Post-Effective Amendment No.1 to
SEC File No. 70-7862
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM U-1
APPLICATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 ("Act")
JERSEY CENTRAL POWER & LIGHT COMPANY ("JCP&L")
300 Madison Avenue
Morristown, New Jersey 07962-1911
METROPOLITAN EDISON COMPANY ("Met-Ed")
2800 Pottsville Pike, Muhlenberg Township
Berks County, Pennsylvania 19605
PENNSYLVANIA ELECTRIC COMPANY ("Penelec")
1001 Broad Street, Johnstown, Pennsylvania 15907
(Names of companies filing this statement
and addresses of principal executive offices)
GENERAL PUBLIC UTILITIES CORPORATION ("GPU")
(Name of top registered holding company parent of applicants)
T. G. Howson, Vice President Douglas E. Davidson, Esq.
and Treasurer Berlack, Israels & Liberman
LLP
M. A. Nalewako, Secretary 120 West 45th Street
GPU Service Corporation New York, New York 10036
100 Interpace Parkway
Parsippany, New Jersey 07054
R. S. Cohen, Secretary W. Edwin Ogden, Esq.
Jersey Central Power & Light Ryan, Russell, Ogden & Seltzer
Company 1100 Berkshire Boulevard
300 Madison Avenue P.O. Box 6219
Morristown, New Jersey 07962-1911 Reading, Pennsylvania 19610
W. C. Matthews, II, Secretary Robert C. Gerlach, Esq.
Metropolitan Edison Company Ballard Spahr Andrews &
Pennsylvania Electric Company Ingersoll
2800 Pottsville Pike 1735 Market Street, 51st Fl.
Reading, Pennsylvania 19605 Philadelphia, PA 19103-7599
________________________________________________________________
(Names and addresses of agents for service of process)<PAGE>
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTIONS.
A. By Order dated August 15, 1991 (SEC File No. 70-7862;
HCAR No. 25361) ("1991 Order"), the Commission, among other
things, authorized JCP&L, Met-Ed and Penelec (collectively, the
"GPU Companies") to enter into separate fuel lease agreements and
to establish related financing arrangements to provide for the
acquisition of nuclear fuel and certain related services for the
Three Mile Island Unit 1 nuclear generating station ("TMI-1") and
the Oyster Creek nuclear generating station ("Oyster Creek").
The GPU Companies jointly own TMI-1 in the following percentages:
Met-Ed - 50%; JCP&L - 25%; and Penelec - 25%. JCP&L owns a 100%
interest in Oyster Creek. TMI-1 and Oyster Creek are operated
and maintained on behalf of the GPU Companies by GPU Nuclear
Corporation, a subsidiary of GPU.
Pursuant to the 1991 Order, a nuclear fuel trust ("Fuel
Trust") was established in accordance with a trust agreement
("Trust Agreement") under which United States Trust Company of
New York acts as trustee. The Fuel Trust is the sole stockholder
of two non-affiliated Delaware corporations, TMI-1 Fuel Corp. and
Oyster Creek Fuel Corp. (collectively, the "Fuel Companies")
which own certain nuclear fuel assemblies and component parts
("Nuclear Material") for use at TMI-1 and Oyster Creek,
respectively. The GPU Companies have entered into separate lease
agreements ("1991 Lease Agreements") by which TMI-1 Fuel Corp.
leases Nuclear Material for TMI-1 to the GPU Companies in
proportion to their respective undivided ownership interests in
TMI-1, and Oyster Creek Fuel Corp. leases Nuclear Material for
Oyster Creek to JCP&L. In connection with the 1991 Lease
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Agreements, The Prudential Life Insurance Company of America and
certain of its affiliates (collectively, "Prudential") entered
into lending agreements described below to provide for borrowings
by the Fuel Companies of up to a total of $250 million to finance
the acquisition costs of Nuclear Material under such lease
agreements.
As a result of a recent review and analysis of their nuclear
fuel financing arrangements, the GPU Companies determined that
they could likely achieve certain cost savings by replacing
Prudential as funding agent. Consequently, the GPU Companies
conducted a series of discussions with other lending institutions
with a view towards establishing a new credit facility to provide
financing for the acquisition of Nuclear Material, without making
material modifications to the existing 1991 Lease Agreements or
the structure of the Fuel Trust. As a result of those
discussions, the GPU Companies have now entered into a commitment
letter with Union Bank of Switzerland, New York Branch ("UBS" or
the "Agent") to provide a new credit facility which would provide
for borrowings of up to $210 million by the Fuel Companies from
UBS and other lenders for which UBS would act as agent
(collectively, the "Lenders"). Accordingly, the GPU Companies
have notified Prudential that the Fuel Companies will terminate
their existing lending arrangements with Prudential on or before
December 27, 1995. The Fuel Companies will enter into one or
more new credit facilities (collectively, "New Credit Facility")
providing for aggregate borrowings of up to $210 million and
under which (i) letters of credit would be issued by UBS, as
agent, to provide credit enhancement for commercial paper to be
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issued by the Fuel Companies and (ii) revolving credit loans
would be made by the Lenders to the Fuel Companies. In addition,
the 1991 Lease Agreements would be amended and/or restated in
certain respects consistent with the establishment of the New
Credit Facility.
B. 1991 Lease Agreements.
1. To provide for the acquisition of Nuclear
Material, pursuant to the 1991 Order, the Fuel Companies and
Prudential entered into separate floating rate loan agreements,
fixed rate loan agreements and security agreements. The Fuel
Companies have since issued and sold to Prudential from time to
time their promissory notes pursuant to the floating rate loan
agreements ("Existing Notes") representing borrowings made from
Prudential (or its affiliates) to pay for unrecovered acquisition
costs for Nuclear Material and payments for related costs and
services ("Acquisition Costs"). (To date, the Fuel Companies have
not made any borrowings under the fixed rate loan agreements.)
Under the 1991 Lease Agreements, the principal amount of Existing
Notes outstanding at any one time may not exceed $125,000,000 in
the case of each Fuel Company or a total of $250,000,000. The
Existing Notes are secured by the related leases (and the lease
payments made thereunder) and Nuclear Material and bear interest
at a floating rate equivalent to the Lease Rate defined in
subparagraph B.3 below.
2. The 1991 Lease Agreements provide for an initial
term of two years following which they are renewable annually,
subject to the satisfaction of certain conditions and to early
termination upon the occurrence of certain events. In addition,
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either the lessor or the lessee may terminate the agreement at
the end of any annual renewal term, upon at least five months
prior written notice.
3. (a) Under the 1991 Lease Agreements, each GPU
Company pays to the lessor a monthly rental payment consisting of
(i) a British Thermal Unit, or so-called "burn-up", charge ("BTU
Charge") and (ii) a lease rate paid in advance ("Lease Rate").
The BTU Charge consists of an amount based upon the rate of
consumption of the fuel in the reactor. During the term of a
lease, the GPU Companies may revise the BTU Charge to reflect
changes in the anticipated operating life, energy output or
utilization of the Nuclear Material, as initially estimated. To
the extent that a GPU Company makes BTU Charge payments to the
lessor under a lease, the amount of outstanding Acquisition Costs
is correspondingly reduced, thereby creating availability under
the lease for the lessor to acquire additional Nuclear Material.
(b) The Lease Rate for the Existing Notes, which
is based upon the unamortized cost of the Nuclear Material from
time to time, is the yield adjusted rate charged on 30-day dealer
placed commercial paper issued by a Prudential affiliate, as such
rate is in effect from time to time on the 15th day of each
month, plus .70%. Each of the GPU Companies is required to make
monthly Lease Rate payments to the lessor and to make BTU Charge
payments beginning as of the time fuel consumption commences. At
August 1, 1995, an aggregate of approximately $169 million of
unrecovered Acquisition Costs were outstanding under the 1991
Lease Agreements at a current Lease Rate of 6.60%.
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4. Except as provided below, upon termination of a
lease, the GPU Company which is a party thereto is obligated to
pay to the lessor the "Stipulated Casualty Value" of any Nuclear
Material acquired by the lessor, which amount is designed to
reflect the then unamortized cost of the Nuclear Material plus
all other amounts which may be owed to the lessor. However, the
GPU Company would use its best efforts to dispose of such Nuclear
Material on behalf of the lessor to a third party; the proceeds
of any such disposition in excess of the Stipulated Casualty
Value would be paid to the lessor. If a lease is voluntarily
terminated by the lessor, the GPU Company is required to purchase
the Nuclear Material but may, at its option, do so during the
five-month notice period at the higher of (i) its then fair
market value and (ii) the Stipulated Casualty Value. If a GPU
Company does not exercise such option, or in the event it elects
voluntarily to terminate a lease, it would pay the lessor the
Stipulated Casualty Value of the Nuclear Material in the manner
described above. If a GPU Company is unable to dispose of the
Nuclear Material to a third party upon termination of a lease,
the lessor may then convey the Nuclear Material to the GPU
Company.
C. New Credit Facility and Proposed Lease Amendments.
1. Under the present lease financing arrangements, a
Prudential affiliate issues commercial paper to provide the funds
borrowed by the Fuel Companies to pay the Acquisition Costs for
Nuclear Material subject to lease. Under the new UBS financing
arrangement, the Fuel Companies would issue and sell their
commercial paper from time to time to finance acquisition costs
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of Nuclear Material. To reduce borrowing costs, the Fuel
Companies' commercial paper credit would be enhanced through the
issuance by UBS of letters of credit ("LC's") in an aggregate
face amount of up to $210,000,000 outstanding at any time,
subject to the following sublimits: JCP&L ($127.5 million), Met-
Ed ($55 million) and Penelec ($27.5 million). The commercial
paper would be evidenced by commercial paper notes ("CP Notes").
The CP Notes would be deposited with a commercial paper
depository and sold to or through a commercial paper dealer.
Under the New Credit Facility, the Fuel Companies would
enter into separate credit agreements ("New Credit Agreements")
pursuant to which the Agent would issue its LC's and each Fuel
Company would agree to reimburse the Lenders for drawings made
thereunder. The Fuel Companies would also be entitled to borrow
under the New Credit Facility to provide for direct borrowings in
lieu of issuing CP Notes. To evidence its obligations to repay
such direct borrowings, each Fuel Company will issue and sell to
the Lenders its promissory notes ("New Notes"). The aggregate
principal amount of New Notes outstanding at any time would not
exceed the lesser of (a) $210,000,000 less the outstanding
principal amount of CP Notes and (b) the Stipulated Casualty
Value of all Nuclear Material under lease at such time, less the
outstanding principal amount of CP Notes. The New Credit
Facility would have an initial term of three years, renewable on
the first anniversary thereof and on each anniversary thereafter.
The New Notes would be secured on the same basis as the
Existing Notes and would bear interest at either an Alternative
Base Rate or a Eurodollar Rate. The Alternative Base Rate is a
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fluctuating annual rate equal to the higher of (i) the Agent's
publicly announced prime rate and (ii) 50 basis points above the
rate on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers.
Eurodollar Rate Notes would bear interest at the Eurodollar Rate
plus the Applicable Margin and would be fixed at the Fuel
Company's option for interest periods of 1, 2, 3 or 6 months.
The Eurodollar Rate is defined as the annual interest rate for
deposits in U.S. dollars as reported in the Dow Jones Telerate
system or if such rate is not reported, at the LIBOR rate, in
each case for the two business day period prior to such interest
period. The Applicable Margin would range from 27.5 to 65 basis
points depending on the GPU Company's senior secured long term
debt ratings assigned by Standard & Poor's Corporation, Moody's
Investors Services or Duff & Phelps (collectively, the "Rating
Agencies").
Under the New Credit Agreements, the Fuel Companies
would have the right upon three business days notice to prepay
outstanding New Notes. In addition, the Fuel Companies would be
obligated to prepay outstanding New Notes in amounts equal to the
sum of (a) the cost of Nuclear Material consumed plus any
associated finance charges incurred in connection therewith which
the Fuel Companies are unable to capitalize (Basic Rent) in
excess of the interest and principal payments due on indebtedness
of the Fuel Companies and other costs incurred in connection with
the Credit Facility and the certain related financing documents
(Monthly Debt Service) and (b) the amount received by the Fuel
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Companies related to a sale or transfer (other than by lease) of
Nuclear Material to the GPU Companies or a third party.
2. The Fuel Companies would pay the following fees to
the Lenders in connection with the New Credit Facility: (i) an
Arrangement Fee of $210,000; (ii) an annual Administration Fee of
$30,000; (iii) a Commitment Fee based on each lender's unused
commitment under the New Credit Facility ranging from 8 to 20
basis points per year depending on the GPU Company's senior
secured long term debt ratings as assigned by the Rating
Agencies; (iv) a Letter of Credit Issuing Fee at a rate of 10
basis points per year based on the committed amount of the New
Credit Facility (i.e., $210,000,000); and (v) a Letter of Credit
Risk Fee at a yearly rate equal to the Applicable Margin on the
average daily principal amount of CP Notes issued by the Fuel
Company from time to time.
In addition, the GPU Companies have agreed to pay
certain transaction expenses in connection with the execution of
the amended and restated lease agreements, the establishment of
the New Credit Facility and the consummation of the transactions
contemplated thereby. The GPU Companies will also indemnify the
Fuel Companies, the Trustee and the Lenders against certain
liability, hazards, contingencies and risks of loss in connection
with the Fuel Companies' acquisition and lease of Nuclear
Material to the GPU Companies. The GPU Companies would reimburse
the Fuel Companies for all such fees, expenses and
indemnification costs and all such expenses would be paid as
additional rent payments under the amended and restated lease
agreements.
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3. In connection with the New Credit Facility, the
GPU Companies also propose to amend and restate each of the lease
agreements between the GPU Companies and TMI-1 Fuel Corp. and
Oyster Creek Fuel Corp. (The 1991 Lease Agreements, as proposed
to be amended and restated, are herein referred to as the
"Amended and Restated Lease Agreements"). The Amended and
Restated Lease Agreements would, among other things, reflect (i)
a reduction in the maximum aggregate value of Nuclear Material to
be leased thereunder from $250,000,000 to $210,000,000 (and a
concurrent reduction in the related sublimits for JCP&L, Met-Ed
and Penelec to $127.5 million, $55 million and $27.5 million,
respectively); (ii) the establishment of the New Credit Facility
with UBS, as agent; (iii) a change in the term of the leases from
being renewable annually to leases with an initial three year
term renewable annually thereafter, but in no event with a term
beyond 20 years; and (iv) certain other modifications to the
representations, covenants and events of default provisions. The
GPU Companies would continue to pay a BTU Charge and a Lease Rate
("Basic Rent") as under the 1991 Lease Agreements although the
new Lease Rate would be based on the rates of the CP Notes and/or
the New Notes, which the GPU Companies expect will be lower than
the current Lease Rate. In addition, the GPU Companies would
execute new letters of representation to the Lenders regarding
performance under the Amended and Restated Lease Agreements and
preservation of collateral, and conforming changes would be made
to the Trust Agreement and ancillary lease and financing
documents, including the Security Agreement.
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D. The GPU Companies submit that all of the criteria
of Rules 53 and 54 under the Act with respect to the proposed
transactions are satisfied.
(i) The average consolidated retained earnings
for GPU and its subsidiaries, as reported for the four
most recent quarterly periods in GPU's Annual Report on
Form 10-K for the year ended December 31, 1994 and
Quarterly Reports on Form 10-Q for the quarters ended
September 30, 1994, March 31, 1995 and June 30, 1995,
as filed under the Securities Exchange Act of 1934, was
approximately $1.82 billion. At the date hereof, GPU
had invested, or committed to invest, directly or
indirectly, an aggregate of approximately $60.4 million
in EWGs and $300,000 in FUCOs. Accordingly, GPU's
investment in EWGs and FUCOs, assuming all outstanding
or pending authorizations ($200 million in SEC File No.
70-8593, $130 million in SEC File No. 70-8455, $200
million in SEC File No. 70-7926 and $550 million in SEC
File No. 70-7727), is invested in EWGs or FUCOs, would
be approximately 3% of such average consolidated
retained earnings, which is below the 50% limitation in
Rule 53.
(ii) GPU maintains books and records to identify
investments in, and earnings from, each EWG and FUCO in
which it directly or indirectly holds an interest. (A)
For each United States EWG in which GPU directly or
indirectly holds an interest:
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(1) the books and records for such EWG
will be kept in conformity with United States
generally accepted accounting principles ("GAAP");
(2) the financial statements will be
prepared in accordance with GAAP; and
(3) GPU directly or through its
subsidiaries undertakes to provide the Commission
access to such books and records and financial
statements as the Commission may request.
(B) For each FUCO or foreign EWG which is a
majority-owned subsidiary of GPU:
(1) the books and records for such
subsidiary will be kept in accordance with GAAP;
(2) the financial statements for such
subsidiary will be prepared in accordance with
GAAP; and
(3) GPU directly or through its
subsidiaries undertakes to provide the Commission
access to such books and records and financial
statements, or copies thereof in English, as the
Commission may request.
(C) For each FUCO or foreign EWG in which
GPU owns 50% or less of the voting securities, GPU directly
or through its subsidiaries will proceed in good faith, to
the extent reasonable under the circumstances, to cause
(1) such entity to maintain books and
records in accordance with GAAP;
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(2) the financial statements of such entity
to be prepared in accordance with GAAP; and
(3) access by the Commission to such books
and records and financial statements (or copies
thereof) in English as the Commission may request
and, in any event, will provide the Commission on
request copies of such materials as are made
available to GPU and its subsidiaries. If and to
the extent that such entity's books, records or
financial statements are not maintained in
accordance with GAAP, GPU will, upon request of
the Commission, describe and quantify each
material variation therefrom as and to the extent
required by subparagraphs (a) (2) (iii) (A) and
(a) (2) (iii) (B) of Rule 53.
(iii) No more than 2% of GPU's domestic public
utility subsidiaries will render any services, directly or
indirectly, to any EWG or FUCO in which GPU directly or
indirectly holds an interest.
(iv) Copies of this Application on Form U-1 are
being provided to the New Jersey Board of Public Utilities,
the Pennsylvania Public Utility Commission and the New York
Public Service Commission, the only federal, state or local
regulatory agencies having jurisdiction over the retail
rates of GPU's electric utility subsidiaries. In addition,
GPU will submit to each such commission copies of any Rule
24 certificates required hereunder, as well as a copy of
Item 9 of GPU's Form U5S and Exhibits G and H thereof
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(commencing with the Form U5S to be filed for the calendar
year in which the authorization herein requested is
granted).
(v) None of the provisions of paragraph (b) of
Rule 53 render paragraph (a) of that Rule unavailable for
the proposed transactions.
