File No. 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
APPLICATION OR DECLARATION
ON
FORM U-1
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
Monongahela Power Company
1310 Fairmont Avenue
Fairmont, WV 26554
The Potomac Edison Company
10435 Downsville Pike
Hagerstown, MD 21740-1766
West Penn Power Company
800 Cabin Hill Drive
Greensburg, PA 15601
(Name of company or companies filing this statement and addresses
of principal executive offices)
Allegheny Power System, Inc.
(Name of top registered holding company parent of each applicant
or declarant)
Nancy H. Gormley, Esq.
Allegheny Power System, Inc.
12 East 49th Street
New York, NY 10017
(Name and address of agent for service)
<PAGE>
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTIONS.
A. Monongahela Power Company ("Monongahela"), The Potomac Edison Company
("Potomac Edison") and West Penn Power Company ("West Penn") are wholly-owned
subsidiaries of Allegheny Power System, Inc., a registered holding company under
the Public Utility Holding Company Act of 1935, as amended (the "Act").
Monongahela, Potomac Edison and West Penn are sometimes hereinafter referred to
individually as an "Operating Subsidiary" and collectively as the "Operating
Subsidiaries." The Operating Subsidiaries propose to issue and sell at any time
or from time to time in one or more series through December 31, 1998 under an
Indenture or Indentures to be entered into between each Operating Subsidiary and
a Trustee or Trustees to be named, as Trustee, up to an aggregate of
$266,834,900 of junior subordinated debentures described below (the "Debt
Securities"), which is up to $95 million of Debt Securities in the case of
Monongahela; up to $61,834,900 of Debt Securities in the case of Potomac
Edison; and up to $110 million of Debt Securities in the case of West Penn.
B. The Debt Securities of each series will have a term (including any
extension) of up to 50 years. Prior to maturity, each Operating Subsidiary will
pay only interest on its Debt Securities, at a rate which may be either a fixed
rate or an adjustable rate to be determined on a periodic basis as a percentage
of or interest rate spread from some predetermined benchmark security, or by
auction or remarketing procedures, in accordance with a formula or formulae
based upon certain reference rates, or by other predetermined methods.
Interest on the Debt Securities will be payable monthly, quarterly or at other
periodic intervals. Each Operating Subsidiary may have the right, from time to
time, to defer payment of interest on its Debt Securities for up to five
years; provided that (i) at the end of any such deferral period such Operating
Subsidiary would
<PAGE>
be required to pay all interest then accrued and unpaid (together with interest
thereon at the rate borne by such Debt Securities), and (ii) during any such
deferral period, such Operating Subsidiary may not be permitted to declare or
pay any dividend on, or redeem or otherwise acquire, any of its capital stock.
C. The Debt Securities of each Operating Subsidiary will be unsecured
obligations and will be subordinate to all other existing and future
indebtedness for borrowed money of such Operating Subsidiary, and may or may
not have cross-default provisions with respect to other indebtedness of such
Operating Subsidiary--i.e., a default under any other outstanding indebtedness
of any Operating Subsidiary may or may not result in a default under any Debt
Securities of such Operating Subsidiary.
D. It is expected that each Operating Subsidiary's interest payments on
the Debt Securities issued by it will be deductible for federal income tax
purposes. The Debt Securities of any series may be redeemable at the option of
the Operating Subsidiary issuing such series at a price equal to their principal
amount, plus any accrued and unpaid interest, plus a premium amount, if any, at
any time after a specified date not later than 20 years from their date of
issuance.
E. The Operating Subsidiaries believe that the proposed Debt Securities
will provide substantial benefits over traditional perpetual preferred stock
while still receiving substantially similar treatment for rating agency and
other credit analysis purposes. Although the Operating Subsidiaries expect
that the Debt Securities will carry a somewhat higher interest rate than
traditional perpetual preferred stock, the expected tax deductibility of
<PAGE>
interest payments will afford increased cash flow and net income and result in
a lower net interest cost. At the same time, the Operating Subsidiaries
understand that the financial markets will view the financing that each
Operating Subsidiary obtains through the Debt Securities as having
essentially the same equity characteristics as would be the case if such
Operating Subsidiary were to issue traditional perpetual preferred stock. The
Operating Subsidiaries also understand that the rating agencies will view the
financing that each Operating Subsidiary obtains through the issuance of
the Debt Securities as having equity characteristics
similar to traditional perpetual preferred stock. Indeed, based on an assumed
dividend rate of about 8-1/4% for an Operating Subsidiary perpetual preferred
issue and an assumed 8-3/4% interest rate for the Debt Securities, the Operating
Subsidiaries believe that over an assumed 30-year life of a $100 million Debt
Securities issue approximately $36.6 million of savings, on a net present value
basis, would be achieved. The Debt Securities will be carried in the debt
section of the respective Operating Subsidiaries' balance sheets.
F. The Debt Securities will be sold at such time, at such interest rates,
and for such prices as shall be approved by the respective Operating
Subsidiaries. The timing of the sale of each series of Debt Securities will
depend upon a subjective determination by the Operating Subsidiaries of market
conditions. Each Operating Subsidiary, individually, expects to apply the net
proceeds of the Debt Securities to the redemption, tender offer or other
retirement of outstanding preferred stock. However, each Operating Subsidiary,
individually, represents that it will not so redeem or tender for its
outstanding securities unless the estimated present value savings derived from
the difference between interest payments on a new issue of Debt Securities
and those securities refunded is on an after-tax basis greater than the
estimated present value of all redemption, tendering and issuing costs,
assuming an appropriate discount rate. Such discount rate will be based
on meeting each Operating Subsidiary's long-term capital structure goals,
with appropriate adjustments for income taxes.
Other information regarding the proposed transaction is set forth in the
Registration Statements which will be filed as Exhibits C-1, C-2 and C-3 hereto
by amendment and incorporated herein by reference.
Except as described herein, no associate company or affiliate of the
Applicants or any affiliate of any such associate company has any material
interest, directly or indirectly, in the proposed transactions.
ITEM 2. FEES, COMMISSIONS AND EXPENSES.
Estimated expenses of the Operating Subsidiaries in connection with the
proposed transaction are set forth in the appropriate item of the respective
Registration Statements (Exhibit C-1, C-2 and C-3). No other fees, commissions
and expenses are to be paid or incurred by the Operating Subsidiaries in
connection with the proposed transaction.
