<PAGE>
(PP&L LOGO
APPEARS HERE)
PP&L Resources, Inc.
Pennsylvania Power & Light Company
FORM 10 - K
Annual Report
to the Securities
and Exchange
Commission
For the Year Ended
December 31, 1996
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _________ to ___________
Commission File Registrant;State of Incorporation; IRS Employer
Number Address and Telephone Number Identification No.
1-11459 PP&L Resources, Inc. 23-2758192
(Exact name of Registrant as
specified in its charter)
(Pennsylvania)
Two North Ninth Street
Allentown, PA 18101
(610) 774-5151
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
Common Stock New York & Philadelphia Stock Exchanges
Securities registered pursuant to Section 12(g) of the Act: None
Commission File Registrant;State of Incorporation; IRS Employer
Number Address and Telephone Number Identification No.
1-905 PENNSYLVANIA POWER & LIGHT COMPANY 23-0959590
(Exact name of Registrant as
specified in its charter)
(Pennsylvania)
Two North Ninth Street
Allentown, PA 18101
(610) 774-5151
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Preferred Stock
4-1/2% New York & Philadelphia Stock Exchanges
3.35% Series Philadelphia Stock Exchange
4.40% Series New York & Philadelphia Stock Exchanges
4.60% Series Philadelphia Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of Registrants' knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.
PP&L Resources, Inc. [ ]
Pennsylvania Power & Light Company [ X ]
Indicate by check mark whether the Registrants (1) have filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrants were required to file
such reports), and (2) have been subject to such filing requirements
for the past 90 days.
PP&L Resources, Inc. Yes X No
Pennsylvania Power & Light Company Yes X No
The aggregate market value of the voting common stock held by non-
affiliates of PP&L Resources, Inc. at January 31, 1997 was
$3,715,517,738. PP&L Resources, Inc. held all 157,300,382
outstanding common shares, no par value,of Pennsylvania Power & Light
Company. The aggregate market value of the voting preferred stock
held by non-affiliates of Pennsylvania Power & Light Company at
January 31, 1997 was $435,250,434.
The number of shares of PP&L Resources, Inc. Common Stock, $.01 par
value, outstanding on January 31, 1997 was 163,319,461.
Documents incorporated by reference:
Registrants have incorporated herein by reference certain
sections of their 1997 Notices of Annual Meetings and Proxy
Statements which will be filed with the Securities and Exchange
Commission not later than 120 days after December 31, 1996. Such
Proxy Statements will provide the information required by Part III of
this Report.
<PAGE>
PP&L RESOURCES, INC.
PENNSYLVANIA POWER & LIGHT COMPANY
FORM 10-K ANNUAL REPORT TO
THE SECURITIES AND EXCHANGE COMMISSION
FOR THE YEAR ENDED DECEMBER 31, 1996
TABLE OF CONTENTS
This combined Form 10-K is separately filed by PP&L
Resources, Inc. and Pennsylvania Power & Light Company. Prior
to the filing of the combined Form 10-Q for the quarter ended
June 30, 1995, PP&L Resources, Inc. was not a reporting company
for the purposes of the Securities Exchange Act of 1934 and
Pennsylvania Power & Light Company filed its own separate reports
on Form 10-K. Information contained herein relating to
Pennsylvania Power & Light Company is filed by PP&L Resources,
Inc. and separately by Pennsylvania Power & Light Company on its
own behalf. Pennsylvania Power & Light Company makes no
representation as to information relating to PP&L Resources, Inc.
or its subsidiaries, except as it may relate to Pennsylvania
Power & Light Company.
Item Page
PART I
1. Business ............................................. 1
2. Properties ........................................... 14
3. Legal Proceedings .................................... 14
4. Submission of Matters to a Vote of Security Holders .. 18
Executive Officers of the Registrants ................ 19
PART II
5. Market for the Registrants' Common Equity and Related
Stockholder Matters .................................. 21
6. Selected Financial Data .............................. 21
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................. 21
8. Financial Statements and Supplementary Data .......... 22
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure .................. 23
PART III
10. Directors and Executive Officers of the Registrants .. 87
11. Executive Compensation ............................... 87
12. Security Ownership of Certain Beneficial
Owners and Management ................................ 87
13. Certain Relationships and Related Transactions ....... 88
PART IV
14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K .................................. 89
Signatures ........................................... 91
Exhibit Index ........................................ 92
Computation of Ratio of Earnings to Fixed Charges .... 105
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Glossary of Terms and Abbreviations
AFUDC (Allowance for Funds Used During Construction) - the cost of equity
and debt funds used to finance construction projects that is capitalized as
part of construction cost.
Atlantic - Atlantic City Electric Company
BG&E - Baltimore Gas & Electric Company
Clean Air Act (Federal Clean Air Act Amendments of 1990) - legislation
passed by Congress to address environmental issues including acid rain,
ozone and toxic air emissions.
DEP - Pennsylvania Department of Environmental Protection
District Court - United States District Court for the Eastern District of
Pennsylvania
DOE - Department of Energy
DRIP (Dividend Reinvestment Plan) - program available to shareowners of
PP&L Resources' common stock and PP&L preferred stock to reinvest dividends
in PP&L Resources' common stock instead of receiving dividend checks.
ECR (Energy Cost Rate) - a tariff applied to PUC-jurisdictional customers
to recover fuel and other energy costs. Differences between actual and
estimated amounts are collected or refunded to customers. The ECR was
terminated effective December 1996.
EMF - Electric and Magnetic Fields
Energy Act (Energy Policy Act of 1992) - legislation passed by Congress to
promote competition in the electric energy market for bulk power.
EPA - Environmental Protection Agency
ESOP - Employee Stock Ownership Plan
FASB (Financial Accounting Standards Board) - a rulemaking organization
that establishes financial accounting and reporting standards.
FGD - Flue gas desulfurization equipment installed at coal-fired power
plants to reduce sulfur dioxide emissions.
FERC (Federal Energy Regulatory Commission) - government agency that
regulates interstate transmission and sale of electricity and related
matters.
IBEW - International Brotherhood of Electrical Workers
IEC (Interstate Energy Company) - a subsidiary of PP&L that operates an oil
and gas pipeline.
ISO - Independent System Operator
JCP&L - Jersey Central Power & Light Company
Major utilities - Atlantic, BG&E and JCP&L
MSHA - Mine Safety and Health Administration
NJDEP - New Jersey Department of Environmental Protection
NPDES - National Pollutant Discharge Elimination System
NRC - Nuclear Regulatory Commission
NUG (Non-Utility Generator) - generating plant not owned by regulated
utilities. If the NUG meets certain criteria, its electrical output must
be purchased by public utilities as required by PURPA.
OCA - Pennsylvania Office of Consumer Advocate
OSM - United States Office of Surface Mining
Pa. CNI - Pennsylvania Corporate Net Income Tax
PCB (Polychlorinated Biphenyl) - additive to oil used in certain electrical
equipment up to the late 1970s. Now classified as a hazardous chemical.
PECO - PECO Energy Company
PJM (Pennsylvania - New Jersey - Maryland Interconnection Association) -
Mid-Atlantic power pool consisting of 11 operating electric utilities,
including PP&L.
Plan - PP&L's noncontributory defined benefit pension plan.
PMDC (Power Markets Development Company) - PP&L Resources' unregulated
subsidiary formed to invest in and develop world-wide power markets.
PP&L - Pennsylvania Power & Light Company
PP&L Resources (PP&L Resources, Inc.) - parent holding company of PP&L,
PMDC and Spectrum.
PSE&G - Public Service Electric & Gas Company
PUC (Pennsylvania Public Utility Commission) - agency that regulates
certain ratemaking, accounting, and operations of Pennsylvania utilities.
PUC Decision - final order issued by the PUC on September 27, 1995
pertaining to PP&L's base rate case filed in December 1994.
PURPA (Public Utility Regulatory Policies Act of 1978) - legislation passed
by Congress to encourage energy conservation, efficient use of resources,
and equitable rates.
RCRA - 1976 Resource Conservation and Recovery Act
SBRCA - Special Base Rate Credit Adjustment
SEC - Securities and Exchange Commission
SER - Schuylkill Energy Resources, Inc.
SFAS (Statement of Financial Accounting Standards) - accounting and
financial reporting rules issued by the FASB.
Small utilities - utilities subject to FERC jurisdiction whose billings
include base rate charges and a supplemental charge or credit for fuel
costs over or under the levels included in base rates.
Spectrum (Spectrum Energy Services Corporation) - PP&L Resources'
unregulated subsidiary formed to offer energy related products and
services.
STAS (State Tax Adjustment Surcharge) - rate adjustment mechanism to
customer bills for changes in certain state taxes.
Superfund - Federal and state legislation that addresses remediation of
contaminated sites.
SWEB - South Western Electricity plc, a British regional electric utility
company.
UGI - UGI Corporation
VEBA (Voluntary Employee Benefit Association Trust) - trust accounts for
health and welfare plans for future payments to employees, retirees or
their beneficiaries.
VERP - Voluntary Early Retirement Program
<PAGE>
PART I
ITEM 1. BUSINESS
Terms and abbreviations appearing in "BUSINESS" are explained in
the glossary.
BACKGROUND
To take advantage of new business opportunities, both
domestically and in foreign countries, PP&L formed a holding company
structure in April 1995. As a result of this restructuring, PP&L
became a direct subsidiary of PP&L Resources. PP&L Resources is the
parent company of PP&L, PMDC and Spectrum.
PP&L is an operating electric utility, incorporated under the
laws of the Commonwealth of Pennsylvania in 1920.
In 1995, PP&L Resources also became the parent holding company
of PMDC. PMDC engages in unregulated business activities through
investments in electric energy projects. See "Increasing
Competition" in the Review of the Financial Condition and Results of
Operations and Financial Note 9 for additional information regarding
PMDC.
In 1995, PP&L Resources formed Spectrum, an unregulated
subsidiary, which offers energy-related products and services to
PP&L's existing customers and to others outside of PP&L's service
territory. Other subsidiaries may be formed by PP&L Resources to
take advantage of new business opportunities.
PP&L is PP&L Resources' principal subsidiary (approximately 97%
of consolidated assets as of December 31, 1996), and the financial
condition and results of operation of PP&L are currently the
principal factors affecting the financial condition and results of
operations of PP&L Resources.
The electric utility industry, including PP&L, has experienced
and will continue to experience a significant increase in the level
of competition in the energy supply market. The Energy Act amended
the PUHCA to create a new class of independent power producers, and
amended the Federal Power Act to provide open access to electric
transmission systems for wholesale transactions. In addition, in
December 1996 legislation was enacted in Pennsylvania to restructure
the state's electric utility industry in order to create retail
access to a competitive market for the generation of electricity.
PP&L has announced its support for full customer choice of their
energy supplier for all customer classes. See "Pennsylvania
Restructuring Legislation" on page 27 and "Increasing Competition" on
page 36 for a discussion of pending PUC and FERC proceedings on
industry competition and PP&L's involvement in those proceedings.
PP&L is subject to regulation as a public utility by the PUC and
is subject in certain of its activities to the jurisdiction of the
FERC under Parts I, II and III of the Federal Power Act. PP&L
Resources and PP&L have been exempted by the SEC from the provisions
of PUHCA applicable to them as holding companies.
PP&L is subject to the jurisdiction of the NRC in connection
with the operation of the two nuclear-fueled generating units at
PP&L's Susquehanna station. PP&L owns a 90% undivided interest in
each of the Susquehanna units and Allegheny Electric Cooperative,
Inc. owns a 10% undivided interest in each of those units.
PP&L is also subject to the jurisdiction of certain federal,
regional, state and local regulatory agencies with respect to air and
water quality, land use and other environmental matters. The
operations of PP&L are subject to the Occupational Safety and Health
Act of 1970, and the coal cleaning and loading operations of a PP&L
subsidiary are subject to the Federal Mine Safety and Health Act of
1977.
PP&L serves approximately 1.2 million customers in a 10,000
square mile territory in 29 counties of central eastern Pennsylvania
(see Map on page 13), with a population of approximately 2.6 million
persons. This service area has 129 communities with populations over
5,000, the largest cities of which are Allentown, Bethlehem,
Harrisburg, Hazleton, Lancaster, Scranton, Wilkes-Barre and
Williamsport.
During 1996, about 98% of total operating revenue was derived
from electric energy sales, with 35% coming from residential
customers, 28% from commercial customers, 20% from industrial
customers, 14% from other major utilities and the PJM and 3% from
others.
Wholly-owned subsidiary companies of PP&L principally are
engaged in oil and gas pipeline operations and passive financial
investing.
PP&L operates its generation and transmission facilities as part
of the PJM. The PJM, one of the world's largest power pools,
includes 11 companies serving about 22 million people in a 50,000
square mile territory covering all or part of Pennsylvania, New
Jersey, Maryland, Delaware, Virginia and Washington, D.C.
In July 1996, all of the PJM companies, except PECO, submitted a
comprehensive filing for FERC approval of changes to the PJM to
accommodate greater competition and broader participation. The
filing would (i) establish pool-wide transmission service tariffs to
provide comparable, open-access service for all wholesale
transactions throughout PJM; (ii) establish a price-based bidding
system, with the resulting regional energy market open to all
wholesale buyers and sellers of power; (iii) create a not-for-profit
corporate entity in the form of an ISO responsible for impartial
daily management and administration of the energy market and the
transmission system; and (iv) develop an enhanced pool-wide planning
function to be administered by the ISO. In August 1996, PECO filed a
separate PJM restructuring proposal with the FERC, which differed
significantly in several areas from the other companies' filing.
In November 1996, the FERC rejected both proposals for
restructuring the PJM for several reasons, the principal one being
its view that the ISO was not sufficiently independent. FERC ordered
the PJM companies to file a pool-wide tariff and modified
coordination agreements reflecting the removal of provisions which
FERC considered discriminatory against non-PJM members. In December
1996, all members of PJM submitted an interim compliance filing with
the FERC, which proposed a pool-wide pro forma transmission tariff
and a revised interconnection agreement and transmission owners
agreement designed to accommodate open, non-discriminatory
participation in the pool. The PJM companies currently are working
with multiple stakeholders to develop a consensus package for the
comprehensive restructuring of the PJM, which is expected to be filed
with the FERC in May 1997.
FINANCIAL CONDITION
See "Earnings", "Electric Energy Sales", and "Financial Indicators"
in the Review of the Financial Condition and Results of Operations
for this information.
CAPITAL EXPENDITURE REQUIREMENTS AND FINANCING
See "Financial Condition - Capital Expenditure Requirements" on
page 32 for information concerning PP&L's estimated capital
expenditure requirements for the years 1997-2001. See "Environmental
Matters" on page 34 and Note 14 to Financial Statements for
information concerning PP&L's estimate of the cost to comply with the
federal clean air legislation enacted in 1990, to address groundwater
degradation and waste water control at PP&L facilities and to comply
with solid waste disposal regulations adopted by the DEP.
See "Financing and Liquidity" on page 32 for information
concerning the 1997 financing plans for PP&L Resources and PP&L.
POWER SUPPLY
PP&L's system capacity (winter rating) at December 31, 1996 was
as follows:
Net
Kilowatt
Plant Capacity
Nuclear-fueled steam station
Susquehanna 1,995,000 (a)
Coal-fired steam stations
Montour 1,525,000
Brunner Island 1,469,000
Sunbury 389,000
Martins Creek 300,000
Keystone 210,000 (b)
Conemaugh 194,000 (c)
Holtwood 73,000
Total coal-fired 4,160,000
Oil-fired steam station
Martins Creek 1,592,000
Combustion turbines and diesels 364,000
Hydroelectric 146,000
Total generating capacity 8,257,000
Firm purchases
Hydroelectric 139,000 (d)
Qualifying facilities 474,000 (e)
Total firm purchases 613,000
Total system capacity 8,870,000
_____________________________
(a) PP&L's 90% undivided interest.
(b) PP&L's 12.34% undivided interest.
(c) PP&L's 11.39% undivided interest.
(d) From Safe Harbor Water Power Corporation.
(e) From NUG companies. Effective January 1, 1997,
an additional 5,000 kilowatts of NUG capacity
were added.
The system capacity shown in the preceding tabulation does not
reflect: (i) sales of capacity and energy to Atlantic; (ii) sales
of capacity and energy to BG&E; (iii) sales of capacity and energy to
JCP&L; or (iv) sales of capacity credits to GPU Service Corporation
and Delmarva Power & Light Company for PJM installed capacity
accounting purposes only, which capacity credit sales aggregated
284,000 kilowatts at December 31, 1996. Giving effect to the sales
to Atlantic (129,000 kilowatts), BG&E (132,000 kilowatts), and JCP&L
(756,000 kilowatts), PP&L's net system capacity at December 31, 1996
was 7,853,000 kilowatts.
The capacity of generating units is based upon a number of
factors, including the operating experience and physical condition of
the units, and may be revised from time to time to reflect changed
circumstances.
During 1996, PP&L produced about 39.4 billion kwh in plants it
owned. PP&L purchased 7.8 billion kwh under purchase agreements and
received 1.7 billion kwh as power pool interchange. During the year,
PP&L delivered about 1.3 billion kwh as pool interchange and about
6.3 billion kwh under purchase agreements.
During 1996, 57% of the energy generated by PP&L's plants came
from coal-fired stations, 38.5% from nuclear operations at the
Susquehanna station, 2.5% from the Martins Creek oil-fired steam
station and 2.0% from hydroelectric stations.
The maximum one-hour demand recorded on PP&L's system is
6,607,000 kilowatts, which occurred on February 6, 1996. The maximum
recorded one-hour summer demand is 6,021,000 kilowatts, which
occurred on August 2, 1995. The peak demands do not include energy
sold to Atlantic, BG&E or JCP&L.
PP&L purchases energy from other utilities and FERC-certified
power marketers when it is economically desirable to do so. From
time to time, PP&L purchases energy from systems outside the PJM on a
daily, weekly or monthly basis, at advantageous prices. The amount
of energy purchased depends on a number of factors, including cost
and the import capability of the transmission network.
Under a compliance tariff filed with the FERC in July 1996, PP&L
has been providing open access of available capability on its
transmission system for use by wholesale entities on a basis that is
comparable with PP&L's own use of its transmission facilities.
In 1995, the FERC accepted a PP&L wholesale generating services
tariff. This tariff enables PP&L to sell to other utilities and
marketers reservations of output from PP&L's generating units during
certain periods, with the option to purchase energy from these units.
As of the end of 1996, about 60 utilities and marketers have signed
service agreements under the tariff. Typically, a reciprocal
agreement will enable PP&L to purchase energy from these same
utilities and marketers. Transactions under these agreements will
continue to allow PP&L to make more efficient use of its generating
resources and provide benefits to both PP&L and the other utilities.
At the end of 1996, PP&L filed with FERC for revisions to this tariff
to unbundle transmission costs which are now part of its open access
tariff. PP&L also sought FERC approval to sell power purchased from
third parties, in addition to power from its own system resources.
This "buy-for-resale" provision would increase PP&L's capabilities in
making profitable wholesale transactions.
See Note 4 to Financial Statements for additional information
concerning the sale of capacity and energy to Atlantic, BG&E and
JCP&L, the sale of capacity credits (but not energy) to other
electric utilities in the PJM and the sale of transmission
entitlements and the reservation of output from the Martins Creek
units.
In addition to the 474,000 kilowatts of non-utility generation
shown in the preceding tabulation, PP&L is purchasing about 10,000
kilowatts of output from various other non-utility generating
companies. The payments made to non-utility generating companies,
all of whose facilities are located in PP&L's service area, are
recovered from customers through base rate charges applicable to PUC-
and FERC-jurisdictional customers.
The PJM companies had 57.3 million kilowatts of installed
generating capacity at December 31, 1996, and transmission line
connections with neighboring power pools have the capability of
transferring an additional 4 to 5 million kilowatts between the PJM
and neighboring power pools. Through December 31, 1996, the maximum
one-hour demand recorded on the PJM was approximately 48.5 million
kilowatts, which occurred on August 2, 1995. PP&L is also a party to
the Mid-Atlantic Area Coordination Agreement, which provides for the
coordinated planning of generation and transmission facilities by the
companies included in the PJM.
PP&L has completed the conversion of the two oil-fired
generating units at Martins Creek Steam Electric Station to burn both
natural gas and oil. Dual fuel operation began in the second quarter
of 1996. The IEC transmission facilities were converted to transport
natural gas and oil through the existing oil pipeline. In November
1996, the Commonwealth Court of PA ruled against another party's
appeal of the PUC's approval of IEC's application for gas
transmission service.
FUEL SUPPLY
Coal
During 1996, PP&L's generating stations burned about 8.4 million
tons of bituminous coal and about 1.1 million tons of anthracite and
petroleum coke.
During 1996, 66% of the coal delivered to PP&L's generating
stations was purchased under contracts and 34% was obtained through
open market purchases.
The amount of bituminous coal carried in inventory at PP&L's
generating stations varies from time to time depending on market
conditions and plant operations. As of December 31, 1996, PP&L's
bituminous coal supply was sufficient for about 39 days of
operations.
Contracts with non-affiliated coal producers provided PP&L with
about 4.4 million tons of bituminous coal in 1996 and are expected to
provide PP&L with about 4.5 million tons in both 1997 and 1998.
The coal burned in PP&L's generating stations contains both
organic and pyritic sulfur. Mechanical cleaning processes are
utilized to reduce the pyritic sulfur content of the coal. The
reduction of the pyritic sulfur content by either mechanical cleaning
or blending has lowered the total sulfur content of the coal burned
to levels which permit compliance with current sulfur dioxide
emission regulations established by the DEP. For information
concerning PP&L's plans to achieve compliance with the federal clean
air legislation enacted in 1990, see "Environmental Matters" on page
34 and Note 14 to Financial Statements.
PP&L owns a 12.34% undivided interest in the Keystone station
and an 11.39% undivided interest in the Conemaugh station, both of
which are generating stations located in western Pennsylvania. The
owners of the Keystone station have a long-term contract with a coal
supplier to provide at least two-thirds of that station's
requirements through 1999 and declining amounts thereafter until the
contract expires at the end of 2004. The balance of the Keystone
station requirements are purchased in the open market. The coal
supply requirements for the Conemaugh station are being met from
several sources through a blend of long-term and short-term contracts
and spot market purchases.
At December 31, 1996, PP&L's inventory of anthracite was about
3.6 million tons. PP&L's requirements for petroleum coke and any
additional anthracite that may be required over the remainder of the
expected useful lives of PP&L's anthracite-fired generating stations
are expected to be obtained by contract and market purchases.
Natural Gas
During 1996, PP&L's Martins Creek Steam Electric Station
consumed about 2,000,000 mcf of natural gas. All of this natural gas
was purchased and transported under short-term agreements that were
one month or less in duration. PP&L does not have any long-term
agreements to purchase gas or gas transportation.
Oil
As of December 31, 1996, PP&L has an agreement with one supplier
under which it can purchase up to 75% of the oil requirements for the
Martins Creek units. The balance is purchased in the spot market.
However, if there are price advantages to be realized from purchasing
oil in the spot market, the contract permits PP&L to acquire up to
75% of its expected oil requirements for the Martins Creek units in
that manner. The current agreement expires in mid-1997.
During 1996, approximately 87% of the oil requirements for the
Martins Creek units was purchased under PP&L's oil contracts and the
balance was purchased on the spot market.
Nuclear
The nuclear fuel cycle consists of the mining of uranium ore and
its milling to produce uranium concentrates; the conversion of
uranium concentrates to uranium hexafluoride; the enrichment of
uranium hexafluoride; the fabrication of fuel assemblies; the
utilization of the fuel assemblies in the reactor; the temporary
storage of spent fuel; and the permanent disposal of spent fuel.
PP&L has entered into uranium supply agreements that satisfy
100% of the uranium concentrate requirements for the Susquehanna
units through 1997 and approximately 50% of the requirements for the
period 1998-1999. Deliveries under these agreements are expected to
provide sufficient quantities of uranium concentrates to permit Unit
1 to operate into the first quarter of 2000 and Unit 2 to operate
into the first quarter of 1999.
PP&L has entered into agreements that satisfy 100% of its
conversion requirements through 1997 and approximately 50% of its
conversion requirements for the period 1998-1999.
PP&L also has entered into agreements for other segments of the
nuclear fuel cycle. Based upon the current operating plans for each
of the Susquehanna units, the following table shows the years through
which contracts, including options to extend, could provide the
indicated segments of the nuclear fuel cycle:
Enrichment 2014
Fabrication 2006
PP&L has elected to cancel all or a portion of potential
deliveries under its existing enrichment contract during the period
1999 through 2002, and is currently evaluating its options for
satisfying these requirements through 2004. Additional arrangements
will be necessary to satisfy the remaining fuel requirements of the
Susquehanna units over their anticipated useful lives.
PP&L estimates that there is sufficient storage capability in
the spent fuel pools at Susquehanna to accommodate the fuel that is
expected to be discharged through the end of 1997. Federal law
requires the federal government to provide for the permanent disposal
of commercial spent nuclear fuel. Pursuant to the requirements of
that law, DOE has initiated an analysis of a site in Nevada for a
permanent nuclear waste repository. Progress on characterization of
a proposed disposal facility has been slow, and the repository is not
expected to be operational before 2010. Congress is considering new
legislation designed to re-establish a schedule for the spent fuel
disposal program. This legislation would authorize an above-ground
interim storage facility, along with the permanent disposal facility,
as part of an integrated disposal program. Even if this legislation
is enacted and DOE is successful in building and operating the
interim storage facility, it is unlikely that any spent fuel will be
shipped from Susquehanna until well after the year 2005 because of
the large volume of other utilities' spent fuel that is scheduled to
be shipped before PP&L's spent fuel. Therefore, expansion of
Susquehanna's spent fuel storage capability is necessary. To support
this expansion, PP&L has contracted for the design and construction
of a spent fuel storage facility employing dry fuel storage
technology at the Susquehanna plant. The facility will be modular so
that additional storage capacity can be added as needed. PP&L
currently estimates that construction of the facility will be
completed by mid-1997.
Federal law also provides that the costs of spent nuclear fuel
disposal are the responsibility of the generators of such wastes.
PP&L includes in customer rates the fees charged by the DOE to fund
the permanent disposal of spent nuclear fuel. In January 1997, PP&L
joined over 30 other utilities in a lawsuit in the U.S. Court of
Appeals for the District of Columbia Circuit seeking assurance of
DOE's performance of its contractual obligation to accept the spent
nuclear fuel and suspension of the payment of fees to that agency
pending such performance.
ENVIRONMENTAL MATTERS
PP&L is subject to certain present and developing federal,
regional, state and local laws and regulations with respect to air
and water quality, land use and other environmental matters. See
"Financial Condition - Capital Expenditure Requirements" on page 32
for information concerning environmental expenditures during 1996 and
PP&L's estimate of those expenditures during the years 1997-2001.
PP&L believes that it is presently in substantial compliance with
applicable environmental laws and regulations.
See "Environmental Matters" on page 34 and Note 14 to Financial
Statements for information concerning federal clean air legislation
enacted in 1990, groundwater degradation and waste water control at
PP&L facilities, DEP's solid waste disposal regulations and PP&L's
agreement with the DEP concerning remediation at certain sites of
past operations. Other environmental laws, regulations and
developments that may have a substantial impact on PP&L are discussed
below.
Air
The Clean Air Act includes, among other things, provisions that:
(a) require the prevention of significant deterioration of existing
air quality in regions where air quality is better than applicable
ambient standards; (b) restrict the construction of and revise the
performance standards for new coal-fired and oil-fired generating
stations; and (c) authorize the EPA to impose substantial
noncompliance penalties of up to $25,000 per day of violation for
each facility found to be in violation of the requirements of an
applicable state implementation plan. The DEP administers the EPA's
air quality regulations through the Pennsylvania State Implementation
Plan and has concurrent authority to impose penalties for
noncompliance. At this time, PP&L is meeting all requirements of
Phase I of the Clean Air Act.
Water
To implement the requirements established by the Federal Water
Pollution Control Act of 1972, as amended by the Clean Water Act of
1977 and the Water Quality Act of 1987, the EPA has adopted
regulations including effluent standards for steam electric stations.
The DEP administers the EPA's effluent standards through state laws
and regulations relating, among other things, to effluent discharges
and water quality. The standards adopted by the EPA pursuant to the
Clean Water Act may have a significant impact on PP&L's existing
facilities depending on the DEP's interpretation and future
amendments to its regulations.
The EPA and DEP limitations, standards and guidelines for the
discharge of pollutants from point sources into surface waters are
implemented through the issuance of NPDES permits. PP&L has the NPDES
permits necessary for the operation of its facilities.
Pursuant to the Surface Mining and Reclamation Act of 1977, the
OSM has adopted effluent guidelines which are applicable to PP&L
subsidiaries as a result of their past coal mining and continued coal
processing activities. The EPA and the OSM limitations, guidelines
and standards also are enforced through the issuance of NPDES
permits. In accordance with the provisions of the Clean Water Act
and the Reclamation Act of 1977, the EPA and the OSM have authorized
the DEP to implement the NPDES program for Pennsylvania sources.
Compliance with applicable water quality standards is assured by DEP
review of NPDES permit conditions. PP&L's subsidiaries have received
NPDES permits for their mines and related facilities.
Solid and Hazardous Waste
The RCRA regulates the generation, transportation, treatment,
storage and disposal of hazardous wastes. RCRA also imposes joint
and several liability on generators of solid or hazardous waste for
clean-up costs. A revision of RCRA in late-1984 lowered the
threshold for the amount of on-site hazardous waste generation
requiring regulation and incorporated underground tanks used for the
storage of petroleum and petroleum products as regulated units.
Based upon the results of a survey of its solid waste practices, PP&L
in the past has filed notices with the EPA indicating that hazardous
waste is occasionally generated at all of its steam electric
generating stations and service centers. PP&L has established
specific operating procedures for handling this hazardous waste.
Therefore, at this time RCRA and related DEP regulations are not
expected to have a significant additional impact on PP&L.
The provisions of Superfund authorize the EPA to require past
and present owners of contaminated sites and generators of any
hazardous substance found at a site to clean up the site or pay the
EPA or the state for the costs of clean-up. The generators and past
owners can be liable even if the generator contributed only a minute
portion of the hazardous substances at the site. Present owners can
be liable even if they contributed no hazardous substances to the
site.
The Pennsylvania Superfund law also gives the DEP broad
authority to identify hazardous or contaminated sites in Pennsylvania
and to order owners or responsible parties to clean up the sites. If
responsible parties cannot or will not perform the clean-up, the DEP
can hire contractors to clean up the sites and then require
reimbursement from the responsible parties after the clean-up is
completed. To date, PP&L has principally been involved in federal,
rather than state, Superfund sites.
In 1996, PP&L completed removal of coal tar from one subsurface
accumulation at a former coal gasification plant site along Brodhead
Creek, Monroe County, Pennsylvania and currently expects that
significant additional remedial action will not be required. PP&L
has entered into agreements with the adjacent property owner and DEP
to share the past and future costs of remediating this site. PP&L's
share of the costs is approximately $2.3 million, all of which has
been spent.
The EPA has placed the site of a former PP&L gas plant in
Columbia, Pennsylvania on the national Superfund list. PP&L and
another potentially responsible party had previously conducted a
detailed investigation of the site, and PP&L removed a substantial
amount of coal tar from a pedestrian tunnel at the rear of the
property. However, coal tar remains in two brick pits on the site.
There also is coal tar contamination of the soil and groundwater at
the site and of river sediment adjacent to the site. PP&L signed a
consent order with the DEP to remediate the brick pits and conduct
additional investigations. The costs of investigation and
remediation of the areas of the site where the agencies have required
action are estimated at $2.6 million, all of which has been spent or
is accrued. Further remediation of other areas of the site may be
required, the costs of which are not now determinable but could be
material.
PP&L at one time also owned and operated several other gas
plants in its service area. None of these sites is presently on the
Superfund list. However, a few of them may be possible candidates
for listing at a future date. PP&L expects to continue to investigate
and, if necessary, remediate these sites. The cost of this work is
not now determinable but could be material.
See "LEGAL PROCEEDINGS" on page 14 for information concerning an
EPA order and a complaint filed by the EPA in federal district court
against PP&L and 35 unrelated parties for remediation of a Superfund
site in Berks County, Pennsylvania; a complaint filed by PP&L and 16
unrelated parties in federal district court against other parties for
contribution under Superfund relating to the Novak landfill Superfund
site in Lehigh County, Pennsylvania and a related action by EPA
against PP&L and 29 unrelated parties to recover the agency's past
and future costs at the Novak landfill site; and an action by the EPA
for reimbursement of the EPA's past response costs and remediation at
the site of a former metal salvaging operation in Montour County,
Pennsylvania.
PP&L is involved in several other sites where it may be
required, along with other parties, to contribute to investigation
and remediation. Some of these sites have been listed by the EPA
under Superfund, and others may be candidates for listing at a future
date. Future investigation or remediation work at sites currently
under review, or at sites currently unknown, may result in material
additional operating costs which PP&L cannot estimate at this time.
In addition, certain federal and state statutes, including Superfund
and the Pennsylvania Hazardous Sites Cleanup Act, empower certain
governmental agencies, such as the EPA and the DEP, to seek
compensation from the responsible parties for the lost value of
damaged natural resources. The EPA and the DEP may file such
compensation claims against the parties, including PP&L, held
responsible for cleanup of such sites. Such natural resource damage
claims against PP&L could result in material additional liabilities.
Low-Level Radioactive Waste
Under federal law, each state is responsible for the disposal of
low-level radioactive waste generated in that state. States may join
in regional compacts to jointly fulfill their responsibilities. The
states of Pennsylvania, Maryland, Delaware and West Virginia are
members of the Appalachian States Low-Level Radioactive Waste
Compact. Efforts to develop a regional disposal facility in
Pennsylvania are currently underway. Low-level radioactive wastes
resulting from the operation of Susquehanna are currently being sent
to Barnwell, South Carolina for disposal. In the event that this
disposal option becomes unavailable or no longer cost effective, the
low-level radioactive waste will be stored on-site at Susquehanna.
PP&L cannot predict the future availability of low-level waste
disposal facilities or the cost of such disposal.
General
Concerns have been expressed by some members of the scientific
community and others regarding the potential health effects of EMFs.
These fields are emitted by all devices carrying electricity,
including electric transmission and distribution lines and substation
equipment. Federal, state and local officials are focusing increased
attention on this issue. PP&L is actively participating in the
current research effort to determine whether EMFs cause any human
health problems and is taking steps to reduce EMFs, where practical,
in the design of new transmission and distribution facilities. PP&L
is unable to predict what effect the EMF issue might have on PP&L
operations and facilities and the associated cost.
In addition to the matters described above, PP&L and its
subsidiaries have been cited from time to time for temporary
violations of the DEP and EPA regulations with respect to air and
water quality and solid waste disposal in connection with the
operation of their facilities and may be cited for such violations in
the future. As a result, PP&L and its subsidiaries may be subject to
certain penalties which are not expected to be material in amount.
PP&L is unable to predict the ultimate effect of evolving
environmental laws and regulations upon its existing and proposed
facilities and operations. In complying with statutes, regulations
and actions by regulatory bodies involving environmental matters,
including the areas of water and air quality, hazardous and solid
waste handling and disposal and toxic substances, PP&L may be
required to modify, replace or cease operating certain of its
facilities. PP&L may also incur material capital expenditures and
operating expenses in amounts which are not now determinable.
FRANCHISES AND LICENSES
PP&L has authority to provide electric public utility service
throughout its entire service area as a result of grants by the
Commonwealth of Pennsylvania in corporate charters to PP&L and
companies to which it has succeeded and as a result of certification
thereof by the PUC. PP&L has been granted the right to enter the
streets and highways by the Commonwealth subject to certain
conditions. In general, such conditions have been met by ordinance,
resolution, permit, acquiescence or other action by an appropriate
local political subdivision or agency of the Commonwealth.
PP&L operates Susquehanna Unit 1 and Unit 2 pursuant to NRC
operating licenses which expire in 2022 and 2024, respectively. PP&L
operates two hydroelectric projects pursuant to licenses which were
renewed by the FERC in 1980: Wallenpaupack (44,000 kilowatts
capacity) and Holtwood (102,000 kilowatts capacity). The
Wallenpaupack license expires in 2004 and the Holtwood license
expires in 2014.
PP&L also owns one-third of the capital stock of Safe Harbor
Water Power Corporation, which holds a project license which extends
until 2030 for the operation of its hydroelectric plant. The total
capability of the Safe Harbor plant is 417,500 kilowatts, and PP&L is
entitled by contract to one-third of the total capacity (139,000
kilowatts).
EMPLOYEE RELATIONS
As of December 31, 1996, approximately 4,190 of PP&L's 6,428
full-time employees were represented by the IBEW under a three-year
agreement which expires in May 1997.
<PAGE>
Page 13 contains a map of PP&L's service territory which shows its
location, the location of each of PP&L's coal-fired, oil-fired, hydro and
nuclear-fueled generating stations and the location of major population
centers.
<PAGE>
ITEM 2. PROPERTIES
The accompanying Map shows the location of PP&L's service
area and generating stations.
Reference is made to the "Utility Plant" section of Note 1
for information concerning investments in property, plant and
equipment. Substantially all electric utility plant is subject
to the lien of PP&L's first mortgage.
For additional information concerning the properties of PP&L
see Item 1, "BUSINESS - Power Supply" and "BUSINESS - Fuel
Supply".
ITEM 3. LEGAL PROCEEDINGS
Reference is made to Notes to Financial Statements for
information concerning rate matters.
Reference is made to Item 1 "BUSINESS-Fuel Supply" for
information concerning a lawsuit against DOE for failure of that
agency to perform contractual obligations.
In August 1991, a group of fuel oil dealers in PP&L's
service area filed a complaint against PP&L in District Court
alleging that PP&L's promotion of electric heat pumps and off-
peak thermal storage systems had violated and continues to
violate the federal antitrust laws. Specifically, the complaint
alleged that PP&L's use of its PUC-filed tariff to provide a
lower electric rate for newly constructed residences equipped
with thermal storage systems, combined with PP&L's program of
providing cash grants to developers and contractors for the
installation of high efficiency heat pumps in these residences,
allowed PP&L to illegally capture at least 70% of the market for
heating in new residential construction within its service area.
The complaint requested judgment against PP&L for a sum in
excess of $10 million for the alleged antitrust violations,
treble the damages alleged to have been sustained by the
plaintiffs over the past four years. The complaint also
requested a permanent injunction against all activities found to
be illegal, including the cash grant program.
PP&L filed a motion for summary judgment seeking to dispose
of plaintiffs' claims in this case, and in September 1992, the
judge ruled on this motion and dismissed all counts against PP&L.
The plaintiffs appealed to the Court of Appeals for the Third
Circuit. In April 1994, the Court of Appeals issued a decision
which in part affirmed the lower court's grant of summary
judgment for PP&L, but reversed the grant of summary judgment as
to cash grants to developers based upon all-electric builder
agreements.
The District Court reacquired jurisdiction over this case.
In February 1997, the parties reached an agreement in principle
to settle this proceeding. The terms of this settlement would
not have a material effect on PP&L.
In August 1995, SER, one of the non-utility generating
companies from which PP&L purchases power under the PURPA,
brought suit against PP&L in the District Court. SER alleged
that, since July 1994, PP&L has improperly curtailed power
purchases from SER under the power purchase agreement between the
parties. SER claims that such activity breached the power
purchase agreement and violated the federal antitrust laws, among
other counts. SER alleged that PP&L's actions resulted in loss
of revenue from power sales of $1.6 million and an unquantified
increase in its costs of operation. SER requested compensatory
and punitive damages, as well as treble damages and attorneys'
fees for alleged antitrust violations. In May 1996, the District
Court granted PP&L's motion to dismiss the complaint. SER has
appealed this decision to the U.S. Court of Appeals for the Third
Circuit.
In December 1995, PP&L filed a petition with the PUC for a
declaratory order that it had acted properly in curtailing
purchases from SER and other NUGs during minimum generation
emergencies on the PJM system. The PUC has stayed a
determination in this case pending a FERC decision regarding
PP&L's request to decertify SER as a qualifying cogeneration
facility (see discussion below).
In November 1995, PP&L initiated a civil action against SER
in the Lehigh County Court of Common Pleas. The principal issue
is whether SER and an affiliate of SER properly used the steam
generated by the plant in accordance with the terms of the
contract. Under the contract, if the steam was used properly,
SER is entitled to a rate of 6.6 cents per KWH; if not, it is
entitled to a rate of only 5.0 cents per KWH. The total annual
difference in payment under the two rates is about $9 million.
In April 1996, the Court concluded that PP&L must seek a
determination by the FERC prior to reducing the rate paid to SER.
Accordingly, in July 1996 PP&L filed a motion with the FERC
to revoke SER's status as a qualifying cogeneration facility.
PP&L's motion alleges that SER has engaged in a conscious and
continuing scheme to mislead PP&L and the FERC and that SER has
never complied with the FERC's requirements for a qualifying
cogeneration facility. This motion is pending.
In a related matter, in June 1996 SER filed a state court
lawsuit against PP&L in Lehigh County, Pennsylvania. In this
lawsuit, SER restates its allegations concerning PP&L's
procedures for curtailing power deliveries from SER during
periods of minimum generation emergencies declared by the PJM.
SER's claims include breach of contract, fraud, negligent
misrepresentation and breach of duty of good faith and fair
dealing. In addition, SER claims that public statements by PP&L
were libelous. In January 1997, the Court stayed SER's state law
claims against PP&L pending consideration by the PUC of PP&L's
minimum generation petition and dismissed SER's libel claims.
PP&L cannot predict the outcome of these proceedings.
In April 1991, the U.S. Department of Labor through its MSHA
issued citations to one of PP&L's coal-mining subsidiaries for
alleged coal-dust sample tampering at one of the subsidiary's
mines. The MSHA at the same time issued similar citations to
more than 500 other coal-mine operators. Based on a review of
its dust sampling procedures, the subsidiary is contesting all of
the citations. It is believed at this time, based on the
information available, that the MSHA allegations are without
merit. Citations were also issued against the independent
operator of another subsidiary mine, who is also contesting the
citations issued with respect to that mine. The Administrative
Law Judge assigned to the proceedings ordered that one case be
tried against a single mine operator unrelated to PP&L to
determine whether the MSHA could prove its general allegations
regarding sample tampering. In April 1994, the Judge ruled in
favor of the mine operator and vacated the 75 citations against
it. The MSHA appealed the Judge's decision to the Mine Safety
and Health Review Commission. In November 1995, the Commission
affirmed the Judge's rulings in favor of the operator. The
Secretary of Labor has appealed the Commission's decision to the
U.S. Court of Appeals for the District of Columbia Circuit. PP&L
cannot predict the outcome of these proceedings.
On July 25, 1994, Mon Valley Steel Company, Inc. filed suit
in the Court of Common Pleas of Fayette County, Pennsylvania,
against PP&L and two of its subsidiaries, claiming that PP&L and
those subsidiaries made fraudulent misrepresentations during
negotiations for the 1992 sale to Mon Valley of Tunnelton Mining
Company. Tunnelton was a coal-mining operation formerly owned by
PP&L's subsidiary, Pennsylvania Mines Corporation. Specifically,
Mon Valley alleges that PP&L and those subsidiaries
misrepresented Tunnelton's capability to produce coal, as well as
the amount of funding Tunnelton would receive for mine closing
costs. Mon Valley is claiming about $6 million to cover mine
closing costs as well as punitive damages in an unspecified
amount. In July 1994, PP&L and those subsidiaries filed a legal
action in the Court of Common Pleas of Allegheny County,
Pennsylvania, requesting a judicial determination that they had
not breached any of their contractual obligations to Mon Valley.
While these matters were pending, Mon Valley was forced into
involuntary bankruptcy by its creditors and, accordingly in
August 1996, PP&L removed the Fayette County action to Federal
Bankruptcy Court. The Allegheny County action by PP&L has been
stayed pending the Bankruptcy Court's determination. PP&L cannot
predict the outcome of these proceedings.
In August 1994, PP&L filed a rate complaint with the
Interstate Commerce Commission, now the Surface Transportation
Board, challenging Consolidated Rail Corporation's (Conrail's)
coal transportation rates from interchange points with connecting
carriers to PP&L's power plants. In September 1995, PP&L amended
its complaint to add the connecting carriers, CSX Corporation and
Norfolk Southern Corporation, as additional defendants.
As a result of an Surface Transportation Board ruling in
December 1996, PP&L's complaint against Conrail alone was
dismissed, but PP&L's case against Conrail, CSX and Norfolk
Southern jointly continues. PP&L cannot predict the outcome of
this proceeding or its ultimate impact on PP&L's coal
transportation rates.
In August 1991, PP&L and 35 other unrelated parties received
an EPA order under Superfund requiring that certain remedial
actions be taken at a former oil recovery site in Berks County,
Pennsylvania, which has been included on the federal Superfund
list. PP&L had been identified by the EPA as a potentially
responsible party, along with over 100 other parties. The EPA
order required remediation by the 36 named parties of four
specific areas of the site. Remedial action under this order has
been completed at a cost of approximately $2 million, of which
PP&L's interim share was approximately $50,000.
The EPA at the same time filed a complaint under Section 107
of Superfund in the District Court against PP&L and the same 35
unrelated parties. The complaint asks the District Court to hold
the parties jointly and severally liable for all EPA's past costs
at the site and future costs of remediating some of the remaining
areas of the site. The EPA claims it has spent approximately $21
million to date. PP&L and a group of the other named parties
have sued in District Court approximately 460 other parties that
have contributed waste to the site, demanding that these
companies contribute to the clean-up costs.
In July 1993, PP&L and 33 of the 35 unrelated parties
received an EPA order under Section 106 of Superfund requiring
remediation of the remaining areas of the site identified by EPA.
Current estimates of remediating the remainder of the site range
from $50 million to $200 million. These costs would be shared
among the responsible parties. PP&L and other parties to the
lawsuit have reached a settlement with the federal government
regarding these claims. PP&L's share is not material.
In December 1991, PP&L and 16 unrelated parties filed
complaints against 64 other parties in District Court seeking
reimbursement under Superfund for costs the plaintiffs have
incurred and will incur to investigate and remediate the Novak
landfill site in Lehigh County, Pennsylvania. The complaints
allege that the 64 defendants generated or transported substances
disposed of at the Superfund site. A Remedial Investigation and
Draft Feasibility Study for the site has been completed at a cost
of approximately $3 million, of which PP&L's share was
approximately $200,000. EPA's selected remedy is currently
estimated to cost approximately $20 million. EPA has issued a
106 Order against PP&L and several other parties to implement
this remedy. In January 1997, EPA filed an action against PP&L
and 29 other parties under section 107 of CERCLA to recover its
costs at the site, which it alleges are in excess of $990,000.
The parties currently are negotiating with EPA. PP&L's allocated
share is not expected to be material.
In April 1993, PP&L received an order under Section 106 of
Superfund requiring that actions be taken at the site of a former
metal salvaging operation in Montour County, Pennsylvania. The
EPA has taken similar action with two other potentially
responsible parties at the site. The cost of compliance with the
order is currently estimated to be approximately $37 million.
The EPA currently estimates that additional remediation work not
covered by the order will cost an additional $36 million. In
addition, the EPA has already incurred clean-up costs of
approximately $5 million to date. The EPA had indicated that it
will seek to recover these additional costs at a later date.
PP&L's records indicate that scrap metal, wire and transformers
were sold to the salvage operator between 1969 and 1971. Current
information indicates that PP&L's contribution to the site, if
any, is de minimis.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security
holders, through the solicitation of proxies or otherwise, during
the fourth quarter of 1996.
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANTS
Officers of PP&L Resources and PP&L are elected annually by
their Boards of Directors to serve at the pleasure of the
respective Boards. There are no family relationships among any
of the executive officers, or any arrangement or understanding
between any executive officer and any other person pursuant to
which the officer was selected.
There have been no events under any bankruptcy act, no
criminal proceedings and no judgments or injunctions material to
the evaluation of the ability and integrity of any executive
officer during the past five years.
Listed below are the executive officers of:
PP&L Resources, Inc.
