to be issued and secured, and will be applied by Gulf to payment of the cost of construction of the Project or to refund outstanding pollution control revenue obligations.

The Trust Indenture and the Agreement may give the holders of the Revenue Bonds the right, during such time as the Revenue Bonds bear interest at a fluctuating rate or otherwise, to require Gulf to purchase the Revenue Bonds from time to time, and arrangements may be made for the remarketing of any Revenue Bonds through a remarketing agent. Gulf also may be required to purchase the Revenue Bonds, or the Revenue Bonds may be subject to mandatory redemption, at any time if the interest on the Revenue Bonds is determined to be subject to federal income tax. Also in the event of taxability, interest on the Revenue Bonds may be effectively converted to a higher variable or fixed rate, and Gulf also may be required to indemnify the bondholders against any other additions to interest, penalties and additions to tax.

In order to obtain the benefit of ratings for the Revenue Bonds equivalent to the rating of Gulf's first mortgage bonds outstanding under the indenture dated as of September 1, 1941 between Gulf and JP Morgan Chase Bank (formerly The Chase Manhattan Bank), as trustee, as supplemented and amended ("Mortgage"), Gulf may determine to secure its obligations under the Note and/or the Agreement by delivering to the Trustee, to be held as collateral, a series of its first mortgage bonds ("Collateral Bonds"). The aggregate principal amount of the Collateral Bonds would be equal to either: (i) the principal amount of the Revenue Bonds or (ii) the sum of such principal amount of the Revenue Bonds plus interest payments on the Revenue Bonds for a specified period.

As a further alternative to, or in conjunction with, securing its obligations through the issuance of the Collateral Bonds, Gulf may: (i) cause an irrevocable Letter of Credit or other credit facility ("Letter of Credit") of a bank or other financial institution to be delivered to the Trustee; and/or (ii) cause an insurance company to issue a policy ("Policy") guaranteeing the payment of the Revenue Bonds. In the event that the Letter of Credit is delivered to the Trustee as an alternative to the issuance of the Collateral Bonds, Gulf may also convey to the County a subordinated security interest in the Project or other property of Gulf as further security for Gulf's obligations under the Agreement and the Note.

The effective cost to Gulf of any series of the Revenue Bonds will not exceed the greater of (i) 200 basis points over comparable term U.S. Treasury securities, or (ii) a gross spread over U.S. Treasury securities which is consistent with comparable securities. The effective cost will reflect the applicable interest rate or rates and any underwriters' discount or commission.

Gulf also proposes to issue and sell, at any time during the Authorization Period: one or more series of its (a) Senior Notes; (b) first mortgage bonds ("new Bonds"); and (c) preferred stock in an aggregate amount of up to $450 million, in any combination of issuance. The Senior Notes will have a maturity that will not exceed approximately 50 years. The interest rate on each issue of Senior Notes may be either a fixed rate or an adjustable rate to be determined on a periodic basis by auction or remarketing procedures, in accordance with formula or formulae based upon certain reference rates, or by other predetermined methods. The Senior Notes will be direct, unsecured and unsubordinated obligations of Gulf ranking pari passu with all other unsecured and unsubordinated obligations of Gulf. The Senior Notes will be effectively subordinated to all secured debt of Gulf, including its new Bonds. The Senior Notes will be governed by an indenture or other document. The effective cost of money to Gulf on the Senior Notes will not exceed the greater of (i) 300 basis points over comparable term U.S. Treasury securities, or (ii) a gross spread over U.S. Treasury securities which is consistent with comparable securities.

The new Bonds will have a term of not more than 40 years and will be sold for the best price obtainable, but not less than 98 % or more than 101 ¾ % of the principal amount, plus any accrued interest. Gulf may enhance the marketability of the new Bonds by purchasing an insurance policy to guarantee the payment when due of the new Bonds.

Gulf proposes that each issuance of Gulf's preferred stock, par or stated value of up to $100 per share ("new Preferred Stock"), will be sold for the best price obtainable (after giving effect to the purchasers' compensation) but for a price to Gulf (before giving effect to the purchasers' compensation) of not less than 100% of the par or stated value per share.