(A) Neither GPU nor any subsidiary of GPU is
the subject of any pending bankruptcy or similar
proceeding.
(B) GPU's average consolidated retained
earnings for the four most recent quarterly
periods (approximately $1.82 billion) represented
a decrease of approximately $20 million (or
approximately 1.1%) in the average consolidated
retained earnings for the previous four quarterly
periods (approximately $1.84 billion).
(C) GPU did not incur operating losses from
direct or indirect investments in EWGs and FUCOs
in 1994 in excess of 5% of GPU's consolidated
retained earnings.
ITEM 2. FEES, COMMISSIONS AND EXPENSES.
The estimated fees, commissions and expenses to be
incurred by the GPU Companies in connection with the proposed
transaction will be supplied by a further post-effective
amendment.
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ITEM 3. APPLICABLE STATUTORY PROVISIONS.
The GPU Companies believe that the proposed transac-
tions may be subject to Sections 9(a) and 10 of the Act.
ITEM 4. REGULATORY APPROVALS.
The New Jersey Board of Public Utilities ("NJBPU") has
jurisdiction with respect to JCP&L's proposed lease of the
Nuclear Material. By Order dated August 1, 1991, the NJBPU
authorized JCP&L to enter into the transactions contemplated by
the 1991 Lease Agreements to which it is a party. Such order
required that JCP&L inform the NJBPU in advance of the extension,
amendment or renewal of the 1991 Lease Agreements. JCP&L will so
inform the NJBPU and if required will file with the NJBPU a
Petition (or an amendment to its prior Petition, as appropriate)
relating to its Oyster Creek and TMI-1 Leases and in such event
it would be expected that the NJBPU will expressly authorize such
transaction.
The Pennsylvania Public Utility Commission ("PaPUC")
has jurisdiction with respect to the proposed lease of Nuclear
Material for use at TMI-1 by Met-Ed and Penelec. By Orders dated
August 1, 1991, the PaPUC authorized Met-Ed and Penelec to enter
into the transactions contemplated by the 1991 Lease Agreements
to which such companies are party. A further order of the PaPUC
may be required to approve the proposed transactions. If so
required, Met-Ed and Penelec will file with the PaPUC Securities
Certificates (or amendments to their prior Securities
Certificates as appropriate) with respect to such transactions.
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In such event it would be expected that the PaPUC will issue
orders expressly authorizing such transactions.
No other state commission has jurisdiction with respect
to any aspect of the proposed transaction and, assuming your
Commission authorizes and approves all aspects of the transaction
(including the accounting therefor), no Federal commission other
than your Commission has jurisdiction with respect to any aspect
thereof.
ITEM 5. PROCEDURE.
It is requested that the Commission issue an order with
respect to the transactions proposed herein at the earliest
practicable date but, in any event, not later than October 13,
1995. It is further requested that (i) there not be a
recommended decision by an Administrative Law Judge or other
responsible officer of the Commission, (ii) the Office of Public
Utility Regulation be permitted to assist in the preparation of
the Commission's decision, and (iii) there be no waiting period
between the issuance of the Commission's order and the date on
which it is to become effective.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.
(a) Exhibits:
B-1(a) - Term Sheet between the GPU Companies and
Union Bank of Switzerland.
B-2(a) - Forms of Amended and Restated Nuclear
Material Lease Agreements -- to be filed
by post-effective amendment.
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B-2(b) - Forms of New Letters of Representation -
- to be filed by post-effective
amendment.
B-3(c) - Form of Amended and Restated Trust
Agreement -- to be filed by post-
effective amendment.
C - None.
E - Not Applicable.
F-1(a) - Opinion of Berlack, Israels & Liberman
LLP -- to be filed by post-effective
amendment.
F-2(a) - Opinion of Richard S. Cohen, Esq. -- to
be filed by post-effective amendment.
F-3(a) - Opinion of Ryan, Russell, Ogden &
Seltzer -- to be filed by post-effective
amendment.
F-4(a) - Opinion of Ballard Spahr Andrews &
Ingersoll -- to be filed by post-
effective amendment.
G - Financial Data Schedule.
H - Proposed form of public notice.
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(b) Financial Statements:
1-A(i) - GPU and Subsidiary Companies
Consolidated Balance Sheets, actual and
pro forma, as at June 30, 1995, and
Consolidated Statement of Income, actual
and pro forma, and Statements of
Retained Earnings, for the twelve months
ended June 30, 1995; pro forma journal
entries.
1-B(i) - JCP&L Balance Sheets, actual and pro
forma, as at June 30, 1995, and State-
ments of Income, actual and pro forma,
and Statements of Retained Earnings, for
the twelve months ended June 30, 1995;
pro forma journal entries.
1-C(i) - Met-Ed Consolidated Balance Sheets,
actual and pro forma, as at June 30,
1995, and Consolidated Statements of
Income, actual and pro forma, and
Statements of Retained Earnings, for the
twelve months ended June 30, 1995; pro
forma journal entries.
1-D(i) - Penelec Consolidated Balance Sheets,
actual and pro forma, as at June 30,
1995, and Consolidated Statements of
Income, actual and pro forma, and State-
ments of Retained Earnings, for the
twelve months ended June 30, 1995; pro
forma journal entries.
Note: - GPU (Corporate) actual and pro forma
financial statements are omitted since
they are not deemed to be relevant to
the proposed transaction.
3 - Not Applicable.
4 - Statement of Material Changes since the
date of the balance sheet which are not
reflected in the notes to the financial
statements - None.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.
(a) The proposed transactions are designed to assist
the GPU Companies in providing for the Acquisition Costs of the
Nuclear Material. As such, the issuance of an order by your
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Commission with respect to the various proposed transactions
which are the subject hereof is not a major Federal action
significantly affecting the quality of the human environment.
(b) No Federal agency has prepared or is preparing an
environmental impact statement with respect to the various
proposed transactions which are the subject hereof. Reference is
made to Item 4 hereof regarding regulatory approvals with respect
to the proposed transactions.
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SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE PUBLIC UTILITY
HOLDING COMPANY ACT OF 1935, THE UNDERSIGNED COMPANIES HAVE DULY
CAUSED THIS POST-EFFECTIVE AMENDMENT TO BE SIGNED ON ITS BEHALF
BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
JERSEY CENTRAL POWER & LIGHT
COMPANY
METROPOLITAN EDISON COMPANY
PENNSYLVANIA ELECTRIC COMPANY
By:__________________________________
T. G. Howson, Vice President
and
Treasurer
Date: August 15, 1995<PAGE>
EXHIBITS AND FINANCIAL STATEMENTS TO BE FILED BY EDGAR
Exhibits:
B-1(a) - Term Sheet between the GPU Companies and
Union Bank of Switzerland.
G - Financial Data Schedule.
H - Proposed form of public notice.
Financial Statements:
1-A(i) - GPU and Subsidiary Companies
Consolidated Balance Sheets, actual and
pro forma, as at June 30, 1995, and
Consolidated Statement of Income, actual
and pro forma, and Statements of
Retained Earnings, for the twelve months
ended June 30, 1995; pro forma journal
entries.
1-B(i) - JCP&L Balance Sheets, actual and pro
forma, as at June 30, 1995, and State-
ments of Income, actual and pro forma,
and Statements of Retained Earnings, for
the twelve months ended June 30, 1995;
pro forma journal entries.
1-C(i) - Met-Ed Consolidated Balance Sheets,
actual and pro forma, as at June 30,
1995, and Consolidated Statements of
Income, actual and pro forma, and
Statements of Retained Earnings, for the
twelve months ended June 30, 1995; pro
forma journal entries.
1-D(i) - Penelec Consolidated Balance Sheets,
actual and pro forma, as at June 30,
1995, and Consolidated Statements of
Income, actual and pro forma, and State-
ments of Retained Earnings, for the
twelve months ended June 30, 1995; pro
forma journal entries.<PAGE>
Exhibit B-1(a)
Proposed Summary of Terms and Conditions
for
US $210,000,000 Credit Facility
for
Jersey Central Power & Light Company,
Metropolitan Edison Company and
Pennsylvania Electric Company
July, 1995
Account Parties: Oyster Creek Fuel Corp. and TMI-1 Fuel
Corp. (collectively, the "Fuel Companies")
Facility: $210,000,000 Secured Credit with sublimits
as follows:
Jersey Central Power & Light Company -
$127.5 million
Metropolitan Edison Company - $55.0 million
Pennsylvania Electric Company - $27.5
million
Purpose: The Facility will be available for (a) an
irrevocable direct pay letter of credit to
enhance taxable commercial paper ("CP
Notes") issued by the Fuel Company ("Letter
of Credit") and (b) revolving loans funded
by the Banks ("Bank Loans").
Beneficiary: Issuing and Paying Agent for the benefit of
the CP Noteholders.
Agent, Issuing Bank
and Arranger: Union Bank of Switzerland, New York Branch
("UBS")
Bank Participants: UBS, and other commercial banks
(collectively, the "Banks") selected by,
and deemed satisfactory to, the Fuel
Companies and the Agent. All such
prospective risk participants in the Letter
of Credit shall be subject to formal credit
approval of the Agent in its sole
discretion.
Security: The obligations of the Fuel Companies under
the Facility will be secured for the
benefit of the Issuing Bank and Banks, by a
security interest in the fuel Companies'
right, title and interest in, to and under
the Collateral. "Collateral" will be
defined in the Security Agreement and is
generally described as the Nuclear Fuel
Lease Agreement (the "Lease") of each<PAGE>
utility and related documents, nuclear fuel
leased under the Lease ("Nuclear Fuel"),
nuclear fuel contracts and any proceeds and
monies received by the Fuel Companies
related to the Lease or Nuclear Fuel.
Availability: Letter of Credit. Subject to the
conditions of closing outlined herein, the
Issuing Bank will issue a Letter of Credit
in the amount of up to $210,000,000.
Bank Loans. At the Fuel Companies' option
and subject to the conditions precedent
hereinafter setforth, Bank Loans will be
provided as either an Alternative Base Rate
("ABR") Advance or Eurodollar Rate
Advance, in each case solely to refinance
reimbursement obligations in respect of the
Letter of Credit or as direct borrowings in
lieu of issuance of CP Notes.
(a) Eurodollar Rate Advance. Interest
will be payable at the Eurodollar
Rate plus the Applicable Margin.
The Eurodollar Rate shall mean the
interest rate per annum for
deposits in U.S. dollars which
appears on page 3750 of the Dow
Jones Telerate Screen as of 11:00
A.M., London Time, on the date that
is two business days prior to such
interest period, or, if such a rate
does not appear on the Dow Jones
Telerate Screen, an interest rate
per annum at which deposits in U.S.
dollars are offered by the
Reference Banks to prime banks in
the London interbank market at
11:00 A.M., London time, two
business day before the first day
of the interest period, as adjusted
for reserve requirements.
The Eurodollar Rate shall be fixed, at
the Fuel Companies' option, for interest
periods of 1, 2, 3, or 6 months.
(b) ABR Advances. Interest will be
payable at the ABR.
The ABR is a fluctuating rate per annum
equal to the higher of (i) the Agent's
publicly announced prime rate and (ii)
50 basis points above the rate on
overnight Federal funds transactions
with members of the Federal Reserve
-2-<PAGE>
System arranged by Federal funds
brokers.
The aggregate principal amount of Bank
Loans outstanding shall not at any time
exceed the lesser of (a) $210,000,000 less
the outstanding amount of CP Notes or (b)
the Stipulated Casualty Value of all
Nuclear Fuel leased at such at such time
under the Leases less the outstanding
amount of CP Notes.
"Stipulated Casualty Value" for any leased
Nuclear Fuel is an amount equal to the
acquisition cost for such Nuclear Fuel
reduced by the aggregate total amount, if
any, of Monthly Rent Components paid by the
Lessees to the Fuel Companies with respect
to such Nuclear Fuel. Monthly Rent
Component will be defined in the Lease, but
is generally described as the monthly
charge for any leased Nuclear Fuel based on
the amount of heat produced by such Nuclear
Fuel. The Lessees under the Leases shall
be Jersey Central Power & Light Company,
Metropolitan Edison Company and
Pennsylvania Electric Company,
respectively.
Term: The initial term of the Facility will be
three years. A renewal provision will
provide for one year extensions on the
first anniversary of the Facility and on
each anniversary thereafter at the sole
discretion of the Issuing Bank and the
Banks.
Prepayment: Optional Prepayment: The Fuel Companies
shall have the right, upon three business
days notice, to prepay outstanding Bank
Loans under the Facility subject to the
payment of all breakage costs, if
applicable;
Mandatory Prepayment: The Fuel Companies,
as applicable, shall prepay outstanding
Bank Loans under the Facility equal to the
sum of: (a) the amount of Basic Rent in
excess of Monthly Debt Service and (b) the
amount received by the Fuel Companies
related to a sale or transfer (other than
by lease) of Nuclear Fuel to the lessees or
a third party. In lieu of prepaying
outstanding Bank Loans, or if the aggregate
amount received by the Fuel Companies is in
excess of outstanding Bank Loans, the Fuel
-3-<PAGE>
Companies may place any such amount in a
collateral account for the benefit of the
Banks.
"Basic Rent", on a monthly basis, is equal
to the cost of Nuclear Fuel which has been
consumed in the generation of electricity
plus any finance charges directly or
indirectly incurred in connection with
Nuclear Fuel which the Fuel Companies are
not able to capitalize and finance.
"Monthly Debt Service" for any month means
the interest principal due on indebtedness
of the Fuel companies and other cots
incurred in connection with the Facility
and the Basic Documents (to be defined
herein).
Reduction of
Commitment: The Fuel Companies may at their discretion,
upon three business days notice, terminate
or cancel, in whole or in part, the
Facility, subject to the payment in full of
any outstanding CP Notes, Bank Loans and
unreimbursed Letter of Credit drawings, and
all interest, fees and other amounts
payable under the Credit Facility, and the
payment of any breakage costs if
applicable.
Pricing: Arrangement Fee: The Fuel Companies shall
pay to the Agent for its own account at
closing an Arrangement Fee equal to the
higher of 10 basis points per annum payable
on the amount of the Facility, or $200,000.
Administration Fee: The Fuel Companies
shall pay to the Agent for its own account
an annual Administration Fee equal to
$30,000, payable at closing and thereafter
annually in advance.
Commitment Fee: The Fuel Companies agree
to pay the Agent, for the account of each
Bank, the following Commitment Fee on such
Bank's pro rata share of the Unused
Commitment. The "Unused Commitment" shall
be equal to the Total commitment available
under the Facility less outstanding Bank
Loans and CP Notes. The Commitment Fee
shall be payable quarterly in arrears and
is calculated on the basis of a 360-day
year for actual days elapsed. The
Commitment Fee will be based on the ratings
assigned by Standard & Poors, Moody's and
Duff & Phelps to the Lessees' senior
-4-<PAGE>
secured long term debt ("Senior Secured
Debt Rating"), as follows:
Rating* Commitment Fee
A-/A3 and above 8.0 basis points per
annum
BBB+/Baa1 11.5 basis points
per annum
BBB/Baa2 12.5 basis points
per annum
BBB-/Baa3 15.0 basis points
per annum
Less than
BBB-/Baa3 20.0 basis points
per annum
* For purposes of determining the amount
of the Commitment Fee, the Senior Secured
Debt Rating for each Lessee shall be deemed
to be that corresponding to the lower of
such Lessee's two highest Senior Secured
Debt Ratings at the time of determination.
The Commitment Fee shall be based on the
lowest Senior Secured Debt Rating of the
Lessees.
Interest Rates: Interest on a Eurodollar
Rate Advance shall be calculated on the
basis of a 360-day year and the actual
number of days elapsed, and interest on an
ABR Rate Advance shall be calculated on the
basis of a 365(366)-day year and the actual
number of days elapsed.
The Applicable Margin will be based on the
ratings assigned by Standard & Poors,
Moody's and Duff & Phelps to the Lessees'
Senior Secured Debt Ratings, as follows:
Rating* Applicable Margin
A-/A3 and above 27.5 basis points per
annum
BBB+/Baa1 32.5 basis points
per annum
BBB/Baa2 40.0 basis points
per annum
-5-<PAGE>
BBB-/Baa3 50.0 basis points
per annum
Less than
BBB-/Baa3 65.0 basis points
per annum
* For purposes of determining the
Applicable Margin, the Senior Secured Debt
Rating for each Lessee shall be deemed to
be that corresponding to the lower of such
Lessee's two highest Senior Secured Debt
Ratings at the time of determination. The
Applicable Margin shall be based on the
lowest Senior Secured Debt Rating of the
Lessees.
Letter of Credit Issuing Fee: Each Fuel
Company agrees to pay to UBS a fee at a
rate of 10 basis points per annum on the
average daily face amount of CP Notes
issued by such Fuel Company outstanding
from time to time. The Letter of Credit
Issuing Fee shall be payable quarterly in
arrears and is calculated on the basis of a
360-day year for actual days elapsed.
Letter of Credit Risk Fee: Each Fuel
Company agrees to pay to the Agent, for the
account of each Bank, a fee at a rate per
annum equal to the Applicable Margin on the
average daily face amount of CP Notes
issued by such Fuel Company outstanding
from time to time. The Letter of Credit
Risk Fee shall be payable quarterly in
arrears and is calculated on the basis of a
360-day year for actual days elapsed.
Drawing Fee: $100 per drawing subject to a
maximum payment of $1,000 per month in
aggregate for the Fuel Companies.
Default Rates: Interest on amounts not
paid when due shall be based on the higher
of the ABR plus 2% per annum or 2% per
annum above the then applicable interest
rate. If the Facility is in default, the
applicable Letter of Credit Risk Fee shall
be at a rate per annum equal to the
Applicable Margin plus 2% on the aggregate
outstanding amount of CP Notes issued by
such Fuel Company.
Terms of
Reimbursement by
Reimbursement
-6-<PAGE>
Banks: On the date of payment by the Issuing Bank
of a draw on the Letter of Credit, each
Bank will absolutely and unconditionally
agree to pay to the Agent, for the account
of the Issuing Bank, a sum equal to (x)
such Bank's participation percentage of the
amount of such draw plus (y) interest, if
any, from the reimbursement due date to the
date of reimbursement at a rate to be
determined by the Issuing Bank.
Terms of
Reimbursement by
the Fuel
Companies: The Fuel Companies, the Agent, the Issuing
Bank and The Banks will all be party to a
credit agreement (the "Credit Agreement")
which will set forth in detail the terms
under which the Fuel Issuing Bank and the
Banks for the amount of the draws under the
Letter of Credit.
