Exhibit H
H Form of Notice
1. News Digest
ALLEGHENY ENERGY, INC., ET AL. A notice has been issued
giving interested persons until January __, 2001, to request a
hearing on a proposal by Allegheny Energy, Inc. ("Allegheny"), a
registered holding company, and Allegheny Energy Supply Company,
LLC, a wholly owned non-utility subsidiary of Allegheny, for
financing and other related authority in connection with the
proposed acquisition of the outstanding membership interests in
certain domestic exempt wholesale generators ("EWGs") and non-
EWGs. (Rel. 35-27____).
2. Notice
Allegheny Energy, Inc. et al. (70-1______)
Allegheny Energy, Inc. ("Allegheny"), a registered holding
company, located at 10435 Downsville Pike, Hagerstown, MD 21740-
1766, and Allegheny Energy Supply Company, LLC ("Genco"), a wholly
owned non-utility subsidiary of Allegheny located at R.R. 12, P.O.
Box 1000, Roseytown, Pennsylvania 15601 subsidiary (collectively
"Applicants"), have filed this application - declaration pursuant
to sections 6(a), 7, 9(a), 10, 12(b), and 32 of the Public Utility
Holding Company Act of 1935, as amended ("Act"), and Rules 45, 53
and 54 under the Act, for financing and other related authority in
connection with the proposed acquisition of certain domestic
exempt wholesale generators ("EWGs") ") and non-EWGs. Applicants
request expedited treatment of this application and request an
order issued and effective not later than March 31, 2001.
AE Supply and Enron North America Corp. ("Enron"), a Delaware
corporation, have entered into a Purchase and Sale Agreement dated
November 13, 2000 ("Agreement").<F1> Under the Agreement, AE Supply
has agreed to purchase and Enron has agreed to sell the
outstanding membership interests in five (5) limited liability
companies for the sum of $1,028,000,000.00 (one billion twenty
eight million dollars) ("Purchase Price")<F2>. Three (3) of these
L.L.C.s are EWGs: Des Plaines Green Land Development, L.L.C.;
Gleason Power I, L.L.C.; and, West Fork Land Development, L.L.C.
Two (2) are not EWGs: Energy Financing Company, L.L.C.<F3>; and, Lake
Acquisition Company, L.L.C.<F4> ("Non-EWGs"). The acquisition of
1,710 megawatts (MW) of natural gas-fired merchant generating
capacity will give AE Supply a total generating capacity of more
than 10,400 MW and represents a pivotal step in the Company's plan
to become a national energy supplier.
<F1> See Exhibit A, Purchase and Sale Agreement (November 13, 2000).
<F2> The Purchase Price is subject to adjustment after closing in
accordance with the terms of the Agreement.
<F3> This limited liability company was set up to purchase some of
the equipment that was ultimately installed in the Des Plaines
Green Land Development, L.L.C. facility. The only transaction
currently in place with Energy Financing Company, L.L.C. is an
Equipment Sale Agreement dated October 5, 2000, for the purchase
by Des Plaines Green Land Development, L.L.C. of such equipment in
monthly installments through May 14, 2015.
<F4> This L.L.C. leases acreage and a lake to West Fork Land
Development Company, L.L.C.
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Allegheny and AE Supply will finance the acquisition with a
combination of debt and equity that is consistent with Allegheny's
existing limits on "aggregate investment" under Rule 53.
Specifically, Allegheny seeks authority to issue and sell a
combination of debt and equity securities, which shall not exceed
the lesser of the remaining permissible aggregate investment under
the "safe harbor" provision of Rule 53 limitation or $400 million
(as set forth more fully in this application-declaration).<F5>
Additionally, Allegheny seeks authority to issue and sell up to $1
billion in equity securities in connection with this transaction
and for other corporate purposes and make a capital contribution
of up to $1 billion to AE Supply in support of this transaction
and for other corporate purposes.
AE Supply seeks authorization to increase by $550 million its
authority to issue debt and equity securities and to provide non-
recourse credit support to an aggregate amount of $950 million.<F6>
AE Supply also seeks approval to establish a financing vehicle,
Allegheny Energy Supply Capital, Inc. ("Supply Capital "), that
will, among other things, issue equity to and accept purchase
notes from AE Supply in connection with its activities described
herein and future transactions approved by the Commission or
allowed by Commission rules. Finally, Allegheny and AE Supply
seek approval to engage in certain intercompany transactions,
including loans by Allegheny to AE Supply from the proceeds of the
equity issued by Allegheny, and transactions between AE Supply and
Supply Capital. Due to the dynamic nature of the transaction and
the penalty of $41.1 million (4% of the Purchase Price) for
failure to timely receive Commission approval to close the
transaction, Applicants request expedited treatment of this
application and request an order issued and effective not later
than March 31, 2001.
For the twelve months ended September 30, 2000, Allegheny's
gross revenues and net income were approximately $3.524 billion
and $188 million, respectively. AE Supply, which began operating
as a separate company on November 18, 1999, had gross revenues of
approximately $1.497 billion and net income of approximately $42.6
million for the 9 month period ended September 30, 2000.
<F5> Rule 53 sets forth the circumstances precluding a finding that a
security issued to finance the acquisition of an EWG is not, among
other things, reasonably adapted to the earning power or security
structure of the holding company. In general terms, the rule
establishes a "safe harbor." This safe harbor applies when, like
the present case, the holding company's investment in EWGs and
FUCOs does not exceed 50% of the holding company's consolidated
retained earnings.
<F6> The AE Supply financing will be non-recourse to Allegheny and so
will not count as "aggregate investment" for purposes of Rule 53.
As defined under Rule 53, "aggregate investment" means all amounts
invested, or committed to be invested, in exempt wholesale
generators and foreign utility companies, for which there is
recourse, directly or indirectly, to the registered holding
company.