Effective Date of
Election to
Name Age Position Present Position
William F. Hecht 53 Chairman, President
and Chief Executive February 24, 1995
Officer
Francis A. Long 56 Executive Vice
President February 24, 1995
Robert G. Byram* 51 Senior Vice President-
Nuclear - PP&L December 20, 1995
Ronald E. Hill 54 Senior Vice President-
Financial August 1, 1996
Robert D. Fagan* 51 President - Power Markets
Development Company December 20, 1995
Robert J. Grey 46 Senior Vice President,
General Counsel and
Secretary March 1, 1996
Joseph J. McCabe 46 Vice President and
Controller August 1, 1995
Pennsylvania Power & Light Company:
Effective Date of
Election to
Name Age Position Present Position
William F. Hecht 53 Chairman, President
and Chief Executive
Officer January 1, 1993
Francis A. Long 56 Executive Vice
President and Chief
Operating Officer January 1, 1993
Robert G. Byram 51 Senior Vice President-
Nuclear March 26, 1993
Ronald E. Hill 54 Senior Vice President-
Financial January 1, 1994
John R. Biggar 52 Vice President-
Finance August 1, 1996
Robert J. Grey 46 Senior Vice President,
General Counsel and
Secretary March 1, 1996
Joseph J. McCabe 46 Vice President and
Controller August 1, 1995
* Mr. Byram and Mr. Fagan have been designated executive
officers of PP&L Resources by virtue of their respective
positions at PP&L Resources subsidiaries.
Each of the above officers, with the exception of Mr. Fagan,
Mr. Grey, and Mr. McCabe, has been employed by PP&L for more than
five years as of December 31, 1996. Mr. Fagan joined PMDC - then
a PP&L subsidiary - in November 1994. Prior to that time, he was
Vice President and General Manager at Mission Energy Company. Mr.
McCabe joined PP&L in May 1994 and was previously a partner of
Deloitte & Touche LLP. Mr. Grey joined PP&L in March 1995. He
had been General Counsel of Long Island Lighting Company since
1992. Prior to that time, he held the position of partner at the
law firm of Preston Gates & Ellis.
Prior to election to the positions shown above, the
following executive officers held other positions with PP&L since
January 1, 1992: Mr. Hecht was President and Chief Operating
Officer; Mr. Long was Senior Vice President - System Power &
Engineering; Mr. Byram was Vice President - Nuclear Operations
and Senior Vice President - System Power & Engineering; Mr. Hill
was Vice President, Comptroller and Senior Vice President -
Financial and Treasurer of PP&L Resources; Mr. Biggar was Vice
President-Finance and Vice President - Finance and Treasurer; Mr.
Grey was Vice President, General Counsel and Secretary, and Mr.
McCabe was Controller.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S
COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Additional information for this item is set forth in the
section entitled "Shareowner and Investor Information" on pages
81 through 83 of this report, and the number of common
shareowners is set forth in the section entitled "Selected
Financial and Operating Data" on page 79.
ITEM 6. SELECTED FINANCIAL DATA
Information for this item is set forth in the section
entitled "Selected Financial and Operating Data" on pages 79 and
80 of this report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Information for this item is set forth in the section
entitled "Review of the Financial Condition and Results of
Operations of PP&L Resources, Inc. and Pennsylvania Power & Light
Company" on pages 24 through 39 of this report.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA
Financial statements and supplementary data are set forth on
the pages indicated below.
Page
Report of Independent Accountants 41
Independent Auditors' Report 42
Management's Report on Responsibility for Financial
Statements 43
Financial Statements:
PP&L Resources, Inc.
Consolidated Statement of Income for the Three Years
Ended December 31, 1996 45
Consolidated Statement of Cash Flows for the Three
Years Ended December 31, 1996 46
Consolidated Balance Sheet at December 31, 1996 and
1995 47
Consolidated Statement of Shareowners' Common Equity
for the Three Years Ended December 31, 1996 49
Consolidated Statement of Preferred Stock at
December 31, 1996 and 1995 49
Consolidated Statement of Long-Term Debt at
December 31, 1996 and 1995 51
Pennsylvania Power & Light Company
Consolidated Statement of Income for the Three Years
Ended December 31, 1996 53
Consolidated Statement of Cash Flows for the Three
Years Ended December 31, 1996 54
Consolidated Balance Sheet at December 31, 1996 and
1995 55
Consolidated Statement of Shareowners' Common Equity
for the Three Years Ended December 31, 1996 57
Consolidated Statement of Preferred Stock at
December 31, 1996 and 1995 57
Consolidated Statement of Long-Term Debt at
December 31, 1996 and 1995 59
Notes to Financial Statements 60
Supplemental Financial Statement Schedule:
II - Valuation and Qualifying Accounts and
Reserves for the Three Years Ended
December 31, 1996 86
Selected Financial and Operating Data for the Five
Years Ended December 31, 1996 79
Quarterly Financial, Common Stock Price and
Dividend Data 84
ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Based upon a recommendation of its Audit Committee, PP&L's
Board of Directors decided on January 25, 1995 that Deloitte &
Touche LLP would not be retained as the independent auditors for
1995. On February 22, 1995, PP&L's Board of Directors, based
upon a recommendation of PP&L's Audit Committee, appointed Price
Waterhouse LLP as PP&L's new independent auditors.
The auditors' report of Deloitte & Touche LLP on PP&L's
financial statements for each of the two years ended December 31,
1993 and 1994, did not contain any adverse opinion or disclaimer
of opinion, nor were the reports modified or qualified in any
manner.
During the period of such two years and the period from
December 31, 1994 through January 25, 1995, there were no
disagreements with Deloitte & Touche LLP on any matter of
accounting principles or practices, financial statement
disclosure or auditing scope or procedure. During such periods,
there were no "reportable events" as that term is defined in Item
304(a)(1)(v) of Regulation S-K.
Deloitte & Touche LLP provided a letter to PP&L regarding
this matter, dated February 1, 1995, indicating that they agreed
with the statements in the two preceding paragraphs.
<PAGE>
REVIEW OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF PP&L RESOURCES, INC. AND PENNSYLVANIA POWER & LIGHT COMPANY
PP&L Resources is the parent holding company of PP&L, PMDC and
Spectrum. PP&L Resources' principal subsidiary, PP&L, is an operating
public utility providing electric service in central eastern
Pennsylvania. PMDC was formed to engage in unregulated business
activities through investments in electric energy projects. Spectrum,
another unregulated subsidiary, was formed to pursue opportunities to
offer energy-related products and services to PP&L's existing customers
and to others beyond PP&L's service territory.
The financial condition and results of operations of PP&L are
currently the principal factors affecting the financial condition and
results of operations of PP&L Resources. All fluctuations, unless
specifically noted, are primarily due to activities of PP&L. All
nonutility operating transactions are included in "Other Income and
Deductions - Net" on the Consolidated Statement of Income.
Terms and abbreviations appearing in the Review of the Financial
Condition and Results of Operations are explained in the glossary.
Results of Operations
Earnings
Earnings per share of common stock were $2.05 in 1996, $2.05 in 1995
and $1.41 in 1994. The following table highlights the major items that
impacted earnings for each of the years:
1996 1995 1994
Earnings per share - excluding
workforce reductions and one-
time adjustments $2.05 $1.79 $2.02
Workforce reduction programs:
Voluntary early retirement
program 0.24 (0.28)
Other (0.03) (0.11) 0.03
One-time adjustments:
Research and experimentation
income tax credits 0.03
Postretirement benefits other
than pensions 0.10 (0.04)
Disallowance - Susquehanna
Unit No. 1 deferred costs (0.13)
ECR purchased power costs 0.04 (0.06)
Gain/(loss) on subsidiary coal
reserves 0.12 (0.26)
Earnings per share - reported $2.05 $2.05 $1.41
Earnings per share, excluding the adjustments identified above,
improved by $.26 for 1996. This earnings improvement reflects higher
revenues resulting from the 3.8% base rate increase from the PUC
Decision, as well as higher sales to all service-area classes. On a
weather-adjusted basis, sales to commercial customers grew by 3.6%, with
sales to residential and industrial customers posting increases of 3.2%
and 1.7%, respectively. Earnings also benefited from lower interest
expense, due to the refinancing of long-term debt with lower cost
securities. These earnings gains were partially offset by a reduction in
contractual bulk power sales to JCP&L, as well as higher depreciation
expense. The higher depreciation is due to new property, plant and
equipment placed in service in 1996, as well as higher depreciation for
the Susquehanna station as a result of the PUC Decision.
The decline in earnings in 1995, excluding the adjustments
identified above, was primarily due to higher operating costs,
depreciation for the Susquehanna station and costs associated with the
review of PECO's proposals to acquire PP&L Resources.
The reduction in contractual bulk power sales to JCP&L and other
major utilities will continue to adversely affect earnings over the next
few years. PP&L has increased its efforts to sell this returning energy
and capacity on the open market. In addition, legislation recently
enacted in Pennsylvania to restructure its electric utility industry to
create retail access to a competitive market for generation of
electricity could have a major impact on the future financial performance
of PP&L. See "Pennsylvania Restructuring Legislation" for additional
information.
Electric Energy Sales
The increases (decreases) in PP&L's electric energy sales were
attributable to the following:
1996 1995
vs vs
1995 1994
(Millions of KWH)
Electric energy sales
Residential 548 (144)
Commercial 341 232
Industrial 171 309
Other (including UGI) 60 (40)
System sales 1,120 357
Sales to other utilities 3,843 1,368
PJM energy sales (1,020) (800)
3,943 925
System, or service area, sales increased 1.1 billion kwh, or 3.4%,
over 1995. Part of this increase was attributable to colder weather in
the first quarter of 1996. If normal weather had been experienced in
both 1996 and 1995, system sales for 1996 would have increased by about
953 million kwh, or 2.9%, over 1995.
Actual sales to residential customers in 1996 increased 548 million
kwh, or 4.8%, from 1995, compared with a decrease in 1995 of 144 million
kwh, or 1.3%, from 1994. Under normal weather conditions, the 1996
increase would have been 3.2%. Weather-adjusted commercial sales
increased 3.6% in 1996, and sales to industrial customers increased by
1.7% from 1995. Commercial and industrial sales are good indicators of
the region's economic health.
Sales to other utilities increased 3.8 billion kwh, or 50.1%, from
1995, despite a reduction in PP&L's contractual bulk power sales to
JCP&L. These increases were primarily the result of PP&L's one-year
contract to supply energy to PSE&G and increased efforts to sell energy
and capacity on the open market. Sales to other utilities in 1995
increased by 1.4 billion kwh, or 21.7% from 1994. These increases were
primarily due to PP&L's efforts to increase direct two-party sales to
other utilities rather than selling to PJM.
Sales to PJM in 1996 decreased by 1 billion kwh, or 43.3%, from
1995. These lower PJM sales were primarily the result of increases in
direct sales to other utilities, such as the contract sales to PSE&G
referenced above. Sales to PJM in 1995 decreased by 800 million kwh, or
25.3% from 1994. These decreases were also primarily due to PP&L's
efforts to increase direct two-party sales.
See "Operating Revenues" for more information.
Operating Revenues
The increases in total operating revenues were attributable to the
following:
1996 1995
vs vs
1995 1994
(Millions of Dollars)
Base rate revenues:
Rate increase - PUC Decision $ 76 $17
Sales volume/mix 57 25
Weather 13 (10)
Energy revenue 5 4
Sales to other utilities & PJM 27 (5)
Other, net (20) (4)
$158 $27
Operating revenues increased by $158 million, or 5.8%, in 1996 over
1995. Base rate revenues were enhanced by the PUC Decision, which
increased PUC jurisdictional rates about 3.8% and by strong sales growth
in all customer classes. In addition, weather had a favorable impact
when comparing 1996 to 1995. This is a result of the extremely cold
weather during the first quarter of 1996 compared to milder weather
during the first quarter of 1995. Finally, revenues during 1996 reflect
increased sales to other utilities, primarily due to the one-year
contract to supply energy to PSE&G. These increases were partially
offset by the loss of revenue due to the phasing-out of the capacity
sales agreement with JCP&L.
Operating revenues increased $27 million, or 1%, in 1995 over 1994.
Base rate revenues in 1995 were enhanced for three months as a result of
the PUC Decision and by higher sales in the commercial and industrial
sectors. These revenues were partially offset by unfavorable weather
variances caused by the mild weather in early 1995 compared to the
extremely cold weather in early 1994.
PP&L's generation sales tariff was amended effective January 1,
1997, subject to FERC approval, to allow PP&L to buy energy for the
purpose of resale in competitive wholesale markets. This change provides
PP&L additional flexibility in creating wholesale power supply
opportunities that will increase operating revenues.
Pennsylvania Restructuring Legislation
In December 1996, Pennsylvania enacted legislation to restructure
its electric utility industry in order to create retail access to a
competitive market for the generation of electricity. The legislation,
which was effective on January 1, 1997, includes the following major
provisions:
1. All electric utilities in Pennsylvania are required to file,
beginning on April 1, 1997 and in no event later than September 30, 1997,
a restructuring plan to implement direct access to a competitive market
for electric generation. The plan must include unbundled rates for
generation, jurisdictional transmission, distribution and other services;
a proposed competitive transition charge; a proposed universal service
and energy conservation cost recovery mechanism; procedures for ensuring
direct access to all licensed energy suppliers; a discussion of the
proposed plan's impacts on utility employees and revised tariffs and
rates implementing the foregoing.
2. Retail customer choice will be phased in as follows: up to 33%
of all customer load on January 1, 1999; up to 66% of all customer load
on January 1, 2000; and 100% of all customer load by January 1, 2001.
The PUC can delay this schedule by two 6-month periods, if necessary.
3. Electric distribution companies will be the suppliers of last
resort. The PUC will ensure that adequate generation reserves exist to
maintain reliable electric service. The utility's transmission and
distribution system must continue to meet established national industry
standards for installation, maintenance and safety.
4. Retail rates will be capped for at least 4-1/2 years for
transmission and distribution charges and for as long as 9 years for
generation charges. A utility may be exempted from the caps only under
very specific circumstances, e.g., the need for extraordinary rate
relief, non-utility generation contracts, changes in laws or regulations,
required upgrades or repairs to the transmission system, increases in
fuel prices or purchased power prices, nuclear power plant
decommissioning costs or taxes.
5. Pennsylvania utilities are permitted to recover PUC-approved
transition or stranded costs over several years; however, the utilities
are required to mitigate these costs to the extent practicable. Also,
the recovery of these costs must not result in cost shifting among
customers.
6. "Transition bonds" may be issued to pay the stranded costs.
This procedure involves the following elements: (i) the sale or transfer
by the utility of the right to recover a portion of its stranded costs to
a financing entity -- for a lump-sum payment of cash -- that could be
used to retire the utility's debt and equity and to pay stranded costs;
(ii) the issuance by the financing entity of "transition bonds"; (iii)
the collection by the utility of "transition charges" on customers'
bills, which are transferred to the financing entity to pay the principal
and interest and other related costs of issuing the transition bonds;
(iv) upon the imposition of transition charges on customers' bills, the
utility must reduce customer rates by an amount equal to the revenue
requirements of the stranded costs financed with transition bonds; and
(v) a PUC "qualified rate order," which would be irrevocable, approving
the collection of the transition charges. This irrevocability would
protect the cash flow stream used to repay the transition bonds.
7. All generation suppliers must demonstrate financial and
technical fitness and must be licensed by the PUC. Cooperatives and
municipalities may participate in retail competition but are not subject
to the provisions of the legislation, unless they elect to serve
customers outside their franchise territories.
8. State tax revenues paid by utilities and generation suppliers
are to remain at their current level, to protect against any state
revenue loss from restructuring.
9. The PUC will monitor electricity markets for anti-competitive or
discriminatory conduct, and will consider the impact of mergers and
acquisitions on these markets.
PP&L is formulating its restructuring plan, which it currently plans
to file on April 1, 1997. Under the legislation, the PUC must take
action on the restructuring plan within nine months of the filing date.
PP&L is unable to predict the ultimate effect of this legislation on its
financial position, results of operation or its need to issue securities
to meet future capital requirements.
Rate Matters
Base Rate Filing with the PUC
In September 1995, the PUC issued a final order with respect to the
base rate case filed by PP&L in December 1994. The PUC Decision
increased PUC jurisdictional rates by about $85 million annually, or
3.8%. The PUC Decision permitted the levelization of depreciation
expense for the Susquehanna station, recovery of retiree health care
costs and costs of the 1994 voluntary early retirement program and
revised costs to decommission Susquehanna SES. The order also permitted
recovery of deferred operating and capital costs, net of energy savings,
for Susquehanna Unit 2 but disallowed similar costs for Unit No. 1. The
PUC also ruled that PP&L could not include in the ECR the cost of
capacity billed to other utilities after the contractual arrangements
with these utilities expire. The OCA has appealed certain aspects of the
PUC Decision to the Commonwealth Court. PP&L cannot predict the final
outcome in this matter.
Energy Cost Rate Issues
Through December 1996, PP&L's PUC tariffs contained an ECR under
which customers were billed an estimated amount for fuel and other energy
costs. Any difference between the actual and estimated amount for such
costs was collected from, or refunded to, customers in a subsequent
period.
In December 1996, the PUC issued a tentative order permitting the
roll-in of PP&L's ECR into base rates. The order also authorized PP&L to
defer certain unrecovered energy costs as regulatory assets and seek
recovery for these costs in the competitive transition charge described
above under "Pennsylvania Restructuring Legislation."
In 1994, the PUC reduced PP&L's ECR claim by $16 million for costs
associated with replacement power during a Susquehanna Unit 1 outage for
refueling and repairs. PP&L's appeal of that reduction was settled in
1995, and as a result PP&L recorded a net credit to income of $10
million.
Special Base Rate Credit Adjustment
Beginning in April 1991, PP&L's PUC tariff included a SBRCA rider
which provided for credits to retail customers' bills for three
nonrecurring items. They were (i) the use of an inventory method of
accounting for certain power plant spare parts (this credit expired as of
April 1, 1996); (ii) the sale of capacity and related energy from PP&L's
wholly owned coal-fired stations to Atlantic (this credit was rolled into
retail base rates at Docket No. R-00943271 and was removed from the SBRCA
effective in September 1995); and (iii) the proceeds from a settlement of
outstanding contract claims arising from construction of the Susquehanna
station (this credit is due to expire in the second quarter of 1997).
State Tax Adjustment Surcharge
Through December 1996, PP&L's PUC tariffs included a rate mechanism
to adjust customer bills for changes in certain state taxes. The STAS
had no effect on net income. In December 1996, the PUC issued a
tentative order permitting the roll-in of STAS into base rates.
FERC-Major Utilities' Rates
In August 1995, JCP&L filed a complaint against PP&L with the FERC
regarding billings under the bulk power sales agreement between the
parties. In its complaint, JCP&L alleges that PP&L inappropriately
allocated certain costs to JCP&L that should not have been billed and
seeks other adjustments. JCP&L is seeking both refunds (with interest)
in an unspecified amount and an amendment to the agreement. PP&L has
denied JCP&L's allegations and requested that FERC dismiss the complaint.
PP&L cannot predict the final outcome of this proceeding.
In October 1995, FERC allowed PP&L to begin charging, subject to
refund, four major electric utility customers of PP&L (Atlantic, BG&E,
JCP&L and UGI) for certain PP&L costs for post-retirement benefits other
than pensions. In that same proceeding, FERC opened to review all other
charges by PP&L under its contracts with those customers. JCP&L raised a
number of objections to PP&L's charges. In November 1996, an
Administrative Law Judge ruled in PP&L's favor on all issues. The case
currently is pending before the FERC.
In January 1996, PP&L filed a request with the FERC to incorporate a
change in the method of calculating depreciation under its contracts with
these same four major utilities. PP&L also sought to increase the
charges to those customers for nuclear decommissioning costs. This case
was settled in principle with the four customers in January 1997, under
terms which would have no material effect on PP&L. Formal settlement
documents are expected to be filed with the FERC by March 1997.
See Note 4 for more information regarding these contracts.
Power Purchases
Power purchases in 1996 increased $61 million from 1995 and remained
essentially unchanged in 1995 from 1994. The increase in 1996 was
primarily due to greater quantities of power purchased from PJM and other
utilities, increased customer demand, planned and unplanned outages of
PP&L generating stations, and attractive market prices for energy.
Income Taxes
Income tax expense for 1996 decreased $33 million, or 11.3%, from
1995. This was primarily due to a decrease in pre-tax book income of $25
million, and the recording of the tax benefits of research and
experimental tax credits and deductions of $5 million.
Income tax expense in 1995 increased $106 million, or 59%, from
1994. This increase was primarily due to a higher pre-tax book income of
$212 million, one-time charges for expensing deferred tax benefits of $12
million as a result of the PUC Decision and recognizing deferred tax
liabilities of $4 million relative to undeveloped coal reserves.
Partially offsetting these increases was an $8 million decrease resulting
from the reduction of the Pa. CNI rate from 11.99% for 1994 to 9.99% for
1995.
Other Operation, Maintenance and Depreciation
Other operation expenses increased $40 million in 1996 and $29
million in 1995. However, other operation expenses were impacted by the
PUC Decision, which prescribed the treatment of postretirement benefit
costs, the amortization of VERP expenses and other issues. After
eliminating the effects of these rate case issues from both years, other
operation expenses decreased by $6 million in 1996, versus an increase of
$54 million in 1995.
The $6 million decrease in 1996 reflects a $24 million decline in
workforce reduction expenses and a $5 million decrease in the provision
for uncollectible customer accounts. These decreases were partially
offset by a 1996 accrual of $9 million for licensing and design basis
projects committed for the Susquehanna station, an $8 million increase in
pension and medical expenses, and a net increase of $6 million relating
to higher lease expenses and outside litigation costs.
The $54 million increase in 1995 was primarily due to $31 million
for PP&L's workforce reductions, an $18 million increase in computer
support designed to enhance productivity, an $8 million increase in the
provision for uncollectible accounts, and $6 million of higher leasing
costs. These increases were partially offset by a $17 million decline in
postretirement benefits costs in 1995 versus 1994. The 1994
postretirement benefits costs included the write-off of FAS 106 costs,
based on the May 1994 Commonwealth Court decision that reversed a
previous PUC order permitting the deferral of these costs.
Maintenance expenses increased $5 million in 1996 and $6 million in
1995. The 1996 maintenance expenses were $21 million less than in 1995
due to the expiration of a credit to income for a change in inventory
practices. See "Rate Matters" for a discussion of the SBRCA. In
addition, 1996 contracted maintenance costs were about $10 million higher
at the fossil generating stations due to unplanned outages. These items
were partially offset by a $19 million charge recorded in 1995 for
obsolete and excess inventory at PP&L's generating stations, and a $5
million decrease in the amortization of deferred refueling and inspection
outage costs at the Susquehanna station. The $6 million increase in 1995
resulted from the $19 million charge for obsolete and excess inventory,
offset by $13 million in lower maintenance costs reflecting continued
efforts to reduce costs and achieve longer operating cycles at PP&L's
generating stations.
Depreciation expense increased $14 million in 1996 and $34 million
in 1995. These increases resulted from new property, plant and equipment
placed in service, as well as higher depreciation expense for the
Susquehanna station. The PUC Decision provided for an increase in
Susquehanna depreciation applicable to property placed in service prior
to January 1, 1989. The order provided for the Susquehanna property to
be depreciated at an annual level of $173 million from October 1, 1995 to
December 31, 1998, after which depreciation is scheduled to decline by
$71 million annually.
Voluntary Early Retirement Program
As part of its continuing efforts to reduce costs, PP&L offered a
VERP to 851 employees who were age 55 or older by December 31, 1994. A
total of 640 employees elected to retire under the program, at a total
cost of $76 million. The VERP provided for a lump sum payment based on
an employee's years of service, no reduction in retirement benefits for
age, and supplemental monthly payments. PP&L recorded the cost of this
program as a charge against income in the fourth quarter of 1994, which
reduced net income by $43 million, or 28 cents per share of common stock.
As a result of the PUC Decision, PP&L was allowed to recover through
customer rates the PUC-jurisdictional amount, $66 million, of the cost of
its VERP over a period of five years. Consequently, PP&L recorded a $38
million after-tax credit to income, or 24 cents per share of common
stock, in the third quarter of 1995 to reverse the PUC-jurisdictional
portion of the charge for this program that was recorded in the fourth
quarter of 1994. The estimated annual savings of $35 million from this
program also are included in rates.
Other Income and (Deductions) - Net
Other income and deductions improved in 1996 due to the equity
earnings from PMDC's investment in SWEB, as well as gains on the sale of
investment securities by PP&L. Other income and deductions in 1995
reflected a gain on the sale of a PP&L subsidiary's undeveloped coal
reserves, offset by the write-off of Susquehanna Unit 1 deferred
operating expenses and carrying costs (net of energy savings) resulting
from the PUC Decision, and by expenses associated with evaluating and
responding to PECO's unsolicited proposals to acquire PP&L Resources.
Other income and deductions in 1994 were adversely impacted by the
writedown of the undeveloped coal reserves which were sold in 1995.
Financing Costs
In 1996, PP&L Resources continued to take advantage of opportunities
to reduce its financing costs by retiring long-term debt with the
proceeds from the sale of securities at a lower cost and the issuance of
common stock through its DRIP. Interest on long-term debt and dividends
on preferred stock decreased from $260 million in 1993 to $235 million in
1996, for a total decrease of $25 million.
Financial Condition
Capital Expenditure Requirements
The schedule below shows PP&L's current capital expenditure
projections for the years 1997-2001 and actual spending for the year
1996.
PP&L's Capital Expenditure Requirements (a)
Actual -------------Projected----------------
1996 1997 1998 1999 2000 2001
(Millions of Dollars)
Construction expenditures
Generating facilities $ 86 $ 65 $ 81 $ 53 $ 76 $ 68
Transmission and
distribution facilities 124 120 126 123 147 142
Environmental 16 16 21 34 3 3
Other 39 57 44 20 17 17
Total Construction
Expenditures 265 258 272 230 243 230
Nuclear fuel owned and
leased 98 68 71 67 71 73
Other leased property 19 24 22 22 22 22
Total Capital Expen-
ditures $382 $350 $365 $319 $336 $325
(a) Construction expenditures include AFUDC which is expected to be less
than $10 million in each of the years 1997-2001.
PP&L's capital expenditure projections for the years 1997-2001 total
about $1.7 billion. Capital expenditure plans are revised from time to
time to reflect changes in conditions.
Financing and Liquidity
Net cash provided by operating activities for 1996 increased $101
million over 1995. This increase is primarily due to higher operating
revenues, which reflects the 3.8% base rate increase from the PUC
Decision as well as higher sales to all customer classes. Lower interest
expense also contributed to the increase. These increases were partially
offset by higher fuel inventories. Net cash provided by operating
activities between 1995 and 1994 was essentially unchanged.
Net cash used in investing activities was $119 million higher in
1996 than 1995. This increase was primarily due to PMDC's increased
investments in electric energy projects, partially offset by lower
construction expenditures by PP&L. Net cash used in investing activities
was $184 million lower in 1995 than 1994. This decrease was due
primarily to lower construction expenditures by PP&L and the proceeds
from the sale of coal reserves.
In 1996, PP&L sold $116 million of unsecured notes while PP&L
Resources issued $77 million of common stock of which $70 million was
issued through its DRIP and the remaining $7 million issued to PP&L's
ESOP. During the year, PP&L retired $145 million of long-term debt.
For the years 1994-1996, PP&L issued $1.1 billion of long-term debt
and $80 million of preferred stock. For the same period, PP&L and PP&L
Resources issued a total of $228 million of common stock. Proceeds from
security sales were used to retire $923 million of long-term debt and
$120 million of preferred stock to lower PP&L's financing costs, reduce
short-term debt and finance construction expenditures. During the years
1994-1996, PP&L also incurred $249 million of obligations under capital
leases (primarily nuclear fuel).
PP&L Resources established a revolving credit facility in the second
quarter of 1996 in the amount of $300 million. PP&L Resources used $190
million of borrowings under this revolving credit facility to fund a PMDC
subsidiary's acquisition of a 25 percent interest in SWEB. Borrowings of
$135 million were outstanding under this credit facility at December 31,
1996. See Note 9 for further information.
To enhance financing flexibility, PP&L maintains a $250 million
revolving credit arrangement with a group of banks, which is used
principally as a back-up for PP&L's commercial paper. In addition, $45
million in credit arrangements are maintained with a group of banks to
provide back-up for PP&L's commercial paper and short-term borrowings of
certain of its subsidiaries. No borrowings were outstanding at December
31, 1996 under these arrangements. See Financial Note 9 for further
information. In January 1997, PP&L requested FERC authorization to
issue, from time to time, up to $750 million of short-term debt to
provide funding for working capital requirements, the maturity of long-
term debt, the early retirement of long-term debt and the refinancing of
other securities.
PP&L plans to redeem four series of its first mortgage bonds on
April 1, 1997. Three of the series of first mortgage bonds, which have a
total principal amount of $180 million, will be redeemed under the
maintenance and replacement fund provisions of these bonds. The fourth
series, having a principal amount of $30 million, will be redeemed under
the optional redemption provisions of these bonds. The redemption of
these series of bonds is part of PP&L's plan to reduce its overall cost
of financing.
PP&L has registered with the SEC to issue Junior Subordinated
Deferrable Interest Debentures to support a $100 million public offering
of Trust Originated Preferred Securities. The proceeds of this issuance
will be used for general corporate purposes, including the refinancing of
outstanding securities.
The funds required by PP&L Resources during 1997 to retire the
borrowings outstanding under its revolving credit facility (described
above), to permit PMDC to complete the acquisition of a 25.05 percent
interest in Emel and for investment in other PMDC projects (see
"Unregulated Investments") are expected to be provided through the
issuance of about $170 million of debt pursuant to a medium-term note
program that PP&L Resources plans to put in place in the second quarter
of 1997 and the issuance of about $70 million of common stock under the
DRIP. The liquidation of temporary cash investments of about $57 million
is expected to provide the balance of the funds necessary for PMDC
investments during 1997.
It is currently expected that the DRIP will be continued after 1997
as necessary to provide equity funding for PMDC investments, and that
PP&L's ESOP will provide proceeds of about $8 million in each of the
years 1997 through 2001.
Financial Indicators
PP&L Resources earned a 12.30% return on average common equity
during 1996, a decrease from the 12.81% earned in 1995. Excluding one-
time adjustments, as described in "Earnings", the return on average
common equity was 12.11% during 1996, an increase from the 11.96% earned
in 1995. The ratio of PP&L Resources' pre-tax income to interest charges
was 3.55 for 1996, virtually unchanged from 1995. Excluding one-time
adjustments, the ratio of PP&L Resources' pre-tax income to interest
charges was 3.53 in 1996, an increase from the 3.48 in 1995. The annual
per share dividend rate on common stock remained unchanged at $1.67 per
share. The book value per share of common stock increased 3.6% from
$16.29 at the end of 1995 to $16.87 at the end of 1996. The ratio of the
market price to book value of common stock was 136% at the end of 1996
compared with 153% at the end of 1995.
Environmental Matters
Air
The Clean Air Act deals, in part, with acid rain, attainment of
federal ambient ozone standards and toxic air emissions. PP&L has
complied with the Phase I acid rain provisions, required to be
implemented by 1995, by installing continuous emission monitors on all
units, burning lower sulfur coal and installing low nitrogen oxide
burners on certain units. To comply with the year 2000 acid rain
provisions, PP&L plans to purchase lower sulfur coal and use banked or
purchased emission allowances instead of installing FGD equipment on its
wholly-owned units.
PP&L has met the initial ambient ozone requirements identified in
Title I of the Clean Air Act by reducing nitrogen oxide emissions by 40%
through the use of low nitrogen oxide burners. Further seasonal (i.e., 5
month) nitrogen oxide reductions to 55% and 75% of pre-Clean Air Act
levels for 1999 and 2003, respectively, are specified under the Northeast
Ozone Transport Region's Memorandum of Understanding.
The Clean Air Act requires EPA to study the health effects of
hazardous air emissions from power plants and other sources. In this
regard, in November 1996 the EPA proposed new national standards for
ambient levels of ground-level ozone and fine particulates. The new
standards, if implemented, may result in EPA mandating additional NOx and
SO2 reductions from utility boilers in the 2005-2010 timeframe. NOx
reductions to meet the new ozone standard are likely to be in the range
of the 75% seasonal NOx reductions that already are required for PP&L
under the Memorandum of Understanding in 2003 and beyond. However, to
meet the new fine particulate standards, EPA may mandate additional SO2
reductions significantly greater than those now planned for the acid rain
program and extend the NOx reductions required by the Memorandum of
Understanding from seasonal to year-round.
Expenditures to meet the year 1999 Memorandum of Understanding
requirements are included in the table of projected construction
expenditures in the section "Financial Condition - Capital Expenditure
Requirements". PP&L currently estimates that additional capital
expenditures and operating costs for environmental compliance under the
Clean Air Act will be incurred beyond 2001 in amounts which are not now
determinable but could be material.
Water and Residual Waste
DEP residual waste regulations require PP&L to obtain permits for
existing ash basins at all of its coal-fired generating stations as
disposal facilities. Ash basins that cannot be permitted are required to
close by July 1997. Any groundwater contamination caused by the basins
must also be addressed. Any new ash disposal facility must meet the
rigid siting and design standards set forth in the regulations.
To address the DEP regulations, PP&L is moving forward with plans to
install dry fly ash handling systems at its power stations.
Groundwater degradation related to fuel oil leakage from underground
facilities and seepage from coal refuse disposal areas and coal storage
piles has been identified at several PP&L generating stations. Remedial
work is substantially completed at two generating stations. At this
time, there is no indication that remedial work will be required at other
PP&L generating stations.
The current Montour station NPDES permit and proposed Holtwood
station NPDES permit contain stringent limits for certain toxic metals
and increased monitoring requirements. Depending on the results of toxic
reduction studies in progress, additional water treatment facilities may
be needed at these stations.
Capital expenditures through the year 2001 to comply with the
residual waste regulations, correct groundwater degradation at fossil-
fueled generating stations, and address waste water control at PP&L
facilities are included in the table of construction expenditures in the
section "Financial Condition - Capital Expenditure Requirements". PP&L
currently estimates that $12 million of additional capital expenditures
may be required in the next four years and $67 million of additional
capital expenditures could be required beyond the year 2001. Actions
taken to correct groundwater degradation, to comply with the DEP's
regulations and to address waste water control are also expected to
result in increased operating costs in amounts which are not now
determinable but could be material.
Superfund and Other Remediation
PP&L has signed a consent order with the DEP to address a number of
sites where PP&L may be liable for remediation of contamination. This
may include potential PCB contamination at certain PP&L substations and
pole sites; potential contamination at a number of coal gas manufacturing
facilities formerly owned and operated by PP&L; and oil or other
contamination which may exist at some of PP&L's former generating
facilities.
At December 31, 1996, PP&L had accrued $10 million, representing the
amount PP&L can reasonably estimate it will have to spend to remediate
sites involving the removal of hazardous or toxic substances including
those covered by the consent order mentioned above. Future cleanup or
remediation work at sites currently under review, or at sites not
currently identified, may result in material additional operating costs
which PP&L cannot estimate at this time. In addition, certain federal
and state statutes, including Superfund and the Pennsylvania Hazardous
Sites Cleanup Act, empower certain governmental agencies, such as the EPA
and the DEP, to seek compensation from the responsible parties for the
lost value of damaged natural resources. The EPA and the DEP may file
such compensation claims against the parties, including PP&L, held
responsible for cleanup of such sites. Such natural resource damage
claims against PP&L could result in material additional liabilities.
Other Environmental Matters
In addition to the issues discussed above, PP&L may be required to
modify, replace or cease operating certain facilities to comply with
other statutes, regulations and actions by regulatory bodies or courts
involving environmental matters, including the areas of water and air
quality, hazardous and solid waste handling and disposal, toxic
substances and electric and magnetic fields. In this regard, PP&L also
may incur capital expenditures, operating expenses and other costs in
amounts which are not now determinable, but may be material.
Increasing Competition
Background
The electric utility industry has experienced and will continue to
experience a significant increase in the level of competition in the
energy supply market. PP&L has publicly expressed its support for full
customer choice of electricity suppliers for all customer classes. PP&L
is actively involved in efforts at both the state and federal levels to
encourage a smooth transition to full competition. PP&L believes that
this transition to full competition should provide for the recovery of a
utility's stranded costs, which are generation-related costs that
traditionally would be recoverable in a regulated environment, but which
may not be recoverable in a competitive electric generation market.
Pennsylvania Activities
Reference is made to "Pennsylvania Restructuring Legislation" for a
discussion of the recent Pennsylvania restructuring legislation and
PP&L's planned PUC filings pursuant to that legislation.
In response to a July 1996 PUC Report on achieving retail
competition in Pennsylvania, PP&L in October 1996 became the first
Pennsylvania utility to file for PUC approval of a retail pilot program.
Under this program, approximately 54,000 PP&L residential, commercial,
and industrial customers -- representing approximately 5% of PP&L's
average peak load -- will have an opportunity to purchase energy from
alternative suppliers. In January 1997, the PUC issued final guidelines
for retail access pilot programs. Those guidelines require each major
electric utility in Pennsylvania to file a proposed pilot program in
accordance with the guidelines by March 1, 1997. PP&L is currently
evaluating the impact of the guidelines on its proposed pilot program and
will respond, as appropriate, by March 1, 1997.
Under its proposed pilot program, PP&L initially will provide all
back-up services and customer service. Other utilities may participate
in PP&L's program as suppliers if they offer this same opportunity for
PP&L to participate in their programs.
Federal Activities
Legislation has been introduced in the U.S. Congress that would give
all retail customers the right to choose among competitive suppliers of
electricity as early as 2000.
In addition, in April 1996 the FERC adopted rules on competition in
the wholesale electricity market primarily dealing with open access to
transmission lines, recovery of stranded costs, and information systems
for displaying available transmission capability (FERC Orders 888 and
889). These rules required all electric utilities to file open access
transmission tariffs by July 9, 1996. The tariffs must offer point-to-
point and network services, as well as ancillary services. A utility
must offer these services to all eligible wholesale customers on a basis
comparable to the services the utility provides to itself. A utility
must take service under its open access transmission tariff for its own
wholesale sales and purchases. The rules do not abrogate existing
transmission agreements.
The rules also provide that utilities are entitled to recover from
their wholesale customers all "legitimate, verifiable, prudently incurred
stranded costs." The FERC has provided recovery mechanisms for wholesale
stranded costs, including stranded costs resulting from municipalization.
Wholesale contracts signed after July 11, 1994 must contain explicit
provisions addressing recovery of stranded costs. For contracts signed
before this date, a utility may seek recovery if it can show that it had
a reasonable expectation of continuing to serve the customer after the
contract term.
Finally, the rules require that a power pool-wide open access
transmission tariff and modified bilateral coordination agreements
reflecting the removal of discriminatory provisions be filed by December
31, 1996 and implemented by March 1, 1997. In addition, utilities must
separate their transmission and power marketing functions, and they must
implement an electronic bulletin board for transmission capacity
information by January 3, 1997.
Under the new rules, 16 small utilities which have contracts with
PP&L signed before July 11, 1994, requested and were provided with PP&L's
current estimate of its stranded costs applicable to these customers if
they were to terminate their contracts in 1999. Based upon a formula set
forth in FERC Order 888 and applicable only to wholesale customers, and
based upon data unique to the contracts between PP&L and these customers,
PP&L estimated that the stranded costs associated with service to these
wholesale customers would be approximately $95 million. This estimate
was subsequently raised to approximately $125 million. As a result of a
protest by these parties against such recovery, the FERC has scheduled
hearings in the spring of 1997 regarding PP&L's right to recover these
stranded costs.
In July 1996, PP&L filed the open access transmission tariff
required by FERC Order 888. Under the new FERC rules, that tariff became
effective on July 9, 1996, subject to refund. Several parties, including
the small utilities, moved to intervene and protested the new rates.
These matters may be set for hearing by the FERC.
In addition, PP&L has made the required informational filing which
showed unbundled generation and transmission components of its billing to
existing wholesale customers. The FERC has accepted this filing.
In July 1996, all of the PJM companies, except PECO, submitted a
comprehensive filing for FERC approval of changes to the PJM to
accommodate greater competition and broader participation. The filing
would (i) establish pool-wide transmission service tariffs to provide
comparable, open-access service for all wholesale transactions throughout
PJM; (ii) establish a price-based bidding system, with the resulting
regional energy market open to all wholesale buyers and sellers of power;
(iii) create a not-for-profit corporate entity in the form of an ISO
responsible for impartial daily management and administration of the
energy market and the transmission system; and (iv) develop an enhanced
pool-wide planning function to be administered by the ISO. In August
1996, PECO filed a separate PJM restructuring proposal with the FERC,
which differed significantly in several areas from the other companies'
filing.
In November 1996, the FERC rejected both proposals for restructuring
the PJM for several reasons, the principal one being its view that the
ISO was not sufficiently independent. FERC ordered the PJM companies to
file a pool-wide tariff and modified coordination agreements reflecting
the removal of provisions which FERC considered discriminatory against
non-PJM members. In December 1996, all members of PJM submitted an
interim compliance filing with the FERC, which proposed a pool-wide pro
forma transmission tariff and a revised interconnection agreement and
transmission owners agreement designed to accommodate open, non-
discriminatory participation in the pool. The PJM companies currently
are working with multiple stakeholders to develop a consensus package for
the comprehensive restructuring of the PJM, which is expected to be filed
with the FERC in May 1997.
Unregulated Investments
PMDC continues to pursue opportunities to develop and acquire
electric generation, transmission and distribution facilities in the
United States and abroad.
As of December 31, 1996, PMDC had investments and commitments in the
amount of approximately $250 million in distribution, transmission and
generation facilities in the United Kingdom, Bolivia, Peru, Argentina,
Spain and Portugal. The principal investment to date is its July 1, 1996
purchase of a 25 percent interest in SWEB, a British regional electric
utility company, for approximately $189 million.
In addition, PMDC is negotiating definitive agreements for the
purchase of a 25.05 percent interest in Empresas Emel S.A., a Chilean
holding company. Emel is the third largest distributor of electricity in
Chile, and the second largest in Bolivia. Emel, through its controlling
interests in six electric distribution companies, serves a total of
535,000 customers in Chile and Bolivia. Under the terms of the
agreements being negotiated, PMDC would purchase existing and new shares
of Emel for about $120 million in mid-1997.
See Financial Note 14 for additional information on the financing of
these investments.
PP&L Resources' other unregulated subsidiary, Spectrum, offers
energy-related products and services to PP&L's existing customers and to
others outside of PP&L's service territory. Other subsidiaries may be
formed by PP&L Resources to take advantage of new business opportunities.
<PAGE>
(Address and phone number appears here)
Thirty South Seventeenth Street
Philadelphia, PA 19103-4094
Telephone 215 575 5000
(Price Waterhouse LLP logo appears here)
Report of Independent Accountants
February 3, 1997
To the Shareowners and Board of Directors of
PP&L Resources, Inc. and to the Shareowners and
Board of Directors of Pennsylvania Power & Light Company
In our opinion, the accompanying consolidated financial statements listed
in the index appearing under Item 8 on page 22, present fairly, in all
material respects, the consolidated financial position of PP&L Resources,
Inc. and its subsidiaries (PP&L Resources) at December 31, 1996 and 1995,
and the consolidated results of their operations and their cash flows for
each of the two years then ended and the consolidated financial position of
Pennsylvania Power & Light Company and its subsidiaries (PP&L) at December
31, 1996 and 1995, and the consolidated results of their operations and their
cash flows for each of the two years then ended, in conformity with
generally accepted accounting principles. These financial statements are
the responsibility of management of PP&L Resources and PP&L; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance
with generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above. The consolidated
financial statements of PP&L for the year ended December 31, 1994, prior to
restatement (not presented separately herein), were audited by other
independent accountants whose report dated February 3, 1995 expressed an
unqualified opinion on those financial statements.
Effective April 27, 1995, PP&L Resources, which had been a wholly-owned
subsidiary of PP&L, became the parent holding company of PP&L. The
accompanying consolidated financial statements reflect this reorganization
on a retroactive basis. We have audited the adjustments that were applied
to restate the 1994 PP&L consolidated financial statements. In our
opinion, such adjustments are appropriate and have been properly applied to
the 1994 PP&L consolidated financial statements.
(Signed) Price Waterhouse LLP
PRICE WATERHOUSE LLP
<PAGE>
(Deloitte & Touche LLP Logo appears here)
(Address and phone number appear here)
Two Hilton Court
P.O. Box 319
Parsippany, New Jersey 07054-0319
Telephone: (201) 631-7000
Facsimile: (201) 631-7459
INDEPENDENT AUDITORS' REPORT
Pennsylvania Power & Light Company:
We have audited the consolidated statements of income, shareowners' common
equity, and cash flows of Pennsylvania Power & Light Company and its
subsidiaries for the year ended December 31, 1994, prior to restatement
and not presented separately herein. Our audit also included the
financial statement schedule for the year ended December 31, 1994 listed
in the Index at Item 8. These financial statements and the financial
statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statements
and financial statement schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audit
provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements, prior to
restatement and not presented separately herein, present fairly, in all
material respects, the results of operations of Pennsylvania Power & Light
Company and its subsidiaries and their cash flows for the year ended
December 31, 1994 in conformity with generally accepted accounting
principles. Also, in our opinion, the financial statement schedule for
the year ended December 31, 1994, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
(Signed) Deloitte & Touche LLP
February 3, 1995
(Deloitte Touche
Tohmatsu
International logo appears here)
<PAGE>
PP&L Resources, Inc.
Management's Report on Responsibility for Financial Statements
The management of PP&L Resources, Inc. is responsible for the
preparation, integrity and objectivity of the consolidated financial
statements and all other sections of this annual report. The financial
statements were prepared in accordance with generally accepted accounting
principles and the Uniform System of Accounts prescribed by the Federal
Energy Regulatory Commission. In preparing the financial statements,
management makes informed estimates and judgments of the expected effects
of events and transactions based upon currently available facts and
circumstances. Management believes that the financial statements are free
of material misstatement and present fairly the financial position, results
of operations and cash flows of PP&L Resources.
PP&L Resources' consolidated financial statements have been audited by
Price Waterhouse LLP (Price Waterhouse), independent certified public
accountants, whose report with respect to the financial statements appears
on page 41. Price Waterhouse's appointment as auditors was previously
ratified by the shareowners. Management has made available to Price
Waterhouse all PP&L Resources' financial records and related data, as well
as the minutes of shareowners' and directors' meetings. Management
believes that all representations made to Price Waterhouse during its audit
were valid and appropriate.
PP&L Resources maintains a system of internal control designed to
provide reasonable, but not absolute, assurance as to the integrity and
reliability of the financial statements, the protection of assets from
unauthorized use or disposition and the prevention and detection of
fraudulent financial reporting. The concept of reasonable assurance
recognizes that the cost of a system of internal control should not exceed
the benefits derived and that there are inherent limitations in the
effectiveness of any system of internal control.
Fundamental to the control system is the selection and training of
qualified personnel, an organizational structure that provides appropriate
segregation of duties, the utilization of written policies and procedures
and the continual monitoring of the system for compliance. In addition,
PP&L Resources maintains an internal auditing program to evaluate PP&L
Resources' system of internal control for adequacy, application and
compliance. Management considers the internal auditors' and Price
Waterhouse's recommendations concerning its system of internal control and
has taken actions which are believed to be cost-effective in the
circumstances to respond appropriately to these recommendations.
Management believes that PP&L Resources' system of internal control is
adequate to accomplish the objectives discussed in this report.
The Board of Directors, acting through its Audit and Corporate
Responsibility Committee, oversees management's responsibilities in the
preparation of the financial statements. In performing this function, the
Audit and Corporate Responsibility Committee, which is composed of five
independent directors, meets periodically with management, the internal
auditors and the independent certified public accountants to review the
work of each. The independent certified public accountants and the
internal auditors have free access to the Audit and Corporate
Responsibility Committee and to the Board of Directors, without management
present, to discuss internal accounting control, auditing and financial
reporting matters.
Management also recognizes its responsibility for fostering a strong
ethical climate so that PP&L Resources' affairs are conducted according to
the highest standards of personal and corporate conduct. This
responsibility is characterized and reflected in the business policies and
guidelines of PP&L Resources' operating subsidiaries. These policies and
guidelines address: the necessity of ensuring open communication within
PP&L Resources; potential conflicts of interest; proper procurement
activities; compliance with all applicable laws, including those relating
to financial disclosure; and the confidentiality of proprietary
information.