Reimbursement
by the Fuel
Companies: Unless a drawing under the Letter of Credit
is to be funded by a Bank Loan, the Fuel
Companies shall pay to the Agent on demand
for the account of each Bank the amount of
each such drawing.
Representation
and Warranties: Those usual and customary for transactions
of this type, including but not limited to:
1) Existence and authority;
2) Execution and delivery of documents;
3) Required consents;
4) Binding effect;
5) No litigation and adverse rulings;
6) Financial information related to the
Fuel Companies;
7) No material adverse change at closing;
8) All of the capital stock of the Fuel
Companies is owned by U.S. Trust or
another acceptable owner trustee;
9) Title or properties;
10) Payment of Taxes;
11) Compliance with laws including
environmental, and ERISA;
12) Each representation and warranty of
the Fuel Companies set forth in any
of the Basic Documents if true and
correct;
13) Disclosure;
14) Perfected first priority security
interest in the Collateral.
-7-<PAGE>
Conditions Precedent
to Closing and the
Obligations of the
Banks: Those usual and customary for transactions
of this type, including but not limited to:
1) Receipt of legal opinions satisfactory
in form and substance to the Agent from
counsel to the Fuel Companies, the
Lessees and the Owner Trustee;
2) All representations and warranties in
the Facility and all Basic Documents
shall be true and correct and no
material adverse change in the financial
condition, operations, properties or
assets of the Fuel Companies or the
Lessees shall have occurred since [June
30,] 1995;
3) The final terms and conditions of the
Facility and the transactions
contemplated thereby and all
documentation relating thereto shall be
in form and substance satisfactory to
the Agent and the Banks and the Fuel
Companies shall have performed and
complied with all agreements and
conditions contained in the Facility;
4) Receipt of copies of the Nuclear Fuel
Lease Agreements, the Letter Agreements,
the Security Agreements, the Trust
Agreements, the Depositary Agreements,
the Dealer Agreements, promissory notes
and other related agreements
(collectively and including the Credit
Agreement and the CP Notes, the "Basic
Documents") all of which shall be in
form and substance satisfactory to the
Agent, the Issuing Bank and the Banks;
5) No Default or Event of Default shall
have occurred under the Facility and
related documents or under the other
Basic Documents;
6) Delivery of standard certified
resolutions, certified articles of
incorporation and bylaws, incumbency
certificates, good standing certificates
and copies of all governmental and
regulatory approvals, including without
limitation all governmental and
regulatory approvals necessary for the
-8-<PAGE>
Fuel Companies to enter into the
Facility and all Basic Documents;
7) All necessary UCC financing statements
have been filed and duly recorded and
there has been created and perfected a
valid first priority security interest
in the Collateral of the Fuel Companies
securing all obligations of the Fuel
Companies under the Facility;
8) All governmental and third party
consents and approvals required shall
have been obtained and shall be in form
and substance satisfactory to the Agent
and the Banks;
9) Payment of all reasonable fees and
expenses, including fees and
disbursements of legal counsel on the
terms agreed to by the parties in this
term sheet and elsewhere;
10) Satisfactory completion of the
Agent's due diligence to the Basic
Documents, other conditions in
respect of the credit approval of
the Agent, and any other approvals,
opinions or documents that the
Agent or the Banks may reasonable
request;
11) A certificate of the Lessees a)
acknowledging the Facility, b)
stating that there has been no
material adverse change in the
Lessees' businesses or financial
condition since [June 30,] 1995,
and c) certifying that the Lessees
are not in default under the Basic
Documents to which they are a party
and such documents are in full
force and effect.
12) The Agent, the Issuing Bank and the
Banks shall be reasonably satisfied
with the CP Note dealers and
depositary and all CP Note offering
materials;
13) Termination of existing Prudential
credit facilities including without
limitation the Note Agreement and
all existing liens.
Conditions Precedent
-9-<PAGE>
to all Credit Events
under the Facility: "Credit Events" shall mean the issuance of
any CP Notes or the making or conversion of
any Bank Loans under the Facility.
1) All representations and warranties
in the Facility and all Basic
Documents shall be true and correct
(excluding the representation as to
the absence of a material adverse
change);
2) No Default or Event of Default
shall have occurred and be
continuing under the Facility or
under the Basic Documents;
3) All other terms of the Facility and
the Basic Documents applicable to
such Credit Events have been
complied with;
4) After giving effect to any Credit
Events, the Stipulated Casualty
Value of Nuclear Fuel leased by
each Fuel Company is greater than
the outstanding amount of Bank
Loans under the Facility and CP
Notes of such Fuel Company.
Covenants of the
Fuel Companies: Those usual and customary for
transactions of this type, including but
not limited to:
1) Maintain corporate existence;
2) Payment of obligations and taxes;
3) Financial reporting;
4) Default, termination and litigation
notice;
5) Access to books and records;
maintain properties;
6) Indemnification of the Banks;
7) Insurance;
8) Compliance by Fuel Companies with
obligations under Basic Documents
9) No Indebtedness, other than (a) CP
Notes and Bank Loans under the
Facility not to exceed the lesser
of $210,000,000 or the Stipulated
Casualty Value at such time of all
Nuclear Fuel leased at such time
under the Lease and (b) the Letter
of Credit issued under the
Facility; (Indebtedness shall be
defined in the Facility but is
-10-<PAGE>
generally described as all items
which in accordance with GAAP
should be reflected on the
liability side of a balance sheet
and any guaranties, endorsements
and contingent obligations)
10) No liens other than liens in favor
of the Banks pursuant to the
Security Agreements;
11) The Fuel Companies shall not engage
in any business other than owning
and leasing Nuclear Fuel and
engaging in the activities
contemplated by the Facility and
the Basic Documents;
12) Not sell, transfer, assign or
otherwise dispose of material
assets except pursuant to the Basic
Documents;
13) No mergers or consolidations;
14) No sale of capital stock of the
Fuel Companies to any person other
than the Lessees, their affiliates
or U.S. Trust;
15) No investments, loans, advances,
guarantees or purchases of
securities other than investments
held in a collateral account for
the benefit of the Banks;
16) No dividends other than amounts to
the owner trustee in the nature of
a reasonable fee for services
rendered;
17) No sale of CP Notes except with an
offering memorandum satisfactory to
the Agent, the Issuing Bank and the
Banks;
18) No amendment or waiver of any
provision of the Leases.
Events of Default: Those usual and customary for
transactions of this type, including but
not limited to:
1) any representation or warranty made
or deemed made by the Fuel
Companies or the Lessees in the
Facility or Basic Documents shall
prove to be false or misleading in
any material respect;
2) failure by the Fuel Companies to
reimburse any drawing, or to make
any payment of principal, interest
or fees under the Facility when
-11-<PAGE>
due, subject to applicable grace
periods to be determined;
3) failure by the Fuel Companies to
make any payment of principal and
interest due on CP Notes or any
other default with respect to CP
Notes subject to applicable grace
periods to be determined;
4) failure of the Fuel Companies to
make any other payment owing under
the Facility on or before 20
business days after such payment is
due;
5) failure by the Fuel Companies to
observe or perform any negative
covenant and certain affirmative
covenants contained in the
Facility;
6) failure by the Fuel Companies and
the Lessees to observe or perform
any other covenants, terms or
conditions contained in the
Facility and the Basic Documents
that continue for 30 days;
7) voluntary or involuntary bankruptcy
of the Fuel Companies or any
Lessee;
8) judgments for the payment of money
of Fuel Companies in excess of
$500,000 that remain undischarged
or unstayed pending appeal for 30
days;
9) any Event of Default under the
Basic Documents or failure by any
Lessee to comply with the terms and
covenants of the Letter Agreement
to the Banks to which it is a
party'
10) termination of the Lease;
11) failure of the security to provide
a first priority perfected security
interest to the Banks;
12) any material provision of the Basic
Documents shall cease to be valid
and binding on any party thereto;
-12-<PAGE>
13) ERISA defaults;
14) failure by Lessee to observe or
perform any covenant or obligation
under such Lessee's Letter
Agreement to the Banks;
15) defaults in payment or any other
material obligation in respect of
any nuclear fuel contract unless
contested in good faith;
Remedies: Remedies of the Agent and the Banks for
an Event of Default shall be usual and
customary for transactions of this type
including but not limited to:
1) acceleration of all amounts
outstanding under the Facility;
2) termination of commitments under
the Facility;
3) ability to direct commercial paper
depositary to draw on the Letter of
Credit supporting CP Notes in an
amount equal to the face amount of
such CP Notes; and
4) exercise rights with respect to the
Collateral
Upon the occurrence of a default or an
Event of Default, the Agent may direct
the commercial paper depositary not to
issue any additional CP Notes.
Participations
and Assignments: Each Bank may sell participations in its
commitment and Bank Loans under the
Facility to other eligible financial
institutions. Each Bank may, with the
prior written consent of the Agent in
consultation with the Lessees (provided
that no consent of the Lessees shall be
required), assign portions of its
commitment and Bank Loans under the
Facility (in minimum amounts of
$5,000,000) to other eligible financial
institutions. Notwithstanding the
above, the Agent may not sell
participations in its commitment and
Bank Loans under the Facility nor assign
portions of its commitment and Bank
Loans under the Facility without the
prior consent of the Lessees. Each
assignment will be subject to payment by
the relevant Bank (or its transferee) to
the Agent of a $2,500 processing fee.
-13-<PAGE>
Yield Protection: The usual and customary for transactions
of this type, including, but not limited
to, unavailability of funding
illegality, reserves if incurred,
capital adequacy, redeployment costs and
any other yield protection deemed
necessary by the Agent.
Indemnification: Except for gross negligence or willful
misconduct, the Fuel Companies will
indemnify the Agent, the Issuing Bank
and the Banks against all losses,
liabilities, claims, suits, damages or
expenses relating to their Bank Loans,
the Letter of Credit, the Basic
Documents, use of proceeds, or the
commitments, including, but not limited
to, reasonable attorney's fees and
settlement costs.
Fees and Expenses: Reasonable closing costs incurred by the
Agent, in connection with documenting,
closing and syndicating the Facility,
(including reasonable out-of-pocket
expenses, and fees and disbursements of
counsel) will be for the account of the
Fuel Companies, and will be payable
whether or not the Basic Documents are
signed or closing of the Facility
occurs. Expense, fees and costs
incurred by the Banks (other than the
Agent) will be for their own accounts.
Governing Law: New York.
Clear Market: From the date hereof until the close of
syndication, neither the Account
Parties, GPU nor the GPU Subsidiaries
shall approach banks or other financial
institutions in the domestic or
international capital or loan
syndication markets for any financing
which in the reasonable opinion of UBS,
would compete with the financing
described herein. This provision
excludes short term transactions made in
the ordinary course of business.
-14-<PAGE>
Nuclear Fuel Lease Agreement
The Nuclear Fuel Lease Agreements (the
"Lease") will be entered into by TMI-1
Fuel Corp. and Oyster Creek Fuel Corp.,
each as lessor (the "Fuel Companies"),
and Jersey Central Power & Light
Company, Metropolitan Edison Company and
Pennsylvania Electric Company, as
applicable, each as lessee (the
"Lessees"). The Lease states that the
Fuel Companies will pay for Nuclear Fuel
on the instructions of the Lessees from
funds to be borrowed under the Facility,
or through the issuance of CP Notes.
Any payments in the nuclear fuel cycle
will be eligible for financing through
the Lease. Such payments may include
exploration, mining, ore purchases,
processing, enrichment, design,
fabrication and any capitalized rent,
debt service and all other costs related
to the fuel cycle such as legal fees,
printing costs, insurance premiums,
taxes, issuing agent fees and
independent auditor's fees.
The maximum aggregate value of Nuclear
Fuel leased under the Leases shall be
$210,000,000.
Term: Each Lease will remain in full force and
effect until the related CP Notes and
Bank Loans are repaid in full, but in no
event beyond 20 years. A Lease may be
terminated by the Fuel Company only
under the conditions described below
under Events of Termination and Events
of Default.
Payments: The Lessees under the applicable Leases
will be unconditionally obligated to pay
to the related Fuel Companies:
1) Basic Rent. In addition, the
Lessees agree to prepay Basic Rent
to the extent required to enable
the Fuel Company to pay interest or
other amounts due under the
Facility, or the CP Notes.
2) Additional Rent, on demand, from
time to time equal to all costs
-15-<PAGE>
incurred by the Fuel Company to the
extent not paid as part of Basic
Rent and any other amounts
necessary to enable the Fuel
Company to meet obligations under
the Basic Documents (such amounts
to include, without limitation,
indemnity payments).
Termination: Each Fuel Company, at the direction of
the Banks, may terminate its Lease upon
the occurrence of certain events
including, but not limited to: (1) an
Event of Default under the Lease, (2)
the Fuel Company or its owners becomes
subject to adverse rules, regulations,
decisions, or determinations because of
its participation in this transaction or
any material adverse change in the
insurers, coverage, or insurance policy
maintained by the Lessees, (3) a nuclear
accident occurs giving rise to liability
of the Lessees in excess of $20,000,000,
or (4) a Deemed Loss Event shall have
occurred.
Deemed Loss Event shall be defined in
the Lease, but is generally described
(without limitation) as an event in
which the Public Utility Holding Company
Act shall be amended or be subject to a
change in its interpretation which shall
have a material adverse change on the
validity and enforceability of the Basic
Documents.
If the Lease is terminated the Lessees
will purchase the nuclear fuel at a
price equal to the unamortized fuel cost
plus the amount required to have the
Fuel Companies meet all of its then
outstanding obligations.
Events of Default: Events of Default under the Lease will
include, without limitation:
1) The failure of the lessees to pay
Basic Rent or Additional Rent,
subject to applicable grace periods
presently in place;
2) The Lessees fail to maintain
adequate nuclear insurance;
3) The Lessees fail to purchase
Nuclear Fuel from the Fuel Company
-16-<PAGE>
when required to do so under the
Lease;
4) A final judgment in excess of
$20,000,000 against the Lessees
remains undischarged or unstayed
pending appeal for 30 days;
5) The Lessees fail to perform any
other material obligation or
covenant under the Lease and such
default remains uncured for 30
days;
6) Any representation or warranty made
at the time by the Lessees in the
Lease, or any other Basic Document,
proves to be false or misleading in
any material respect;
7) Certain acts of bankruptcy or
insolvency occur on the part of the
Lessees;
8) Any other Event of Default under
the Basic Documents;
9) A cross default to indebtedness of
the Lessees with a principal amount
equal to or in excess of
$20,000,000.
-17-<PAGE>
Lessees' Letter Agreement to the Banks
The Letter Agreement will be an
agreement between the Lessees, each Fuel
Company and the Banks. The Letter
Agreements shall provide that:
1) the Lessees will perform and comply
with all obligations under the
Lease;
2) the Lessees will not permit the
creation of any liens on any
Collateral other than liens created
by the Security Agreement, title
transfer and commingling of Nuclear
Fuel in connection with processing
by manufacturers, and certain
permitted liens including those
created in the normal course f
business by mechanics, laborers,
etc. or created by government
impositions;
3) The Lessees represent that the
Banks have a first lien and
security interest in the Collateral
and shall take all actions
necessary to perfect the Banks'
security interest in the
Collateral;
4) the Lessees shall not permit the
aggregate Stipulated Casualty Value
of the Nuclear Fuel leased under
the Lease to be less than the sum
of outstanding Bank Loans under the
Facility and CP Notes;
5) the Lessees shall not provide any
guarantee or collateral or agree to
any covenant in order to induce any
person to extend credit to the Fuel
Company;
6) The Lessees shall not direct the
owner Trustee to liquidate the Fuel
Company or cause the Owner Trustee
to take any action under the Trust
Agreement which is inconsistent
with the duties imposed on the Fuel
Company by the Basic Documents;
-18-<PAGE>
7) the lessees agree that the Banks
may on the occurrence of an Event
of Default under the Facility, in
accordance with the Security
Agreement, exercise any of the Fuel
Companies' rights under the Lease
and each other Basic Document to
which the Lessees are a party.
8) each year, the Lessees shall
certify that the insurance policies
and indemnification agreements
required in the Lease are in effect
and in compliance with the Lease;
Representations and
Warranties of the
Lessees to the Banks Usual and customary for transactions of
this type, including, but not limited, to:
1) Existence and authority;
2) Execution and delivery of
documents;
3) Required consents;
4) Binding effect;
5) No material litigation and adverse
rulings other than disclosed in the
annual report of these Lessees for
the year ended December 31, 1994
and SEC Form 10-Q of the Lessees
for the quarter ended [June 30,]
1995;
6) Financial information related to
the Lessee;
7) No material adverse change at
closing;
8) Compliance with other material
instruments;
9) No defaults under nuclear fuel
contracts;
11) Compliance with laws including
environmental and ERISA, non-
compliance with which could
reasonably be expected to have a
material adverse effect on the
Lessees ability to perform under
the Leases or the financial
condition, operations or assets of
such Lessee, except those being
contested in good faith by
appropriate proceedings;
12) Payment of taxes subject to good
faith contests;
13) The Lessee is in compliance with
all terms and conditions in the
Lease;
-19-<PAGE>
14) No Event of Default under the
Lease;
15) No defaults under agreements for
borrowed money;
16) The execution and delivery of the
Lease will not result in any action
which would have a material adverse
effect on the Lessee;
17) Upon execution of the Security
Agreement and the due filing of
required UCC financing statements;
the Banks will have perfected
security interest in the
collateral;
18) Disclosure;
19) The aggregate Stipulated Casualty
Value of the Nuclear Fuel leased
under the Lease is greater than the
sum of outstanding Bank Loans under
the Facility and CP Notes;
Covenants of the
Lessees: Usual and customary for transactions of
this type, including, but not limited,
to:
1) The Lessees will furnish to the
Banks notice of an Event of Default
under the Lease or, within 10 days
after the occurrence of any other
material event affecting the
obligations of the Lessees under
the Basic Documents, notice of such
material event except to the extent
that such material event has been
earlier disclosed to the Banks in
any SEC filings of the Lessees;
2) The Lessees will furnish to the
Banks quarterly and annual
financial statements of the
Lessees;
3) The lessees will furnish to the
Banks notice of material
litigation;
4) The Lessees will furnish to the
banks notice of any claimed default
on borrowed money in excess of
$20,000,000;
5) The Lessees will perform and comply
with the terms and conditions of
the Lease;
6) The Lessees will not permit the
creation of any liens on the
Collateral;
7) The Lessees will comply with all
laws (including, without
-20-<PAGE>
limitation, all laws applicable to
Nuclear Fuel and operating the
generating facilities), non-
compliance with which could
reasonably be expected to have a
material adverse effect on the
Lessees ability to perform under
the Leases or the financial
condition, operations or assets of
such Lessee, except those being
contested in good faith by
appropriate proceedings continue to
engage principally in the electric
business; maintain in effect all
necessary material consents and
permits; pay all taxes, may not
merge or consolidate with another
person unless such successor person
assumes the obligations of the
Lessees under the Letter Agreement
and the other Basic Documents;
8) The Lessees will comply with the
covenants outlined in Section 5.01
and 5.02(d), (e)(if no longer
investment grade), and (f) of the
US$150,000,000 Credit Agreement
between GPU, the Lessees and banks
named therein dated March 19, 1992
as amended by the First Amendment
dated November 1, 1994.
