File No. 70-
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM U-1
APPLICATION OR DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
ALLEGHENY POWER SYSTEM, INC.
12 EAST 49TH STREET
NEW YORK, NY 10017
(Name of company or companies filing this statement and addresses of
principal executive offices)
Allegheny Power System, Inc.
(Name of top registered holding company parent of each applicant or
declarant)
Nancy H. Gormley, Esq.
Vice President
Allegheny Power System, Inc.
Tower Forty-Nine
12 East 49th Street
New York, NY 10017
(Name and address of agent for service)
<PAGE>
1. Description of Proposed Transaction.
Allegheny Power System, Inc. ("APS"), a registered holding company
under the Public Utility Holding Company Act of 1935 (the "Act"), requests
authority through December 31, 1996 to organize and finance a new wholly-
owned, non-utility subsidiary corporation to be named AYP Capital, Inc.
("AYP"). The activities of AYP would be primarily limited to investigating
opportunities for investment in companies in the area of emerging technologies
closely related to APS's core utility business and which are in the public
interest by promoting efficient and environmentally friendly means of
generating and using electricity. APS requests authority through December 31,
1996 to commit up to $500,000 to be used in the formation of and operational
costs of AYP.
Request for Authority to Form AYP Capital, Inc.
APS requests authority to incorporate and operate AYP under the
laws of the State of Delaware, with an initial authorized capital of up to
1,000 shares of common stock with no par value. APS also requests authority
to subscribe to 100 shares of AYP common stock at a price of $10.00 per share.
APS further requests authority to fund AYP from time-to-time through December
31, 1996, by means of purchases of additional AYP stock or capital
contributions, in an aggregate amount not to exceed $500,000 (including
formation costs and the subscription cost of the common stock), without
further Securities and Exchange Commission approval. APS will obtain funds
for this purpose from the sale of APS common stock pursuant to its Dividend
Reinvestment and Stock Purchase and Employee Stock Ownership and Savings
Plans, from its regular bank lines of credit or from internal sources. APS
will not guarantee any indebtedness of AYP. AYP will use such funds to pursue
<PAGE>
preliminary development activities with regard to locating appropriate
investment opportunities.
Initially, APS does not anticipate that AYP will have any paid
employees. Instead, personnel employed by Allegheny Power Service Corporation
("APSC"), a wholly-owned subsidiary of APS, will provide a wide range of
services on an as-needed basis to AYP pursuant to a service agreement to be
entered into between AYP and APSC. Under this service agreement, AYP will
reimburse APSC for the cost of services provided, computed in accordance with
Rules 90 and 91 of the Act, as well as applicable rules and regulations. All
time spent by APSC employees working for AYP will be billed to and paid by AYP
on a monthly basis.
AYP will maintain separate financial records and detailed
supporting records, including profit/loss statements. These records will be
available to any proper federal regulatory agency or state regulatory agency
for review. The accounting staff of APSC, pursuant to the service agreement
with AYP, will be responsible for record keeping and maintaining audit
procedures which are in compliance with generally accepted accounting
principles.
Significant opportunities exist for investment by AYP in companies
that are developing new technologies closely related to APS's core utility
business and which are in the public interest by promoting efficient and
environmentally friendly means of generating and using electricity. Such new
<PAGE>
technologies would have the capability of improving or augmenting the
operations of APS' operating subsidiaries currently or in the future. The
areas in which AYP investment activity would be focused include:
* Energy conversion, storage and delivery technology;
* Conservation, load management, and demand side management
technologies, systems and services;
* Environmental and waste treatment technologies and services
related to electricity generation, transmission and
distribution (e.g. technologies for scrubbing of stack
emissions or disposal of fly ash wastes), or environmental
technologies which use electric power as a key component in
their waste treatment process;
* Advanced computer hardware and software for use in the
generation, transmission and distribution (or planning
therefor) of electricity (including artificial
intelligence/neural net systems and components);
* Power-related electronic systems, control systems and
components; and
* Electronic automation systems and components, including
instrumentation, sensors, robotics and inspection
techniques.