Gulf proposes that the effective cost of money on the new Bonds and the new Preferred Stock will not exceed competitive market rates available at the time of issuance for securities having the same or reasonably similar terms and conditions issued by similar companies of reasonably comparable credit quality, provided that in no event will such effective cost of money on the new Bonds exceed 300 basis points over comparable term U.S. Treasury securities.

Gulf states that it may determine to use the proceeds from the sale of the Revenue Bonds, the Senior Notes, the new Bonds and the new Preferred Stock to redeem or otherwise retire its outstanding senior notes, new Bonds, pollution control bonds and/or preferred stock. Gulf also proposes that it may use the proceeds from the sale of the Senior Notes, the new Bonds and new Preferred Stock, along with other funds, to pay a portion of its cash requirements to carry on its electric utility business. Gulf further states that it may determine to use the proceeds from the sale of the Revenue Bonds, the Senior Notes, the new Bonds and the new Preferred Stock to redeem or otherwise retire its outstanding senior notes, first mortgage bonds, pollution control bonds and/or preferred stock if such use is considered advisable.

Gulf's obligations with respect to the Collateral Bonds, the borrowings under the Agreements, the issuance of the Notes in respect thereof and the issuance and sale of the Senior Notes, the new Bonds and the new Preferred Stock will have been expressly authorized by the Florida Public Service Commission, which has jurisdiction over the issuance of stocks, bonds and certain evidence of indebtedness by public utility companies operating in Florida.¹

Gulf represents that it will maintain its common equity as a percentage of its capitalization (inclusive of short-term debt) at no less than 30%. Gulf further represents that no securities may be issued unless: (i) the security to be issued, if rated, is rated investment grade; (ii) all outstanding securities of Gulf that are rated are rated investment grade; and (iii) all outstanding securities of Southern that are rated are rated investment grade. For purposes of this condition, a security will be considered rated investment grade if it is rated investment grade by at least one "nationally recognized statistical rating organization," as that term is used in paragraphs (c)(2)(vi)(E), (F) and (H) of rule 15c3-1 under the Securities Exchange Act of 1934. Nevertheless, Gulf may issue a security that does not satisfy this condition if the requirements of rule 52(a)(1) and 52(a)(3) are met and the issue and sale of the security have been expressly authorized by the Florida Public Service Commission.²

Gulf states, for purposes of rule 54, that the conditions specified in rule 53(a) are satisfied and that none of the adverse conditions specified in rule 53(b) exist. As a result, the Commission will not consider the effect on the Southern system of the capitalization or earnings of any Southern subsidiary that is an "exempt wholesale generator" or a "foreign utility company," as those terms are defined in sections 32 and 33 of the Act, respectively, in determining whether to approve the proposed transactions.

Fees and expenses in the estimated amount not to exceed $2 million are expected to be incurred in connection with these transactions. Gulf states that no other state or federal commission, other than the Florida Public Service Commission and this Commission, has jurisdiction over the proposed transactions.

Due notice of the filing of the Application has been given in the manner prescribed in rule 23 under the Act, and no hearing has been requested of or ordered by the Commission. On the basis of the facts in the record, it is hereby found that the applicable standards of the Act and rules are satisfied, and that no adverse findings are necessary.

IT IS ORDERED, under the applicable provisions of the Act and rules, that the Application, as amended, is granted and permitted to become effective immediately, subject to the terms and conditions prescribed in rule 24 under the Act.

For the Commission, by the Division of Investment Management, pursuant to delegated authority.

¹ Gulf is a Maine corporation doing business in the State of Florida. The Commission is approving the proposed financings in the absence of the approval of the Maine public-utility commission because Gulf does not do business in the State of Maine and because the State of Florida, where Gulf does do business, has approved the proposed financings.

² See note 1, supra.

http://www.sec.gov/divisions/investment/opur/filing/35-27690.htm