Consent: The Lessee consents to and approves the
execution, delivery and performance of
the Facility and Security Agreement.
Lessee agrees that it will make all
payments of monies due to the Fuel
Company under the lease and other Basic
Documents to which the Lessee is a
party, directly to an account with, and
pledged by the Fuel Companies to, the
Agent.
-21-<PAGE>
Security Agreement
The Security Agreement is between the
Fuel Companies and the Banks. The
Security Agreement shall provide that:
Grant of Security
Interest: The Fuel Companies assign, convey,
pledge, transfer and grant to the Banks,
a security interest in, to and under the
following (collectively referred to
herein as the "Collateral"):
(1) the Lease and related documents
including leasing records and bills
of sale;
(2) all assignments now existing and
hereafter executed of nuclear fuel
contacts entered into by the
Lessees, either in their own names
or as agents for the Fuel Companies
with one or more nuclear fuel
manufacturers/processors relating
to the acquisition or servicing of
Nuclear Fuel;
(3) all agreements between the Lessee
and the Fuel Companies to assign
nuclear fuel contracts to the Fuel
Companies;
(4) all Nuclear Fuel;
(5) all rights and claims of the Fuel
Companies, (a) for all monies due
and to become due under any of the
agreements and instruments referred
to in clauses (1) and (2) above,
(b) for all other amounts or
benefits provided for with any of
the agreements and instruments
referred to in clauses (1) and (2)
above or the Nuclear Fuel, (c) to
accept delivery of and receive
title to Nuclear Fuel or to obtain
any service with respect thereto
under any such agreement or
instrument or to perform or to
exercise or enforce any and all
covenants, remedies, powers and
privileges thereunder; and
-22-<PAGE>
(6) to the extent not otherwise
included, all proceeds and products
of any of the foregoing;
Assignment of Rights,
Powers and Privileges
under the Lease and
related documents In addition to the assignment and
security interest in the Collateral, the
Fuel Companies assign and transfer, on
and after a default or Event of Default
under the Facility, the rights, powers
and privileges of the Fuel Companies
under the Lease and any related
documents. The Fuel Companies agree
that it will exercise all such rights,
powers and privileges as may be so
instructed by the Banks. The Fuel
Companies also agree that the Banks may
exercise all such rights, powers and
privileges without prior notice to or
consent by the Fuel Companies.
Covenants: (1) The Fuel Companies shall take all
actions necessary to perfect the
Banks' security interest in the
Collateral.
(2) Maintenance of records.
(3) Indemnification of the Banks.
(4) The Fuel Companies will not permit
the creation of any liens on the
Collateral.
This Preliminary Term Sheet is an outline only and does not
purport to summarize all of the provisions that would be
contained in the definitive Basic Documents. Those matters not
covered or made clear in this outline and all other matters and
documents pertinent to the proposed transactions are subject to
the agreement of the parties.
The Preceding Preliminary Term Sheet and Description of Legal
Documents are for Discussion Purposes Only and Do Not Form any
Commitment on the Part of Union Bank of Switzerland.
-23-<PAGE>
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<CIK> 0000040779
<NAME> GENERAL PUBLIC UTILITIES CORPORATION
<MULTIPLIER> 1000
<CURRENCY> US DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1994
<PERIOD-START> JUL-01-1994 JUL-01-1994
<PERIOD-END> JUN-30-1995 JUN-30-1995
<EXCHANGE-RATE> 1 1
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 6,304,392 6,360,655
<OTHER-PROPERTY-AND-INVEST> 552,695 552,695
<TOTAL-CURRENT-ASSETS> 932,800 928,007
<TOTAL-DEFERRED-CHARGES> 1,683,796 1,683,796
<OTHER-ASSETS> 0 0
<TOTAL-ASSETS> 9,473,683 9,525,153
<COMMON> 314,458 314,458
<CAPITAL-SURPLUS-PAID-IN> 686,272 686,272
<RETAINED-EARNINGS> 1,810,025 1,807,028
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,648,735 <F1> 2,645,738
464,000 <F2> 464,000
98,116 98,116
<LONG-TERM-DEBT-NET> 2,525,840 2,525,840
<SHORT-TERM-NOTES> 190,700 190,700
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 79,561 79,561
<LONG-TERM-DEBT-CURRENT-PORT> 87,666 87,666
0 0
<CAPITAL-LEASE-OBLIGATIONS> 15,105 15,105
<LEASES-CURRENT> 162,513 218,776
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,201,447 3,199,651
<TOT-CAPITALIZATION-AND-LIAB> 9,473,683 9,525,153
<GROSS-OPERATING-REVENUE> 3,617,394 3,617,394
<INCOME-TAX-EXPENSE> 183,334 181,538
<OTHER-OPERATING-EXPENSES> 2,887,853 2,892,646
<TOTAL-OPERATING-EXPENSES> 3,071,187 3,074,184
<OPERATING-INCOME-LOSS> 546,207 543,210
<OTHER-INCOME-NET> (2,498) (2,498)
<INCOME-BEFORE-INTEREST-EXPEN> 543,709 540,712
<TOTAL-INTEREST-EXPENSE> 241,104 <F3> 241,104
<NET-INCOME> 302,605 299,608
0 0
<EARNINGS-AVAILABLE-FOR-COMM> 302,605 299,608
<COMMON-STOCK-DIVIDENDS> 212,514 212,514
<TOTAL-INTEREST-ON-BONDS> 183,461 183,461
<CASH-FLOW-OPERATIONS> 665,738 665,738
<EPS-PRIMARY> 2.62 2.62
<EPS-DILUTED> 2.62 2.62
<FN>
<F1> INCLUDES REACQUIRED COMMON STOCK OF $162,020.
<F2> INCLUDES SUBSIDIARY-OBLIGATED MANDATORILY REDEEMABLE
<F2> PREFERRED SECURITIES OF $330,000.
<F3> INCLUDES DIVIDENDS ON SUBSIDIARY-OBLIGATED MANDATORILY
<F3> REDEEMABLE PREFERRED SECURITIES OF $18,064 AND PREFERRED
STOCK
<F3> DIVIDENDS OF SUBSIDIARIES OF $18,190.
</FN>
<PAGE>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<CIK> 0000053456
<NAME> JERSEY CENTRAL POWER & LIGHT COMPANY
<MULTIPLIER> 1000
<CURRENCY> US DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1994
<PERIOD-START> JUL-01-1994 JUL-01-1994
<PERIOD-END> JUN-30-1995 JUN-30-1995
<EXCHANGE-RATE> 1 1
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 2,879,046 2,914,045
<OTHER-PROPERTY-AND-INVEST> 293,979 293,979
<TOTAL-CURRENT-ASSETS> 527,746 524,781
<TOTAL-DEFERRED-CHARGES> 818,369 818,369
<OTHER-ASSETS> 0 0
<TOTAL-ASSETS> 4,519,140 4,551,174
<COMMON> 153,713 153,713
<CAPITAL-SURPLUS-PAID-IN> 450,768 450,768
<RETAINED-EARNINGS> 787,860 785,933
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,392,341 1,390,414
259,000 <F1> 259,000
37,741 37,741
<LONG-TERM-DEBT-NET> 1,218,549 1,218,549
<SHORT-TERM-NOTES> 64,900 64,900
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 30,893 30,893
<LONG-TERM-DEBT-CURRENT-PORT> 47,439 47,439
10,000 10,000
<CAPITAL-LEASE-OBLIGATIONS> 3,343 3,343
<LEASES-CURRENT> 95,112 130,111
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,359,822 1,358,784
<TOT-CAPITALIZATION-AND-LIAB> 4,519,140 4,551,174
<GROSS-OPERATING-REVENUE> 1,927,733 1,927,733
<INCOME-TAX-EXPENSE> 83,155 82,117
<OTHER-OPERATING-EXPENSES> 1,572,030 1,574,995
<TOTAL-OPERATING-EXPENSES> 1,655,185 1,657,112
<OPERATING-INCOME-LOSS> 272,548 270,621
<OTHER-INCOME-NET> 5,677 5,677
<INCOME-BEFORE-INTEREST-EXPEN> 278,255 276,298
<TOTAL-INTEREST-EXPENSE> 100,649 <F2> 100,649
<NET-INCOME> 177,576 175,649
14,682 14,682
<EARNINGS-AVAILABLE-FOR-COMM> 162,894 160,967
<COMMON-STOCK-DIVIDENDS> 80,000 <F3> 80,000
<TOTAL-INTEREST-ON-BONDS> 92,035 92,035
<CASH-FLOW-OPERATIONS> 341,333 341,333
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<FN>
<F1> INCLUDES COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED
<F1> SECURITIES OF $125,000.
<F2> INCLUDES DIVIDENDS ON COMPANY-OBLIGATED MANDATORILY
REDEEMABLE
<F2> PREFERRED SECURITIES OF $1,278.
<F3> REPRESENTS COMMON STOCK DIVIDENDS PAID TO PARENT
CORPORATION.
</FN>
<PAGE>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<CIK> 0000065350
<NAME> METROPOLITAN EDISON COMPANY
<MULTIPLIER> 1000
<CURRENCY> US DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1994
<PERIOD-START> JUL-01-1994 JUL-01-1994
<PERIOD-END> JUN-30-1995 JUN-30-1995
<EXCHANGE-RATE> 1 1
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 1,596,312 1,610,488
<OTHER-PROPERTY-AND-INVEST> 88,514 88,514
<TOTAL-CURRENT-ASSETS> 187,929 186,710
<TOTAL-DEFERRED-CHARGES> 425,932 425,932
<OTHER-ASSETS> 0 0
<TOTAL-ASSETS> 2,298,687 2,311,644
<COMMON> 66,273 66,273
<CAPITAL-SURPLUS-PAID-IN> 355,200 355,200
<RETAINED-EARNINGS> 172,088 171,374
<TOTAL-COMMON-STOCKHOLDERS-EQ> 593,561 592,847
100,000 <F1> 100,000
23,598 23,598
<LONG-TERM-DEBT-NET> 603,284 603,284
<SHORT-TERM-NOTES> 8,100 8,100
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 7,873 7,873
<LONG-TERM-DEBT-CURRENT-PORT> 27,018 27,018
0 0
<CAPITAL-LEASE-OBLIGATIONS> 1,455 1,455
<LEASES-CURRENT> 42,090 56,266
<OTHER-ITEMS-CAPITAL-AND-LIAB> 891,708 891,203
<TOT-CAPITALIZATION-AND-LIAB> 2,298,687 2,311,644
<GROSS-OPERATING-REVENUE> 787,561 787,561
<INCOME-TAX-EXPENSE> 39,800 39,295
<OTHER-OPERATING-EXPENSES> 625,497 626,716
<TOTAL-OPERATING-EXPENSES> 665,297 666,011
<OPERATING-INCOME-LOSS> 122,264 121,550
<OTHER-INCOME-NET> (140) (140)
<INCOME-BEFORE-INTEREST-EXPEN> 122,124 121,410
<TOTAL-INTEREST-EXPENSE> 55,085 <F2> 55,085
<NET-INCOME> 67,039 66,325
1,616 1,616
<EARNINGS-AVAILABLE-FOR-COMM> 65,423 64,709
<COMMON-STOCK-DIVIDENDS> 85,000 <F3> 85,000
<TOTAL-INTEREST-ON-BONDS> 44,393 44,393
<CASH-FLOW-OPERATIONS> 167,993 167,993
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<FN>
<F1> REPRESENTS COMPANY-OBLIGATED MANDATORILY REDEEMABLE
<F1> PREFERRED SECURITIES.
<F2> INCLUDES DIVIDENDES ON COMPANY-OBLIGATED MANDATORILY
<F2> REDEEMABLE PREFERRED SECURITIES OF $7,700.
<F3> REPRESENTS COMMONS STOCK DIVIDENDS PAID TO PARENT
CORPORTAION.
</FN>
<PAGE>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> OPUR1
<CIK> 0000077227
<NAME> PENNSYLVANIA ELECTRIC COMPANY
<MULTIPLIER> 1000
<CURRENCY> US DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1994 DEC-31-1994
<PERIOD-START> JUL-01-1994 JUL-01-1994
<PERIOD-END> JUN-30-1995 JUN-30-1995
<EXCHANGE-RATE> 1 1
<BOOK-VALUE> PER-BOOK PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 1,770,661 1,777,749
<OTHER-PROPERTY-AND-INVEST> 40,901 40,901
<TOTAL-CURRENT-ASSETS> 224,981 224,372
<TOTAL-DEFERRED-CHARGES> 383,768 383,768
<OTHER-ASSETS> 0 0
<TOTAL-ASSETS> 2,420,311 2,426,790
<COMMON> 105,812 105,812
<CAPITAL-SURPLUS-PAID-IN> 270,487 270,487
<RETAINED-EARNINGS> 312,398 312,042
<TOTAL-COMMON-STOCKHOLDERS-EQ> 688,697 688,341
105,000 <F1> 105,000
36,777 36,777
<LONG-TERM-DEBT-NET> 676,507 676,507
<SHORT-TERM-NOTES> 15,600 15,600
<LONG-TERM-NOTES-PAYABLE> 0 0
<COMMERCIAL-PAPER-OBLIGATIONS> 40,795 40,795
<LONG-TERM-DEBT-CURRENT-PORT> 9 9
0 0
<CAPITAL-LEASE-OBLIGATIONS> 5,975 5,975
<LEASES-CURRENT> 22,005 29,093
<OTHER-ITEMS-CAPITAL-AND-LIAB> 828,946 828,693
<TOT-CAPITALIZATION-AND-LIAB> 2,420,311 2,426,790
<GROSS-OPERATING-REVENUE> 962,305 962,305
<INCOME-TAX-EXPENSE> 60,379 60,126
<OTHER-OPERATING-EXPENSES> 747,132 747,741
<TOTAL-OPERATING-EXPENSES> 807,511 807,867
<OPERATING-INCOME-LOSS> 154,794 154,438
<OTHER-INCOME-NET> (4,467) (4,467)
<INCOME-BEFORE-INTEREST-EXPEN> 150,327 149,971
<TOTAL-INTEREST-EXPENSE> 59,980 <F2> 59,980
<NET-INCOME> 90,347 89,991
1,892 1,892
<EARNINGS-AVAILABLE-FOR-COMM> 88,455 88,099
<COMMON-STOCK-DIVIDENDS> 75,000 <F3> 75,000
<TOTAL-INTEREST-ON-BONDS> 47,033 47,033
<CASH-FLOW-OPERATIONS> 164,985 164,985
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
<FN>
<F1> REPRESENTS COMPANY-OBLIGATED MANDATORILY REDEEMABLE
<F1> PREFERRED SECURITIES.
<F2> INCLUDES DIVIDENDS ON COMPANY-OBLIGATED MANDATORILY
<F3> REDEEMABLE PREFERRED SECURITIES OF $9,086.
<F3> REPRESENTS COMMON STOCK DIVIDENDS PAID TO PARENT
CORPORATION.
</FN>
<PAGE>
</TABLE>
EXHIBIT H
SECURITIES AND EXCHANGE COMMISSION
(RELEASE NO. 35- ; 70- )
JERSEY CENTRAL POWER & LIGHT COMPANY
METROPOLITAN EDISON COMPANY
PENNSYLVANIA ELECTRIC COMPANY
NOTICE OF PROPOSAL TO AMEND FUEL LEASE ARRANGEMENTS
Jersey Central Power & Light Company ("JCP&L"), 300
Madison Avenue, Morristown, New Jersey 07460, Metropolitan Edison
Company ("Met-Ed") and Pennsylvania Electric Company ("Penelec"),
2800 Pottsville Pike, Reading, Pennsylvania 19605 (collectively,
the "GPU Companies"), each electric utility subsidiaries of
General Public Utilities Corporation, a registered holding
company, have filed an application pursuant to Sections 9(a) and
10 of the Public Utility Holding Company Act of 1935.
By Order dated August 15, 1991 (SEC File No. 70-7862;
HCAR No. 25361) ("1991 Order"), the Commission, among other
things, authorized JCP&L, Met-Ed and Penelec to enter into
separate fuel lease agreements and to establish related financing
arrangements to provide for the acquisition of nuclear fuel and
certain related services for the Three Mile Island Unit 1 nuclear
generating station ("TMI-1") and the Oyster Creek nuclear
generating station ("Oyster Creek"). The GPU Companies jointly
own TMI-1 in the following percentages: Met-Ed - 50%; JCP&L -
25%; and Penelec - 25%. JCP&L owns a 100% interest in Oyster
Creek. TMI-1 and Oyster Creek are operated and maintained on
behalf of the GPU Companies by GPU Nuclear Corporation, a
subsidiary of GPU.
-1-<PAGE>
Pursuant to the 1991 Order, a nuclear fuel trust ("Fuel
Trust") was established in accordance with a trust agreement
("Trust Agreement") under which United States Trust Company of
New York acts as trustee. The Fuel Trust is the sole stockholder
of two non-affiliated Delaware corporations, TMI-1 Fuel Corp. and
Oyster Creek Fuel Corp. (collectively, the "Fuel Companies")
which own certain nuclear fuel assemblies and component parts
("Nuclear Material") for use at TMI-1 and Oyster Creek,
respectively. The GPU Companies have entered into separate lease
agreements ("1991 Lease Agreements") by which TMI-1 Fuel Corp.
leases Nuclear Material for TMI-1 to the GPU Companies in
proportion to their respective undivided ownership interests in
TMI-1, and Oyster Creek Fuel Corp. leases Nuclear Material for
Oyster Creek to JCP&L. In connection with the 1991 Lease
Agreements, The Prudential Life Insurance Company of America and
certain of its affiliates (collectively, "Prudential") entered
into lending agreements described below to provide for borrowings
by the Fuel Companies of up to a total of $250 million to finance
the acquisition costs of Nuclear Material under such lease
agreements.