AYP may invest directly in companies which are developing emerging
technologies relevant to APS's core utility business or AYP may seek
experienced investment partners and may structure investment vehicles with
<PAGE>
those partners to invest in such companies. Although the exact form of any
particular investment may vary, each one will be structured in such a manner
as to limit AYP's exposure to excessive liabilities. If an investment vehicle
chosen by AYP makes a direct investment in a company, then AYP may have a role
in the company as though it invested directly in the company. At this time,
APS does not propose any specific investment or investment vehicles for AYP
and no investments shall be made by AYP without asking for and receiving prior
Securities and Exchange Commission approval.
Except as described herein, no associate company or affiliate of
the Applicant or any affiliate of any such associate company has any material
interest, directly or indirectly, in the proposed transactions.
2. Fees, Commissions and Expenses
None, other than (i) ordinary expenses not over $500 in connection
with the preparation of this Application or Declaration, (ii) the $2,000
filing fee for this Application or Declaration, and (iii) $5,000 in connection
with the formation of AYP Capital, Inc.
None of such fees, commissions or expenses are to be paid to any
associate company or affiliate of the Applicant or any affiliate of any such
associate company except for legal, financial and other services to be
performed at cost by Allegheny Power Service Corporation.
3. Applicable Statutory Provisions
The Applicant has been advised that the proposed transactions, in
<PAGE>
whole or in part, may be subject to Sections 9(a), 10, 12(b) and 13(b) of the
Public Utility Holding Company Act of 1935 and Rules 45, 87, 90 and 91
thereunder.
4. Regulatory Approval
No commission other than the Securities and Exchange Commission
has jurisdiction over the proposed transactions.
5. Procedure
It is requested that the Commission's order granting this
Application or Declaration be issued as soon as possible. There should be no
recommended decision by a hearing or other responsible officer of the
Commission and no 30-day waiting period between the issuance of the
Commission's order and its effective date. The Applicant consents to the
Division of Corporate Regulation's assisting in the preparation of the
Commission's decision and order in this matter, unless the Division opposes
the transactions covered by this Application or Declaration.
6. Exhibits and Financial Statements
(a) Exhibits
A Articles and Bylaws of AYP
Capital, Inc. (to be filed by
amendment)
B Service Agreement between AYP
Capital, Inc. and Allegheny
Power Service Corporation (to
be filed by amendment)
<PAGE>
F Opinion of Counsel
H Form of Notice
(b) Financial Statements as of December 31, 1993
1-A APS and subsidiaries consolidated balance sheet, per
books.
1-B APS and subsidiaries consolidated statements of
income, per books, and earned surplus.
7. Information as to Environmental Effects
(a) For the reasons set forth in Item 1 above, the authorization
applied for herein does not require major federal action
significantly affecting the quality of the human environment
for purposes of Section 102(2)(C) of the National
Environmental Policy Act (42 U.S.C. 4232(2)(C)).
(b) Not applicable.
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company
Act of 1935, the undersigned company has duly caused this statement to be
signed on its behalf by the undersigned thereunto duly authorized.
ALLEGHENY POWER SYSTEM, INC.
By: NANCY H. GORMLEY
Nancy H. Gormley
Counsel
Dated: April 7, 1994
[N. H. GORMLEY'S PERSONAL LETTERHEAD] EXHIBIT F
April 7, 1994
Securities and Exchange Commission
450 5th Street, N.W.
Washington, DC 20549
Gentlemen:
Referring to the Application or Declaration on Form U-1
contemporaneously filed by Allegheny Power System, Inc. ("APS") under the
Public Utility Holding Company Act of 1935 with respect to the proposed
formation of a Delaware non-utility subsidiary, AYP Capital, Inc. ("AYP"), all
as described in the Application or Declaration of which this Opinion is a
part, I have examined such documents and questions of law as I deemed
necessary to enable me to render this opinion.
