<PAGE>
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.
10435 DOWNSVILLE PIKE
HAGERSTOWN, MD 21740
(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)
Thomas K. Henderson, Esq.
Vice President
Allegheny Power System, Inc.
10435 Downsville Pike
Hagerstown, MD 21740
(Name and address of agent for service)
<PAGE>
Item 1. Description of Proposed Transaction.
Allegheny Power System, Inc. (hereinafter "APS"), a
registered public utility holding company, files this
Application or Declaration pursuant to Sections 6(a) and 7 of
the Public Utility Holding Company Act of 1935. APS requests
authority through December 31, 2007 to issue up to a total of
500,000 shares of its common stock. Shares will be authorized
and unissued shares. Common stock will be awarded to senior officers
of APS and its subsidiaries under a Performance Share Plan
("Plan").
The Board believes the Plan will be an important
aid to APS in attracting and retaining individuals of
outstanding ability by rewarding them for the continued
providing of economical service to the customers of Allegheny
Power. The Plan was approved by APS stockholders at the
annual meeting in May 1994. The first Plan cycle ended on
December 31, 1996. The Board has determined that it would
like the flexibility to make payments to the Plan
participants either in APS stock or a combination of cash and
APS stock. APS expects to issue shares when needed for
payouts under the Plan. Common stock will not be issued by APS
for this purpose prior to the approval of this
application-declaration by the Commission.
<PAGE>
The Plan is administered by the Management Review
Committee of the Board ("Committee") and consists of Plan
cycles which are not less than three (3) nor more than five
(5) years in length. The first Plan cycle began on January
1, 1994 and ended on December 31, 1996. Target awards are
granted at the time a Plan cycle begins, but payouts, if any,
occur at the end of a cycle after it is determined whether
performance criteria have been met. The Committee
establishes, and the Board reviews and approves, each Plan
cycle, the conditions of each award made under the Plan,
which senior officers will receive awards, the amount of each
award, and guidelines for each Plan cycle. The performance
criteria and standards in the Plan guidelines include
customer related criteria and shareholder related criteria.
The type of award which is granted under the Plan
at the beginning of a Plan cycle is a "performance share
award." Each such award is contingent upon meeting the
established criteria. Any payout at the end of a Plan cycle
is determined by whether the criteria were met. Based upon
the guidelines set forth in each cycle, a payout is
calculated by multiplying the amount of cash awarded by the
payout ratio, and converting that into a number of shares at
the price specified for that Plan cycle. The dividends that
were paid on those shares are treated as having been
reinvested since the beginning of the Plan cycle. The shares
<PAGE>
are then converted back into an amount of cash using the
closing price at the end of the cycle. A participant
receives either APS stock or cash and APS stock
after the end of the Plan cycle.
The total number of award shares eligible for
issuance in each Plan cycle is not expected to exceed 40,000
shares. The Plan provides that the total number of award
shares eligible to be granted over the life of the Plan, which
is expected to end in 2007, will not exceed 500,000 shares.
Common stock to be issued under the Plan will be
authorized and unissued stock. Each share of common stock will
be valued at the closing price for the common stock at the end
of the Plan cycle to which it relates. The performance share awards
granted may be paid in common stock or in cash and stock, as determined
by the Committee. A participant may elect to have the receipt of such
cash or shares deferred until some future date.
The Board may amend, revise or suspend the Plan or
any portion thereof, provided that no such amendment shall be
made without shareholder approval if it would materially
increase the benefits accruing to participants or increase
the number of shares which may be paid under the Plan. No
<PAGE>
such amendment or modification shall impair the rights of any
participant under any award without the consent of such
participant.
In the event of any change in the outstanding
shares of common stock by reason of any stock dividend or
split, recapitalization, combination, exchange of shares,
spin-off or other distribution of assets (other than normal
cash dividends), or other similar changes in the common
stock, then appropriate adjustments shall be made in the
shares of common stock theretofore awarded but not yet
paid out to the participants and in the aggregate number of
shares of common stock which may be awarded to the
participants and in the aggregate number of shares of common
stock which may be awarded pursuant to the Plan.