As a result of a recent review and analysis of their
nuclear fuel financing arrangements, the GPU Companies determined
that they could likely achieve certain cost savings by replacing
Prudential as funding agent. Consequently, the GPU Companies
conducted a series of discussions with other lending institutions
with a view towards establishing a new credit facility to provide
financing for the acquisition of Nuclear Material, without making
material modifications to the existing 1991 Lease Agreements or
-2-<PAGE>
the structure of the Fuel Trust. As a result of those
discussions, the GPU Companies have now entered into a commitment
letter with Union Bank of Switzerland, New York Branch ("UBS" or
the "Agent") to provide a new credit facility which would provide
for borrowings of up to $210 million by the Fuel Companies from
UBS and other lenders for which UBS would act as agent
(collectively, the "Lenders"). Accordingly, the GPU Companies
have notified Prudential that the Fuel Companies will terminate
their existing lending arrangements with Prudential on or before
December 27, 1995. The Fuel Companies will enter into one or
more new credit facilities (collectively, "New Credit Facility")
providing for aggregate borrowings of up to $210 million and
under which (i) letters of credit would be issued by UBS, as
agent, to provide credit enhancement for commercial paper to be
issued by the Fuel Companies and (ii) revolving credit loans
would be made by the Lenders to the Fuel Companies. In addition,
the 1991 Lease Agreements would be amended and/or restated in
certain respects consistent with the establishment of the New
Credit Facility.
To provide for the acquisition of Nuclear Material,
pursuant to the 1991 Order, the Fuel Companies and Prudential
entered into separate floating rate loan agreements and security
agreements. The Fuel Companies have since issued and sold to
Prudential from time to time their promissory notes pursuant to
the floating rate loan agreements ("Existing Notes") representing
borrowings made from Prudential (or its affiliates) to pay for
unrecovered acquisition costs for Nuclear Material and payments
for related costs and services ("Acquisition Costs"). Under the
-3-<PAGE>
1991 Lease Agreements, the principal amount of Existing Notes
outstanding at any one time may not exceed $125,000,000 in the
case of each Fuel Company or a total of $250,000,000. The
Existing Notes are secured by the related leases (and the lease
payments made thereunder) and Nuclear Material and bear interest
at a floating rate equivalent to the Lease Rate defined below.
The 1991 Lease Agreements provide for an initial term
of two years following which they are renewable annually, subject
to the satisfaction of certain conditions and to early
termination upon the occurrence of certain events. In addition,
either the lessor or the lessee may terminate the agreement at
the end of any annual renewal term, upon at least five months
prior written notice.
Under the 1991 Lease Agreements, each GPU Company pays
to the lessor a monthly rental payment consisting of (i) a
British Thermal Unit, or so-called "burn-up", charge ("BTU
Charge") and (ii) a lease rate paid in advance ("Lease Rate").
The BTU Charge consists of an amount based upon the rate of
consumption of the fuel in the reactor. During the term of a
lease, the GPU Companies may revise the BTU Charge to reflect
changes in the anticipated operating life, energy output or
utilization of the Nuclear Material, as initially estimated. To
the extent that a GPU Company makes BTU Charge payments to the
lessor under a lease, the amount of outstanding Acquisition Costs
is correspondingly reduced, thereby creating availability under
the lease for the lessor to acquire additional Nuclear Material.
The Lease Rate for the Existing Notes, which is based
upon the unamortized cost of the Nuclear Material from time to
-4-<PAGE>
time, is the yield adjusted rate charged on 30-day dealer placed
commercial paper issued by a Prudential affiliate, as such rate
is in effect from time to time on the 15th day of each month,
plus .70%. Each of the GPU Companies is required to make monthly
Lease Rate payments to the lessor and to make BTU Charge payments
beginning as of the time fuel consumption commences. At August
1, 1995, an aggregate of approximately $169 million of
unrecovered Acquisition Costs were outstanding under the 1991
Lease Agreements at a current Lease Rate of 6.60%.
Except as provided below, upon termination of a lease,
the GPU Company which is a party thereto is obligated to pay to
the lessor the "Stipulated Casualty Value" of any Nuclear
Material acquired by the lessor, which amount is designed to
reflect the then unamortized cost of the Nuclear Material plus
all other amounts which may be owed to the lessor. However, the
GPU Company would use its best efforts to dispose of such Nuclear
Material on behalf of the lessor to a third party; the proceeds
of any such disposition in excess of the Stipulated Casualty
Value would be paid to the lessor. If a lease is voluntarily
terminated by the lessor, the GPU Company is required to purchase
the Nuclear Material but may, at its option, do so during the
five-month notice period at the higher of (i) its then fair
market value and (ii) the Stipulated Casualty Value. If a GPU
Company does not exercise such option, or in the event it elects
voluntarily to terminate a lease, it would pay the lessor the
Stipulated Casualty Value of the Nuclear Material in the manner
described above. If a GPU Company is unable to dispose of the
-5-<PAGE>
Nuclear Material to a third party upon termination of a lease,
the lessor may then convey the Nuclear Material to the GPU
Company.
Under the present lease financing arrangements, a
Prudential affiliate issues commercial paper to provide the funds
borrowed by the Fuel Companies to pay the Acquisition Costs for
Nuclear Material subject to lease. Under the new UBS financing
arrangement, the Fuel Companies would issue and sell their
commercial paper from time to time to finance acquisition costs
of Nuclear Material. To reduce borrowing costs, the Fuel
Companies' commercial paper credit would be enhanced through the
issuance by UBS of letters of credit ("LC's") in an aggregate
face amount of up to $210,000,000 outstanding at any time,
subject to the following sublimits: JCP&L ($127.5 million), Met-
Ed ($55 million) and Penelec ($27.5 million). The commercial
paper would be evidenced by commercial paper notes ("CP Notes").
The CP Notes would be deposited with a commercial paper
depository and sold to or through a commercial paper dealer.
Under the New Credit Facility, the Fuel Companies would
enter into separate credit agreements ("New Credit Agreements")
pursuant to which the Agent would issue its LC's and each Fuel
Company would agree to reimburse the Lenders from drawings made
thereunder. The Fuel Companies would also be entitled to borrow
under the New Credit Facility to provide for direct borrowings in
lieu of issuing CP Notes. To evidence its obligations to repay
such direct borrowings, each Fuel Company will issue and sell to
the Lenders its promissory notes ("New Notes"). The aggregate
principal amount of New Notes outstanding at any time would not
-6-<PAGE>
exceed the lesser of (a) $210,000,000 less the outstanding
principal amount of CP Notes and (b) the Stipulated Casualty
Value of all Nuclear Material under lease at such time, less the
outstanding principal amount of CP Notes. The New Credit
Facility would have an initial term of three years, renewable on
the first anniversary thereof and on each anniversary thereafter.
The New Notes would be secured on the same basis as the
Existing Notes and would bear interest at either an Alternative
Base Rate or a Eurodollar Rate. The Alternative Base Rate is a
fluctuating annual rate equal to the higher of (i) the Agent's
publicly announced prime rate and (ii) 50 basis points above the
rate on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers.
Eurodollar Rate Notes would bear interest at the Eurodollar Rate
plus the Applicable Margin and would be fixed at the Fuel
Company's option for interest periods of 1, 2, 3 or 6 months.
The Eurodollar Rate is defined as the annual interest rate for
deposits in U.S. dollars as reported in the Dow Jones Telerate
system or if such rate is not reported, at the LIBOR rate, in
each case for the two business day period prior to such interest
period. The Applicable Margin would range from 27.5 to 65 basis
points depending on the GPU Company's senior secured long term
debt ratings assigned by Standard & Poor's Corporation, Moody's
Investors Services or Duff & Phelps (collectively, the "Rating
Agencies").
The Fuel Companies would pay the following fees to the
Lenders in connection with the New Credit Facility: (iii) an
Arrangement Fee of $210,000; (iv) an annual Administration Fee of
-7-<PAGE>
$30,000; (v) a Commitment Fee based on each lender's unused
commitment under the New Credit Facility ranging from 8 to 20
basis points per year depending on the GPU Company's senior
secured long term debt ratings as assigned by the Rating
Agencies; (vi) a Letter of Credit Issuing Fee at a rate of 10
basis points per year based on the committed amount of the New
Credit Facility (i.e., $210,000,000); and (vii) a Letter of
Credit Risk Fee at a yearly rate equal to the Applicable Margin
on the average daily principal amount of CP Notes issued by the
Fuel Company from time to time.
The GPU Companies have agreed to pay certain
transaction expenses in connection with the execution of the
amended and restated lease agreements, the establishment of the
New Credit Facility and the consummation of the transactions
contemplated thereby. The GPU Companies will also indemnify the
Fuel Companies, the Trustee and the Lenders against certain
liability, hazards, contingencies and risks of loss in connection
with the Fuel Companies' acquisition and lease of Nuclear
Material to the GPU Companies.
In connection with the New Credit Facility, the GPU
Companies also propose to amend and restate each of the lease
agreements between the GPU Companies and TMI-1 Fuel Corp. and
Oyster Creek Fuel Corp. (The 1991 Lease Agreements, as proposed
to be amended and restated, are herein referred to as the
"Amended and Restated Lease Agreements"). The Amended and
Restated Lease Agreements would, among other things, reflect
(viii) a reduction in the maximum aggregate value of Nuclear
Material to be leased thereunder from $250,000,000 to
-8-<PAGE>
$210,000,000 (and a concurrent reduction in the related sublimits
for JCP&L, Met-Ed and Penelec to $127.5 million, $55 million and
$27.5 million, respectively); (ix) the establishment of the New
Credit Facility with UBS, as agent; (x) a change in the term of
the leases from being renewable annually to leases with an
initial three year term renewable annually thereafter, but in no
event with a term beyond 20 years; and (xi) certain other
modifications to the representations, covenants and events of
default provisions. The GPU Companies would continue to pay a
BTU Charge and a Lease Rate ("Basic Rent") as under the 1991
Lease Agreements although the new Lease Rate would be based on
the rates of the CP Notes and/or the New Notes, which the GPU
Companies expect will be lower than the current Lease Rate. In
addition, the GPU Companies would execute new letters of
representation to the Lenders regarding performance under the
Amended and Restated Lease Agreements and preservation of
collateral, and conforming changes would be made to the Trust
Agreement and ancillary lease and financing documents, including
the Security Agreement.
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 October
12, 1995 to the Secretary, Securities and Exchange Commission,
Washington, D.C. 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
-9-<PAGE>
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 issues in
this matter. After said date, the Application, as it may be
amended, may be granted.
-10-<PAGE>
<TABLE>
Financial Statements
Item 6(b) 1-A(i)
Page 1 of 30
GENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
ACTUAL AND PRO FORMA
AT June 30, 1995
(IN THOUSANDS)
<CAPTION>
Adjustments
Actual (see page 4) Pro Forma
<S> <C> <C> <C>
ASSETS
Utility Plant:
In Service, at original cost $9 082 843 $ - $9 082 843
Less, accumulated depreciation 3 301 382 - 3 301 382
Net utility plant in service 5 781 461 - 5 781 461
Construction work in progress 324 818 - 324 818
Other, net 198 113 56 263 254 376
Net utility plant 6 304 392 56 263 6 360 655
Other Property and Investments:
Nuclear decommissioning trusts 311 721 - 311 721
Nonregulated investments, net 116 816 - 116 816
Nuclear fuel disposal fund 90 595 - 90 595
Other, net 33 563 - 33 563
Total other property and investments 552 695 - 552 695
Current Assets:
Cash and temporary cash investments 19 031 (4 793) 14 238
Special deposits 13 030 - 13 030
Accounts receivable:
Customers, net 237 361 - 237 361
Other 56 475 - 56 475
Unbilled revenues 107 768 - 107 768
Materials and supplies, at average cost or less:
Construction and maintenance 196 685 - 196 685
Fuel 47 981 - 47 981
Deferred energy costs 4 637 - 4 637
Deferred income taxes 17 562 - 17 562
Prepayments 232 270 - 232 270
Total current assets 932 800 (4 793) 928 007
Deferred Debits and Other Assets:
Regulatory assets:
Three Mile Island Unit 2 deferred costs 149 008 - 149 008
Unamortized property losses 106 558 - 106 558
Income taxes recoverable through future rates 574 519 - 574 519
Other 357 191 - 357 191
Total regulatory assets 1 187 276 - 1 187 276
Deferred income taxes 436 110 - 436 110
Other 60 410 - 60 410
Total deferred debits and other assets 1 683 796 - 1 683 796
Total Assets $9 473 683 $ 51 470 9 525 153
The accompanying note is an integral part of the consolidated financial statements.<PAGE>
Financial Statements
Item 6(b) 1-A(i)
Page 2 of 30
GENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
ACTUAL AND PRO FORMA
AT JUNE 30, 1995
(IN THOUSANDS)
<CAPTION>
Adjustments
Actual (see page 4) Pro Forma
<S> <C> <C> <C>
LIABILITIES AND CAPITAL
Capitalization:
Common stock $ 314 458 $ - $ 314 458
Capital surplus 686 272 - 686 272
Retained earnings 1 810 025 (2 997) 1 807 028
Total 2 810 755 (2 997) 2 807 758
Less, reacquired common stock, at cost 162 020 - 162 020
Total common stockholders' equity 2 648 735 (2 997) 2 645 738
Cumulative preferred stock:
With mandatory redemption 134 000 - 134 000
Without mandatory redemption 98 116 - 98 116
Subsidiary-obligated mandatorily redeemable
preferred securities 330 000 - 330 000
Long-term debt 2 525 840 - 2 525 840
Total capitalization 5 736 691 (2 997) 5 733 694
Current Liabilities:
Securities due within one year 87 666 - 87 666
Notes payable 270 261 - 270 261
Obligations under capital leases 162 513 56 263 218 776
Accounts payable 249 454 - 249 454
Taxes accrued 19 563 (1 796) 17 767
Interest accrued 69 556 - 69 556
Other 267 243 - 267 243
Total current liabilities 1 126 256 54 467 1 180 723
Deferred Credits and Other Liabilities:
Deferred income taxes 1 462 739 - 1 462 739
Unamortized investment tax credits 151 088 - 151 088
Three Mile Island Unit 2 future costs 347 390 - 347 390
Regulatory liabilities 110 519 - 110 519
Other 539 000 - 539 000
Total deferred credits and other liabilities 2 610 736 - 2 610 736
Commitments and Contingencies (Note 1)
Total Liabilities and Capital $9 473 683 $ 51 470 $9 525 153
The accompanying note is an integral part of the consolidated financial statements.<PAGE>
Financial Statements
Item 6(b) 1-A(i)
Page 3 of 30
GENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
ACTUAL AND PRO FORMA
FOR THE TWELVE MONTHS ENDED JUNE 30, 1995
(IN THOUSANDS)
<CAPTION>
Adjustments
Actual (see page 4) Pro Forma
<S> <C> <C> <C>
Operating Revenues $3 617 394 $ - $3 617 394
Operating Expenses:
Fuel 344 025 3 713 347 738
Power purchased and interchanged 923 532 - 923 532
Deferral of energy costs, net 1 328 - 1 328
Other operation and maintenance 921 638 1 080 922 718
Depreciation and amortization 357 476 - 357 476
Taxes, other than income taxes 339 854 - 339 854
Total operating expenses 2 887 853 4 793 2 892 646
Operating Income Before Income Taxes 729 541 (4 793) 724 748
Income taxes 183 334 (1 796) 181 538
Operating income 546 207 (2 997) 543 210
Other Income and Deductions:
Allowance for other funds used during
construction 5 743 - 5 743
Other income/(expense), net (12 407) - (12 407)
Income taxes 4 166 - 4 166
Total other income and deductions (2 498) - (2 498)
Income Before Interest Charges and
Preferred Dividends 543 709 (2 997) 540 712
Interest Charges and Preferred Dividends:
Interest on long-term debt 183 461 - 183 461
Other interest 29 511 - 29 511
Allowance for borrowed funds used during
construction (8 122) - (8 122)
Dividends on subsidiary-obligated mandatorily
redeemable preferred securities 18 064 - 18 064
Preferred stock dividends of subsidiaries 18 190 - 18 190
Total interest charges and preferred
dividends 241 104 - 241 104
Net Income $ 302 605 (2 997) 299 608
Retained Earnings:
Balance at beginning of period $1 715 678 $ - $1 715 678
Add - Net income 302 605 (2 997) 299 608
Deduct - Cash dividends on common stock 212 514 - 212 514
Other adjustments (4 256) - (4 256)
Balance at end of period $1 810 025 $ (2 997) $1 807 028
The accompanying note is an integral part of the consolidated financial statements.<PAGE>
</TABLE>
Financial Statements
Item 6(b) 1-A(i)
Page 4 of 30
GENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARY COMPANIES
PRO FORMA ADJUSTMENTS
AT JUNE 30, 1995
(IN THOUSANDS)
(1)
Other Utility Plant, net $56,263
Obligations Under Capital Leases $56,263
To record the potential incremental nuclear fuel to be leased for TMI-1 and
Oyster Creek (proposed $210,000 limit less $153,737 of nuclear fuel subject to
lease at June 30, 1995.)
(2)
Fuel Expense $ 3,713
Cash $ 3,713
To record incremental rent expense on the proposed nuclear fuel lease at an
annual rate of 6.6%.
(3)
Other operation and maintenance $ 1,080
Cash $ 1,080
To record annual fees associated with the proposed nuclear fuel lease.
(4)
Taxes Accrued $ 1,796
Income Taxes $ 1,796
To record the decrease in income taxes associated with the proposed nuclear
fuel lease.