/s/ William F. Hecht
William F. Hecht
Chairman, President and Chief Executive Officer
/s/ R. E. Hill
R. E. Hill
Senior Vice President - Financial
<PAGE>
Pennsylvania Power & Light Company
Management's Report on Responsibility for Financial Statements
The management of Pennsylvania Power & Light Company is responsible
for the preparation, integrity and objectivity of the consolidated
financial statements and all other sections of this annual report. The
financial statements were prepared in accordance with generally accepted
accounting principles and the Uniform System of Accounts prescribed by the
Federal Energy Regulatory Commission. In preparing the financial
statements, management makes informed estimates and judgments of the
expected effects of events and transactions based upon currently available
facts and circumstances. Management believes that the financial statements
are free of material misstatement and present fairly the financial
position, results of operations and cash flows of PP&L.
PP&L's consolidated financial statements have been audited by Price
Waterhouse LLP (Price Waterhouse), independent certified public
accountants, whose report with respect to the financial statements appears
on page 41. Price Waterhouse's appointment as auditors was previously
ratified by the shareowners. Management has made available to Price
Waterhouse all PP&L's financial records and related data, as well as the
minutes of shareowners' and directors' meetings. Management believes that
all representations made to Price Waterhouse during its audit were valid
and appropriate.
PP&L maintains a system of internal control designed to provide
reasonable, but not absolute, assurance as to the integrity and reliability
of the financial statements, the protection of assets from unauthorized use
or disposition and the prevention and detection of fraudulent financial
reporting. The concept of reasonable assurance recognizes that the cost of
a system of internal control should not exceed the benefits derived and
that there are inherent limitations in the effectiveness of any system of
internal control.
Fundamental to the control system is the selection and training of
qualified personnel, an organizational structure that provides appropriate
segregation of duties, the utilization of written policies and procedures
and the continual monitoring of the system for compliance. In addition,
PP&L maintains an internal auditing program to evaluate PP&L's system of
internal control for adequacy, application and compliance. Management
considers the internal auditors' and Price Waterhouse's recommendations
concerning its system of internal control and has taken actions which are
believed to be cost-effective in the circumstances to respond appropriately
to these recommendations. Management believes that PP&L's system of
internal control is adequate to accomplish the objectives discussed in this
report.
The Board of Directors, acting through PP&L Resources' Audit and
Corporate Responsibility Committee, oversees management's responsibilities
in the preparation of the financial statements. In performing this
function, the Audit and Corporate Responsibility Committee, which is
composed of five independent directors, meets periodically with management,
the internal auditors and the independent certified public accountants to
review the work of each. The independent certified public accountants and
the internal auditors have free access to PP&L Resources' Audit and
Corporate Responsibility Committee and to the Board of Directors, without
management present, to discuss internal accounting control, auditing and
financial reporting matters.
Management also recognizes its responsibility for fostering a strong
ethical climate so that PP&L's affairs are conducted according to the
highest standards of personal and corporate conduct. This responsibility
is characterized and reflected in PP&L's business policies and guidelines.
These policies and guidelines address: the necessity of ensuring open
communication within PP&L; potential conflicts of interest; proper
procurement activities; compliance with all applicable laws, including
those relating to financial disclosure; and the confidentiality of
proprietary information.
/s/ William F. Hecht
William F. Hecht
Chairman, President and Chief Executive Officer
/s/ R. E. Hill
R. E. Hill
Senior Vice President - Financial
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF INCOME
PP&L Resources, Inc. and Subsidiaries
(Millions of Dollars, except per share data)
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Operating Revenues (Notes 1, 3 and 4)................................. $2,910 $2,752 $2,725
Operating Expenses
Operation
Fuel..................................................................... 448 451 472
Power purchases.......................................................... 352 291 287
Other.................................................................... 544 504 475
Maintenance................................................................ 191 186 180
Depreciation (including amortized depreciation) (Notes
1 and 8) ................................................................ 363 349 315
Income taxes (Note 5)...................................................... 253 262 218
Taxes, other than income (Note 5).......................................... 203 201 201
Voluntary early retirement program (Note 11) ...................................... (66) 76
2,354 2,178 2,224
Operating Income......................................... 556 574 501
Other Income and (Deductions) - Net 21 2 (30)
Income Before Interest Charges and Dividends on
Preferred Stock ........................................................... 577 576 471
Interest Charges
Long-term debt......................................... 207 213 214
Short-term debt and other.................................................. 13 12 13
220 225 227
Preferred Stock Dividend Requirements........................................ 28 28 28
Net Income............................................... $329 $323 $216
Earnings Per Share of Common Stock (a)................... $2.05 $2.05 $1.41
Average Number of Shares Outstanding (thousands)............................. 161,060 157,649 153,458
Dividends Declared Per Share of Common Stock................................. $1.67 $1.67 $1.67
(a) Based on average number of shares outstanding.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
PP&L Resources, Inc. and Subsidiaries
(Millions of Dollars)
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income............................................ $329 $323 $216
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation............................................................. 366 352 317
Amortization of property under capital leases............................ 86 79 86
Amortization of contract settlement proceeds and
deferred cost of power plant spare parts............................... (15) (37) (38)
Deferred income taxes and investment tax credits........................... 16 (70)
Voluntary early retirement program ................................................... (66) 76
Write-down of coal reserves .............................................................. 74
Change in current assets and current liabilities
Fuel inventories....................................................... (14) 43 (30)
Other.................................................................. (35) (30) (5)
Other operating activities -- net........................................ 76 12 85
Net cash provided by operating activities............................ 793 692 711
Cash Flows From Investing Activities
Property, plant and equipment expenditures............ (360) (403) (505)
Proceeds from sale of nuclear fuel to trust................................ 93 44 36
Proceeds from sale of coal reserves................................................... 52
Purchases of available-for-sale securities ................................ (600) (303) (204)
Sales and maturities of available-for-sale securities ..................... 631 301 148
Investment in electric energy projects..................................... (201) (12)
Other investing activities -- net.......................................... 5 8 28
Net cash used in investing activities................................ (432) (313) (497)
Cash Flows From Financing Activities
Issuance of long-term debt............................ 116 55 919
Issuance of common stock................................................... 77 81 70
Issuance of preferred stock.................................................................. 80
Retirement of long-term debt............................................... (145) (140) (638)
Retirement of preferred stock .............................................................. (120)
Payments on capital lease obligations...................................... (86) (79) (86)
Common and preferred dividends paid........................................ (296) (290) (284)
Net increase (decrease) in short-term debt................................. 55 15 (128)
Other financing activities -- net.......................................... (1) (11) (25)
Net cash used in financing activities................................ (280) (369) (212)
Net Increase in Cash and
Cash Equivalents............................................................. 81 10 2
Cash and Cash Equivalents at Beginning of Period............................. 20 10 8
Cash and Cash Equivalents at End of Period................................... $101 $20 $10
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for:
Interest (net of amount capitalized)..................................... $213 $218 $200
Income taxes............................................................. $286 $257 $264
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET AT DECEMBER 31
PP&L Resources, Inc. and Subsidiaries
(Millions of Dollars)
<CAPTION>
Assets 1996 1995
<S> <C> <C>
Property, Plant and Equipment
Electric utility plant in service - at original cost........... $9,824 $9,637
Accumulated depreciation (Notes 1 and 8)............................................. (3,337) (3,113)
6,487 6,524
Construction work in progress - at cost ............................................... 172 170
Nuclear fuel owned and leased - net of amortization .................................. 170 134
Other leased property - net of amortization .......................................... 76 85
Electric utility plant - net ........................................................ 6,905 6,913
Other property - (net of depreciation, amortization
and depletion 1996, $54; 1995, $56) (Note 13)........................................ 55 57
6,960 6,970
Investments
Investment in electric energy projects -- at equity (Note 1) .. 224 12
Affiliated companies - at equity (Note 1).............................................. 17 17
Nuclear plant decommissioning trust fund (Notes 1 and 6)............................... 128 109
Financial investments (Notes 1 and 7) ................................................. 133 142
Other-at cost or less (Note 7) ........................................................ 18 9
520 289
Current Assets
Cash and cash equivalents (Note 1) ............................ 101 20
Current financial investments (Notes 1 and 7).......................................... 73 96
Accounts receivable (less reserve: 1996, $25; 1995, $35)
Customers ........................................................................... 196 197
Other ............................................................................... 19 14
Unbilled revenues...................................................................... 85 92
Fuel, materials and supplies - at average cost ........................................ 201 190
Deferred income taxes (Note 5)......................................................... 21 42
Other ................................................................................. 53 42
749 693
Regulatory Assets and Other (Note 8).................................................... 1,407 1,540
$9,636 $9,492
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Liabilities 1996 1995
<S> <C> <C>
Capitalization
Common equity
Common stock ........................................................................ $2 $2
Capital in excess of par value ..................................................... 1,590 1,513
Earnings reinvested.................................................................. 1,143 1,083
Capital stock expense and other ..................................................... 10 (1)
2,745 2,597
Preferred stock
With sinking fund requirements ...................................................... 295 295
Without sinking fund requirements ................................................... 171 171
Long-term debt ........................................................................ 2,802 2,829
6,013 5,892
Current Liabilities
Commercial paper (Note 9) ..................................... 68
Bank loans (Note 9) ................................................................... 144 21
Long-term debt due within one year .................................................... 30 30
Capital lease obligations due within one year ......................................... 81 81
Accounts payable ...................................................................... 133 128
Taxes accrued ......................................................................... 19 47
Interest accrued ...................................................................... 61 66
Dividends payable ..................................................................... 75 74
Other ................................................................................. 78 86
621 601
Deferred Credits and Other Noncurrent Liabilities
Deferred investment tax credits (Note 5) ...................... 209 219
Deferred income taxes (Note 5) ........................................................ 2,052 2,106
Capital lease obligations ............................................................. 166 139
Other (Notes 1, 3, 6, and 10).......................................................... 575 535
3,002 2,999
Commitments and Contingent Liabilities (Note 14) ......................................
$9,636 $9,492
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF SHAREOWNERS' COMMON EQUITY
PP&L Resources, Inc. and Subsidiaries
(Millions of Dollars)
<CAPTION>
Common
Common Stock Capital Capital
Stock Outstand- in Excess Earnings Stock
Outstanding ing of Par Rein- Expense &
Shares (a) Amount Value vested Other
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993... 152,132,089 $2 $1,369 $1,066 $(11)
Net income.......................................... 216
Cash dividends declared on
common stock................................... (257)
Stock redemption costs....................... (1)
Common stock issued (b) ................ 3,349,873 64
Other.................................................... 7
Balance at December 31, 1994... 155,481,962 $2 $1,433 $1,024 $(4)
Net income.......................................... 323
Cash dividends declared on
common stock................................... (264)
Common stock issued (b) ................ 3,921,304 80
Other.................................................... 3
Balance at December 31, 1995... 159,403,266 $2 $1,513 $1,083 $(1)
Net income.......................................... 329
Cash dividends declared on
common stock................................... (269)
Common stock issued (b) ................ 3,262,150 77
Other.................................................... 11
Balance at December 31, 1996... 162,665,416 $2 $1,590 $1,143 $10
<FN>
(a) $.01 par value, 390,000,000 shares authorized.
Each share entitles the holder to one vote on
any question presented to any shareowners' meeting.
(b) Common Stock issued through the ESOP and the DRIP.
</TABLE>
<PAGE>
<TABLE>
Consolidated Statement of Preferred Stock at December 31
PP&L Resources, Inc. and Subsidiaries (a)
(Millions of Dollars)
<CAPTION> Shares
Outstand- Outstand- Outstand-
ing ing ing Shares
1996 1995 1996 Authorized
<S> <C> <C> <C> <C>
PP&L
Preferred Stock - $100 par, cumulative
4-1/2%.................... $53 $53 530,189 629,936
Series............................................... 413 413 4,133,556 10,000,000
$466 $466
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Details of Preferred Stock (b)
<CAPTION>
Optional Sinking Fund
Redemption Provisions (c)
Shares Price Per Shares to be
Outstanding Outstanding Share Redeemed Redemption
1996 1995 1996 1996 Annually Period
<S> <C> <C> <C> <C> <C> <C>
With Sinking Fund Requirements
Series Preferred
5.95% ................... $30 $30 300,000 (d) 300,000 April 2001
6.05%.................... 25 25 250,000 (d) 250,000 April 2002
6.125% .................. 115 115 1,150,000 (d) (e) 2003-2008
6.15%.................... 25 25 250,000 (d) 250,000 April 2003
6.33% ................... 100 100 1,000,000 (d) (f) 2003-2008
$295 $295
Without Sinking Fund Requirements
4-1/2% Preferred........... $53 $53 530,189 $110.00
Series Preferred
3.35%.................... 4 4 41,783 103.50
4.40%.................... 23 23 228,773 102.00
4.60%.................... 6 6 63,000 103.00
6.75%.................... 85 85 850,000 (d)
$171 $171
</TABLE>
<TABLE>
Increases (Decreases) in Preferred Stock
<CAPTION>
1996 1995 1994
Shares Amount Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C>
Series Preferred Stock
5.95% ............................. 300,000 $30
6.05% ............................. 250,000 25
6.125% ...........................
6.15% ............................. 250,000 25
6.33% .............................
6.75% .............................
6.875% ........................... (400,000) (40)
7.00% ............................. (800,000) (80)
Decreases in Preferred Stock represent: (i) the redemption of stock
pursuant to sinking fund requirements; or (ii) shares redeemed
pursuant to optional redemption provisions. There were no issuances or
redemptions of preferred stock in 1996 or 1995.
<FN>
(a) Each share of PP&L's preferred stock entitles the holder to one vote
on any question presented to PP&L's shareowners' meetings. There
were 10,000,000 shares of Resources' preferred stock and 5,000,000
shares of PP&L's preference stock authorized; none were outstanding
at December 31, 1996 and 1995, respectively.
(b) The involuntary liquidation price of the preferred stock is $100 per share.
The optional voluntary liquidation price is the optional redemption price
per share in effect, except for the 4-1/2% Preferred Stock for which such
price is $100 per share (plus in each case any unpaid dividends).
(c) These series of preferred stock are not redeemable prior to the following
years: 5.95%, 2001; 6.05%, 2002; 6.125%, 6.15%, 6.33% and 6.75%, 2003.
(d) Shares to be redeemed annually on October 1 as follows: 2003-2007,
57,500; 2008, 862,500.
(e) Shares to be redeemed annually on July 1 as follows: 2003-2007,
50,000; 2008, 750,000.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF LONG-TERM DEBT AT DECEMBER 31
PP&L Resources, Inc. and Subsidiaries
(Millions of Dollars)
<CAPTION>
Outstanding
1996 1995 Maturity(b)
<S> <C> <C> <C> <C> <C>
First Mortgage Bonds (a)
5 5/8% .................................. $30 June 1, 1996
6 3/4% .................................................. $30 30 November 1, 1997
5 1/2%................................................... 150 150 April 1, 1998
7%....................................................... 40 40 January 1, 1999
8 1/8%................................................................... 40 June 1, 1999
6%....................................................... 125 125 June 1, 2000
7 1/4% .................................................. 60 60 February 1, 2001
6.5% to 7 3/4%........................................... 755 830 2002-2006
7.70%.................................................... 200 200 2007-2011 (c)
7 3/8%................................................... 100 100 2012-2016
9 1/4% to 9 3/8% ........................................ 315 315 2017-2021
6 3/4% to 8 1/2% ........................................ 650 650 2022-2026
First Mortgage Pollution Control Bonds (a)
6.40% Series H........................... 90 90 November 1, 2021
5.50% Series I........................................... 53 53 February 15, 2027
6.40% Series J........................................... 116 116 September 1, 2029
6.15% Series K........................................... 55 55 August 1, 2029
2,739 2,884
Unsecured promissory notes ................................ 116 (d)
2,855 2,884
Unamortized (discount) and premium -- net ................. (23) (25)
2,832 2,859
Less amount due within one year............................ 30 30
Total long-term debt .................................... $2,802 $2,829
__________________________________________
<FN>
(a) Substantially all owned electric utility plant is subject to the lien of
PP&L's first mortgage.
(b) Aggregate long-term debt maturities through 2001 are (millions of
dollars): 1997, $30; 1998, $150; 1999, $40; 2000, $125; 2001, $60.
Maximum sinking fund requirements aggregate $5.6 million through
2001 and may be met with property additions or retirement of bonds.
The annual sinking fund requirements through 2001 will not exceed
$1.8 million.
(c) Any registered owner of these bonds has the right to require PP&L
to redeem such owner's bonds on October 1, 1999 at a
price of 100% of the principal amount.
(d) In 1996, PP&L issued $116 million of unsecured promissory notes
due in March 2001. The proceeds were used to redeem
$40 million of First Mortgage Bonds, 8-1/8% Series due 1999, and
$75 million of First Mortgage Bonds, 7-5/8% Series due 2002.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF INCOME
Pennsylvania Power & Light Company and Subsidiaries
(Millions of Dollars)
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Operating Revenues (Notes 1, 3 and 4)............................. $2,910 $2,752 $2,725
Operating Expenses
Operation
Fuel.......................................................... 448 451 472
Power purchases............................................... 352 291 287
Other......................................................... 544 504 475
Maintenance..................................................... 191 186 180
Depreciation (including amortized depreciation)
(Notes 1 and 8) .............................................. 363 349 315
Income taxes (Note 5)........................................... 253 262 218
Taxes, other than income (Note 5)............................... 203 201 201
Voluntary early retirement program (Note 11) ...................... (66) 76
2,354 2,178 2,224
Operating Income.................................................. 556 574 501
Other Income and (Deductions) - Net 15 4 (31)
Income Before Interest Charges.................................... 571 578 470
Interest Charges
Long-term debt................................ 207 213 214
Short-term debt and other....................................... 7 13 13
214 226 227
Net Income........................................................ 357 352 243
Dividends on Preferred Stock...................................... 28 28 28
Earnings Available to PP&L Resources, Inc. .................... $329 $324 $215
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
Pennsylvania Power & Light Company and Subsidiaries
(Millions of Dollars)
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Cash Flows From Operating Activities
Net income............................................ $357 $352 $243
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation........................................................... 366 352 317
Amortization of property under capital leases.......................... 86 79 86
Amortization of contract settlement proceeds and
deferred cost of power plant spare parts............................. (15) (37) (38)
Deferred income taxes and investment tax credits....................... (1) 16 (70)
Voluntary early retirement program ................................................. (66) 76
Write down of coal reserves .............................................................. 74
Change in current assets and current liabilities
Fuel inventories..................................................... (14) 43 (30)
Other................................................................ (38) (28) (4)
Other operating activities -- net...................................... 58 (15) 56
Net cash provided by operating activities.......................... 799 696 710
Cash Flows From Investing Activities
Property, plant and equipment expenditures............ (360) (403) (505)
Proceeds from sales of nuclear fuel to trust............................. 93 44 36
Proceeds from sale of coal reserves................................................... 52
Purchases of available-for-sale securities .............................. (90) (81) (95)
Sales and maturities of available-for-sale securities ................... 93 80 90
Other investing activities -- net........................................ 5 7 27
Net cash used in investing activities.............................. (259) (301) (447)
Cash Flows From Financing Activities
Issuance of long-term debt............................ 116 55 919
Issuance of common stock and capital
contribution from parent............................................... 32 60 70
Issuance of preferred stock.................................................................. 80
Retirement of long-term debt............................................. (145) (140) (638)
Retirement of preferred stock............................................................... (120)
Payments on capital lease obligations.................................... (86) (79) (86)
Common and preferred dividends paid...................................... (296) (290) (284)
Dividends for capitalization of PMDC .................................................. (50)
Net increase (decrease) in short-term debt............................... (79) 15 (128)
Other financing activities -- net........................................ (2) (10) (25)
Net cash used in financing activities.............................. (460) (389) (262)
Net Increase in Cash and
Cash Equivalents........................................................... 80 6 1
Cash and Cash Equivalents at Beginning of Period........................... 15 9 8
Cash and Cash Equivalents at End of Period................................. $95 $15 $9
Supplemental Disclosures of Cash Flow Information
Cash paid during the year for
Interest (net of amount capitalized)................................... $208 $218 $200
Income taxes........................................................... $289 $258 $264
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET AT DECEMBER 31
Pennsylvania Power & Light Company and Subsidiaries
(Millions of Dollars)
<CAPTION>
Assets 1996 1995
<S> <C> <C>
Property, Plant and Equipment
Electric utility plant in service - at original cost...... $9,824 $9,637
Accumulated depreciation (Notes 1 and 8)..................................... (3,337) (3,113)
6,487 6,524
Construction work in progress - at cost ....................................... 172 170
Nuclear fuel owned and leased - net of amortization ........................... 170 134
Other leased property - net of amortization ................................... 76 85
Electric utility plant - net ................................................. 6,905 6,913
Other property - net of depreciation, amortization
and depletion (1996, $54; 1995, $56) (Note 13)............................... 55 57
6,960 6,970
Investments
Affiliated companies - at equity (Note 1) ................ 17 17
Nuclear plant decommissioning trust fund (Notes 1 and 6)....................... 128 110
Financial investments (Notes 1 and 7) ......................................... 133 132
Other - at cost or less (Note 7) .............................................. 10 9
288 268
Current Assets
Cash and cash equivalents (Note 1) ....................... 95 15
Marketable securities (Notes 1 and 7).......................................... 51 55
Accounts receivable (less reserve: 1996, $25; 1995, $35)
Customers ................................................................... 196 197
Other ....................................................................... 14 13
Unbilled revenues.............................................................. 85 92
Fuel, material and supplies - at average cost ................................. 201 190
Deferred income taxes (Note 5)................................................. 21 42
Other ......................................................................... 53 42
716 646
Regulatory Assets and Other (Note 8)............................................. 1,407 1,540
$9,371 $9,424
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Liabilities 1996 1995
<S> <C> <C>
Capitalization
Common equity
Common stock ................................................................ $1,476 $1,476
Additional paid-in capital .................................................. 57 25
Earnings reinvested ......................................................... 1,094 1,034
Capital stock expense and other ............................................ (10) (7)
2,617 2,528
Preferred stock
With sinking fund requirements .............................................. 295 295
Without sinking fund requirements ........................................... 171 171
Long-term debt ................................................................ 2,802 2,829
5,885 5,823
Current Liabilities
Commercial paper (Note 9) ................................ 68
Bank loans (Note 9) ........................................................... 10 21
Long-term debt due within one year ............................................ 30 30
Capital lease obligations due within one year ................................. 81 81
Accounts payable .............................................................. 132 128
Taxes accrued ................................................................. 21 48
Interest accrued .............................................................. 60 66
Dividends payable ............................................................. 75 74
Other ......................................................................... 78 86
487 602
Deferred Credits and Other Noncurrent Liabilities
Deferred investment tax credits (Note 5) ................. 209 219
Deferred income taxes (Note 5) ................................................ 2,050 2,106
Capital lease obligations .................................................... 166 139
Other (Notes 1, 3, 6 and 10) .................................................. 574 535
2,999 2,999
Commitments and Contingent Liabilities (Note 14) ............................
$9,371 $9,424
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF
SHAREOWNERS' COMMON EQUITY
Pennsylvania Power & Light Company
and Subsidiaries
(Millions of Dollars)
<CAPTION>
Common Capital
Stock Additional Stock
Outstanding Paid-in Earnings Expense &
Shares (a) Amount Capital Reinvested Other
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993......... 152,132,089 $1,371 $0 $1,066 $(11)
Net income...................................................... 243
Cash dividends declared
Preferred stock.............................................. (28)
Common stock............................................... (257)
Dividends for capitalization
of PMDC....................................................... (50)
Stock redemption costs................................... (1)
Common stock issued (b) ........................ 3,349,873 70
Other................................................................ 1
Balance at December 31, 1994......... 155,481,962 $1,441 $0 $973 $(10)
Net income...................................................... 352
Cash dividends declared
Preferred stock.............................................. (28)
Common stock............................................... (263)
Common stock issued (b) ........................ 1,818,420 35
Capital contribution from
PP&L Resources........................................... 25
Other................................................................ 3
Balance at December 31, 1995......... 157,300,382 $1,476 $25 $1,034 $(7)
Net income...................................................... 357
Cash dividends declared
Preferred stock.............................................. (28)
Common stock............................................... (269)
Common stock issued (b) ...............................
Other................................................................ 32 (3)
Balance at December 31, 1996......... 157,300,382 $1,476 $57 $1,094 $(10)
<FN>
(a) No par value. 170,000,000 shares authorized.
As of April 27, 1995, all holders of PP&L
common stock became holders of PP&L Resources common
stock, all PP&L common stock was acquired
by PP&L Resources.
(b) Common Stock was issued through the ESOP and DRIP.
</TABLE>
<PAGE>
<TABLE>
Consolidated Statement of Preferred
Stock at December 32
Pennsylvania Power & Light Company
and Subsidiaries(a)
(Millions of Dollars)
<CAPTION>
Shares
Outstanding Outstanding Shares
1996 1995 1996 Authorized
<S> <C> <C> <C> <C> <C>
Preferred Stock -- $100 par, cumulative
4-1/2%.......................... $53 $53 530,189 629,936
Series....................................................... 413 413 4,133,556 10,000,000
$466 $466
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
Details of Preferred Stock (b)
<CAPTION>
Optional Sinking Fund
Redemption Provisions (c)
Shares Price Per Shares to be
Outstanding Outstanding Share Redeemed Redemption
1996 1995 1996 1996 Annually Period
<S> <C> <C> <C> <C> <C> <C>
With Sinking Fund Requirements
Series Preferred
5.95% ................... $30 $30 300,000 (d) 300,000 April 2001
6.05%.................... 25 25 250,000 (d) 250,000 April 2002
6.125% .................. 115 115 1,150,000 (d) (e) 2003-2008
6.15%.................... 25 25 250,000 (d) 250,000 April 2003
6.33% ................... 100 100 1,000,000 (d) (f) 2003-2008
$295 $295
Without Sinking Fund Requirements
4-1/2% Preferred........... $53 $53 530,189 $110.00
Series Preferred
3.35%.................... 4 4 41,783 103.50
4.40%.................... 23 23 228,773 102.00
4.60%.................... 6 6 63,000 103.00
6.75%.................... 85 85 850,000 (d)
$171 $171
Increases (Decreases) in Preferred Stock
1996 1995 1994
Shares Amount Shares Amount Shares Amount
Series Preferred Stock
5.95% ............................. 300,000 $30
6.05% ............................. 250,000 25
6.125% ...........................
6.15% ............................. 250,000 25
6.33% .............................
6.75% .............................
6.875% ........................... (400,000) (40)
7.00% ............................. (800,000) (80)
Decreases in Preferred Stock represent: (i) the redemption of stock
pursuant to sinking fund requirements; or (ii) shares redeemed
pursuant to optional redemption provisions. There were no issuances
or redemptions of preferred stock in 1996 or 1995.
(a) Each share of PP&L's preferred stock entitles the holder to one vote
on any question presented to PP&L's shareowners' meetings.
There were 5,000,000 shares of PP&L's preference stock authorized;
none were outstanding at December 31, 1996 and 1995, respectively.
(b) The involuntary liquidation price of the preferred stock is $100 per share.
The optional voluntary liquidation price is the optional redemption price
per share in effect, except for the 4-1/2% Preferred Stock for which
such price is $100 per share (plus in each case any unpaid dividends).
(c) These series of preferred stock are not redeemable prior to the following
years: 5.95%, 2001; 6.05%, 2002; 6.125%, 6.15%, 6.33% and 6.75%, 2003.
(d) Shares to be redeemed annually on October 1 as follows: 2003-2007,
57,500; 2008, 862,500.
(e) Shares to be redeemed annually on July 1 as follows: 2003-2007,
50,000; 2008, 750,000.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF LONG-TERM DEBT AT DECEMBER 31
Pennsylvania Power & Light Company and Subsidiaries
(Millions of Dollars)
<CAPTION>
Outstanding
1996 1995 Maturity(b)
<S> <C> <C> <C> <C> <C>
First Mortgage Bonds (a)
5 5/8% .................................. $30 June 1, 1996
6 3/4% .................................................. $30 30 November 1, 1997
5 1/2%................................................... 150 150 April 1, 1998
7%....................................................... 40 40 January 1, 1999
8 1/8%................................................................... 40 June 1, 1999
6%....................................................... 125 125 June 1, 2000
7 1/4% .................................................. 60 60 February 1, 2001
6.5% to 7 3/4%........................................... 755 830 2002-2006
7.70%.................................................... 200 200 2007-2011 (c)
7 3/8%................................................... 100 100 2012-2016
9 1/4% to 9 3/8% ........................................ 315 315 2017-2021
6 3/4% to 8 1/2% ........................................ 650 650 2022-2026
First Mortgage Pollution Control Bonds (a)
6.40% Series H........................... 90 90 November 1, 2021
5.50% Series I........................................... 53 53 February 15, 2027
6.40% Series J........................................... 116 116 September 1, 2029
6.15% Series K........................................... 55 55 August 1, 2029
2,739 2,884
Unsecured promissory notes ................................ 116 (d)
2,855 2,884
Unamortized (discount) and premium -- net ................. (23) (25)
2,832 2,859
Less amount due within one year............................ 30 30
Total long-term debt .................................... $2,802 $2,829
__________________________________________
<FN>
(a) Substantially all owned electric utility plant is subject to the lien of
PP&L's first mortgage.
(b) Aggregate long-term debt maturities through 2001 are (millions of
dollars): 1997, $30; 1998, $150; 1999, $40; 2000, $125; 2001,
$60. Maximum sinking fund requirements aggregate $5.6 million through 2001
and may be met with property additions or retirement of bonds.
The annual sinking fund requirements through 2001 will not exceed $1.8 million.
(c) Any registered owner of these bonds has the right to require PP&L to
redeem such owner's bonds on October 1, 1999 at a
price of 100% of the principal amount.
(d) In 1996, PP&L issued $116 million of unsecured promissory notes
due in March 2001. The proceeds were used to redeem $40 million
of First Mortgage Bonds, 8-1/8% Series due 1999, and $75 million
of First Mortgage Bonds, 7-5/8% Series due 2002.
See accompanying Notes to Financial Statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Terms and abbreviations appearing in Notes to Financial Statements
are explained in the glossary.
1. Summary of Significant Accounting Policies
Business and Consolidation
PP&L Resources is the parent holding company of PP&L, PMDC and
Spectrum.
PP&L's financial condition and results of operations are currently
the principal factors affecting PP&L Resources' financial condition and
results of operations. PP&L is an operating electric utility serving
customers in central eastern Pennsylvania. All nonutility operating
transactions are included in "Other Income and Deductions -- Net" on the
Consolidated Statements of Income.
The consolidated financial statements include the accounts of PP&L
Resources and its direct and indirect subsidiaries. All significant
intercompany transactions have been eliminated.
Less than 50% owned affiliates are accounted for using the equity
method. These affiliates consist principally of Safe Harbor Water Power
Corporation and investments held by PMDC.
Reclassification
Certain amounts from prior years' financial statements have been
reclassified to conform to the current year presentation.
Management's Estimates
These financial statements have been prepared using information
available including certain information which represents management's
best estimates of existing conditions. Actual results could differ from
these estimates.
Accounting Records
The accounting records for PP&L, the principal subsidiary of PP&L
Resources, are maintained in accordance with the Uniform System of
Accounts prescribed by the FERC and adopted by the PUC.
Regulation
PP&L prepares its financial statements in accordance with the
provisions of SFAS 71, "Accounting for the Effects of Certain Types of
Regulation." SFAS 71 requires a rate-regulated entity to reflect the
effects of regulatory decisions in its financial statements. In
accordance with SFAS 71, PP&L has deferred certain costs pursuant to the
rate actions of the PUC and the FERC and is recovering or expects to
recover such costs in electric rates charged to customers. These
deferred costs or "regulatory assets" are enumerated and discussed in
Note 8.
To the extent that PP&L concludes that recovery of a regulatory
asset is no longer probable due to regulatory treatment, the effects of
competition or other factors, the amount would have to be written off
against income.
Utility Plant
Additions to utility plant and replacement of units of property are
capitalized at cost. The cost of funds used to finance construction
projects or AFUDC is capitalized as part of construction cost.
The cost of units of property retired or replaced is charged to
accumulated depreciation. Expenditures for maintenance and repairs of
property and the cost of replacing items determined to be less than an
entire unit of property are charged to operating expense.
Major classes of electric utility plant in service and their
respective balances are (millions of dollars):
1996 1995
Production $6,303 $6,251
Transmission 386 374
Distribution 2,774 2,652
General 303 302
Other 58 58
$9,824 $9,637
For financial statement purposes, depreciation is being provided
over the estimated useful lives of property using a straight-line method
for all property except for certain property at the Susquehanna steam
station. Susquehanna property is depreciated at an annual rate of $173
million from October 1995 through December 1998, after which depreciation
is scheduled to decline by $71 million annually. Provisions for
depreciation, as a percent of average depreciable property, approximated
3.8% in 1996, 3.7% in 1995 and 3.5% in 1994.
Nuclear Decommissioning and Fuel Disposal
An annual provision for PP&L's share of the future cost to
decommission the Susquehanna station, equal to the amount allowed for
ratemaking purposes, is charged to operating expense. Such amounts are
invested in external trust funds which can be used only for future
decommissioning costs. See Notes 3 and 6.
The DOE is responsible for the permanent storage and disposal of
spent nuclear fuel removed from nuclear reactors. PP&L pays DOE a fee
for future disposal services and recovers such costs in customer rates.
PP&L has joined other utilities in a federal lawsuit to suspend payments
to DOE and to place the fees in escrow unless that department begins
accepting nuclear fuel as agreed to in its contract with the utilities.
Financial Investments
Securities subject to the requirements of SFAS 115 "Accounting for
Certain Investments in Debt and Equity Securities" are carried at fair
value, determined at the balance sheet date. Net unrealized gains on
available-for-sale securities are included in common equity. Net
unrealized gains and losses on trading securities are included in income.
Net unrealized gains and losses on securities that are not available for
unrestricted use due to regulatory or legal reasons are reflected in the
related asset and liability accounts. Realized gains and losses on the
sale of securities are recognized utilizing the specific cost
identification method. Investments in financial limited partnerships are
accounted for under the equity method of accounting and venture capital
investments are recorded at cost. See Note 7.
Premium on Reacquired Long-Term Debt
Premiums paid and expenses incurred by PP&L to redeem long-term debt
are deferred and amortized over the life of the new debt issue or the
remaining life of the retired debt when the redemption is not financed by
a new issue.
Capital Leases
Leased property of PP&L capitalized on the Consolidated Balance
Sheet is recorded at the present value of future lease payments and is
amortized so that the total of interest on the lease obligation and
amortization of the leased property equals the rental expense allowed for
ratemaking purposes. Future minimum lease payments under capital leases
in effect at December 31, 1996 (excluding nuclear fuel) aggregate $89
million, including $13 million in imputed interest. Future lease
payments for nuclear fuel are based on the quantity of electricity
produced at the Susquehanna Station. The maximum amount of nuclear fuel
available for lease under current arrangements is $200 million.
Revenues
Electric revenues are recorded based on the amounts of electricity
delivered to customers through the end of each calendar month. This
includes amounts customers will be billed for electricity delivered from
the time meters were last read to the end of the month. Through December
1996, PP&L's tariff included revenues from the ECR, SBRCA and STAS.
Approximately 98% of operating revenues were derived from electric
energy sales, with 35% coming from residential customers, 28% from
commercial customers, 20% from industrial customers, 14% from other major
utilities and the PJM and 3% from others. For information on the ECR,
SBRCA and STAS, see Note 3.
Income Taxes
PP&L Resources and its subsidiaries file a consolidated federal
income tax return. Income taxes are allocated to operating expenses and
other income and deductions on the Consolidated Statements of Income.
The provision for PP&L's deferred income taxes is based upon the
ratemaking principles reflected in rates established by the PUC and FERC.
The difference in the provision for deferred income taxes and the amount
that otherwise would be recorded under generally accepted accounting
principles is deferred and included in taxes recoverable through future
rates on the Consolidated Balance Sheet. See Note 5.
Investment tax credits were deferred when utilized and are amortized
over the average lives of the related property.
Pension Plan and Other Postretirement and Postemployment Benefits
PP&L has a noncontributory pension plan covering substantially all
employees. Subsidiary companies of PP&L formerly engaged in coal mining
have a noncontributory pension plan for substantially all non-bargaining,
full-time employees. Funding is based upon actuarially determined
computations that take into account the amount deductible for income tax
purposes and the minimum contribution required under the Employee
Retirement Income Security Act of 1974.
PMDC has a non-qualified retirement plan for its corporate officers.
For information on other postretirement and postemployment benefits,
see Note 10.
Cash Equivalents
All highly liquid debt instruments purchased with original
maturities of three months or less are considered to be cash equivalents.
2. Pennsylvania Restructuring Legislation
In December 1996, Pennsylvania enacted legislation to restructure
its electric utility industry in order to create retail access to a
competitive market for the generation of electricity. The legislation,
which was effective on January 1, 1997, includes the following major
provisions:
1. All electric utilities in Pennsylvania are required to file,
beginning on April 1, 1997 and in no event later than September 30, 1997,
a restructuring plan to implement direct access to a competitive market
for electric generation. The plan must include unbundled rates for
generation, jurisdictional transmission, distribution and other services;
a proposed competitive transition charge; a proposed universal service
and energy conservation cost recovery mechanism; procedures for ensuring
direct access to all licensed energy suppliers; a discussion of the
proposed plan's impacts on utility employees and revised tariffs and
rates implementing the foregoing.
2. Retail customer choice will be phased in as follows: up to 33%
of all customer load on January 1, 1999; up to 66% of all customer load
on January 1, 2000; and 100% of all customer load by January 1, 2001.
The PUC can delay this schedule by two 6-month periods, if necessary.
3. Electric distribution companies will be the suppliers of last
resort. The PUC will ensure that adequate generation reserves exist to
maintain reliable electric service. The utility's transmission and
distribution system must continue to meet established national industry
standards for installation, maintenance and safety.
4. Retail rates will be capped for at least 4-1/2 years for
transmission and distribution charges and for as long as 9 years for
generation charges. A utility may be exempted from the caps only under
very specific circumstances, e.g., the need for extraordinary rate
relief, non-utility generation contracts, changes in laws or regulations,
required upgrades or repairs to the transmission system, increases in
fuel prices or purchased power prices, nuclear power plant
decommissioning costs or taxes.
5. Pennsylvania utilities are permitted to recover PUC-approved
transition or stranded costs over several years; however, the utilities
are required to mitigate these costs to the extent practicable. Also,
the recovery of these costs must not result in cost shifting among
customers.
6. "Transition bonds" may be issued to pay the stranded costs.
This procedure involves the following elements: (i) the sale or transfer
by the utility of the right to recover a portion of its stranded costs to
a financing entity -- for a lump-sum payment of cash -- that could be
used to retire the utility's debt and equity and to pay stranded costs;
(ii) the issuance by the financing entity of "transition bonds"; (iii)
the collection by the utility of "transition charges" on customers'
bills, which are transferred to the financing entity to pay the principal
and interest and other related costs of issuing the transition bonds;
(iv) upon the imposition of transition charges on customers' bills, the
utility must reduce customer rates by an amount equal to the revenue
requirements of the stranded costs financed with transition bonds; and
(v) a PUC "qualified rate order," which could be irrevocable, approving
the collection of the transition charges. This irrevocability would
protect the cash flow stream used to repay the transition bonds.
7. All generation suppliers must demonstrate financial and
technical fitness and must be licensed by the PUC. Cooperatives and
municipalities may participate in retail competition but are not subject
to the provisions of the legislation, unless they elect to serve
customers outside their franchise territories.
8. State tax revenues paid by utilities and generation suppliers
are to remain at their current level, to protect against any state
revenue loss from restructuring.
9. The PUC will monitor electricity markets for anti-competitive or
discriminatory conduct, and will consider the impact of mergers and
acquisitions on these markets.
PP&L is formulating its restructuring plan, which it currently plans
to file on April 1, 1997. Under the legislation, the PUC must take
action on the restructuring plan within nine months of the filing date.
PP&L is unable to predict the ultimate effect of this legislation on its
financial position, results of operation or its need to issue securities
to meet future capital requirements.
3. Rate Matters
Base Rate Filing with the PUC
In September 1995, the PUC issued a final order with respect to the
base rate case filed by PP&L in December 1994. The PUC Decision
increased PUC jurisdictional rates by about $85 million annually, or
3.8%. The PUC Decision permitted the levelization of depreciation
expense for the Susquehanna station, recovery of retiree health care
costs and costs of the 1994 voluntary early retirement program and
revised costs to decommission Susquehanna SES. The order also permitted
recovery of deferred operating and capital costs, net of energy savings,
for Susquehanna Unit 2 but disallowed similar costs for Unit No. 1. The
PUC also ruled that PP&L could not include in the ECR the cost of
capacity billed to other utilities after the contractual arrangements
with these utilities expire. The OCA has appealed certain aspects of the
PUC Decision to the Commonwealth Court. PP&L cannot predict the final
outcome in this matter.
Energy Cost Rate Issues
Through December 1996, PP&L's PUC tariffs contained an ECR under
which customers were billed an estimated amount for fuel and other energy
costs. Any difference between the actual and estimated amount for such
costs was collected from, or refunded to, customers in a subsequent
period.
In December 1996, the PUC issued a tentative order permitting the
roll-in of PP&L's ECR into base rates. The order also authorized PP&L to
defer certain unrecovered energy costs as regulatory assets and seek
recovery for these costs in the competitive transition charge described
above under "Pennsylvania Restructuring Legislation."
In 1994, the PUC reduced PP&L's ECR claim by $16 million for costs
associated with replacement power during a Susquehanna Unit 1 outage for
refueling and repairs. PP&L's appeal of that reduction was settled in
1995, and as a result PP&L recorded a net credit to income of $10
million.
Special Base Rate Credit Adjustment
Beginning in April 1991, PP&L's PUC tariff included a SBRCA rider
which provided for credits to retail customers' bills for three
nonrecurring items. They were (i) the use of an inventory method of
accounting for certain power plant spare parts (this credit expired as of
April 1, 1996); (ii) the sale of capacity and related energy from PP&L's
wholly owned coal-fired stations to Atlantic (this credit was rolled into
retail base rates at Docket No. R-00943271 and was removed from the SBRCA
effective in September 1995); and (iii) the proceeds from a settlement of
outstanding contract claims arising from construction of the Susquehanna
station (this credit is due to expire in the second quarter of 1997).
State Tax Adjustment Surcharge
Through December 1996, PP&L's PUC tariffs included a rate mechanism
to adjust customer bills for changes in certain state taxes. The STAS
had no effect on net income. In December 1996, the PUC issued a
tentative order permitting the roll-in of STAS into base rates.
FERC-Major Utilities' Rates
In August 1995, JCP&L filed a complaint against PP&L with the FERC
regarding billings under the bulk power sales agreement between the
parties. In its complaint, JCP&L alleges that PP&L inappropriately
allocated certain costs to JCP&L that should not have been billed and
seeks other adjustments. JCP&L is seeking both refunds (with interest)
in an unspecified amount and an amendment to the agreement. PP&L has
denied JCP&L's allegations and requested that FERC dismiss the complaint.
PP&L cannot predict the final outcome of this proceeding.
In October 1995, FERC allowed PP&L to begin charging, subject to
refund, four major electric utility customers of PP&L (Atlantic, BG&E,
JCP&L and UGI) for certain PP&L costs for post-retirement benefits other
than pensions. In that same proceeding, FERC opened to review all other
charges by PP&L under its contracts with those customers. JCP&L raised a
number of objections to PP&L's charges. In November 1996, an
Administrative Law Judge ruled in PP&L's favor on all issues. The case
currently is pending before the FERC.
In January 1996, PP&L filed a request with the FERC to incorporate a
change in the method of calculating depreciation under its contracts with
these same four major utilities. PP&L also sought to increase the
charges to those customers for nuclear decommissioning costs. This case
was settled in principle with the four customers in January 1997, under
terms which would have no material effect on PP&L. Formal settlement
documents are expected to be filed with the FERC by March 1997.
See Note 4 for more information regarding these contracts.
4. Sales to Other Electric Utilities
PP&L provides Atlantic with 125,000 kilowatts of capacity (summer
rating) and related energy from its wholly owned coal-fired stations.
Sales to Atlantic will continue through March 1998.
PP&L provided JCP&L with 756,000 kilowatts of capacity and related
energy from all of its generating units during 1996. This amount will
decline by 189,000 kilowatts per year until the end of the agreement on
December 31, 1999. PP&L expects to be able to resell the capacity and
energy at market prices.
In March 1996, the New Jersey Board of Public Utilities approved an
agreement between PP&L and JCP&L, under which PP&L will provide JCP&L
with 150,000 kilowatts of capacity credits and energy from June 1997
through May 1998, 200,000 kilowatts from June 1998 through May 1999 and
300,000 kilowatts from June 1999 through May 2004. Prices under the new
agreement are based on a predetermined reservation rate that escalates
over time, plus an energy component based on PP&L's actual fuel-related
costs. PP&L filed the agreement for FERC review and acceptance in
October 1996, and the matter is still pending.
PP&L provides BG&E with 129,000 kilowatts or 6.6 percent of its
share of capacity and related energy from the Susquehanna station. Sales
to BG&E will continue through May 2001.
See Note 3 for more information regarding these contracts.
In September 1996, PP&L made installed capacity credit sales for up
to 300,000 kilowatts to GPU Energy which will continue through the first
half of 1997.
On December 31, 1996, PP&L filed for FERC approval of amendments to
its generation sales tariff to allow PP&L to buy energy for the purpose
of resale in competitive wholesale markets. This change provides PP&L
flexibility in pursuing wholesale power supply opportunities to increase
operating revenues. PP&L is currently operating under this amended
tariff, subject to final FERC approval.
5. Income Taxes
The corporate federal income tax rate is 35%. The Pa. CNI rate was
11.99% in 1994 and 9.99% in 1995 and 1996.
For 1995 PP&L Resources recorded a decrease in Pa. CNI expense of $8
million from the prior year related to the rate reduction. Substantially
all of this reduction was reflected in lower customer rates through the
STAS.
The tax effects of significant temporary differences comprising PP&L
Resources' net deferred income tax liability were as follows (millions of
dollars):
1996 1995
Deferred tax assets
Deferred investment tax credits $ 86 $ 90
Accrued pension costs 67 54
Other 75 87
Valuation allowance (6) (6)
222 225
Deferred tax liabilities
Electric utility plant - net 1,788 1,788
Other property - net 9 12
Taxes recoverable through future rates 399 416
Reacquired debt costs 46 48
Other 11 25
2,253 2,289
Net deferred tax liability $2,031 $2,064
Details of the components of income tax expense, a reconciliation of
federal income taxes derived from statutory tax rates applied to income
from continuing operations for accounting purposes, and details of taxes,
other than income are as follows (millions of dollars):
Income Tax Expense 1996 1995 1994
Included in operating expenses
Provision - Federal $189 $195 $198
State 64 62 77
253 257 275
Deferred - Federal 4 9 (34)
State 6 6 (11)
10 15 (45)
Investment tax credit,
net - Federal (10) (10) (12)
253 262 218
Included in other income
and deductions
Provision (credit) - Federal (1) 8 (18)
State 1 4 (7)
0 12 (25)
Deferred - Federal 1 10 (9)
State (1) 2 (4)
0 12 (13)
0 24 (38)
Total income tax
expense - Federal 183 212 125
State 70 74 55
$253 $286 $180
Reconciliation of Income
Tax Expense
Indicated federal income tax on
pre-tax income at statutory
tax rate - 35% $213 $223 $148
Increase (decrease) due to:
State income taxes 44 50 35
Flow through of depreciation
differences not previously
normalized 20 16 15
Amortization of investment
tax credit (10) (10) (12)
Research & experimentation
income tax credits (5)
Other (9) 7 (6)
40 63 32
Total income tax expense $253 $286 $180
Effective income tax rate 41.5% 44.9% 42.4%
Taxes, Other Than Income
State gross receipts $105 $102 $ 99
State utility realty 44 46 47
State capital stock 34 33 35
Social security and other 20 20 20
$203 $201 $201
6. Nuclear Decommissioning Costs
PP&L's most recent estimate of the cost to decommission the
Susquehanna station was completed in 1993 and was a site-specific study,
based on immediate dismantlement and decommissioning of each unit
following final shutdown. The study indicates that PP&L's 90% share of
the total estimated cost of decommissioning the Susquehanna station is
approximately $724 million in 1993 dollars. The estimated cost includes
decommissioning the radiological portions of the station and the cost of
removal of nonradiological structures and materials. The operating
licenses for Units 1 and 2 expire in 2022 and 2024, respectively.