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
The proposed transactions may be subject to Sections 6(a), 7 and 12(c) of
the Act and Rule 42 thereunder.
<PAGE>
ITEM 4. REGULATORY APPROVAL.
The Public Utility Commission of Ohio has jurisdiction over the proposed
transaction insofar as Monongahela is concerned. The State Corporation
Commission of Virginia and the Public Service Commission of Maryland have
jurisdiction over the proposed transaction insofar as Potomac Edison is
concerned. The Public Utility Commission of Pennsylvania has jurisdiction over
the proposed transaction insofar as West Penn is concerned.
No regulatory agency, other than those named, and the Securities and
Exchange Commission, has jurisdiction over any of the proposed transactions.
ITEM 5. PROCEDURE.
It is hereby requested that the Commission's order be issued as soon as the
rules allow, and that there be no thirty-day waiting period between the issuance
of the Commission's order and the date on which it is to become effective. The
Operating Subsidiaries hereby waive a recommended decision by a hearing officer
or other responsible officer of the Commission and hereby consent that the
Division of Investment Management may assist in the preparation of the
Commission's decision and/or order in this matter unless such Division opposes
the matters covered hereby.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS
(a) Exhibits
B-1 Form of Indenture (to be filed by Amendment).
B-2 Form of Underwriting Agreement (to be filed by
Amendment).
<PAGE>
C-1 Registration Statement of Monongahela Power Company
under the Securities Act of 1933, as amended, relating
to the various securities which are the subject hereof
(to be filed by Amendment).
C-2 Registration Statement of The Potomac Edison Company
under the Securities Act of 1933, as amended, relating
to the various securities which are the subject hereof
(to be filed by Amendment).
C-3 Registration Statement of West Penn Power Company under
the Securities Act of 1933, as amended, relating to the
various securities which are the subject hereof (to be
filed by Amendment).
D-1 Monongahela's Application to the Ohio Public Utility
Commission (to be filed by Amendment).
D-2 Potomac Edison's Application to the Maryland Public
Service Commission (to be filed by Amendment).
D-3 Potomac Edison's Application to the Virginia State
Corporation Commission (to be filed by Amendment).
D-4 West Penn's Application to the Pennsylvania Public
Utility Commission (to be filed by Amendment).
D-5 Order of the Maryland Public Service Commission
regarding Potomac Edison's Application (to be filed by
Amendment).
D-6 Order of the Ohio Public Utility Commission (to be filed
by Amendment).
D-7 Order of the Pennsylvania Public Utility Commission (to
be filed by Amendment).
D-8 Order of the Virginia State Corporation Commission
regarding Potomac Edison's Application (to be filed by
Amendment).
F Opinion of Counsel.
G Financial Data Schedules.
H Form of Notice.
(b) Financial Statements as of December 31, 1994
1-A Balance sheets of Monongahela per books and pro forma.
<PAGE>
2-A Balance sheets of Potomac Edison per books and pro
forma.
3-A Balance sheets of West Penn per books and pro forma.
4-A APS and subsidiaries consolidated balance sheet, per
books and pro forma.
1-B Statements of income and retained earnings of
Monongahela per books and pro forma.
2-B Statements of income and retained earnings of Potomac
Edison per books and pro forma.
3-B Statements of income and retained earnings of West Penn
per books and pro forma.
4-B APS and subsidiaries consolidated statements of income
and retained earnings, per books and pro forma.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.
(a) For the reasons set forth in Item 1, the authorization applied
for herein does not require major federal action significantly
affecting the quality of the human environment for purposes of
Section 102(2)(c) of the National Environmental Policy Act (42
U.S.C. 4232(2)(c)).
(b) Not applicable.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company
Act of 1935, the undersigned companies have duly caused this statement to be
signed on their behalf by the undersigned thereunto duly authorized.
MONONGAHELA POWER COMPANY
By NANCY H. GORMLEY
Nancy H. Gormley
Vice President
THE POTOMAC EDISON COMPANY
By NANCY H. GORMLEY
Nancy H. Gormley
Counsel
WEST PENN POWER COMPANY
By NANCY H. GORMLEY
Nancy H. Gormley
Counsel
Dated: April 11, 1995
U:\DUMP\MIDS\U-1
EXHIBIT F
April 11, 1995
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Referring to the Application or Declaration on Form U-1
contemporaneously filed by Monongahela Power Company (Monongahela), The
Potomac Edison Company (Potomac Edison) and West Penn Power Company (West
Penn) under the Public Utility Holding Company Act of 1935 with respect to the
proposed issuance of up to $261,834,900 of junior subordinated debentures
(Debt Securities) through December 31, 1998, all as described in the
Application or Declaration of which this Opinion is a part, I have examined
such documents and questions of law as I deemed necessary to enable me to
render this opinion.
I understand that the actions taken in connection with the
proposed issuance of the Debt Securities will be in accordance with the
Application or Declaration; that all amendments necessary to complete the
above-mentioned Application or Declaration will be filed with the Commission;
and that all other necessary corporate action by the Board of Directors and
officers of Monongahela, Potomac Edison and West Penn in connection with the
issuance has been or will be taken prior thereto.
Based upon the foregoing, I am of the opinion that
(1) Monongahela is a validly organized and duly existing corporation;
(2) Potomac Edison is a validly organized and duly existing
corporation;
(3) West Penn is a validly organized and duly existing corporation;
and
(4) If the said Application or Declaration is permitted to become
effective and the proposed transaction is consummated in
accordance therewith: (a) all state laws applicable to the
proposed transaction will have been complied with; (b) the Debt
Securities issued by Monongahela, Potomac Edison and West Penn
will be valid and binding obligations of Monongahela, Potomac
Edison and West Penn, respectively, in accordance with their
terms; and (c) the consummation of the proposed transaction will
<PAGE>
not violate the legal rights of the holders of any of the
securities issued by Monongahela, Potomac Edison and West Penn or
by any associate or affiliate company or any of them.
This opinion does not relate to State Blue Sky or securities laws.
I consent to the use of this Opinion as part of the Application or
Declaration to which it is appended, which is to be filed by Monongahela,
Potomac Edison and West Penn.