I understand that the actions taken in connection with the
proposed transactions will be in accordance with the Application or
Declaration; that all amendments necessary to complete the above-mentioned
Application or Declaration will be filed with the Commission; and that all
other necessary corporate action by the Board of Directors and officers of APS
in connection with the described transactions has been or will be taken prior
thereto.
Based upon the foregoing, I am of the opinion that
(1) If the said Application or Declaration is permitted to become
effective and AYP is created in accordance therewith, AYP will be
a validly organized and duly existing corporation;
(2) if the said Application or Declaration is permitted to become
effective and the proposed transactions are consummated in
accordance therewith: (a) all state laws applicable to the
proposed transaction will have been complied with; (b) AYP's stock
will be validly issued, fully paid and nonassessable, and the
holder thereof will be entitled to the rights and privileges
appertaining thereto set forth in the charter or other document
defining such rights and privileges; (c) APS will legally acquire
the stock of AYP as set forth in the Application or Declaration;
and (d) the consummation of the proposed transactions will not
violate the legal rights of the holders of any of the securities
issued by APS or by any associate or affiliate company or any of
them.
<PAGE>
This opinion does not relate to State Blue Sky or securities laws.
I consent to the use of this Opinion as part of the Application or
Declaration to which it is appended, which is to be filed by APS.
Very truly yours,
NANCY H. GORMLEY
Nancy H. Gormley
Counsel for
ALLEGHENY POWER SYSTEM, INC.
EXHIBIT H
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- : )
Allegheny Power System, Inc.
Notice of Proposed Formation of New Wholly-Owned, Non-Utility
Subsidiary Corporation to be Named AYP Capital, Inc.
Allegheny Power System, Inc., 12 E. 49th Street, New York, New
York, 10017, a Maryland corporation and a registered holding company
(hereinafter "APS"), has filed an Application or Declaration pursuant to
Sections 9(a), 10, 12(b) and 13(b) of the Public Utility Holding Company Act
of 1935 (the "Act") and Rules 45, 87, 90 and 91 thereunder.
APS requests authority through December 31, 1996 to organize and
finance a new wholly-owned, non-utility subsidiary corporation to be named AYP
Capital, Inc. ("AYP"). The activities of AYP would be primarily limited to
investigating opportunities for investment in companies in the area of
emerging technologies closely related to APS's core utility business and which
are in the public interest by promoting efficient and environmentally friendly
means of generating and using electricity. APS requests authority through
December 31, 1996 to commit up to $500,000 to be used in the formation of and
operational costs of AYP.
APS requests authority to incorporate and operate AYP under the
laws of the State of Delaware, with an initial authorized capital of up to
1,000 shares of common stock with no par value. APS also requests authority
to subscribe to 100 shares of AYP common stock at a price of $10.00 per share.
<PAGE>
APS further requests authority to fund AYP from time-to-time through December
31, 1996, by means of purchases of additional AYP stock or capital
contributions, in an aggregate amount not to exceed $500,000 (including
formation costs and the subscription cost of the common stock), without
further Securities and Exchange Commission approval. APS will obtain funds
for this purpose from the sale of APS common stock pursuant to its Dividend
Reinvestment and Stock Purchase and Employee Stock Ownership and Savings
Plans, from its regular bank lines of credit or from internal sources. APS
will not guarantee any indebtedness of AYP. AYP will use such funds to pursue
preliminary development activities with regard to locating appropriate
investment opportunities.
Initially, APS does not anticipate that AYP will have any paid
employees. Instead, personnel employed by Allegheny Power Service Corporation
("APSC"), a wholly-owned subsidiary of APS, will provide a wide range of
services on an as-needed basis to AYP pursuant to a service agreement to be
entered into between AYP and APSC. Under this service agreement, AYP will
reimburse APSC for the cost of services provided, computed in accordance with
Rules 90 and 91 of the Act, as well as applicable rules and regulations. All
time spent by APSC employees working for AYP will be billed to and paid by AYP
on a monthly basis.