Decommissioning costs charged to operating expense were $12 million
in 1996, $8 million in 1995 and $7 million in 1994 and are based upon
amounts included in customer rates. The increases in 1996 and 1995 are a
result of the PUC Decision, in which recovery of decommissioning costs
was based on the cost estimates in the 1993 site-specific study. Rates
charged to small utilities reflect the estimated cost of decommissioning
in the 1993 study. In January 1996, PP&L filed with the FERC to increase
its decommissioning rate to reflect the projected cost of decommissioning
the Susquehanna station. See Note 3 for further information.
Amounts collected from customers for decommissioning, less
applicable taxes, are deposited in external trust funds for investment
and can be used only for future decommissioning costs. The market value
of securities held and accrued income in the trust funds at December 31,
1996 and 1995 aggregated approximately $128 million and $109 million,
respectively. The trust funds experienced, on a fair market value basis,
a $6 million net gain in 1996, which includes net unrealized appreciation
of $2 million, and a net gain in 1995 of $14 million, which includes net
unrealized appreciation of $8 million. The trust fund activity is
reflected in the nuclear plant decommissioning trust fund and in other
noncurrent liabilities on the Consolidated Balance Sheet. Accrued
nuclear decommissioning costs were $130 million and $112 million at
December 31, 1996 and 1995, respectively.
The FASB issued an exposure draft on the accounting for liabilities
related to closure and removal of long-lived assets, including
decommissioning of nuclear power plants. As a result, current industry
accounting practices for decommissioning may change, including the
possibility that the estimated cost for decommissioning could be recorded
as a liability at the present value of the estimated future cash outflows
that will be required to satisfy those obligations.
7. Financial Instruments
The carrying amount shown on the Consolidated Balance Sheet and the
estimated fair value of PP&L Resources' financial instruments are as
follows (millions of dollars):
December 31, 1996 December 31, 1995
Carrying Fair Carrying Fair
Amount Value Amount Value
Assets
Nuclear plant decommis-
sioning trust fund (a) $128 $128 $109 $109
Financial investments (a) 206 206 238 236
Other investments 18 18 9(c) 9(c)
Cash and cash equivalents 101 101 20 20
Other financial instru-
ments included in
other current assets 2 2 3 3
Liabilities
Preferred stock with
sinking fund require-
ments (b) 295 294 295 295
Long-term debt (b) 2,832 2,885 2,859 3,033
Commercial paper and
bank loans 144 144 89 89
(a) The carrying value of financial instruments generally is based on
established market prices and approximates fair value.
(b) The fair value generally is based on quoted market prices for the
securities where available and estimates based on current rates offered
to PP&L Resources where quoted market prices are not available.
(c) $12 million of PMDC's other investments for 1995 were reclassi-
fied as investments in electric energy projects - at equity.
8. Regulatory Assets
The following regulatory assets were reflected in the PP&L
Consolidated Balance Sheet (millions of dollars):
1996 1995
Deferred depreciation $ 140 $ 209
Deferred operating and carrying
costs - Susquehanna 17 18
Reacquired debt costs 110 117
Taxes recoverable through future
rates 963 1,003
Assessment for decommissioning
uranium enrichment facilities 30 32
Postretirement benefits other
than pensions 28 31
Voluntary early retirement program 49 62
ECR undercollection 17
Other 45 57
$1,399 $1,529
As of December 31, 1996, substantially all of PP&L's regulatory
assets are being recovered through rates charged to customers over
periods ranging from 3 to 29 years. In December 1996, Pennsylvania
passed restructuring legislation which will continue to permit utilities
to recover approved regulatory assets as transition or stranded costs.
See Note 2 "Pennsylvania Restructuring Legislation".
For a discussion of taxes recoverable through future rates,
postretirement benefits other than pensions, assessment for
decommissioning uranium enrichment facilities, VERP, and additional
information on the PUC Decision, see Notes 3, 5, 10, and 11.
9. Credit Arrangements
PP&L issues commercial paper and, from time to time, borrows from
banks to provide short-term funds required for general corporate
purposes. In addition, certain subsidiaries also borrow from banks to
obtain short-term funds. Bank borrowings generally bear interest at
rates negotiated at the time of the borrowing. PP&L's weighted average
interest rate on short-term borrowings was 4.9% and 6.0% at December 31,
1996 and 1995, respectively.
PP&L has a $250 million revolving credit arrangement with a group of
banks. At the option of PP&L, interest rates would be based upon
certificate of deposit rates, Eurodollar deposit rates or the prime rate.
Any loans made under this credit arrangement would mature in September
1999. PP&L has additional credit arrangements with another group of
banks. The banks have committed to lend PP&L up to $45 million under
these credit arrangements, which mature in May 1997, at interest rates
based upon Eurodollar deposit rates or the prime rate. These credit
arrangements produce a total of $295 million of lines of credit to
provide back-up for PP&L's commercial paper and short-term borrowings of
certain subsidiaries. No borrowings were outstanding at December 31,
1996 under these credit arrangements.
PP&L Resources has a revolving credit facility in the amount of $300
million. At the option of PP&L Resources, interest rates can be based on
Eurodollar deposit rates or the prime rate. Loans made under this credit
arrangement will mature, and the facility will terminate at the end of
May 1997. PP&L Resources used $190 million of this credit facility in
June 1996 to fund a PMDC subsidiary's acquisition of a 25 percent
interest in SWEB. Borrowings of $135 million were outstanding under this
credit facility at December 31, 1996. PP&L Resources expects to repay a
portion of the outstanding balance through the liquidation of temporary
cash investments and repay the balance by issuing medium-term notes.
PP&L leases its nuclear fuel from a trust. The maximum financing
capacity of the trust under existing credit arrangements is $200 million.
10. Pension Plan and Other Postretirement and
Postemployment Benefits
Pension Plan
PP&L has a funded noncontributory defined benefit pension plan
covering substantially all employees. Benefits are based upon a
participant's earnings and length of participation in the Plan, subject
to meeting certain minimum requirements.
PP&L has an unfunded supplemental retirement plan for certain
management employees. A similar plan for directors was terminated
December 31, 1996. Benefit payments pursuant to these supplemental plans
are made directly by PP&L. At December 31, 1996, the projected benefit
obligation of these supplemental plans was approximately $20 million.
Effective December 1, 1994, PMDC has a non-qualified retirement plan for
its corporate officers. The cost of the plan was immaterial in 1996.
The components of PP&L's net periodic pension cost for the three
plans were (millions of dollars):
1996 1995 1994
Service cost-benefits earned
during the period $ 32 $ 27 $ 33
Interest cost 61 58 51
Actual return on plan assets (146) (241) 29
Net amortization and deferral 68 167 (96)
Net periodic pension cost $ 15 $ 11 $ 17
The net periodic pension cost charged to operating expenses was $9
million in 1996, $6 million in 1995 and $10 million in 1994. The balance
was charged to construction and other accounts. The funded status of
PP&L's Plan was (millions of dollars):
December 31
1996 1995
Fair value of plan assets $1,187 $1,086
Actuarial present value of benefit obligations:
Vested benefits 695 673
Nonvested benefits 2
Accumulated benefit obligation 695 675
Effect of projected future compensation 191 194
Projected benefit obligation 886 869
Plan assets in excess of projected
benefit obligation 301 217
Unrecognized transition assets (being
amortized over 23 years) (59) (63)
Unrecognized prior service cost 55 59
Unrecognized net gain (495) (394)
Accrued expense $(198) $(181)
The weighted average discount rate used in determining the actuarial
present value of projected benefit obligations was 7.0% and 6.75% on
December 31, 1996 and 1995, respectively. The rate of increase in future
compensation used in determining the actuarial present value of projected
benefit obligations was 5.0% on December 31, 1996 and 1995. The assumed
long-term rates of return on assets used in determining pension cost in
1996 and 1995 was 8.0%. Plan assets consist primarily of common stocks,
government and corporate bonds and temporary cash investments.
PP&L's subsidiaries formerly engaged in coal mining have a
noncontributory defined benefit pension plan covering substantially all
non-bargaining unit, full-time employees, which is fully funded,
primarily by group annuity contracts with insurance companies. This plan
was amended to freeze benefit increases effective June 1996. In
addition, the companies are liable under federal and state laws to pay
black lung benefits to claimants and dependents with respect to approved
claims, and are members of a trust which was established to facilitate
payment of such liabilities. Such costs were not material in 1996, 1995
and 1994.
Postretirement Benefits Other Than Pensions
Substantially all employees of PP&L and its subsidiaries will become
eligible for certain health care and life insurance benefits upon
retirement. PP&L sponsors four health and welfare benefit plans that
cover substantially all management and bargaining unit employees upon
retirement. One plan provides for retiree health care benefits to
certain management employees, another plan provides retiree health care
benefits to bargaining unit employees, a third plan provides retiree life
insurance benefits to certain management employees up to a specified
amount and a fourth plan provides retiree life insurance benefits to
bargaining unit employees.
Dollar limits have been established for the amount PP&L will
contribute annually toward the cost of retiree health care for employees
retiring after March 1993.
In accordance with a PUC order, PP&L had deferred from January 1,
1993 through 1994, the PUC-jurisdictional accrued cost of retiree health
and life insurance benefits recorded pursuant to SFAS 106, "Employers'
Accounting For Postretirement Benefits Other Than Pensions" in excess of
actual claims paid pending recovery of the increased cost in retail
rates. As a result of a decision of the Commonwealth Court, in 1994 PP&L
started to expense the increased costs applicable to operations that were
previously being deferred and wrote off such costs deferred in 1993.
The PUC Decision in 1995 permitted recovery of the PUC-
jurisdictional amount of retiree health care costs resulting from the
adoption of SFAS 106. In addition, the PUC Decision permitted PP&L to
recover, over a period of about 17 years, the amount of SFAS 106 costs
that would have been deferred from January 1, 1993 through September 30,
1995, pursuant to a PUC order but for a Commonwealth Court decision that
PP&L could not recover these deferred costs. As a result of the PUC
Decision, which provided for recovery of $27 million of previously
expensed SFAS 106 costs, PP&L recorded a $16 million after-tax credit to
income in the third quarter of 1995.
In December 1993, PP&L established a separate VEBA for each of the
four health and welfare benefit plans for retirees. After making initial
contributions, additional funding of the trusts was deferred pending
resolution of PP&L's ability to recover the costs of the plans in rates.
Continued funding of these trusts is subject to the resolution of the OCA
appeal of the PUC Decision. See Note 3.
The following table sets forth the plan's combined funded status
reconciled with the amount shown on PP&L Resources' Consolidated Balance
Sheet as of December 31 (millions of dollars):
1996 1995
Accumulated postretirement benefit obligation:
Retirees $123 $128
Fully eligible active plan participants 19 18
Other active plan participants 85 79
227 225
Plan assets at fair value, primarily
temporary cash investments 31 29
Accumulated postretirement benefit obligation
in excess of plan assets 196 196
Unrecognized prior service costs (5) (5)
Unrecognized net loss (12) (19)
Unrecognized transition obligation (being
amortized over 20 years) (139) (148)
Accrued postretirement benefit cost $ 40 $ 24
The net periodic postretirement benefit cost included the following
components (millions of dollars):
1996 1995 1994
Service cost - benefits attributed
to service during the period $ 4 $ 4 $ 4
Interest cost on accumulated
postretirement benefit obligation 15 15 14
Actual return on plan assets (1) (2)
Net amortization and deferral 9 9 8
Net periodic postretirement
benefit cost $ 27 $26 $26
Retiree health and benefits costs charged to operating expenses were
approximately $20 million in 1996, a net credit of approximately $17
million in 1995 (reflecting both a $32 million credit due to the PUC
Decision and costs applicable to contractual agreements with other major
utilities), and $27 million in 1994 (which includes $11 million of
retiree health and benefits costs previously deferred in 1993). Costs in
excess of the amount charged to expense were charged to construction and
other accounts.
For measurement purposes, an 8% annual rate of increase in the per
capita cost of covered health care benefits was assumed for 1997; the
rate was assumed to decrease gradually to 6% by 2006 and remain at that
level thereafter. Increasing the assumed health care cost trend rates by
1% in each year would increase the accumulated postretirement benefit
obligation as of December 31, 1996, by about $11 million and the
aggregate of the service and interest cost components of net periodic
postretirement benefit cost for the year then ended by about $1 million.
In determining the accumulated postretirement benefit obligation,
the weighted average discount rate used was 7.0% and 6.75% on December
31, 1996 and 1995, respectively. The trusts that are holding the plan
assets, except for retiree health care benefits to certain management
employees, are tax-exempt. The expected long-term rate of return on plan
assets for the tax-exempt trusts was 6.5% on December 31, 1996 and 1995.
In 1992, as a result of the Energy Act, PP&L and its subsidiaries
formerly engaged in coal mining accrued an additional liability for the
cost of health care of retired miners previously employed by them. The
liability, based on the present value of future benefits, was estimated
at $54 million as of December 1996 and 1995.
Postemployment Benefits
PP&L provides health and life insurance benefits to disabled
employees and income benefits to eligible spouses of deceased employees.
Postemployment benefits charged to operating expenses were not material.
11. Workforce Reductions
PP&L continued its efforts to reduce costs in 1996. An employment
decline of approximately 100 management employees occurred through job
displacements, rather than from the type of major initiatives in
workforce reductions that took place in 1994 and 1995. In anticipation
of planned further workforce reductions in 1997 and to accrue for
enhanced pension benefits for employees displaced in 1996, PP&L recorded
costs of $5 million after-tax, or 3 cents per share of common stock.
During 1995, PP&L offered a voluntary severance program to employees who
are members of the IBEW Local 1600 and continued re-engineering efforts
that reduced the management workforce. Total employment declined in 1995
by approximately 225 due to these two initiatives. The costs of the
workforce reductions in 1995 amounted to about $19 million after-tax, or
11 cents per share of common stock.
During 1994, PP&L offered a voluntary early retirement program to
851 employees who were age 55 or older by December 31, 1994. A total of
640 employees elected to retire under the program, at a total cost of $76
million. PP&L recorded the cost of the program as a charge against
income in the fourth quarter of 1994, which reduced net income by $43
million, or 28 cents per share of common stock. As a result of the PUC
Decision, which permitted recovery of the PUC-jurisdictional amount
through customer rates, PP&L recorded in 1995 a $38 million after-tax
credit to expense, or 24 cents per share of common stock, to reverse the
charge for this program that was recorded in 1994. PP&L estimates annual
savings of $35 million from this program, which were included in the PUC
Decision.
12. Jointly Owned Facilities
At December 31, 1996, PP&L or its subsidiary owned undivided
interests in the following facilities (millions of dollars):
Merrill
-----Generating Stations------ Creek
Susquehanna Keystone Conemaugh Reservoir
Ownership interest 90.00% 12.34% 11.39% 8.37%
Electric utility plant in
service $4,060 $66 $102
Other property $22
Accumulated depreciation 1,000 35 37 8
Construction work in progress 55 1 1
Each participant in these facilities provides its own financing.
PP&L receives a portion of the total output of the generating stations
equal to its percentage ownership. PP&L's share of fuel and other
operating costs associated with the stations is reflected on the PP&L
Consolidated Statement of Income. The Merrill Creek Reservoir provides
water during periods of low river flow to replace water from the Delaware
River used by PP&L and other utilities in the production of electricity.
13. Subsidiary Coal Reserves
In connection with a review by PP&L of its non-core business assets
performed in 1994, a subsidiary of PP&L initiated an evaluation of the
carrying value of its $84 million investment in undeveloped coal reserves
in western Pennsylvania. Outside appraisal firms completed the evaluation
and indicated that due to changing market conditions an impairment had
occurred. Accordingly, the carrying value of this investment was written
down to its estimated net realizable value of $10 million, resulting in a
$74 million pre-tax charge to income. This write down resulted in an
after-tax charge to income of $40 million in 1994.
These reserves were acquired in 1974 with the intention of supplying
future coal-fired generating stations. PP&L concluded that it would not
develop these reserves. In November 1995, the coal reserves were sold
for $52 million, which resulted in a $42 million gain, or $20 million
after-tax.
14. Commitments and Contingent Liabilities
Construction Expenditures
PP&L's construction expenditures for the period 1997-2001 are
estimated to aggregate $1.2 billion, including AFUDC. For discussion
pertaining to construction expenditures, see Review of Financial
Condition and Results of Operations under the caption "Financial
Condition -- Capital Expenditure Requirements" on page 32.
Nuclear Insurance
PP&L is a member of certain insurance programs which provide
coverage for property damage to members' nuclear generating stations.
Facilities at the Susquehanna station are insured against property damage
losses up to $2.75 billion under these programs. PP&L is also a member
of an insurance program which provides insurance coverage for the cost of
replacement power during prolonged outages of nuclear units caused by
certain specified conditions. Under the property and replacement power
insurance programs, PP&L could be assessed retroactive premiums in the
event of the insurers' adverse loss experience. The maximum amount PP&L
could be assessed under these programs at December 31, 1996 was about $35
million.
PP&L's public liability for claims resulting from a nuclear incident
at the Susquehanna station is limited to about $8.9 billion under
provisions of The Price Anderson Amendments Act of 1988. PP&L is
protected against this liability by a combination of commercial insurance
and an industry assessment program. In the event of a nuclear incident
at any of the reactors covered by The Price Anderson Amendments Act of
1988, PP&L could be assessed up to $151 million per incident, payable at
a rate of $20 million per year, plus an additional 5% surcharge, if
applicable.
Environmental Matters
Air
The Clean Air Act deals, in part, with acid rain, attainment of
federal ambient ozone standards and toxic air emissions. PP&L has
complied with the Phase I acid rain provisions, required to be
implemented by 1995, by installing continuous emission monitors on all
units, burning lower sulfur coal and installing low nitrogen oxide
burners on certain units. To comply with the year 2000 acid rain
provisions, PP&L plans to purchase lower sulfur coal and use banked or
purchased emission allowances instead of installing FGD on its wholly-
owned units.
PP&L has met the initial ambient ozone requirements identified in
Title I of the Clean Air Act by reducing nitrogen oxide emissions by 40%
through the use of low nitrogen oxide burners. Further seasonal (i.e., 5
month) nitrogen oxide reductions to 55% and 75% of pre-Clean Air Act
levels for 1999 and 2003, respectively, are specified under the Northeast
Ozone Transport Region's Memorandum of Understanding.
The Clean Air Act requires EPA to study the health effects of
hazardous air emissions from power plants and other sources. In this
regard, in November 1996 the EPA proposed new national standards for
ambient levels of ground-level ozone and fine particulates. The new
standards, if implemented, may result in EPA mandating additional NOx and
SO2 reductions from utility boilers in the 2005-2010 timeframe. NOx
reductions to meet the new ozone standard are likely to be in the range
of the 75% seasonal NOx reductions that already are required for PP&L
under the Memorandum of Understanding in 2003 and beyond. However, to
meet the new fine particulate standards, EPA may mandate additional SO2
reductions significantly greater than those now planned for the acid rain
program and extend the NOx reductions required by the Memorandum of
Understanding from seasonal to year-round.
Expenditures to meet the year 1999 Memorandum of Understanding
requirements are included in the table of projected construction
expenditures in the Review of the Financial Condition and Results of
Operations under the caption "Financial Condition - Capital Expenditure
Requirements". PP&L currently estimates that additional capital
expenditures and operating costs for environmental compliance under the
Clean Air Act will be incurred beyond 2001 in amounts which are not now
determinable but could be material.
Water and Residual Waste
DEP residual waste regulations require PP&L to obtain permits for
existing ash basins at all of its coal-fired generating stations as
disposal facilities. Ash basins that cannot be permitted are required to
close by July 1997. Any groundwater contamination caused by the basins
must also be addressed. Any new ash disposal facility must meet the
rigid siting and design standards set forth in the regulations.
To address the DEP regulations, PP&L is moving forward with plans to
install dry fly ash handling systems at its power stations.
Groundwater degradation related to fuel oil leakage from underground
facilities and seepage from coal refuse disposal areas and coal storage
piles has been identified at several PP&L generating stations. Remedial
work is substantially completed at two generating stations. At this
time, there is no indication that remedial work will be required at other
PP&L generating stations.
The current Montour station NPDES permit and proposed Holtwood
station NPDES permit contain stringent limits for certain toxic metals
and increased monitoring requirements. Depending on the results of toxic
reduction studies in progress, additional water treatment facilities may
be needed at these stations.
Capital expenditures through the year 2001 to comply with the
residual waste regulations, correct groundwater degradation at fossil-
fueled generating stations, and address waste water control at PP&L
facilities are included in the table of construction expenditures in the
Review of the Financial Condition and Results of Operations under the
caption "Financial Condition - Capital Expenditure Requirements". PP&L
currently estimates that $12 million of additional capital expenditures
may be required in the next four years and $67 million of additional
capital expenditures could be required beyond the year 2001. Actions
taken to correct groundwater degradation, to comply with the DEP's
regulations and to address waste water control are also expected to
result in increased operating costs in amounts which are not now
determinable but could be material.
Superfund and Other Remediation
PP&L has signed a consent order with the DEP to address a number of
sites where PP&L may be liable for remediation of contamination. This
may include potential PCB contamination at certain PP&L substations and
pole sites; potential contamination at a number of coal gas manufacturing
facilities formerly owned and operated by PP&L; and oil or other
contamination which may exist at some of PP&L's former generating
facilities.
At December 31, 1996, PP&L had accrued $10 million, representing the
amount PP&L can reasonably estimate it will have to spend to remediate
sites involving the removal of hazardous or toxic substances including
those covered by the consent order mentioned above. Future cleanup or
remediation work at sites currently under review, or at sites not
currently identified, may result in material additional operating costs
which PP&L cannot estimate at this time. In addition, certain federal
and state statutes, including Superfund and the Pennsylvania Hazardous
Sites Cleanup Act, empower certain governmental agencies, such as the EPA
and the DEP, to seek compensation from the responsible parties for the
lost value of damaged natural resources. The EPA and the DEP may file
such compensation claims against the parties, including PP&L, held
responsible for cleanup of such sites. Such natural resource damage
claims against PP&L could result in material additional liabilities.
Other Environmental Matters
In addition to the issues discussed above, PP&L may be required to
modify, replace or cease operating certain facilities to comply with
other statutes, regulations and actions by regulatory bodies or courts
involving environmental matters, including the areas of water and air
quality, hazardous and solid waste handling and disposal, toxic
substances and electric and magnetic fields. In this regard, PP&L also
may incur capital expenditures, operating expenses and other costs in
amounts which are not now determinable, but may be material.
Loan Guarantees of Affiliated Companies
PMDC has provided a parental guarantee of a subsidiary's pro rata
share of the outstanding portion of certain debt issuances of an
investee. At December 31, 1996, $11 million of such loans were
guaranteed by PMDC. During 1997, PMDC will guarantee another $8 million
in connection with additional borrowings in 1997.
In addition, Spectrum has a $1 million line of credit, which is
guaranteed by PP&L Resources.
Source of Labor Supply
At December 31, 1996, PP&L had a total of approximately 6,428 full-
time employees. Approximately 65 percent of these full-time employees
are represented by the IBEW. The existing three-year agreement with the
IBEW will expire in May 1997.
<PAGE>
<TABLE>
SELECTED FINANCIAL AND OPERATING DATA
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C><C> <C><C> <C>
PP&L RESOURCES, INC.
Income Items -- millions
Operating revenues ................ $2,910 $2,752 $2,725 $2,727 $2,744
Operating income............................... 556 574 501 563 573
Net Income (e)................................. 329 323 (d) 216 (d) 314 306
Balance Sheet Items -- millions (a)
Property, plant and equipment, net. 6,960 6,970 7,195 7,146 7,020
Total assets................................... 9,636 9,492 9,372 9,454 8,192
Long-term debt................................. 2,832 2,859 2,941 2,663 2,627
Preferred and preference stock
With sinking fund
requirements................................ 295 295 295 335 326
Without sinking fund
requirements................................ 171 171 171 171 224
Common equity.................................. 2,745 2,597 2,454 2,426 2,367
Short-term debt................................ 144 89 74 202 159
Total capital provided
by investors.................................. 6,187 6,011 5,936 5,797 5,703
Capital lease obligations ..................... 247 220 225 249 251
Financial Ratios
Return on average common
equity -- % ...................... 12.30 12.81 8.73 13.06 13.11
Embedded cost rates (a)
Long-term debt -- %.......................... 7.89 7.95 8.07 8.63 9.36
Preferred and preference
stock -- %.................................. 6.09 6.09 6.07 6.30 7.36
Times interest earned before
income taxes................................. 3.55 3.56 2.73 3.33 3.18
Ratio of earnings to fixed charges
-- total enterprise basis (b)................ 3.45 3.47 2.70 3.31 3.15
Ratio of earnings to fixed charges
and dividends on preferred and
preference stock
--total enterprise basis (b)................ 2.90 2.91 2.27 2.71 2.53
Common Stock Data
Number of shares outstanding
-- thousands
Year-end..................................... 162,665 159,403 155,482 152,132 151,885
Average...................................... 161,060 157,649 153,458 151,904 151,676
Number of shareowners (a)...................... 123,290 128,075 132,632 130,677 129,394
Earnings per share ............................ $2.05 $2.05 (d) $1.41 (d) $2.07 $2.02
Dividends declared per share................... $1.67 $1.67 $1.67 $1.65 $1.60
Book value per share (a)....................... $16.87 $16.29 $15.79 $15.95 $15.58
Market price per share (a)..................... $23 $25 $19 $27 $27-1/4
Dividend payout rate -- %...................... 82 82 119 80 79
Dividend yield -- % (c)........................ 7.26 6.68 8.79 6.11 5.87
Price earnings ratio (c)....................... 11.22 12.20 13.48 13.04 13.49
(a) At year-end
(b) Computed using earnings and fixed charges of
PP&L Resources and its subsidiaries. Fixed charges
consist of interest on short-and long-term debt,
other interest charges, interest on capital lease
obligations and the estimated interest component
of other rentals.
(c) Based on year-end market prices.
(d) 1995 and 1994 earnings were affected by several
one-time adjustments. See Financial Notes 3,
11, and 13.
(e) Prior years restated to reflect formation of
the holding company.
</TABLE>
<PAGE>
<TABLE>
SELECTED FINANCIAL AND OPERATING DATA
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C><C> <C><C> <C>
Pennsylvania Power & Light Company
Income Items -- millions
Operating revenues ...................... $2,910 $2,752 $2,725 $2,727 $2,744
Operating income........................................ 556 574 501 563 573
Earnings available to PP&L
Resources, Inc. (d)................................... 329 324 (c) 215 (c) 314 306
Balance Sheet Items -- millions (a)
Property, plant and equipment, net....... 6,960 6,970 7,195 7,146 7,020
Total assets............................................ 9,371 9,424 9,321 9,454 8,192
Long-term debt.......................................... 2,832 2,859 2,941 2,663 2,627
Preferred and preference stock
With sinking fund requirements........................ 295 295 295 335 326
Without sinking fund requirements..................... 171 171 171 171 224
Common equity........................................... 2,617 2,528 2,404 2,426 2,367
Short-term debt......................................... 10 89 74 202 159
Total capital provided by investors..................... 5,925 5,942 5,885 5,797 5,703
Capital lease obligations .............................. 247 220 225 249 251
Financial Ratios
Return on average common equity -- % .... 12.95 13.10 8.83 13.06 13.11
Embedded cost rates (a)
Long-term debt -- %................................... 7.89 7.95 8.07 8.63 9.36
Preferred and preference stock -- %................... 6.09 6.09 6.07 6.30 7.36
Times interest earned before......................................
income taxes.......................................... 3.62 3.58 2.73 3.33 3.18
Ratio of earnings to fixed charges --
total enterprise basis (b)............................ 3.50 3.48 2.70 3.31 3.15
Ratio of earnings to fixed charges and
dividends on preferred and preference
stock--total enterprise basis (b).................... 2.93 2.92 2.26 2.71 2.53
Revenue Data
Average price per kwh billed for system
sales - cents....................................... 7.22 7.10 7.14 7.27 7.39
Sales Data
Customers(a)............................. 1,236,294 1,226,089 1,213,023 1,203,139 1,186,682
Electric energy sales billed --
millions of kwh
Residential .......................................... 11,849 11,300 11,444 11,043 10,604
Commercial ........................................... 10,288 9,948 9,716 9,373 9,039
Industrial ........................................... 10,016 9,845 9,536 9,100 8,746
Other ................................................ 1,638 1,578 1,618 1,534 1,366
System sales ....................................... 33,791 32,671 32,314 31,050 29,755
Contractual sales to other
major utilities .................................... 11,519 7,676 6,307 7,142 7,327
PJM energy sales ..................................... 1,338 2,358 3,158 4,142 5,160
Total electric energy sales billed ................. 46,648 42,705 41,779 42,334 42,242
Number of Full-Time Employees (a)......................... 6,428 6,661 7,431 7,677 7,882
<FN>
(a) At year-end
(b) Computed using earnings and fixed charges of PP&L and its subsidiaries.
Fixed charges consist of interest on short- and long-term debt, other
interest charges, interest on capital lease obligations and the estimated
interest component of other rentals.
(c) 1995 and 1994 earnings were affected by several one-time adjustments.
See Financial Notes 3, 11, and 13.
(d) Prior years restated to reflect formation of the holding company.
</TABLE>
<PAGE>
SHAREOWNER AND INVESTOR INFORMATION
Annual Meetings: The annual meetings of shareowners of PP&L Resources and
PP&L are held each year on the fourth Wednesday of April. The 1997 annual
meetings will be held on Wednesday, April 23, 1997, at Lehigh University's
Stabler Arena, at the Goodman Campus Complex located in Lower Saucon
Township, outside Bethlehem, PA.
Proxy Material: A proxy statement and notice of PP&L Resources' and PP&L's
annual meetings are mailed to all shareowners of record as of February 28,
1997.
Dividends: The 1997 dates for consideration of the declaration of
dividends by the board of directors or its finance committee are February
26, May 28, August 27 and November 26. Subject to the declaration,
dividends are paid on the first day of April, July, October and January.
Dividend checks are mailed in advance of those dates with the intention
that they arrive as close as possible to the payment dates. The 1997
record dates for dividends are expected to be the 10th day of March, June,
September and December.
Direct Deposit of Dividends: Shareowners may choose to have their dividend
checks deposited directly into their checking or savings account.
Quarterly dividend payments are electronically credited on the dividend
date, or the first business day thereafter.
Dividend Reinvestment Plan: Shareowners may choose to have dividends on
their PP&L Resources common stock or PP&L preferred stock reinvested in
PP&L Resources common stock instead of receiving the dividend by check.
Certificate Safekeeping: Shareowners participating in the Dividend
Reinvestment Plan may choose to have their common stock certificates
forwarded to PP&L for safekeeping.
Lost Dividend or Interest Checks: Dividend or interest checks lost by
investors, or those that may be lost in the mail, will be replaced if the
check has not been located by the 10th business day following the payment
date.
Transfer of Stock or Bonds: Stock or bonds may be transferred from one
name to another or to a new account in the name of another person. Please
contact Investor Services regarding transfer instructions.
Bondholder Information: Much of the information and many of the procedures
detailed here for shareowners also apply to bondholders. Questions related
to bondholder accounts should be directed to Investor Services.
Lost Stock or Bond Certificates: Please contact Investor Services for an
explanation of the procedure to replace lost stock or bond certificates.
Publications: Several publications are prepared each year and sent to all
investors of record and to others who request their names be placed on our
mailing list. If your stock is held in street name and you wish to receive
company information on a more timely basis, write, call or E-mail Investor
Services at the addresses or number listed below. We will add your name to
our direct mailing list.
PP&L Resources
Summary Annual Report -- published and mailed in mid-March to all
shareowners of record.
Shareowners' Newsletter -- an easy-to-read newsletter containing current
items of interest to shareowners -- published and mailed at the beginning
of each quarter.
Quarterly Review -- published in May, July and October to provide quarterly
financial information to investors.
Periodic Mailings: Letters regarding new investor programs, special items
of interest, or other pertinent information are mailed on a non-scheduled
basis as necessary.
Duplicate Mailings: The summary annual report and other investor
publications are mailed to each investor account. If you have more than
one account, or if there is more than one investor in your household, you
may contact Investor Services to request that only one publication be
delivered to your address. Please provide account numbers for all
duplicate mailings.
Investor Services: For any questions you have or additional information
you require about PP&L Resources and its subsidiaries, please call the
toll-free number listed below, or write to:
George I. Kline
Manager-Investor Services
Pennsylvania Power & Light Co.
Two North Ninth Street
Allentown, PA 18101
Toll-Free Phone Number: For information regarding your investor account,
or other inquiries, call toll-free: 1-800-345-3085.
Internet Access: For updated information throughout the year, check out
our home page at http://www.papl.com. You may also contact Investor
Services via E-mail at [email protected].
Security Analyst and Institutional
Investor Inquiries: Members of the financial community seeking additional
information may contact:
Timothy J. Paukovits
Investor Relations Manager
Phone: (610) 774-4124
Fax: (610) 774-5106
E-mail: [email protected]
Listed Securities: Fiscal Agents:
New York Stock Exchange Stock Transfer Agents and Registrars
PP&L Resources, Inc.: Norwest Bank Minnesota, N.A.
Common Stock (Code: PPL) Shareowner Services
161 North Concord Exchange
Pennsylvania Power & Light Co.: South St. Paul, MN 55075
4-1/2% Preferred Stock
(Code: PPLPRB) Pennsylvania Power & Light Co.
4.40% Series Preferred Stock Investor Services Department
(Code: PPLPRA)
Dividend Disbursing Office and
Dividend Reinvestment Plan Agent
Philadelphia Stock Exchange Pennsylvania Power & Light Co.
PP&L Resources, Inc.: Investor Services Department
Common Stock
Mortgage Bond Trustee
Bankers Trust Co.
Pennsylvania Power & Light Co.: Attn: Security Transfer Unit
4-1/2% Preferred Stock P.O. Box 291569
3.35% Series Preferred Stock Nashville, TN 37229
4.40% Series Preferred Stock
4.60% Series Preferred Stock Bond Interest Paying Agent
Pennsylvania Power & Light Co.
Investor Services Department
<PAGE>
<TABLE>
QUARTERLY FINANCIAL, COMMON STOCK PRICE AND DIVIDEND DATA (Unaudited)
PP&L Resources, Inc. and Subsidiaries
(Millions of Dollars, except per share data)
<CAPTION>
For the Quarters Ended (a)
March 31 June 30 Sept. 30 Dec. 31
<S> <C> <C> <C> <C>
1996
Operating revenues...................... $789 $669 $715 $737
Operating income.............................. 176 120 136 124
Net income.................................... 116 61 79 73
Earnings per common share (b)................. 0.73 0.38 0.49 0.45
Dividends declared per common share (c)....... 0.4175 0.4175 0.4175 0.4175
Price per common share
High........................................ 26 24 1/2 24 24 1/2
Low......................................... 23 1/2 22 21 5/8 21 7/8
1995
Operating revenues...................... $728 $609 $682 $733
Operating income.............................. 162 104 179 129
Net income.................................... 101 45 87 90
Earnings per common share (b)................. 0.65 0.28 0.55 0.56
Dividends declared per common share (c)....... 0.4175 0.4175 0.4175 0.4175
Price per common share
High........................................ 20 7/8 19 7/8 23 1/2 26 1/2
Low......................................... 19 1/8 17 7/8 18 5/8 21 5/8
<FN>
(a) PP&L's electric utility business is seasonal in nature with peak sales
periods generally occurring in the winter months. In addition
earnings in several quarters were affected by several one-time adjustments.
Accordingly, comparisons among quarters of a year may not be indicative of
overall trends and changes in operations.
(b) The sum of the quarterly amounts may not equal annual earnings per
share due to changes in the number of common shares outstanding
during the year or rounding.
(c) PP&L Resources has paid quarterly cash dividends on its common
stock in every year since 1946. The dividends paid per
share in 1996 and 1995 were $1.67. The most recent regular quarterly
dividend paid by PP&L Resources was 41.75 cents per share
(equivalent to $1.67 per annum) paid January 1, 1997. Future dividends
will be dependent upon future earnings, financial requirements
and other factors.
</TABLE>
<PAGE>
<TABLE>
QUARTERLY FINANCIAL DATA (Unaudited)
Pennsylvania Power & Light Company and Subsidiaries
(Millions of Dollars)
<CAPTION>
For the Quarters Ended (a)
March 31 June 30 Sept. 30 Dec. 31
<S> <C> <C> <C> <C>
1996
Operating revenues.................. $789 $669 $715 $737
Operating income.......................... 176 120 136 124
Net income ............................... 125 69 86 77
Earnings available to PP&L Resources...... 118 62 79 70
1995
Operating revenues.................. $728 $609 $682 $733
Operating income.......................... 162 104 179 129
Net income ............................... 108 52 95 97
Earnings available to PP&L Resources...... 101 45 88 90
<FN>
(a) PP&L's electric utility business is seasonal in nature with peak sales
periods generally occurring in the winter months. Accordingly, comparisons
among quarters of a year may not be indicative of overall trends
and changes in operations.
</TABLE>
<PAGE>
<TABLE>
PP&L Resources, Inc.
Pennsylvania Power & Light Company
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<CAPTION>
Column A Column B Column C Column D Column E
Deductions
from
Balance Additions Reserves -
at Charges Losses or Balance at
Beginning Charged to Other Expenses End of
Description of Period to Income Accounts Applicable Period
(Millions of Dollars)
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1996
Reserves deducted from assets in
the Balance Sheet
Uncollectible accounts ............................ $35 $20 $30 $25
Obsolete inventory - Materials and supplies........ 15 15 0
Year Ended December 31, 1995
Reserves deducted from assets in
the Balance Sheet
Uncollectible accounts ............................ 29 25 19 35
Obsolete inventory - Materials and supplies........ 0 15 15
Year Ended December 31, 1994
Reserves deducted from assets in
the Balance Sheet
Uncollectible accounts ............................ 29 17 17 29
Obsolete inventory - Materials and supplies........ 0 0
</TABLE>
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information for this item concerning directors of PP&L
Resources will be set forth in the sections entitled
"Nominees for Directors" and "Directors Continuing in
Office" in PP&L Resources' 1997 Notice of Annual Meeting and
Proxy Statement, which will be filed with the SEC not later
than 120 days after December 31, 1996, and which information
is incorporated herein by reference. Information required
by this item concerning the executive officers of PP&L
Resources is set forth on page 19 through 20 of this report.
Information for this item concerning directors of PP&L
will be set forth in the sections entitled "Nominees for
Directors" and "Directors Continuing in Office" in PP&L's
1997 Notice of Annual Meeting and Proxy Statement, which
will be filed with the SEC not later than 120 days after
December 31, 1996, and which information is incorporated
herein by reference. Information required by this item
concerning the executive officers of PP&L is set forth on
page 19 through 20 of this report.
ITEM 11. EXECUTIVE COMPENSATION
Information for this item for PP&L Resources will be
set forth in the sections entitled "Compensation of
Directors," "Summary Compensation Table" and "Retirement
Plans for Executive Officers" in PP&L Resources' 1997 Notice
of Annual Meeting and Proxy Statement, which will be filed
with the SEC not later than 120 days after December 31,
1996, and which information is incorporated herein by
reference.
Information for this item for PP&L will be set forth in
the sections entitled "Compensation of Directors," "Summary
Compensation Table" and "Retirement Plans for Executive
Officers" in PP&L's 1997 Notice of Annual Meeting and Proxy
Statement, which will be filed with the SEC not later than
120 days after December 31, 1996, and which information is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
Information for this item for PP&L Resources will be
set forth in the section entitled "Stock Ownership" in PP&L
Resources' 1997 Notice of Annual Meeting and Proxy
Statement, which will be filed with the SEC not later than
120 days after December 31, 1996, and which information is
incorporated herein by reference.
Information for this item for PP&L will be set forth in
the section entitled "Stock Ownership" in PP&L's 1997 Notice
of Annual Meeting and Proxy Statement, which will be filed
with the SEC not later than 120 days after December 31,
1996, and which information is incorporated herein by refer-
ence.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements - included in response to Item 8.
PP&L Resources, Inc.
Report of Independent Accountants
Independent Auditors' Report
Consolidated Statement of Income for the Three
Years Ended December 31, 1996
Consolidated Statement of Cash Flows for
the Three Years Ended December 31, 1996
Consolidated Balance Sheet at December 31, 1996
and 1995
Consolidated Statement of Shareowners' Common Equity
for the Three Years Ended December 31, 1996
Consolidated Statement of Preferred Stock at
December 31, 1996 and 1995
Consolidated Statement of Long-Term Debt at
December 31, 1996 and 1995
Notes to Financial Statements
Pennsylvania Power & Light Company
Report of Independent Accountants
Independent Auditors' Report
Consolidated Statement of Income for the Three
Years Ended December 31, 1996
Consolidated Statement of Cash Flows for
the Three Years Ended December 31, 1996
Consolidated Balance Sheet at December 31, 1996
and 1995
Consolidated Statement of Shareowners' Common Equity
for the Three Years Ended December 31, 1996
Consolidated Statement of Preferred Stock at
December 31, 1996 and 1995
Consolidated Statement of Long-Term Debt at
December 31, 1996 and 1995
Notes to Financial Statements
2. Supplementary Data and Supplemental Financial Statement
Schedule - included in response to Item 8.
Schedule II - Valuation and Qualifying Accounts and
Reserves for the Three Years Ended
December 31, 1996
All other schedules are omitted because of the absence
of the conditions under which they are required or
because the required information is included in the
financial statements or notes thereto.
3. Exhibits
Exhibit Index on page 92.
(b) Reports on Form 8-K:
The following Reports on Form 8-K were filed during the
three months ended December 31, 1996:
Report dated December 6, 1996 and
Amended on December 9, 1996
Item 5. Other Events
Information regarding major provisions in the Pennsylvania
legislation enacted to restructure the electric utility
industry in order to create retail access to a competitive
market for the generation of electricity.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
PP&L Resources, Inc.
(Registrant)
Pennsylvania Power & Light Company
(Registrant)
By /s/ William F. Hecht
William F. Hecht - Chairman, President
and Chief Executive
Officer (PP&L Resources,
Inc. and Pennsylvania
Power & Light Company)
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the Registrant and in the capacities and on the date indicated.
TITLE
By /s/ William F. Hecht Principal Executive
William F. Hecht - Chairman, President Officer and Director
and Chief Executive
Officer (PP&L Resources,
Inc. and Pennsylvania
Power & Light Company)
By /s/ R. E. Hill Principal Financial
R. E. Hill - Senior Vice President- Officer
Financial (PP&L
Resources, Inc. and
Pennsylvania Power &
Light Company)
By /s/ J. J. McCabe Chief Accounting
J. J. McCabe - Vice President and Officer
Controller(PP&L Resources,
Inc. and Pennsylvania Power
& Light Company)
E. Allen Deaver Stuart Heydt
William J. Flood Clifford L. Jones
Elmer D. Gates Ruth Leventhal
Derek C. Hathaway Francis A. Long Directors
Norman Robertson
By /s/ William F. Hecht
William F. Hecht, Attorney-in-fact Date: February 28, 1997
<PAGE>
EXHIBIT INDEX
The following Exhibits indicated by an asterisk preceding
the Exhibit number are filed herewith. The balance of the
Exhibits have heretofore been filed with the Commission and
pursuant to Rule 12(b)-32 are incorporated herein by
reference. Exhibits indicated by a # are filed or listed
pursuant to Item 601(b)(10)(iii) of Regulation S-K.
3(a)-1 - Articles of Incorporation of Resources
(Exhibit B to Proxy Statement of PP&L and
Prospectus of Resources, dated March 9,
1995)
3(a)-2 - Restated Articles of Incorporation of PP&L
(Exhibit A to Proxy Statement of PP&L and
Prospectus of Resources, dated March 9,
1995)
3(b)-1 - By-laws of Resources (Exhibit 3.2 to
Registration Statement No. 33-57949)
3(b)-2 - By-laws of PP&L (Exhibit 3(ii) to PP&L's
Form 10-K Report (File No. 1-905) for the
year ended December 31, 1993)
4(a)-1 - Amended and Restated Employee Stock
Ownership Plan, dated October 26, 1988
(Exhibit 4(b) to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1988)
4(a)-2 - Amendment No. 1 to said Employee Stock
Ownership Plan, effective January 1, 1989
(Exhibit 4(b)-2 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1989)
4(a)-3 - Amendment No. 2 to said Employee Stock
Ownership Plan, effective January 1, 1990
(Exhibit 4(b)-3 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1989)
4(a)-4 - Amendment No. 3 to said Employee Stock
Ownership Plan, effective January 1, 1991
(Exhibit 4(b)-4 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1990)
4(a)-5 - Amendment No. 4 to said Employee Stock
Ownership Plan, effective January 1, 1991
(Exhibit 4(a)-5 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1991)
4(a)-6 - Amendment No. 5 to said Employee Stock
Ownership Plan, effective October 23, 1991
(Exhibit 4(a)-6 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1991)
4(a)-7 - Amendment No. 6 to said Employee Stock
Ownership Plan, effective January 1, 1990
and January 1, 1992 (Exhibit 4(a)-7 to
PP&L's Form 10-K Report (File No. 1-905)
for the year ended December 31, 1991)
4(a)-8 - Amendment No. 7 to said Employee Stock
Ownership Plan, effective January 1, 1992
(Exhibit 4(a)-8 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1991)
4(a)-9 - Amendment No. 8 to said Employee Stock
Ownership Plan, effective July 1, 1992
(Exhibit 4(a)-9 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1992)
4(a)-10 - Amendment No. 9 to said Employee Stock
Ownership Plan, effective January 1, 1993
(Exhibit 4(a)-10 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1992)
4(a)-11 - Amendment No. 10 to said Employee Stock
Ownership Plan, effective January 1, 1993
(Exhibit 4(a)-11 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1993)
4(a)-12 - Amendment No. 11 to said Employee Stock
Ownership Plan, effective January 1, 1994
(Exhibit 4(a)-12 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1994)
4(a)-13 - Amendment No. 12 to said Employee Stock
Ownership Plan, effective January 1, 1994
(Exhibit 4(a)-13 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1994)
4(a)-14 - Amendment No. 13 to said Employee Stock
Ownership Plan, effective April 27, 1995
(Exhibit 4(a)-14 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1995)
4(a)-15 - Amendment No. 14 to said Employee Stock
Ownership Plan, effective January 1, 1989
and January 1, 1995 (Exhibit 4(a)-14 to
PP&L's Form 10-K Report (File No. 1-905)
for the year ended December 31, 1994)
4(a)-16 - Amendment No. 15 to said Employee Stock
Ownership Plan, effective October 25, 1995
(Exhibit 4(a)-16 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1995)
*4(a)-17 - Amendment No. 16 to said Employee Stock
Ownership Plan, effective January 1, 1989
*4(a)-18 - Amendment No. 17 to said Employee Stock
Ownership Plan, effective January 1, 1996
4(b)-1 - Mortgage and Deed of Trust, dated as of
October 1, 1945, between PP&L and Guaranty
Trust Company of New York, as Trustee (now
Bankers Trust Company, as successor
Trustee) (Exhibit 2(a)-4 to Registration
Statement No. 2-60291)
4(b)-2 - Supplement, dated as of July 1, 1954, to
said Mortgage and Deed of Trust (Exhibit
2(b)-5 to Registration Statement
No. 219255)
4(b)-4 - Supplement, dated as of November 1, 1967,
to said Mortgage and Deed of Trust (Exhibit
2(a)-14 to Registration Statement No. 2-
60291)
4(b)-5 - Supplement, dated as of January 1, 1969, to
said Mortgage and Deed of Trust (Exhibit
2(a)-16 to Registration Statement No. 2-
60291)
4(b)-7 - Supplement, dated as of February 1, 1971,
to said Mortgage and Deed of Trust (Exhibit
2(a)-19 to Registration Statement No. 2-
60291)
4(b)-9 - Supplement, dated as of January 1, 1973, to
said Mortgage and Deed of Trust (Exhibit
2(a)-21 to Registration Statement No. 2-
60291)
4(b)-10 - Supplement, dated as of October 1, 1989, to
said Mortgage and Deed of Trust (Exhibit
4(a) to PP&L's Form 8-K Report (File No. 1-
905) dated November 6, 1989)
4(b)-11 - Supplement, dated as of July 1, 1991, to
said Mortgage and Deed of Trust
(Exhibit 4(a) to PP&L's Form 8-K Report
(File No. 1-905) dated July 29, 1991)
4(b)-12 - Supplement, dated as of May 1, 1992, to
said Mortgage and Deed of Trust (Exhibit
4(a) to PP&L's Form 8-K Report (File No. 1-
905) dated June 1, 1992)
4(b)-13 - Supplement, dated as of November 1, 1992,
to said Mortgage and Deed of Trust (Exhibit
4(b)-29 to PP&L's Form 10-K Report (File 1-
905) for the year ended December 31, 1992)
4(b)-14 - Supplement, dated as of February 1, 1993,
to said Mortgage and Deed of Trust (Exhibit
4(a) to PP&L's Form 8-K Report (File No. 1-
905) dated February 16, 1993)
4(b)-15 - Supplement, dated as of April 1, 1993, to
said Mortgage and Deed of Trust (Exhibit
4(a) to PP&L's Form 8-K Report (File No. 1-
905) dated April 30, 1993)
4(b)-16 - Supplement, dated as of June 1, 1993, to
said Mortgage and Deed of Trust (Exhibit
4(a) to PP&L's Form 8-K Report (File No. 1-
905) dated July 7, 1993)
4(b)-17 - Supplement, dated as of October 1, 1993, to
said Mortgage and Deed of Trust (Exhibit
4(a) to PP&L's Form 8-K Report (File No. 1-
905) dated October 29, 1993)
4(b)-18 - Supplement, dated as of February 15, 1994,
to said Mortgage and Deed of Trust (Exhibit
4(a) to PP&L's Form 8-K Report (File No. 1-
905) dated March 11, 1994)
4(b)-19 - Supplement, dated as of March 1, 1994, to
said Mortgage and Deed of Trust (Exhibit
4(b) to PP&L's Form 8-K Report (File No. 1-
905) dated March 11, 1994)
4(b)-20 - Supplement, dated as of March 15, 1994, to
said Mortgage and Deed of Trust (Exhibit
4(a) to PP&L's Form 8-K Report (File No. 1-
905) dated March 30, 1994)
4(b)-21 - Supplement, dated as of September 1, 1994,
to said Mortgage and Deed of Trust (Exhibit
4(a) to PP&L's Form 8-K (File No. 1-905)
dated October 3, 1994)
4(b)-22 - Supplement, dated as of October 1, 1994, to
said Mortgage and Deed of Trust (Exhibit
4(a) to PP&L's Form 8-K Report (File No. 1-
905) dated October 3, 1994)
4(b)-23 - Supplement, dated as of August 1, 1995, to
said Mortgage and Deed of Trust (Exhibit
6(a) to PP&L's Form 10-Q Report (File No.