<PAGE>
<TABLE>
Financial Statements
Item 6(b) 1-B(i)
Page 5 of 30
JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY
CONSOLIDATED BALANCE SHEETS
ACTUAL AND PRO FORMA
AT June 30, 1995
(IN THOUSANDS)
<CAPTION>
Adjustments
Actual (see page 8) Pro Forma
<S> <C> <C> <C>
ASSETS
Utility Plant:
In Service, at original cost $4 210 146 $ - $4 210 146
Less, accumulated depreciation 1 591 111 - 1 591 111
Net utility plant in service 2 619 035 - 2 619 035
Construction work in progress 145 306 - 145 306
Other, net 114 705 34 999 149 704
Net utility plant 2 879 046 34 999 2 914 045
Other Property and Investments:
Nuclear decommissioning trusts 196 509 - 196 509
Nuclear fuel disposal fund 90 595 - 90 595
Other, net 6 875 - 6 875
Total other property and investments 293 979 - 293 979
Current Assets:
Cash and temporary cash investments 1 024 (2 965) (1 941)
Special deposits 7 360 - 7 360
Accounts receivable:
Customers, net 118 584 - 118 584
Other 13 276 - 13 276
Unbilled revenues 59 989 - 59 989
Materials and supplies, at average cost or less:
Construction and maintenance 99 533 - 99 533
Fuel 19 280 - 19 280
Deferred energy costs 11 618 - 11 618
Deferred income taxes 10 421 - 10 421
Prepayments 186 661 - 186 661
Total current assets 527 746 (2 965) 524 781
Deferred Debits and Other Assets:
Regulatory assets:
Three Mile Island Unit 2 deferred costs 130 654 - 130 654
Unamortized property losses 102 071 - 102 071
Income taxes recoverable through future rates 141 350 - 141 350
Other 295 847 - 295 847
Total regulatory assets 669 922 - 669 922
Deferred income taxes 127 571 - 127 571
Other 20 876 - 20 876
Total deferred debits and other assets 818 369 - 818 369
Total Assets $4 519 140 $ 32 034 $4 551 174
The accompanying note is an integral part of the consolidated financial statements.<PAGE>
Financial Statements
Item 6(b) 1-B(i)
Page 6 of 30
JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY
CONSOLIDATED BALANCE SHEETS
ACTUAL AND PRO FORMA
AT JUNE 30, 1995
(IN THOUSANDS)
<CAPTION>
Adjustments
Actual (see page 8) Pro Forma
<S> <C> <C> <C>
LIABILITIES AND CAPITAL
Capitalization:
Common stock $ 153 713 $ - $ 153 713
Capital surplus 450 768 - 450 768
Retained earnings 787 860 (1 927) 785 933
Total common stockholders' equity 1 392 341 (1 927) 1 390 414
Cumulative preferred stock:
With mandatory redemption 134 000 - 134 000
Without mandatory redemption 37 741 - 37 741
Company-obligated mandatorily redeemable
preferred securities 125 000 - 125 000
Long-term debt 1 218 549 - 1 218 549
Total capitalization 2 907 631 (1 927) 2 905 704
Current Liabilities:
Securities due within one year 57 439 - 57 439
Notes payable 95 793 - 95 793
Obligations under capital leases 95 112 34 999 130 111
Accounts payable:
Affiliates 26 768 - 26 768
Other 83 245 - 83 245
Taxes accrued 2 735 (1 038) 1 697
Interest accrued 30 317 - 30 317
Other 122 144 - 122 144
Total current liabilities 513 553 33 961 547 514
Deferred Credits and Other Liabilities:
Deferred income taxes 603 878 - 603 878
Unamortized investment tax credits 70 071 - 70 071
Three Mile Island Unit 2 future costs 86 836 - 86 836
Regulatory liabilities 39 897 - 39 897
Other 297 274 - 297 274
Total deferred credits and other liabilities 1 097 956 - 1 097 956
Commitments and Contingencies (Note 1)
Total Liabilities and Capital $4 519 140 $ 32 034 $4 551 174
The accompanying note is an integral part of the consolidated financial statements.<PAGE>
Financial Statements
Item 6(b) 1-B(i)
Page 7 of 30
JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
ACTUAL AND PRO FORMA
FOR THE TWELVE MONTHS ENDED JUNE 30, 1995
(IN THOUSANDS)
<CAPTION>
Adjustments
Actual (see page 8) Pro Forma
<S> <C> <C> <C>
Operating Revenues $1 927 733 $ - $1 927 733
Operating Expenses:
Fuel 80 665 2 309 82 974
Power purchased and interchanged:
Affiliates 16 903 - 16 903
Others 611 663 - 611 663
Deferral of energy costs, net (20 796) - (20 796)
Other operation and maintenance 467 014 656 467 670
Depreciation and amortization 192 842 - 192 842
Taxes, other than income taxes 223 739 - 223 739
Total operating expenses 1 572 030 2 965 1 574 995
Operating Income Before Income Taxes 355 703 (2 965) 352 738
Income taxes 83 155 (1 038) 82 117
Operating income 272 548 (1 927) 270 621
Other Income and Deductions:
Allowance for other funds used during
construction 1 241 - 1 241
Other income/(expense), net 9 383 - 9 383
Income taxes (4 947) - (4 947)
Total other income and deductions 5 677 - 5 677
Income Before Interest Charges and
Dividends on Preferred Securities 278 225 (1 927) 276 298
Interest Charges and Dividends on
Preferred Securities:
Interest on long-term debt 92 035 - 92 035
Other interest 11 378 - 11 378
Allowance for borrowed funds used during
construction (4 042) - (4 042)
Dividends on company-obligated mandatorily
redeemable preferred securities 1 278 - 1 278
Total interest charges and dividends
on preferred securities 100 649 - 100 649
Net Income 177 576 (1 927) 175 649
Preferred stock dividends 14 682 - 14 682
Earnings Available for Common Stock $ 162 894 $ (1 927) $ 160 967
Retained Earnings:
Balance at beginning of period $ 705 068 $ - $ 705 068
Add - Net income 177 576 (1 927) 175 649
Deduct - Cash dividends on common stock 80 000 - 80 000
Cash dividends on preferred stock 14 682 - 14 682
Other adjustments 102 - 102
Balance at end of period $ 787 860 $ (1 927) $ 785 933
The accompanying note is an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
Financial Statements
Item 6(b) 1-B(i)
Page 8 of 30
JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY
PRO FORMA ADJUSTMENTS
AT JUNE 30, 1995
(IN THOUSANDS)
(1)
Other Utility Plant, net $34,999
Obligations Under Capital Leases $34,999
To record the potential incremental nuclear fuel to be leased for TMI-1 and
Oyster Creek (proposed $127,500 limit less $92,501 of nuclear fuel subject to
lease at June 30, 1995.)
(2)
Fuel Expense $ 2,309
Cash $ 2,309
To record incremental rent expense on the proposed nuclear fuel lease at an
annual rate of 6.6%.
(3)
Other operation and maintenance $ 656
Cash $ 656
To record annual fees under the proposed credit agreement.
(4)
Taxes Accrued $ 1,038
Income Taxes $ 1,038
To record the decrease in income taxes associated with the proposed nuclear
fuel lease.
<PAGE>
<TABLE>
Financial Statements
Item 6(b) 1-C(i)
Page 9 of 30
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
ACTUAL AND PRO FORMA
AT June 30, 1995
(IN THOUSANDS)
<CAPTION>
Adjustments
Actual (see page 12) Pro Forma
<S> <C> <C> <C>
ASSETS
Utility Plant:
In Service, at original cost $2 198 808 $ - $2 198 808
Less, accumulated depreciation 738 017 - 738 017
Net utility plant in service 1 460 791 - 1 460 791
Construction work in progress 90 729 - 90 729
Other, net 44 792 14 176 58 968
Net utility plant 1 596 312 14 176 1 610 488
Other Property and Investments:
Nuclear decommissioning trusts 78 901 - 78 901
Other, net 9 613 - 9 613
Total other property and investments 88 514 - 88 514
Current Assets:
Cash and temporary cash investments 5 398 (1 219) 4 179
Special deposits 1 204 - 1 204
Accounts receivable:
Customers, net 51 293 - 51 293
Other 23 266 - 23 266
Unbilled revenues 23 987 - 23 987
Materials and supplies, at average cost or less:
Construction and maintenance 41 909 - 41 909
Fuel 13 232 - 13 232
Deferred income taxes 5 764 - 5 764
Prepayments 21 876 - 21 876
Total current assets 187 929 (1 219) 186 710
Deferred Debits and Other Assets:
Regulatory assets:
Three Mile Island Unit 2 deferred costs 5 314 - 5 314
Income taxes recoverable through future rates 211 959 - 211 959
Other 45 199 - 45 199
Total regulatory assets 262 472 - 262 472
Deferred income taxes 149 824 - 149 824
Other 13 636 - 13 636
Total deferred debits and other assets 425 932 - 425 932
Total Assets $2 298 687 $ 12 957 $2 311 644
The accompanying note is an integral part of the consolidated financial statements.<PAGE>
Financial Statements
Item 6(b) 1-C(i)
Page 10 of 30
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
ACTUAL AND PRO FORMA
AT JUNE 30, 1995
(IN THOUSANDS)
<CAPTION>
Adjustments
Actual (see page 12) Pro Forma
<S> <C> <C> <C>
LIABILITIES AND CAPITAL
Capitalization:
Common stock $ 66 273 $ - $ 66 273
Capital surplus 355 200 - 355 200
Retained earnings 172 088 (714) 171 374
Total common stockholders' equity 593 561 (714) 592 847
Cumulative preferred stock 23 598 - 23 598
Company-obligated mandatorily redeemable
preferred securities 100 000 - 100 000
Long-term debt 603 284 - 603 284
Total capitalization 1 320 443 (714) 1 319 729
Current Liabilities:
Securities due within one year 27 018 - 27 018
Notes payable 15 973 - 15 973
Obligations under capital leases 42 090 14 176 56 266
Accounts payable:
Affiliates 8 795 - 8 795
Other 87 718 - 87 718
Taxes accrued 7 915 (505) 7 410
Deferred energy credits 3 686 - 3 686
Interest accrued 19 669 - 19 669
Other 25 113 - 25 113
Total current liabilities 237 977 13 671 251 648
Deferred Credits and Other Liabilities:
Deferred income taxes 389 904 - 389 904
Unamortized investment tax credits 34 577 - 34 577
Three Mile Island Unit 2 future costs 173 718 - 173 718
Nuclear fuel disposal fee 26 610 - 26 610
Regulatory liabilities 31 856 - 31 856
Other 83 602 - 83 602
Total deferred credits and other liabilities 740 267 - 740 267
Commitments and Contingencies (Note 1)
Total Liabilities and Capital $2 298 687 $ 12 957 $2 311 644
The accompanying note is an integral part of the consolidated financial statements.<PAGE>
Financial Statements
Item 6(b) 1-C(i)
Page 11 of 30
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
ACTUAL AND PRO FORMA
FOR THE TWELVE MONTHS ENDED JUNE 30, 1995
(IN THOUSANDS)
<CAPTION>
Adjustments
Actual (see page 12) Pro Forma
<S> <C> <C> <C>
Operating Revenues $ 787 561 $ - $ 787 561
Operating Expenses:
Fuel 86 765 936 87 701
Power purchased and interchanged:
Affiliates 23 833 - 23 833
Others 160 015 - 160 015
Deferral of energy costs, net (2 348) - (2 348)
Other operation and maintenance 219 743 283 220 026
Depreciation and amortization 86 931 - 86 931
Taxes, other than income taxes 50 558 - 50 558
Total operating expenses 625 497 1 219 626 716
Operating Income Before Income Taxes 162 064 (1 219) 160 845
Income taxes 39 800 (505) 39 295
Operating income 122 264 (714) 121 550
Other Income and Deductions:
Allowance for other funds used during
construction 2 471 - 2 471
Other income/(expense), net (4 190) - (4 190)
Income taxes 1 579 - 1 579
Total other income and deductions (140) - (140)
Income Before Interest Charges and
Dividends on Preferred Securities 122 124 (714) 121 410
Interest Charges and Dividends on
Preferred Securities:
Interest on long-term debt 44 393 - 44 393
Other interest 4 737 - 4 737
Allowance for borrowed funds used during
construction (1 745) - (1 745)
Dividends on company-obligated mandatorily
redeemable preferred securities 7 700 - 7 700
Total interest charges and dividends
on preferred securities 55 085 - 55 085
Net Income 67 039 (714) 66 325
Preferred stock dividends 1 616 - 1 616
Earnings Available for Common Stock $ 65 423 $ (714) $ 64 709
Retained Earnings:
Balance at beginning of period $ 190 403 $ - $ 190 403
Add - Net income 67 039 (714) 66 325
Deduct - Cash dividends on common stock 85 000 - 85 000
Cash dividends on preferred stock 1 616 - 1 616
Other adjustments (1 262) - (1 262)
Balance at end of period $ 172 088 $ (714) $ 171 374
The accompanying note is an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
Financial Statements
Item 6(b) 1-C(i)
Page 12 of 30
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES
PRO FORMA ADJUSTMENTS
AT JUNE 30, 1995
(IN THOUSANDS)
(1)
Other Utility Plant, net $14,176
Obligations Under Capital Leases $14,176
To record the potential incremental nuclear fuel to be leased for TMI-1
(proposed $55,000 limit less $40,824 of nuclear fuel subject to lease at June
30, 1995.)
(2)
Fuel Expense $ 936
Cash $ 936
To record incremental rent expense on the proposed nuclear fuel lease at an
annual rate of 6.6%.
(3)
Other operation and maintenance $ 283
Cash $ 283
To record annual fees associated with the proposed nuclear fuel lease.
(4)
Taxes Accrued $ 505
Income Taxes $ 505
To record the decrease in income taxes associated with the proposed nuclear
fuel lease.
<PAGE>
<TABLE>
Financial Statements
Item 6(b) 1-D(i)
Page 13 of 30
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
ACTUAL AND PRO FORMA
AT June 30, 1995
(IN THOUSANDS)
<CAPTION>
Adjustments
Actual (see page 16) Pro Forma
<S> <C> <C> <C>
ASSETS
Utility Plant:
In Service, at original cost $2 600 467 $ - $2 600 467
Less, accumulated depreciation 949 566 - 949 566
Net utility plant in service 1 650 901 - 1 650 901
Construction work in progress 88 783 - 88 783
Other, net 30 977 7 088 38 065
Net utility plant 1 770 661 7 088 1 777 749
Other Property and Investments:
Nuclear decommissioning trusts 36 311 - 36 311
Other, net 4 590 - 4 590
Total other property and investments 40 901 - 40 901
Current Assets:
Cash and temporary cash investments 1 248 (609) 639
Special deposits 2 610 - 2 610
Accounts receivable:
Customers, net 67 484 - 67 484
Other 31 354 - 31 354
Unbilled revenues 23 792 - 23 792
Materials and supplies, at average cost or less:
Construction and maintenance 55 243 - 55 243
Fuel 15 469 - 15 469
Deferred income taxes 3 255 - 3 255
Prepayments 24 526 - 24 526
Total current assets 224 981 (609) 224 372
Deferred Debits and Other Assets:
Regulatory assets:
Three Mile Island Unit 2 deferred costs 13 040 - 13 040
Income taxes recoverable through future rates 221 210 - 221 210
Other 20 632 - 20 632
Total regulatory assets 254 882 - 254 882
Deferred income taxes 113 499 - 113 499
Other 15 387 - 15 387
Total deferred debits and other assets 383 768 - 383 768
Total Assets $2 420 311 $ 6 479 2 426 790
The accompanying note is an integral part of the consolidated financial statements.<PAGE>
Financial Statements
Item 6(b) 1-D(i)
Page 14 of 30
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
ACTUAL AND PRO FORMA
AT JUNE 30, 1995
(IN THOUSANDS)
<CAPTION>
Adjustments
Actual (see page 16) Pro Forma
<S> <C> <C> <C>
LIABILITIES AND CAPITAL
Capitalization:
Common stock $ 105 812 $ - $ 105 812
Capital surplus 270 487 - 270 487
Retained earnings 312 398 (356) 312 042
Total common stockholders' equity 688 697 (356) 688 341
Cumulative preferred stock 36 777 - 36 777
Company-obligated mandatorily redeemable
preferred securities 105 000 - 105 000
Long-term debt 676 507 - 676 507
Total capitalization 1 506 981 (356) 1 506 625
Current Liabilities:
Securities due within one year 9 - 9
Notes payable 56 395 - 56 395
Obligations under capital leases 22 005 7 088 29 093
Accounts payable:
Affiliates 9 776 - 9 776
Other 58 524 - 58 524
Taxes accrued 16 707 (253) 16 454
Deferred energy credits 3 295 - 3 295
Interest accrued 18 303 - 18 303
Vacations accrued 11 407 - 11 407
Other 10 885 - 10 885
Total current liabilities 207 306 6 835 214 141
Deferred Credits and Other Liabilities:
Deferred income taxes 453 361 - 453 361
Unamortized investment tax credits 46 440 - 46 440
Three Mile Island Unit 2 future costs 86 836 - 86 836
Nuclear fuel disposal fee 13 305 - 13 305
Regulatory liabilities 38 766 - 38 766
Other 67 316 - 67 316
Total deferred credits and other
liabilities 706 024 - 706 024
Commitments and Contingencies (Note 1)
Total Liabilities and Capital $2 420 311 $ 6 479 $ 2 426 790
The accompanying note is an integral part of the consolidated financial statements.<PAGE>
Financial Statements
Item 6(b) 1-D(i)
Page 15 of 30
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
ACTUAL AND PRO FORMA
FOR THE TWELVE MONTHS ENDED JUNE 30, 1995
(IN THOUSANDS)
<CAPTION>
Adjustments
Actual (see page 16) Pro Forma
<S> <C> <C> <C>
Operating Revenues $ 962 305 $ - $ 962 305
Operating Expenses:
Fuel 176 595 468 177 063
Power purchased and interchanged:
Affiliates 7 482 - 7 482
Others 151 854 - 151 854
Deferral of energy costs, net 24 472 - 24 472
Other operation and maintenance 243 469 141 243 610
Depreciation and amortization 77 703 - 77 703
Taxes, other than income taxes 65 557 - 65 557
Total operating expenses 747 132 609 747 741
Operating Income Before Income Taxes 215 173 (609) 214 564
Income taxes 60 379 (253) 60 126
Operating income 154 794 (356) 154 438
Other Income and Deductions:
Allowance for other funds used during
construction 2 031 - 2 031
Other income/(expense), net (11 782) - (11 782)
Income taxes 5 284 - 5 284
Total other income and deductions (4 467) - (4 467)
Income Before Interest Charges and
Dividends on Preferred Securities 150 327 (356) 149 971
Interest Charges and Dividends on
Preferred Securities:
Interest on long-term debt 47 033 - 47 033
Other interest 6 196 - 6 196
Allowance for borrowed funds used during
construction (2 335) - (2 335)
Dividends on Company-obligated mandatorily
redeemable preferred securities 9 086 - 9 086
Total interest charges and preferred
dividends 59 980 - 59 980
Net Income 90 347 (356) 89 991
Preferred stock dividends 1 892 - 1 892
Earnings Available for Common Stock $ 88 455 $ (356) $ 88 099
Retained Earnings:
Balance at beginning of period $ 298 455 $ - $ 298 455
Add - Net income 90 347 (356) 89 991
Deduct - Cash dividends on common stock 75 000 - 75 000
Cash dividends on preferred stock 1 892 - 1 892
Other adjustments (488) - (488)
Balance at end of period $ 312 398 $ (356) $ 312 042
The accompanying note is an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
Financial Statements
Item 6(b) 1-D(i)
Page 16 of 30
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
PRO FORMA ADJUSTMENTS
AT JUNE 30, 1995
(IN THOUSANDS)
(1)
Other Utility Plant, net $ 7,088
Obligations Under Capital Leases $ 7,088
To record the potential incremental nuclear fuel to be leased for TMI-1
(proposed $27,500 limit less $20,412 of nuclear fuel subject to lease at June
30, 1995).
