Post-Effective Amendment No. 5 to
SEC File No. 70-7926
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM U-1
DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 ("Act")
GENERAL PUBLIC UTILITIES CORPORATION ("GPU")
100 Interpace Parkway
Parsippany, New Jersey 07054
JERSEY CENTRAL POWER & LIGHT COMPANY ("JCP&L")
300 Madison Avenue
Morristown, New Jersey 07960
METROPOLITAN EDISON COMPANY ("MET-ED")
PENNSYLVANIA ELECTRIC COMPANY ("PENELEC")
2800 Pottsville Pike
Reading, Pennsylvania 19605
(Names of companies filing this statement and
addresses of principal executive offices)
GENERAL PUBLIC UTILITIES CORPORATION
(Name of top registered holding company parent of applicants)
T. G. Howson, Vice President W. Edwin Ogden, Esq.
and Treasurer Ryan, Russell, Ogden & Seltzer
M. A. Nalewako, Secretary 1100 Berkshire Boulevard
General Public Utilities P.O. Box 6219
Corporation Reading, Pennsylvania 19610
100 Interpace Parkway
Parsippany, New Jersey 07054
Robert C. Gerlach, Esq.
R.S. Cohen, Secretary Ballard Spahr Andrews &
Jersey Central Power & Light Ingersoll
Company 1735 Market Street
300 Madison Avenue Philadelphia, Pennsylvania
19103
Morristown, New Jersey 07960
Douglas E. Davidson, Esq.
W.C. Matthews, II, Secretary Berlack, Israels & Liberman LLP
Metropolitan Edison Company 120 West 45th Street
Pennsylvania Electric Company New York, New York 10036
2800 Pottsville Pike
Reading, Pennsylvania 19605
(Names and addresses of agents for service)<PAGE>
GPU, JCP&L, Met-Ed and Penelec (the "GPU Companies") hereby
post-effectively amend their Declaration on Form U-1, docketed in
SEC File No. 70-7926, as follows:
A. By Order dated October 26, 1994 (HCAR No. 35-26150),
the Commission, among other things, authorized the GPU Companies
to enter into an amendment to their Credit Agreement, dated as of
March 19, 1992, with a group of commercial banks for which
Citibank, N.A. and Chemical Bank act as co-agents and Chemical
Bank acts as the administrative agent, in order to extend through
December 31, 1997 the period during which the GPU Companies were
authorized to issue, sell and renew their unsecured promissory
notes (the "Notes") from time to time in amounts up to $250
million outstanding at any time. On November 1, 1994, the GPU
Companies entered into the First Amendment to the Credit
Agreement pursuant to the October 26, 1994 order. In addition,
as previously reported in a Rule 24 Certificate of Partial
Completion of Transactions, dated November 7, 1995, on October
24, 1995, the GPU Companies entered into a Second Amendment to
the Credit Agreement which modified certain negative covenants in
the Credit Agreement. The Credit Agreement, as so amended, is
referred to as the "Prior Credit Agreement".
B. Pursuant to the October 26, 1994 Order, the aggregate
principal amount of Notes outstanding at any time under the Prior
Credit Agreement, together with all other unsecured debt then
outstanding, may not exceed the limitations on such indebtedness
imposed by the charters of each of JCP&L, Met-Ed and Penelec, and
$200 million in the case of GPU. As of March 31, 1996, the
charter limitations on such indebtedness for JCP&L, Met-Ed and
1<PAGE>
Penelec were $290 million, $133 million and $145 million,
respectively. At May 1, 1996, the GPU Companies had unsecured
indebtedness outstanding as follows:
GPU $102.7 million
JCP&L $213.4 million
Met-Ed $ 26.0 million
Penelec $111.2 million
C. The Notes issued under the Prior Credit Agreement
mature not more than six months from their date of issue and the
annual interest rate on each borrowing is either: (a) the
Alternate Base Rate, as in effect from time to time; (b) the CD
Rate, as in effect from time to time, plus an amount (the "CD
Applicable Margin") ranging from .375% to .625% depending upon
the senior secured non-credit enhanced long-term debt rating
("Debt Rating") of the borrower or, in the case of GPU, the Debt
Rating of JCP&L; or (c) the Eurodollar Rate, as in effect from
time to time, plus an amount (the "Eurodollar Applicable Margin")
ranging from .25% to .50% depending upon the Debt Rating of the
borrower or, in the case of GPU, the Debt Rating of JCP&L. In
addition, the GPU Companies pay a facility fee ranging from .125%
to .375% per annum, depending on the Debt Ratings of JCP&L, Met-
Ed and Penelec, of the total amount of the commitments, a
competitive bid fee of $2,500 for each request for a competitive
bid, and an annual administrative fee of $15,000. The GPU
Companies also paid aggregate agency fees of $50,000 upon signing
of the First Amendment.
D. On May 6, 1996, the GPU Companies entered into an
Amended and Restated Credit Agreement with the banks named
therein (and banks that may subsequently become parties thereto)
2<PAGE>
and The Chase Manhattan Bank, N.A. (successor to Chemical Bank),
as Administrative Agent, and Citibank, N.A., as Syndication Agent
(the "Restated Credit Agreement")(1), which, subject to receipt
of the authorization herein requested, permits borrowings
thereunder through May 6, 2001 and increases the amount that GPU
may borrow thereunder to up to $250 million outstanding at any
time. The Restated Credit Agreement also modifies in material
respects a number of the covenants contained in the Prior Credit
Agreement.
Accordingly, the GPU Companies have agreed, subject to receipt of
the authorization herein requested, to an increased facility fee
equal to .50% (rather than .375%) per annum of the total amount
of the commitments under the Restated Credit Agreement in the
event
that the applicable Debt Rating(2) is BB or below as rated by
Standard & Poor's or Duff & Phelps, or Ba or below as rated by
Moody's Investor Services, or if there is no Debt Rating. The CD
Applicable Margin will be .75% (rather than .625%) if the
__________________________
1. Immediately prior to the effectiveness of the Restated
Credit Agreement, the GPU Companies entered into a Third
Amendment to the Prior Credit Agreement, which allowed for the
termination of the commitments under the Prior Credit Agreement
of those banks which did not execute the Restated Credit
Agreement.
2. The applicable Debt Rating for purposes of determining
the facility fee is based on the lowest Debt Rating of any
borrower, with the Debt Rating of each borrower, in turn, being
based on the lower of the two highest Debt Ratings from the three
rating agencies (Standard & Poor's, Moody's Investor Services and
Duff & Phelps) of such borrower and, in the case of GPU, of GPU's
own Debt Ratings or, if GPU does not have a Debt Rating, then of
the Debt Ratings of EI Energy, Inc. or, if EI Energy, Inc. does
not have a Debt Rating, then on the lowest applicable Debt Rating
of JCP&L, Met-Ed or Penelec.
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applicable Debt Rating(3) is BB+ as rated by Standard & Poor's or
Duff & Phelps, or Ba1 as rated by Moody's Investor Services, and
1.37% (rather than .625%) if the applicable Debt Rating is BB or
below as rated by Standard & Poor's or Duff & Phelps, or Ba or
below as rated by Moody's Investor Services, or if there is no
Debt Rating. The Eurodollar Applicable Margin will be .625%
(rather than .50%) if the applicable Debt Rating is BB+ as rated
by Standard & Poor's or Duff & Phelps, or Ba1 as rated by Moody's
Investor Services, and 1.25% (rather than .50%) if the applicable
Debt Rating is BB or below as rated by Standard & Poor's or Duff
& Phelps, or Ba or below as rated by Moody's Investor Services,
or if there is no Debt Rating. All other CD and Eurodollar
Applicable Margins and all other fees remain unchanged (although
there are no new agency fees payable by the GPU Companies in
connection with the Restated Credit Agreement). Other
provisions, including those relating to conditions to borrowing,
acceleration and prepayment, also remain unchanged.
E. At the date hereof, the Debt Ratings of JCP&L, Met-Ed
and Penelec were as follows (neither GPU nor EI Energy, Inc.
presently has a Debt Rating):
Standard & Poor's Duff & Phelps Moody's
JCP&L BBB+ BBB+ Baa1
Met-Ed BBB+ A- Baa1
Penelec A- A- A3
_______________________
3. The applicable Debt Rating for purposes of determining the
CD or Eurodollar Applicable Margin is based on the lower of the
two highest Debt Ratings from the three rating agencies (Standard
& Poor's, Moody's Investor Services and Duff & Phelps) of the
borrower and, in the case of GPU, of GPU's own Debt Ratings or,
if GPU does not have a Debt Rating, then of the Debt Ratings of
EI Energy, Inc. or, if EI Energy, Inc. does not have a Debt
Rating, then on the lowest applicable Debt Rating of JCP&L, Met-
Ed or Penelec.
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<PAGE>
As a result, the higher facility fee and the higher CD and
Eurodollar Applicable Margins would not now be applicable.
F. In sum, the GPU Companies hereby request authorization
to: (i) extend from December 31, 1997 to May 6, 2001 the period
during which they may make borrowings under the Restated Credit
Agreement, (ii) increase to $250 million from $200 million the
aggregate amount of unsecured indebtedness which GPU may have
outstanding at any time, including borrowings under the Restated
Credit Agreement, and (iii) pay the higher facility fee and CD
and Eurodollar Applicable Margins under the circumstances
contemplated by the Restated Credit Agreement.
G. GPU submits 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, 1995 and
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996, as filed under the Securities Exchange
Act of 1934, was approximately $1.99 billion. As of
March 31, 1996, GPU had invested, or committed to
invest, directly or indirectly, an aggregate of
approximately $200 million in exempt wholesale
generators ("EWGs") and $114 million in foreign utility
companies ("FUCOs"), representing approximately 16% of
such average consolidated retained earnings. GPU's
aggregate investment in EWGs and FUCOs, including
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<PAGE>
amounts invested pursuant to all outstanding or pending
authorizations to make investments in EWGs or FUCOs
(i.e., $500 million in SEC File No. 70-7727, $200
million in SEC File No. 70-7926, $30 million in SEC
File No. 70-8369, and $200 million in SEC File No. 70-
8593) will not at any time exceed 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:
(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
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<PAGE>
(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;
(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 subsidiary employees will render any services,
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<PAGE>
directly or indirectly, to any EWG or FUCO in which GPU
directly or indirectly holds an interest.
(iv) Copies of this Post-Effective Amendment 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
(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 $1.99 billion) represented
an increase of approximately $199 million (or
approximately 11%) in the average consolidated
retained earnings for the previous four quarterly
periods (approximately $1.79 billion).
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(C) GPU did not incur operating losses from
direct or indirect investments in EWGs and FUCOs
in 1995 in excess of 5% of GPU's consolidated
retained earnings.
(vi) In accordance with Rule 54, the requirements
of Rule 53(a), (b) and (c) are fulfilled.
H. The estimated fees, commissions and expenses expected
to be incurred by the GPU Companies in connection with the
proposed transactions will be supplied by further post-effective
amendment.
I. It is believed that Sections 6(a) and 7 of the Act are
applicable to the transactions proposed herein.
J. No state or Federal commission other than your
Commission has jurisdiction with respect to any aspect of the
proposed transactions, except as set forth below.
The Pennsylvania Public Utility Commission ("PaPUC")
has jurisdiction with respect to Met-Ed's and Penelec's issuance
of Notes under the Restated Credit Agreement. Met-Ed and Penelec
will file Securities Certificates with the PaPUC with respect to
such transactions, and it is expected that such Securities
Certificates will be registered by the PaPUC.
K. 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 June 27, 1996.
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
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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.
L. The following additional exhibits and financial
statements are filed in Item 6 hereof:
(a) Exhibits:
A-1(b)- Forms of Notes - incorporated by
reference to Exhibits A-1 through A-4
and B-1 through B-4 to Exhibit B-1(c)
hereto.
B-1(b)- Third Amendment to the Credit Agreement.
B-1(c)- Amended and Restated Credit Agreement -
to be filed by further post-effective
amendment.
C - None.
D-1(d)- Copy of Securities Certificate of Met-Ed
filed with the PaPUC.
D-1(e)- Copy of Order of the PaPUC registering
Met-Ed's Securities Certificate - to be
filed by further post-effective
amendment.
D-2(d)- Copy of Securities Certificate of
Penelec filed with the PaPUC.
D-2(e)- Copy of Order of the PaPUC registering
Penelec's Securities Certificate - to be
filed by further post-effective
amendment.
E - None.
F-1(b)- Opinion of Berlack, Israels & Liberman
LLP -- to be filed by further post-
effective amendment.
F-2(b)- Opinion of Richard S. Cohen, Esq. -- to
be filed by further post-effective
amendment.
F-3(b)- Opinion of Ryan, Russell, Ogden &
Seltzer -- to be filed by further post-
effective amendment.
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F-4(b)- Opinion of Ballard Spahr Andrews &
Ingersoll -- to be filed by further
post-effective amendment.
G - Source and Application of Funds
Statement
H - Proposed form of public notice.