1-905) for the quarter ended September 30,
1995)
10(a) - Revolving Credit Agreement, dated as of
August 30, 1994, between PP&L and the Banks
named therein (Exhibit 10(a)-1 to PP&L's
Form 10-K Report (File No. 1-905) for the
year ended December 31, 1994)
10(b) - Agreement, dated as of May 30, 1996,
between PP&L Resources, Inc., Chemical Bank
and Citibank, N.A. (Exhibit 10(a) to PP&L's
Form 10-Q Report (File No. 1-905) for the
quarter ended September 30, 1996)
*10(c) - Credit Agreement, dated as of March 14,
1996, between PP&L and The First National
Bank of Chicago
10(d) - Pollution Control Facilities Agreement,
dated as of May 1, 1973, between PP&L and
the Lehigh County Industrial Development
Authority (Exhibit 5(z) to Registration
Statement No. 2-60834)
10(e)-1 - Interconnection Agreement, dated September
26, 1956, among Public Service Electric &
Gas Company, Philadelphia Electric Company,
PP&L, Baltimore Gas & Electric Company,
Pennsylvania Electric Company, Metropolitan
Edison Company, New Jersey Power & Light
Company and Jersey Central Power & Light
Company (Exhibit 5(e) to Registration
Statement No. 2-60291)
10(e)-2 - Supplemental Agreement, dated April 1,
1974, to said Interconnection Agreement
(Exhibit 5(f)-4 to Registration Statement
No. 2-51312)
10(e)-3 - Supplemental Agreement, dated June 15,
1977, to said Interconnection Agreement
(Exhibit 5(e)-5 to Registration Statement
No. 2-60291)
10(e)-4 - Agreement of Settlement and Compromise,
dated July 25, 1980, among the parties to
said Interconnection Agreement (Exhibit
20(b)-8 to PP&L's Form 10-Q Report (File
No. 1-905) for the quarter ended September
30, 1980)
10(e)-5 - Supplemental Agreement, dated March 26,
1981, to said Interconnection Agreement
(Exhibit l0(b)-l0 to PP&L's Form l0-K
Report (File No. 1-905) for the year ended
December 31, 1981)
10(e)-6 - Revisions to Schedules 4.02, 7.01, and
9.01, all effective August 9, 1982, to said
Interconnection Agreement (Exhibit 10(e)-11
to PP&L's Form l0-K Report (File No. l-905)
for the year ended December 31, 1982)
10(e)-7 - Schedules 4.02, 5.01, 5.02, 5.04, 5.05,
6.01, 6.03, 6.04, 7.01, 7.02 7.03; all
effective February 6, 1984, to said
Interconnection Agreement (Exhibit 10(e)-8
to PP&L's Form l0-K Report (File No. 1-905)
for the year ended December 31, 1985)
10(e)-8 - Schedule 5.03, Revision l, Exhibit A,
revised May 31, 1985, to said Intercon-
nection Agreement (Exhibit 10(e)-10 to
PP&L's Form l0-K Report (File No. 1-905)
for the year ended December 31, 1985)
10(e)-9 - Schedule 4.02, Revision No. 2, effective
December 4, 1989, to said Interconnection
Agreement (Exhibit 10(d)-13 to PP&L's Form
10-K Report (File No. 1-905) for the year
ended December 31, 1989)
10(e)-10 - Schedule 5.06, Revision No. 1, effective
June 1, 1990, to said Interconnection
Agreement (Exhibit 10(d)-14 to PP&L's Form
10-K Report (File No. 1-905) for the year
ended December 31, 1990)
10(e)-11 - Schedule 2.21, Revision No. 1, effective
June 1, 1990, to said Interconnection
Agreement (Exhibit 10(d)-15 to PP&L's Form
10-K Report (File No. 1-905) for the year
ended December 31, 1990)
10(e)-12 - Schedule 2.212, Revision No. 2, effective
June 1, 1990, to said Interconnection
Agreement (Exhibit 10(d)-16 to PP&L's Form
10-K Report (File No. 1-905) for the year
ended December 31, 1990)
10(e)-13 - Schedule 9.01, Revision No. 4, effective
June 1, 1992, to said Interconnection
Agreement (Exhibit 10(d)-18 to PP&L's Form
10-K Report (File No. 1-905) for the year
ended December 31, 1990)
10(e)-14 - Schedule 3.01, Revision No. 3, effective
June 1, 1992, to said Interconnection
Agreement (Exhibit 10(c)-15 to PP&L's Form
10-K Report (File No. 1-905) for the year
ended December 31, 1991)
10(e)-15 - Schedule 4.01, Revision No. 13, effective
June 1, 1993, to said Interconnection
Agreement (Exhibit 10(c)-15 to PP&L's Form
10-K Report (File No. 1-905) for the year
ended December 31, 1993)
10(f) - Capacity and Energy Sales Agreement, dated
June 29, 1983, between PP&L and Atlantic
City Electric Company (Exhibit 10(f)-2 to
PP&L's Form 10-K Report (File No. 1-905)
for the year ended December 31, 1983)
10(g)-1 - Capacity and Energy Sales Agreement, dated
March 9, 1984, between PP&L and Jersey
Central Power & Light Company (Exhibit
l0(f)-3 to PP&L's Form 10-K Report (File
No. 1-905) for the year ended December 31,
1984)
10(g)-2 - First Supplement, effective February 28,
1986, to said Capacity and Energy Sales
Agreement (Exhibit 10(e)-4 to PP&L's Form
10-K Report (File No. 1-905) for the year
ended December 31, 1986)
10(g)-3 - Second Supplement, effective January 1,
1987, to said Capacity and Energy Sales
Agreement (Exhibit 10(g)-3 to PP&L's Form
10-K Report (File No. 1-905) for the year
ended December 31, 1989)
10(g)-4 - Amendments to Exhibit A, effective
October 1, 1987, to said Capacity and
Energy Sales Agreement (Exhibit 10(e)-6 to
PP&L's Form 10-K Report (File No. 1-905)
for the year ended December 31, 1987)
10(g)-5 - Third Supplement, effective December 1,
1988, to said Capacity and Energy Sales
Agreement (Exhibit 10(g)-5 to PP&L's Form
10-K Report (File No. 1-905) for the year
ended December 31, 1989)
10(g)-6 - Fourth Supplement, effective December 1,
1988, to said Capacity and Energy Sales
Agreement (Exhibit 10(g)-6 to PP&L's Form
10-K Report (File No. 1-905) for the year
ended December 31, 1989)
10(h)-1 - Capacity and Energy Sales Agreement, dated
December 21, 1989, between PP&L and GPU
Service Corporation (Exhibit 10(h) to
PP&L's Form 10-K Report (File No. 1-905)
for the year ended December 31, 1989)
10(h)-2 - First Supplement, effective June 1, 1991,
to said Capacity and Energy Sales Agreement
(Exhibit 10(f)-2 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1991)
10(i)-1 - Capacity and Energy Sales Agreement, dated
January 28, 1988, between PP&L and
Baltimore Gas and Electric Company (Exhibit
10(e)-7 to PP&L's Form 10-K Report (File
No. 1-905) for the year ended December 31,
1987)
10(i)-2 - First Supplement, effective November 1,
1988, to said Capacity and Energy Sales
Agreement (Exhibit 10(i)-2 to PP&L's Form
10-K Report (File No. 1-905) for the year
ended December 31, 1989)
10(i)-3 - Second Supplement, effective June 1, 1989,
to said Capacity and Energy Sales Agreement
(Exhibit 10(i)-3 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1989)
10(i)-4 - Third Supplement, effective June 1, 1991,
to said Capacity and Energy Sales Agreement
(Exhibit 10(g)-4 to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1991)
#10(j)-1 - Amended and Restated Directors Deferred
Compensation Plan, effective July 1, 1995
(Exhibit C to Proxy Statement of PP&L and
Prospectus of Resources, dated March 9,
1995)
*#10(j)-1 - Amendment No. 1 to said Amended and
Restated Directors Deferred Compensation
Plan, effective November 1, 1996
*#10(j)-2 - Amendment No. 2 to said Amended and
Restated Directors Deferred Compensation
Plan, effective January 1, 1997
#10(k) - Amended and Restated Directors Retirement
Plan, effective April 27, 1995 (Exhibit
10(i) to PP&L's Form 10-K Report (File No.
1-905) for the year ended December 31,
1995)
#10(l)-1 - Amended and Restated Deferred
Compensation Plan for Executive Officers,
effective January 1, 1990 (Exhibit 10(s) to
PP&L's Form 10-K Report (File No. 1-905)
for the year ended December 31, 1990)
#10(l)-2 - Amendment No. 1 to said Officers Deferred
Compensation Plan, effective January 1,
1991 (Exhibit 10(j)-2 to PP&L's Form 10-K
Report (File No. 1-905) for the year ended
December 31, 1991)
#10(l)-3 - Amendment No. 2 to said Officers Deferred
Compensation Plan, effective October 23,
1991 (Exhibit 10(j)-3 to PP&L's Form 10-K
Report (File No. 1-905) for the year ended
December 31, 1991)
#10(l)-4 - Amendment No. 3 to said Officers Deferred
Compensation Plan, effective January 1,
1992 and April 1, 1992 (Exhibit 10(j)-4 to
PP&L's Form 10-K Report (File No. 1-905)
for the year ended December 31, 1991)
#10(l)-5 - Amendment No. 4 to said Officers Deferred
Compensation Plan, effective January 1,
1995 (Exhibit 10(j)-5 to PP&L's Form 10-K
Report (File No. 1-905) for the year ended
December 31, 1994)
*10(l)-6 - Amendment No. 5 to said Officers Deferred
Compensation Plan, effective January 1,
1996
#10(m) - Amended and Restated Supplemental Executive
Retirement Plan, effective August 31, 1995
(Exhibit 10(k) to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1995)
*#10(m)-1 - Amendment No. 1 to said Amended and
Restated Supplemental Executive Retirement
Plan, effective July 1, 1996
#10(n) - Amended and Restated Executive Retirement
Security Plan, effective August 31, 1995
(Exhibit 10(l) to PP&L's Form 10-K Report
(File No. 1-905) for the year ended
December 31, 1995)
*#10(n)-1 - Amendment No. 1 to said Amended and
Restated Executive Retirement Security
Plan, effective January 1, 1996
#10(o)-1 - Amended and Restated Incentive
Compensation Plan, effective January 1,
1995 (Exhibit D to Proxy Statement of PP&L
and Prospectus of Resources, dated March 9,
1995)
#10(o)-2 - Amendment No. 1 to said Amended and
Restated Incentive Compensation Plan,
effective April 27, 1995 (Exhibit 10(m)-2
to PP&L's Form 10-K Report (File No. 1-905)
for the year ended December 31, 1995)
*#10(o)-3 - Amendment No. 2 to said Amended and
Restated Incentive Compensation Plan,
effective January 1, 1996
*#10(o)-4 - Amendment No. 3 to said Amended and
Restated Incentive Compensation Plan,
effective January 1, 1997
*#10(p) - Description of Executive Compensation
Incentive Award Program 1/
10(q) - Nuclear Fuel Lease, dated as of February
1, 1982, between PP&L, as lessee, and
Newton I. Waldman, not in his individual
capacity, but solely as Cotrustee of the
Pennsylvania Power & Light Energy Trust, as
lessor (Exhibit 10(g) to PP&L's Form l0-K
Report (File No. 1-905) for the year ended
December 31, 1981)
*12 - Computation of Ratio of Earnings to Fixed
Charges
*23(a) - Consent of Price Waterhouse LLP
*23(b) - Consent of Deloitte & Touche LLP
*24 - Power of Attorney
*27 - Financial Data Schedule
1/ This description is provided pursuant to 17 C.F.R.
Subsection 229.601(b)(10)(iii)(A).
<PAGE>
(PP&L LOGO
APPEARS HERE)
PP&L Resources, Inc.
Two North Ninth Street * Allentown, PA 18101
Bulk Rate
U.S. Postage
PAID
Allentown, PA.
Permit No. 104
<PAGE>
AMENDMENT NO. 16
TO
PENNSYLVANIA POWER & LIGHT COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
WHEREAS, Pennsylvania Power & Light Company ("Company") has
adopted the Pennsylvania Power & Light Company Employee Stock
Ownership Plan ("Plan") effective January 1, 1975; and
WHEREAS, the Plan was amended and restated effective Janu-
ary 1, 1987, and subsequently amended by Amendment Nos. 1, 2, 3,
4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15; and
WHEREAS, the Company desires to further amend the Plan;
NOW, THEREFORE, the Plan is hereby amended effective
January 1, 1989 as follows:
I. Effective January 1, 1989, the following sections of Arti-
cle II are amended to read:
2.8 "Compensation" shall mean the following.
(a) Compensation shall mean the annual compensation
received by an Employee from the Company as reported on Internal
Revenue Service Form W-2 or a successor form plus the Employee's
elective deferrals under the Employee Savings Plan or Deferred
Savings Plan; provided, however, that Compensation shall not
include fringe benefits not normally included in compensation,
such as tuition refunds, moving expenses, etc. and shall not, for
purposes of allocation under Section 5.2(a), include any amount
in excess of (i) for the 1975 and 1976 Plan Years, $16,000 and
(ii) commencing with the 1977 Plan Year, the median annual com-
pensation of all Participants during the Plan Year or $100,000,
whichever is less. Such median compensation shall be determined
as of the close of a Plan Year and shall be rounded to an even
thousand dollars.
(b) With respect to a Highly Compensated Eligible
Employee who is one of the 10 most highly compensated employees
of the Company and Affiliated Companies or a 5% owner, the Com-
pensation of such individual plus the Compensation, if any, of
his spouse and lineal descendants who have not attained age 19
before the close of the Plan Year, that is taken into account
under the Plan, shall not exceed $200,000 as indexed (for Plan
Years beginning on or after January 1, 1989 and before January 1,
1994), or $150,000 as indexed (for Plan Years beginning on or
after January 1, 1994). This limit shall be allocated among
family members in proportion to their Compensation as defined in
Subsection (a).
II. Except as provided for in this Amendment No. 16, all
other provisions of the Plan shall remain in full force and
effect.
IN WITNESS WHEREOF, this Amendment No. 16 is executed this
5th day of February, 1996.
PENNSYLVANIA POWER & LIGHT COMPANY
By:/s/ John M. Chappelear_________
John M. Chappelear
Vice President-Investments &
Pensions
<PAGE>
AMENDMENT NO. 17
TO
PENNSYLVANIA POWER & LIGHT COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
WHEREAS, Pennsylvania Power & Light Company ("Company") has
adopted the Pennsylvania Power & Light Company Employee Stock
Ownership Plan ("Plan") effective January 1, 1975; and
WHEREAS, the Plan was amended and restated effective Janu-
ary 1, 1987, and subsequently amended by Amendment Nos. 1, 2, 3,
4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15 and 16; and
WHEREAS, the Company desires to further amend the Plan;
NOW, THEREFORE, the Plan is hereby amended effective
January 1, 1989 as follows:
I. Effective January 1, 1996, the following sections of
Articles II, III, V, VII, XII are amended to read:
2.3 "Affiliated Company" or "Affiliated Companies" shall
mean (a) such subsidiaries of the Company (or companies under
common control with the Company) which would qualify as
includible corporations within the meaning of Section 1563(a) of
the Code; (b) such trades or businesses under common control with
the Company, as determined under Section 414(c) of the Code; and
(c) such members of an affiliated service group, as determined
under Section 414(m) of the Code, of which the Company is a mem-
ber. "50% Affiliated Company" shall mean an Affiliated Company,
but with the phrase "more than 50%" substituted for the phrase
"at least 80%" of Section 1563(a) of the Code.
2.8 "Compensation" shall mean the following.
(a) Compensation shall mean the annual compensation
received by an Employee from the Company as reported on Internal
Revenue Service Form W-2 or a successor form plus the Employee's
elective deferrals under the Employee Savings Plan or Deferred
Savings Plan; provided, however, that Compensation shall not
include fringe benefits not normally included in compensation,
such as tuition refunds, moving expenses, etc. and shall not, for
purposes of allocation under Section 5.2(a), include any amount
in excess of (i) for the 1975 and 1976 Plan Years, $16,000 and
(ii) commencing with the 1977 Plan Year, the median annual com-
pensation of all Participants during the Plan Year or $100,000,
whichever is less. Such median compensation shall be determined
as of the close of a Plan Year and shall be rounded to an even
thousand dollars. For an MCP Employee, Compensation shall also
include the full amount of any lump-sum award paid to the Partic-
ipant from the fund credited with 2% of annualized base pay sala-
ries for 1996.
(b) With respect to a Highly Compensated Eligible
Employee who is one of the 10 most highly compensated employees
of the Company and Affiliated Companies or a 5% owner, the
Compensation of such individual plus the Compensation, if any, of
his spouse and lineal descendants who have not attained age 19
before the close of the Plan Year, that is taken into account
under the Plan, shall not exceed $200,000 as indexed (for Plan
Years beginning on or after January 1, 1989 and before January 1,
1994), or $150,000 as indexed (for Plan Years beginning on or
after January 1, 1994). This limit shall be allocated among
family members in proportion to their Compensation as defined in
Subsection (a).
2.25 "MCP Employee" shall mean an Employee who is entitled
to all benefits of the Managers Compensation Plan of the Company.
3.1 Eligibility.
(a) All persons who were participants in the Plan
immediately prior to the Effective Date and who are in the employ
of the Company on the Effective Date shall be Participants
hereunder as of such date. All Employees as of the Effective
Date (but who are not eligible to participate under the preceding
sentence) who have completed one year of Credited Service shall
be Participants as of that date. Other Employees shall become
Participants on the first day of the calendar month next
following the date on which an Employee completes one year of
Credited Service, or if later, on which an individual becomes an
Employee. A "year of Credited Service," for the purposes of this
Article, shall require completion of at least 1,000 Hours of
Service during the 12 months from commencement of employment. An
Employee who fails to complete 1,000 Hours of Service during his
initial 12 months of employment shall complete a year of Credited
Service as of the end of any Plan Year in which he completes
1,000 Hours of Service; provided, however, that the first Plan
Year during which such Employee shall have the opportunity to
complete such 1,000 Hours of Service shall include the
anniversary of his commencement of employment.
(b) An Employee may elect in writing not to become a
Participant by filing such election with the Employee Benefit
Plan Board.
5.5 Maximum Allocation.
(m) For the purpose of this Section 5.5, "compensation"
shall be defined in accordance with Section 415(c)(3) of the Code
and regulations thereunder.
7.4 Disability.
(a) If a Participant suffers a Total Disability prior to
his termination of employment with the Company and all
Affiliated Companies and is on inactive status on account of such
Total Disability, the full amount of his interest in the Fund
shall be paid to him or applied for his benefit upon
Participant's consent in writing to such payment or application
following the determination of his Total Disability in accordance
with the provisions of this Article VII.
7.7 Timing of Distribution.
(a) Subject to Subsection (b), a Participant entitled to
receive benefits under this Article shall commence to receive
benefits as soon as administratively practicable, but in no event
shall any Participant receive benefits later than the earliest of
the dates determined under (1), (2) or (3) below:
(1) the 60th day after the close of the Plan Year in
which occurs the later of (A) the Participant's attainment of age
65 or (B) the Participant's termination of employment with the
Company and all Affiliated Companies;
12.7 Voting or Tendering Shares. Each Participant (or, in
the event of his or her death, his or her beneficiary) is, for
purposes of this Section 12.7, hereby designated a "named fidu-
ciary," within the meaning of Section 403(a)(1) of ERISA with
respect to his or her proportionate number of shares (such pro-
portionate shares being determined at the respective times such
fiduciary rights are exercisable, as set forth below).
(a) Voting Rights. Each Participant (or beneficiary)
shall have the right, to the extent of his or her proportionate
number of shares (as determined in the last sentence of this
Section 12.7(a)) to instruct the Trustee in writing as to the
manner in which to vote such shares at any stockholders' meeting
of the Company. The Company shall use its best efforts to timely
distribute or cause to be distributed to each Participant (or
beneficiary) the information distributed to stockholders of the
Company in connection with any such stockholders' meeting,
together with a form requesting confidential instructions to the
Trustee on how such shares shall be voted on each such matter.
Upon timely receipt of such instructions, the Trustee shall, on
each such matter, vote as directed the appropriate number of
shares (including fractional shares). The instructions received
by the Trustee from individual Participants (or beneficiaries)
shall be held by the Trustee in strict confidence and shall not
be divulged to any person, including employees, officers and
directors of the Company or any affiliate; provided, however,
that, to the extent necessary for the operation of the Plan, such
instructions may be relayed by the Trustee to a recordkeeper,
auditor or other person providing services to the Plan if such
person (i) is not the Company, an affiliate or any employee,
officer or director thereof, and (ii) agrees not to divulge such
directions to any other person, including employees, officers and
directors of the Company and its affiliates. An individual's
proportionate number of shares held in the trust shall be equal
to the product of multiplying the total number of shares by a
fraction, the numerator of which shall be the respective number
of shares which are held in such individual's account for which
he or she provides instructions to the Trustee and the denomina-
tor of which shall be the number of such shares in all such
accounts for which instructions are provided to the Trustee.
II. Effective January 1, 1996, section 11.4 of Article XI
is deleted.
III. Except as provided for in this Amendment No. 17, all
other provisions of the Plan shall remain in full force and
effect.
IN WITNESS WHEREOF, this Amendment No. 17 is executed this
23rd day of May, 1996.
PENNSYLVANIA POWER & LIGHT COMPANY
By:/s/ John M. Chappelear_________
John M. Chappelear
Vice President-Investments &
Pensions
<PAGE>
Exhibit 10(c)
CREDIT AGREEMENT
among
PENNSYLVANIA POWER & LIGHT COMPANY,
THE LENDERS,
and
THE FIRST NATIONAL BANK OF CHICAGO,
Individually and as Agent
Dated as of March 14, 1996
<PAGE>
TABLE OF CONTENTS
ARTICLE I. DEFINITIONS ................................................ 1
ARTICLE II. THE CREDITS ............................................... 8
2.1. Commitment ................................................. 8
2.2. Required Payments; Termination ............................. 9
2.3. Ratable Loans .............................................. 9
2.4. Types of Advances .......................................... 9
2.5. Minimum Amount of Each Advance ............................. 9
2.6. Optional Principal Payments ................................ 9
2.7. Method of Selecting Types and Interest Periods for
Initial Advances ........................................... 9
2.8. Conversion and Continuation of Advances .................... 10
2.9. Application of Interest Rates, etc. ........................ 10
2.10. Rates Applicable After Default ............................. 11
2.11. Method of Payment .......................................... 11
2.12. Telephonic Notices ......................................... 11
2.13. Interest Payment Dates; Interest Basis ..................... 12
2.14 Notification of Advances, Interest Rates, Prepayments
and Commitment Reductions .................................. 12
2.15. Lending Installations ...................................... 12
2.16. Non-Receipt of Funds by the Agent .......................... 13
2.17. Withholding Tax Exemption .................................. 13
ARTICLE III. CHANGE IN CIRCUMSTANCES .................................. 14
3.1. Yield Protection ........................................... 14
3.2. Changes in Capital Adequacy Regulations .................... 14
3.3. Availability of Types of Advances .......................... 15
3.4. Funding Indemnification .................................... 15
3.5. Lender Statements; Survival of Indemnity ................... 15
ARTICLE IV. CONDITIONS PRECEDENT ...................................... 16
ARTICLE V. REPRESENTATIONS AND WARRANTIES ............................. 17
5.1. Corporate Status ........................................... 17
5.2. Authority; No Conflict ..................................... 17
5.3. Legality, Etc. ............................................. 17
5.4. Financial Statements ....................................... 18
5.5. Litigation ................................................. 18
5.6. No Violation ............................................... 18
5.7. ERISA ...................................................... 18
5.8. Consents ................................................... 18
5.9. Subsidiaries ............................................... 18
5.10. Limitation Event ........................................... 19
5.11. Investment Company Act ..................................... 19
5.12. Public Utility Holding Company Act ......................... 19
ARTICLE VI. COVENANTS ................................................. 19
6.1. Financial Statements ....................................... 19
6.2. Mergers .................................................... 20
ARTICLE VII. DEFAULTS ................................................. 20
7.1. Representations, Etc. ...................................... 20
7.2. Principal and Interest ..................................... 20
7.3. Defaults Under Other Agreements............................. 20
7.4. Bankruptcy, Etc. ........................................... 21
7.5. Other Covenants ............................................ 21
ARTICLE VIII. AMENDMENTS; PRESERVATION OF RIGHTS ...................... 22
8.1. Amendments ................................................. 22
8.2. Preservation of Rights ..................................... 23
ARTICLE IX. GENERAL PROVISIONS ........................................ 23
9.1. Survival of Representations ................................ 23
9.2. Governmental Regulation .................................... 23
9.3. Taxes ...................................................... 23
9.4. Headings ................................................... 23
9.5. Entire Agreement ........................................... 24
9.6. Several Obligations; Benefits of this Agreement ............ 24
9.7. Expenses; Indemnification .................................. 24
9.8. Numbers of Documents ....................................... 24
9.9. Accounting ................................................. 24
9.10. Severability of Provisions ................................. 25
9.11. Nonliability of Lenders .................................... 25
9.12. Choice of Law .............................................. 25
9.13. Consent to Jurisdiction .................................... 25
9.14. Waiver of Jury Trial........................................ 26
9.15. Confidentiality ............................................ 26
ARTICLE X. THE AGENT .................................................. 26
10.1. Appointment ................................................ 26
10.2. Powers ..................................................... 26
10.3. General Immunity ........................................... 26
10.4. No Responsibility for Loans, Recitals, etc. ................ 26
10.5. Action on Instructions of Lenders .......................... 27
10.6. Employment of Agents and Counsel ........................... 27
10.7. Reliance on Documents; Counsel ............................. 27
10.8. Agent's Reimbursement and Indemnification .................. 27
10.9. Rights as a Lender ......................................... 28
10.10. Lender Credit Decision ..................................... 28
10.11. Successor Agent ............................................ 28
10.12. Agent's Fee ................................................ 29
ARTICLE XI. SETOFF; RATABLE PAYMENTS .................................. 29
11.1. Setoff ..................................................... 29
11.2. Ratable Payments ........................................... 29
ARTICLE XII. BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS ........ 30
12.1. Successors and Assigns ..................................... 30
12.2. Participations.............................................. 30
12.2.1. Permitted Participants; Effect .................... 30
12.2.2. Voting Rights ..................................... 31
12.2.3. Benefit of Setoff ................................. 31
12.3. Assignments ................................................ 31
12.3.1. Permitted Assignments ............................. 31
12.3.2. Effect; Effective Date ............................ 31
12.4. Dissemination of Information ............................... 32
12.5. Tax Treatment .............................................. 32
ARTICLE XIII. NOTICES ................................................. 33
13.1. Giving Notice .............................................. 33
13.2. Change of Address .......................................... 33
ARTICLE XIV. COUNTERPARTS ............................................. 33
EXHIBITS
EXHIBIT "A" - Note .................................................... 38
EXHIBIT "B" - Form of Opinion ......................................... 40
EXHIBIT "C" - Officer' Certificate ................................... 42
EXHIBIT "D" - Assignment Agreement .................................... 43
EXHIBIT "E" - Loan/credit Related Money Transfer Instruction .......... 54
<PAGE>
PENNSYLVANIA POWER & LIGHT COMPANY
TERM CREDIT AGREEMENT
This Agreement, dated as of March 14, 1996, is among Pennsylvania Power
& Light Company, the Lenders and The First National Bank of Chicago, as Agent.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement:
"Advance" means, with respect to the Borrowing, a portion of the
Borrowing accruing interest at a certain set or designated Rate Option and, in
the case of a Eurodollar Advance, for a certain set or designated Interest
Period.
"Affiliate" of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10%
or more of any class of voting securities (or other ownership interests) of
the controlled Person or possesses, directly or indirectly, the power to
direct or cause the direction of the management or policies of the controlled
Person, whether through ownership of stock, by contract or otherwise.
"Agent" means The First National Bank of Chicago in its capacity as
agent for the Lenders pursuant to Article X, and not in its individual
capacity as a Lender, and any successor Agent appointed pursuant to Article X.
"Aggregate Commitment" means the aggregate of the Commitments of all the
Lenders, as reduced from time to time pursuant to the terms hereof.
"Agreement" means this term credit agreement, as it may be amended or
modified and in effect from time to time.
"Alternate Base Rate" means, for any day, a rate of interest per annum
equal to the higher of (i) the Corporate Base Rate for such day or (ii) the
sum of the Federal Funds Effective Rate for such day plus 1/2% per annum.
"Applicable Margin" means:
(I) from the date of this Agreement through the third anniversary
thereof (a) at all times that the Borrower's First Mortgage Bond
ratings are at Level I, .35%; (b) at all times that the Borrower's
First Mortgage Bond ratings are at Level II, .40%; (c) at all
times that the Borrower's First Mortgage Bond ratings are at Level
III, .45%; (d) at all times that the Borrower's First Mortgage
Bond ratings are at Level IV, .55%; and (e) at all times that the
Borrower's First Mortgage Bond ratings are at Level V, .80%; and
(II) after the third anniversary of the date of this Agreement (a) at
all times that the Borrower's First Mortgage Bond ratings are at
Level I, .45%; (b) at all times that the Borrower's First Mortgage
Bond ratings are at Level II, .50%; (c) at all times that the
Borrower's First Mortgage Bond ratings are at Level III, .55%; (d)
at all times that the Borrower's First Mortgage Bond ratings are
at Level IV, .65%; and (e) at all times that the Borrower's First
Mortgage Bond ratings are at Level V, .90%.
Each change in the Applicable Margin resulting from a change in the rating of
the Borrower's First Mortgage Bonds by either rating agency shall take effect
at the time such change in such rating is publicly announced by the relevant
rating agency. At all times when either the Borrower has no First Mortgage
Bonds or the Borrower's First Mortgage Bonds are not rated, the Borrower
shall be deemed to be at Level V.
"Article" means an article of this Agreement unless another document is
specifically referenced.
"Authorized Officer" means any of the Senior Vice President-Financial,
Vice President-Finance, or Treasurer of the Borrower or any other Person
designated in writing by the Treasurer of the Borrower, acting singly.
"Borrower" means Pennsylvania Power & Light Company, a Pennsylvania
corporation, and its permitted successors and assigns.
"Borrowing" means the single borrowing made pursuant to Section 2.1 of
this Agreement, consisting of the aggregate of the several extensions of
credit provided by the Lenders, which borrowing bears interest at the
Eurodollar Rate or the Floating Rate, or a combination thereof, as selected by
the Borrower pursuant to Sections 2.7 and 2.8.
"Borrowing Date" means the date on which the Borrowing is made
hereunder.
"Borrowing Notice" is defined in Section 2.7.
"Business Day" means (i) with respect to any borrowing, payment or rate
selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on
which banks generally are open in Chicago and New York for the conduct of
substantially all of their commercial lending activities and on which dealings
in United States dollars are carried on in the London interbank market and
(ii) for all other purposes, a day (other than a Saturday or Sunday) on which
banks generally are open in Chicago for the conduct of substantially all of
their commercial lending activities.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Commitment" means, for each Lender, the obligation of such Lender to
make Loans not exceeding the amount set forth opposite its signature below or
as set forth in any Notice of Assignment relating to any assignment that has
become effective pursuant to Section 12.3.2, as such amount may be modified
from time to time pursuant to the terms hereof.
"Conversion/Continuation Notice" is defined in Section 2.8.
"Corporate Base Rate" means a rate per annum equal to the corporate base
rate of interest announced by First Chicago from time to time, changing when
and as said corporate base rate changes.
"Default" means an event described in Article VII.
"Disclosure Documents" means, collectively, the Borrower's (i) Annual
Report to the SEC on Form 10-K for the year 1994; (ii) Quarterly Reports to
the SEC on Form 10-Q for the quarterly periods ended March 31, 1995, June 30,
1995, and September 30, 1995; (iii) Periodic Reports filed subsequent to the
Borrower's Annual Report described in clause (i) above but prior to the the
date of this Agreement; and (iv) if available to the Agent and the Lenders
prior to the date of this Agreement, Annual Report to the SEC on Form 10-K for
the year 1995.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.
"Eurodollar Advance" means an Advance which bears interest at a
Eurodollar Rate.
"Eurodollar Base Rate" means, with respect to a Eurodollar Advance for
the relevant Interest Period, the rate determined by the Agent to be the
arithmetic average of the rates reported to the Agent by each Reference Bank
as the rate at which deposits in U.S. dollars are offered by such Reference
Bank to first-class banks in the London interbank market at approximately
11 a.m. (London time) two Business Days prior to the first day of such
Interest Period, in the approximate amount of such Reference Bank's relevant
Eurodollar Loan and having a maturity approximately equal to such Interest
Period. If any Reference Bank fails to provide such quotation to the Agent,
then the Agent shall determine the Eurodollar Base Rate on the basis of the
quotations of the remaining Reference Bank(s).
"Eurodollar Loan" means a Loan which bears interest at a Eurodollar
Rate.
"Eurodollar Rate" means, with respect to a Eurodollar Advance for the
relevant Interest Period, a rate per annum equal to the sum of (i) the
quotient of (a) the Eurodollar Base Rate applicable to such Interest Period,
divided by (b) one minus the Reserve Requirement (expressed as a decimal)
applicable to such Interest Period, if any, plus (ii) the Applicable Margin.
The Eurodollar Rate shall be rounded to the next higher multiple of 1/16 of 1%
if the rate is not such a multiple.
"Facility Termination Date" means March 14, 2001.
"Federal Funds Effective Rate" means, for any day, an interest rate per
annum equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published for such day (or, if such day is not a
Business Day, for the immediately preceding Business Day) by the Federal
Reserve Bank of New York, or, if such rate is not so published for any day
which is a Business Day, the average of the quotations at approximately 10
a.m. (Chicago time) on such day on such transactions received by the Agent
from three Federal funds brokers of recognized standing selected by the Agent
in its sole discretion.
"First Chicago" means The First National Bank of Chicago in its
individual capacity, and its successors.
"Floating Rate" means, for any day, a rate per annum equal to the
Alternate Base Rate for such day, changing when and as the Alternate Base Rate
changes.
"Floating Rate Advance" means an Advance which bears interest at the
Floating Rate.
"Floating Rate Loan" means a Loan which bears interest at the Floating
Rate.
"Interest Period" means, with respect to a Eurodollar Advance, a period
of one, two, three, or six months commencing on a Business Day selected by the
Borrower pursuant to this Agreement. Such Interest Period shall end on (but
exclude) the day which corresponds numerically to such date one, two, three,
or six months thereafter, provided, however, that if there is no such
numerically corresponding day in such next, second, third, or sixth succeeding
month, such Interest Period shall end on the last Business Day of such next,
second, third, or sixth succeeding month. If an Interest Period would
otherwise end on a day which is not a Business Day, such Interest Period shall
end on the next succeeding Business Day, provided, however, that if said next
succeeding Business Day falls in a new calendar month, such Interest Period
shall end on the immediately preceding Business Day.
"Lenders" means the lending institutions listed on the signature pages
of this Agreement and their respective successors and assigns.
"Lending Installation" means, with respect to a Lender or the Agent, any
office, branch, subsidiary or affiliate of such Lender or the Agent.
"Letter of Credit" of a Person means a letter of credit or similar
instrument which is issued upon the application of such Person or upon which
such Person is an account party or for which such Person is in any way liable.
"Level" means any of Level I, Level II, Level III, Level IV, or Level V.
"Level I" means, with respect to the Borrower's First Mortgage Bonds, a
rating equal to or better than A- from S&P or A3 from Moody's.
"Level II" means, with respect to the Borrower's First Mortgage Bonds, a
rating equal to or better than BBB+ from S&P or Baa1 from Moody's but less
than a rating that would place the Borrower at Level I.
"Level III" means, with respect to the Borrower's First Mortgage Bonds,
a rating equal to or better than BBB from S&P or Baa2 from Moody's but less
than a rating that would place the Borrower at Level I or Level II.
"Level IV" means, with respect to the Borrower's First Mortgage Bonds, a
rating equal to or better than BBB- from S&P or Baa3 from Moody's but less
than a rating that would place the Borrower at Level I, Level II or Level III.
"Level V" means, with respect to the Borrower's First Mortgage Bonds, a
rating equal to or lower than BB+ from S&P and Ba1 from Moody's.
"Limitation Event" shall mean and include each of the following:
(1) A nuclear incident (as that term is defined in 42 U.S.C.
Section 2014 or any similar statute enacted in its place) involving or
connected in any way with any facility of the Borrower utilizing nuclear
fuel or any portion thereof shall have occurred, which nuclear incident
may give rise to an aggregate liability, or to damage, destruction or
personal injury, in excess of $50,000,000; or
(2) Any facility of the Borrower utilizing nuclear fuel cannot be
(in the good faith determination of the Borrower) used by the Borrower
for a period of 12 months because (i) a necessary license or other
necessary public authorization, order, consent or approval cannot be
obtained or is revoked, withheld or suspended, (ii) the utilization of
such license, authorization, order, consent or approval is made subject
to specified conditions which cannot be met, (iii) an injunction has
been entered enjoining the operation or materially impairing the use of
such facility or (iv) such facility has suffered substantial damage
(including, without limitation, contamination); or
(3) There shall have occurred a loss of the title to, ownership
of, or use and possession of, any facility of the Borrower utilizing
nuclear fuel, or any substantial portion of such facility, as the result
of, or in anticipation of, the exercise of any right of condemnation or
eminent domain pursuant to any law, general or special, or by reason of
the temporary or permanent requisition of such facility by any
governmental authority (civil or military).
"Loan" means, with respect to an individual Lender, the portion of an
Advance to be provided by such Lender, calculated by multiplying the amount of
such Advance by a percentage representing the ratio such Lender's Commitment
bears to the Aggregate Commitment.
"Loan Documents" means this Agreement and the Notes.
"Moody's" means Moody's Investors Service, Inc., or any successor
thereto.
"Note" means a promissory note, in substantially the form of Exhibit "A"
hereto, duly executed by the Borrower and payable to the order of a Lender in
the amount of its Commitment, including any amendment, modification, renewal
or replacement of such promissory note.
"Notice of Assignment" is defined in Section 12.3.2.
"Obligations" means all unpaid principal of and accrued and unpaid
interest on the Notes, all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations of the Borrower to the
Lenders or to any Lender, the Agent or any indemnified party hereunder arising
under the Loan Documents.
"Officer's Certificate" means a certificate, in substantially the form
of Exhibit "C" hereto, duly executed by the Treasurer or another principal
financial officer of the Borrower.
"Participants" is defined in Section 12.2.1.
"Payment Date" means the last day of each March, June, September and
December.
"Person" means any natural person, corporation, firm, joint venture,
partnership, association, enterprise, trust or other entity or organization,
or any government or political subdivision or any agency, department or
instrumentality thereof.
"Property" of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets
owned, leased or operated by such Person.
"Purchasers" is defined in Section 12.3.1.
"Rate Option" means the Eurodollar Rate or the Floating Rate.
"Reference Banks" means First Chicago, Credit Suisse, and The Bank of
New York.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor
thereto or other regulation or official interpretation of said Board of
Governors relating to reserve requirements applicable to member banks of the
Federal Reserve System.
"Required Lenders" means Lenders in the aggregate having at least 66_%
of the Aggregate Commitment or, if the Aggregate Commitment has been
terminated, Lenders in the aggregate holding at least 66_% of the aggregate
unpaid principal amount of the outstanding Advances.
"Reset Date" means the effective date of a conversion or continuation of
an Advance pursuant to Section 2.8, which shall be the effective date that a
Rate Option and, with respect to a Eurodollar Advance, Interest Period of an
Advance are set or designated under this Agreement.
"Reserve Requirement" means, with respect to an Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D on
Eurocurrency liabilities (as defined therein).
"S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill,
Inc., or any successor thereto.
"SEC" means the Securities and Exchange Commission.
"Section" means a numbered section of this Agreement, unless another
document is specifically referenced.
"Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or
more of its Subsidiaries or by such Person and one or more of its
Subsidiaries, or (ii) any partnership, association, joint venture or similar
business organization more than 50% of the ownership interests having ordinary
voting power of which shall at the time be so owned or controlled. Unless
otherwise expressly provided, all references herein to a "Subsidiary" shall
mean a Subsidiary of the Borrower.
"Transferee" is defined in Section 12.4.
"Type" means, with respect to any Advance, its nature as a Floating Rate
Advance or a Eurodollar Advance.
"Unmatured Default" means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default.
"Wholly-Owned Subsidiary" of a Person means (i) any Subsidiary all of
the outstanding voting securities of which shall at the time be owned or
controlled, directly or indirectly, by such Person or one or more Wholly-Owned
Subsidiaries of such Person, or by such Person and one or more Wholly-Owned
Subsidiaries of such Person, or (ii) any partnership, association, joint
venture or similar business organization 100% of the ownership interests
having ordinary voting power of which shall at the time be so owned or
controlled.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms.
ARTICLE II
THE CREDITS
2.1. Commitment. Each Lender severally agrees, on the terms and
conditions set forth in this Agreement, to make extensions of credit to the
Borrower on the Borrowing Date in the form of loans in amounts not to exceed
in the aggregate the amount of its Commitment. Upon the making of the initial
Advances comprising the Borrowing hereunder and at all times thereafter, the
Commitment of each Lender shall automatically reduce to the amount of Loans by
such Lender then outstanding. The Borrower will use the proceeds of the
Borrowing to refinance the principal and related call premium on the
Borrower's $40,000,000 principal amount of 8.125% First Mortgage Bonds due
June 1999 and $75,000,000 principal amount of 7.625% First Mortgage Bonds due
2002 and to pay expenses related to such refinancing. The Commitments to lend
hereunder shall expire on the Facility Termination Date. Principal payments
made hereunder may not be reborrowed.
2.2. Required Payments; Termination. Any outstanding Advances and all
other unpaid Obligations shall be paid in full by the Borrower on the Facility
Termination Date.
2.3. Ratable Loans. Each Advance hereunder shall consist of Loans
made from the several Lenders ratably in proportion to the ratio that their
respective Commitments bear to the Aggregate Commitment.
2.4. Types of Advances. The Advances may be Floating Rate Advances,
Eurodollar Advances, or a combination thereof, selected by the Borrower in
accordance with Sections 2.7 and 2.8.
2.5. Minimum Amount of Each Advance. Each Advance shall be in the
minimum amount of $5,000,000 (and in multiples of $1,000,000 if in excess
thereof), provided, however, that any Floating Rate Advance may be in the
amount of the unutilized Aggregate Commitment.
2.6. Optional Principal Payments. The Borrower may from time to time
pay, without penalty or premium, all outstanding Floating Rate Advances, or,
in a minimum aggregate amount of $5,000,000 or any integral multiple of
$1,000,000 in excess thereof, any portion of the outstanding Floating Rate
Advances upon one Business Day's prior notice to the Agent. The Borrower may
from time to time pay all outstanding Eurodollar Advances, or, in a minimum
aggregate amount of $5,000,000 or any integral multiple of $1,000,000 in
excess thereof, any portion of the outstanding Eurodollar Advances upon three
Business Days' prior notice to the Agent, subject to Section 3.4.
2.7. Method of Selecting Types and Interest Periods for Initial
Advances. The Borrower shall select the Rate Option and, in the case of each
Eurodollar Advance, the Interest Period applicable on the Borrowing Date to
each initial Advance. The Borrower shall give the Agent irrevocable notice (a
"Borrowing Notice") not later than 10:00 a.m. (Chicago time) at least one
Business Day before the Borrowing Date for each Floating Rate Advance and
three Business Days before the Borrowing Date for each Eurodollar Advance,
specifying:
(i) the Borrowing Date, which shall be a Business Day,
(ii) the aggregate amount of such Advance,
(iii) the Rate Option selected for such Advance, and
(iv) in the case of each Eurodollar Advance, the Interest Period
applicable thereto.
Not later than noon (Chicago time) on the Borrowing Date, each Lender shall
make available its Loan or Loans, in funds immediately available in Chicago to
the Agent at its address specified pursuant to Article XIII. The Agent will
make the funds so received from the Lenders available to the Borrower at the
Agent's aforesaid address.
2.8. Conversion and Continuation of Advances. Floating Rate Advances
shall continue as Floating Rate Advances unless and until such Floating Rate
Advances are converted into Eurodollar Advances. Each Eurodollar Advance
shall continue as a Eurodollar Advance until the end of the then applicable
Interest Period therefor, at which time such Eurodollar Advance shall be
automatically converted into a Floating Rate Advance unless the Borrower shall
have given the Agent a Conversion/Continuation Notice requesting that, at the
end of such Interest Period, such Eurodollar Advance either continue as a
Eurodollar Advance for the same or another Interest Period or be converted
into a Floating Rate Advance. Subject to the terms of Section 2.5, the
Borrower may elect from time to time to convert all or any part of an Advance
of any Type into any other Type (or, if more than one, Types) of Advances;
provided that any conversion of any Eurodollar Advance shall be made on, and
only on, the last day of the Interest Period applicable thereto. The Borrower
shall give the Agent irrevocable notice (a "Conversion/Continuation Notice")
of each conversion of an Advance or continuation of a Eurodollar Advance not
later than 10:00 a.m. (Chicago time) at least one Business Day, in the case of
a conversion into a Floating Rate Advance, or three Business Days, in the case
of a conversion into or continuation of a Eurodollar Advance, prior to the
requested Reset Date, specifying:
(i) the Reset Date for such existing Advance, which shall be a
Business Day;
(ii) the aggregate amount of and Rate Option for the Advance which is
to be converted or continued; and
(iii) the amount(s) of new Advance(s) and Rate Option(s) into which
such existing Advance is to be converted or continued and, in
the case of a conversion into or continuation of a Eurodollar
Advance, the duration of the Interest Period applicable thereto.