APS anticipates that the Plan will be fully funded
by income provided from the operating activities of APS'
subsidiaries and that external borrowing will not be used to
meet the requirements of the Plan. The cost of the Plan awards
will be charged to APS and the subsidiaries receiving services
based upon allocation factors previously approved by the SEC.
<PAGE>
Except as described herein, no associate company or
affiliate of APS or any affiliate of any such associate company
has any material interest, directly or indirectly, in the proposed
transaction.
Item 2. Fees, Commissions and Expenses
None, other than ordinary expenses not over $1,500 in
connection with the preparation of this Application or
Declaration.
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.
Item 3. Applicable Statutory Provisions
The Applicant is informed by counsel that Sections
6(a) and 7 of the Public Utility Holding Company Act of 1935
may be applicable in whole or in part to the proposed
transaction.
Item 4. Regulatory Approval
No commission other than the Securities and
Exchange Commission has jurisdiction over the proposed
transaction. No state or federal regulatory approval,
<PAGE>
except for that of the Securities and Exchange Commission, is
required in connection with the proposed transaction.
Item 5. Procedure
It is requested that the Commission's order
granting this Application or Declaration be issued as soon as
possible, or by May 30, 1997. There should be no recommended
decision by a hearing officer or by any 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 Division of Investment Management may
assist in the preparation of the Commission's decision unless
the Division opposes the matters covered by this Application
or Declaration.
6. Exhibits and Financial Statements
(a) Exhibits
B Performance Share Plan<FN1>
F Opinion of Counsel
G Financial Data Schedule
H Form of Notice
(b) Financial Statements - December 31, 1996
1-A APS and subsidiaries consolidated
balance sheet, per books and pro forma.
<FN1> Incorporated by reference to Form 10-K of Allegheny Power System, Inc.,
(1-267), December 31, 1994, exh. 10.9
<PAGE>
1-B APS and subsidiaries consolidated
statements of income, and retained
earnings, per books and pro forma.
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.
<PAGE>
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: /s/ Carol G. Russ
Carol G. Russ
Counsel
Dated: April 14, 1997
<PAGE>
[Letterhead]
EXHIBIT F
April 14, 1997
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 proposal
to issue common stock in connection with the Performance Share Plan,
all as described in the Application or Declaration of which
this Opinion is a part, I have examined, or have had persons under my
supervision examine, 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
Performance Share Plan 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;
that the Board of Directors of APS have taken appropriate action to
approve the Performance Share Plan; that the stockholders have approved
the Performance Share Plan; and that all other necessary corporate action
by the Board of Directors and officers of APS in connection with the
issuance has been or will be taken prior thereto.
Based upon the foregoing, I am of the opinion that
(1) APS is a validly organized and duly existing corporation; and
(2) when (a) the said Application or Declaration is permitted to
become effective, (b) the above-mentioned action shall have
been duly taken, and (c) the proposed transaction is
consummated in accordance therewith:
(i) all state laws applicable to said Performance Share
Plan will have been complied with;
(ii) the shares of APS common stock to be awarded pursuant to
the Performance Share Plan will be validly issued,
fully paid and nonassessable and the holders thereof
will be entitled to the rights and privileges
appertaining thereto set forth in the Charter, as
amended, of APS;
<PAGE>
(iii) the consummation of the proposed transaction will not
violate the legal rights of the holders of any of the
securities issued by APS or by an associate or
affiliate company or any of them.
This opinion does not relate to State Blue Sky or securities
laws.
I consent to the use of this Opinion as part of the
Application or Declaration to which it is appended, which is to be filed
by APS.