(b) Financial Statements:
1-A(b)- GPU (corporate) Balance Sheets, actual
and pro forma, as at March 31, 1996, and
Statements of Income and Retained
Earnings, actual and pro forma, for the
twelve months ended March 31, 1996; pro
forma journal entries.
1-B(b)- GPU and Subsidiary Companies
Consolidated Balance Sheets, actual and
pro forma, as of March 31, 1996, and
Consolidated Statements of Income and
Retained Earnings, actual and pro forma,
for the twelve months ended March 31,
1996; pro forma journal entries.
1-C(b)- JCP&L Consolidated Balance Sheets,
actual and pro forma, as of March 31,
1996, and Consolidated Statements of
Income and Retained Earnings, actual and
pro forma, for the twelve months ended
March 31, 1996; pro forma journal
entries.
1-D(b)- Met-Ed Consolidated Balance Sheets,
actual and pro forma, as of March 31,
1996, and Consolidated Statements of
Income and Retained Earnings, actual and
pro forma, for the twelve months ended
March 31, 1996; pro forma journal
entries.
1-E(b)- Penelec Consolidated Balance Sheets,
actual and pro forma, as of March 31,
1996, and Consolidated Statements of
Income and Retained Earnings, actual and
pro forma, for the twelve months ended
March 31, 1996; pro forma journal
entries.
2 - None.
3 - None.
4 - None.
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M. The proceeds from the issuance and sale of any Notes
will be used by the GPU Companies to finance their business
activities. As such, the issuance of an order by your Commission
with respect to the proposed transactions which are the subject
hereof is not a major Federal action significantly affecting the
quality of the human environment.
N. No Federal agency has prepared or is preparing an
environmental impact statement with respect to the proposed
transactions which are the subject hereof. Reference is made to
paragraph J 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 STATEMENT TO BE SIGNED ON THEIR BEHALF BY THE UNDER-
SIGNED THEREUNTO DULY AUTHORIZED.
GENERAL PUBLIC UTILITIES CORPORATION
JERSEY CENTRAL POWER & LIGHT COMPANY
METROPOLITAN EDISON COMPANY
PENNSYLVANIA ELECTRIC COMPANY
By:
________________________________
T. G. Howson
Vice President and Treasurer
Date: May 29, 1996<PAGE>
EXHIBITS AND FINANCIAL STATEMENTS TO BE FILED BY EDGAR
Exhibits:
B-1(b) - Third Amendment to the Credit Agreement.
D-1(d) - Copy of Securities Certificate of Met-Ed
filed with the PaPUC.
D-2(d) - Copy of Securities Certificate of Penelec
filed with the PaPUC.
G - Source and Application of Funds Statement
H - Proposed form of public notice.
Financial Statements:
1-A(b) - GPU (corporate) Balance Sheets, actual and
pro forma, as at March 31, 1996, and
Statements of Income and Retained Earnings,
actual and pro forma, for the twelve months
ended March 31, 1996; pro forma journal
entries.
1-B(b) - GPU and Subsidiary Companies Consolidated
Balance Sheets, actual and pro forma, as of
March 31, 1996, and Consolidated Statements
of Income and Retained Earnings, actual and
pro forma, for the twelve months ended March
31, 1996; pro forma journal entries.
1-C(b) - JCP&L Consolidated Balance Sheets, actual and
pro forma, as of March 31, 1996, and
Consolidated Statements of Income and
Retained Earnings, actual and pro forma, for
the twelve months ended March 31, 1996; pro
forma journal entries.
1-D(b) - Met-Ed Consolidated Balance Sheets, actual
and pro forma, as of March 31, 1996, and
Consolidated Statements of Income and
Retained Earnings, actual and pro forma, for
the twelve months ended March 31, 1996; pro
forma journal entries.
1-E(b) - Penelec Consolidated Balance Sheets, actual
and pro forma, as of March 31, 1996, and
Consolidated Statements of Income and
Retained Earnings, actual and pro forma, for
the twelve months ended March 31, 1996; pro
forma journal entries.<PAGE>
EXHIBIT B-1(b)
EXECUTION COPY
THIRD AMENDMENT TO THE
CREDIT AGREEMENT
Dated as of May 6, 1996
This THIRD AMENDMENT (the "Amendment") is made by and among
GENERAL PUBLIC UTILITIES CORPORATION, a Pennsylvania corporation
("GPU"), JERSEY CENTRAL POWER & LIGHT COMPANY, a New Jersey
corporation ("JC"), METROPOLITAN EDISON COMPANY, a Pennsylvania
c o r poration ("ME"), and PENNSYLVANIA ELECTRIC COMPANY, a
Pennsylvania corporation ("PE") ("GPU", "JC", "ME" and "PE" each
being individually a "Borrower" and being, collectively, the
"Borrowers"), the banks listed on the signature pages of this
Amendment (the "Banks"), CHEMICAL BANK and CITIBANK, N.A., as co-
agents for the Banks (the "Co-Agents"), and CHEMICAL BANK, as
administrative agent for the Banks (the "Administrative Agent").
PRELIMINARY STATEMENTS:
(1) The Borrowers, the Co-Agents, the Banks and the
Administrative Agent have entered into a Credit Agreement, dated
as of March 19, 1992, as amended by the First Amendment to the
Credit Agreement, dated as of November 1, 1994, and the Second
Amendment to the Credit Agreement, dated as of October 24, 1995
(such Credit Agreement, as so amended, hereinafter referred to as
the "Credit Agreement"). Capitalized terms used but not defined
herein shall have the meanings assigned such terms in the Credit
Agreement.
(2) The Borrowers have requested that the Banks agree to
further amend the Credit Agreement as set forth herein.
(3) The Banks, on the terms and conditions hereinafter set
forth, are willing to grant the request of the Borrowers.
NOW, THEREFORE, in consideration of the premises and in
order to induce the Banks to the amend the Credit Agreement
pursuant to the terms below, the parties hereto agree as follows:
SECTION 1. Amendment to Credit Agreement. Section 2.06 of
the Credit Agreement is, effective as of the date hereof, hereby
amended (i) by deleting the phrase "upon at least three Business
Days' notice to the Co-Agents" in its entirety and substituting
the new phrase "upon written notice to the Administrative Agent"
and (ii) by deleting the phrase "to terminate in whole or reduce
ratably in part" in its entirety and substituting the new phrase
"to terminate in whole or reduce in part, ratably or non-ratably
(provided, that with respect to any Bank the Commitment of which
-1-<PAGE>
is reduced or terminated on a non-ratable basis, the Borrowers
shall have paid to such Bank on the date of such reduction or
termination the amount of all accrued Facility Fees payable
hereunder through the date of such reduction or termination with
respect to that portion of such Lender's Commitment so reduced or
terminated)".
SECTION 2. Representations and Warranties of the Borrower.
Each Borrower represents and warrants with respect to itself as
follows:
(a) The representations and warranties of such Borrower
contained in Section 4.01 of the Credit Agreement, as amended
hereby, are true and correct on and as of the date hereof as
though made on and as of such date.
(b) T h e execution, delivery and performance by such
Borrower of this Amendment is within such Borrower's corporate
powers, have been duly authorized by all necessary corporate
action and do not contravene (i) such Borrower's charter or
by-laws or (ii) law or any material contractual restriction
binding on or affecting such Borrower, and do not result in or
require the creation of any Lien upon or with respect to any of
its properties.
(c) No authorization or approval or other action by, and no
notice to, or filing with, any governmental authority or
regulatory body is required for the due execution, delivery and
performance by such Borrower of this Amendment except for such
orders as have been duly obtained, and are in full force and
effect.
(d) This Amendment and the Credit Agreement, as amended by
t h i s Amendment, constitute the legal, valid and binding
obligations of such Borrower, enforceable against such Borrower
in accordance with their respective terms (except as such
enforceability may be qualified by the absence of certain
governmental approvals which are not required to be obtained
until a later date).
(e) There is no pending or, to the knowledge of such
Borrower, threatened action or proceeding affecting such Borrower
before any court, governmental agency or arbitrator, which could
reasonably be expected to materially adversely affect the ability
of such Borrower to perform its obligations under this Amendment
or the Credit Agreement, as amended by this Amendment.
(f) N o e vent has occurred and is continuing that
constitutes an Unmatured Default or an Event of Default.
SECTION 3. Reference to and Effect on the Credit Agreement.
Upon the effectiveness of this Amendment, on and after the date
h e reof, each reference in the Credit Agreement to "this
Agreement", "hereunder", "hereof" or words of like import
referring to the Credit Agreement and each reference in the Notes
-2-<PAGE>
to the Credit Agreement, shall mean and be a reference to the
Credit Agreement as amended hereby.
SECTION 4. Execution in Counterparts. This Amendment may
be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so
executed and delivered shall be deemed to be an original and all
of which taken together shall constitute but one and the same
instrument.
SECTION 5. Effectiveness. This Amendment shall, in
accordance with Section 8.01 of the Credit Agreement, become
effective when duly executed and delivered by the Borrowers, the
Administrative Agent and the Majority Banks.
SECTION 6. Governing Law. This Amendment shall be governed
by, and construed in accordance with, the laws of the State of
New York.
-3-<PAGE>
Amendment S-1
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their respective officers thereunto
duly authorized, as of the date first above written.
GENERAL PUBLIC UTILITIES
CORPORATION
By:
Name:
Title:
JERSEY CENTRAL POWER & LIGHT
COMPANY
By:
Name:
Title:
METROPOLITAN EDISON COMPANY
By:
Name:
Title:
PENNSYLVANIA ELECTRIC
COMPANY
By:
Name:
Title:<PAGE>
Amendment S-2
CHEMICAL BANK, as a Co-Agent
and Administrative Agent
By:
Name:
Title:<PAGE>
Amendment S-3
CITIBANK, N.A., as a Co-Agent
By:
Name:
Title:
Banks
CITIBANK, N.A.
By
Name:
Title:<PAGE>
Amendment S-4
CHEMICAL BANK
By
Name:
Title:<PAGE>
Amendment S-5
MELLON BANK, N.A.
By
Name:
Title:<PAGE>
Amendment S-6
THE BANK OF NEW YORK
By ________________________________
Name:
Title:<PAGE>
Amendment S-7
THE CHASE MANHATTAN BANK, N.A.
By
Name:
Title:<PAGE>
Exhibit D-1(d)
BEFORE THE
PENNSYLVANIA PUBLIC UTILITY COMMISSION
In re:
SECURITIES CERTIFICATE OF :
METROPOLITAN EDISON COMPANY : Securities Certificate
IN THE MATTER OF THE ISSUANCE :
OF PROMISSORY NOTES TO BANKS : No. S-
PURSUANT TO A REVOLVING :
CREDIT AGREEMENT :
TO THE PENNSYLVANIA PUBLIC UTILITY COMMISSION:
1. The name and address of the public utility filing
this Securities Certificate are Metropolitan Edison Company
("Met-Ed"), Muhlenberg Township, Berks County, Pennsylvania
(mailing address P.O. Box 16001, Reading, PA 19640-0001).
2. The names and address of Met-Ed's attorneys are
W. Edwin Ogden, Esquire, Jeffrey A. Franklin, Esquire and Ryan,
Russell, Ogden & Seltzer, 1100 Berkshire Boulevard, P.O. Box
6219, Reading, Pennsylvania 19610-0219.
3. Met-Ed, a public utility as defined in the
Pennsylvania Public Utility Code, is a corporation organized and
existing under the laws of the Commonwealth of Pennsylvania. It
i s e n gaged in the business of generating, purchasing,
transmitting, distributing and selling electric energy in eastern
and central Pennsylvania.
4. All outstanding shares of Met-Ed's common stock
are owned by General Public Utilities Corporation ("GPU"). GPU
also owns all outstanding shares of common stock of Pennsylvania
Electric Company ("Penelec") and Jersey Central Power & Light
Company ("JCP&L").<PAGE>
5. This Securities Certificate relates to proposed
borrowings by Met-Ed from banks pursuant to an Amended and
Restated Revolving Credit Agreement, as described herein.
Under date of March 19, 1992, GPU, JCP&L, Met-Ed and
Penelec (the "GPU Companies") entered into a revolving credit
agreement (the "1992 Agreement") with a group of commercial banks
for which Chemical Bank and Citibank, N.A. acted as Co-Agents and
Chemical Bank acted as Administrative Agent. Reference is made
to Securities Certificate No. S-910197 and the related order
entered on January 30, 1992.
On November 1, 1994, Met-Ed (as one of the GPU
Companies) amended the 1992 Agreement to, among other things,
extend the termination date to November 1, 1999 and increase the
commitments of the banks to $250,000,000. Reference is made to
Securities Certificate No. S- 00940463 and the related order
entered on September 22, 1994. The 1992 Agreement, as amended,
is referred to herein as the "Prior Credit Agreement".