2.9. Application of Interest Rates, etc. Each Floating Rate Advance
shall bear interest on the outstanding principal amount thereof, for each day
from and including the date such Advance is made or is converted from a
Eurodollar Advance into a Floating Rate Advance pursuant to Section 2.8 to but
excluding the date it becomes due or is converted into a Eurodollar Advance
pursuant to Section 2.8 hereof, at a rate per annum equal to the Floating Rate
for such day. Changes in the rate of interest on that portion of any Advance
maintained as a Floating Rate Advance will take effect simultaneously with
each change in the Alternate Base Rate. Each Eurodollar Advance shall bear
interest from and including the first day of the Interest Period applicable
thereto to (but not including) the last day of such Interest Period at the
interest rate determined as applicable to such Eurodollar Advance. No
Interest Period may end after the Facility Termination Date.
2.10. Rates Applicable After Default. Notwithstanding anything to the
contrary contained in Section 2.7 or 2.8, during the continuance of a Default
or Unmatured Default the Required Lenders may, at their option, by notice to
the Borrower (which notice may be revoked at the option of the Required
Lenders notwithstanding any provision of Section 8.2 requiring unanimous
consent of the Lenders to changes in interest rates), declare that no Advance
may be made as, converted into or continued as a Eurodollar Advance. During
the continuance of a Default the Required Lenders may, at their option, by
notice to the Borrower (which notice may be revoked at the option of the
Required Lenders notwithstanding any provision of Section 8.2 requiring
unanimous consent of the Lenders to changes in interest rates), declare that
(i) each Eurodollar Advance shall bear interest for the remainder of the
applicable Interest Period at the rate otherwise applicable to such Interest
Period plus 2% per annum and (ii) each Floating Rate Advance shall bear
interest at a rate per annum equal to the Floating Rate otherwise applicable
to the Floating Rate Advance plus 2% per annum.
2.11. Method of Payment. All payments of the Obligations hereunder
shall be made, without setoff, deduction, or counterclaim, in immediately
available funds to the Agent at the Agent's address specified pursuant to
Article XIII, or at any other Lending Installation of the Agent specified in
writing by the Agent to the Borrower, by noon (local time) on the date when
due and shall be applied ratably by the Agent among the Lenders. Each payment
delivered to the Agent for the account of any Lender shall be delivered
promptly by the Agent to such Lender in the same type of funds that the Agent
received at its address specified pursuant to Article XIII or at any Lending
Installation specified in a notice received by the Agent from such Lender.
The Agent is hereby authorized to charge the account of the Borrower
maintained with First Chicago for each payment of principal, interest and fees
as it becomes due hereunder.
2.12. Telephonic Notices. The Borrower hereby authorizes the Lenders
and the Agent to extend, convert or continue Advances, effect selections of
Types of Advances and Rate Options and to transfer funds based on telephonic
notices made by any Authorized Officer. The Borrower agrees to deliver
promptly to the Agent a written confirmation, if such confirmation is
requested by the Agent or any Lender, of each telephonic notice signed by an
Authorized Officer. If the written confirmation differs in any material
respect from the action taken by the Agent and the Lenders, the records of the
Agent and the Lenders shall govern absent manifest error.
2.13. Interest Payment Dates; Interest Basis. Interest accrued on
each Floating Rate Advance shall be payable on each Payment Date, commencing
with the first such date to occur after the date hereof, on any date on which
the Floating Rate Advance is prepaid, whether due to acceleration or
otherwise, and at maturity. Interest accrued on that portion of the
outstanding principal amount of any Floating Rate Advance converted into a
Eurodollar Advance on a day other than a Payment Date shall be payable on the
date of conversion. Interest accrued on each Eurodollar Advance shall be
payable on the last day of its applicable Interest Period, on any date on
which the Eurodollar Advance is prepaid, whether by acceleration or otherwise,
and at maturity. Interest accrued on each Eurodollar Advance having an
Interest Period longer than three months shall also be payable on the last day
of each three-month interval during such Interest Period. Interest on
Floating Rate Advances shall be calculated for actual days elapsed on the
basis of a 365- or 366-day year, as appropriate. Interest on Eurodollar
Advances shall be calculated for actual days elapsed on the basis of a 360-day
year. Interest shall be payable for the day an Advance is made but not for
the day of any payment on the amount paid if payment is received prior to noon
(local time) at the place of payment. If any payment of principal of or
interest on an Advance shall become due on a day which is not a Business Day,
such payment shall be made on the next succeeding Business Day and, in the
case of a principal payment, such extension of time shall be included in
computing interest in connection with such payment.
2.14. Notification of Advances, Interest Rates, Prepayments and
Commitment Reductions. Promptly after receipt thereof, the Agent will notify
each Lender of the contents of each Borrowing Notice, Conversion/Continuation
Notice, and repayment notice received by it hereunder. The Agent will notify
each Lender of the interest rate applicable to each Eurodollar Advance
promptly upon determination of such interest rate and will give each Lender
prompt notice of each change in the Alternate Base Rate. Each Reference Bank
agrees to furnish timely information for the purpose of determining the
Eurodollar Rate.
2.15. Lending Installations. Each Lender may book its Loans at any
Lending Installation selected by such Lender and may change the Lending
Installation at which it books its Loans from time to time. All terms of this
Agreement shall apply to any such Lending Installation and the Notes shall be
deemed held by each Lender for the benefit of such Lending Installation. Each
Lender may, by written or telex notice to the Agent and the Borrower,
designate a Lending Installation through which Loans will be made by it and
for whose account Loan payments are to be made. Each Lender shall use its
best efforts to minimize any additional cost (if any) to the Borrower as a
result of a change of Lending Installation (including, if appropriate, a
return to a prior Lending Installation at such time as the circumstances
giving rise to a change of Lending Installation are no longer in effect), but
no Lender shall be required to take or omit to take any action which action or
omission would be economically or legally disadvantageous to such Lender.
2.16. Non-Receipt of Funds by the Agent. Unless the Borrower or a
Lender, as the case may be, notifies the Agent prior to the date on which it
is scheduled to make payment to the Agent of (i) in the case of a Lender, the
proceeds of a Loan or (ii) in the case of the Borrower, a payment of
principal, interest or fees to the Agent for the account of the Lenders, that
it does not intend to make such payment, the Agent may assume that such
payment has been made. The Agent may, but shall not be obligated to, make the
amount of such payment available to the intended recipient in reliance upon
such assumption. If such Lender or the Borrower, as the case may be, has not
in fact made such payment to the Agent, the recipient of such payment shall,
on demand by the Agent, repay to the Agent the amount so made available
together with interest thereon in respect of each day during the period
commencing on the date such amount was so made available by the Agent until
the date the Agent recovers such amount at a rate per annum equal to (i) in
the case of payment by a Lender, the Federal Funds Effective Rate for such day
or (ii) in the case of payment by the Borrower, the interest rate applicable
to the relevant Loan.
2.17. Withholding Tax Exemption. At least five Business Days prior to
the first date on which interest or fees are payable hereunder for the account
of any Lender, each Lender that is not incorporated under the laws of the
United States of America, or a state thereof, agrees that it will deliver to
each of the Borrower and the Agent two duly completed copies of United States
Internal Revenue Service Form 1001 or 4224, certifying in either case that
such Lender is entitled to receive payments under this Agreement and the Notes
without deduction or withholding of any United States federal income taxes.
Each Lender which so delivers a Form 1001 or 4224 further undertakes to
deliver to each of the Borrower and the Agent two additional copies of such
form (or a successor form) on or before the date that such form expires
(currently, three successive calendar years for Form 1001 and one calendar
year for Form 4224) or becomes obsolete or after the occurrence of any event
requiring a change in the most recent forms so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Borrower or the Agent, in each case certifying that such
Lender is entitled to receive payments under this Agreement and the Notes
without deduction or withholding of any United States federal income taxes,
unless an event (including without limitation any change in treaty, law or
regulation) has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would
prevent such Lender from duly completing and delivering any such form with
respect to it and such Lender advises the Borrower and the Agent that it is
not capable of receiving payments without any deduction or withholding of
United States federal income tax. Any such Lender that fails to provide
appropriate forms or other documents to the Borrower and the Agent in
accordance with this Section 2.17 agrees to indemnify the Borrower and the
Agent in full for any costs, fines, penalties, or other liabilities imposed on
either the Borrower or the Agent, or both, for any failure to withhold taxes.
ARTICLE III
CHANGE IN CIRCUMSTANCES
3.1. Yield Protection. If any change after the date of this Agreement
in any law or any governmental or quasi-governmental rule, regulation, policy,
guideline or directive (whether or not having the force of law), or any
interpretation thereof, or the compliance of any Lender therewith,
(i) subjects any Lender or any applicable Lending Installation to any
tax, duty, charge or withholding on or from payments due from
the Borrower (excluding taxation of the overall net income of
any Lender or applicable Lending Installation), or changes the
basis of taxation of payments to any Lender in respect of its
Loans or other amounts due it hereunder, or
(ii) imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar
requirement against assets of, deposits with or for the account
of, or credit extended by, any Lender or any applicable Lending
Installation (other than reserves and assessments taken into
account in determining interest rates applicable to Eurodollar
Advances), or
(iii) imposes any other condition the result of which is to increase
the cost to any Lender or any applicable Lending Installation of
making, funding or maintaining loans or reduces any amount
receivable by any Lender or any applicable Lending Installation
in connection with loans, or requires any Lender or any
applicable Lending Installation to make any payment calculated
by reference to the amount of loans held or interest received by
it, by an amount deemed material by such Lender,
then, within 15 days of demand by such Lender, the Borrower shall pay such
Lender that portion of such increased expense incurred or reduction in an
amount received which such Lender determines is attributable to making,
funding and maintaining its Loans and its Commitment.
3.2. Changes in Capital Adequacy Regulations. If a Lender determines
the amount of capital required or expected to be maintained by such Lender,
any Lending Installation of such Lender or any corporation controlling such
Lender is increased as a result of a Change, then, within 15 days of demand by
such Lender, the Borrower shall pay such Lender the amount necessary to
compensate for any shortfall in the rate of return on the portion of such
increased capital which such Lender determines is attributable to this
Agreement, its Loans or its obligation to make Loans hereunder (after taking
into account such Lender's policies as to capital adequacy). "Change" means
(i) any change after the date of this Agreement in the Risk-Based Capital
Guidelines or (ii) any adoption of or change in any other law, governmental or
quasi-governmental rule, regulation, policy, guideline, interpretation, or
directive (whether or not having the force of law) after the date of this
Agreement which affects the amount of capital required or expected to be
maintained by any Lender or any Lending Installation or any corporation
controlling any Lender. "Risk-Based Capital Guidelines" means (i) the risk-
based capital guidelines in effect in the United States on the date of this
Agreement, including transition rules, and (ii) the corresponding capital
regulations promulgated by regulatory authorities outside the United States
implementing the July 1988 report of the Basle Committee on Banking Regulation
and Supervisory Practices Entitled "International Convergence of Capital
Measurements and Capital Standards," including transition rules, and any
amendments to such regulations adopted prior to the date of this Agreement.
3.3. Availability of Types of Advances. If any Lender determines that
maintenance of its Eurodollar Loans at a suitable Lending Installation would
violate any applicable law, rule, regulation, or directive, whether or not
having the force of law, or if the Required Lenders determine that (i)
deposits of a type and maturity appropriate to match fund Eurodollar Advances
are not available or (ii) the interest rate applicable to a Type of Advance
does not accurately reflect the cost of making or maintaining such Advance,
then the Agent shall suspend the availability of the affected Type of Advance
and require any Eurodollar Advances to be converted to Floating Rate Advances.
3.4. Funding Indemnification. If any payment of a Eurodollar Advance
occurs on a date which is not the last day of the applicable Interest Period,
whether because of acceleration, prepayment or otherwise, or a Eurodollar
Advance is not made on the date specified by the Borrower for any reason other
than default by one or more of the Lenders, the Borrower will indemnify each
Lender for any loss or cost incurred by it resulting therefrom, including,
without limitation, any loss or cost in liquidating or employing deposits
acquired to fund or maintain such Eurodollar Advance.
3.5. Lender Statements; Survival of Indemnity. To the extent
reasonably possible, each Lender shall designate an alternate Lending
Installation with respect to its Eurodollar Loans to reduce any liability of
the Borrower to such Lender under Sections 3.1 and 3.2 or to avoid the
unavailability of a Type of Advance under Section 3.3, so long as such
designation is not disadvantageous to such Lender. Each Lender shall deliver
to the Borrower and the Agent a written statement of such Lender as to the
amount due, if any, under Sections 3.1, 3.2 or 3.4. Such written statement
shall set forth in reasonable detail the calculations upon which such Lender
determined such amount and shall be final, conclusive and binding on the
Borrower in the absence of manifest error. Determination of amounts payable
under such Sections in connection with a Eurodollar Loan shall be calculated
as though each Lender funded its Eurodollar Loan through the purchase of a
deposit of the type and maturity corresponding to the deposit used as a
reference in determining the Eurodollar Rate applicable to such Loan, whether
in fact that is the case or not. Unless otherwise provided herein, the amount
specified in the written statement shall be payable on demand after receipt by
the Borrower of the written statement. The obligations of the Borrower under
Sections 3.1, 3.2 and 3.4 shall survive payment of the Obligations and
termination of this Agreement.
ARTICLE IV
CONDITIONS PRECEDENT
The Lenders shall not be required to fund the Borrowing hereunder unless
the Borrower has furnished to the Agent with sufficient copies for the
Lenders:
4.1. Copies of the articles of incorporation of the Borrower,
together with all amendments, and a certificate of good
standing, both certified by the appropriate governmental officer
in its jurisdiction of incorporation.
4.2. Copies, certified by the Secretary or an Assistant Secretary of
the Borrower, of its by-laws and of its Board of Directors'
resolutions (and resolutions of other bodies, if any are deemed
necessary by counsel for any Lender) authorizing the execution
of the Loan Documents.
4.3. An incumbency certificate, executed by the Secretary or an
Assistant Secretary of the Borrower, which shall identify by
name and title and bear the signature of the officers of the
Borrower authorized to sign the Loan Documents and to select
Rate Options and Types of Advances hereunder, upon which
certificate the Agent and the Lenders shall be entitled to rely
until informed of any change in writing by the Borrower.
4.4. A certificate, signed by the chief financial officer of the
Borrower, stating that on the Borrowing Date the representations
and warranties contained in Article V are true and correct and
no Default or Unmatured Default has occurred and is continuing.
4.5. A written opinion of the Borrower's counsel, addressed to the
Lenders in substantially the form of Exhibit "B" hereto.
4.6. Notes payable to the order of each of the Lenders.
4.7. Written money transfer instructions, in substantially the form
of Exhibit "E" hereto, addressed to the Agent and signed by an
Authorized Officer, together with such other related money
transfer authorizations as the Agent may have reasonably
requested.
4.8. Payment in full of all amounts due upon the execution of this
Agreement.
4.9. Such other documents as any Lender or its counsel may have
reasonably requested.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders to enter into this Agreement and to make
the Loans provided for herein, the Borrower makes the following
representations and warranties to the Lenders:
5.1. Corporate Status. The Borrower is duly incorporated, validly
existing and in good standing under the laws of the Commonwealth of
Pennsylvania, and has the corporate power to make and perform this Agreement
and the Notes and to borrow hereunder.
5.2. Authority; No Conflict. The making and performance by the
Borrower of this Agreement, and the Notes to be executed and delivered by it
as contemplated by this Agreement, have been duly authorized by all necessary
corporate action and do not and will not violate any provision of law or
regulation, or any decree, order, writ or judgment, or any provision of its
charter or by-laws, or result in the breach of or constitute a default under
any indenture or other agreement or instrument to which it is a part.
5.3. Legality, Etc. This Agreement constitutes and, when delivered,
the Notes will constitute legal, valid and binding obligations of the Borrower
enforceable in accordance with their respective terms except to the extent
limited by bankruptcy, insolvency or reorganization laws or by other laws
relating to or affecting the enforceability of creditors' rights generally and
by general equitable principles which may limit the right to obtain equitable
remedies.
5.4. Financial Statements. The financial statements of the Borrower
for the year ended as at December 31, 1994 furnished to the Lenders, fairly
present the financial position of the Borrower at December 31, 1994 and the
results of its operations for the year then ended. Since that date there has
been no adverse change in the business, assets, financial condition or
operations of the Borrower which would materially and adversely affect the
ability of the Borrower to perform any of its obligations hereunder or under
the Notes.
5.5. Litigation. Except as disclosed in or contemplated by the
Disclosure Documents furnished to the Lenders, no litigation, arbitration or
administrative proceeding is pending or, to the knowledge of the Borrower,
threatened, which, if determined adversely to the Borrower, would materially
and adversely affect the ability of the Borrower to perform any of its
obligations under this Agreement or the Notes. There is no litigation,
arbitration or administrative proceeding pending or, to the knowledge of the
Borrower, threatened which questions the validity of this Agreement or the
Notes.
5.6. No Violation. No part of the proceeds of the Borrowing will be
used, directly or indirectly, by the Borrower for the purpose of purchasing or
carrying any "margin stock" within the meaning of Regulation U of the Board of
Governors of the Federal Reserve System, or for any other purpose which
violates, or which conflicts with, the provisions of Regulations G, U or X of
said Board of Governors. The Borrower is not engaged principally, or as one
of its important activities, in the business of extending credit for the
purpose of purchasing or carrying any such "margin stock".
5.7. ERISA. The issuance of the Notes hereunder will not cause the
Borrower to be engaged in a "prohibited transaction," as such term is defined
in Section 4975 of the Internal Revenue Code and there have not been any
"reportable events," as that term is defined in Section 4043 of ERISA, which
would result in a material liability to the Borrower.
5.8. Consents. No authorization, consent or approval from
governmental bodies or regulatory authorities is required for the making and
performance of this Agreement by the Borrower and the execution and delivery
of the Notes issued or proposed to be issued by the Borrower hereunder, except
such authorizations, consents and approvals (including the approval of the
Pennsylvania Public Utility Commission) as have been obtained prior to the
making of any Loans and are in full force and effect at the time of the making
of each Loan.
5.9. Subsidiaries. The assets of all Subsidiaries of the Borrower do
not comprise in the aggregate more than 20% of the total consolidated assets
of the Borrower.
5.10. Limitation Event. No Limitation Event has occurred with respect
to the business, operation or condition (financial or otherwise) of the
Borrower which materially and adversely affects the ability of the Borrower to
perform any of its obligations hereunder or under the Notes.
5.11. Investment Company Act. Neither the Borrower nor any Subsidiary
thereof is an "investment company" or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of 1940, as
amended.
5.12. Public Utility Holding Company Act. The Borrower is an "exempt
holding company" within the meaning of the Act by virtue of Section 3(a)(2)
thereof. Such exemption is in full force and effect.
ARTICLE VI
COVENANTS
While this Agreement is in effect and until the Aggregate Commitment has
been terminated and all Obligations hereunder and under the Notes shall have
been paid in full, the Borrower agrees that:
6.1. Financial Statements. It will furnish to each Lender:
(a) within 120 days after the end of each of its fiscal years an
auditors' report, including a balance sheet as at the close of such
fiscal year and statements of income, shareowners' common equity and
cash flows for such year, prepared in conformity with generally accepted
accounting principles, with an opinion expressed by Price Waterhouse LLP
or other independent auditors of recognized standing selected by the
Borrower;
(b) within 60 days after the end of each of the first three
quarters in each of the Borrower's fiscal years, a balance sheet as at
the close of such quarterly period and statements of income,
shareowners' common equity and cash flows for such quarterly period,
prepared in conformity with generally accepted accounting principles;
(c) within 120 days after the end of each of its fiscal years, a
copy of the Borrower's Form 10-K Report to the SEC and within 60 days
after the end of the first three quarters in each of the Borrower's
fiscal years, a copy of the Borrower's Form 10-Q Report to the SEC;
provided, that the Borrower's obligations under this Section 6.1(c) may
be satisfied by delivery of Forms 10-K and Forms 10-Q of a holding
company of the Borrower, so long as such statements set forth separate
information for the Borrower and its consolidated Subsidiaries;
(d) from time to time, with reasonable promptness, such further
information regarding the Borrower's business affairs and financial
condition as such Lender may reasonably request; and
(e) upon acquiring knowledge of the existence of an Unmatured
Default or Default, the Borrower will promptly deliver to each Lender a
certificate of a financial officer of the Borrower specifying: (i) the
nature of such Unmatured Default or Default, (ii) the period of the
existence thereof, and (iii) the actions that the Borrower proposes to
take with respect thereto.
The financial statements required to be furnished pursuant to clauses
(a) and (b) above shall be accompanied by an Officer's Certificate.
6.2. Mergers. It will not merge or consolidate (other than a merger
or consolidation under which the Borrower is the surviving corporation) with
any Person or, except in the ordinary course of its business, dispose of all
or substantially all of its assets.
ARTICLE VII
DEFAULTS
Upon the occurrence of any of the following events (each a "Default"):
7.1. Representations, Etc. Any certificate furnished by the Borrower
to the Lenders pursuant hereto shall prove to have been incorrect in any
material respect or any of the representations and warranties made by the
Borrower herein or in connection herewith shall prove to have been incorrect
in any material respect when made; or
7.2. Principal and Interest. The Borrower shall fail to make any
payment of principal on any Note when due or the Borrower shall fail to make
any payment of interest on any Note or any other payment payable by the
Borrower hereunder within 10 days of the due date thereof; or
7.3. Defaults Under Other Agreements. The Borrower shall default in
the payment of the principal of or interest on any obligation (other than
hereunder) for borrowed money beyond any period of grace provided with respect
thereto and the aggregate amount of any such default or defaults shall exceed
$10,000,000 during the term of this Agreement; or the Borrower shall default
in the performance or observance of any other agreement, term or condition
contained therein or in any other agreement or indenture pursuant to which any
such obligation is created or by which it is secured for such period of time
as would cause, or permit the holder or holders of such obligations (or a
trustee or other Person on behalf of such holder or holders) to cause, such
obligation to become due prior to its stated maturity or a portion thereof to
be prepaid (other than by a regularly scheduled required prepayment) prior to
such stated maturity and the aggregate amount of such obligation or
obligations shall exceed $10,000,000 during the term of this Agreement; or
7.4. Bankruptcy, Etc. The Borrower shall commence a voluntary case
concerning itself under Title 11 of the United States Code entitled
"Bankruptcy" as now or hereafter in effect or any successor thereto (the
"Bankruptcy Code"); or an involuntary case is commenced against the Borrower
or such case is controverted but is not dismissed within 60 days after the
commencement of the case; or the Borrower is not generally paying its debts as
they become due; or a custodian (as defined in the Bankruptcy Code) is
appointed for, or takes charge of, all or substantially all of the property of
the Borrower or the Borrower commences any other proceedings under any
reorganization, arrangement, readjustment of debt, relief of debtors,
dissolution, insolvency or liquidation or similar laws of any jurisdiction
whether now or hereafter in effect relating to the Borrower or there is
commenced against the Borrower any such proceeding which remains undismissed
for a period of 60 days or the Borrower is adjudicated insolvent or bankrupt;
or the Borrower fails to controvert in a timely manner any such case under the
Bankruptcy Code or any such proceeding, or any order of relief or other order
approving any such case or proceeding is entered; or the Borrower by any act
or failure to act indicates its consent to, approval of or acquiescence in any
such case or proceeding or in the appointment of any custodian or the like for
its or any substantial part of its property or suffers any such appointment to
continue undischarged or unstayed for a period of 60 days; or the Borrower
makes a general assignment for the benefit of creditors; or any corporate
action is taken by the Borrower for the purpose of effecting any of the
foregoing; or
7.5. Other Covenants. Either (a) the Borrower shall fail to perform
its obligations under Section 6.1(e) and any such failure shall remain
unremedied for a period of 30 days, or (b) the Borrower shall fail to perform
or observe any other term, covenant or agreement contained in this Agreement
on its part to be performed or observed and any such failure shall remain
unremedied for a period of 30 days after written notice thereof shall have
been received by the Borrower from the Agent or the Required Lenders;
then, and in any such event, and at any time thereafter, if any Default shall
then be continuing, either or both of the following actions may be taken: (i)
the Agent, at the direction of the Required Lenders, shall by written notice
to the Borrower, declare the principal of and accrued interest in respect of
all of the Notes to be, whereupon the same and all other amounts due hereunder
shall become, forthwith due and payable without presentment, demand, protest
or other notice of any kind, all of which are hereby expressly waived by the
Borrower, anything contained herein or in the Notes to the contrary
notwithstanding, and (ii) the Agent, at the direction of the Required Lenders,
shall by written notice to the Borrower, declare the Aggregate Commitment
terminated, whereupon the Commitment of each Lender and the obligation of each
Lender to make its Loans hereunder shall terminate immediately; provided that
if an Event of Default described in Section 7.4 shall occur, the result which
would otherwise occur only upon the giving of written notice by the Agent to
the Borrower as specified in clauses (i) and (ii) above shall occur
automatically without the giving of any such notice and without any
instruction by the Required Lenders to give such notice. If, within 14 days
after acceleration of the maturity of the Obligations or termination of the
obligations of the Lenders to make Loans hereunder as a result of any Default
(other than any Default as described in Section 7.4) and before any judgment
or decree for the payment of the Obligations due shall have been obtained or
entered, the Required Lenders (in their sole discretion) shall so direct, the
Agent shall, by notice to the Borrower, rescind and annul such acceleration
and/or termination.
ARTICLE VIII
AMENDMENTS; PRESERVATION OF RIGHTS
8.1. Amendments. Subject to the provisions of this Article VIII, the
Required Lenders (or the Agent with the consent in writing of the Required
Lenders) and the Borrower may enter into agreements supplemental hereto for
the purpose of adding or modifying any provisions to the Loan Documents or
changing in any manner the rights of the Lenders or the Borrower hereunder or
waiving any Default hereunder; provided, however, that no such supplemental
agreement shall, without the consent of each Lender affected thereby:
(i) Extend the maturity of any Loan or Note or forgive all or any
portion of the principal amount thereof, or reduce the rate or
extend the time of payment of interest or fees thereon.
(ii) Reduce the percentage specified in the definition of Required
Lenders.
(iii) Reduce the amount or extend the payment date for the mandatory
payments required under Section 2.2, or increase the amount of
the Commitment of any Lender hereunder, or permit the Borrower
to assign its rights under this Agreement.
(iv) Amend this Section 8.1.
No amendment of any provision of this Agreement relating to the Agent shall be
effective without the written consent of the Agent. The Agent may waive
payment of the fee required under Section 12.3.2 without obtaining the consent
of any other party to this Agreement.
8.2. Preservation of Rights. No delay or omission of the Lenders or
the Agent to exercise any right under the Loan Documents shall impair such
right or be construed to be a waiver of any Default or an acquiescence
therein, and the making of a Loan notwithstanding the existence of a Default
or the inability of the Borrower to satisfy the conditions precedent to such
Loan shall not constitute any waiver or acquiescence. Any single or partial
exercise of any such right shall not preclude other or further exercise
thereof or the exercise of any other right, and no waiver, amendment or other
variation of the terms, conditions or provisions of the Loan Documents
whatsoever shall be valid unless in writing signed by the Lenders required
pursuant to Section 8.1, and then only to the extent in such writing
specifically set forth. All remedies contained in the Loan Documents or by
law afforded shall be cumulative and all shall be available to the Agent and
the Lenders until the Obligations have been paid in full.
ARTICLE IX
GENERAL PROVISIONS
9.1. Survival of Representations. All representations and warranties
of the Borrower contained in this Agreement shall survive delivery of the
Notes and the making of the Loans herein contemplated.
9.2. Governmental Regulation. Anything contained in this Agreement to
the contrary notwithstanding, no Lender shall be obligated to extend credit to
the Borrower in violation of any limitation or prohibition provided by any
applicable statute or regulation.
9.3. Taxes. Any taxes (excluding income taxes on the overall net
income of any Lender) or other similar assessments or charges made by any
governmental or revenue authority in respect of the Loan Documents shall be
paid by the Borrower, together with interest and penalties, if any.
9.4. Headings. Section headings in the Loan Documents are for
convenience of reference only, and shall not govern the interpretation of any
of the provisions of the Loan Documents.
9.5. Entire Agreement. The Loan Documents embody the entire agreement
and understanding among the Borrower, the Agent and the Lenders and supersede
all prior agreements and understandings among the Borrower, the Agent and the
Lenders relating to the subject matter thereof.
9.6. Several Obligations; Benefits of this Agreement. The respective
obligations of the Lenders hereunder are several and not joint and no Lender
shall be the partner or agent of any other (except to the extent to which the
Agent is authorized to act as such). The failure of any Lender to perform any
of its obligations hereunder shall not relieve any other Lender from any of
its obligations hereunder. This Agreement shall not be construed so as to
confer any right or benefit upon any Person other than the parties to this
Agreement and their respective successors and assigns.
9.7. Expenses; Indemnification. The Borrower shall reimburse the
Agent for any costs, internal charges and out-of-pocket expenses (including
reasonable attorneys' fees and time charges of attorneys for the Agent, which
attorneys may be employees of the Agent) paid or incurred by the Agent in
connection with the preparation, negotiation, execution, delivery, review,
amendment, modification, and administration of the Loan Documents, subject to
the terms of that certain letter agreement between the Agent and the Borrower
dated October 27, 1995. The Borrower also agrees to reimburse the Agent and
the Lenders for any costs, internal charges and out-of-pocket expenses
(including reasonable attorneys' fees and time charges of attorneys for the
Agent and the Lenders, which attorneys may be employees of the Agent or the
Lenders) paid or incurred by the Agent or any Lender in connection with the
collection and enforcement of the Loan Documents. The Borrower further agrees
to indemnify the Agent and each Lender, its directors, officers and employees
against all losses, claims, damages, penalties, judgments, liabilities and
expenses (including, without limitation, all expenses of litigation or
preparation therefor whether or not the Agent or any Lender is a party
thereto) which any of them may pay or incur arising out of or relating to this
Agreement, the other Loan Documents, the transactions contemplated hereby or
the direct or indirect application or proposed application of the proceeds of
any Loan hereunder provided that such indemnification shall not extend to
disputes among the Agent and the Lenders. The obligations of the Borrower
under this Section shall survive the termination of this Agreement.
9.8. Numbers of Documents. All statements, notices, closing
documents, and requests hereunder shall be furnished to the Agent with
sufficient counterparts so that the Agent may furnish one to each of the
Lenders.
9.9. Accounting. Except as provided to the contrary herein, all
accounting terms used herein shall be interpreted and all accounting
determinations hereunder shall be made in accordance with generally accepted
accounting principles, except that any determination which is to be made on a
consolidated basis shall be made for the Borrower and all its Subsidiaries,
including those Subsidiaries, if any, which are unconsolidated on the
Borrower's audited financial statements.
9.10. Severability of Provisions. Any provision in any Loan Document
that is held to be inoperative, unenforceable, or invalid in any jurisdiction
shall, as to that jurisdiction, be inoperative, unenforceable, or invalid
without affecting the remaining provisions in that jurisdiction or the
operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are
declared to be severable.
9.11. Nonliability of Lenders. The relationship between the Borrower
and the Lenders and the Agent shall be solely that of borrower and lender.
Neither the Agent nor any Lender shall have any fiduciary responsibilities to
the Borrower. Neither the Agent nor any Lender undertakes any responsibility
to the Borrower to review or inform the Borrower of any matter in connection
with any phase of the Borrower's business or operations.
9.12. CHOICE OF LAW. THE LOAN DOCUMENTS (OTHER THAN THOSE CONTAINING
A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE OF
ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL BANKS.
9.13. CONSENT TO JURISDICTION. EACH OF THE BORROWER, THE AGENT, AND
EACH LENDER HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY UNITED
STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND HEREBY
IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY
BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES ANY OBJECTION
IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT, ACTION OR
PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN INCONVENIENT
FORUM. IN THE EVENT THAT ANY SUCH UNITED STATES FEDERAL OR ILLINOIS STATE
COURT SITTING IN CHICAGO DOES NOT ACCEPT SUCH JURISDICTION, NOTHING HEREIN
SHALL LIMIT THE RIGHT OF ANY PARTY HERETO TO BRING PROCEEDINGS AGAINST THE
BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY JUDICIAL PROCEEDING BY
THE BORROWER AGAINST THE AGENT OR ANY LENDER OR ANY AFFILIATE OF THE AGENT OR
ANY LENDER INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING
OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY
IN A COURT IN CHICAGO, ILLINOIS.
9.14. WAIVER OF JURY TRIAL. THE BORROWER, THE AGENT AND EACH LENDER
HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR
INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN
ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE
RELATIONSHIP ESTABLISHED THEREUNDER.
9.15. Confidentiality. Each Lender agrees to hold any confidential
information which it may receive from the Borrower pursuant to this Agreement
in confidence, except for disclosure (i) to other Lenders and their respective
Affiliates, (ii) to legal counsel, accountants, and other professional
advisors to that Lender or to a Transferee, (iii) to regulatory officials,
(iv) to any Person as required by law, regulation, or legal process, (v) to
any Person in connection with any legal proceeding to which that Lender is a
party, and (vi) permitted by Section 12.4.
ARTICLE X
THE AGENT
10.1. Appointment. The First National Bank of Chicago is hereby
appointed Agent hereunder and under each other Loan Document, and each of the
Lenders irrevocably authorizes the Agent to act as the agent of such Lender.
The Agent agrees to act as such upon the express conditions contained in this
Article X. The Agent shall not have a fiduciary relationship in respect of
the Borrower or any Lender by reason of this Agreement.
10.2. Powers. The Agent shall have and may exercise such powers under
the Loan Documents as are specifically delegated to the Agent by the terms of
each thereof, together with such powers as are reasonably incidental thereto.
The Agent shall have no implied duties to the Lenders, or any obligation to
the Lenders to take any action thereunder except any action specifically
provided by the Loan Documents to be taken by the Agent.
10.3. General Immunity. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to the Borrower, the Lenders or
any Lender for any action taken or omitted to be taken by it or them hereunder
or under any other Loan Document or in connection herewith or therewith except
for its or their own gross negligence or willful misconduct.
10.4. No Responsibility for Loans, Recitals, etc. Neither the Agent
nor any of its directors, officers, agents or employees shall be responsible
for or have any duty to ascertain, inquire into, or verify (i) any statement,
warranty or representation made in connection with any Loan Document or any
borrowing hereunder; (ii) the performance or observance of any of the
covenants or agreements of any obligor under any Loan Document, including,
without limitation, any agreement by an obligor to furnish information
directly to each Lender; (iii) the satisfaction of any condition specified in
Article IV, except receipt of items required to be delivered to the Agent;
(iv) the validity, effectiveness or genuineness of any Loan Document or any
other instrument or writing furnished in connection therewith; or (v) the
value, sufficiency, creation, perfection or priority of any interest in any
collateral security. The Agent shall have no duty to disclose to the Lenders
information that is not required to be furnished by the Borrower to the Agent
at such time, but is voluntarily furnished by the Borrower to the Agent
(either in its capacity as Agent or in its individual capacity).
10.5. Action on Instructions of Lenders. The Agent shall in all cases
be fully protected in acting, or in refraining from acting, hereunder and
under any other Loan Document in accordance with written instructions signed
by the Required Lenders, and such instructions and any action taken or failure
to act pursuant thereto shall be binding on all of the Lenders and on all
holders of Notes. The Agent shall be fully justified in failing or refusing
to take any action hereunder and under any other Loan Document unless it shall
first be indemnified to its satisfaction by the Lenders pro rata against any
and all liability, cost and expense that it may incur by reason of taking or
continuing to take any such action.
10.6. Employment of Agents and Counsel. The Agent may execute any of
its duties as Agent hereunder and under any other Loan Document by or through
employees, agents, and attorneys-in-fact and shall not be answerable to the
Lenders, except as to money or securities received by it or its authorized
agents, for the default or misconduct of any such agents or attorneys-in-fact
selected by it with reasonable care. The Agent shall be entitled to advice of
counsel concerning all matters pertaining to the agency hereby created and its
duties hereunder and under any other Loan Document.
10.7. Reliance on Documents; Counsel. The Agent shall be entitled to
rely upon any Note, notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected by the Agent, which
counsel may be employees of the Agent.
10.8. Agent's Reimbursement and Indemnification. The Lenders agree to
reimburse and indemnify the Agent ratably in proportion to their respective
Commitments (i) for any amounts not reimbursed by the Borrower for which the
Agent is entitled to reimbursement by the Borrower under the Loan Documents,
(ii) for any other expenses incurred by the Agent on behalf of the Lenders, in
connection with the preparation, execution, delivery, administration and
enforcement of the Loan Documents and (iii) for any liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind and nature whatsoever which may be imposed on,
incurred by or asserted against the Agent in any way relating to or arising
out of the Loan Documents or any other document delivered in connection
therewith or the transactions contemplated thereby, or the enforcement of any
of the terms thereof or of any such other documents, provided that no Lender
shall be liable for any of the foregoing to the extent they arise from the
gross negligence or willful misconduct of the Agent. The obligations of the
Lenders under this Section 10.8 shall survive payment of the Obligations and
termination of this Agreement.
10.9. Rights as a Lender. In the event the Agent is a Lender, the
Agent shall have the same rights and powers hereunder and under any other Loan
Document as any Lender and may exercise the same as though it were not the
Agent, and the term "Lender" or "Lenders" shall, at any time when the Agent is
a Lender, unless the context otherwise indicates, include the Agent in its
individual capacity. The Agent may accept deposits from, lend money to, and
generally engage in any kind of trust, debt, equity or other transaction, in
addition to those contemplated by this Agreement or any other Loan Document,
with the Borrower or any of its Subsidiaries in which the Borrower or such
Subsidiary is not restricted hereby from engaging with any other Person. The
Agent, in its individual capacity, is not obligated to remain a Lender.
10.10. Lender Credit Decision. Each Lender acknowledges that it has,
independently and without reliance upon the Agent or any other Lender and
based on the financial statements prepared by the Borrower and such other
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement and the other Loan
Documents. Each Lender also acknowledges that it will, independently and
without reliance upon the Agent or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue
to make its own credit decisions in taking or not taking action under this
Agreement and the other Loan Documents.
10.11. Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Lenders and the Borrower, such resignation to be
effective upon the appointment of a successor Agent or, if no successor Agent
has been appointed, forty-five days after the retiring Agent gives notice of
its intention to resign. Upon any such resignation, the Required Lenders
shall have the right to appoint, on behalf of the Borrower and the Lenders and
with the consent of the Borrower (which shall not be unreasonably withheld or
delayed), a successor Agent. If no successor Agent shall have been so
appointed by the Required Lenders within thirty days after the resigning
Agent's giving notice of its intention to resign, then the resigning Agent may
appoint, on behalf of the Borrower and the Lenders and with the consent of the
Borrower (which shall not be unreasonably withheld or delayed), a successor
Agent. If the Agent has resigned and no successor Agent has been appointed,
the Lenders may perform all the duties of the Agent hereunder and the Borrower
shall make all payments in respect of the Obligations to the applicable Lender
and for all other purposes shall deal directly with the Lenders. No successor
Agent shall be deemed to be appointed hereunder until such successor Agent has
accepted the appointment. Any such successor Agent shall be a commercial bank
having capital and retained earnings of at least $50,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the resigning Agent. Upon the
effectiveness of the resignation of the Agent, the resigning Agent shall be
discharged from its duties and obligations hereunder and under the Loan
Documents. After the effectiveness of the resignation of an Agent, the
provisions of this Article X shall continue in effect for the benefit of such
Agent in respect of any actions taken or omitted to be taken by it while it
was acting as the Agent hereunder and under the other Loan Documents.
10.12. Agent's Fee. The Borrower agrees to pay to the Agent, for its
own account, the fees agreed to by the Borrower and the Agent pursuant to that
certain letter agreement dated October 27, 1995.
ARTICLE XI
SETOFF; RATABLE PAYMENTS
11.1. Setoff. In addition to, and without limitation of, any rights
of the Lenders under applicable law, if the Borrower becomes insolvent,
however evidenced, or any Default occurs, any and all deposits (including all
account balances, whether provisional or final and whether or not collected or
available) and any other Indebtedness at any time held or owing by any Lender
to or for the credit or account of the Borrower may be offset and applied
toward the payment of the Obligations owing to such Lender, whether or not the
Obligations, or any part hereof, shall then be due.
11.2. Ratable Payments. If any Lender, whether by setoff or
otherwise, has payment made to it upon its Loans (other than payments received
pursuant to Sections 3.1, 3.2 or 3.4) in a greater proportion than that
received by any other Lender, such Lender agrees, promptly upon demand, to
purchase a portion of the Loans held by the other Lenders so that after such
purchase each Lender will hold its ratable proportion of Loans. If any
Lender, whether in connection with setoff or amounts which might be subject to
setoff or otherwise, receives collateral or other protection for its
Obligations or such amounts which may be subject to setoff, such Lender
agrees, promptly upon demand, to take such action necessary such that all
Lenders share in the benefits of such collateral ratably in proportion to
their Loans. In case any such payment is disturbed by legal process, or
otherwise, appropriate further adjustments shall be made.
ARTICLE XII
BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS
12.1. Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Borrower and
the Lenders and their respective successors and assigns, except that (i) the
Borrower shall not have the right to assign its rights or obligations under
the Loan Documents and (ii) any assignment by any Lender must be made in
compliance with Section 12.3. Notwithstanding clause (ii) of this Section,
any Lender may at any time, without the consent of the Borrower or the Agent,
assign all or any portion of its rights under this Agreement and its Notes to
a Federal Reserve Bank; provided, however, that no such assignment shall
release the transferor Lender from its obligations hereunder. The Agent may
treat the payee of any Note as the owner thereof for all purposes hereof
unless and until such payee complies with Section 12.3 in the case of an
assignment thereof or, in the case of any other transfer, a written notice of
the transfer is filed with the Agent. Any assignee or transferee of a Note
agrees by acceptance thereof to be bound by all the terms and provisions of
the Loan Documents. Any request, authority or consent of any Person, who at
the time of making such request or giving such authority or consent is the
holder of any Note, shall be conclusive and binding on any subsequent holder,
transferee or assignee of such Note or of any Note or Notes issued in exchange
therefor.
12.2. Participations.
12.2.1. Permitted Participants; Effect. Any Lender may, in the
ordinary course of its business and in accordance with applicable law,
at any time sell to one or more banks or other entities ("Participants")
participating interests in any Loan owing to such Lender, any Note held
by such Lender, any Commitment of such Lender or any other interest of
such Lender under the Loan Documents. In the event of any such sale by
a Lender of participating interests to a Participant, such Lender's
obligations under the Loan Documents shall remain unchanged, such Lender
shall remain solely responsible to the other parties hereto for the
performance of such obligations, such Lender shall remain the holder of
any such Note for all purposes under the Loan Documents, all amounts
payable by the Borrower under this Agreement shall be determined as if
such Lender had not sold such participating interests, and the Borrower
and the Agent shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under the
Loan Documents.
12.2.2. Voting Rights. Each Lender shall retain the sole right
to approve, without the consent of any Participant, any amendment,
modification or waiver of any provision of the Loan Documents other than
any amendment, modification or waiver with respect to any Loan or
Commitment in which such Participant has an interest which forgives
principal, interest or fees or reduces the interest rate or fees payable
with respect to any such Loan or Commitment, postpones any date fixed
for any regularly-scheduled payment of principal of, or interest or fees
on, any such Loan or Commitment, releases any guarantor of any such Loan
or releases any substantial portion of collateral, if any, securing any
such Loan.
12.2.3. Benefit of Setoff. The Borrower agrees that each
Participant shall be deemed to have the right of setoff provided in
Section 11.1 in respect of its participating interest in amounts owing
under the Loan Documents to the same extent as if the amount of its
participating interest were owing directly to it as a Lender under the
Loan Documents, provided that each Lender shall retain the right of
setoff provided in Section 11.1 with respect to the amount of
participating interests sold to each Participant. The Lenders agree to
share with each Participant, and each Participant, by exercising the
right of setoff provided in Section 11.1, agrees to share with each
Lender, any amount received pursuant to the exercise of its right of
setoff, such amounts to be shared in accordance with Section 11.2 as if
each Participant were a Lender.
12.3. Assignments.
12.3.1. Permitted Assignments. Any Lender may, in the ordinary
course of its business and in accordance with applicable law, at any
time assign to one or more banks or other entities ("Purchasers") all or
any part of its rights and obligations under the Loan Documents,
provided that any such assignment shall be in a minimum amount equal to
the lesser of the assigning Lender's Commitment or $10,000,000. Such
assignment shall be substantially in the form of Exhibit "D" hereto or
in such other form as may be agreed to by the parties thereto. The
consent of the Borrower and the Agent shall be required prior to an
assignment becoming effective with respect to a Purchaser which is not a
Lender or an Affiliate thereof; provided, however, that if a Default has
occurred and is continuing, the consent of the Borrower shall not be
required. Such consent shall not be unreasonably withheld or delayed.
12.3.2. Effect; Effective Date. Upon (i) delivery to the Agent
of a notice of assignment, substantially in the form attached as Exhibit
"I" to Exhibit "D" hereto (a "Notice of Assignment"), together with any
consents required by Section 12.3.1, and (ii) payment of a $3,500 fee to
the Agent for processing such assignment, such assignment shall become
effective on the effective date specified in such Notice of Assignment.
The Notice of Assignment shall contain a representation by the
Purchaser to the effect that none of the consideration used to make the
purchase of the Commitment and Loans under the applicable assignment
agreement are "plan assets" as defined under ERISA and that the rights
and interests of the Purchaser in and under the Loan Documents will not
be "plan assets" under ERISA. On and after the effective date of such
assignment, such Purchaser shall for all purposes be a Lender party to
this Agreement and any other Loan Document executed by the Lenders and
shall have all the rights and obligations of a Lender under the Loan
Documents, to the same extent as if it were an original party hereto,
and no further consent or action by the Borrower, the Lenders or the
Agent shall be required to release the transferor Lender with respect to
the percentage of the Aggregate Commitment and Loans assigned to such
Purchaser. Upon the consummation of any assignment to a Purchaser
pursuant to this Section 12.3.2, the transferor Lender, the Agent and
the Borrower shall make appropriate arrangements so that replacement
Notes are issued to such transferor Lender and new Notes or, as
appropriate, replacement Notes, are issued to such Purchaser, in each
case in principal amounts reflecting their Commitment, as adjusted
pursuant to such assignment.
12.4. Dissemination of Information. The Borrower authorizes each
Lender to disclose to any Participant or Purchaser or any other Person
acquiring an interest in the Loan Documents by operation of law (each a
"Transferee") and any prospective Transferee any and all information in such
Lender's possession concerning the creditworthiness of the Borrower and its
Subsidiaries, provided that each Transferee and prospective Transferee agrees
to be bound by Section 9.15 of this Agreement.
12.5. Tax Treatment. If any interest in any Loan Document is
transferred to any Transferee which is organized under the laws of any
jurisdiction other than the United States or any State thereof, the transferor
Lender shall cause such Transferee, concurrently with the effectiveness of
such transfer, to comply with the provisions of Section 2.17.
ARTICLE XIII
NOTICES
13.1. Giving Notice. Except as otherwise permitted by Section 2.12
with respect to borrowing notices, all notices and other communications
provided to any party hereto under this Agreement or any other Loan Document
shall be in writing or by telex or by facsimile and addressed or delivered to
such party at its address set forth below its signature hereto or at such
other address as may be designated by such party in a notice to the other
parties. Any notice, if mailed and properly addressed with postage prepaid,
shall be deemed given when received; any notice, if transmitted by telex or
facsimile, shall be deemed given when transmitted (answerback confirmed in the
case of telexes).