AYP will maintain separate financial records and detailed
supporting records, including profit/loss statements. These records will be
available to any proper federal regulatory agency or state regulatory agency
for review. The accounting staff of APSC, pursuant to the service agreement
with AYP, will be responsible for record keeping and maintaining audit
<PAGE>
procedures which are in compliance with generally accepted accounting
principles.
Significant opportunities exist for investment by AYP in companies
that are developing new technologies closely related to APS's core utility
business and which are in the public interest by promoting efficient and
environmentally friendly means of generating and using electricity. Such new
technologies would have the capability of improving or augmenting the
operations of APS' operating subsidiaries currently or in the future. The
areas in which AYP investment activity would be focused include:
* Energy conversion, storage and delivery technology;
* Conservation, load management, and demand side management
technologies, systems and services;
* Environmental and waste treatment technologies and services
related to electricity generation, transmission and
distribution (e.g. technologies for scrubbing of stack
emissions or disposal of fly ash wastes), or environmental
technologies which use electric power as a key component in
their waste treatment process;
* Advanced computer hardware and software for use in the
generation, transmission and distribution (or planning
therefor) of electricity (including artificial
intelligence/neural net systems and components);
* Power-related electronic systems, control systems and
components; and
<PAGE>
* Electronic automation systems and components, including
instrumentation, sensors, robotics and inspection
techniques.
AYP may invest directly in companies which are developing emerging
technologies relevant to APS's core utility business or AYP may seek
experienced investment partners and may structure investment vehicles with
those partners to invest in such companies. Although the exact form of any
particular investment may vary, each one will be structured in such a manner
as to limit AYP's exposure to excessive liabilities. If an investment vehicle
chosen by AYP makes a direct investment in a company, then AYP may have a role
in the company as though it invested directly in the company. At this time,
APS does not propose any specific investment or investment vehicles for AYP
and no investments shall be made by AYP without asking for and receiving prior
Securities and Exchange Commission approval.
Except as described herein, no associate company or affiliate of
the Applicants or any affiliate of any such associate company has any material
interest, directly or indirectly, in the proposed transactions.
The application and any amendments thereto are available for
public inspection through the Commission's Office of Public Reference.
Interested persons wishing to comment or request a hearing should submit their
views in writing by , 1994, to the Secretary, Securities and
Exchange Commission, Washington, DC 20549, and serve a copy on the Applicant
at the address specified above. Proof of service (by affidavit or, in case of
<PAGE>
an attorney at law, by certificate) should be filed with the request. Any
request for a hearing shall identify specifically the issues of fact or law
that are disputed. A person who so requests will be notified of any hearing,
if ordered, and will receive a copy of any notice or order issued in this
matter. After said date, the application, as filed or as it may be amended,
may be granted.
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
CONTENTS
Statement
No.
Balance sheet at December 31, 1993:
Allegheny Power System, Inc. and Subsidiaries 1-A
Statement of income and retained earnings for year
ended December 31, 1993:
Allegheny Power System, Inc. and Subsidiaries 2-B
These financial statements have been prepared for Form U-1
purposes and are unaudited.
Reference is made to the Notes to Financial Statements in the
Allegheny Power System companies combined Annual Report on
Form 10-K for the year ended December 31, 1993.
The income statements do not reflect any additional income from
investments which may be made with the proceeds from the
transactions set forth in this application-declaration.