On May 6, 1996, the GPU Companies terminated the
commitments of all of the banks under the Prior Credit Agreement
except the commitments of Citibank, N.A. and The Chase Manhattan
Bank, N.A. (successor to Chemical Bank) and entered into an
Amended and Restated Credit Agreement dated as of May 6, 1996
(the "Restated Credit Agreement") among the GPU Companies, the
banks named therein (the "Banks") and The Chase Manhattan Bank,
a s Administrative Agent (the "Administrative Agent"), and
Citibank, N.A., as Syndication Agent. The principal purposes of
the amendment and restatement of the Prior Credit Agreement are
(i) to extend the termination date from November 1, 1999 to May
- 2 -<PAGE>
6, 2001, (ii) to increase the amount that GPU may borrow
thereunder up to $250,000,000 and (iii) to modify in material
respects a number of the covenants contained therein. Except for
these changes and as otherwise described in this Securities
Certificate, the terms of the Restated Credit Agreement are
substantially the same as the terms of the Prior Credit
Agreement.
Subject to the limitation on the aggregate available
commitments of the Banks under the Restated Credit Agreement,
borrowings by Met-Ed under the Restated Credit Agreement are
independent of borrowings by the other GPU Companies thereunder.
Borrowings by each of the GPU Companies, including Met-Ed, are
payable solely by that GPU Company. An event of default by one
of the GPU Companies under the Restated Credit Agreement will
not, itself, constitute an event of default with respect to any
other of the GPU Companies or permit the Banks to accelerate
repayments of borrowings by any other of the GPU Companies
thereunder.
The Restated Credit Agreement provides that Met-Ed's
rights and obligations as a borrower under the Restated Credit
Agreement shall not become effective until your Honorable
Commission has entered an order authorizing Met-Ed to perform its
obligations under the Restated Credit Agreement. Met-Ed (as one
of the GPU Companies) is now requesting regulatory authorization
for borrowings under the Restated Credit Agreement.
At March 31, 1996, Met-Ed's charter would have
permitted it to have a maximum of short-term indebtedness of $133
million outstanding at any one time.
- 3 -<PAGE>
EXACT TITLE OF SECURITY:
The title of the security is "Metropolitan Edison
Company Notes" issued under the Restated Credit Agreement.
AGGREGATE PRINCIPAL AMOUNT OF BORROWINGS:
B o rrowings by Met-Ed under the Restated Credit
Agreement, as evidenced by Met-Ed's notes, will be not more than
the lesser of $250,000,000 outstanding at any time and, together
with other unsecured indebtedness of Met-Ed, the limitation on
unsecured indebtedness imposed by Met-Ed's Restated Articles of
Incorporation.
NOMINAL DATE OF ISSUE AND DATE OF MATURITY:
The Restated Credit Agreement was executed as of May
6, 1996 but no borrowings by Met-Ed are permitted under the
Restated Credit Agreement until Met-Ed has delivered to the Banks
a final, non-appealable order of your Honorable Commission
authorizing Met-Ed to perform its obligations under the Restated
Credit Agreement. The Restated Credit Agreement terminates on
May 6, 2001. As under the Prior Credit Agreement, the Restated
Credit Agreement will also afford Met-Ed the option of inviting
competitive bids from the Banks for borrowings for requested
maturities of up to six months in such principal amounts as Met-
Ed may request, subject to the $250 million limit of the Restated
Credit Agreement. No Bank would be required to bid for any such
loan and Met-Ed would not be obligated to accept any bid
received.
INTEREST RATES:
The permitted interest rates on borrowings by Met-Ed
under the Restated Credit Agreement would be (a) the Alternate
- 4 -
<PAGE>
Base Rate, as in effect from time to time, (b) the CD Rate, as in
effect from time to time, plus an applicable margin depending
upon Met-Ed's senior secured non-credit enhanced long-term debt
ratings issued by Standard & Poor's Corporation ("S&P"), Duff &
Phelps ("D&P") and Moody's Investor Services ("Debt Ratings") or
(c) the Eurodollar Rate, as in effect from time to time, plus an
applicable margin depending upon Met-Ed's Debt Ratings.
The Alternate Base Rate is the greater of (a) the
Administrative Agent's Prime Rate in effect from time to time and
(b) the Federal Funds Rate then in effect for such day, plus .50%
per annum.
The CD Rate is the domestic money market bid rate for
certificates of deposit of various maturities issued by three of
the Banks, including the Co-Agents (collectively, the "Reference
Banks"), adjusted for the statutory reserve requirements and
Federal Deposit Insurance Corporation assessment.
The Eurodollar Rate is the average of the rates quoted
at which deposits in U.S. dollars are offered by the principal
offices of the Reference Banks in London to prime banks in the
London interbank market from time to time, plus additional costs
for reserves, if applicable.
The applicable margin for the CD Rate borrowings and
Eurodollar Rate borrowings will be determined as follows based on
Met-Ed's Debt Ratings as follows:
- 5 -
<PAGE>
Level 1 Level 2 Level 3 Level 4 Level 5* Level 6**
S&P A- or BBB+ BBB BBB- BB+ BB or below
better
Moody's A3 or Baa1 Baa2 Baa3 Bal Ba or below
better
D&P A- or BBB+ BBB BBB- BB+ BB or below
better
Eurodollar
Rate plus .25% .30% .325% .375% .625% 1.25%
CD Rate
plus .375% .425% .45% .50% .75% 1.37%
If Met-Ed's Debt Ratings are at different levels, the
applicable margin will be based on the lower of the two highest
Debt Ratings. The current Debt Ratings of Met-Ed's mortgage
bonds are BBB+ by S&P, Baa1 by Moody's and A- by D&P.
Interest will be payable at the end of each interest
period and, (i) for interest periods longer than three months in
the case of Eurodollar Rate borrowings or for interest periods
longer than 90 days in the case of CD Rate borrowings and
competitive bid borrowings, at the end of each three-month period
or 90-day period, as applicable, and (ii) at the end of each
calendar quarter for base rate borrowings within such interest
period.
___________________________
* Revised by Restated Credit Agreement
** Added by Restated Credit Agreement
- 6 -
<PAGE>
6. The GPU Companies pay the Banks a facility fee
ranging from .125% to .50%* per annum, of the total amount of the
commitment under the Restated Credit Agreement, depending on the
Debt Ratings of the GPU Companies, and a competitive bid fee of
$2,500 for each request for a competitive bid. In addition, an
annual administrative agent fee of $15,000 continues to be
payable to the Administrative Agent. A list of the expenses to
be incurred by Met-Ed in connection with the Restated Credit
Agreement will be filed by amendment.
Borrowings under the Restated Credit Agreement would be
subject to certain conditions, and to acceleration by the Banks
upon Events of Default by Met-Ed, under the Restated Credit
Agreement. Borrowings bearing interest at the Alternate Base
R a t e would be prepayable at any time, without penalty.
Borrowings bearing interest at the CD Rate or the Eurodollar Rate
would also be prepayable at any time, upon payment of certain
costs to the Banks resulting from the prepayment. Borrowings at
a competitive bid rate would not be prepayable. The GPU
Companies are allowed to reduce the commitment of the Banks under
the Restated Credit Agreement at any time. The Restated Credit
Agreement does not represent a change from the Prior Credit
Agreement in this regard.
_____________________________
Prior Credit Agreement had a facility fee ranging from
.125% to .375%. The higher facility fee would be
payable only if the debt rating on Met-Ed's mortage
bonds are at Level 6 as provided under "Interest
Rates".
- 7 -
<PAGE>
Under the Restated Credit Agreement, as with the Prior
Credit Agreement, Met-Ed will provide the Banks with certain
standard yield protections. As part of such yield protections,
if Met-Ed is required to make any withholding or deduction on
account of any taxes assessed by the United States or any
subdivision or taxing authority thereof from any payment to any
Bank, Met-Ed will pay to that Bank an amount sufficient to
increase the yield on the new Notes to the yield the Bank would
have received absent such deduction or withholding.
Met-Ed has no rights or obligations with respect to
borrowings under the Restated Credit Agreement until it delivers
to the Banks a final, non-appealable order of your Honorable
Commission authorizing Met-Ed to perform its obligations under
the Restated Credit Agreement. Penelec is filing a Securities
Certificate with your Honorable Commission with respect to
comparable proposed transactions by it under the Restated Credit
Agreement.
7. Met-Ed proposes to borrow under the Restated
Credit Agreement from time to time as Met-Ed believes necessary
to achieve the least cost for its short-term cash requirements
through the period ending five years from the effective date of
the Restated Credit Agreement. The net proceeds of borrowings by
Met-Ed under the Restated Credit Agreement would be used by Met-
Ed for general corporate purposes, to provide temporary working
capital and to repay short term borrowings.
- 8 -
<PAGE>
8. A Form U-1 filing by the GPU Companies with the
Securities and Exchange Commission has been made, in respect of
the Restated Credit Agreement. See Exhibit H.
9. There are appended hereto and made part hereof the
following Exhibits:
Exhibit A - Balance sheet of Met-Ed as at March 31,
1996.
Exhibit B - A n income statement, statement of
retained earnings, and statement of
capital surplus for Met-Ed for the
twelve months ended March 31, 1996.
Exhibit C - M e t-Ed filed with the Pennsylvania
Public Utility Commission under date of
October 24, 1945 an original cost study
(EOC 27). Edison Light and Power
Company, which was merged into Met-Ed as
o f June 1, 1950, filed with the
Commission under date of September 30,
1946 an original cost study (EOC 11).
Each of the above original cost studies
is incorporated herein by reference.
Attached hereto, marked "Exhibit C", is
a s t atement of original cost of
property, plant and equipment brought
down to March 31, 1996.
Exhibit D- A Statement of securities of other
corporations owned by Met-Ed as at March
31, 1996.
Exhibit E - A statement showing the status of the
funded debt of Met-Ed outstanding as at
March 31, 1996.
Exhibit F - A statement showing the status of the
outstanding capital stock of Met-Ed as
at March 31, 1996.
Exhibit G - Not applicable.
Exhibit H - A copy of Post-Effective Amendment No. 5
to the Declaration on Form U-1 filed
with the SEC under the Public Utility
Holding Company Act of 1935, together
with the exhibits thereto. (To be
filled by Amendment.)
- 9 -
<PAGE>
Exhibit I - A copy of the resolution of the Board of
Directors of Met-Ed authorizing the
proposed Restated Credit Agreement.
Exhibit J - Restated Credit Agreement.
Exhibit K - Pro forma journal entries of Met-Ed
giving effect to the proposed trans-
action (See Exhibit H).
Exhibit L - Met-Ed Source and Application of Funds
Statement.
WHEREFORE, Metropolitan Edison Company prays your
Honorable Commission to register this Securities Certificate
pursuant to Chapter 19 of the Public Utility Code, as amended.
Attest: METROPOLITAN EDISON COMPANY
__________________________ By:__________________________
Secretary T. G. Howson
Vice-President and Treasurer
(SEAL)
- 10 -
<PAGE>
STATE OF NEW JERSEY )
: ss.
COUNTY OF MORRIS )
T. G. Howson being duly sworn according to law, deposes
a n d says that he is a Vice-President and Treasurer of
Metropolitan Edison Company; that he is authorized to and does
make this affidavit for it; and that the facts set forth above
are true and correct to the best of his knowledge, information
and belief.
Sworn to and subscribed before
me this 22nd day of May, 1996.
Notary
(SEAL)<PAGE>
Exhibit D-2(d)
BEFORE THE
PENNSYLVANIA PUBLIC UTILITY COMMISSION
________________________________________
In re: :
: SECURITIES CERTIFICATE
SECURITIES CERTIFICATE OF PENNSYLVANIA :
ELECTRIC COMPANY IN THE MATTER OF THE : NO. S-
ISSUANCE OF PROMISSORY NOTES TO BANKS :
PURSUANT TO A REVOLVING CREDIT AGREEMENT:
________________________________________:
TO PENNSYLVANIA PUBLIC UTILITY COMMISSION
1. The name and address of the public utility filing
this Securities Certificate are:
Pennsylvania Electric Company (hereinafter "Penelec")
2800 Pottsville Pike
Reading, Pennsylvania 19605
2. The names and addresses of the public utility's
attorneys are:
Walter A. Boquist, II, Esquire
Vice President
Pennsylvania Electric Company
2800 Pottsville Pike
Reading, Pennsylvania 19605
Robert C. Gerlach, Esquire
Ballard Spahr Andrews & Ingersoll
1735 Market Street - 51st Floor
Philadelphia, Pennsylvania 19103
3. Penelec is a public utility as defined in the
Pennsylvania Public Utility Code. Penelec is a Pennsylvania
corporation governed by the Pennsylvania Business Corporation Law
and pursuant to such law has corporate power and authority, among
other things, to render to the public electric and steam heat
service throughout Pennsylvania. Penelec renders electric
service to the public in numerous municipalities in thirty-one
- 1 -<PAGE>
c o unties in western, northern and south-central parts of
Pennsylvania.
4. All of the outstanding Common Stock of Penelec is
o w ned by General Public Utilities Corporation ("GPU"), a
Pennsylvania corporation. GPU also owns all of the outstanding
Common Stock of Metropolitan Edison Company ("Met-Ed") and Jersey
Central Power & Light Company ("JCP&L").