Very truly yours,
NANCY H. GORMLEY
Nancy H. Gormley
Counsel for
MONONGAHELA POWER COMPANY
THE POTOMAC EDISON COMPANY
WEST PENN POWER COMPANY
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<F1>Not calculated for Form U-1 purposes.
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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0
58,708
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943
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<OTHER-OPERATING-EXPENSES> 1,933,792
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<OTHER-INCOME-NET> 8,138
<INCOME-BEFORE-INTEREST-EXPEN> 405,739
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2,204
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<CASH-FLOW-OPERATIONS> 0<F1>
<EPS-PRIMARY> 2.25
<EPS-DILUTED> 2.25
<FN>
<F1>Not calculated for Form U-1 purposes.
</FN>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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0
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0
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<TOTAL-INTEREST-EXPENSE> 36,776
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7,260
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<TOTAL-INTEREST-ON-BONDS> 28,678
<CASH-FLOW-OPERATIONS> 0<F1>
<EPS-PRIMARY> 0<F2>
<EPS-DILUTED> 0<F2>
<FN>
<F1>Not calculated for Form U-1 purposes.
<F2>All common stock is owned by parent, no EPS required.
</FN>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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0
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0
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<TOTAL-INTEREST-EXPENSE> 45,326
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858
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<EPS-PRIMARY> 0<F2>
<EPS-DILUTED> 0<F2>
<FN>
<F1>Not calculated for Form U-1 purposes.
<F2>All common stock is owned by parent, no EPS required.
</FN>
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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25,200
36,378
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1,200
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<INCOME-TAX-EXPENSE> 33,163
<OTHER-OPERATING-EXPENSES> 613,880
<TOTAL-OPERATING-EXPENSES> 647,043
<OPERATING-INCOME-LOSS> 112,322
<OTHER-INCOME-NET> 13,914
<INCOME-BEFORE-INTEREST-EXPEN> 126,236
<TOTAL-INTEREST-EXPENSE> 44,253
<NET-INCOME> 98,454
4,331
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<COMMON-STOCK-DIVIDENDS> 62,454
<TOTAL-INTEREST-ON-BONDS> 38,775
<CASH-FLOW-OPERATIONS> 0<F1>
<EPS-PRIMARY> 0<F2>
<EPS-DILUTED> 0<F2>
<FN>
<F1>Not calculated for Form U-1 purposes.
<F2>All common stock is owned by parent, no EPS required.
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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0
0
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943
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<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 303,862
<TOT-CAPITALIZATION-AND-LIAB> 1,631,747
<GROSS-OPERATING-REVENUE> 759,365
<INCOME-TAX-EXPENSE> 31,110
<OTHER-OPERATING-EXPENSES> 613,880
<TOTAL-OPERATING-EXPENSES> 644,990
<OPERATING-INCOME-LOSS> 114,375
<OTHER-INCOME-NET> 13,914
<INCOME-BEFORE-INTEREST-EXPEN> 128,289
<TOTAL-INTEREST-EXPENSE> 49,818
<NET-INCOME> 94,942
125
<EARNINGS-AVAILABLE-FOR-COMM> 94,817
<COMMON-STOCK-DIVIDENDS> 62,454
<TOTAL-INTEREST-ON-BONDS> 38,775
<CASH-FLOW-OPERATIONS> 0<F1>
<EPS-PRIMARY> 0<F2>
<EPS-DILUTED> 0<F2>
<FN>
<F1>Not calculated for Form U-1 purposes.
<F2>All common stock is owned by parent, no EPS required.
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,004,212
<OTHER-PROPERTY-AND-INVEST> 100,228
<TOTAL-CURRENT-ASSETS> 235,417
<TOTAL-DEFERRED-CHARGES> 390,527
<OTHER-ASSETS> 1,474
<TOTAL-ASSETS> 2,731,858
<COMMON> 465,994
<CAPITAL-SURPLUS-PAID-IN> 55,687
<RETAINED-EARNINGS> 433,801
<TOTAL-COMMON-STOCKHOLDERS-EQ> 955,482
0
149,708
<LONG-TERM-DEBT-NET> 836,426
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 27,000
0
<CAPITAL-LEASE-OBLIGATIONS> 2,468
<LEASES-CURRENT> 906
<OTHER-ITEMS-CAPITAL-AND-LIAB> 759,868
<TOT-CAPITALIZATION-AND-LIAB> 2,731,858
<GROSS-OPERATING-REVENUE> 1,128,242
<INCOME-TAX-EXPENSE> 50,385
<OTHER-OPERATING-EXPENSES> 935,963
<TOTAL-OPERATING-EXPENSES> 986,348
<OPERATING-INCOME-LOSS> 141,894
<OTHER-INCOME-NET> 15,347
<INCOME-BEFORE-INTEREST-EXPEN> 157,241
<TOTAL-INTEREST-EXPENSE> 56,226
<NET-INCOME> 120,046
8,504
<EARNINGS-AVAILABLE-FOR-COMM> 111,542
<COMMON-STOCK-DIVIDENDS> 90,029
<TOTAL-INTEREST-ON-BONDS> 45,250
<CASH-FLOW-OPERATIONS> 0<F1>
<EPS-PRIMARY> 0<F2>
<EPS-DILUTED> 0<F2>
<FN>
<F1>Not calculated for Form U-1 purposes.
<F2>All common stock is owned by parent, no EPS required.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<BOOK-VALUE> PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 2,004,212
<OTHER-PROPERTY-AND-INVEST> 100,228
<TOTAL-CURRENT-ASSETS> 235,072
<TOTAL-DEFERRED-CHARGES> 396,196
<OTHER-ASSETS> 1,474
<TOTAL-ASSETS> 2,737,182
<COMMON> 465,994
<CAPITAL-SURPLUS-PAID-IN> 55,687
<RETAINED-EARNINGS> 433,801
<TOTAL-COMMON-STOCKHOLDERS-EQ> 955,482
0
39,708
<LONG-TERM-DEBT-NET> 946,426
<SHORT-TERM-NOTES> 5,324
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 27,000
0
<CAPITAL-LEASE-OBLIGATIONS> 2,468
<LEASES-CURRENT> 906
<OTHER-ITEMS-CAPITAL-AND-LIAB> 759,868
<TOT-CAPITALIZATION-AND-LIAB> 2,737,182
<GROSS-OPERATING-REVENUE> 1,128,242
<INCOME-TAX-EXPENSE> 46,227
<OTHER-OPERATING-EXPENSES> 935,963
<TOTAL-OPERATING-EXPENSES> 982,190
<OPERATING-INCOME-LOSS> 146,052
<OTHER-INCOME-NET> 15,347
<INCOME-BEFORE-INTEREST-EXPEN> 161,399
<TOTAL-INTEREST-EXPENSE> 66,126
<NET-INCOME> 114,304
1,220
<EARNINGS-AVAILABLE-FOR-COMM> 113,084
<COMMON-STOCK-DIVIDENDS> 90,029
<TOTAL-INTEREST-ON-BONDS> 45,250
<CASH-FLOW-OPERATIONS> 0<F1>
<EPS-PRIMARY> 0<F2>
<EPS-DILUTED> 0<F2>
<FN>
<F1>Not calculated for Form U-1 purposes.