Very truly yours,
/s/ T. K. Henderson
T. K. Henderson
Counsel for
ALLEGHENY POWER SYSTEM, INC.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 5,296,191
<OTHER-PROPERTY-AND-INVEST> 78,274
<TOTAL-CURRENT-ASSETS> 582,258
<TOTAL-DEFERRED-CHARGES> 657,428
<OTHER-ASSETS> 4,359
<TOTAL-ASSETS> 6,618,510
<COMMON> 152,300
<CAPITAL-SURPLUS-PAID-IN> 1,028,124
<RETAINED-EARNINGS> 988,667
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,169,091
0
170,086
<LONG-TERM-DEBT-NET> 2,397,149
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 156,430
<LONG-TERM-DEBT-CURRENT-PORT> 26,900
0
<CAPITAL-LEASE-OBLIGATIONS> 2,073
<LEASES-CURRENT> 887
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,695,894
<TOT-CAPITALIZATION-AND-LIAB> 6,618,510
<GROSS-OPERATING-REVENUE> 2,327,649
<INCOME-TAX-EXPENSE> 127,992
<OTHER-OPERATING-EXPENSES> 1,808,803
<TOTAL-OPERATING-EXPENSES> 1,936,795
<OPERATING-INCOME-LOSS> 390,854
<OTHER-INCOME-NET> 7,527
<INCOME-BEFORE-INTEREST-EXPEN> 398,381
<TOTAL-INTEREST-EXPENSE> 179,054
<NET-INCOME> 219,327
9,280
<EARNINGS-AVAILABLE-FOR-COMM> 210,047
<COMMON-STOCK-DIVIDENDS> 204,720
<TOTAL-INTEREST-ON-BONDS> 111,854
<CASH-FLOW-OPERATIONS> 0<F1>
<EPS-PRIMARY> 1.73
<EPS-DILUTED> 1.73
<FN>
<F1>*Not calculated for Form U-1 purposes.
</FN>
</TABLE>
<PAGE>
EXHIBIT H
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- : )
Allegheny Power System, Inc.
Performance Share Plan
Allegheny Power System, Inc. (hereinafter "APS"), a
registered public utility holding company, located at 10435 Downsville
Pike, Hagerstown, MD 21740-1766 files this Application or Declaration
pursuant to Sections 6(a) and 7 of the Public Utility Holding Company
Act of 1935. APS requests authority through December 31, 2007 to issue
up to a total of 500,000 shares of its common stock. Shares will be
authorized and unissued shares. Common stock will be awarded to senior
officers of APS and its subsidiaries under a Performance Share Plan
("Plan").
The Board believes the Plan will be an important aid to APS
in attracting and retaining individuals of outstanding ability by
rewarding them for the continued providing of economical service to the
customers of Allegheny Power. The Plan was approved by APS stockholders
at the annual meeting in May 1994. The first Plan cycle ended on
December 31, 1996. The Board has determined that it would like the
flexibility to make payments to the Plan participants either in APS stock or
a combination of cash and APS stock. APS expects to issue shares
when needed for payouts under the Plan. Common stock will not be issued
by APS for this purpose prior to the approval of this application-declaration
by the Commission.
The Plan is administered by the Management Review Committee
of the Board ("Committee") and consists of Plan cycles which are not
less than three (3) nor more than five (5) years in length. The first
Plan cycle began on January 1, 1994 and ended on December 31, 1996.
Target awards are granted at the time a Plan cycle begins, but payouts,
if any, occur at the end of a cycle after it is determined whether
performance criteria have been met. The Committee establishes, and the
Board reviews and approves, each Plan cycle, the conditions of each
award made under the Plan, which senior officers will receive awards,
the amount of each award, and guidelines for each Plan cycle. The
performance criteria and standards in the Plan guidelines include
customer related criteria and shareholder related criteria.