5. This Securities Certificate relates to proposed
borrowings by Penelec from the banks pursuant to an Amended and
Restated Revolving Credit Agreement, as described herein.
GPU, JCP&L, Met-Ed and Penelec (the "GPU Companies")
have previously entered into a Revolving Credit Agreement dated
as of March 19, 1992 with a group of commercial banks for which
Chemical Bank and Citibank, N.A. acted as Co-Agents and Chemical
Bank acted as Administrative Agent. Reference is made to
Securities Certificate S-910194 and the related order entered on
January 30, 1992.
On November 1, 1994, Penelec (as one of the GPU
Companies) entered into a First Amendment to the Credit Agreement
to, among other things, extend the termination date to November
1, 1999 and to increase the commitments of the banks to
$250,000,000. Reference is made to Securities Certificate S-
940462 and the related order entered on September 22, 1994. The
Revolving Credit Agreement dated as of March 19, 1992, as
amended, is referred to herein as the "Prior Credit Agreement".
On May 6, 1996, the GPU Companies terminated the
commitments of all of the banks under the Prior Credit Agreement
- 2 -<PAGE>
except the commitments of Citibank, N.A. and The Chase Manhattan
Bank, N.A. (successor to Chemical Bank) and entered into an
Amended and Restated Credit Agreement dated as of May 6, 1996
(the "Restated Credit Agreement") among the GPU Companies, the
banks named therein (the "Banks") and The Chase Manhattan Bank,
a s Administrative Agent (the "Administrative Agent"), and
Citibank, N.A., as Syndication Agent. The principal purposes of
the amendment and restatement of the Prior Credit Agreement are
(i) to extend the termination date from November 1, 1999 to May
6, 2001, (ii) to increase the amount that GPU may borrow
thereunder up to $250,000,000 and (iii) to modify certain
covenants contained therein. Except for these changes and as
otherwise described in this Securities Certificate, the terms of
the Restated Credit Agreement are substantially the same as the
terms of the Prior Credit Agreement.
Subject to the limitation on the aggregate available
commitments of the Banks under the Restated Credit Agreement,
borrowings by Penelec under the Restated Credit Agreement are
independent of borrowings by the other GPU Companies thereunder.
Borrowings by each GPU Company, including Penelec, are payable
solely by that GPU Company. An event of default by one GPU
Company under the Restated Credit Agreement will not, itself,
constitute an event of default with respect to any other GPU
Company or permit the Banks to accelerate repayment of borrowings
by any other GPU Company thereunder.
The Restated Credit Agreement provides that Penelec's
rights and obligations as a borrower under the Restated Credit
Agreement shall not become effective until your Honorable
- 3 -<PAGE>
Commission has entered an order authorizing Penelec to perform
its obligations under the Restated Credit Agreement. Penelec (as
o n e of the GPU Companies) is now requesting regulatory
authorization for borrowings under the Restated Credit Agreement.
EXACT TITLE OF SECURITY:
The title of the security is "Pennsylvania Electric
Company Notes" issued under the Restated Credit Agreement.
AGGREGATE PRINCIPAL AMOUNT OF BORROWINGS:
B o rrowings by Penelec under the Restated Credit
Agreement, as evidenced by Penelec's notes, will be not more than
the lesser of $250,000,000 outstanding at any time and, together
with other unsecured indebtedness of Penelec, the limitation on
unsecured indebtedness imposed by Penelec's Restated Articles of
Incorporation.
NOMINAL DATE OF ISSUE:
The Restated Credit Agreement was executed as of May 6,
1996 but no borrowings by Penelec are permitted under the
Restated Credit Agreement until Penelec has delivered to the
Banks a final, non-appealable order of your Honorable Commission
authorizing Penelec to perform its obligations under the Restated
Credit Agreement.
- 4 -<PAGE>
DATE OF MATURITY:
The Restated Credit Agreement has a revolving credit
availability for a period of five years from May 6, 1996. Upon
delivery to the banks of a final, non-appealable order of your
H o n o rable Commission authorizing Penelec to perform its
obligations under the Restated Credit Agreement, Penelec will be
entitled, subject to certain conditions, to borrow, repay and
reborrow amounts available under the Restated Credit Agreement.
INTEREST RATES:
The permitted interest rates on the borrowings by
Penelec under the Restated Credit Agreement are (a) the Alternate
Base Rate, as in effect from time to time, (b) the CD Rate, as in
effect from time to time, plus an applicable margin depending on
Penelec's senior secured non-credit enhanced long-term debt
ratings issued by Standard & Poor's Corporation ("S&P"), Duff &
Phelps ("D&P") and Moody's Investor Services ("Debt Ratings") or
(c) the Eurodollar Rate, as in effect from time to time, plus an
applicable margin depending on Penelec's Debt Ratings. The
Alternate Base Rate is the greater of (a) the Administrative
Agent's Prime Rate in effect from time to time, and (b) the
Federal Funds Rate then in effect for such day plus 1/2% per
annum. The CD Rate is the domestic money market bid rate for
certificates of deposit of various maturities issued by three of
the Banks, including the Co-Agents (collectively, the "Reference
Banks"), adjusted for the statutory reserve requirements and
Federal Deposit Insurance Corporation assessment. The Eurodollar
Rate is the average of the rates quoted at which deposits in U.S.
dollars are offered by the principal offices of the Reference
- 5 -<PAGE>
Banks in London to prime banks in the London interbank market
from time to time, plus additional costs for reserves, if
applicable.
The applicable margin for the CD Rate borrowings and
Eurodollar Rate borrowings will be determined based on Penelec's
Debt Ratings as follows:
Level 1 Level 2 Level 3 Level 4 Level 5* Level 6**
S&P A- or BBB+ BBB BBB- BB+ BB or below
better
Moody's A3 or Baa1 Baa2 Baa3 Ba1 Ba or below
better
D&P A- or BBB+ BBB BBB- BB+ BB or below
better
Eurodollar
Rate plus .25% .30% .325% .375% .625% 1.25%
CD Rate
plus .375% .425% .45% .50% .75% 1.37%
If Penelec's Debt Ratings are at different levels, the
applicable margin will be based on the lower of the two highest
Debt Ratings. The current Debt Ratings of Penelec's mortgage
bonds are A- by S&P, A3 by Moody's (currently under review for
possible downgrading) and A- by D&P.
The Restated Credit Agreement will also afford Penelec
the option of inviting competitive bids from the Banks for
borrowings for requested maturities of up to six months in such
principal amounts as Penelec may request, subject to the $250
million limit of the Restated Credit Agreement. No Bank would be
required to bid for any such loan and Penelec would not be
obligated to accept any bid received.
____________________________
* Revised by Restated Credit Agreement.
** Added by Restated Credit Agreement.
- 6 -
<PAGE>
INTEREST PAYMENT DATES:
Interest will be payable at the end of each interest
period and (i) for interest periods longer than three months in
the case of Eurodollar Rate borrowings or for interest periods
longer than 90 days in the case of CD Rate borrowings and
competitive bid borrowings, at the end of each three-month period
or 90-day period, as applicable, and (ii) at the end of each
calendar quarter for base rate borrowings within such interest
period.
PREPAYMENTS:
B o rrowings by Penelec under the Restated Credit
Agreement are subject to certain conditions and are subject to
acceleration by the Banks upon Events of Default by Penelec under
the Restated Credit Agreement. Borrowings bearing interest at
the Alternate Base Rate are prepayable at any time without
penalty. Borrowings bearing interest at the CD Rate or the
Eurodollar Rate are prepayable at any time upon payment by
Penelec of the costs to the Banks resulting from the prepayment
of the Banks' funding of such borrowings. Borrowings at
competitively bid rates are not prepayable. The GPU Companies
are allowed to reduce the commitment of the Banks under the
Restated Credit Agreement at any time.
- 7 -
<PAGE>
FEES:
Under the Restated Credit Agreement, the GPU Companies
pay the Banks a facility fee ranging from .125% to .50%* per
annum of the total amount of the commitment, depending on the
debt ratings of the GPU Companies, and a competitive bid fee of
$2,500 for each request for a competitive bid. In addition, an
annual administration agent fee of $15,000 is payable to the
Administrative Agent.
ASSUMPTION OF TAXES:
Under the Restated Credit Agreement, Penelec will
provide the Banks with certain standard yield protections. As
part of such yield protections, if Penelec is required to make
any withholding or deduction on account of any taxes assessed by
the United States or any subdivision or taxing authority thereof
from any payment to any Bank, Penelec will pay to that Bank an
amount sufficient to increase the yield on the borrowings from
such Bank to the yield the Bank would have received absent such
deduction or withholding.
________________________
* Prior Credit Agreement had a facility fee ranging from
.125% to .375%. The higher facility fee would be
payable only if the Debt Rating on Penelec's mortgage
bonds are at Level 6 as provided under "Interest
Rates".
- 8 -
<PAGE>
6. Penelec has no rights or obligations with respect
to borrowings under the Restated Credit Agreement until it
delivers to the Banks a final, non-appealable order of your
Honorable Commission authorizing Penelec to perform its
obligations under the Restated Credit Agreement. Comparable
provisions apply to Met-Ed which is also filing a Securities
Certificate with your Honorable Commission.
7. A list of the expenses to be incurred by Penelec
in connection with the issuance of the Restated Credit Agreement
will be filed by amendment.
8. Penelec proposes to borrow under the Restated
Credit Agreement from time to time as Penelec believes necessary
to achieve the least cost for its short-term cash requirements
through the period ending five years from the effective date of
the Restated Credit Agreement. The net proceeds of borrowings by
Penelec under the Restated Credit Agreement would be used by
Penelec for general corporate purposes, including to provide
temporary working capital and to repay short term borrowings.
At March 31, 1996, Penelec's charter would have
permitted it to have a maximum of $145 million of short-term
indebtedness outstanding at any one time.
9. The GPU Companies have requested that the
Securities and Exchange Commission authorize them to perform
certain provisions of the Restated Credit Agreement pursuant to
the Public Utility Holding Company Act of 1935. See Exhibit H.
10. There are appended hereto and made a part hereof
the following exhibits:
- 9 -
<PAGE>
A Balance sheet of Penelec per books and pro forma
giving effect to the proposed transactions as at
March 31, 1996.
B-1 Statement of Income of Penelec for the twelve
months ended March 31, 1996.
B-2 Statement of Retained Earnings and Statement of
Capital Surplus of Penelec for the twelve months
ended March 31, 1996.
C Statement of Utility Plant by Classified Accounts
of Penelec as at March 31, 1996.
D Statement of Securities of Other Corporations
Owned by Penelec as at March 31, 1996.
E Statement of Long Term Debt Outstanding of Penelec
as at March 31, 1996.
F Statement of Capital Stock Outstanding of Penelec
as at March 31, 1996.
G Not applicable.
H Copy of Post-Effective Amendment No. 5 to the
Declaration filed by Penelec and the other GPU
Companies on Form U-1 with the Securities and
Exchange Commission under the Public Utility
Holding Company Act of 1935. (To be filed by
Amendment).
I Copy of resolutions of the Board of Directors of
Penelec authorizing the Restated Credit Agreement.
J Restated Credit Agreement.
K Pro Forma Journal Entries of Penelec giving effect
to the proposed transactions.
L Penelec Source and Application of Funds Statement.
- 10 -
<PAGE>
WHEREFORE, Pennsylvania Electric Company prays your
Honorable Commission to register this Securities Certificate
pursuant to Chapter 19 of the Public Utility Code.
Attest: PENNSYLVANIA ELECTRIC COMPANY
By:
Assistant Secretary Vice President and
Treasurer
(SEAL)
- 11 -
<PAGE>
STATE OF NEW JERSEY :
: ss.
COUNTY OF MORRIS :
T. G. Howson, being duly sworn according to law,
deposes and says that he is a Vice President and Treasurer of
Pennsylvania Electric Company, that he is authorized to and does
make this affidavit for it; and that the facts set forth above
are true and correct to the best of his knowledge, information
and belief.
Sworn to and subscribed
before me this 22nd day
of May, 1996.