(2)
Fuel Expense $ 468
Cash $ 468
To record incremental rent expense on the proposed nuclear fuel lease at an
annual rate of 6.6%.
(3)
Other operation and maintenance $ 141
Cash $ 141
To record annual fees associated with the proposed nuclear fuel lease.
(4)
Taxes Accrued $ 253
Income Taxes $ 253
To record the decrease in income taxes associated with the proposed nuclear
fuel lease.
<PAGE>
Financial Statements
Item 6(b)
Page 17 of 30
GENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
General Public Utilities Corporation (the Corporation) is a holding
company registered under the Public Utility Holding Company Act of 1935. The
Corporation does not directly operate any utility properties, but owns all the
outstanding common stock of three electric utilities -- Jersey Central Power &
Light Company (JCP&L), Metropolitan Edison Company (Met-Ed) and Pennsylvania
Electric Company (Penelec) (the Subsidiaries). The Corporation also owns all
the common stock of GPU Service Corporation (GPUSC), a service company; GPU
Nuclear Corporation (GPUN), which operates and maintains the nuclear units of
the Subsidiaries; and Energy Initiatives, Inc. (EI) and EI Power, Inc., which
develop, own and operate nonutility generating facilities. All of these
companies considered together with their subsidiaries are referred to as the
"GPU System."
These notes should be read in conjunction with the notes to consolidated
financial statements included in the 1994 Annual Report on Form 10-K. The
year-end condensed balance sheet data contained in the attached financial
statements were derived from audited financial statements. For disclosures
required by generally accepted accounting principles, see the 1994 Annual
Report on Form 10-K.
1. COMMITMENTS AND CONTINGENCIES
NUCLEAR FACILITIES
The Subsidiaries have made investments in three major nuclear projects--
Three Mile Island Unit 1 (TMI-1) and Oyster Creek, both of which are
operational generating facilities, and Three Mile Island Unit 2 (TMI-2), which
was damaged during a 1979 accident. TMI-1 and TMI-2 are jointly owned by
JCP&L, Met-Ed and Penelec in the percentages of 25%, 50% and 25%,
respectively. Oyster Creek is owned by JCP&L. At June 30, 1995 and December
31, 1994, the Subsidiaries' net investment in TMI-1 and Oyster Creek,
including nuclear fuel, was as follows:
Net Investment (Millions)
TMI-1 Oyster Creek
June 30, 1995 $640 $791
December 31, 1994 $627 $817
The Subsidiaries' net investment in TMI-2 at June 30, 1995 and December
31, 1994 was $101 million and $103 million, respectively, of which JCP&L's
remaining investment was $87 million and $89 million, respectively. JCP&L is
collecting retail revenues for TMI-2 on a basis which provides for the
recovery of its remaining investment in the plant by 2008. Met-Ed and Penelec
have recovered substantially all of their investments in TMI-2.
Costs associated with the operation, maintenance and retirement of
nuclear plants continue to be significant and less predictable than costs
associated with other sources of generation, in large part due to changing
regulatory requirements, safety standards and experience gained in the
construction and operation of nuclear facilities. The GPU System may also
<PAGE>
Financial Statements
Item 6(b)
Page 18 of 30
incur costs and experience reduced output at its nuclear plants because of the
prevailing design criteria at the time of construction and the age of the
plants' systems and equipment. In addition, for economic or other reasons,
operation of these plants for the full term of their now-assumed lives cannot
be assured. Also, not all risks associated with the ownership or operation of
nuclear facilities may be adequately insured or insurable. Consequently, the
ability of electric utilities to obtain adequate and timely recovery of costs
associated with nuclear projects, including replacement power, any unamortized
investment at the end of each plant's useful life (whether scheduled or
premature), the carrying costs of that investment and retirement costs, is not
assured (see NUCLEAR PLANT RETIREMENT COSTS). Management intends, in general,
to seek recovery of such costs through the ratemaking process, but recognizes
that recovery is not assured (see COMPETITION AND THE CHANGING REGULATORY
ENVIRONMENT).
TMI-2:
The 1979 TMI-2 accident resulted in significant damage to, and
contamination of, the plant and a release of radioactivity to the environment.
The cleanup program was completed in 1990, and, after receiving Nuclear
Regulatory Commission (NRC) approval, TMI-2 entered into long-term monitored
storage in December 1993.
As a result of the accident and its aftermath, individual claims for
alleged personal injury (including claims for punitive damages), which are
material in amount, have been asserted against the Corporation and the
Subsidiaries. Approximately 2,100 of such claims are pending in the United
States District Court for the Middle District of Pennsylvania. Some of the
claims also seek recovery for injuries from alleged emissions of radioactivity
before and after the accident. If, notwithstanding the developments noted
below, punitive damages are not covered by insurance and are not subject to
the liability limitations of the federal Price-Anderson Act ($560 million at
the time of the accident), punitive damage awards could have a material
adverse effect on the financial position of the GPU System.
At the time of the TMI-2 accident, as provided for in the Price-Anderson
Act, the Subsidiaries had (a) primary financial protection in the form of
insurance policies with groups of insurance companies providing an aggregate
of $140 million of primary coverage, (b) secondary financial protection in the
form of private liability insurance under an industry retrospective rating
plan providing for premium charges deferred in whole or in major part under
such plan, and (c) an indemnity agreement with the NRC, bringing their total
primary and secondary insurance financial protection and indemnity agreement
with the NRC up to an aggregate of $560 million.
The insurers of TMI-2 had been providing a defense against all TMI-2
accident-related claims against the Corporation and the Subsidiaries and their
suppliers under a reservation of rights with respect to any award of punitive
damages. However, in March 1994, the defendants in the TMI-2 litigation and
the insurers agreed that the insurers would withdraw their reservation of
rights with respect to any award of punitive damages.
In June 1993, the Court agreed to permit pre-trial discovery on the
punitive damage claims to proceed. A trial of ten allegedly representative
cases is scheduled to begin in June 1996. In February 1994, the Court held
<PAGE>
Financial Statements
Item 6(b)
Page 19 of 30
that the plaintiffs' claims for punitive damages are not barred by the Price-
Anderson Act to the extent that the funds to pay punitive damages do not come
out of the U.S. Treasury. The Court also denied the defendants' motion
seeking a dismissal of all cases on the grounds that the defendants complied
with applicable federal safety standards regarding permissible radiation
releases from TMI-2 and that, as a matter of law, the defendants therefore did
not breach any duty that they may have owed to the individual plaintiffs. The
Court stated that a dispute about what radiation and emissions were released
cannot be resolved on a motion for summary judgment. In July 1994, the Court
granted defendants' motions for interlocutory appeal of these orders, stating
that they raise questions of law that contain substantial grounds for
differences of opinion. The issues are now before the United States Court of
Appeals for the Third Circuit.
In an order issued in April 1994, the Court: (1) noted that the
plaintiffs have agreed to seek punitive damages only against the Corporation
and the Subsidiaries; and (2) stated in part that the Court is of the opinion
that any punitive damages owed must be paid out of and limited to the amount
of primary and secondary insurance under the Price-Anderson Act and,
accordingly, evidence of the defendants' net worth is not relevant in the
pending proceeding.
NUCLEAR PLANT RETIREMENT COSTS
Retirement costs for nuclear plants include decommissioning the
radiological portions of the plants and the cost of removal of nonradiological
structures and materials. The disposal of spent nuclear fuel is covered
separately by contracts with the U.S. Department of Energy (DOE).
In 1990, the Subsidiaries submitted a report, in compliance with NRC
regulations, setting forth a funding plan (employing the external sinking fund
method) for the decommissioning of their nuclear reactors. Under this plan,
the Subsidiaries intend to complete the funding for Oyster Creek and TMI-1 by
the end of the plants' license terms, 2009 and 2014, respectively. The TMI-2
funding completion date is 2014, consistent with TMI-2's remaining in long-
term storage and being decommissioned at the same time as TMI-1. Under the
NRC regulations, the funding targets (in 1994 dollars) for TMI-1 and Oyster
Creek are $157 million and $189 million, respectively. Based on NRC studies,
a comparable funding target for TMI-2 has been developed which takes the
accident into account (see TMI-2 Future Costs). The NRC continues to study
the levels of these funding targets. Management cannot predict the effect
that the results of this review will have on the funding targets. NRC
regulations and a regulatory guide provide mechanisms, including exemptions,
to adjust the funding targets over their collection periods to reflect
increases or decreases due to inflation and changes in technology and
regulatory requirements. The funding targets, while not considered cost
estimates, are reference levels designed to assure that licensees demonstrate
adequate financial responsibility for decommissioning. While the regulations
address activities related to the removal of the radiological portions of the
plants, they do not establish residual radioactivity limits nor do they
address costs related to the removal of nonradiological structures and
materials.
<PAGE>
Financial Statements
Item 6(b)
Page 20 of 30
In 1988, a consultant to GPUN performed site-specific studies of TMI-1
and Oyster Creek that considered various decommissioning plans and estimated
the cost of decommissioning the radiological portions of each plant to range
from approximately $225 to $309 million and $239 to $350 million, respectively
(in 1994 dollars). In addition, the studies estimated the cost of removal of
nonradiological structures and materials for TMI-1 and Oyster Creek at
$74 million and $48 million, respectively (in 1994 dollars). To date, no
site-specific study has been performed for TMI-2.
The ultimate cost of retiring the GPU System's nuclear facilities may be
materially different from the funding targets and the cost estimates contained
in the site-specific studies. Such costs are subject to (a) the type of
decommissioning plan selected, (b) the escalation of various cost elements
(including, but not limited to, general inflation), (c) the further
development of regulatory requirements governing decommissioning, (d) the
absence to date of significant experience in decommissioning such facilities
and (e) the technology available at the time of decommissioning. The
Subsidiaries charge to expense and contribute to external trusts amounts
collected from customers for nuclear plant decommissioning and nonradiological
costs. In addition, the Subsidiaries have contributed amounts written off for
TMI-2 nuclear plant decommissioning in 1990 and 1991 to TMI-2's external trust
and will await resolution of the case pending before the Pennsylvania Supreme
Court before making any further contributions for amounts written off by Met-
Ed and Penelec in 1994 (see TMI-2 Future Costs). Amounts deposited in
external trusts, including the interest earned on these funds, are classified
as Nuclear Decommissioning Trusts on the balance sheet.
The Financial Accounting Standards Board (FASB) is currently reviewing
the utility industry's accounting practices for nuclear decommissioning costs.
If the FASB's tentative conclusions are adopted, Oyster Creek and TMI-1
retirement costs may have to be recorded as a liability, rather than as
accumulated depreciation, with an offsetting asset recorded for amounts
collectible through rates. Any amounts that cannot be collected through rates
may have to be charged to expense. The FASB is expected to release an
Exposure Draft on decommissioning accounting practices by the fourth quarter
of 1995.
TMI-1 and Oyster Creek:
JCP&L is collecting revenues for decommissioning, which are expected to
result in the accumulation of its share of the NRC funding target for each
plant. JCP&L is also collecting revenues, based on estimates of $15.3 million
for TMI-1 and $31.6 million for Oyster Creek adopted in previous rate orders
issued by the New Jersey Board of Public Utilities (NJBPU), for its share of
the cost of removal of nonradiological structures and materials. The
Pennsylvania Public Utility Commission (PaPUC) previously granted Met-Ed
revenues for decommissioning costs of TMI-1 based on its share of the NRC
funding target and nonradiological cost of removal as estimated in the site-
specific study. The PaPUC also approved a rate change for Penelec which
increased the collection of revenues for decommissioning costs for TMI-1 to a
basis equivalent to that granted Met-Ed. Collections from customers for
retirement expenditures are deposited in external trusts. Provision for the
future expenditures of these funds has been made in accumulated depreciation,
amounting to $57 million for TMI-1 and $120 million for Oyster Creek at
<PAGE>
Financial Statements
Item 6(b)
Page 21 of 30
June 30, 1995. Oyster Creek and TMI-1 retirement costs are charged to
depreciation expense over the expected service life of each nuclear plant.
Management believes that any TMI-1 and Oyster Creek retirement costs, in
excess of those currently recognized for ratemaking purposes, should be
recoverable under the current ratemaking process.
TMI-2 Future Costs:
The Subsidiaries have recorded a liability for the radiological
decommissioning of TMI-2, reflecting the NRC funding target (in 1995 dollars).
The Subsidiaries record escalations, when applicable, in the liability based
upon changes in the NRC funding target. The Subsidiaries have also recorded a
liability for incremental costs specifically attributable to monitored
storage. In addition, the Subsidiaries have recorded a liability for the
nonradiological cost of removal consistent with the TMI-1 site-specific study
and have spent $3 million as of June 30, 1995. Estimated TMI-2 Future Costs
as of June 30, 1995 and December 31, 1994 are as follows:
June 30, 1995 December 31, 1994
(Millions) (Millions)
Radiological Decommissioning $256 $250
Nonradiological Cost of Removal 72 72
Incremental Monitored Storage 19 19
Total $347 $341
The above amounts are reflected as Three Mile Island Unit 2 Future Costs
on the balance sheet. At June 30, 1995, $112 million was in trust funds for
TMI-2 and included in Nuclear Decommissioning Trusts on the balance sheet, and
$48 million was recoverable from customers and included in Three Mile Island
Unit 2 Deferred Costs on the balance sheet.
In 1993, a PaPUC rate order for Met-Ed allowed for the future recovery
of certain TMI-2 retirement costs. The Pennsylvania Office of Consumer
Advocate requested the Commonwealth Court to set aside the PaPUC's 1993 rate
order and in 1994, the Commonwealth Court reversed the PaPUC order. In
December 1994, the Pennsylvania Supreme Court granted Met-Ed's request to
review that decision. Oral argument was held on April 27, 1995, and the
matter is pending. As a consequence of the Commonwealth Court decision,
Met-Ed recorded pre-tax charges totaling $127.6 million during 1994. Penelec,
which is also subject to PaPUC regulation, recorded pre-tax charges of
$56.3 million during 1994, for its share of such costs applicable to its
retail customers. These charges appear in the Other Income and Deductions
section of the 1994 Consolidated Statement of Income and are composed of
$121 million for radiological decommissioning costs, $48.2 million for the
nonradiological cost of removal and $14.7 million for incremental monitored
storage costs. Met-Ed and Penelec will await resolution of the appeal pending
before the Pennsylvania Supreme Court before making any nonrecoverable funding
contributions to external trusts for their share of these costs. The
Pennsylvania Subsidiaries are similarly required to charge to expense their
share of future increases in the estimate of the costs of retiring TMI-2 if
the Pennsylvania Supreme Court does not reverse the Commonwealth Court's
decision. Earnings on trust fund deposits for Met-Ed and Penelec are recorded
as income. Prior to the Commonwealth Court's decision, Met-Ed and Penelec
<PAGE>
Financial Statements
Item 6(b)
Page 22 of 30
contributed $40 million and $20 million respectively, to external trusts
relating to their shares of the accident-related portion of the
decommissioning liability. JCP&L also made a contribution of $15 million to
an external decommissioning trust. These contributions were not recovered
from customers and have been expensed. JCP&L's share of earnings on trust fund
deposits are offset against amounts shown on the balance sheet under Three
Mile Island Unit 2 Deferred Costs as collectible from customers.
The NJBPU has granted JCP&L decommissioning revenues for the remainder
of the NRC funding target and allowances for the cost of removal of
nonradiological structures and materials. JCP&L, which is not affected by the
Commonwealth Court's ruling, intends to seek recovery for any increases in
TMI-2 retirement costs, but recognizes that recovery cannot be assured.
As a result of TMI-2's entering long-term monitored storage in late
1993, the Subsidiaries are incurring incremental annual storage costs of
approximately $1 million. The Subsidiaries estimate that the remaining annual
storage costs will total $19 million through 2014, the expected retirement
date of TMI-1. JCP&L's rates reflect its $5 million share of these costs.
INSURANCE
The GPU System has insurance (subject to retentions and deductibles) for
its operations and facilities including coverage for property damage,
liability to employees and third parties, and loss of use and occupancy
(primarily incremental replacement power costs). There is no assurance that
the GPU System will maintain all existing insurance coverages. Losses or
liabilities that are not completely insured, unless allowed to be recovered
through ratemaking, could have a material adverse effect on the financial
position of the GPU System.
The decontamination liability, premature decommissioning and property
damage insurance coverage for the TMI station and for Oyster Creek totals
$2.7 billion per site. In accordance with NRC regulations, these insurance
policies generally require that proceeds first be used for stabilization of
the reactors and then to pay for decontamination and debris removal expenses.
Any remaining amounts available under the policies may then be used for repair
and restoration costs and decommissioning costs. Consequently, there can be
no assurance that in the event of a nuclear incident, property damage
insurance proceeds would be available for the repair and restoration of that
station.
The Price-Anderson Act limits the GPU System's liability to third
parties for a nuclear incident at one of its sites to approximately
$8.9 billion. Coverage for the first $200 million of such liability is
provided by private insurance. The remaining coverage, or secondary financial
protection, is provided by retrospective premiums payable by all nuclear
reactor owners. Under secondary financial protection, a nuclear incident at
any licensed nuclear power reactor in the country, including those owned by
the GPU System, could result in assessments of up to $79 million per incident
for each of the GPU System's two operating reactors (TMI-2 being excluded
under an exemption received from the NRC in 1994), subject to an annual
maximum payment of $10 million per incident per reactor. In addition to the
<PAGE>
Financial Statements
Item 6(b)
Page 23 of 30
retrospective premiums payable under Price-Anderson, the GPU System is also
subject to retrospective premium assessments of up to $69 million in any one
year under insurance policies applicable to nuclear operations and facilities.
The GPU System has insurance coverage for incremental replacement power
costs resulting from an accident-related outage at its nuclear plants.
Coverage commences after the first 21 weeks of the outage and continues for
three years beginning at $1.8 million for Oyster Creek and $2.6 million for
TMI-1 per week for the first year, decreasing by 20 percent for years two and
three.