The type of award which is granted under the Plan at the
beginning of a Plan cycle is a "performance share award." Each such
award is contingent upon meeting the established criteria. Any payout
at the end of a Plan cycle is determined by whether the criteria were
met. Based upon the guidelines set forth in each cycle, a payout is
calculated by multiplying the amount of cash awarded by the payout
<PAGE>
ratio, and converting that into a number of shares at the price
specified for that Plan cycle. The dividends that were paid on those
shares are treated as having been reinvested since the beginning of the
Plan cycle. The shares are then converted back into an amount of cash
using the closing price at the end of the cycle. A participant receives
either APS stock or cash and APS stock after the end of the Plan cycle.
The total number of award shares eligible for issuance in
each Plan cycle is not expected to exceed 40,000 shares. The Plan
provides that the total number of award shares eligible to be granted
over the life of the Plan, which is expected to end in 2007, will not
exceed 500,000 shares.
Common stock to be issued under the Plan will be authorized
and unissued stock. Each share of common stock will be valued at the
closing price for the common stock at the end of the Plan Cycle to which
it relates. The performance share awards granted may be paid in common
stock or in cash and APS stock, as determined by the Committee. A
participant may elect to have the receipt of such cash or shares deferred
until some future date.
The Board may amend, revise or suspend the Plan or any
portion thereof, provided that no such amendment shall be made without
shareholder approval if it would materially increase the benefits
accruing to participants or increase the number of shares which may be
paid under the Plan. No such amendment or modification shall impair the
rights of any participant under any award without the consent of such
participant.
In the event of any change in the outstanding shares of
common stock by reason of any stock dividend or split, recapitalization,
combination, exchange of shares, spin-off or other distribution of
assets (other than normal cash dividends), or other similar changes in
the common stock, then appropriate adjustments shall be made in the
shares of common stock theretofore awarded but not yet paid out to the
participants and in the aggregate number of shares of common stock which
may be awarded to the participants and in the aggregate number of shares
of common stock which may be awarded pursuant to the Plan.
APS anticipates that the Plan will be fully funded by income
provided from the operating activities of APS' subsidiaries and that
external borrowing will not be used to meet the requirements of the
Plan. The cost of the Plan awards will be charged to APS and the
subsidiaries receiving services based upon allocation factors previously
approved by the SEC.
Except as described herein, no associate company or
affiliate of APS or any affiliate of any such associate company has any
material interest, directly or indirectly, in the proposed transaction.
<PAGE>
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 April , 1997, 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 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.
<PAGE>
CONTENTS
Statement
No.
Balance sheets at December 31, 1996, and pro forma giving
effect as at that date to the adjustments set forth herein:
Allegheny Power System, Inc. and Subsidiaries 1-A
Statements of income and retained earnings for twelve months
ended December 31, 1996, and pro forma giving effect
as at beginning of period to the adjustments set forth herein:
Allegheny Power System, Inc. and Subsidiaries 1-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, 1996.
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, 1996
PER BOOKS AND PRO FORMA GIVING EFFECT AS AT
THAT DATE TO THE ADJUSTMENTS SET FORTH HEREIN
<TABLE>
<CAPTION>
(Thousands)
Assets Per Books Adjustments Pro Forma
<S> <C> <C> <C>
Property, plant, and equipment:
At original cost 8,206,213 8,206,213
Accumulated depreciation (2,910,022) (2,910,022)
5,296,191 5,296,191
Investments and other assets:
Subsidiaries consolidated--excess of cost
over book equity at acquisition 15,077 15,077
Benefit plans' investments 63,197 63,197
Other 4,359 4,359
82,633 82,633
Current assets:
Cash and temporary cash investments 19,242 19,242
Accounts receivable:
Electric service, net of $15,052,000 uncollectible allowance 280,154 280,154
Other 22,188 22,188
Materials and supplies--at average cost:
Operating and construction 82,057 82,057
Fuel 60,755 60,755
Prepaid taxes 62,110 62,110
Deferred income taxes 39,428 39,428
Other 16,324 16,324
582,258 0 582,258
Deferred charges:
Regulatory assets 565,185 565,185
Unamortized loss on reacquired debt 53,403 53,403
Deferred tax asset 6,030 (2) 6,030
Other 38,840 38,840
657,428 6,030 663,458
Total Assets 6,618,510 6,030 6,624,540
Capitalization and Liabilities
Capitalization:
Common stock 152,300 625 (1) 152,925
Other paid-in capital 1,028,124 14,563 (1) 1,042,687
Retained earnings 988,667 (9,158)(2) 979,509
2,169,091 6,030 2,175,121
Preferred stock 170,086 170,086
Long-term debt of subsidiaries 2,397,149 2,397,149
4,736,326 6,030 4,742,356
Current liabilities:
Short-term debt 156,430 156,430
Long-term debt due within one year 26,900 26,900
Accounts payable 147,161 147,161
Taxes accrued:
Federal and state income 7,173 7,173
Other 62,361 62,361
Interest accrued 40,630 40,630
Deferred power costs 22,845 22,845
Restructuring liability 56,101 56,101
Other 57,436 57,436
577,037 0 577,037
Deferred credits and other liabilities:
Unamortized investment credit 141,519 141,519
Deferred income taxes 1,000,023 1,000,023
Regulatory liabilities 93,216 93,216
Other 70,389 70,389
1,305,147 1,305,147
Total Capitalization and Liabilities 6,618,510 6,030 6,624,540
</TABLE>
(1) Proposed issuance of 500,000 shares of common stock @ $30.375 (December
1996 closing price) $1.25 par value under the Company's Performance
Share Plan.
(2) See Statement 1-B.
<PAGE>
Statement 1-B
ALLEGHENY POWER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME FOR TWELVE MONTHS ENDED DECEMBER 31, 1996
PER BOOKS AND PRO FORMA GIVING EFFECT AS AT BEGINNING OF PERIOD
TO THE ADJUSTMENTS SET FORTH HEREIN
<TABLE>
<CAPTION>
(Thousands)
Per Books Adjustments Pro Forma
<S> <C> <C> <C>
ELECTRIC OPERATING REVENUES 2,327,649 2,327,649
OPERATING EXPENSES:
Operation:
Fuel 513,210 513,210
Purchased power and exchanges, net 184,357 184,357
Deferred power costs, net 15,621 15,621
Other 299,817 15,188 315,005
Maintenance 243,314 243,314
Restructuring charges and asset write-offs 103,865 103,865
Depreciation 263,246 263,246
Taxes other than income taxes 185,373 185,373
Federal and state income taxes 127,992 (6,030) 121,962
Total Operating Expenses 1,936,795 9,158 1,945,953
Operating Income 390,854 (9,158) 381,696
OTHER INCOME AND DEDUCTIONS:
Allowance for other than borrowed funds
used during construction 3,157 3,157
Other income, net 4,370 4,370
Total Other Income and Deductions 7,527 7,527
Income Before Interest Charges and
Preferred Dividends 398,381 (9,158) 389,223
INTEREST CHARGES AND PREFERRED DIVIDENDS:
Interest on first mortgage bonds 111,854 111,854
Interest on other long-term obligations 54,533 54,533
Other interest 15,398 15,398
Allowance for borrowed funds used during
construction (2,731) (2,731)
Dividends on preferred stock of subsidiaries 9,280 9,280
Total Interest Charges and
Preferred Dividends 188,334 0 188,334
Consolidated Net Income 210,047 (9,158) 200,889
</TABLE>
<PAGE>
Statement 1-B
(continued)
ALLEGHENY POWER SYSTEM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
FOR TWELVE MONTHS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
(Thousands)
Per Books Adjustments ProForma
<S> <C> <C> <C>
Balance at January 1, 1996 983,340 983,340
Add:
Consolidated net income 210,047 (9,158) 200,889
1,193,387 (9,158) 1,184,229
Deduct:
Dividends on common stock of Allegheny
Power System, Inc. (cash) 204,720 204,720
Balance at December 31, 1996 988,667 (9,158) 979,509
</TABLE>