Notary Public
(SEAL)<PAGE>
<TABLE>
Exhibit G
Page 1 of 4
General Public Utilities Corporation
Forecasted Source and Application of Funds
($ Millions)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1997
2Q 3Q 4Q 1Q 2Q 3Q 4Q 1998 1999 2000 2001
Application of Funds
GPU Common
Dividend* 57 57 57 57 60 60 60 240 240 240 240
Equity Contr. 2 0 12 0 300 0 0 140 100 0 0
Operating Costs 3 3 4 1 3 2 7 14 19 22 22
Total Application 62 60 73 58 363 62 67 394 359 262 262
Source of Funds
Dividends to GPU
JCP&L 50 50 35 50 30 35 40 160 180 190 200
Met-Ed 15 20 15 10 15 15 15 90 60 75 70
Penelec 10 10 10 15 15 15 20 50 40 60 70
EI Group 0 0 0 0 0 0 0 2 20 20 20
EI UK Holdings 0 0 0 0 0 0 24 17 28 41 53
Common Stock Sales 0 0 0 0 160 0 0 0 0 0 0
Debenture Sales 0 0 0 0 0 0 100 100 0 0 0
Short Term Debt (13) (20) 13 (17) 143 (3) (132) (25) 31 (124) (151)
Total Sources 62 60 73 58 363 62 67 394 359 262 262
Short Term Debt
Outstanding 90 70 83 66 209 206 74 49 80 (44) (195)
* Does not reflect any growth in Dividends.<PAGE>
Exhibit G
Page 2 of 4
Jersey Central Power & Light Company
Forecasted Source and Application of Funds
($ Millions)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1997
2Q 3Q 4Q 1Q 2Q 3Q 4Q 1998 1999 2000 2001
Application of Funds
Construction 65 65 61 54 54 54 54 205 192 203 199
Refinancing 20 0 0 30 20 26 20 39 3 51 10
Common Dividend
to GPU 50 50 35 50 30 35 40 160 180 190 200
Total Application 135 115 96 134 104 115 114 404 375 444 409
Source of Funds
Internal (42) 165 96 108 101 91 83 409 415 374 424
Preferred Stock 0 0 0 0 0 0 0 0 0 50 0
Long Term Debt 0 0 0 0 0 0 0 50 30 30 0
Short Term Debt 177 (50) 0 26 3 24 31 (55) (70) (10) (15)
Total Sources 135 115 96 134 104 115 114 404 375 444 409
Short Term Debt
Outstanding 200 150 150 176 179 203 234 179 109 99 84
<PAGE>
Exhibit G
Page 3 of 4
Metropolitan Edison Company
Forecasted Source and Application of Funds
($ Millions)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1997
2Q 3Q 4Q 1Q 2Q 3Q 4Q 1998 1999 2000 2001
Application of Funds
Construction 25 25 30 25 25 25 27 104 118 102 111
Refinancing 15 0 0 0 20 20 0 0 30 50 0
Common Dividend
to GPU 15 20 15 10 15 15 15 90 60 75 70
Total Application 55 45 45 35 60 60 42 194 208 227 181
Source of Funds
Internal 38 46 38 45 37 47 25 164 172 172 161
Long Term Debt 0 0 0 0 30 0 0 0 25 75 60
Short Term Debt 17 (1) 7 (10) (7) 13 17 30 11 (20) (40)
Total Sources 55 45 45 35 60 60 42 194 208 227 181
Short Term Debt
Outstanding 46 45 52 42 35 48 65 95 106 86 46
<PAGE>
Exhibit G
Page 4 of 4
Pennsylvania Electric Company
Forecasted Source and Application of Funds
($ Millions)
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996 1997
2Q 3Q 4Q 1Q 2Q 3Q 4Q 1998 1999 2000 2001
Application of Funds
Construction 34 34 27 29 29 29 34 149 185 136 131
Refinancing 0 0 50 0 26 0 0 30 0 30 30
Common Dividend
to GPU 10 10 10 15 15 15 20 50 40 60 70
Total Application 44 44 87 44 70 44 54 229 225 226 231
Source of Funds
Internal 39 41 40 20 46 46 53 187 173 191 206
Long Term Debt 0 25 50 0 0 0 40 70 65 25 35
Short Term Debt 5 (22) (3) 24 24 (2) (39) (28) (13) 10 (10)
Total Sources 44 44 87 44 70 44 54 229 225 226 231
Short Term Debt
Outstanding 98 76 73 97 121 119 80 52 39 49 39
</TABLE>
<PAGE>
EXHIBIT H
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35- ___; 70-7926)
General Public Utilities Corporation, et al.
General Public Utilities Corporation ("GPU"), 100
Interpace Parkway, Parsippany, New Jersey 07054, and its
subsidiaries, JERSEY CENTRAL POWER & LIGHT COMPANY, 300 Madison
Avenue, Morristown, New Jersey 07962 ("JCP&L"), METROPOLITAN
EDISON COMPANY, P.O. Box 16001, Reading, Pennsylvania 19640
("Met-Ed"), and PENNSYLVANIA ELECTRIC COMPANY, P.O. Box 16001,
Reading, Pennsylvania 19640 ("Penelec" and, together with GPU,
JCP&L and Met-Ed, the "GPU Companies"), have filed a post-
effective amendment under Sections 6(a) and 7 of the Public
Utility Holding Company Act of 1935 (the "Act").
By Order dated October 26, 1994 (HCAR No. 35-26150),
the Commission, among other things, authorized the GPU Companies
to enter into an amendment to their Credit Agreement, dated as of
March 19, 1992, with a group of commercial banks for which
Citibank, N.A. and Chemical Bank act as co-agents and Chemical
Bank acts as the administrative agent, in order to extend through
December 31, 1997 the period during which the GPU Companies were
authorized to issue, sell and renew their unsecured promissory
notes (the "Notes") from time to time in amounts up to $250
million outstanding at any time. On November 1, 1994, the GPU
Companies entered into the First Amendment to the Credit<PAGE>
Agreement pursuant to the October 26, 1994 order. In addition,
on October 24, 1995, the GPU Companies entered into a Second
Amendment to the Credit Agreement which modified certain negative
covenants in the Credit Agreement. The Credit Agreement, as so
amended, is referred to as the "Prior Credit Agreement".
Pursuant to the October 26, 1994 Order, the aggregate
principal amount of Notes outstanding at any time under the Prior
Credit Agreement, together with all other unsecured debt then
outstanding, may not exceed the limitations on such indebtedness
imposed by the charters of each of JCP&L, Met-Ed and Penelec, and
$200 million in the case of GPU. As of March 31, 1996, the
charter limitations on such indebtedness for JCP&L, Met-Ed and
Penelec were $290 million, $133 million and $145 million,
respectively. At May 1, 1996, the GPU Companies had unsecured
indebtedness outstanding as follows:
GPU $102.7 million
JCP&L $213.4 million
Met-Ed $ 26.0 million
Penelec $111.2 million
The Notes issued under the Prior Credit Agreement
mature not more than six months from their date of issue and the
annual interest rate on each borrowing is either: (a) the
Alternate Base Rate, as in effect from time to time; (b) the CD
Rate, as in effect from time to time, plus an amount (the "CD
Applicable Margin") ranging from .375% to .625% depending upon
the senior secured non-credit enhanced long-term debt rating
("Debt Rating") of the borrower or, in the case of GPU, the Debt
Rating of JCP&L; or (c) the Eurodollar Rate, as in effect from
time to time, plus an amount (the "Eurodollar Applicable Margin")
- 2 -<PAGE>
ranging from .25% to .50% depending upon the Debt Rating of the
borrower or, in the case of GPU, the Debt Rating of JCP&L. In
addition, the GPU Companies pay a facility fee ranging from .125%
to .375% per annum, depending on the Debt Ratings of JCP&L, Met-
Ed and Penelec, of the total amount of the commitments, a
competitive bid fee of $2,500 for each request for a competitive
bid, and an annual administrative fee of $15,000. The GPU
Companies also paid aggregate agency fees of $50,000 upon signing
of the First Amendment.
On May 6, 1996, the GPU Companies entered into an
Amended and Restated Credit Agreement with the banks named
therein (and banks that may subsequently become parties thereto)
and The Chase Manhattan Bank, N.A. (successor to Chemical Bank),
as Administrative Agent, and Citibank, N.A., as Syndication Agent
(the "Restated Credit Agreement")(1), which, subject to receipt
of the authorization herein requested, permits borrowings
thereunder through May 6, 2001 and increases the amount that GPU
may borrow thereunder to up to $250 million outstanding at any
time. The Restated Credit Agreement also modifies in material
respects a number of the covenants contained in the Prior Credit
Agreement. Accordingly, the GPU Companies have agreed, subject
to receipt of the authorization herein requested, to an increased
___________________________
1 Immediately prior to the effectiveness of the Restated
Credit Agreement, the GPU Companies entered into a Third
Amendment to the Prior Credit Agreement, which allowed for
the termination of the commitments under the Prior Credit
Agreement of those banks which did not execute the Restated
Credit Agreement.
- 3 -<PAGE>
facility fee equal to .50% (rather than .375%) per annum of the
total amount of the commitments under the Restated Credit
Agreement in the event that the applicable Debt Rating(2) is BB
or below as rated by Standard & Poor's or Duff & Phelps, or Ba or
below as rated by Moody's Investor Services, or if there is no
Debt Rating.
_________________________________
2 The applicable Debt Rating for purposes of determining the
facility fee is based on the lowest Debt Rating of any
borrower, with the Debt Rating of each borrower, in turn,
being based on the lower of the two highest Debt Ratings
from the three rating agencies (Standard & Poor's, Moody's
Investor Services and Duff & Phelps) of such borrower and,
in the case of GPU, of GPU's own Debt Ratings or, if GPU
does not have a Debt Rating, then of the Debt Ratings of EI
Energy, Inc. or, if EI Energy, Inc. does not have a Debt
Rating, then on the lowest applicable Debt Rating of JCP&L,
Met-Ed or Penelec.
- 4 -<PAGE>
The CD Applicable Margin will be .75% (rather than .625%) if the
applicable Debt Rating(3) is BB+ as rated by Standard & Poor's or
Duff & Phelps, or Ba1 as rated by Moody's Investor
Services, and 1.37% (rather than .625%) if the applicable Debt
Rating is BB or below as rated by Standard & Poor's or Duff &
Phelps, or Ba or below as rated by Moody's Investor Services, or
if there is no Debt Rating. The Eurodollar Applicable Margin
will be .625% (rather than .50%) if the applicable Debt Rating is
BB+ as rated by Standard & Poor's or Duff & Phelps, or Ba1 as
rated by Moody's Investor Services, and 1.25% (rather than .50%)
if the applicable Debt Rating is BB or below as rated by Standard
& Poor's or Duff & Phelps, or Ba or below as rated by Moody's
Investor Services, or if there is no Debt Rating. All other CD
and Eurodollar Applicable Margins and all other fees remain
unchanged (although there are no new agency fees payable by the
GPU Companies in connection with the Restated Credit Agreement).
Other provisions, including those relating to conditions to
borrowing, acceleration and prepayment, also remain unchanged.
________________________________
3 The applicable Debt Rating for purposes of determining the
CD or Eurodollar Applicable Margin is based on the lower of the
two highest Debt Ratings from the three rating agencies (Standard
& Poor's, Moody's Investor Services and Duff & Phelps) of the
borrower and, in the case of GPU, of GPU's own Debt Ratings or,
if GPU does not have a Debt Rating, then of the Debt Ratings of
EI Energy, Inc. or, if EI Energy, Inc. does not have a Debt
Rating, then on the lowest applicable Debt Rating of JCP&L, Met-
Ed or Penelec.
- 5 -<PAGE>
At the date of filing of the post-effective amendment,
the Debt Ratings of JCP&L, Met-Ed and Penelec were as follows
(neither GPU nor EI Energy, Inc. presently has a Debt Rating):
Standard & Poor's Duff & Phelps Moody's
JCP&L BBB+ BBB+ Baa1
Met-Ed BBB+ A- Baa1
Penelec A- A- A3
As a result, the higher facility fee and the higher CD and
Eurodollar Applicable Margins would not now be applicable.
The declarants submit that all of the criteria of Rules
53 and 54 under the Act with respect to the proposed transactions
have been satisfied.
The post-effective amendment 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 _________, 1996 to the Secretary, Securities and Exchange
Commission, Washington, D.C. 20549, and serve a copy on the
declarants at the address specified above. Proof of service (by
affidavit or, in the case of an attorney at law, by certificate)
should be filed with the request. Any request for a hearing
shall identify specifically the issues of fact or law that are
disputed. A person who so requests will be notified of any
hearing, if ordered, and will receive a copy of any notice or
order issued in this matter. After said date, the declaration,
as amended or as it may be further amended, may be granted.
For the Commission by the Division of Investment
Management, pursuant to delegated authority.
Jonathan G. Katz
Secretary
- 6 -<PAGE>
<TABLE>
Financial Statements
Item 6(b) 1-A(b)
Page 1 of 40
GENERAL PUBLIC UTILITIES CORPORATION
BALANCE SHEETS
ACTUAL AND PRO FORMA
AT MARCH 31, 1996
(IN THOUSANDS)
<CAPTION>
Adjustments
Actual (See pages 3 & 4) Pro Forma
<S> <C> <C> <C>
ASSETS
Investments:
Investments in subsidiaries $3 170 492 $ (15 596) $3 154 896
Other investments 5 059 - 5 059
Total investments 3 175 551 (15 596) 3 159 955
Current Assets:
Cash and temporary cash investments 8 977 416 078 425 055
Accounts receivable, net 25 - 25
Prepayments 247 - 247
Total current assets 9 249 416 078 425 327
Other assets 8 - 8
Total Assets $3 184 808 $ 400 482 $3 585 290
LIABILITIES AND CAPITAL
Common Stock and Surplus:
Common stock $ 314 458 $ - $ 314 458
Capital surplus 747 563 - 747 563
Retained earnings 2 106 608 (35 721) 2 070 887
Total 3 168 629 (35 721) 3 132 908
Less: reacquired common stock, at cost 89 522 - 89 522
Total common stockholders's equity 3 079 107 (35 721) 3 043 386
Long-term debt - 300 000 300 000
Total capitalization 3 079 107 264 279 3 343 386
Current Liabilities:
Notes payable 100 500 149 500 250 000
Accounts payable 522 - 522
Taxes accrued 4 (13 297) (13 293)
Interest accrued 63 - 63
Other 3 336 - 3 336
Total current liabilities 104 425 136 203 240 628
Deferred credits and other liabilities 1 276 - 1 276
Total Liabilities and Capital $3 184 808 $ 400 482 $3 585 290
The accompanying note is an integral part of the financial statements.