COMPETITION AND THE CHANGING REGULATORY ENVIRONMENT
Nonutility Generation Agreements:
Pursuant to the requirements of the federal Public Utility Regulatory
Policies Act (PURPA) and state regulatory directives, the Subsidiaries have
entered into power purchase agreements with nonutility generators for the
purchase of energy and capacity for periods up to 26 years. The majority of
these agreements contain certain contract limitations and subject the
nonutility generators to penalties for nonperformance. While a few of these
facilities are dispatchable, most are must-run and generally obligate the
Subsidiaries to purchase, at the contract price, the net output up to the
contract limits. As of June 30, 1995, facilities covered by these agreements
having 1,535 MW (JCP&L 892 MW, Met-Ed 246 MW and Penelec 397 MW) of capacity
were in service and 89 MW were scheduled to commence operation later in 1995.
Estimated payments to nonutility generators from 1995 through 1999, assuming
all facilities which have existing agreements, or which have obtained orders
granting them agreements enter service, are as follows:
Payments Under Nonutility Agreements
(Millions)
Total JCP&L Met-Ed Penelec
1995 $ 694 $ 395 $ 114 $ 185
1996 918 556 170 192
1997 1,062 571 278 213
1998 1,306 587 414 305
1999 1,340 607 419 314
These agreements, in the aggregate, will provide approximately 2,589 MW
(JCP&L 1,202 MW, Met-Ed 812 MW and Penelec 575 MW) of capacity and energy to
the GPU System, at varying prices.
The emerging competitive generation market has created uncertainty
regarding the forecasting of the System's energy supply needs which has caused
the Subsidiaries to change their supply strategy to seek shorter-term
agreements offering more flexibility. Due to the current availability of
excess capacity in the marketplace, the cost of near- to intermediate-term
(i.e., one to eight years) energy supply from existing generation facilities
is currently and expected to continue to be competitively priced at least for
the near- to intermediate-term. The projected cost of energy from new
generation supply sources has also decreased due to improvements in power
<PAGE>
Financial Statements
Item 6(b)
Page 24 of 30
plant technologies and reduced forecasted fuel prices. As a result of these
developments, the rates under virtually all of the Subsidiaries' nonutility
generation agreements are substantially in excess of current and projected
prices from alternative sources.
The Subsidiaries are seeking to reduce the above market costs of these
nonutility generation agreements by (1) attempting to convert must-run
agreements to dispatchable agreements; (2) attempting to renegotiate prices of
the agreements; (3) offering contract buy-outs while seeking to recover the
costs through their energy clauses and (4) initiating proceedings before
federal and state administrative agencies, and in the courts. In addition, the
Subsidiaries intend to avoid, to the maximum extent practicable, entering into
any new nonutility generation agreements that are not needed or not consistent
with current market pricing and are supporting legislative efforts to repeal
PURPA. These efforts may result in claims against the GPU System for
substantial damages. There can, however, be no assurance as to what extent
the Subsidiaries' efforts will be successful in whole or in part.
While the Subsidiaries thus far have been granted recovery of their
nonutility generation costs from customers by the PaPUC and NJBPU, there can
be no assurance that the Subsidiaries will continue to be able to recover
these costs throughout the term of the related agreements. The GPU System
currently estimates that in 1998, when substantially all of these nonutility
generation projects are scheduled to be in service, above market payments
(benchmarked against the expected cost of electricity produced by a new gas-
fired combined cycle facility) will range from $300 million to $450 million
annually.
Regulatory Assets and Liabilities:
As a result of the Energy Policy Act of 1992 (Energy Act) and actions of
regulatory commissions, the electric utility industry is moving toward a
combination of competition and a modified regulatory environment. In
accordance with Statement of Financial Accounting Standards No. 71 (FAS 71),
"Accounting for the Effects of Certain Types of Regulation," the GPU System's
financial statements reflect assets and costs based on current cost-based
ratemaking regulations. Continued accounting under FAS 71 requires that the
following criteria be met:
a) A utility's rates for regulated services provided to its customers
are established by, or are subject to approval by, an independent
third-party regulator;
b) The regulated rates are designed to recover specific costs of
providing the regulated services or products; and
c) In view of the demand for the regulated services and the level of
competition, direct and indirect, it is reasonable to assume that
rates set at levels that will recover a utility's costs can be
charged to and collected from customers. This criteria requires
consideration of anticipated changes in levels of demand or
competition during the recovery period for any capitalized costs.
<PAGE>
Financial Statements
Item 6(b)
Page 25 of 30
A utility's operations can cease to meet those criteria for various
reasons, including deregulation, a change in the method of regulation, or a
change in the competitive environment for the utility's regulated services.
Regardless of the reason, a utility whose operations cease to meet those
criteria should discontinue application of FAS 71 and report that
discontinuation by eliminating from its balance sheet the effects of any
actions of regulators that had been recognized as assets and liabilities
pursuant to FAS 71 but which would not have been recognized as assets and
liabilities by enterprises in general.
If a portion of the GPU System's operations continues to be regulated
and meets the above criteria, FAS 71 accounting may only be applied to that
portion. Write-offs of utility plant and regulatory assets may result for
those operations that no longer meet the requirements of FAS 71. In addition,
under deregulation, the uneconomical costs of certain contractual commitments
for purchased power and/or fuel supplies may have to be expensed currently.
Management believes that to the extent that the GPU System no longer qualifies
for FAS 71 accounting treatment, a material adverse effect on its results of
operations and financial position may result.
In accordance with the provisions of FAS 71, the Subsidiaries have
deferred certain costs pursuant to actions of the NJBPU, PaPUC and Federal
Energy Regulatory Commission (FERC) and are recovering or expect to recover
such costs in electric rates charged to customers. Regulatory assets are
reflected in the Deferred Debits and Other Assets section of the Consolidated
Balance Sheet, and regulatory liabilities are reflected in the Deferred
Credits and Other Liabilities section of the Consolidated Balance Sheet.
Regulatory assets and liabilities, as reflected in the June 30, 1995
Consolidated Balance Sheet, were as follows:
(In thousands)
Assets Liabilities
Income taxes recoverable/refundable
through future rates $ 574,519 $102,332
TMI-2 deferred costs 149,008 -
TMI-2 tax refund - 3,786
Unamortized property losses 106,558 -
N.J. unit tax 54,185 -
Unamortized loss on reacquired debt 52,664 -
DOE enrichment facility decommissioning 42,182 -
Load and demand side management programs 44,220 -
Other postretirement benefits 50,552 -
Manufactured gas plant remediation 29,548 -
Nuclear fuel disposal fee 23,608 -
Storm damage 23,048 -
N.J. low level radwaste disposal 16,935 -
Oyster Creek deferred costs 11,430 -
Other 8,819 4,401
Total $1,187,276 $110,519
Income taxes recoverable/refundable through future rates: Represents amounts
deferred due to the implementation of FAS 109, "Accounting for Income Taxes,"
in 1993.
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Financial Statements
Item 6(b)
Page 26 of 30
TMI-2 deferred costs: Primarily represents costs that are being recovered
through retail rates for the remaining JCP&L investment in the plant and fuel
core, radiological decommissioning for JCP&L's share of the NRC's funding
target and allowances for the cost of removal of nonradiological structures
and materials, and long-term monitored storage costs. For additional
information, see TMI-2 Future Costs.
TMI-2 tax refund: Represents the tax refund related to the tax abandonment of
TMI-2. This balance is being amortized by the Pennsylvania subsidiaries
concurrent with its return to customers through a base rate credit.
Unamortized property losses: Consists mainly of costs associated with JCP&L's
Forked River Project, which is included in rates.
N.J. unit tax: JCP&L received NJBPU approval in 1993 to recover, over a ten-
year period on an annuity basis, $71.8 million of Gross Receipts and Franchise
Tax not previously recovered from customers.
Unamortized loss on reacquired debt: Represents premiums and expenses incurred
in the redemption of long-term debt. In accordance with FERC regulations,
reacquired debt costs are amortized over the remaining original life of the
retired debt.
DOE enrichment facility decommissioning: These costs, representing payments
to the DOE over a 15-year period beginning in 1994, are currently being
collected through the Subsidiaries' energy adjustment clauses.
Load and demand side management (DSM) programs: Consists of load management
costs that are currently being recovered through JCP&L's retail base rates
pursuant to a 1993 NJBPU order, and other DSM program expenditures that are
recovered annually. Also includes provisions for lost revenues between base
rate cases and performance incentives.
Other postretirement benefits: Includes costs associated with the adoption of
FAS 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." Recovery of these costs is subject to regulatory approval.
Manufactured gas plant remediation: Consists of costs associated with the
investigation and remediation of several gas manufacturing plants. For
additional information, see ENVIRONMENTAL MATTERS.
Nuclear fuel disposal fee: Represents amounts recoverable through rates for
estimated future disposal costs for spent nuclear fuel at Oyster Creek and
TMI-1 in accordance with the Nuclear Waste Policy Act of 1982.
Storm damage: Relates to noncapital costs associated with various storms in
the JCP&L service territory that are not recoverable through insurance. These
amounts were deferred based upon past rate recovery precedent. An annual
amount for recovery of storm damage expense is included in JCP&L's retail base
rates.
N.J. low level radwaste disposal: Represents the accrual of the estimated
assessment for disposal of low-level waste from Oyster Creek, less
amortization as allowed in JCP&L's rates.
<PAGE>
Financial Statements
Item 6(b)
Page 27 of 30
Oyster Creek deferred costs: Consists of replacement power and O&M costs
deferred in accordance with orders from the NJBPU. JCP&L has been granted
recovery of these costs through rates at an annual amount until fully
amortized.
Amounts related to the decommissioning of TMI-1 and Oyster Creek, which
are not included in Regulatory Assets on the balance sheet, are separately
disclosed in NUCLEAR PLANT RETIREMENT COSTS.
The Subsidiaries continue to be subject to cost-based ratemaking
regulation. The Corporation is unable to estimate to what extent FAS 71 may no
longer be applicable to its utility assets in the future.
ENVIRONMENTAL MATTERS
As a result of existing and proposed legislation and regulations, and
ongoing legal proceedings dealing with environmental matters, including but
not limited to acid rain, water quality, air quality, global warming,
electromagnetic fields, and storage and disposal of hazardous and/or toxic
wastes, the GPU System may be required to incur substantial additional costs
to construct new equipment, modify or replace existing and proposed equipment,
remediate, decommission or clean up waste disposal and other sites currently
or formerly used by it, including formerly owned manufactured gas plants, mine
refuse piles and generating facilities, and with regard to electromagnetic
fields, postpone or cancel the installation of, or replace or modify, utility
plant, the costs of which could be material.
To comply with the federal Clean Air Act Amendments (Clean Air Act) of
1990, the Subsidiaries expect to spend up to $380 million for air pollution
control equipment by the year 2000. In developing its least-cost plan to
comply with the Clean Air Act, the GPU System will continue to evaluate major
capital investments compared to participation in the emission allowance market
and the use of low-sulfur fuel or retirement of facilities. In 1994, the
Ozone Transport Commission (OTC), consisting of representatives of 12
northeast states (including New Jersey and Pennsylvania) and the District of
Columbia, proposed reductions in nitrogen oxide (NOx) emissions it believes
necessary to meet ambient air quality standards for ozone and the statutory
deadlines set by the Clean Air Act. The Corporation expects that the U.S.
Environmental Protection Agency (EPA) will approve the proposal, and that as a
result, the Subsidiaries will spend an estimated $60 million, beginning in
1997, to meet the reductions set by the OTC. The OTC requires additional NOx
reductions to meet the Clean Air Act's 2005 National Ambient Air Quality
Standards for ozone. However, the specific requirements that will have to be
met at that time have not been finalized. The Subsidiaries are unable to
determine what additional costs, if any, will be incurred.
The GPU System companies have been notified by the EPA and state
environmental authorities that they are among the potentially responsible
parties (PRPs) who may be jointly and severally liable to pay for the costs
associated with the investigation and remediation at 12 hazardous and/or toxic
waste sites. In addition, the Subsidiaries have been requested to voluntarily
participate in the remediation or supply information to the EPA and state
environmental authorities on several other sites for which they have not yet
<PAGE>
Financial Statements
Item 6(b)
Page 28 of 30
been named as PRPs. The Subsidiaries have also been named in lawsuits
requesting damages for hazardous and/or toxic substances allegedly released
into the environment. The ultimate cost of remediation will depend upon
changing circumstances as site investigations continue, including (a) the
existing technology required for site cleanup, (b) the remedial action plan
chosen and (c) the extent of site contamination and the portion attributed to
the Subsidiaries.
JCP&L has entered into agreements with the New Jersey Department of
Environmental Protection for the investigation and remediation of 17 formerly
owned manufactured gas plant sites. JCP&L has also entered into various cost-
sharing agreements with other utilities for some of the sites. As of June 30,
1995, JCP&L has an estimated environmental liability of $32 million recorded
on its balance sheet relating to these sites. The estimated liability is
based upon ongoing site investigations and remediation efforts, including
capping the sites and pumping and treatment of ground water. If the periods
over which the remediation is currently expected to be performed are
lengthened, JCP&L believes that it is reasonably possible that the ultimate
costs may range as high as $60 million. Estimates of these costs are subject
to significant uncertainties as JCP&L does not presently own or control most
of these sites; the environmental standards have changed in the past and are
subject to future change; the accepted technologies are subject to further
development; and the related costs for these technologies are uncertain. If
JCP&L is required to utilize different remediation methods, the costs could be
materially in excess of $60 million.
In 1993, the NJBPU approved a mechanism similar to JCP&L's Levelized
Energy Adjustment Clause (LEAC) for the recovery of future manufactured gas
plant remediation costs when expenditures exceed prior collections. Since
collections currently exceed expenditures, the NJBPU decision also provided
for interest on the excess to be credited to customers until the overrecovery
is eliminated and for future costs to be amortized over seven years with
interest. A final 1994 NJBPU order indicated that interest is to be accrued
retroactive to June 1993. JCP&L is pursuing reimbursement of the remediation
costs from its insurance carriers. In 1994, JCP&L filed a complaint with the
Superior Court of New Jersey against several of its insurance carriers,
relative to these manufactured gas plant sites. JCP&L requested the Court to
order the insurance carriers to reimburse JCP&L for all amounts it has paid,
or may be required to pay, in connection with the remediation of the sites.
Pretrial discovery has begun in this case.
The GPU System companies are unable to estimate the extent of possible
remediation and associated costs of additional environmental matters. Also
unknown are the consequences of environmental issues, which could cause the
postponement or cancellation of either the installation or replacement of
utility plant.
OTHER COMMITMENTS AND CONTINGENCIES
The GPU System's construction programs, for which substantial
commitments have been incurred and which extend over several years,
contemplate expenditures of $482 million during 1995. As a consequence of
reliability, licensing, environmental and other requirements, additions to
<PAGE>
Financial Statements
Item 6(b)
Page 29 of 30
utility plant may be required relatively late in their expected service lives.
If such additions are made, current depreciation allowance methodology may not
make adequate provision for the recovery of such investments during their
remaining lives. Management intends to seek recovery of such costs through
the ratemaking process, but recognizes that recovery is not assured.
The Subsidiaries have entered into long-term contracts with
nonaffiliated mining companies for the purchase of coal for certain generating
stations in which they have ownership interests. The contracts, which expire
between 1995 and the end of the expected service lives of the generating
stations, require the purchase of either fixed or minimum amounts of the
stations' coal requirements. The price of the coal under the contracts is
based on adjustments of indexed cost components. One contract also includes a
provision for the payment of environmental and postretirement benefit costs.
The Subsidiaries' share of the cost of coal purchased under these agreements
is expected to aggregate $90 million for 1995.
The Subsidiaries have entered into agreements with other utilities to
purchase capacity and energy for various periods through 2004. These
agreements will provide for up to 1,308 MW in 1995, declining to 1,096 MW in
1997 and 696 MW by 2004. For the years 1995 through 1999, payments pursuant
to these agreements are estimated as follows:
Payments Under Other Utility Agreements
(Millions)
Total JCP&L Met-Ed
1995 $ 208 $ 202 $ 6
1996 175 175 -
1997 162 162 -
1998 145 145 -
1999 128 128 -
JCP&L has commenced construction of a 141 MW gas-fired combustion
turbine at its Gilbert generating station. The new facility, coupled with the
retirement of two older units, will result in a net capacity increase of
approximately 95 MW. This estimated $50 million project is expected to be in-
service by mid-1996. In February 1995, the NJDEP issued an air permit for the
facility based, in part, on the NJBPU's December 1994 order which found that
New Jersey's Electric Facility Need Assessment Act is not applicable to this
combustion turbine and that construction of this facility, without a market
test, is consistent with New Jersey energy policies. An industry trade group
representing nonutility generators has appealed the NJDEP's issuance of the
air permit and the NJBPU's order to the Appellate Division of the New Jersey
Superior Court. JCP&L has moved to dismiss the appeal. There can be no
assurance as to the outcome of this proceeding.
The NJBPU has instituted a generic proceeding to address the appropriate
recovery of capacity costs associated with electric utility power purchases
from nonutility generation projects. The proceeding was initiated, in part,
to respond to contentions of the Division of the Ratepayer Advocate (Ratepayer
Advocate), that by permitting utilities to recover such costs through the
LEAC, an excess or "double recovery" may result when combined with the
<PAGE>
Financial Statements
Item 6(b)
Page 30 of 30
recovery of the utilities' embedded capacity costs through their base rates.
In 1994, the NJBPU ruled that the 1991 LEAC period was considered closed but
subsequent LEAC periods remain open for further investigation. This matter is
pending before a NJBPU Administrative Law Judge. JCP&L estimates that the
potential exposure from the 1992 LEAC period through February 1996, the end of
the current LEAC period, is $73 million. There can be no assurance as to the
outcome of this proceeding.
JCP&L's two operating nuclear units are subject to the NJBPU's annual
nuclear performance standard. Operation of these units at an aggregate annual
generating capacity factor below 65% or above 75% would trigger a charge or
credit based on replacement energy costs. At current cost levels, the maximum
annual effect on net income of the performance standard charge at a 40%
capacity factor would be approximately $11 million before tax. While a
capacity factor below 40% would generate no specific monetary charge, it would
require the issue to be brought before the NJBPU for review. The annual
measurement period, which begins in March of each year, coincides with that
used for the LEAC.
During the normal course of the operation of their businesses, in
addition to the matters described above, the GPU System companies are from
time to time involved in disputes, claims and, in some cases, as defendants in
litigation in which compensatory and punitive damages are sought by customers,
contractors, vendors and other suppliers of equipment and services and by
employees alleging unlawful employment practices. It is not expected that the
outcome of these types of matters would have a material effect on the GPU
System's financial position or results of operations.
<PAGE>
