1011009 Informal Interpretation

November 24,2010

Mr. Michael B. Verne
Federal Trade Commission
Premerger Notification Office
Bureau of Competition, Room 303
600 Pennsylvania Avenue, N.W.
Washington, D.C. 20580

Re:Application of Hart Scott Rodino Act to Texas Local Government Corporation

Dear Mr. Verne:

I amwriting to confirm my interpretation regarding the application of the HartScott Rodino Antitrust Improvements Act (the "HSR Act") to a localgoverl1ll1ent corporation. For the reasons set forth in this letter, I believethe local movement corporation should be considered a political subdivisionunder Section 7A(c)(4) of the HSR Act which exempts transactions involving"transfers to or from a Federal agency or a State or political subdivisionthereof" as well as Section 801.1(a)(2) of the regulations promulgatedunder the HSR Act.

Descriptionof Transaction

Myclient, a Texas local government corporation (the "LGC") is proposingto purchase the assets of an electrical power generating plant located in West Texas. Assuming the size of person tests are met, based on the proposed purchaseprice, the transaction would exceed the size of transaction test under the HSRAct and could therefore potentially be subject to its filing requirements.

The LGCwas fanned by a municipal power agency (the "MPA") which was formedunder the Texas Utilities Code. As a municipal power agency, the MP A is toprovide for the supply of electric power to its member cities. The MPAcurrently satisfies these obligations through a wholesale power sales contractwith a third party, which contract expires without the possibility of renewalin 2019. Because of this expiring contract, the MPA must ensure it hasfacilities built and capable of generating electricity to replace thatcurrently provided under the wholesale contract by 2019.

TheLocal Government Corporation

The LGCwas formed in 2008 by the MP A. The MP A itself is a separate municipalcorporation and political subdivision of the State of Texas fanned by fourcities in west Texas (the "Member Cities"). As a municipal poweragency and municipally-owned utility under the Texas Utilities Code, the MPA isobligated to provide for the reliable and adequate supply of electric energyfor the service of the municipalities included in its geographic coverage. Toaid in the performance of its duties, the MPA formed the LGC as a "localgovernment corporation" under the Texas Transportation Corporation Act,pursuant to Chapter 431, Subchapter D of the Texas Transportation Act.

Purpose and Powers. Pursuant to theLOC's Articles of Incorporation (the "Articles"), the LOC is"organized exclusively for the purposes of benefitting and accomplishing[the] public purposes of, and to act on behalf of [the MPA]."Specifically, the LOC is authorized to issue bonds, notes and other forms ofdebt and acquire, maintain, lease and sell property and interests therein, onbehalf of the MPA, to "promote and develop public generation andtransmission systems within the [MPA] service area and the state of Texas inorder to generate and transport electric energy for the benefit of the membercities of [the MPA]."

The LOC,pursuant to the Articles, has and may exercise "the same powers ofsovereignty of [the MPAJ, including ... the power of eminent domain." Inaddition, the LOC is considered a "governmental unit" and its actionsare "governmental functions" for purposes of the Texas Tort ClaimsAct.

Taxation. The Articles furtherprovide that, "The [LOC] is a constituted authority and a publicinstrumentality within the meaning of the regulations and rulings prescribedand promulgated pursuant to Sections 103 and 141 of the Internal Revenue Codeof 1986, as amended ... " (which provisions generally relate to intereston state and local bonds).

Governance. The affairs of the LOCare managed by a seven person board of directors. Four of the directors aredirectly appointed by each of the member cities and three directors areappointed by the MPA. A majority of tile directors must reside within themember cities and they serve without compensation.

Meetingsof the board are subject to the Texas Open Meetings Act and the LOC ISgenerally subject to the Texas Public Information Act.

AuthorizingStatute

Inlooking at whether a governmental corporation qualifies as a politicalsubdivision of a government entity, one of the most important factors is tileenabling legislation. As stated above, tile LOC was formed pursuant to theTexas Transportation Corporation Act (the "TTCA") underChapter 431 of the Texas Transportation Code.

Purpose. Section 101 of the TTCA providesthat a "local government corporation may be created to aid and act onbehalf of one or more local governments to accomplish any governmental purposeof those local governments."

Inaddition to the governmental purpose describe in Section 101, Section 108(a) ofthe TTCA specifically provides that a local government corporation is a"governmental unit" for purposes of the Texas Civil Practice andRemedies Code. Chapter 101 of tile Texas Civil Practice and Remedies Codedefines a governmental unit as "(A) [the State of Texas] and allthe several agencies of government that collectively constitute the governmentof this state, including other agencies bearing different designations, and alldepartments, bureaus, boards, commissions, offices, agencies, councils, andcourts; (B) a political subdivision of [the State of Texas], including anycity, county, school district, junior college district, levee improvementdistrict, drainage district, irrigation district, water improvement district,water control and improvement district, water control and preservationdistrict, freshwater supply district, navigation district, conservation andreclamation district, soil conservation district, communication district,public health district, and river authority; (C) an emergency serviceorganization; and (D) any other institution, agency, or organ of govenm1ent thestatus and authority of which are derived from the Constitution of Texas orfrom laws passed by the legislature under the constitution."

Section I08(b) of the TTCA goes on the state, "The operations of a local governmentcorporation are governmental, not proprietary functions."

Taxation. The TTCA further provides,in Section 22, that a local government corporation is considered a "publiccharity" under Article VIII, Section 2 of the Texas Constitution, whichgenerally exempts from taxation "public property used for publicpurposes." In addition, Section 102 of the TTCA provides that the propertyof a local government corporation (as well as a transaction to acquireproperty) is generally exempt from taxation.

Income. Section 107 of the TTCAprovides that a local government which creates a local government corporationis entitled at any time to receive any income earned by the local governmentcorporation that is not needed for the local government corporation'sobligation. In addition, Section 107 specifically prohibits the earnings of alocal government corporation from benefitting a private interest.

DeclaratoryJudgment

Inconnection with a previous potential transaction, the LGC and the MP A, inJanuary 2009, sought and obtained a judgment from a Texas District Court withrespect to its rights and authority. Specifically, the District Court found,an10ng other things:

1.The MPA is a municipal power agency, amunicipal corporation and a municipally owned utility.

2.The MPA is a municipality for purposesof the TTCA and has the authority to create a local government corporation.

3.The LGC is a local government corporationwith the authority of a non-profit corporation.

4.The LGC is a municipally-owned utilitywithin the meaning of the Texas Public Utility Regulatory Act.

5.The LGC was properly formed and has theauthority to issue bonds without seeking a further declaratory judgment underthe Texas Government Code.

Conclusion

Based onthe intent of the governing statute, the provisions of the LGC's organizationaldocuments and the declaratory judgment issued by the District Court in Texas, I believe it is clear that the LGC constitutes a political subdivision of the Stateof Texas and therefore would not be considered an "entity" forpurposes of the HSR Act. I believe the facts and analysis are very similar tothose in a November 7, 2007 informal interpretation (#0711008) regarding theacquisition of a power plant in Ohio, in which you concurred that a privatelyformed non-profit corporation organized by specific legislative act of itsmembers, all political subdivisions, for the sole purpose of benefiting itsmembers, was not an equity under Section 801.1(a)(2), but rather a politicalsubdivision for purposes of Section 7A(c)(4).

If, basedon these facts, you believe a different conclusion is warranted, I wouldappreciate the opportunity to discuss the matter at your earliest convenience.If you are in agreement with my conclusion, I would appreciate it if you couldacknowledge such by phone or email.