13.2. Change of Address. The Borrower, the Agent and any Lender may
each change the address for service of notice upon it by a notice in writing
to the other parties hereto.
ARTICLE XIV
COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Agreement by signing any such counterpart. This
Agreement shall be effective when it has been executed by the Borrower, the
Agent and the Lenders and each party has notified the Agent by telex or
telephone, that it has taken such action.
<PAGE>
IN WITNESS WHEREOF, the Borrower, the Lenders and the Agent have
executed this Agreement as of the date first above written.
PENNSYLVANIA POWER & LIGHT COMPANY
By: _/s/ John R. Biggar_________________
John R. Biggar
Vice President - Finance and
Treasurer
Two North Ninth Street
Allentown, Pennsylvania 18101-1179
Attention: Treasurer
Telecopier: (610) 774-5106
Commitments
$25,000,000 THE FIRST NATIONAL BANK OF
CHICAGO, Individually and as Agent
By: __/s/ Kenneth J. Bauer_______________
Kenneth J. Bauer
Authorized Agent
One First National Plaza
Chicago, Illinois 60670
Attention: Electric, Gas &
Telecommunications Division
Telecopier: (312) 732-3055
<PAGE>
$24,000,000 CREDIT SUISSE
By: __/s/ Andrea E. Shkane_______________
Print Name: Andrea E. Shkane_____________
Title: Member of Senior Management_______
By: __/s/ Thomas G. Muoio________________
Print Name: _Thomas G. Muoio_____________
Title: ______Associate___________________
12 East 49th Street
New York, New York 10017
Attention: Mid-Atlantic Group
Telecopier: (212) 238-5389
$20,000,000 MELLON BANK
By: __/s/ Mary Ellen Usher_______________
Mary Ellen Usher
Vice President
One Mellon Bank Center
Room 4425
Pittsburgh, Pennsylvania 15258
Attention: Energy and Utilities Group
Telecopier: (412) 234-8888
<PAGE>
$10,000,000 THE BANK OF NEW YORK
By: ____/s/ Nathan S. Howard____________
Print Name: __Nathan S. Howard__________
Title: ___Vice President________________
One Wall Street
New York, New York 10286
Attention: Nathan Howard
Vice President
Telecopier: (212) 635-7923
$10,000,000 SANWA BANK
By: ____/s/ Christian Kambour___________
Print Name: __Christian Kambour_________
Title: _______Assistant Vice President__
55 East 52nd Street
New York, New York 10055
Attention: _____________________________
Telecopier: (212) 754-1304
$10,000,000 TORONTO DOMINION (TEXAS), INC
By: ___/s/_Diane_Bailey_________________
Print Name: ____Diane_Bailey____________
Title: _________Vice_President__________
909 Fannin, Suite 1700
Houston, Texas 77010
Attention: Diane Bailey
Telecopier: (713) 951-9921
<PAGE>
$10,000,000 UNION BANK OF SWITZERLAND
By: _/s/_Paul_R._Morrison________________
Print Name: __Paul_R._Morrison___________
Title: _______Vice_President_____________
By: __/s/_Robert_A._High_________________
Print Name: __Robert_A._High_____________
Title: _______Assistant_Treasurer________
299 Park Avenue, 31st Floor
New York, New York 10171-0026
Attention: Paul R. Morrison
Telecopier: (212) 821-3878
$7,000,000 CHEMICAL BANK
By: _____/s/_Jane_Ritchie_______________
Jane Ritchie
Vice President
270 Park Avenue, 10th Floor
New York, New York 10017-2070
Attention: Jane Ritchie
Utilities Group
Telecopier: (212) 270-5007
____________
$116,000,000
<PAGE>
EXHIBIT "A"
NOTE
$_____________ _______________, 19____
PENNSYLVANIA POWER & LIGHT COMPANY, a Pennsylvania corporation (the
"Borrower"), promises to pay to the order of _____________________ (the
"Lender") the lesser of the principal sum of _____________________ Dollars or
the aggregate unpaid principal amount of all Loans made by the Lender to the
Borrower pursuant to Article II of the Credit Agreement (as the same may be
amended or modified, the "Agreement") hereinafter referred to, in immediately
available funds at the main office of The First National Bank of Chicago in
Chicago, Illinois, as Agent, together with interest on the unpaid principal
amount hereof at the rates and on the dates set forth in the Agreement. The
Borrower shall pay the principal of and accrued and unpaid interest on the
Loans in full on the Facility Termination Date.
The Lender shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of each Loan and the date and amount of each principal
payment hereunder.
This Note is one of the Notes issued pursuant to, and is entitled to the
benefits of, the Credit Agreement, dated as of March 14, 1996 among the
Borrower, The First National Bank of Chicago, individually and as Agent, and
the lenders named therein, including the Lender, to which Agreement, as it may
be amended from time to time, reference is hereby made for a statement of the
terms and conditions governing this Note, including the terms and conditions
under which this Note may be prepaid or its maturity date accelerated.
Capitalized terms used herein and not otherwise defined herein are used with
the meanings attributed to them in the Agreement.
PENNSYLVANIA POWER & LIGHT COMPANY
By: _____________________________________
Print Name: _____________________________
Title: __________________________________
<PAGE>
SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
TO
NOTE OF PENNSYLVANIA POWER & LIGHT COMPANY
DATED _______________________, 19____
Maturity
Principal Maturity Principal
Amount of of Interest Amount Unpaid
___Date___________Loan___________Period_____________Paid____________Balance___
<PAGE>
EXHIBIT "B"
FORM OF OPINION
March 14, 1996
The Agent and the Lenders who are parties to the
Credit Agreement described below.
Gentlemen/Ladies:
I am Senior Counsel of Pennsylvania Power & Light Company (the
"Borrower"), and, as such, am familiar with the steps and proceedings taken by
the Borrower in connection with its execution and delivery of a Term Credit
Agreement among the Borrower, The First National Bank of Chicago, individually
and as Agent, and the Lenders named therein, providing for Advances in an
aggregate principal amount not exceeding $116,000,000 at any one time
outstanding and dated as of March 14, 1996 (the "Agreement"). All capitalized
terms used in this opinion and not otherwise defined shall have the meanings
attributed to them in the Agreement.
I have examined the Borrower's articles of incorporation, by-laws,
resolutions, the Loan Documents and such other matters of fact and law which I
deem necessary in order to render this opinion. Based upon the foregoing, it
is my opinion that:
l. The Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of its state of incorporation and has all
requisite authority to conduct its business in each jurisdiction in which its
business is conducted.
2. The execution and delivery of the Loan Documents by the Borrower and
the performance by the Borrower of the Obligations have been duly authorized
by all necessary corporate action and proceedings on the part of the Borrower
and will not:
(a) require any consent of the Borrower's shareholders;
(b) violate any law, rule, regulation, order, writ, judgment,
injunction, decree or award binding on the Borrower or the Borrower's
articles of incorporation or by-laws or any indenture, instrument or
agreement binding upon the Borrower; or
(c) result in, or require, the creation or imposition of any lien
pursuant to the provisions of any indenture, instrument or agreement
binding upon the Borrower.
3. The Loan Documents have been duly executed and delivered by the
Borrower and constitute legal, valid and binding obligations of the Borrower
enforceable in accordance with their terms except to the extent the
enforcement thereof may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally and subject also to
the availability of equitable remedies if equitable remedies are sought.
4. Except as set forth in the Borrower's Form 10-K Report to the
Securities and Exchange Commission for the year ended December 31, 1994, there
is no litigation or proceeding against the Borrower or any of its Subsidiaries
which, if adversely determined, could reasonably be expected to have a
material adverse effect on the financial condition of the Borrower or its
ability to perform its obligations under the Loan Documents.
5. No approval, authorization, consent, adjudication or order of any
governmental authority, which has not been obtained by the Borrower, is
required to be obtained by the Borrower in connection with the execution and
delivery of the Loan Documents, the borrowings under the Agreement or in
connection with the payment by the Borrower of the Obligations.
This opinion may be relied upon only by the Agent, the Lenders and their
participants, assignees and other transferees.
Very truly yours,
Michael A. McGrail
Senior Counsel
<PAGE>
EXHIBIT "C"
OFFICER'S CERTIFICATE
To: The Lenders parties to the
Term Credit Agreement Described Below
This Officer's Certificate is furnished pursuant to that certain Term
Credit Agreement dated as of March 14, 1996 (as amended, modified, renewed or
extended from time to time, the "Agreement") among the Borrower, the lenders
party thereto and The First National Bank of Chicago, as Agent for the
Lenders. Unless otherwise defined herein, capitalized terms used in this
Officer's Certificate have the meanings ascribed thereto in the Agreement.
THE UNDERSIGNED HEREBY CERTIFIES THAT:
1. I am the duly elected _____________________ of the Borrower;
2. I have reviewed the terms of the Agreement and I have made, or have
caused to be made under my supervision, a detailed review of the transactions
and conditions of the Borrower and its Subsidiaries during the accounting
period covered by the attached financial statements; and
3. The examinations described in paragraph 2 did not disclose, and I
have no knowledge of, the existence of any condition or event which
constitutes a Default or Unmatured Default during or at the end of the
accounting period covered by the attached financial statements or as of the
date of this Certificate, except as set forth below.
Described below are the exceptions, if any, to paragraph 3 by listing,
in detail, the nature of the condition or event, the period during which it
has existed and the action which the Borrower has taken, is taking, or
proposes to take with respect to each such condition or event:
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
The foregoing certifications are made and delivered this ____ day of ___
__________, 19___.
________________________________
<PAGE>
EXHIBIT "D"
ASSIGNMENT AGREEMENT
This Assignment Agreement (this "Assignment Agreement") between _______
_______________ (the "Assignor") and _______________________________(the
"Assignee") is dated as of _________, 19__. The parties hereto agree as
follows:
1. PRELIMINARY STATEMENT. The Assignor is a party to a Credit
Agreement (which, as it may be amended, modified, renewed or extended from
time to time is herein called the "Credit Agreement") described in Item 1 of
Schedule 1 attached hereto ("Schedule 1"). Capitalized terms used herein and
not otherwise defined herein shall have the meanings attributed to them in the
Credit Agreement.
2. ASSIGNMENT AND ASSUMPTION. The Assignor hereby sells and assigns to
the Assignee, and the Assignee hereby purchases and assumes from the Assignor,
an interest in and to the Assignor's rights and obligations under the Credit
Agreement such that after giving effect to such assignment the Assignee shall
have purchased pursuant to this Assignment Agreement the percentage interest
specified in Item 3 of Schedule 1 of all outstanding rights and obligations
under the Credit Agreement relating to the facilities listed in Item 3 of
Schedule 1 and the other Loan Documents. The aggregate Commitment (or Loans,
if the applicable Commitment has been terminated) purchased by the Assignee
hereunder is set forth in Item 4 of Schedule 1.
3. EFFECTIVE DATE. The effective date of this Assignment Agreement
(the "Effective Date") shall be the later of the date specified in Item 5 of
Schedule 1 or two Business Days (or such shorter period agreed to by the
Agent) after a Notice of Assignment substantially in the form of Exhibit "I"
attached hereto has been delivered to the Agent. Such Notice of Assignment
must include any consents required to be delivered to the Agent by Section
12.3.1 of the Credit Agreement. In no event will the Effective Date occur if
the payments required to be made by the Assignee to the Assignor on the
Effective Date under Sections 4 and 5 hereof are not made on the proposed
Effective Date. The Assignor will notify the Assignee of the proposed
Effective Date no later than the Business Day prior to the proposed Effective
Date. As of the Effective Date, (i) the Assignee shall have the rights and
obligations of a Lender under the Loan Documents with respect to the rights
and obligations assigned to the Assignee hereunder and (ii) the Assignor shall
relinquish its rights and be released from its corresponding obligations under
the Loan Documents with respect to the rights and obligations assigned to the
Assignee hereunder.
4. PAYMENTS OBLIGATIONS. On and after the Effective Date, the Assignee
shall be entitled to receive from the Agent all payments of principal,
interest and fees with respect to the interest assigned hereby. The Assignee
shall advance funds directly to the Agent with respect to all Loans and
reimbursement payments made on or after the Effective Date with respect to the
interest assigned hereby. [In consideration for the sale and assignment of
Loans hereunder, (i) the Assignee shall pay the Assignor, on the Effective
Date, an amount equal to the principal amount of the portion of all Floating
Rate Loans assigned to the Assignee hereunder and (ii) with respect to each
Eurodollar Loan made by the Assignor and assigned to the Assignee hereunder
which is outstanding on the Effective Date, (a) on the last day of the
Interest Period therefor or (b) on such earlier date agreed to by the Assignor
and the Assignee or (c) on the date on which any such Eurodollar Loan either
becomes due (by acceleration or otherwise) or is prepaid (the date as
described in the foregoing clauses (a), (b) or (c) being hereinafter referred
to as the "Payment Date"), the Assignee shall pay the Assignor an amount equal
to the principal amount of the portion of such Eurodollar Loan assigned to the
Assignee which is outstanding on the Payment Date. If the Assignor and the
Assignee agree that the Payment Date for such Eurodollar Loan shall be the
Effective Date, they shall agree to the interest rate applicable to the
portion of such Loan assigned hereunder for the period from the Effective Date
to the end of the existing Interest Period applicable to such Eurodollar Loan
(the "Agreed Interest Rate") and any interest received by the Assignee in
excess of the Agreed Interest Rate shall be remitted to the Assignor. In the
event interest for the period from the Effective Date to but not including the
Payment Date is not paid by the Borrower with respect to any Eurodollar Loan
sold by the Assignor to the Assignee hereunder, the Assignee shall pay to the
Assignor interest for such period on the portion of such Eurodollar Loan sold
by the Assignor to the Assignee hereunder at the applicable rate provided by
the Credit Agreement. In the event a prepayment of any Eurodollar Loan which
is existing on the Payment Date and assigned by the Assignor to the Assignee
hereunder occurs after the Payment Date but before the end of the Interest
Period applicable to such Eurodollar Loan, the Assignee shall remit to the
Assignor the excess of the prepayment penalty paid with respect to the portion
of such Eurodollar Loan assigned to the Assignee hereunder over the amount
which would have been paid if such prepayment penalty was calculated based on
the Agreed Interest Rate. The Assignee will also promptly remit to the
Assignor (i) any principal payments received from the Agent with respect to
Eurodollar Loans prior to the Payment Date and (ii) any amounts of interest on
Loans and fees received from the Agent which relate to the portion of the
Loans assigned to the Assignee hereunder for periods prior to the Effective
Date, in the case of Floating Rate Loans or fees, or the Payment Date, in the
case of Eurodollar Loans, and not previously paid by the Assignee to the
Assignor.]** In the event that either party hereto receives any payment to
which the other party hereto is entitled under this Assignment Agreement, then
the party receiving such amount shall promptly remit it to the other party
hereto.
5. FEES PAYABLE BY THE ASSIGNEE. The Assignee shall pay to the
Assignor a fee on each day on which a payment of interest is made under the
Credit Agreement with respect to the amounts assigned to the Assignee
hereunder (other than a payment of interest or commitment fees for the period
prior to the Effective Date or, in the case of Eurodollar Loans, the Payment
Date, which the Assignee is obligated to deliver to the Assignor pursuant to
Section 4 hereof). The amount of such fee shall be the difference between (i)
the interest paid with respect to the amounts assigned to the Assignee
___________
* Each Assignor may insert its standard payment provisions in lieu of the
payment terms included in this Exhibit.
hereunder and (ii) the interest or fee, as applicable, which would have been
paid with respect to the amounts assigned to the Assignee hereunder if each
interest rate was of 1% less than the interest rate paid by the Borrower.
In addition, the Assignee agrees to pay % of the recordation fee required
to be paid to the Agent in connection with this Assignment Agreement.
6. REPRESENTATIONS OF THE ASSIGNOR; LIMITATIONS ON THE ASSIGNOR'S
LIABILITY. The Assignor represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim created by the Assignor. It
is understood and agreed that the assignment and assumption hereunder are made
without recourse to the Assignor and that the Assignor makes no other
representation or warranty of any kind to the Assignee. Neither the Assignor
nor any of its officers, directors, employees, agents or attorneys shall be
responsible for (i) the due execution, legality, validity, enforceability,
genuineness, sufficiency or collectability of any Loan Document, including
without limitation, documents granting the Assignor and the other Lenders a
security interest in assets of the Borrower or any guarantor, (ii) any
representation, warranty or statement made in or in connection with any of the
Loan Documents, (iii) the financial condition or creditworthiness of the
Borrower or any guarantor, (iv) the performance of or compliance with any of
the terms or provisions of any of the Loan Documents, (v) inspecting any of
the Property, books or records of the Borrower, (vi) the validity,
enforceability, perfection, priority, condition, value or sufficiency of any
collateral securing or purporting to secure the Loans or (vii) any mistake,
error of judgment, or action taken or omitted to be taken in connection with
the Loans or the Loan Documents.
7. REPRESENTATIONS OF THE ASSIGNEE. The Assignee (i) confirms that it
has received a copy of the Credit Agreement, together with copies of the
financial statements requested by the Assignee and such other documents and
information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment Agreement, (ii) agrees that it will,
independently and without reliance upon the Agent, the Assignor or any other
Lender and based on such documents and information at it shall deem
appropriate at the time, continue to make its own credit decisions in taking
or not taking action under the Loan Documents, (iii) appoints and authorizes
the Agent to take such action as agent on its behalf and to exercise such
powers under the Loan Documents as are delegated to the Agent by the terms
thereof, together with such powers as are reasonably incidental thereto, (iv)
agrees that it will perform in accordance with their terms all of the
obligations which by the terms of the Loan Documents are required to be
performed by it as a Lender, (v) agrees that its payment instructions and
notice instructions are as set forth in the attachment to Schedule 1, (vi)
confirms that none of the funds, monies, assets or other consideration being
used to make the purchase and assumption hereunder are "plan assets" as
defined under ERISA and that its rights, benefits and interests in and under
the Loan Documents will not be "plan assets" under ERISA, [and (vii) attaches
the forms prescribed by the Internal Revenue Service of the United States
certifying that the Assignee is entitled to receive payments under the Loan
Documents without deduction or withholding of any United States federal income
taxes].**
8. INDEMNITY. The Assignee agrees to indemnify and hold the Assignor
harmless against any and all losses, costs and expenses (including, without
limitation, reasonable attorneys' fees) and liabilities incurred by the
Assignor in connection with or arising in any manner from the Assignee's
non-performance of the obligations assumed under this Assignment Agreement.
9. SUBSEQUENT ASSIGNMENTS. After the Effective Date, the Assignee
shall have the right pursuant to Section 12.3.1 of the Credit Agreement to
assign the rights which are assigned to the Assignee hereunder to any entity
or person, provided that (i) any such subsequent assignment does not violate
any of the terms and conditions of the Loan Documents or any law, rule,
regulation, order, writ, judgment, injunction or decree and that any consent
required under the terms of the Loan Documents has been obtained and (ii)
unless the prior written consent of the Assignor is obtained, the Assignee is
not thereby released from its obligations to the Assignor hereunder, if any
remain unsatisfied, including, without limitation, its obligations under
Sections 4, 5 and 8 hereof.
10. REDUCTIONS OF AGGREGATE COMMITMENT. If any reduction in the
Aggregate Commitment occurs between the date of this Assignment Agreement and
the Effective Date, the percentage interest specified in Item 3 of Schedule 1
shall remain the same, but the dollar amount purchased shall be recalculated
based on the reduced Aggregate Commitment.
11. ENTIRE AGREEMENT. This Assignment Agreement and the attached
Notice of Assignment embody the entire agreement and understanding between the
parties hereto and supersede all prior agreements and understandings between
the parties hereto relating to the subject matter hereof.
12. GOVERNING LAW. This Assignment Agreement shall be governed by the
internal law, and not the law of conflicts, of the State of Illinois.
13. NOTICES. Notices shall be given under this Assignment Agreement in
the manner set forth in the Credit Agreement. For the purpose hereof, the
addresses of the parties hereto (until notice of a change is delivered) shall
be the address set forth in the attachment to Schedule 1.
** to be inserted if the Assignee is not incorporated under the laws of the
United States, or a state thereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Assignment
Agreement by their duly authorized officers as of the date first above
written.
[NAME OF ASSIGNOR]
By: ________________________________
Title: _____________________________
_____________________________
_____________________________
[NAME OF ASSIGNEE]
By: ________________________________
Title: _____________________________
_____________________________
_____________________________
SCHEDULE 1
to Assignment Agreement
1. Description and Date of Credit Agreement:
Term Credit Agreement dated March 14, 1996 by and among Pennsylvania
Power & Light Company, The First National Bank of Chicago, individually
and as Agent, and the Lenders party thereto.
2. Date of Assignment Agreement: _____________, 19__
3. Amounts (As of Date of Item 2 above):
a. Total of Commitments
(Loans)* under
Credit Agreement $______
b. Assignee's Percentage
of Facility purchased
under the Assignment
Agreement** _______%
c. Amount of Assigned Share in
Facility purchased under
the Assignment
Agreement $______
4. Assignee's Aggregate (Loan
Amount)* Commitment Amount
Purchased Hereunder: $______
5. Proposed Effective Date: _______________
Accepted and Agreed:
[NAME OF ASSIGNOR] [NAME OF ASSIGNEE]
By: __________________________________ By: _______________________________
Title: _______________________________ Title: ____________________________
* If a Commitment has been terminated, insert outstanding Loans in place of
Commitment
** Percentage taken to 10 decimal places
<PAGE>
Attachment to SCHEDULE 1 to ASSIGNMENT AGREEMENT
Attach Assignor's Administrative Information Sheet, which must
include notice address for the Assignor and the Assignee
<PAGE>
EXHIBIT "I"
to Assignment Agreement
NOTICE
OF ASSIGNMENT
____________________, 19__
To: PENNSYLVANIA POWER & LIGHT COMPANY
Two North Ninth Street
Allentown, Pennsylvania 18101-1179
Attention: Treasurer
THE FIRST NATIONAL BANK OF
CHICAGO, as Agent
One First National Plaza
Chicago, Illinois 60670
Attention: Electric, Gas & Telecommunications Division
From: [NAME OF ASSIGNOR] (the "Assignor")
[NAME OF ASSIGNEE] (the "Assignee")
1. We refer to that Term Credit Agreement (the "Credit Agreement")
described in Item 1 of Schedule 1 attached hereto ("Schedule 1"). Capitalized
terms used herein and not otherwise defined herein shall have the meanings
attributed to them in the Credit Agreement.
2. This Notice of Assignment (this "Notice") is given and delivered
to the Borrower and the Agent pursuant to Section 12.3.2 of the Credit
Agreement.
3. The Assignor and the Assignee have entered into an Assignment
Agreement, dated as of , 19 (the "Assignment"), pursuant to
which, among other things, the Assignor has sold, assigned, delegated and
transferred to the Assignee, and the Assignee has purchased, accepted and
assumed from the Assignor the percentage interest specified in Item 3 of
Schedule 1 of all outstandings, rights and obligations under the Credit
Agreement relating to the facilities listed in Item 3 of Schedule 1. The
Effective Date of the Assignment shall be the later of the date specified in
Item 5 of Schedule 1 or two Business Days (or such shorter period as agreed to
by the Agent) after this Notice of Assignment and any consents and fees
required by Sections 12.3.1 and 12.3.2 of the Credit Agreement have been
delivered to the Agent, provided that the Effective Date shall not occur if
any condition precedent agreed to by the Assignor and the Assignee has not
been satisfied.
4. The Assignor and the Assignee hereby give to the Borrower and the
Agent notice of the assignment and delegation referred to herein. The
Assignor will confer with the Agent before the date specified in Item 5 of
Schedule 1 to determine if the Assignment Agreement will become effective on
such date pursuant to Section 3 hereof, and will confer with the Agent to
determine the Effective Date pursuant to Section 3 hereof if it occurs
thereafter. The Assignor shall notify the Agent if the Assignment Agreement
does not become effective on any proposed Effective Date as a result of the
failure to satisfy the conditions precedent agreed to by the Assignor and the
Assignee. At the request of the Agent, the Assignor will give the Agent
written confirmation of the satisfaction of the conditions precedent.
5. The Assignor or the Assignee shall pay to the Agent on or before
the Effective Date the processing fee of $3,500 required by Section 12.3.2 of
the Credit Agreement.
6. If Notes are outstanding on the Effective Date, the Assignor and
the Assignee request and direct that the Agent prepare and cause the Borrower
to execute and deliver new Notes or, as appropriate, replacements notes, to
the Assignor and the Assignee. The Assignor and, if applicable, the Assignee
each agree to deliver to the Agent the original Note received by it from the
Borrower upon its receipt of a new Note in the appropriate amount.
7. The Assignee advises the Agent that notice and payment
instructions are set forth in the attachment to Schedule 1.
8. The Assignee hereby represents and warrants that none of the
funds, monies, assets or other consideration being used to make the purchase
pursuant to the Assignment are "plan assets" as defined under ERISA and that
its rights, benefits, and interests in and under the Loan Documents will not
be "plan assets" under ERISA.
9. The Assignee authorizes the Agent to act as its agent under the
Loan Documents in accordance with the terms thereof. The Assignee
acknowledges that the Agent has no duty to supply information with respect to
the Borrower or the Loan Documents to the Assignee until the Assignee becomes
a party to the Credit Agreement.*
NAME OF ASSIGNOR NAME OF ASSIGNEE
By:_____________________________ By: ___________________________________
Title: _________________________ Title: ________________________________
ACKNOWLEDGED AND CONSENTED TO ACKNOWLEDGED AND CONSENTED TO
BY THE FIRST NATIONAL BANK OF BY PENNSYLVANIA POWER & LIGHT
CHICAGO COMPANY
By: ____________________________ By: ____________________________________
Title: _________________________ Title: _________________________________
[Attach photocopy of Schedule 1 to Assignment]
* May be eliminated if Assignee is a party to the Credit Agreement prior to
the Effective Date.
<PAGE>
EXHIBIT "E"
LOAN/CREDIT RELATED MONEY TRANSFER INSTRUCTION
To The First National Bank of Chicago,
as Agent (the "Agent") under the Credit Agreement
Described Below.
Re: Term Credit Agreement, dated March 14, 1996 (as the same may be amended
or modified, the "Credit Agreement"), among Pennsylvania Power & Light
Company (the "Borrower"), the Agent, and the Lenders named therein.
Terms used herein and not otherwise defined shall have the meanings
assigned thereto in the Credit Agreement.
The Agent is specifically authorized and directed to act upon the
following standing money transfer instructions with respect to the proceeds of
Advances or other extensions of credit from time to time until receipt by the
Agent of a specific written revocation of such instructions by the Borrower,
provided, however, that the Agent may otherwise transfer funds as hereafter
directed in writing by the Borrower in accordance with Section 13.1 of the
Credit Agreement or based on any telephonic notice made in accordance with
Section 2.12 of the Credit Agreement.
Facility Identification Number(s)__________________________________________
Customer/Account Name _____________________________________________________
Transfer Funds To _________________________________________________________
_______________________________________________________
_______________________________________________________
For Account No. ___________________________________________________________
Reference/Attention To ____________________________________________________
Authorized Officer (Customer Representative) Date ______________________
______________________________ ______________________________________
(Please Print) Signature
Bank Officer Name Date _________________________________
______________________________ ______________________________________
(Please Print) Signature
(Deliver Completed Form to Credit Support Staff For Immediate Processing)
s:\coml\asg\pp&l96.ca
<PAGE>
AMENDMENT NO. 1
TO
PENNSYLVANIA POWER & LIGHT COMPANY
DIRECTORS DEFERRED COMPENSATION PLAN
WHEREAS, Pennsylvania Power & Light Company ("Company") has
adopted the Pennsylvania Power & Light Company Directors Deferred
Compensation Plan ("Plan") effective January 26, 1972; and
WHEREAS, the Plan was amended and restated effective April
26, 1995; and
WHEREAS, the Company desires to further amend the Plan;
NOW, THEREFORE, the Plan is hereby amended as follows:
I. Effective January 1, 1997, Article 11(b) is deleted and
the following sections of Articles II and XI are amended
to read:
2. Definitions.
(d) "Committee" means two or more directors, who have been
designated by the Board to act as the Committee and who qualify
as "non-employee directors," under the rules of the Securities
and Exchange Commission issued pursuant to Section 16 of the
Securities Exchange Act of 1934.
11. Termination or Amendment.
(a) The Committee may, in its discretion, terminate or
amend this Plan from time to time. In addition, the
EBPB may make such amendments to the Plan as it deems
necessary or desirable except those amendments which
substantially increase the cost of the Plan to the
Company or significantly alter the benefit design or
eligibility requirements of the Plan. Notwithstanding
the foregoing, the definitions of Mandatory Deferral
Amount and Fair Market Value herein and Paragraph
7.1(a) hereof shall not be amended more often than once
every six months other than to comport with changes in
the Internal Revenue Code, the Employee Retirement
Income Security Act, or the rules thereunder. No
termination or amendment shall (without Participant's
consent) alter: a) Participant's right to payments of
amounts previously credited to Participant's Accounts,
which amounts shall continue to earn interest or accu-
mulate dividends as provided for herein as though
termination or amendment had not been effected, or b)
the amount or times of payment of such amounts which
have commenced prior to the effective date of such
termination or amendment; provided, however, that no
such consent may accelerate the Participant's payments.
Notwithstanding the foregoing, if the Company is
liquidated, the EBPB shall have the right to determine
the Total Amount Payable under Paragraph 8 to
Participant, and to cause the amount so determined to
be paid in one or more installments or upon such other
terms and conditions and at such other time (not beyond
the time provided for herein) as the EBPB determines to
be just and equitable. Any determinations made
pursuant to the preceding sentence shall be consistent
as to all Participants.
II. Except as provided for in this Amendment No. 1, all other
provisions of the Plan shall remain in full force and
effect.
IN WITNESS WHEREOF, this Amendment No. 1 is executed this
17th day of December, 1996.
PENNSYLVANIA POWER & LIGHT COMPANY
By:/s/ John M. Chappelear__________
John M. Chappelear
Chairman
Employee Benefit Plan Board
<PAGE>
Exhibit 10(j)-2
AMENDMENT NO. 2
TO
PENNSYLVANIA POWER & LIGHT COMPANY
DIRECTORS DEFERRED COMPENSATION PLAN
WHEREAS, Pennsylvania Power & Light Company ("Company") has
adopted the Pennsylvania Power & Light Company Directors Deferred
Compensation Plan ("Plan") effective January 26, 1972; and
WHEREAS, the Plan was amended and restated effective April
26, 1995, and subsequently amended by Amendment No. 1; and
WHEREAS, the Company desires to further amend the Plan;
NOW, THEREFORE, the Plan is hereby amended as follows:
I. Effective January 1, 1997, Articles VI, VII and XI are
amended to read:
6. Deferred Cash Compensation.
(a) Participant shall have the right to elect to have all,
or a portion, of his Cash Compensation deferred
hereunder, either to his Stock Account or his Cash
Account and may change the allocation between such
accounts of any such Cash Compensation so deferred.
The amount of Cash Compensation credited to either the
Stock Account or the Cash Account will be limited to
the Cash Compensation earned after the date of the
election.
(d) Participant may revoke his election to defer Cash
Compensation at any time by so notifying the EBPB in
writing not later than December 31 of the year preced-
ing the year for which the revocation will be effec-
tive. For any subsequent calendar year, Participant
may resume his election to defer if he files with the
EBPB an election form not later than December 31 of the
year preceding such subsequent calendar year.
(f) Any election will be effective when actually received
by PP&L's Payroll Section.
7.1 Stock Account. The Company shall maintain a Stock Account in
the name of each Participant. Such Stock Account shall be
maintained as follows:
(a) The Company shall credit to Participant's Stock Account
the number of Stock Units equal to the Mandatory Defer-
ral Amount on the date such amount would otherwise be
payable to such Participant, divided by the Fair Market
Value of one share of Common Stock on such date.
(b) The Company shall credit to Participant's Stock
Account, the number of Stock Units equal to the amount
of Deferred Cash Compensation elected by Participant to
be credited to his Stock Account, divided by the Fair
Market Value of one share of Common Stock on such date.
(d) Subject to the limitations of Paragraph 5(b) and pro-
vided that such an election is at least six months
after the date of such Participant's last election, if
any, to convert all or any portion of his Cash Account
into interests in his Stock Account, a Participant may
elect to convert all or any portion of his Stock
Account into interests in such Participant's Cash
Account by filing with the EBPB an election form. If
such an election is made, the Participant's Cash
Account shall be credited with an amount equal to the
number of Stock Units being converted, multiplied by
the Fair Market Value of one share of Common Stock on
the date such amount is credited.
7.2 Cash Account. The Company shall maintain a Cash Account in
the name of each Participant. Such Cash Account shall be
maintained as follows:
(a) The Company shall credit to Participant's Cash Account
as of the same day on which the last Cash Compensation
for the month would have been paid to said Participant
an amount equal to the Deferred Cash Compensation
elected by Participant to be credited to his Cash
Account.
(b) Participant's Cash Account shall be credited with
interest monthly based on a rate of interest substan-
tially equivalent to that applied on account balances
in the Blended Interest Rate Fund in the Deferred
Savings Plan or such other comparable fund as may be
selected by the EBPB.
(c) Provided that such an election is at least six months
after the date of such Participant's last election, if
any, to convert all or any portion of his Stock Account
into interests in his Cash Account, a Participant may
elect to convert all or any portion of his Cash Account
into interests in such Participant's Stock Account by
filing with the EBPB an election form. If such an
election is made, the Participant's Stock Account
shall be credited with a number of Stock Units equal to
the Cash Account amount to be converted, divided by the
Fair Market Value of one share of Common Stock on such
date.
11. Termination or Amendment.
(a) The Committee may, in its discretion, terminate or
amend this Plan from time to time. In addition, the
EBPB may make such amendments to the Plan as it deems
necessary or desirable except those amendments which
substantially increase the cost of the Plan to the
Company or significantly alter the benefit design or
eligibility requirements of the Plan. No termination
or amendment shall (without Participant's consent)
alter: a) Participant's right to payments of amounts
previously credited to Participant's Accounts, which
amounts shall continue to earn interest or accumulate
dividends as provided for herein as though termination
or amendment had not been effected, or b) the amount or
times of payment of such amounts which have commenced
prior to the effective date of such termination or
amendment; provided, however, that no such consent may
accelerate the Participant's payments. Notwithstanding
the foregoing, if the Company is liquidated, the EBPB
shall have the right to determine the Total Amount
Payable under Paragraph 8 to Participant, and to cause
the amount so determined to be paid in one or more
installments or upon such other terms and conditions
and at such other time (not beyond the time provided
for herein) as the EBPB determines to be just and
equitable. Any determinations made pursuant to the
preceding sentence shall be consistent as to all Par-
ticipants.
II. Effective January 1, 1997, Article X Section (i) is
deleted in its entirety.
<PAGE>
III. Except as provided for in this Amendment No. 2, all other
provisions of the Plan shall remain in full force and
effect.
IN WITNESS WHEREOF, this Amendment No. 2 is executed
this 13th day of February, 1997.
PENNSYLVANIA POWER & LIGHT COMPANY
By:_/s/ John M. Chappelear________
John M. Chappelear
Chairman
Employee Benefit Plan Board
<PAGE>
AMENDMENT NO. 5
TO
PENNSYLVANIA POWER & LIGHT COMPANY
OFFICERS DEFERRED COMPENSATION PLAN
WHEREAS, Pennsylvania Power & Light Company ("Company") has
adopted the Pennsylvania Power & Light Company Officers Deferred
Compensation Plan ("Plan") effective July 1, 1985; and
WHEREAS, the Plan was amended and restated effective
January 1, 1990, and subsequently amended by Amendment Nos. 1, 2,
3 and 4; and
WHEREAS, the Company desires to further amend the Plan;
NOW, THEREFORE, the Plan is hereby amended as follows:
I. Effective January 1, 1996, Articles 6 and 7 are amended to
read:
6. Payment of Account - General Provisions
(a) The Total Amount Payable shall be payable to
Participant:
(i) if Participant becomes totally disabled while
employed by the Company or an Affiliated
Company, as determined by the EBPB in its
discretion;
(ii) if Participant retires from the Company and all
Affiliated Companies under the Retirement Plan;
or
(iii) if Participant resigns or otherwise ceases
employment with the Company and all Affiliated
Companies;
within thirty (30) days of such event or in the January
of the calendar year following such event, as elected by
Participant. Such election must be made before the
applicable Cash Compensation and/or Cash Award is
deferred and may not be changed with respect to Cash
Compensation and/or Cash Award once it has been
deferred. If Participant has made no election, payments
will commence within thirty (30) days after cessation of
employment.
(b) (i) The Total Amount Payable shall be paid to
Participant in a single sum or in annual
installments up to a maximum of fifteen (15)
years, as elected by the Participant. Such
election must be made before the applicable Cash
Compensation and/or Cash Award is deferred and
may not be changed with respect to Cash
Compensation and/or Cash Award once it has been
deferred.
(ii) All annual installments shall, except for the
final payment, be not less than $5,000. To the
extent necessary, the number of annual
installments may be reduced to insure that
annual installments are at least $5,000.
(iii) The amount of each annual installment shall be
determined by dividing the Total Amount Payable
less any payments already made to Participant by
the remaining number of annual installments to
be made (i.e., a 10 year payout shall pay 1/10
of the Total Amount Payable as the first
installment, 1/9 as the second annual
installment, etc.).
(c) (i) If Participant dies while employed by the
Company or an Affiliated Company or before all
installments have been paid under paragraph
5(b), payments shall be made within 30 days
after Participant's death to the beneficiary
designated in writing by Participant.
Participant shall have a continuing power to
designate a new beneficiary in the event of his
death at any time prior to his death by written
instrument delivered by Participant to the EBPB
without the consent or approval of any person
theretofore named as his beneficiary. In the
event the designated beneficiary does not
survive Participant, payment will be made to an
alternate beneficiary designated in writing by
Participant. If no such designation is in
effect at the time of death of Participant, or
if no person so designated shall survive
Participant, payment shall be made to
Participant's estate.
(ii) Payments made to Participant's designated
beneficiary will be made at the times and in the
amounts as if Participant were living based on
Participant's elected form of distribution;
provided, however, if payments are to be made to
Participant's estate, payment will be made in a
single sum.
7. Supplemental Payments.
(a) Upon his retirement under the Retirement Plan or the
Company's Supplemental Executive Retirement Plan or
upon his death while still employed by the Company
or an Affiliated Company, Participant and/or his
beneficiaries shall be paid a monthly supplemental
retirement benefit (or supplemental pre-retirement
spouse's annuity, as the case may be) equal to the
difference, if any, between the benefit which would
have been payable to him under such plan if the
Participant's Deferred Cash Compensation had been
included in the Participant's compensation for such
plan and the benefit actually payable to the
Participant and/or his beneficiaries thereunder.
Such supplemental retirement benefit shall be
payable in accordance with all the terms and
conditions applicable to the Participant's or his
beneficiary's benefit under the Retirement Plan,
including any optional form of payment. If such
supplemental retirement payments would be less than
one hundred dollars ($100) per month, the EBPB, in
its discretion, may elect to make such monthly
supplemental retirement payments in such
installments as the EBPB may determine or in a
single lump-sum payment. Notwithstanding the
foregoing, in the event that Participant's benefits
under the Retirement Plan are subject to a qualified
domestic relations order, any supplemental
retirement benefits payable under this paragraph
shall be calculated and made without regard to such
order.
II. Except as provided for in this Amendment No. 5, all other
provisions of the Plan shall remain in full force and effect.
IN WITNESS WHEREOF, this Amendment No. 5 is executed this
16th day of May, 1996.
PENNSYLVANIA POWER & LIGHT COMPANY
By:/s/ John M. Chappelear_________
John M. Chappelear
Chairman
Employee Benefit Plan Board
<PAGE>
AMENDMENT NO. 1
TO
PENNSYLVANIA POWER & LIGHT COMPANY
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WHEREAS, Pennsylvania Power & Light Company ("Company") has
adopted the Pennsylvania Power & Light Company Supplemental
Executive Retirement Plan ("Plan") effective July 1, 1985; and
WHEREAS, the Plan was amended and restated effective
January 1, 1996; and
WHEREAS, the Company desires to further amend the Plan;
NOW, THEREFORE, the Plan is hereby amended as follows:
I. Effective July 1, 1996, Articles 2, 3 and 4 are amended to
read:
2. Definitions.
(a) "Actuarial Equivalent" means having or that which has
equal actuarial value to the Supplemental Executive
Retirement Benefit based on the assumptions and factors
described in Schedule A of the Retirement Plan.
(b) "Affiliated Company" or "Affiliated Companies" shall
mean any parent or subsidiaries of the Company (or
companies under common control with the Company) which
are members of the same controlled group of
corporations (within the meaning of Section 1563(a) of
the Code) as the Company.
(c) "Board" means the Board of Directors of Pennsylvania
Power & Light Company.
(d) "Cause" for termination of Participant's employment
means (i) the willful and continued failure by
Participant to substantially perform Participant's
duties with the Company or an Affiliated Company (other
than any such failure resulting from Participant's
incapacity due to physical or mental illness) after a
written demand for substantial performance is delivered
to Participant by the Board, which demand specifically
identifies the manner in which the Board believes that
Participant has not substantially performed
Participant's duties, or (ii) the willful engaging by
Participant in conduct which is demonstrably and
materially injurious to the Company or an Affiliated
Company, monetarily or otherwise. For purposes of
clauses (i) and (ii) of this definition, no act, or
failure to act, on Participant's part shall be deemed
"willful" unless done, or omitted to be done, by
Participant not in good faith and without reasonable
belief that Participant's act, or failure to act, was
in the best interest of the Company or Affiliated
Company. In no event shall the termination of
employment of any Participant be deemed to have been
for Cause unless a copy of a resolution duly adopted by
the affirmative vote of not less than three quarters
(3/4) of the entire membership of the Board at a
meeting of the Board which was called and held for the
purpose of considering such termination (after
reasonable notice to Participant and an opportunity for
Participant, together with Participant's counsel, to be
heard before the Board) that, in the good faith opinion
of the Board, Participant was guilty of conduct set
forth in clauses (i) or (ii) of this definition, and
specifying the particulars thereof in detail, is
delivered to the executive. If at the time of
determination, Participant is employed by an Affiliated
Company, for purposes of this definition, the board of
directors of such Affiliated Company shall be
substituted for the Board.
(e) "Change in Control" - means the occurrence of any one
of the following events: (a) any change in the control
of Resources of a nature that would be required to be
reported in response to Item 1(a) of Form 8-K under the
Securities Exchange Act of 1934, as amended (the
"Exchange Act"); (b) during any period of not more than
two consecutive years, individuals who at the beginning
of such period constitute the Board of Directors of
Resources and any new director (other than a director
designated by a Person who has entered into an
agreement with Resources to effect a transaction
described in clause (a), (c) or (d) of this paragraph)
whose election by the Board of Directors of Resources
or nomination for election by the shareowners of
Resources was approved or recommended by a vote of at
least two-thirds (2/3) of the directors then still in
office who either were directors at the beginning of
the period or whose election or nomination for election
was previously so approved or recommended, cease for
any reason to constitute at least a majority thereof;
(c) any Person becomes the beneficial owner, directly
or indirectly, of securities of Resources representing
20% or more of the combined voting power of Resources'
then outstanding securities entitled to vote generally
in the election of directors; (d) the approval by the
shareowners of Resources of any merger or consolidation
of Resources with any other corporation or a plan of
complete liquidation of Resources or the sale or other
disposition of all or substantially all of the assets
of Resources to any other person or persons unless,
after giving effect thereto, (1) holders of Resources'
then outstanding securities entitled to vote generally
in the election of directors will own a majority of the
outstanding stock entitled to vote generally in the
election of directors of the continuing, surviving or
transferee corporation or any parent (within the
meaning of Rule 12b-2 under the Exchange Act) thereof
and (2) the incumbent members of the Board of Directors
of Resources as constituted immediately prior thereto
shall constitute at least a majority of the directors
of the continuing, surviving or transferee corporation
and any parent thereof; or (e) the Board of Directors
of Resources adopts a resolution to the effect that a
"Change in Control" has occurred or is anticipated to
occur.
(f) "Company" means Pennsylvania Power & Light Company.
(g) "Early Retirement Reduction Factor" means for Partici-
pants between the ages of 50 and 60 the percentage that
appears adjacent to his age below:
Age at Benefit Percentage
Commencement Applicable
60 100%
59 95%
58 90%
57 85%
56 80%
55 75%
54 70%
53 65%
52 60%
51 55%
50 50%
Notwithstanding the preceding sentence, the percentage
applicable to a Participant who qualifies for benefits
pursuant to the Company's Displaced Managers Policy
(SPM Policy 606) after completing at least one Year of
Vesting Service shall be 100%, regardless of such
Participant's age.
(h) "EBPB" means the Employee Benefit Plan Board, the
members of which are appointed by the Board.
(i) "Officers Deferred Compensation Plan" means the
Pennsylvania Power & Light Company Officers Deferred
Compensation Plan, as amended from time to time.
(j) "Participant" means an eligible officer or former
officer of the Company entitled to receive benefits
under this Plan.
(k) "Person" shall have the meaning given in Section 3(a)(9)
of the Exchange Act, as modified and used in Sections
13(d) and 14(d) thereof; however, a Person shall not
include (i) Resources or any of its subsidiaries, (ii)
a trustee or other fiduciary holding securities under
an employee benefit plan of Resources or any of its
subsidiaries, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities,
or (iv) a corporation owned, directly or indirectly, by
the shareowners of Resources in substantially the same
proportions as their ownership of stock of Resources.
(l) "Plan" means this Supplemental Executive Retirement
Plan, as amended from time to time.
(m) "Prior Plan" means any defined benefit plan, as defined
in Section 3(35) of the Employee Retirement Income
Security Act of 1974, as amended, which at any time
satisfies the applicable requirements of Section 401(a)
of the Internal Revenue Code of 1986, as amended,
provided that (i) such plan has a sponsor other than
the Company, and (ii) Participant was a participant in
such plan prior to employment with the Company.
(n) "Projected Years of Service" means the number of full or
partial twelve-month periods beginning on the date on
which Participant attains the age of 30 and ending on
the date Participant ceases to accrue benefits under
the Retirement Plan.
(o) "Resources" shall mean PP&L Resources, Inc.
(p) "Retirement Plan" means the Retirement Plan of
Pennsylvania Power & Light Company, as amended from
time to time.
(q) "SERB" means the Supplemental Executive Retirement
Benefit payable under this Plan calculated under
paragraph 4.
(r) "Supplemental Final Average Earnings" means the
following:
(1) Participant's Final Average Earnings as determined
under the Retirement Plan, determined as of the date
the Participant terminates employment with the
Company, except
(A) using Cash Compensation (as defined by the Officers
Deferred Compensation Plan) instead of Monthly Rate
of Earnings (as defined by the Retirement Plan) and
(B) increasing the amount of Cash Compensation for each
month by the value of
(i) any Awards (including any dividends distributed
on Restricted Stock during the Restriction
Period) granted to Participant under the
Incentive Compensation Plan attributable to such
month, and
(ii) any cash grants awarded to Participant pursuant
to the executive incentive awards program
initially approved by the Board on October 25,
1989. For the purposes of determining the
amount by which Cash Compensation is increased,
the EBPB will determine
(I) the value of any Award under the Incentive
Compensation Plan as of the Award's Date of
Grant (as defined by the Incentive
Compensation Plan) and prorate such value
over the year for which the Award was
granted;
(II) the amount of any dividends distributed on
Restricted Stock during the Restriction
Period and prorate such amount over the
period for which such dividends are paid; and
(III) the amount of any cash grant awarded under
the executive incentive awards program and
prorate such amount over the year for which
the award was granted.
(2) Notwithstanding any provision of the Retirement Plan to
the contrary, the "Final Average Earnings" of a
Participant who has less than 60 full consecutive months
of employment shall be a reduced amount, equal to the
difference of (A) minus (B), below.