<F2>All common stock is owned by parent, no EPS required.
</FN>
</TABLE>
EXHIBIT H
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- : )
Monongahela Power Company, et al.
Notice of Proposed Issuance of Debt Securities
Monongahela Power Company ("Monongahela"), 1310 Fairmont Avenue,
Fairmont, WV 26554, The Potomac Edison Company ("Potomac Edison"), 10435
Downsville Pike, Hagerstown, MD 21740, and West Penn Power Company ("West
Penn"), 800 Cabin Hill Drive, Greensburg, PA 15601, wholly-owned subsidiaries
of Allegheny Power System, Inc., 12 East 49th Street, New York, NY 10017, a
registered holding company, have filed an Application-Declaration with this
Commission pursuant to Sections 6(a), 7 and 12(c) of the Public Utility
Holding Company Act of 1935 ("Act") and Rule 42 thereunder. Monongahela,
Potomac Edison and West Penn are sometimes hereinafter referred to
individually as an "Operating Subsidiary" and collectively as the "Operating
Subsidiaries."
The Operating Subsidiaries propose to issue and sell at any time
or from time to time in one or more series through December 31, 1998 under an
Indenture or Indentures to be entered into between each Operating Subsidiary
and a Trustee or Trustees to be named, as Trustee, up to an aggregate of
$266,834,900 of junior subordinated debentures described below (the "Debt
Securities"), which is up to $95 million of Debt Securities in the case of
Monongahela; up to $61,834,900 of Debt Securities in the case of Potomac
Edison; and up to $110 million of Debt Securities in the case of West Penn.
<PAGE>
The Debt Securities of each series will have a term (including any
extension) of up to 50 years. Prior to maturity, each Operating Subsidiary
will pay only interest on its Debt Securities, at a rate which may be either a
fixed rate or an adjustable rate to be determined on a periodic basis as a
percentage of or interest rate spread from some predetermined benchmark
security, or by auction or remarketing procedures, in accordance with a
formula or formulae based upon certain reference rates, or by other
predetermined methods. Interest on the Debt Securities will be payable
monthly, quarterly or at other periodic intervals. Each Operating Subsidiary
may have the right, from time to time, to defer payment of interest on its
Debt Securities for up to five years; provided that (i) at the end of any such
deferral period such Operating Subsidiary would be required to pay all
interest then accrued and unpaid (together with interest thereon at the rate
borne by such Debt Securities), and (ii) during any such deferral period, such
Operating Subsidiary may not be permitted to declare or pay any dividend on,
or redeem or otherwise acquire, any of its capital stock.
The Debt Securities of each Operating Subsidiary will be unsecured
obligations and will be subordinate to all other existing and future
indebtedness for borrowed money of such Operating Subsidiary, and may or may
not have cross-default provisions with respect to other indebtedness of such
Operating Subsidiary--i.e., a default under any other outstanding indebtedness
of any Operating Subsidiary may or may not result in a default under any Debt
Securities of such Operating Subsidiary.
<PAGE>
It is expected that each Operating Subsidiary's interest payments
on the Debt Securities issued by it will be deductible for federal income tax
purposes. The Debt Securities of any series may be redeemable at the option
of the Operating Subsidiary issuing such series at a price equal to their
principal amount, plus any accrued and unpaid interest, plus a premium amount,
if any, at any time after a specified date not later than 20 years from their
date of issuance.
The Operating Subsidiaries believe that the proposed Debt
Securities will provide substantial benefits over traditional perpetual
preferred stock while still receiving substantially similar treatment for
rating agency and other credit analysis purposes. Although the Operating
Subsidiaries expect that the Debt Securities will carry a somewhat higher
interest rate than traditional perpetual preferred stock, the expected tax
deductibility of interest payments will afford increased cash flow and net
income and result in a lower net interest cost. At the same time, the
Operating Subsidiaries understand that the financial markets will view the
financing that each Operating Subsidiary obtains through the Debt Securities
as having essentially the same equity characteristics as would be the case if
such Operating Subsidiary were to issue traditional perpetual preferred stock.
The Operating Subsidiaries also understand that the rating agencies will view
the financing that each Operating Subsidiary obtains through the issuance of
the Debt Securities as having equity characteristics similar to traditional
perpetual preferred stock. Indeed, based on an assumed dividend rate of about
8-1/4% for an Operating Subsidiary perpetual preferred issue and an assumed 8-
3/4% interest rate for the Debt Securities, the Operating Subsidiaries believe
<PAGE>
that over an assumed 30-year life of a $100 million Debt Securities issue
approximately $36.6 million of savings, on a net present value basis, would be
achieved. The Debt Securities will be carried in the debt section of the
respective Operating Subsidiaries' balance sheets.
The Debt Securities will be sold at such time, at such interest
rates, and for such prices as shall be approved by the respective Operating
Subsidiaries. The timing of the sale of each series of Debt Securities will
depend upon a subjective determination by the Operating Subsidiaries of market
conditions. Each Operating Subsidiary, individually, expects to apply the net
proceeds of the Debt Securities to the redemption, tender offer or other
retirement of outstanding preferred stock. However, each Operating
Subsidiary, individually, represents that it will not so redeem or tender for
its outstanding securities unless the estimated present value savings derived
from the difference between interest payments on a new issue of Debt
Securities and those securities refunded is on an after-tax basis greater than
the estimated present value of all redemption, tendering and issuing costs,
assuming an appropriate discount rate. Such discount rate will be based on
meeting each Operating Subsidiary's long-term capital structure goals, with
appropriate adjustments for income taxes.