<PAGE>
Financial Statements
Item 6(b) 1-A(b)
Page 2 of 40
GENERAL PUBLIC UTILITIES CORPORATION
STATEMENTS OF INCOME AND RETAINED EARNINGS
ACTUAL AND PRO FORMA
FOR THE TWELVE MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS)
<CAPTION>
Adjustments
Actual (See pages 3 & 4) Pro Forma
<S> <C> <C> <C>
Income:
Equity in earnings of subsidiaries $ 483 692 $(15 596) $ 468 096
Other income, net 545 - 545
Total 484 237 (15 596) 468 641
Expense, Taxes and Interest:
General expenses 4 910 2 625 7 535
Income tax expense/(benefit) - (13 297) (13 297)
Interest expense 6 436 30 797 37 233
Total 11 346 20 125 31 471
Net Income $ 472 891 $(35 721) $ 437 170
Retained Earnings:
Balance at beginning of period $1 853 939 $ - $1 853 939
Add - Net income 472 891 (35 721) 437 170
Deduct - Cash dividends on common stock 218 288 - 218 288
Other adjustments, net 1 934 - 1 934
Balance at end of period $2 106 608 $(35 721) $2 070 887
The accompanying note is an integral part of the financial statements.
</TABLE>
<PAGE>
Financial Statements
Item 6(b) 1-A(b)
Page 3 of 40
GENERAL PUBLIC UTILITIES CORPORATION
PRO FORMA ADJUSTMENTS
AT MARCH 31, 1996
(IN THOUSANDS)
(1)
Cash and temporary cash investments $149,500
Notes payable $149,500
To record the proposed issuance of $149.5 million of borrowings under the new
Revolving Credit Agreement or under other unsecured debt agreements, to bring
such borrowings up to the requested limit for GPU of $250 million.
(2)
Interest expense $ 8,447
Cash and temporary cash investments $ 8,447
To record annual interest expense resulting from the proposed issuance of
$149.5 million of borrowings at an assumed rate of 5.65%.
(3)
Taxes accrued $ 2,956
Income tax expense $ 2,956
To record the net decrease in the provision for income taxes attributable to
the proposed issuance of $149.5 million of borrowings.
(4)
Equity in earnings of subsidiaries $ 15,596
Investments in subsidiaries $ 15,596
To record GPU's share of the net effect of the subsidiary companies' annual
interest expense and decrease in the provision for income taxes attributable
to the proposed issuance of $449.3 million of borrowings under the new
Revolving Credit Agreement or under other unsecured debt agreements, to bring
such borrowings up to the aggregate of the subsidiary companies' respective
charter limits.
<PAGE>
Financial Statements
Item 6(b) 1-A(b)
Page 4 of 40
GENERAL PUBLIC UTILITIES CORPORATION
PRO FORMA ADJUSTMENTS
AT MARCH 31, 1996
(IN THOUSANDS)
(5)
Cash and temporary cash investments $300,000
Long-term debt $300,000
To record the proposed issuance of $300 million aggregate principal amount of
unsecured debentures (SEC File No. 70-8843).
(6)
Interest expense $22,350
Cash and temporary cash investments $22,350
To record interest expense associated with the proposed issuance of $300
million aggregate principal amount of unsecured debentures.
(SEC File No. 70-8843)
(7)
General expenses $2,625
Cash and temporary cash investments $2,625
To record commissions and other expenses associated with the proposed issuance
of $300 million aggregate principal amount of unsecured debentures.
(SEC File No. 70-8843)
(8)
Taxes accrued $10,341
Income tax expense $10,341
To record the decreased tax expense associated with the increase in interest
and general expenses (SEC File No. 70-8843).
<PAGE>
<TABLE>
Financial Statements
Item 6(b) 1-B(b)
Page 5 of 40
GENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
ACTUAL AND PRO FORMA
AT MARCH 31, 1996
(IN THOUSANDS)
<CAPTION>
Adjustments
Actual (see pages 8&9) Pro Forma
<S> <C> <C> <C>
ASSETS
Utility Plant:
In service, at original cost $ 9 366 784 $ - $ 9 366 784
Less, accumulated depreciation 3 505 818 - 3 505 818
Net utility plant in service 5 860 966 - 5 860 966
Construction work in progress 308 005 - 308 005
Other, net 198 667 - 198 667
Net utility plant 6 367 638 - 6 367 638
Other Property and Investments:
Nuclear decommissioning trusts 385 479 - 385 479
EI Group investments, net 275 146 - 275 146
Nuclear fuel disposal fund 96 816 - 96 816
Other, net 41 859 - 41 859
Total other property and investments 799 300 - 799 300
Current Assets:
Cash and temporary cash investments 112 207 840 534 952 741
Special deposits 8 710 - 8 710
Accounts receivable:
Customers, net 297 746 - 297 746
Other 127 904 - 127 904
Unbilled revenues 107 532 - 107 532
Materials and supplies, at average cost or less:
Construction and maintenance 195 892 - 195 892
Fuel 32 738 - 32 738
Deferred energy costs 8 014 - 8 014
Deferred income taxes 23 408 - 23 408
Prepayments 96 888 - 96 888
Other 17 715 - 17 715
Total current assets 1 028 754 840 534 1 869 288
Deferred Debits and Other Assets:
Regulatory assets:
Three Mile Island Unit 2 deferred costs 366 561 - 366 561
Unamortized property losses 104 390 - 104 390
Income taxes recoverable through future rates 515 057 - 515 057
Other 436 952 - 436 952
Total regulatory assets 1 422 960 - 1 422 960
Deferred income taxes 335 099 - 335 099
Other 130 723 - 130 723
Total deferred debits and other assets 1 888 782 - 1 888 782
Total Assets $10 084 474 $ 840 534 $10 925 008
The accompanying note is an integral part of the consolidated financial statements.
<PAGE>
Financial Statements
Item 6(b) 1-B(b)
Page 6 of 40
GENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
ACTUAL AND PRO FORMA
AT MARCH 31, 1996
(IN THOUSANDS)
<CAPTION>
Adjustments
Actual (see pages 8&9) Pro Forma
<S> <C> <C> <C>
LIABILITIES AND CAPITAL
Capitalization:
Common stock $ 314 458 $ - $ 314 458
Capital surplus 747 563 - 747 563
Retained earnings 2 106 608 (35 721) 2 070 887
Total 3 168 629 (35 721) 3 132 908
Less, reacquired common stock, at cost 89 522 - 89 522
Total common stockholders' equity 3 079 107 (35 721) 3 043 386
Cumulative preferred stock:
With mandatory redemption 124 000 - 124 000
Without mandatory redemption 98 116 - 98 116
Subsidiary-obligated mandatorily redeemable
preferred securities 330 000 - 330 000
Long-term debt 2 510 040 300 000 2 810 040
Total capitalization 6 141 263 264 279 6 405 542
Current Liabilities:
Securities due within one year 148 044 - 148 044
Notes payable 227 379 598 800 826 179
Obligations under capital leases 167 885 - 167 885
Accounts payable 322 576 - 322 576
Taxes accrued 154 166 (22 545) 131 621
Interest accrued 55 414 - 55 414
Other 209 617 - 209 617
Total current liabilities 1 285 081 576 255 1 861 336
Deferred Credits and Other Liabilities:
Deferred income taxes 1 456 314 - 1 456 314
Unamortized investment tax credits 142 655 - 142 655
Three Mile Island Unit 2 future costs 417 200 - 417 200
Regulatory liabilities 164 265 - 164 265
Other 477 696 - 477 696
Total deferred credits and other liabilities 2 658 130 - 2 658 130
Commitments and Contingencies (Note 1)
Total Liabilities and Capital $10 084 474 $ 840 534 $10 925 008
The accompanying note is an integral part of the consolidated financial statements.
<PAGE>
Financial Statements
Item 6(b) 1-B(b)
Page 7 of 40
GENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
ACTUAL AND PRO FORMA
FOR THE TWELVE MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS)
<CAPTION>
Adjustments
Actual (see pages 8&9) Pro Forma
<S> <C> <C> <C>
Operating Revenues $3 913 618 $ - $3 913 618
Operating Expenses:
Fuel 372 479 - 372 479
Power purchased and interchanged 1 048 835 - 1 048 835
Deferral of energy costs, net (3 896) - (3 896)
Other operation and maintenance 970 493 2 625 973 118
Depreciation and amortization 384 695 - 384 695
Taxes, other than income taxes 354 649 - 354 649
Total operating expenses 3 127 255 2 625 3 129 880
Operating Income Before Income Taxes 786 363 (2 625) 783 738
Income taxes 198 266 (13 291) 184 975
Operating Income 588 097 10 666 598 763
Other Income and Deductions:
Allowance for other funds used during
construction 5 137 - 5 137
Other income/(expense), net 227 219 - 227 219
Income taxes (94 908) 9 254 (85 654)
Total other income and deductions 137 448 9 254 146 702
Income Before Interest Charges and
Preferred Dividends 725 545 19 920 745 465
Interest Charges and Preferred Dividends:
Interest on long-term debt 189 820 22 350 212 170
Other interest 27 823 33 291 61 114
Allowance for borrowed funds used during
construction (9 312) - (9 312)
Dividends on subsidiary-obligated mandatorily
redeemable preferred securities 27 491 - 27 491
Preferred stock dividends of subsidiaries 16 832 - 16 832
Total interest charges and preferred
dividends 252 654 55 641 308 295
Net Income $ 472 891 $(35 721) $ 437 170
Retained Earnings:
Balance at beginning of period $1 853 939 $ - $1 853 939
Add - Net income 472 891 (35 721) 437 170
Net unrealized gain on investments (1 188) - (1 188)
Deduct - Cash dividends on common stock 218 288 - 218 288
Other adjustments, net 746 - 746
Balance at end of period $2 106 608 $(35 721) $2 070 887
The accompanying note is an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
Financial Statements
Item 6(b) 1-B(b)
Page 8 of 40
GENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARY COMPANIES
PRO FORMA ADJUSTMENTS
AT MARCH 31, 1996
(IN THOUSANDS)
(1)
Cash and temporary cash investments $598,800
Notes payable $598,800
To record the proposed issuance of $598.8 million of borrowings under the new
Revolving Credit Agreement or under other unsecured debt agreements, to bring
such borrowings up to the respective charter limits for JCP&L, Met-Ed, and
Penelec, and up to $250 million for GPU.
(2)
Other interest $33,291
Cash and temporary cash investments $33,291
To record annual interest expense resulting from the proposed issuance of
$598.8 million of borrowings at an assumed weighted average rate of 5.56%.
(3)
Taxes accrued $12,204
Income taxes $12,204
To record the net decrease in the provision for income taxes attributable to
the proposed issuance of $598.8 million of borrowings.
(4)
Cash and temporary cash investments $300,000
Long-term debt $300,000
To record the issuance of $300 million aggregate principal amount of unsecured
debentures (SEC File No. 70-8843).
(5)
Interest on long-term debt $22,350
Cash and temporary cash investments $22,350
To record interest expense associated with the issuance of $300 million
aggregate principal amount of unsecured debentures (SEC File No. 70-8843).
<PAGE>
Financial Statements
Item 6(b) 1-B(b)
Page 9 of 40
GENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARY COMPANIES
PRO FORMA ADJUSTMENTS
AT MARCH 31, 1996
(IN THOUSANDS)
(6)
Other operation and maintenance $2,625
Cash and temporary cash investments $2,625
To record commissions and other expenses associated with the issuance of $300
million aggregate principal amount of unsecured debentures (SEC File No. 70-
8843).
(7)
Taxes accrued $1,087
Income taxes $1,087
To record the decreased tax expense associated with the increase in other
operation and maintenance expenses (SEC File No. 70-8843).
(8)
Taxes accrued $9,254
Income taxes $9,254
To record the decreased tax expense associated with the increase in interest
expense (SEC File No. 70-8843).