(A) (i) His total earnings as determined under
Paragraph (r)(1)(A) and (B) above for his entire
period of employment with a Participating
Company, divided by
(ii) the number of years the Participant was
employed by a Participating Company, including
any fraction of a full year thereof, calculated
by dividing the total number of full consecutive
months of employment by 12.
(B) (i) The amount determined in (A) above, multiplied
by
(ii) the Reduction Factor in Appendix A which
corresponds with the Participant's total number
of full consecutive months of employment.
(s) "Years of Service" means the number of full and partial
years used to calculate Participant's accrued benefit
under the Retirement Plan beginning at the
Participant's age 30.
(t) "Year(s) of Vesting Service" means the number of full
years used to calculate Participant's vested interest
in his accrued benefit under the Retirement Plan.
3. Eligibility.
(a) All officers of the Company who are in positions in
Company Salary Groups I through IV immediately prior to
the date of their termination of employment from the
Company or who were in such positions immediately prior
to the date of their transfer to an Affiliated Company
or death if earlier shall receive such benefits as they
are entitled to under this Plan. Notwithstanding the
foregoing, except for the death benefit provided for in
paragraph 6 below, Participant shall have no right to
receive any payment from this Plan and shall have no
rights whatsoever regarding this Plan if such
Participant:
(i) terminates employment with the Company and all
Affiliated Companies for any reason other than
total disability, as determined by the EBPB in its
sole discretion, prior to reaching age 50 and
attaining 10 Years of Vesting Service, unless such
Participant qualifies for benefits pursuant to the
Company's Displaced Managers Policy (SPM Policy
606) after completing at least one Year of Vesting
Service; or
(ii) is terminated by the Company or an Affiliated
Company for Cause.
(b) All officers who are eligible for benefits under
subsection (a) of Paragraph 3 of the Plan and who are
entitled to annual benefits of at least $44,000 in the
aggregate from all Company and Affiliated Company-
sponsored pension, profit-sharing, savings or deferred
compensation plans, shall terminate their employment
with the Company and all Affiliated Companies no later
than the first day of the month following attainment of
age 65, unless the Company or Affiliated Company
requests that employment be extended for up to one
year. In such event, Participant must retire at the
end of the extension, unless the Company or Affiliated
Company requests additional extensions, at the end of
which Participant must retire. Any Participant
requested to serve beyond the mandatory retirement date
may decline to do so without affecting his benefit
status under this Plan or any other Company or
Affiliated Company benefit program. Failure to accept
benefits provided for in this Plan shall not affect the
requirements of this paragraph.
4. Supplemental Executive Retirement Benefit.
(a) Subject to paragraph 3(a) hereof, upon termination of
employment from the Company and all Affiliated
Companies, Participant will be paid a SERB subject to
the terms and conditions of this Plan. The SERB for
Participant shall be calculated as an annual amount
payable for the life of Participant as follows:
(b) the greater of (1) or (2):
(1)(A) 2.7% of Participant's Supplemental Final Average
Earnings times his Years of Service up to 20, plus
(B) 1.0% of Participant's Supplemental Final Average
Earnings times his Years of Service in excess of
20 but not more than 30 Years of Service,
or
(2)(A) 2.7% of Participant's Supplemental Final Average
Earnings times his Projected Years of Service up
to 20, plus
(B) 1.0% of Participant's Supplemental Final Average
Earnings times his Projected Years of Service in
excess of 20 but not more than 30 Projected Years
of Service, less
(C) the annual amount payable to Participant from a
Prior Plan,
(c) less
the annual amount payable as the maximum primary Social
Security benefit payable to an individual aged 65 in the
year of Participant's retirement whether or not received
by Participant,
(d) times
the applicable Early Retirement Reduction Factor,
(e) less
annual amounts provided by the Retirement Plan (but not
including any temporary supplemental amounts payable
under Section 5.3(b) of the Retirement Plan) and
supplemental payments under paragraph 7(a) of the
Officers Deferred Compensation Plan. In the event
Participant commences benefits under this Plan prior to
commencing benefits under the Retirement Plan, deductions
will be made under this subparagraph (e) as if
Participant had commenced benefits under the Retirement
Plan at the later of age 55 or commencement of benefits
under this Plan. The amount of the deduction will not
thereafter be changed upon Participant's actual
commencement of benefits under the Retirement Plan.
Appendix A
# of Full Consecutive
Months of Employment Reduction Factor (%)
60 0.0000
59 0.4167
58 0.8333
57 1.2500
56 1.6667
55 2.0833
54 2.5000
53 2.9167
52 3.3333
51 3.7500
50 4.1667
49 4.5833
48 5.0000
47 5.8333
46 6.6667
45 7.5000
44 8.3333
43 9.1667
42 10.0000
41 10.8333
40 11.6667
39 12.5000
38 13.3333
37 14.1667
36 15.0000
35 16.2500
34 17.5000
33 18.7500
32 20.0000
31 21.2500
30 22.5000
29 23.7500
28 25.0000
27 26.2500
26 27.5000
25 28.7500
24 30.0000
23 31.6667
22 33.3333
21 35.0000
20 36.6667
19 38.3333
18 40.0000
17 41.6667
16 43.3333
15 45.0000
14 46.6667
13 48.3333
12 50.0000
II. Except as provided for in this Amendment No. 1, all other
provisions of the Plan shall remain in full force and
effect.
IN WITNESS WHEREOF, this Amendment No. 1 is executed this
15th day of July, 1996.
PENNSYLVANIA POWER & LIGHT COMPANY
By:/s/ John M. Chappelear_________
John M. Chappelear
Chairman
Employee Benefit Plan Board
<PAGE>
AMENDMENT NO. 1
TO
PENNSYLVANIA POWER & LIGHT COMPANY
EXECUTIVE RETIREMENT SECURITY PLAN
WHEREAS, Pennsylvania Power & Light Company ("Company") has
adopted the Pennsylvania Power & Light Company Executive
Retirement Security Plan ("Plan") effective January 1, 1987; and
WHEREAS, the Plan was amended by Amended and Restated
effective August 31, 1995; and
WHEREAS, the Company desires to further amend the Plan;
NOW, THEREFORE, the Plan is hereby amended as follows:
I. Effective January 1, 1996, the following sections of
Article II, III, IV, V, VI and XI are amended to read:
2.1 "Actuarial Equivalent" means having or that which has equal
actuarial value to the Security Benefit based on the
assumptions and factors described in Schedule A of the
Retirement Plan. For purposes of Section 4.2(B) and
calculating the present value of benefits to determine the
value of any Lump Sum payable under the Plan, the Actuarial
Equivalent will be based on an interest rate equal to the
United States Government 30 year bond rate for the second
month prior to retirement as published in the Federal
Reserve Board Statistical Bulletin and the 1983 Group
Annuity Mortality Table.
2.2 "Affiliated Company" or "Affiliated Companies" shall mean
any parent or subsidiaries of the Company (or companies
under common control with the Company) which are members of
the same controlled group of corporations (within the
meaning of Section 1563(a) of the Code) as the Company.
2.3 "Annual Base Salary" means the greater of Participant's
annual base salary from the Company for the twelve months
immediately prior to the occurrence of the event or
circumstance upon which the Notice of Termination is based
or in effect immediately prior to the Change in Control.
2.4 "Board" means the Board of Directors of the Company.
2.5 "Bonus" means the higher of the average amount paid to
Participant (including as an amount so paid any amount that
would have been so paid but for Participant's request that
the amount not be paid) pursuant to any bonus or incentive
compensation plan or program of the Company ("Incentive
Plans") with respect to the three years (or such shorter
period for which Participant was covered under a Company
sponsored bonus program) preceding the year in which the
Date of Termination occurs or the average amount paid (in-
cluding as an amount so paid any amount that would have been
so paid but for Participant's request that the amount not be
paid) with respect to the three years (or such shorter
period for which Participant was covered under a Company
sponsored bonus program) preceding the year in which the
Change in Control occurs.
2.6 "Cause" for termination by the Company or an Affiliated
Company of Participant's employment means (i) the willful
and continued failure by Participant to substantially
perform Participant's duties with the Company or an
Affiliated Company (other than any such failure resulting
from Participant's incapacity due to physical or mental
illness) after a written demand for substantial performance
is delivered to Participant by the Board, which demand
specifically identifies the manner in which the Board
believes that Participant has not substantially performed
Participant's duties, or (ii) the willful engaging by
Participant in conduct which is demonstrably and materially
injurious to the Company or an Affiliated Company,
monetarily or otherwise. For purposes of clauses (i) and
(ii) of this definition, no act or failure to act, on Par-
ticipant's part shall be deemed "willful" unless done, or
omitted to be done, by Participant not in good faith and
without reasonable belief that Participant's act, or failure
to act, was in the best interest of the Company or an
Affiliated Company. In no event shall the termination of
employment of any Participant be deemed to have been for
Cause unless a copy of a resolution duly adopted by the
affirmative vote of not less than three quarters (3/4) of
the entire membership of the Board at a meeting of the Board
which was called and held for the purpose of considering
such termination (after reasonable notice to Participant and
an opportunity for Participant, together with Participant's
counsel, to be heard before the Board) that, in the good
faith opinion of the Board, Participant was guilty of
conduct set forth in clauses (i) or (ii) of this definition,
and specifying the particulars thereof in detail, is
delivered to the executive.
If at the time of determination, Participant is employed by
an Affiliated Company, for purposes of this definition and
Section 5.1, the board of directors of such Affiliated
Company shall be substituted for the Board.
2.7 "Change in Control" means the occurrence of any one of the
following events: (a) any change in the control of Re-
sources of a nature that would be required to be reported in
response to Item 1(a) of Form 8-K under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); (b)
during any period of not more than two consecutive years,
individuals who at the beginning of such period constitute
the Board of Resources and any new director (other than a
director designated by a Person who has entered into an
agreement with Resources to effect a transaction described
in clause (a), (c) or (d) of this paragraph) whose election
by the Board of Directors of Resources or nomination for
election by Resources' shareowners was approved or
recommended by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at
the beginning of the period or whose election or nomination
for election was previously so approved or recommended,
cease for any reason to constitute at least a majority
thereof; (c) any Person becomes the beneficial owner,
directly or indirectly, of securities of Resources
representing 20% or more of the combined voting power of
Resources' then outstanding securities entitled to vote
generally in the election of directors; (d) the approval by
the shareowners of Resources of any merger or consolidation
of Resources with any other corporation or a plan of
complete liquidation of Resources or the sale or other dis-
position of all or substantially all of the assets of Re-
sources to any other person or persons unless, after giving
effect thereto, (1) holders of Resources' then outstanding
securities entitled to vote generally in the election of
directors will own a majority of the outstanding stock
entitled to vote generally in the election of directors of
the continuing, surviving or transferee corporation or any
parent (within the meaning of Rule 12b-2 under the Exchange
Act) thereof and (2) the incumbent members of the Board of
Directors of Resources as constituted immediately prior
thereto shall constitute at least a majority of the di-
rectors of the continuing, surviving or transferee corpora-
tion and any parent thereof; or (e) the Board of Directors
of Resources adopts a resolution to the effect that a
"Change in Control" has occurred or is anticipated to occur.
2.8 "Company" means Pennsylvania Power & Light Company.
2.9 "Continuation of Coverage" means the benefit provided under
Section 4.3.
2.10 "Date of Termination" has the meaning set forth in Section
5.2.
2.11 "Disability" shall be deemed the reason for the termination
by the Company or Affiliated Company of Participant's em-
ployment, if, as a result of Participant's incapacity due to
physical or mental illness, Participant shall qualify for
coverage under the Company's or Affiliated Company's Long-
Term Disability Plan in effect immediately prior to a Change
in Control, the Company or Affiliated Company shall have
given Participant a Notice of Termination for Disability,
and, within thirty (30) days after such Notice of
Termination is given, Participant shall not have returned to
the full-time performance of Participant's duties.
2.12 "EBPB" means the Employee Benefit Plan Board, the members
of which are appointed by the Board.
2.13 "Good Reason" for termination of Participant's employment
with the Company or an Affiliated Company by such
Participant means the occurrence (without Participant's ex-
press written consent) of any one of the following acts by
the Company or an Affiliated Company:
(a) the assignment to Participant of any duties inconsis-
tent with Participant's status as an executive officer or
key employee of the Company or an Affiliated Company or a
substantial adverse alteration in the nature or status of
Participant's responsibilities from those in effect imme-
diately prior to a Change in Control;
(b) a reduction by the Company or Affiliated Company of
Participant's annual base salary as in effect on the
Effective Date of this restated Plan, or as the same may be
increased from time to time;
(c) the relocation of the Participant's principal work
location to a location more than 30 miles from such work
location immediately prior to a Change in Control;
(d) the failure by the Company or Affiliated Company to pay
to Participant any portion of Participant's current compen-
sation or to pay to Participant any portion of an install-
ment of deferred compensation under any deferred com-
pensation program of the Company or Affiliated Company,
within seven (7) days of the date such compensation is due;
(e) the failure by the Company or Affiliated Company to
continue in effect any compensation or benefit plan in which
Participant participates immediately prior to a Change in
Control which is material to Participant's total compensa-
tion, or any substitute plans adopted prior to a Change in
Control, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the Company or
Affiliated Company to continue Participant's participation
therein (or in such substitute or alternative plan) on a
basis not materially less favorable, both in terms of the
amount of benefits provided and the level of Participant's
participation relative to other participants, as existed at
the time of a Change in Control, or
(f) the failure by the Company or Affiliated Company to
continue to provide Participant with benefits substantially
similar to those enjoyed by Participant under any of the
Company's or Affiliated Company's pension, retirement,
savings, life insurance, medical, health and accident, or
disability plans in which Participant was participating
immediately prior to a Change in Control, the taking of any
action by the Company or Affiliated Company which would
directly or indirectly materially reduce any of such bene-
fits or deprive Participant of any material fringe benefit
enjoyed by Participant immediately prior to a Change in
Control, or the failure by the Company or Affiliated Company
to provide Participant with the number of paid vacation days
to which Participant is entitled on the basis of years of
service with the Company or Affiliated Company in accordance
with the Company's or Affiliated Company's normal vacation
policy in effect immediately prior to a Change in Control.
Participant's right to terminate his or her employment with
the Company or Affiliated Company for Good Reason shall not
be affected by Participant's incapacity due to physical or
mental illness. Participant's continued employment shall
not constitute consent to, or a waiver of rights with
respect to, any act or failure to act constituting Good
Reason hereunder.
2.14 "Lump Sum" has the meaning set forth in Section 7.3.
2.15 "Notice of Termination" has the meaning set forth in
Section 5.1.
2.16 "Officers Deferred Compensation Plan" means the
Pennsylvania Power & Light Company Officers Deferred
Compensation Plan, as amended from time to time.
2.17 "Participant" means an eligible officer of the Company, or
a former eligible officer of the Company who was transferred
to an Affiliated Company within six months prior to a Change
in Control, entitled to receive benefits under this Plan
under Article III.
2.18 "Person" shall have the meaning given in Section 3(a)(9) of
the Exchange Act, as modified and used in Sections 13(d) and
14(d) thereof; however, a Person shall not include (i)
Resources or any of its subsidiaries, (ii) a trustee or
other fiduciary holding securities under an employee benefit
plan of Resources or any of its subsidiaries, (iii) an
underwriter temporarily holding securities pursuant to an
offering of such securities, or (iv) a corporation owned,
directly or indirectly, by the shareowners of Resources in
substantially the same proportions as their ownership of
stock of Resources.
2.19 "Plan" means this Executive Retirement Security Plan, as
amended from time to time.
2.20 "Potential Change in Control" means the occurrence of any
one of the following events or conditions:
(a) Resources enters into an agreement, the consummation of
which would result in the occurrence of a Change in Control;
(b) any Person publicly announces an intention to take or
to consider taking actions which if consummated would
constitute a Change in Control;
(c) any Person is or becomes the beneficial owner, directly
or indirectly, of securities of Resources representing 5% or
more of the combined voting power of Resources' then out-
standing securities entitled to vote generally in the
election of directors.
(d) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control
has occurred.
2.22 "Projected Years of Service" means the number of full or
partial twelve-month periods beginning on the date on which
a Participant attains the age of 30 and ending on the date a
Participant ceases to accrue benefits under the Retirement
Plan.
2.23 "Resources" shall mean PP&L Resources, Inc.
2.24 "Retirement Plan" means The Retirement Plan of Pennsylvania
Power & Light Company, as amended from time to time.
2.25 "Security Benefit" means the security benefit payable under
this Plan calculated under Article IV.
2.26 "SERP" means the Pennsylvania Power & Light Supplemental
Executive Retirement Plan, as amended from time to time.
2.27 "Supplemental Final Average Earnings" means twelve times
the monthly average of a Participant's Cash Compensation (as
defined by the Officers Deferred Compensation Plan) for the
12 full consecutive months in the final 60 (or fewer) full
consecutive months of employment with the Company which
yield the highest average. For this purpose, non-
consecutive months interrupted by periods in which the
Participant receives no Cash Compensation shall be treated
as consecutive. If a Participant does not have 12 full
consecutive months of employment with the Company, his
Supplemental Final Average Earnings shall be the total of
the Cash Compensation earned for the number of months of
employment. The amount of Cash Compensation for each month
shall be increased by the value of (1) any Awards (including
any dividends distributed on Restricted Stock during the
Restriction Period) granted to Participant under the
Incentive Compensation Plan attributable to such month, and
(2) any cash grants awarded to Participant pursuant to the
executive incentive awards program initially approved by the
Board on October 25, 1989. For the purpose of determining
the amount by which Cash Compensation is increased, the EBPB
will determine (a) the value of any Award under the Incen-
tive Compensation Plan prorated over the 12 consecutive
month period for which the Award was granted; (b) the amount
of any dividends distributed on Restricted Stock during the
Restriction Period and prorate such amount over the period
for which such dividends are paid; and (c) the amount of any
cash grant awarded under the executive incentive awards
program and prorate such amount over the 12 consecutive
month period for which the Award was granted.
2.28 "Years of Service" means the number of full and partial
years used to calculate Participant's accrued benefit under
the Retirement Plan, beginning at the Participant's age 30.
3.1 All officers of the Company (i) who are in positions in
Company Salary Grades I through IV any time within six
months prior to the occurrence of a Change in Control and
(ii) whose employment with the Company or an Affiliated
Company is terminated either (A) by the Company or
Affiliated Company for any reason other than for Cause or
Disability, or (B) by Participant for Good Reason, in either
case within three (3) years following a Change in Control,
shall be entitled to receive benefits under this Plan.
Participant's employment shall be deemed to have been ter-
minated following a Change in Control by the Company or an
Affiliated Company without Cause or by Participant for Good
Reason if Participant's employment is terminated prior to a
Change in Control without Cause at the direction of a Person
who has entered into an agreement with Resources the
consummation of which will constitute a Change in Control or
if Participant terminates his employment with Good Reason
prior to a Change in Control (determined by treating a Po-
tential Change in Control as a Change in Control in applying
the definition of Good Reason) if the circumstance or event
which constitutes Good Reason occurs at the direction of
such Person.
4.2 The Security Benefit for Participant shall be calculated as
an annual amount payable for the life of Participant (except
as otherwise provided in Section 7.3, below), equal to the
greater of (a) or (b) as follows:
(a) (1) minus (2):
(1) the greater of (A) or (B)
(A) (i) 2.7% of Participant's Supplemental Final
Average Earnings times his Years of Service
up to 20, plus
(ii) 1.0% of Participant's Supplemental Final
Average Earnings times his Years of Service
in excess of 20 but not more than 30 Years of
Service,
or
(B) (i) 2.7% of Participant's Supplemental Final
Average Earnings times his Projected Years of
Service up to 20, plus
(ii) 1.0% of Participant's Supplemental Final
Average Earnings times his Projected Years of
Service in excess of 20 but not more than 30
Projected Years of Service, less
(iii) the annual amount payable to a Participant
from Prior Plan,
(2) (A) the annual amount payable as the maximum
primary Social Security benefit payable to an
individual aged 65 in the year of Participant's
retirement whether or not received by
Participant,
(B) the annual amount provided by the Retirement
Plan and supplemental payments under paragraph
7(a) of the Officers Deferred Compensation Plan,
and
(C) the annual amount payable to a Participant from
the SERP.
or
(b) (1) For Participants in Company Salary Grades I, II or
III anytime within six months prior to a Change in
Control, an annual payment for the life of the
Participant, the Actuarial Equivalent of which is
equal to the product of (i) the sum of such
Participant's Annual Base Salary and Bonus and (ii)
a factor of three (3), or
(2) For Participants in Company Salary Grade IV
anytime within six months prior to a Change in
Control, an annual payment for the life of the
Participant, the Actuarial Equivalent of which is
equal to the product of (i) the sum of such
Participant's Annual Base Salary and Bonus and (ii)
a factor of two (2).
In the event the Participant commences benefits on or after
age 50, the Security Benefit calculated pursuant to Section
4.2(a) shall be unreduced. In the event the Participant
commences benefits prior to attainment of age 50, the
Security Benefit shall be calculated pursuant to Section
4.2(a), as a benefit payable for the life of the Participant
commencing at the Participant's age 50, using the
Participant's Years of Service on the Date of Termination,
and then reduced on an Actuarially Equivalent basis from age
50 to reflect the actual benefit commencement date.
5.2 "Date of Termination", with respect to any purported ter-
mination of the Participant's employment after a Change in
Control, shall mean (i) if the Participant's employment is
terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that Participant shall not
have returned to the full-time performance of Participant's
duties during such thirty (30) day period), and (ii) if the
Participant's employment is terminated for any other rea-
son, the date specified in the Notice of Termination
(which, in the case of a termination by the Company or an
Affiliated Company, shall not be less than thirty (30) days
(except in the case of a termination for Cause) and, in the
case of a termination by Participant, shall not be less
than fifteen (15) days nor more than sixty (60) days,
respectively, from the date such Notice of Termination is
given).
5.4 If a purported termination occurs following a Change in
Control, and such termination is disputed in accordance
with Section 5.3 hereof, the Company or Affiliated Company
shall continue to pay Participant the full compensation in
effect when the notice giving rise to the dispute was given
(including, but not limited to, salary) and continue
Participant as a participant in all compensation, benefit
and insurance plans in which Participant was participating
when the notice giving rise to the dispute was given, until
the dispute is finally resolved in accordance with Section
5.3 hereof. Amounts paid under this Section 5.4 are in
addition to all other amounts due under this Plan and shall
not be offset against or reduce any other amounts due under
this Plan.
6.1 Security Benefit payments (including payment of the Lump
Sum, if applicable) shall begin as soon as practicable fol-
lowing the Participant's termination of employment with the
Company and all Affiliated Companies.
11.1 Notwithstanding any other provisions of this Plan to the
contrary, in the event that any payment or benefit received
or to be received by Participant in connection with a
Change in Control or the termination of Participant's
employment (whether pursuant to the terms of this Plan or
any other plan, arrangement or agreement with the Company
or Affiliated Company, any person whose actions result in a
Change in Control or any person affiliated with the Company
or such person) (all such payments and benefits, including
under the Plan, being hereinafter called "Total Payments")
would be subject (in whole or part), to the excise tax
imposed under Section 4999 of the Code (the "Excise Tax"),
then the Security Benefit shall be reduced to the extent
necessary so that no portion of the Total Payments is sub-
ject to the Excise Tax (after taking into account any
reduction in the Total Payments provided by reason of
Section 280G of the Code in such other plan, arrangement or
agreement) if, and only if (A) the net amount of such Total
Payments, as so reduced, (and after deduction of the net
amount of federal, state and local income tax on such
reduced Total Payments) is greater than (B) the excess of
(i) the net amount of such Total Payments, without
reduction (but after deduction of the net amount of feder-
al, state and local income tax on such Total Payments),
over (ii) the amount of Excise Tax to which Participant
would be subject in respect of such Total Payments. For
purposes of determining whether and the extent to which the
Total Payments will be subject to the Excise Tax, (i) no
portion of the Total Payments the receipt or enjoyment of
which Participant shall have effectively waived in writing
prior to the date of Participant's termination of
employment shall be taken into account, (ii) no portion of
the Total Payments shall be taken into account which in the
opinion of tax counsel selected by the Company does not
constitute a "parachute payment" within the meaning of
Section 280G(b)(2) of the Code, (including by reason of
Section 280G(b)(4)(A) of the Code) and, in calculating the
Excise Tax, no portion of such Total Payments shall be
taken into account which constitutes reasonable com-
pensation for services actually rendered, within the
meaning of section 280G(b)(4)(B) of the Code, in excess of
the Base Amount (within the meaning of Section 280G(b)(3)
of the Code) allocable to such reasonable compensation, and
(iii) the value of any non-cash benefit or any deferred
payment or benefit included in the Total Payments shall be
determined by the Company in accordance with the principles
of Sections 280G(d)(3) and (4) of the Code. Prior to the
payment of benefits under the Plan, the Company shall
provide Participant with its calculation of the amounts
referred to in this Section and such supporting materials
as are reasonably necessary for Participant to evaluate the
Company's calculations.
II. Except as provided for in this Amendment No. 1, all other
provisions of the Plan shall remain in full force and
effect.
IN WITNESS WHEREOF, this Amendment No. 1 is executed this
16th day of May, 1996.
PENNSYLVANIA POWER & LIGHT COMPANY
By:/s/ John M. Chappelear_____________
John M. Chappelear
Chairman
Employee Benefit Plan Board
<PAGE>
AMENDMENT NO. 2
TO
PENNSYLVANIA POWER & LIGHT COMPANY
INCENTIVE COMPENSATION PLAN
WHEREAS, Pennsylvania Power & Light Company ("Company") has
adopted the Pennsylvania Power & Light Company Incentive Compen-
sation Plan ("Plan") effective January 1, 1987; and
WHEREAS, the Plan was amended and restated effective July 1,
1992, and subsequently amended by Amendment No. 1; and
WHEREAS, the Company desires to further amend the Plan;
NOW, THEREFORE, the Plan is hereby amended as follows:
I. Effective January 1, 1996, the following sections are
amended to read:
SECTION 1. PURPOSE OF THE PLAN.
The purpose of the Incentive Compensation Plan (the "Plan")
is to provide a method whereby officers and other key employees
of Pennsylvania Power & Light Company (the "Company") and Affili-
ated Companies may be awarded additional remuneration for per-
formance in meeting specific Company objectives in a form that
increases their ownership interest and encourages them to remain
in the employ of the Company or an Affiliated Company.
SECTION 2. DEFINITIONS.
"Affiliated Company" or "Affiliated Companies" shall mean
any parent or subsidiaries of the Company (or companies under
common control with the Company) which are members of the same
controlled group of corporations (within the meaning of Section
1563(a) of the Code) as the Company.
"Cause" for termination by the Company or an Affiliated
Company of Participant's employment means (i) the willful and
continued failure by Participant to substantially perform Partic-
ipant's duties with the Company or an Affiliated Company (other
than any such failure resulting from Participant's incapacity due
to physical or mental illness) after a written demand for sub-
stantial performance is delivered to Participant by the Board of
Directors of PP&L, which demand specifically identifies the man-
ner in which the Board of Directors of PP&L believes that Par-
ticipant has not substantially performed Participant's duties, or
(ii) the willful engaging by Participant in conduct which is
demonstrably and materially injurious to the Company or an Affil-
iated Company, monetarily or otherwise. For purposes of clauses
(i) and (ii) of this definition, no act or failure to act, on
Participant's part shall be deemed "willful" unless done, or
omitted to be done, by Participant not in good faith and without
reasonable belief that Participant's act, or failure to act, was
in the best interest of the Company or an Affiliated Company. In
no event shall the termination of employment of any Participant
be deemed to have been for Cause unless a copy of a resolution
duly adopted by the affirmative vote of not less than three quar-
ters (3/4) of the entire membership of the Board of Directors of
PP&L at a meeting of the Board of Directors of PP&L which was
called and held for the purpose of considering such termination
(after reasonable notice to Participant and an opportunity for
Participant, together with Participant's counsel, to be heard
before the Board of Directors of PP&L) that, in the good faith
opinion of the Board of Directors of PP&L, Participant was guilty
of conduct set forth in clauses (i) or (ii) of this definition,
and specifying the particulars thereof in detail, is delivered to
the executive.
If at the time of determination, Participant is employed by
an Affiliated Company, for purposes of this definition, the board
of directors of such Affiliated Company shall be substituted for
the Board of Directors of PP&L.
"Change in Control" means the occurrence of any one of the
following events: (a) any change in the control of Resources of
a nature that would be required to be reported in response to
Item 1(a) of Form 8-K under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"); (b) during any period of not
more than two consecutive years, individuals who at the beginning
of such period constitute the Board and any new director (other
than a director designated by a Person who has entered into an
agreement with Resources to effect a transaction described in
clause (a), (c) or (d) of this paragraph) whose election by the
Board or nomination for election by Resources' shareowners was
approved or recommended by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at
the beginning of the period or whose election or nomination for
election was previously so approved or recommended, cease for any
reason to constitute at least a majority thereof; (c) any Person
becomes the beneficial owner, directly or indirectly, of securi-
ties of Resources representing 20% or more of the combined voting
power of Resources' then outstanding securities entitled to vote
generally in the election of directors; (d) the approval by the
shareowners of Resources of any merger or consolidation of Re-
sources with any other corporation or a plan of complete liquida-
tion of Resources or the sale or other disposition of all or
substantially all of the assets of Resources to any other person
or persons unless, after giving effect thereto, (1) holders of
Resources' then outstanding securities entitled to vote generally
in the election of directors will own a majority of the outstand-
ing stock entitled to vote generally in the election of directors
of the continuing, surviving or transferee corporation or any
parent (within the meaning of Rule 12b-2 under the Exchange Act)
thereof and (2) the incumbent members of the Board as constituted
immediately prior thereto shall constitute at least a majority of
the directors of the continuing, surviving or transferee corpora-
tion and any parent thereof; or (e) the Board adopts a resolution
to the effect that a "Change in Control" has occurred or is an-
ticipated to occur.
"Eligible Employee" means any person employed by the Compa-
ny, or an Affiliated Company on a regularly scheduled basis dur-
ing any portion of a period for which an Award is made and who
satisfies all of the requirements of Section 6.
"Fair Market Value" means the average of the high and low
sale prices of the Common Stock in regular way New York Stock
Exchange Composite Transactions on the day immediately preceding
the date as of which Fair Market Value is being determined or, if
no Common Stock is traded on the date immediately preceding the
date as of which Fair Market Value is being determined, Fair
Market Value shall be the average of the high and low sale prices
of the Common Stock in regular way New York Stock Exchange Com-
posite Transactions on the next preceding day on which the Common
Stock was traded.
"Good Reason" for termination of Participant's employment
with the Company or an Affiliated Company by such Participant
means the occurrence (without Participant's express written con-
sent) of any one of the following acts by the Company or an
Affiliated Company:
(a) the assignment to Participant of any duties incon-
sistent with Participant's status as an executive officer or
key employee of the Company or an Affiliated Company or a
substantial adverse alteration in the nature or status of
Participant's responsibilities from those in effect imme-
diately prior to a Change in Control;
(b) a reduction by the Company or Affiliated Company
of Participant's annual base salary as in effect on the
Effective Date of this restated Plan, or as the same may be
increased from time to time;
(c) the relocation of the Participant's principal work
location to a location more than 30 miles from such work
location immediately prior to a Change in Control;
(d) the failure by the Company or Affiliated Company
to pay to Participant any portion of Participant's current
compensation or to pay to Participant any portion of an in-
stallment of deferred compensation under any deferred com-
pensation program of the Company or Affiliated Company,
within seven (7) days of the date such compensation is due;
(e) the failure by the Company or Affiliated Company
to continue in effect any compensation or benefit plan in
which Participant participates immediately prior to a Change
in Control which is material to Participant's total com-
pensation, or any substitute plans adopted prior to a Change
in Control, unless an equitable arrangement (embodied in an
ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the Company or
Affiliated Company to continue Participant's participation
therein (or in such substitute or alternative plan) on a
basis not materially less favorable, both in terms of the
amount of benefits provided and the level of Participant's
participation relative to other participants, as existed at
the time of a Change in Control, or
(f) the failure by the Company or Affiliated Company
to continue to provide Participant with benefits substan-
tially similar to those enjoyed by Participant under any of
the Company's or Affiliated Company's pension, retirement,
savings, life insurance, medical, health and accident, or
disability plans in which Participant was participating
immediately prior to a Change in Control, the taking of any
action by the Company or Affiliated Company which would
directly or indirectly materially reduce any of such bene-
fits or deprive Participant of any material fringe benefit
enjoyed by Participant immediately prior to a Change in
Control, or the failure by the Company or Affiliated Company
to provide Participant with the number of paid vacation days
to which Participant is entitled on the basis of years of
service with the Company or Affiliated Company in accordance
with the Company's or Affiliated Company's normal vacation
policy in effect immediately prior to a Change in Control.
Participant's right to terminate his or her employment
with the Company or Affiliated Company for Good Reason shall
not be affected by Participant's incapacity due to physical
or mental illness. Participant's continued employment shall
not constitute consent to, or a waiver of rights with
respect to, any act or failure to act constituting Good
Reason hereunder.
"Termination" means resignation or discharge from employment
with the Company and all Affiliated Companies except in the event
of death, Disability or Retirement.
SECTION 6. ELIGIBILITY.
Officers and other key employees of the Company or an
Affiliated Company (including officers or employees who are
members of the Board or the Board of Directors of the Company
and/or any Affiliated Company, but excluding directors who are
not officers or employees) who, in the opinion of the Committee,
are mainly responsible for the continued growth, development and
financial success of the Company or an Affiliated Company shall
be eligible to be granted Awards under the Plan. Subject to the
provisions of the Plan, the Committee shall from time to time
select from such eligible persons those to whom Awards shall be
granted and determine the amount of such Award. No officer or
employee of the Company or an Affiliated Company shall have any
right to be granted an Award under the Plan.
SECTION 7. RESTRICTED STOCK.
C. Forfeiture or Payout of Award. Restricted Stock Awards
are subject to forfeiture or payout (i.e., removal of restric-
tions) as follows:
(i) Termination - the Restricted Stock Award will be com-
pletely forfeited, provided, however, that the Restriction Period
shall be eliminated and the entire Restricted Stock Award will be
paid to a Participant whose employment with the Company or an
Affiliated Company is terminated either (A) by the Company or an
Affiliated Company for any reason other than for Cause or
Disability, or (B) by Participant for Good Reason, in either case
within three (3) years following a Change in Control.
Participant's employment shall be deemed to have been terminated
following a Change in Control without Cause or by Participant for
Good Reason if Participant's employment is terminated prior to a
Change in Control without Cause at the direction of a Person who
has entered into an agreement with Resources the consummation of
which will constitute a Change in Control or if Participant
terminated his employment with Good Reason prior to a Change in
Control (determined by treating a Potential Change in Control as
a Change in Control in applying the definition of Good Reason) if
the circumstance or event which constitutes Good Reason occurs at
the direction of such Person.
(ii) Retirement - payout of the Restricted Stock Award will
be prorated for service during the restriction period.
(iii) Early Retirement - payout of the Restricted Stock
Award will be prorated for service during the restriction period.
(iv) Disability - payout of the Restricted Stock Award will
be prorated as if the Participant had maintained active employ-
ment until the Normal Retirement Date.
(v) Death - payout of the Restricted Stock Award will be
prorated as if the Participant had maintained active employment
until the Normal Retirement Date.
In any instance where payout of a Restricted Stock Award is
to be prorated, the Committee may choose to provide the Partici-
pant (or the Participant's estate) with the entire Award rather
than the prorated portion thereof.
Any Restricted Stock which is forfeited will be transferred
to Resources.
SECTION 10. MISCELLANEOUS PROVISIONS.
B. No Employment Right. Neither this Plan nor any action
taken hereunder shall be construed as giving any right to be
retained as an employee of the Company or any Affiliated Company.
C. Tax Withholding. Participants may be required to pay to
the Company or an Affiliated Company the amount of any Federal,
state or local taxes which the Company or an Affiliated Company
is required to withhold with respect to an Award. At the request
of a Participant, or as required by law, such sums as may be
required for the payment of any estimated or accrued income tax
liability may be withheld by the Company or an Affiliated Company
and paid over to the governmental entity entitled to receive the
same. The Committee, in its sole discretion, may permit a
Participant to satisfy all or part of such Participant's
withholding tax obligation incident to the vesting of Restricted
Stock by having the Company or an Affiliated Company withhold a
portion of the shares of Restricted Stock that otherwise would be
issued to the Participant. Such shares shall be valued at their
Fair Market Value on the date when taxes otherwise would be
withheld in cash. The payment of withholding taxes by
surrendering shares to the Company or an Affiliated Company, if
permitted by the Committee, shall be subject to such restrictions
as the Committee may impose, including any restrictions required
by the rules of the Securities and Exchange Commission.
II. Except as provided for in this Amendment No. 2, all other
provisions of the Plan shall remain in full force and
effect.
IN WITNESS WHEREOF, this Amendment No. 2 is executed this
3rd day of June, 1996.
PENNSYLVANIA POWER & LIGHT COMPANY
By:/s/ John M. Chappelear_________
John M. Chappelear
Chairman
Employee Benefit Plan Board
<PAGE>
Exhibit 10(o)-4
AMENDMENT NO. 3
TO
PENNSYLVANIA POWER & LIGHT COMPANY
INCENTIVE COMPENSATION PLAN
WHEREAS, Pennsylvania Power & Light Company ("Company") has
adopted the Pennsylvania Power & Light Company Incentive Compen-
sation Plan ("Plan") effective January 1, 1987; and
WHEREAS, the Plan was amended and restated effective July 1,
1992, and subsequently amended by Amendment No. 1 and 2; and
WHEREAS, the Company desires to further amend the Plan;
NOW, THEREFORE, the Plan is hereby amended as follows:
I. Effective January 1, 1997, the following sections are
amended to read:
SECTION 2. DEFINITIONS.
"Committee" means two or more non-employee Directors, unless
otherwise determined by the Board, who have been designated by
the Board to act as the Committee and qualify as disinterested
directors under the Securities Exchange Act of 1934.
SECTION 10. MISCELLANEOUS PROVISIONS.
C. Tax Withholding. Participants may be required to pay to
the Company or an Affiliated Company the amount of any Federal,
state or local taxes which the Company or an Affiliated Company
is required to withhold with respect to an Award. At the request
of a Participant, or as required by law, such sums as may be
required for the payment of any estimated or accrued income tax
liability may be withheld by the Company or an Affiliated Company
and paid over to the governmental entity entitled to receive the
same. A Participant may elect to satisfy all or part of such
Participant's withholding tax obligation incident to the vesting
of Restricted Stock by having the Company or an Affiliated
Company withhold a portion of the shares of Restricted Stock that
otherwise would be issued to the Participant. Such shares shall
be valued at their Fair Market Value on the date when taxes
otherwise would be withheld in cash.
II. Effective January 1, 1997, Section 10.M is deleted in its
entirety.
III. Except as provided for in this Amendment No. 3, all other
provisions of the Plan shall remain in full force and
effect.
IN WITNESS WHEREOF, this Amendment No. 3 is executed this
13th day of February, 1997.
PENNSYLVANIA POWER & LIGHT COMPANY
By:_/s/ John M. Chappelear________
John M. Chappelear
Vice President-Investments &
Pensions
<PAGE>
Exhibit 10(p)
Executive Compensation Incentive Award Program
The Company's Executive Compensation Incentive Award
Program is designed to promote the success of the Company by
providing a method whereby officers and key employees of the
Company and its subsidiaries may be awarded additional
remuneration based on specific Company objectives and the
Company's overall return on equity. The program has two
separate components. A short-term incentive plan makes cash
awards to eligible employees based on the achievement of
independent financial, operational and strategic goals
established annually by the Compensation and Corporate
Governance Committee of the Company's Board of Directors, as
well as individual goals for officers who are not members of
the Company's Corporate Leadership Council (CLC). A long-term
incentive plan grants restricted Company stock to eligible
employees based on the achievement of other goals established
by the Committee.
Awards under the program are made by the Committee of
the Board of Directors, except that cash awards are made by CLC
in the case of non-CLC members.
<PAGE>
<TABLE>
Exhibit 12(a)
PP&L RESOURCES, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Millions of Dollars)
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Fixed charges, as defined:
Interest on long-term debt ...................... $207 $213 $214 $226 $240
Interest on short-term debt
and other interest ........................... 17 18 18 13 12
Amortization of debt discount, expense
and premium - net.............................. 2 2 2 2 1
Interest on capital lease
obligations
Charged to expense .......................... 13 15 12 9 10
Capitalized ................................. 2 2 1 1 2
Estimated interest component of
operating rentals ............................. 8 8 6 5 5
Proportionate share of fixed charges
of 50-percent-or-less-owned
persons ....................................... 1 1 1 1 1
Total fixed charges ..................... $250 $259 $254 $257 $271
Earnings, as defined:
Net income ...................................... $329 $323 $216 $314 $306
Preferred and Preference Stock Dividend
Requirements................................... 28 28 28 34 40
Less undistributed income of less
than 50-percent-owned persons ................ - -
357 351 244 348 346
Add (Deduct):
Federal income taxes ............................ 189 195 198 163 145
State income taxes .............................. 64 62 77 64 65
Deferred income taxes ........................... 10 15 (45) 22 33
Investment tax credit - net ..................... (10) (10) (12) (14) (14)
Income taxes on other income and
deductions - net .............................. 0 24 (38) (1) 0
Amortization of capitalized
interest on capital leases .................... 4 5 9 12 13
Total fixed charges as above
(excluding capitalized interest
on capital lease obligations) ................. 248 257 253 256 271
Total earnings .......................... $862 $899 $686 $850 $859
Ratio of earnings to fixed
charges ......................................... 3.45 3.47 2.70 3.31 3.15
</TABLE>
<PAGE>
<TABLE>
Exhibit 12(b)
PENNSYLVANIA POWER & LIGHT COMPANY AND SUBSIDIARIES, CONSOLIDATED
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Millions of Dollars)
<CAPTION>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Fixed charges, as defined:
Interest on long-term debt ................... $207 $213 $214 $226 $240
Interest on short-term debt
and other interest ........................ 11 18 18 13 12
Amortization of debt discount, expense
and premium - net........................... 2 2 2 2 1
Interest on capital lease
obligations
Charged to expense ....................... 13 15 12 9 10
Capitalized .............................. 2 2 1 1 2
Estimated interest component of
operating rentals .......................... 8 8 6 5 5
Proportionate share of fixed charges
of 50-percent-or-less-owned
persons .................................... 1 1 1 1 2
Total fixed charges .................. $244 $259 $254 $257 $272
Earnings, as defined:
Net income ................................... $357 $352 $243 $348 $346
Less undistributed income of less
than 50-percent-owned persons ............. -
357 352 243 348 346
Add (Deduct):
Federal income taxes ......................... 189 195 199 163 145
State income taxes ........................... 64 62 77 64 65
Deferred income taxes ........................ 10 15 (45) 22 33
Investment tax credit - net .................. (10) (11) (12) (14) (14)
Income taxes on other income and
deductions - net ........................... (2) 26 (38) (1) 0
Amortization of capitalized
interest on capital leases ................. 4 6 9 12 13
Total fixed charges as above
(excluding capitalized interest
on capital lease obligations) .............. 243 257 253 256 271
Total earnings ....................... $855 $902 $686 $850 $859
Ratio of earnings to fixed
charges ...................................... 3.50 3.48 2.70 3.31 3.15
</TABLE>
<PAGE>
Exhibit 23(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectuses constituting part of the Registration Statement on
Form S-3 (No. 33-59405) of PP&L Resources, Inc. and of the
Registration Statement on Form S-3 (No. 333-20661) of
Pennsylvania Power & Light Company and in the Registration
Statements on Form S-8 (No. 33-50031 and No. 333-02003) of PP&L
Resources, Inc. of our report dated February 3, 1997 appearing on
page 41 of this Form 10-K.
(Signed) Price Waterhouse LLP
PRICE WATERHOUSE LLP
Philadelphia, Pennsylvania
February 28, 1997
<PAGE>
(Deloitte &
Touche LLP
logo appears here)
Exhibit 23(b)
Two Hilton Court Telephone: (201) 631-7000
P.O. Box 319 Facsimile: (201) 631-7459
Parsippany, New Jersey 07054-0319
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration
Statement No. 33-59405 of PP&L Resources, Inc. on Form S-3,
Registration Statements No. 33-50031 and No. 333-02003 of
PP&L Resources, Inc. on Form S-8 and Registration Statement
No. 333-20661 of Pennsylvania Power & Light Company on Form
S-3 of our report dated February 3, 1995, appearing in the
Annual Report on Forms 10-K of PP&L Resources, Inc. and
Pennsylvania Power & Light Company for the year ended
December 31, 1996.
February 28, 1997
(Deloitte Touche
Tohmatsu International
logo appears here)
<PAGE>
Exhibit 24
PP&L RESOURCES, INC.
PENNSYLVANIA POWER & LIGHT COMPANY
1996 ANNUAL REPORT
TO THE SECURITIES AND EXCHANGE COMMISSION
ON FORM 10-K
POWER OF ATTORNEY
The undersigned directors of PP&L Resources, Inc. and
Pennsylvania Power & Light Company, both Pennsylvania
corporations, which are to file with the Securities and Exchange
Commission, Washington, D.C., under the provisions of the
Securities Exchange Act of 1934, as amended, their 1996 Annual
Report on Form 10-K, do hereby appoint William F. Hecht, Ronald
E. Hill and Robert J. Grey their true and lawful attorney, and
each of them their true and lawful attorney, with power to act
without the other and with full power of substitution and
resubstitution, to execute for them and in their names said Form
10-K Report and any and all amendments thereto, whether said
amendments add to, delete from or otherwise alter said Form 10-K
Report, or add or withdraw any exhibits or schedules to be filed
therewith and any and all instruments in connection therewith.
The undersigned hereby grant to said attorneys and each of them
full power and authority to do and perform in the name of and on
behalf of the undersigned, and in any and all capacities, any act
and thing whatsoever required or necessary to be done in and
about the premises, as fully and to all intents and purposes as
the undersigned might do, hereby ratifying and approving the acts
of said attorneys and each of them.
IN WITNESS WHEREOF, the undersigned have hereunto set
their hands and seals this 26th day of February, 1997.
/s/ E. Allen Deaver L.S. /s/ Stuart Heydt L.S.
E. Allen Deaver Stuart Heydt
/s/ William J. Flood L.S. /s/ Clifford L. Jones L.S.
William J. Flood Clifford L. Jones
/s/ Elmer D. Gates L.S. /s/ Ruth Leventhal L.S.
Elmer D. Gates Ruth Leventhal
/s/ Derek C. Hathaway L.S. /s/ Frank A. Long L.S.
Derek C. Hathaway Frank A. Long
/s/ William F. Hecht L.S. /s/ Norman Robertson L.S.
William F. Hecht Norman Robertson
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF INCOME, CONSOLIDATED BALANCE SHEET, AND CONSOLIDATED
STATEMENT OF CASH FLOWS FOR THE FORM 10-K DATED DECEMBER 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000317187
<NAME> PENNSYLVANIA POWER & LIGHT COMPANY
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 6,905
<OTHER-PROPERTY-AND-INVEST> 343
<TOTAL-CURRENT-ASSETS> 716
<TOTAL-DEFERRED-CHARGES> 1,407
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 9,371
<COMMON> 1,476
<CAPITAL-SURPLUS-PAID-IN> 47
<RETAINED-EARNINGS> 1,094
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,617
295
171
<LONG-TERM-DEBT-NET> 2,802
<SHORT-TERM-NOTES> 10
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 30
0
<CAPITAL-LEASE-OBLIGATIONS> 166
<LEASES-CURRENT> 81
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,199
<TOT-CAPITALIZATION-AND-LIAB> 9,371
<GROSS-OPERATING-REVENUE> 2,910
<INCOME-TAX-EXPENSE> 253
<OTHER-OPERATING-EXPENSES> 2,101
<TOTAL-OPERATING-EXPENSES> 2,354
<OPERATING-INCOME-LOSS> 556
<OTHER-INCOME-NET> 15
<INCOME-BEFORE-INTEREST-EXPEN> 571
<TOTAL-INTEREST-EXPENSE> 214
<NET-INCOME> 357
28
<EARNINGS-AVAILABLE-FOR-COMM> 329
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 207
<CASH-FLOW-OPERATIONS> 799
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