Except as described herein, no associate company or affiliate of
the Applicants or any affiliate of any such associate company has any material
interest, directly or indirectly, in the proposed transactions.
<PAGE>
The application and any amendments thereto are available for
public inspection through the Commission's Office of Public Reference.
Interested persons wishing to comment or request a hearing should submit their
views in writing by , 1995, to the Secretary, Securities and
Exchange Commission, Washington, DC 20549, and serve a copy on the Applicants
at the addresses specified above. Proof of service (by affidavit or, in case
of an attorney at law, by certificate) should be filed with the request. Any
request for a hearing shall identify specifically the issues of fact or law
that are disputed. A person who so requests will be notified of any hearing,
if ordered, and will receive a copy of any notice or order issued in this
matter. After said date, the application, as filed or as it may be amended,
may be granted.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
CONTENTS
Statement
No.
Balance sheets at December 31, 1994, and pro forma giving
effect as at that date to the adjustments set forth herein:
Monongahela Power Company 1-A
The Potomac Edison Company 2-A
West Penn Power Company and Subsidiaries 3-A
Allegheny Power System, Inc. and Subsidiaries 4-A
Statements of income and retained earnings for twelve months
ended December 31, 1994, and pro forma giving effect
as at beginning of period to the adjustments set forth herein:
Monongahela Power Company 1-B
The Potomac Edison Company 2-B
West Penn Power Company and Subsidiaries 3-B
Allegheny Power System, Inc. and Subsidiaries 4-B
These financial statements have been prepared for Form U-1
purposes and are unaudited.
Reference is made to the Notes to Financial Statements in the
Allegheny Power System companies combined Annual Report on
Form 10-K for the year ended December 31, 1994.
The income statements do not reflect any additional income from
investments which may be made with the proceeds from the
transactions set forth in this application-declaration.
<PAGE>
<TABLE>
<CAPTION>
Statement 1-A
MONONGAHELA POWER COMPANY
BALANCE SHEET - DECEMBER 31, 1994 PER BOOKS
AND PRO FORMA GIVING EFFECT AS AT THAT DATE
TO THE ADJUSTMENTS SET FORTH HEREIN
(Thousands)
Per Books Adjustments* Pro Forma
Assets
Property, plant, and equipment:
<S> <C> <C> <C>
At original cost 1,763,533 1,763,533
Accumulated depreciation (701,271) (701,271)
Investments and other assets:
Allegheny Generating Company -
common stock at equity 60,137 60,137
Other 509 509
Current assets:
Cash 132 (92,282)(1) 0
92,150 (2)
Accounts receivable:
Electric service 64,543 64,543
Affiliated and other 9,483 9,483
Allowance for uncollectible accounts (1,912) (1,912)
Materials and supplies--at average cost:
Operating and construction 24,563 24,563
Fuel 23,678 23,678
Prepaid taxes 17,599 17,599
Deferred power costs 1,852 1,852
Other 5,328 5,328
Deferred charges:
Regulatory assets 186,109 186,109
Unamortized loss on reacquired debt 11,500 3,549 (1) 15,049
Other 10,700 2,850 (2) 13,550
Total Assets 1,476,483 6,267 1,482,750
(1) Proposed redemption by the Company of $95,000,000 principal amount of
preferred stock plus optional redemption premium.
(2) Proposed sale by the Company of $95,000,000 principal amount of debt
securities, less estimated issuance expenses.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement 1-A
(continued)
MONONGAHELA POWER COMPANY
BALANCE SHEET - DECEMBER 31, 1994 PER BOOKS
AND PRO FORMA GIVING EFFECT AS AT THAT DATE
TO THE ADJUSTMENTS SET FORTH HEREIN
(Thousands)
Per Books Adjustments* Pro Forma
Capitalization and Liabilities
Capitalization:
Common stock:
Common stock - par value $50 per share,
authorized 8,000,000 shares, outstanding
5,891,000 shares (no change
<S> <C> <C> <C>
since 1-1-94) 294,550 294,550
Other paid-in capital (decreased $477,000
since 1-1-94) 2,517 2,517
Retained earnings 198,626 198,626
Preferred stock:
Cumulative preferred stock - par value
$100 per share, authorized 1,500,000
shares, outstanding 1,140,000 shares:
Not subject to mandatory redemption 114,000 (95,000)(1) 19,000
Long-term debt 470,131 95,000 (2) 565,131
Current liabilities:
Short-term debt 36,570 6,267 (1) 42,837
Notes payable to affiliates 2,900 2,900
Accounts payable 31,871 31,871
Accounts payable to affiliates 6,021 6,021
Taxes accrued:
Federal and state income 118 118
Other 20,193 20,193
Interest accrued 10,927 10,927
Other 16,455 16,455
Deferred credits and other liabilities:
Unamortized investment credit 24,734 24,734
Deferred income taxes 216,264 216,264
Regulatory liabilities 19,974 19,974
Other 10,632 10,632
Total Capitalization and Liabilities 1,476,483 6,267 1,482,750
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement 2-A
THE POTOMAC EDISON COMPANY
BALANCE SHEET - DECEMBER 31, 1994 PER BOOKS
AND PRO FORMA GIVING EFFECT AS AT THAT DATE
TO THE ADJUSTMENTS SET FORTH HEREIN
(Thousands)
Per Books Adjustments* Pro Forma
Assets
Property, plant, and equipment:
<S> <C> <C> <C>
At original cost 1,978,396 1,978,396
Accumulated depreciation (673,853) (673,853)
Investments and other assets:
Allegheny Generating Company -
common stock at equity 62,364 62,364
Other 938 938
Current assets:
Cash 2,196 (62,176)(1) 0
59,980 (2)
Accounts receivable:
Electric service 69,891 69,891
Affiliated and other 2,403 2,403
Allowance for uncollectible accounts (1,177) (1,177)
Notes receivable from affiliates 1,900 1,900
Materials and supplies--at average cost:
Operating and construction 27,800 27,800
Fuel 22,316 22,316
Prepaid taxes 13,168 13,168
Other 5,000 5,000
Deferred charges:
Regulatory assets 88,758 88,758
Unamortized loss on reacquired debt 8,344 2,553 (1) 10,897
Other 21,091 1,855 (2) 22,946
Total Assets 1,629,535 2,212 1,631,747
(1) Proposed redemption by the Company of $61,835,000 principal amount of
preferred stock plus optional redemption premium.