<PAGE>
<TABLE>
Financial Statements
Item 6(b) 1-C(b)
Page 10 of 40
JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY
CONSOLIDATED BALANCE SHEETS
ACTUAL AND PRO FORMA
AT MARCH 31, 1996
(IN THOUSANDS)
<CAPTION>
Adjustments
Actual (see page 13) Pro Forma
<S> <C> <C> <C>
ASSETS
Utility Plant:
In service, at original cost $4 351 349 $ - $4 351 349
Less, accumulated depreciation 1 710 542 - 1 710 542
Net utility plant in service 2 640 807 - 2 640 807
Construction work in progress 158 866 - 158 866
Other, net 122 753 - 122 753
Net utility plant 2 922 426 - 2 922 426
Other Property and Investments:
Nuclear decommissioning trusts 237 223 - 237 223
Nuclear fuel disposal fund 96 816 - 96 816
Other, net 7 333 - 7 333
Total other property and investments 341 372 - 341 372
Current Assets:
Cash and temporary cash investments 85 899 273 789 359 688
Special deposits 3 985 - 3 985
Accounts receivable:
Customers, net 156 912 - 156 912
Other 23 330 - 23 330
Unbilled revenues 56 408 - 56 408
Materials and supplies, at average cost or less:
Construction and maintenance 96 104 - 96 104
Fuel 13 318 - 13 318
Deferred income taxes 9 097 - 9 097
Prepayments 20 928 - 20 928
Total current assets 465 981 273 789 739 770
Deferred Debits and Other Assets:
Regulatory assets:
Three Mile Island Unit 2 deferred costs 135 548 - 135 548
Unamortized property losses 98 827 - 98 827
Income taxes recoverable through future rates 134 110 - 134 110
Other 309 052 - 309 052
Total regulatory assets 677 537 - 677 537
Deferred income taxes 122 908 - 122 908
Other 22 812 - 22 812
Total deferred debits and other assets 823 257 - 823 257
Total Assets $4 553 036 $273 789 $4 826 825
The accompanying note is an integral part of the consolidated financial statements.
<PAGE>
Financial Statements
Item 6(b) 1-C(b)
Page 11 of 40
JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY
CONSOLIDATED BALANCE SHEETS
ACTUAL AND PRO FORMA
AT MARCH 31, 1996
(IN THOUSANDS)
<CAPTION>
Adjustments
Actual (see page 13) Pro Forma
<S> <C> <C> <C>
LIABILITIES AND CAPITAL
Capitalization:
Common stock $ 153 713 $ - $ 153 713
Capital surplus 510 769 - 510 769
Retained earnings 867 680 (10 537) 857 143
Total common stockholder's equity 1 532 162 (10 537) 1 521 625
Cumulative preferred stock:
With mandatory redemption 124 000 - 124 000
Without mandatory redemption 37 741 - 37 741
Company-obligated mandatorily redeemable
preferred securities 125 000 - 125 000
Long-term debt 1 162 997 - 1 162 997
Total capitalization 2 981 900 (10 537) 2 971 363
Current Liabilities:
Securities due within one year 50 010 - 50 010
Notes payable - 290 000 290 000
Obligations under capital leases 103 764 - 103 764
Accounts payable:
Affiliates 15 240 - 15 240
Other 101 544 - 101 544
Taxes accrued 92 433 (5 674) 86 759
Deferred energy credits 1 127 - 1 127
Interest accrued 29 239 - 29 239
Other 67 608 - 67 608
Total current liabilities 460 965 284 326 745 291
Deferred Credits and Other Liabilities:
Deferred income taxes 604 939 - 604 939
Unamortized investment tax credits 65 361 - 65 361
Three Mile Island Unit 2 future costs 104 325 - 104 325
Nuclear Fuel Disposal Fee 122 692 - 122 692
Regulatory liabilities 36 634 - 36 634
Other 176 220 - 176 220
Total deferred credits and other liabilities 1 110 171 - 1 110 171
Commitments and Contingencies (Note 1)
Total Liabilities and Capital $4 553 036 $ 273 789 $4 826 825
The accompanying note is an integral part of the consolidated financial statements.
<PAGE>
Financial Statements
Item 6(b) 1-C(b)
Page 12 of 40
JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
ACTUAL AND PRO FORMA
FOR THE TWELVE MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS)
<CAPTION>
Adjustments
Actual (see page 13) Pro Forma
<S> <C> <C> <C>
Operating Revenues $2 097 168 $ - $2 097 168
Operating Expenses:
Fuel 109 031 - 109 031
Power purchased and interchanged:
Affiliates 20 435 - 20 435
Others 638 447 - 638 447
Deferral of energy and capacity costs, net 6 838 - 6 838
Other operation and maintenance 478 293 - 478 293
Depreciation and amortization 197 247 - 197 247
Taxes, other than income taxes 230 972 - 230 972
Total operating expenses 1 681 263 - 1 681 263
Operating Income Before Income Taxes 415 905 - 415 905
Income taxes 104 551 (5 674) 98 877
Operating income 311 354 5 674 317 028
Other Income and Deductions:
Allowance for other funds used during
construction 2 578 - 2 578
Other income, net 13 413 - 13 413
Income taxes (5 517) - (5 517)
Total other income and deductions 10 474 - 10 474
Income Before Interest Charges and
Dividends on Preferred Securities 321 828 5 674 327 502
Interest Charges and Dividends on
Preferred Securities:
Interest on long-term debt 92 617 - 92 617
Other interest 8 639 16 211 24 850
Allowance for borrowed funds used during
construction (6 105) - (6 105)
Dividends on company-obligated mandatorily
redeemable preferred securities 9 303 - 9 303
Total interest charges and dividends
on preferred securities 104 454 16 211 120 665
Net Income 217 374 (10 537) 206 837
Preferred stock dividends 14 344 - 14 344
Earnings Available for Common Stock $ 203 030 $(10 537) $ 192 493
Retained Earnings:
Balance at beginning of period $ 804 752 $ - $ 804 752
Add - Net income 217 374 (10 537) 206 837
Deduct - Cash dividends on common stock 140 000 - 140 000
Cash dividends on preferred stock 14 344 - 14 344
Other adjustments 102 - 102
Balance at end of period $ 867 680 $(10 537) $ 857 143
The accompanying note is an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
Financial Statements
Item 6(b) 1-C(b)
Page 13 of 40
JERSEY CENTRAL POWER & LIGHT COMPANY AND SUBSIDIARY COMPANY
PRO FORMA ADJUSTMENTS
AT MARCH 31, 1996
(IN THOUSANDS)
(1)
Cash and temporary cash investments $290,000
Notes Payable $290,000
To record the proposed issuance of $290 million of borrowings under the new
Revolving Credit Agreement or other unsecured debt agreements, to bring such
borrowings up to the charter limit.
(2)
Other interest $ 16,211
Cash and temporary cash investments $ 16,211
To record annual interest expense resulting from the proposed issuance of $290
million of borrowings at an assumed rate of 5.59%.
(3)
Taxes Accrued $ 5,674
Income Taxes $ 5,674
To record the net decrease in the provision for income taxes attributable to
the proposed issuance of $290 million of borrowings.
<PAGE>
<TABLE>
Financial Statements
Item 6(b) 1-D(b)
Page 14 of 40
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
ACTUAL AND PRO FORMA
AT MARCH 31, 1996
(IN THOUSANDS)
<CAPTION>
Adjustments
Actual (see page 17) Pro Forma
<S> <C> <C> <C>
ASSETS
Utility Plant:
In service, at original cost $2 254 998 $ - $2 254 998
Less, accumulated depreciation 783 355 - 783 355
Net utility plant in service 1 471 643 - 1 471 643
Construction work in progress 80 825 - 80 825
Other, net 41 821 - 41 821
Net utility plant 1 594 289 - 1 594 289
Other Property and Investments:
Nuclear decommissioning trusts 103 137 - 103 137
Other, net 10 948 - 10 948
Total other property and investments 114 085 - 114 085
Current Assets:
Cash and temporary cash investments 3 055 97 331 100 386
Special deposits 1 075 - 1 075
Accounts receivable:
Customers, net 64 039 - 64 039
Other 18 255 - 18 255
Unbilled revenues 24 270 - 24 270
Materials and supplies, at average cost or less:
Construction and maintenance 40 218 - 40 218
Fuel 7 984 - 7 984
Deferred income taxes 8 443 - 8 443
Prepayments 31 139 - 31 139
Total current assets 198 478 97 331 295 809
Deferred Debits and Other Assets:
Regulatory assets:
Three Mile Island Unit 2 deferred costs 148 831 - 148 831
Income taxes recoverable through future rates 168 276 - 168 276
Other 114 391 - 114 391
Total regulatory assets 431 498 - 431 498
Deferred income taxes 93 922 - 93 922
Other 15 679 - 15 679
Total deferred debits and other assets 541 099 - 541 099
Total Assets $2 447 951 $ 97 331 $2 545 282
The accompanying note is an integral part of the consolidated financial statements.
<PAGE>
Financial Statements
Item 6(b) 1-D(b)
Page 15 of 40
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
ACTUAL AND PRO FORMA
AT MARCH 31, 1996
(IN THOUSANDS)
<CAPTION>
Adjustments
Actual (see page 17) Pro Forma
<S> <C> <C> <C>
LIABILITIES AND CAPITAL
Capitalization:
Common stock $ 66 273 $ - $ 66 273
Capital surplus 370 200 - 370 200
Retained earnings 263 088 (3 205) 259 883
Total common stockholder's equity 699 561 (3 205) 696 356
Cumulative preferred stock 23 598 - 23 598
Company-obligated mandatorily redeemable
preferred securities 100 000 - 100 000
Long-term debt 603 269 - 603 269
Total capitalization 1 426 428 (3 205) 1 423 223
Current Liabilities:
Securities due within one year 15 019 - 15 019
Notes payable 30 183 102 800 132 983
Obligations under capital leases 40 361 - 40 361
Accounts payable:
Affiliates 15 553 - 15 553
Other 78 995 - 78 995
Taxes accrued 31 006 (2 264) 28 742
Deferred energy credits 3 536 - 3 536
Interest accrued 12 553 - 12 553
Other 36 259 - 36 259
Total current liabilities 263 465 100 536 364 001
Deferred Credits and Other Liabilities:
Deferred income taxes 374 019 - 374 019
Unamortized investment tax credits 32 867 - 32 867
Three Mile Island Unit 2 future costs 208 550 - 208 550
Nuclear fuel disposal fee 27 715 - 27 715
Regulatory liabilities 26 545 - 26 545
Other 88 362 - 88 362
Total deferred credits and other liabilities 758 058 - 758 058
Commitments and Contingencies (Note 1)
Total Liabilities and Capital $2 447 951 $ 97 331 $2 545 282
The accompanying note is an integral part of the consolidated financial statements.
<PAGE>
Financial Statements
Item 6(b) 1-D(b)
Page 16 of 40
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
ACTUAL AND PRO FORMA
FOR THE TWELVE MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS)
<CAPTION>
Adjustments
Actual (see page 17) Pro Forma
<S> <C> <C> <C>
Operating Revenues $ 886 613 $ - $ 886 613
Operating Expenses:
Fuel 90 998 - 90 998
Power purchased and interchanged:
Affiliates 29 353 - 29 353
Others 194 230 - 194 230
Deferral of energy costs, net 2 148 - 2 148
Other operation and maintenance 227 447 - 227 447
Depreciation and amortization 100 920 - 100 920
Taxes, other than income taxes 56 798 - 56 798
Total operating expenses 701 894 - 701 894
Operating Income Before Income Taxes 184 719 - 184 719
Income taxes 45 677 (2 264) 43 413
Operating income 139 042 2 264 141 306
Other Income and Deductions:
Allowance for other funds used during
construction 892 - 892
Other income, net 132 047 -
132 047
Income taxes (56 188) - (56 188)
Total other income and deductions 76 751 - 76 751
Income Before Interest Charges and
Dividends on Preferred Securities 215 793 2 264 218 057
Interest Charges and Dividends on
Preferred Securities:
Interest on long-term debt 46 299 - 46 299
Other interest 5 257 5 469 10 726
Allowance for borrowed funds used during
construction (956) - (956)
Dividends on company-obligated mandatorily
redeemable preferred securities 9 000 - 9 000
Total interest charges and dividends
on preferred securities 59 600 5 469 65 069
Net Income 156 193 (3 205) 152 988
Preferred stock dividends 944 - 944
Earnings Available for Common Stock $ 155 249 $ (3 205) $ 152 044
Retained Earnings:
Balance at beginning of period $ 168 157 $ - $ 168 157
Add - Net income 156 193 (3 205) 152 988
Deduct - Cash dividends on common stock 65 000 - 65 000
Cash dividends on preferred stock 944 -
944
Other adjustments (4 682) - (4 682)
Balance at end of period $ 263 088 $ (3 205) $ 259 883
The accompanying note is an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
Financial Statements
Item 6(b) 1-D(b)
Page 17 of 40
METROPOLITAN EDISON COMPANY AND SUBSIDIARY COMPANIES
PRO FORMA ADJUSTMENTS
AT MARCH 31, 1996
(IN THOUSANDS)
(1)
Cash and temporary cash investments $102,800
Notes payable $102,800
To reflect the proposed issuance of $102.8 million of borrowings under the new
Revolving Credit Agreement or other unsecured debt agreements, to bring such
borrowings up to the charter limit.