<PAGE>
ALLEGHENY POWER SYSTEM, INC. AND SUBSIDIARIES Statement 1-A
CONSOLIDATED BALANCE SHEET - DECEMBER 31, 1993
(Thousands)
Assets
Property, plant, and equipment:
At original cost, including $638,920,000
under construction 7,176,847
Accumulated depreciation (2,388,758)
Investments and other assets:
Subsidiaries consolidated--excess of cost
over book equity at acquisition 15,077
Securities of associated company--at cost,
which approximates equity 1,250
Other 24,357
Current assets:
Cash and temporary cash investments 2,417
Accounts receivable:
Electric service, net of $3,418,000
uncollectible allowance 188,139
Other 7,736
Materials and supplies--at average cost:
Operating and construction 86,766
Fuel 71,392
Prepaid taxes 43,139
Deferred power costs 14,054
Other 10,391
Deferred charges:
Regulatory assets 577,817
Unamortized loss on reacquired debt 44,435
Other 74,109
Total Assets 5,949,168
<PAGE>
ALLEGHENY POWER SYSTEM, INC. AND SUBSIDIARIES Statement 1-A
(continued)
CONSOLIDATED BALANCE SHEET - DECEMBER 31, 1993
(Thousands)
Capitalization and Liabilities
Capitalization:
Common Stock:
Common stock of Allegheny Power System, 147,079
Inc. - $1.25 par value per share,
authorized 260,000,000 shares, out-
standing 117,663,582 shares (3,764,846
shares issued since January 1, 1993)
Other paid-in capital (net increase of 931,063
$95,025,000 since January 1, 1993)
Retained earnings 877,673
Preferred stock of subsidiaries:
Preferred stock - cumulative, par value
$100 per share; authorized 9,997,123
shares, outstanding 2,776,861 shares
Not subject to mandatory redemption
3.60% - 4.80% 65,086
$5.88 - $7.92 80,000
$8.00 - $8.80 65,000
Auction 2.55%-2.7% 40,000
Subject to mandatory redemption
$7.16 26,400
Long-term debt of subsidiaries 2,008,104
Current liabilities:
Short-term debt 130,636
Long-term debt and preferred stock
due within one year 27,200
Accounts payable 187,690
Taxes accrued:
Federal and state income 14,689
Other 57,758
Interest accrued 38,626
Other 73,467
Deferred credits and other liabilities:
Unamortized investment credit 166,328
Deferred income taxes 873,695
Regulatory liabilities 107,372
Other 31,302
Total Capitalization and Liabilities 5,949,168
<PAGE>
ALLEGHENY POWER SYSTEM, INC. AND SUBSIDIARIES Statement 2-B
CONSOLIDATED STATEMENT OF INCOME FOR YEAR ENDED DECEMBER 31, 1993
(Thousands)
ELECTRIC OPERATING REVENUES 2,331,526
OPERATING EXPENSES:
Operation:
Fuel 544,659
Purchased power and exchanges, net 417,449
Deferred power costs, net (11,462)
Other 257,732
Maintenance 231,163
Depreciation 210,428
Taxes other than income taxes 178,788
Federal and state income taxes 128,130
Total Operating Expenses 1,956,887
Operating Income 374,639
OTHER INCOME AND DEDUCTIONS:
Allowance for other than borrowed funds
used during construction 12,499
Other income, net (6)
Total Other Income and Deductions 12,493
Income Before Interest Charges and
Preferred Dividends 387,132
INTEREST CHARGES AND PREFERRED DIVIDENDS:
Interest on first mortgage bonds 112,326
Interest on other long-term obligations 45,123
Other interest 5,812
Allowance for borrowed funds used during
construction (8,983)
Dividends on preferred stock of subsidiaries 17,098
Total Interest Charges and
Preferred Dividends 171,376
Consolidated Net Income 215,756
<PAGE>
Statement 2-B
(continued)
ALLEGHENY POWER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
FOR YEAR ENDED DECEMBER 31, 1993
(Thousands)
Balance at January 1, 1993 849,398
Add:
Consolidated net income 215,756
1,065,154
Deduct:
Dividends on common stock of Allegheny
Power System, Inc. (cash) 187,475
Charge on redemption of preferred stock 6
Total Deductions 187,481
Balance at December 31, 1993 877,673