(2) Proposed sale by the Company of $61,835,000 principal amount of debt
securities, less estimated issuance expenses.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement 2-A
(continued)
THE POTOMAC EDISON COMPANY
BALANCE SHEET - DECEMBER 31, 1994 PER BOOKS
AND PRO FORMA GIVING EFFECT AS AT THAT DATE
TO THE ADJUSTMENTS SET FORTH HEREIN
(Thousands)
Per Books Adjustments* Pro Forma
Capitalization and Liabilities
Capitalization:
Common stock:
Common stock - no par value, authorized
23,000,000 shares, outstanding
22,385,000 shares (no change
<S> <C> <C> <C>
since 1-1-94) 447,700 447,700
Other paid-in capital (increase of $10,000
since 1-1-94) 2,724 2,724
Retained earnings 207,722 207,722
Preferred stock:
Cumulative preferred stock - par value
$100 per share, authorized 5,388,046
shares, outstanding 627,784 shares:
Not subject to mandatory redemption 36,378 (36,378)(1) 0
Subject to mandatory redemption 25,200 (25,200)(1) 0
Long-term debt 604,749 61,835 (2) 666,584
Current liabilities:
Short-term debt - 2,212 (1) 2,212
Preferred stock due within one year 1,200 (257)(1) 943
Accounts payable 37,126 37,126
Accounts payable to affiliates 10,485 10,485
Taxes accrued:
Federal and state income 3,565 3,565
Other 11,874 11,874
Interest accrued 9,195 9,195
Other 17,399 17,399
Deferred credits and other liabilities:
Unamortized investment credit 28,041 28,041
Deferred income taxes 149,299 149,299
Regulatory liabilities 16,957 16,957
Other 19,921 19,921
Total Capitalization and Liabilities 1,629,535 2,212 1,631,747
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement 3-A
WEST PENN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - DECEMBER 31, 1994 PER BOOKS
AND PRO FORMA GIVING EFFECT AS AT THAT DATE
TO THE ADJUSTMENTS SET FORTH HEREIN
(Thousands)
Per Books Adjustments* Pro Forma
Assets
Property, plant, and equipment:
<S> <C> <C> <C>
At original cost 3,013,777 3,013,777
Accumulated depreciation (1,009,565) (1,009,565)
Investments and other assets:
Allegheny Generating Company -
common stock at equity 100,228 100,228
Other 1,474 1,474
Current assets:
Cash and temporary cash investments 345 (107,045)(1) 0
106,700 (2)
Accounts receivable:
Electric service 127,287 127,287
Affiliated and other 11,862 11,862
Allowance for uncollectible accounts (8,267) (8,267)
Notes receivable from affiliates 1,000 1,000
Materials and supplies--at average cost:
Operating and construction 39,922 39,922
Fuel 38,205 38,205
Deferred income taxes 12,538 12,538
Prepaid and other 12,525 12,525
Deferred charges:
Regulatory assets 364,473 364,473
Unamortized loss on reacquired debt 10,494 2,369 (1) 12,863
Other 15,560 3,300 (2) 18,860
Total Assets 2,731,858 5,324 2,737,182
(1) Proposed redemption by the Company of $110,000,000 principal amount
of preferred stock plus optional redemption premium.
(2) Proposed sale by the Company of $110,000,000 principal amount of
debt securities, less estimated issuance expenses.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement 3-A
(continued)
WEST PENN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET - DECEMBER 31, 1994 PER BOOKS
AND PRO FORMA GIVING EFFECT AS AT THAT DATE
TO THE ADJUSTMENTS SET FORTH HEREIN
(Thousands)
Per Books Adjustments* Pro Forma
Capitalization and Liabilities
Capitalization:
Common stock:
Common stock - no par value, authorized
28,902,923 shares, outstanding
24,361,586 shares (issued 2,000,000
<S> <C> <C> <C>
shares since 1-1-94) 465,994 465,994
Other paid-in capital (no change
since 1-1-94) 55,687 55,687
Retained earnings 433,801 433,801
Preferred stock:
Cumulative preferred stock - par value
$100 per share, authorized 3,097,077
shares, outstanding 1,497,077 shares:
Not subject to mandatory redemption 149,708 (110,000)(1) 39,708
Long-term debt 836,426 110,000 (2) 946,426
Current liabilities:
Long-term debt due within one year 27,000 27,000
Short-term debt - 5,324 (1) 5,324
Accounts payable 107,792 107,792
Accounts payable to affiliates 6,477 6,477
Taxes accrued:
Federal and state income 9,217 9,217
Other 20,637 20,637
Interest accrued 16,475 16,475
Other 24,028 24,028
Deferred credits and other liabilities:
Unamortized investment credit 52,946 52,946
Deferred income taxes 471,515 471,515
Regulatory liabilities 39,881 39,881
Other 14,274 14,274
Total Capitalization and Liabilities 2,731,858 5,324 2,737,182
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ALLEGHENY POWER SYSTEM, INC. AND SUBSIDIARIES Statement 4-A
CONSOLIDATED BALANCE SHEET - DECEMBER 31, 1994
PER BOOKS AND PRO FORMA GIVING EFFECT AS AT
THAT DATE TO THE ADJUSTMENTS SET FORTH HEREIN
(Thousands)
Assets Per Books Adjustments* Pro Forma
Property, plant, and equipment:
<S> <C> <C> <C>
At original cost 7,586,780 7,586,780
Accumulated depreciation (2,529,354) (2,529,354)
5,057,426 5,057,426
Investments and other assets:
Subsidiaries consolidated--excess of cost
over book equity at acquisition 15,077 15,077
Securities of associated company--at cost,
which approximates equity 1,250 1,250
Other 36,284 36,284
52,611 52,611
Current assets:
Cash and temporary cash investments 2,765 (261,503)(1) 92
Accounts receivable: 258,830 (2)
Electric service 261,720 261,720
Other 8,175 8,175
Allowance for uncollectible accounts (11,353) (11,353)
Materials and supplies--at average cost:
Operating and construction 94,478 94,478
Fuel 84,199 84,199
Deferred power costs 4,443 4,443
Prepaid taxes 43,880 43,880
Other 19,287 19,287
507,594 (2,673) 504,921
Deferred charges:
Regulatory assets 643,791 643,791
Unamortized loss on reacquired debt 40,991 8,471 49,462
Other 59,812 8,005 67,817
744,594 16,476 761,070
Total Assets 6,362,225 13,803 6,376,028
Capitalization and Liabilities
Capitalization:
Common stock 149,116 149,116
Other paid-in capital 963,269 963,269
Retained earnings 946,919 946,919
2,059,304 2,059,304
Preferred stock:
Not subject to mandatory redemption 300,086 (241,378)(1) 58,708
Subject to mandatory redemption 25,200 (25,200)(1) 0
Long-term debt of subsidiaries 2,178,472 266,835 (2) 2,445,307
4,563,062 257 4,563,319
Current liabilities:
Short-term debt 126,818 13,803 (1) 140,621
Long-term debt and preferred stock
due within one year 29,200 (257) 28,943
Accounts payable 190,809 190,809
Taxes accrued:
Federal and state income 13,873 13,873
Other 52,782 52,782
Interest accrued 42,078 42,078
Other 62,073 62,073
517,633 13,546 531,179
Deferred credits and other liabilities:
Unamortized investment credit 158,018 158,018
Deferred income taxes 972,113 972,113
Regulatory liabilities 105,076 105,076
Other 46,323 46,323
1,281,530 1,281,530
Total Capitalization and Liabilities 6,362,225 13,803 6,376,028
(1) Proposed redemption by the subsidiaries of $266,835,000 principal
amount of preferred stock plus optional redemption premium.
(2) Proposed sale by the subsidiaries of $266,835,000 principal amount
of debt securities, less estimated issuance expenses.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement 1-B
MONONGAHELA POWER COMPANY
STATEMENT OF INCOME FOR TWELVE MONTHS ENDED DECEMBER 31, 1994
PER BOOKS AND PRO FORMA GIVING EFFECT AS AT BEGINNING OF PERIOD
TO THE ADJUSTMENTS SET FORTH HEREIN
(Thousands)
Per Books Adjustments* Pro Forma
<S> <C> <C> <C>
ELECTRIC OPERATING REVENUES 680,130 680,130
OPERATING EXPENSES:
Operation:
Fuel 150,088 150,088
Purchased power and exchanges, net 161,839 161,839
Deferred power costs, net 7,604 7,604
Other 74,907 74,907
Maintenance 69,389 69,389
Depreciation 57,952 57,952
Taxes other than income taxes 40,404 40,404
Federal and state income taxes 30,712 (3,249) 27,463
Total Operating Expenses 592,895 (3,249) 589,646
Operating Income 87,235 3,249 90,484
OTHER INCOME AND DEDUCTIONS:
Allowance for other than borrowed funds
used during construction 1,566 1,566
Other income, net 7,911 7,911
Total Other Income and Deductions 9,477 9,477
Income Before Interest Charges 96,712 3,249 99,961
INTEREST CHARGES:
Interest on first mortgage bonds 28,678 28,678
Interest on other long-term obligations 6,509 8,550 15,059
Other interest 2,969 2,969
Allowance for borrowed funds used during
construction (1,380) (1,380)
Total Interest Charges 36,776 8,550 45,326
Income before cumulative effect
of accounting change 59,936 (5,301) 54,635
Cumulative effect of accounting
change, net 7,945 7,945
Net Income 67,881 (5,301) 62,580
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement 1-B
(continued)
MONONGAHELA POWER COMPANY
STATEMENT OF RETAINED EARNINGS
FOR TWELVE MONTHS ENDED DECEMBER 31, 1994
(Thousands)
Per Books Adjustments ProForma
<S> <C> <C> <C>
Balance at January 1, 1994 185,486 185,486
Add:
Net income 67,881 (5,301) 62,580
253,367 (5,301) 248,066
Deduct:
Dividends on capital stock:
Preferred stock 7,260 (6,402) 858
Common stock 47,481 47,481
Total deductions 54,741 (6,402) 48,339
Balance at December 31, 1994 198,626 1,101 199,727
*Sale of $95,000,000 debt securities -
assumed interest rate of 9% 8,550
Decrease in federal and state income taxes (3,249)
Decrease in net income 5,301
Redemption of $95,000,000 existing preferred stock
at various dividend rates 6,402
Increase in Balance for Common 1,101
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement 2-B
THE POTOMAC EDISON COMPANY
STATEMENT OF INCOME FOR TWELVE MONTHS ENDED DECEMBER 31, 1994
PER BOOKS AND PRO FORMA GIVING EFFECT AS AT BEGINNING OF PERIOD
TO THE ADJUSTMENTS SET FORTH HEREIN
(Thousands)
Per Books Adjustments* Pro Forma
<S> <C> <C> <C>
ELECTRIC OPERATING REVENUES 759,365 759,365
OPERATING EXPENSES:
Operation:
Fuel 145,045 145,045
Purchased power and exchanges, net 217,137 217,137
Deferred power costs, net 1,321 1,321
Other 85,024 85,024
Maintenance 58,624 58,624
Depreciation 59,989 59,989
Taxes other than income taxes 46,740 46,740
Federal and state income taxes 33,163 (2,053) 31,110
Total Operating Expenses 647,043 (2,053) 644,990
Operating Income 112,322 2,053 114,375
OTHER INCOME AND DEDUCTIONS:
Allowance for other than borrowed funds
used during construction 3,671 3,671
Other income, net 10,243 10,243
Total Other Income and Deductions 13,914 13,914
Income Before Interest Charges 126,236 2,053 128,289
INTEREST CHARGES:
Interest on first mortgage bonds 38,775 38,775
Interest on other long-term obligations 5,931 5,565 11,496
Other interest 1,750 1,750
Allowance for borrowed funds used during
construction (2,203) (2,203)
Total Interest Charges 44,253 5,565 49,818
Income before cumulative effect
of accounting change 81,983 (3,512) 78,471
Cumulative effect of accounting
change, net 16,471 16,471
Net Income 98,454 (3,512) 94,942
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement 2-B
(continued)
THE POTOMAC EDISON COMPANY
STATEMENT OF RETAINED EARNINGS
FOR TWELVE MONTHS ENDED DECEMBER 31, 1994
(Thousands)
Per Books Adjustments* ProForma
<S> <C> <C> <C>
Balance at January 1, 1994 176,053 176,053
Add:
Net income 98,454 (3,512) 94,942
274,507 (3,512) 270,995
Deduct:
Dividends on capital stock:
Preferred stock 4,331 (4,206) 125
Common stock 62,454 62,454
Total deductions 66,785 (4,206) 62,579
Balance at December 31, 1994 207,722 694 208,416
*Sale of $61,835,000 debt securities -
assumed interest rate of 9% 5,565
Decrease in federal and state income taxes (2,053)
Decrease in net income 3,512
Redemption of $61,835,000 existing preferred stock
at various dividend rates 4,206
Increase in Balance for Common 694
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement 3-B
WEST PENN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME FOR TWELVE MONTHS ENDED DECEMBER 31, 1994
PER BOOKS AND PRO FORMA GIVING EFFECT AS AT BEGINNING OF PERIOD
TO THE ADJUSTMENTS SET FORTH HEREIN
(Thousands)
Per Books Adjustments* ProForma
<S> <C> <C> <C>
ELECTRIC OPERATING REVENUES 1,128,242 1,128,242
OPERATING EXPENSES:
Operation:
Fuel 252,108 252,108
Purchased power and exchanges, net 247,194 247,194
Deferred power costs, net 2,880 2,880
Other 145,781 145,781
Maintenance 111,841 111,841
Depreciation 88,935 88,935
Taxes other than income taxes 87,224 87,224
Federal and state income taxes 50,385 (4,158) 46,227
Total Operating Expenses 986,348 (4,158) 982,190
Operating Income 141,894 4,158 146,052
OTHER INCOME AND DEDUCTIONS:
Allowance for other than borrowed funds
used during construction 6,729 6,729
Asset write-off, net (5,179) (5,179)
Other income, net 13,797 13,797
Total Other Income and Deductions 15,347 15,347
Income Before Interest Charges 157,241 4,158 161,399
INTEREST CHARGES:
Interest on first mortgage bonds 45,250 45,250
Interest on other long-term obligations 12,852 9,900 22,752
Other interest 2,172 2,172
Allowance for borrowed funds used during
construction (4,048) (4,048)
Total Interest Charges 56,226 9,900 66,126
Consolidated income before cumulative
effect of accounting change 101,015 (5,742) 95,273
Cumulative effect of accounting
change, net 19,031 19,031
Consolidated Net Income 120,046 (5,742) 114,304
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement 3-B
(continued)
WEST PENN POWER COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
FOR TWELVE MONTHS ENDED DECEMBER 31, 1994
Per Books Adjustments ProForma
<S> <C> <C> <C>
Balance at January 1, 1994 412,288 412,288
Add:
Consolidated net income 120,046 (5,742) 114,304
532,334 (5,742) 526,592
Deduct:
Dividends on capital stock:
Preferred stock 8,504 (7,284) 1,220
Common stock 90,029 90,029
Total deductions 98,533 (7,284) 91,249
Balance at December 31, 1994 433,801 1,542 435,343
*Sale of $110,000,000 debt securities -
assumed interest rate of 9% 9,900
Decrease in federal and state income taxes (4,158)
Decrease in Consolidated Net Income 5,742
Redemption of $110,000,000 existing preferred stock
at various dividend rates 7,284
Increase in Balance for Common 1,542
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement 4-B
ALLEGHENY POWER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME FOR TWELVE MONTHS ENDED DECEMBER 31, 1994
PER BOOKS AND PRO FORMA GIVING EFFECT AS AT BEGINNING OF PERIOD
TO THE ADJUSTMENTS SET FORTH HEREIN
(Thousands)
Per Books Adjustments* Pro Forma
<S> <C> <C> <C>
ELECTRIC OPERATING REVENUES 2,451,684 2,451,684
OPERATING EXPENSES:
Operation:
Fuel 547,241 547,241
Purchased power and exchanges, net 440,880 440,880
Deferred power costs, net 11,805 11,805
Other 285,010 285,010
Maintenance 241,913 241,913
Depreciation 223,883 223,883
Taxes other than income taxes 183,060 183,060
Federal and state income taxes 129,751 (9,460) 120,291
Total Operating Expenses 2,063,543 (9,460) 2,054,083
Operating Income 388,141 9,460 397,601
OTHER INCOME AND DEDUCTIONS:
Allowance for other than borrowed funds
used during construction 11,966 11,966
Asset write-off, net (5,338) (5,338)
Other income, net 1,510 1,510
Total Other Income and Deductions 8,138 8,138
Income Before Interest Charges and
Preferred Dividends 396,279 9,460 405,739
INTEREST CHARGES AND PREFERRED DIVIDENDS:
Interest on first mortgage bonds 112,702 112,702
Interest on other long-term obligations 40,966 24,015 64,981
Other interest 10,394 10,394
Allowance for borrowed funds used during
construction (7,630) (7,630)
Dividends on preferred stock of subsidiaries 20,096 (17,892) 2,204
Total Interest Charges and
Preferred Dividends 176,528 6,123 182,651
Consolidated income before cumulative
effect of accounting change 219,751 3,337 223,088
Cumulative effect of accounting
change, net 43,446 43,446
Consolidated Net Income 263,197 3,337 266,534
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Statement 4-B
(continued)
ALLEGHENY POWER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
FOR TWELVE MONTHS ENDED DECEMBER 31, 1994
(Thousands)
Per Books Adjustments ProForma
<S> <C> <C> <C>
Balance at January 1, 1994 877,673 877,673
Add:
Consolidated net income 263,197 3,337 266,534
1,140,870 3,337 1,144,207
Deduct:
Dividends on common stock of Allegheny
Power System, Inc. (cash) 193,951 193,951
Balance at December 31, 1994 946,919 3,337 950,256
*Sale of $266,835,000 debt securities -
assumed interest rate of 9% 24,015
Decrease in federal and state income taxes (9,460)
Redemption of $266,835,000 existing preferred stock
at various dividend rates 17,892
Increase in Consolidated Net Income 3,337
</TABLE>