(2)
Other interest $5,469
Cash and temporary cash investments $5,469
To reflect annual interest expense resulting from the proposed borrowings of
$102.8 million at an assumed rate of 5.32%.
(3)
Taxes accrued $2,264
Income taxes $2,264
To record the net decrease in the provision for income taxes attributable to
the proposed issuance of $102.8 million of borrowings.
<PAGE>
<TABLE>
Financial Statements
Item 6(b) 1-E(b)
Page 18 of 40
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
ACTUAL AND PRO FORMA
AT MARCH 31, 1996
(IN THOUSANDS)
<CAPTION>
Adjustments
Actual (see page 21) Pro Forma
<S> <C> <C> <C>
ASSETS
Utility Plant:
In service, at original cost $2 684 320 $ - $2 684 320
Less, accumulated depreciation 986 545 - 986 545
Net utility plant in service 1 697 775 - 1 697 775
Construction work in progress 68 314 - 68 314
Other, net 28 981 - 28 981
Net utility plant 1 795 070 - 1 795 070
Other Property and Investments:
Nuclear decommissioning trusts 45 119 - 45 119
Other, net 6 601 - 6 601
Total other property and investments 51 720 - 51 720
Current Assets:
Cash and temporary cash investments 2 208 53 336 55 544
Special deposits 2 795 - 2 795
Accounts receivable:
Customers, net 76 391 - 76 391
Other 21 160 - 21 160
Unbilled revenues 26 854 - 26 854
Materials and supplies, at average cost or less:
Construction and maintenance 53 561 - 53 561
Fuel 11 436 - 11 436
Deferred energy costs 12 677 - 12 677
Deferred income taxes 4 928 - 4 928
Prepayments 38 956 - 38 956
Total current assets 250 966 53 336 304 302
Deferred Debits and Other Assets:
Regulatory assets:
Three Mile Island Unit 2 deferred costs 82 182 - 82 182
Income taxes recoverable through future rates 212 671 - 212 671
Other 19 072 - 19 072
Total regulatory assets 313 925 - 313 925
Deferred income taxes 77 259 - 77 259
Other 17 653 - 17 653
Total deferred debits and other assets 408 837 - 408 837
Total Assets $2 506 593 $ 53 336 $2 559 929
The accompanying note is an integral part of the consolidated financial statements.
<PAGE>
Financial Statements
Item 6(b) 1-E(b)
Page 19 of 40
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
ACTUAL AND PRO FORMA
AT MARCH 31, 1996
(IN THOUSANDS)
<CAPTION>
Adjustments
Actual (see page 21) Pro Forma
<S> <C> <C> <C>
LIABILITIES AND CAPITAL
Capitalization:
Common stock $ 105 812 $ - $ 105 812
Capital surplus 285 486 - 285 486
Retained earnings 338 370 (1 854) 336 516
Total common stockholder's equity 729 668 (1 854) 727 814
Cumulative preferred stock 36 777 - 36 777
Company-obligated mandatorily redeemable
preferred securities 105 000 - 105 000
Long-term debt 642 477 - 642 477
Total capitalization 1 513 922 (1 854) 1 512 068
Current Liabilities:
Securities due within one year 50 009 - 50 009
Notes payable 88 471 56 500 144 971
Obligations under capital leases 21 126 - 21 126
Accounts payable:
Affiliates 17 955 - 17 955
Other 54 720 - 54 720
Taxes accrued 29 904 (1 310) 28 594
Interest accrued 11 678 - 11 678
Vacations accrued 5 706 - 5 706
Other 11 453 - 11 453
Total current liabilities 291 022 55 190 346 212
Deferred Credits and Other Liabilities:
Deferred income taxes 463 331 - 463 331
Unamortized investment tax credits 44 427 - 44 427
Three Mile Island Unit 2 future costs 104 325 - 104 325
Nuclear fuel disposal fee 13 858 - 13 858
Regulatory liabilities 33 621 - 33 621
Other 42 087 - 42 087
Total deferred credits and other
liabilities 701 649 - 701 649
Commitments and Contingencies (Note 1)
Total Liabilities and Capital $2 506 593 $ 53 336 $ 2 559 929
The accompanying note is an integral part of the consolidated financial statements.
<PAGE>
Financial Statements
Item 6(b) 1-E(b)
Page 20 of 40
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
ACTUAL AND PRO FORMA
FOR THE TWELVE MONTHS ENDED MARCH 31, 1996
(IN THOUSANDS)
<CAPTION>
Adjustments
Actual (see page 21) Pro Forma
<S> <C> <C> <C>
Operating Revenues $ 997 246 $ - $ 997 246
Operating Expenses:
Fuel 172 450 - 172 450
Power purchased and interchanged:
Affiliates 5 657 - 5 657
Others 216 158 - 216 158
Deferral of energy costs, net (12 882) - (12 882)
Other operation and maintenance 272 100 - 272 100
Depreciation and amortization 86 528 - 86 528
Taxes, other than income taxes 66 586 - 66 586
Total operating expenses 806 597 - 806 597
Operating Income Before Income Taxes 190 649 - 190 649
Income taxes 48 038 (1 310) 46 728
Operating income 142 611 1 310 143 921
Other Income and Deductions:
Allowance for other funds used during
construction 1 667 - 1 667
Other income, net 56 816 - 56 816
Income taxes (24 803) - (24 803)
Total other income and deductions 33 680 - 33 680
Income Before Interest Charges and
Dividends on Preferred Securities 176 291 1 310 177 601
Interest Charges and Dividends on
Preferred Securities:
Interest on long-term debt 50 904 - 50 904
Other interest 7 491 3 164 10 655
Allowance for borrowed funds used during
construction (2 251) - (2 251)
Dividends on Company-obligated mandatorily
redeemable preferred securities 9 188 - 9 188
Total interest charges and preferred
dividends 65 332 3 164 68 496
Net Income 110 959 (1 854) 109 105
Preferred stock dividends 1 544 - 1 544
Earnings Available for Common Stock $ 109 415 $ (1 854) $ 107 561
Retained Earnings:
Balance at beginning of period $ 301 650 $ - $ 301 650
Add - Net income 110 959 (1 854) 109 105
Deduct - Cash dividends on common stock 75 000
- 75 000
Cash dividends on preferred stock 1 544 - 1 544
Other adjustments (2 305) - (2 305)
Balance at end of period $ 338 370 $ (1 854) $ 336 516
The accompanying note is an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
Financial Statements
Item 6(b) 1-E(b)
Page 21 of 40
PENNSYLVANIA ELECTRIC COMPANY AND SUBSIDIARY COMPANIES
PRO FORMA ADJUSTMENTS
AT MARCH 31, 1996
(IN THOUSANDS)
(1)
Cash and temporary cash investments $56,500
Notes Payable $56,500
To record the proposed issuance of $56.5 million of borrowings under the new
Revolving Credit Agreement or other unsecured debt agreements, to bring such
borrowings up to the charter limit.
(2)
Other interest $ 3,164
Cash and temporary cash investments $ 3,164
To record annual interest expense resulting from the proposed issuance of
$56.5 million of borrowings at an assumed rate of 5.60%.
(3)
Taxes Accrued $ 1,310
Income Taxes $ 1,310
To record the net decrease in the provision for income taxes attributable to
the proposed issuance of $56.5 million of borrowings.
<PAGE>
Financial Statements
Item 6(b)
Page 22 of 40
GENERAL PUBLIC UTILITIES CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
General Public Utilities Corporation (GPU or 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) (collectively, the
"Subsidiaries"). The Subsidiaries' business is the generation, transmission,
distribution and sale of electricity. The Subsidiaries serve areas of New
Jersey and Pennsylvania with a population of approximately five million, with
revenues about equally divided between New Jersey and Pennsylvania customers.
The Corporation also owns all of the common stock of Energy Initiatives, Inc.,
EI Power, Inc. and EI Energy, Inc., (collectively, the "EI Group") which
develop, own and operate generation, transmission and distribution facilities
in the United States and in foreign countries; GPU Service Corporation
(GPUSC), a service company; GPU Nuclear Corporation (GPUN), which operates and
maintains the nuclear units of the Subsidiaries; and GPU Generation
Corporation (Genco), which operates and maintains the fossil-fueled and
hydroelectric units of the Subsidiaries. All of these companies considered
together with their subsidiaries are referred to as the "GPU System."
Met-Ed owns all of the common stock of York Haven Power Company, the
owner of a small hydroelectric generating station, and Penelec owns all of the
common stock of Waverly Electric Light & Power Company and Nineveh Water
Company.
These notes should be read in conjunction with the notes to consolidated
financial statements included in the 1995 Annual Report on Form 10-K. The
year-end condensed balance sheet data contained in the attached financial
statements was derived from audited financial statements. For disclosures
required by generally accepted accounting principles, see the 1995 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 operating
generation 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 March 31, 1996 and December 31, 1995 the
Subsidiaries' net investment in TMI-1 and Oyster Creek, including nuclear
fuel, was as follows:
<PAGE>
Financial Statements
Item 6(b)
Page 23 of 40
Net Investment (Millions)
TMI-1 Oyster Creek
March 31, 1996
JCP&L $163 $791
Met-Ed 312 -
Penelec 153 -
Total $628 $791
Net Investment (Millions)
TMI-1 Oyster Creek
December 31, 1995
JCP&L $166 $785
Met-Ed 318 -
Penelec 156 -
Total $640 $785
The Subsidiaries' net investment in TMI-2 at March 31, 1996 was
$94 million (JCP&L, Met-Ed and Penelec's shares are $84 million, $2 million,
and $8 million, respectively). The Subsidiaries' net investment in TMI-2 at
December 31, 1995 was $95 million (JCP&L, Met-Ed and Penelec's shares are
$85 million, $2 million, and $8 million, respectively). JCP&L is collecting
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 are collecting revenues
for TMI-2 from their wholesale customers.
Costs associated with the operation, maintenance and retirement of
nuclear plants have continued to be significant and less predictable than
costs associated with other sources of generation, in large part due to
changing regulatory requirements, safety standards, availability of nuclear
waste disposal facilities and experience gained in the construction and
operation of nuclear facilities. The GPU System may also 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 any 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 1993.
<PAGE>
Financial Statements
Item 6(b)
Page 24 of 40
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.
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 up to an aggregate of $335 million in premium charges under
such plan, and (c) an indemnity agreement with the NRC for up to $85 million,
bringing their total primary, secondary and tertiary financial protection up
to an aggregate of $560 million. Under the secondary level, the Subsidiaries
are subject to a retrospective premium charge of up to $5 million per reactor,
or a total of $15 million (JCP&L, Met-Ed and Penelec's shares are $7.5
million, $5 million and $2.5 million, respectively).
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 (the defendants) under a reservation of rights with respect to any
award of punitive damages. However, in 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.
A trial of ten allegedly representative cases is scheduled to begin in
June 1996.
In October 1995, the U.S. Court of Appeals for the Third Circuit ruled
that the Price-Anderson Act provides coverage under its primary and secondary
levels for punitive as well as compensatory damages, but that punitive damages
could not be recovered against the Federal Government under the third level of
financial protection. In so doing, the Court of Appeals referred to the
"finite fund" (the $560 million of financial protection under the Price-
Anderson Act) to which plaintiffs must resort to get compensatory as well as
punitive damages.
The Court of Appeals also ruled that the standard of care owed by the
defendants to a plaintiff was determined by the specific level of radiation
which was released into the environment, as measured at the site boundary,
rather than as measured at the specific site where the plaintiff was located
at the time of the accident (as the Corporation and its Subsidiaries
proposed). The Court of Appeals also held that each plaintiff still must
demonstrate exposure to radiation released during the TMI-2 accident and that
such exposure had resulted in injuries.
The U.S. Supreme Court has denied petitions filed by the Corporation and
its Subsidiaries to review the Court of Appeals' rulings with respect to the
availability of punitive damages and the standard of care.
Based on the above, the Corporation and its Subsidiaries believe that any
liability to which they might be subject by reason of the TMI-2 accident will
not exceed their financial protection under the Price-Anderson Act.
There can be no assurance as to the outcome of this litigation.
<PAGE>
Financial Statements
Item 6(b)
Page 25 of 40
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. Based on NRC
studies, a comparable funding target has been developed for TMI-2 which takes
the accident into account. Under the NRC regulations, the funding targets (in
1996 dollars) are as follows:
(Millions)
Oyster
Creek TMI-1 TMI-2
JCP&L $191 $ 40 $ 63
Met-Ed - 79 127
Penelec - 40 63
Total $191 $159 $253
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. 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.
The Subsidiaries charge to expense and contribute to external trusts
amounts collected from customers for nuclear plant decommissioning and
nonradiological costs. In addition, JCP&L has contributed amounts written off
for TMI-2 nuclear plant decommissioning in 1990, and Met-Ed and Penelec have
contributed amounts written off for TMI-2 nuclear plant decommissioning in
1991, to TMI-2's external trust (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.
In 1995, a consultant to GPUN performed site-specific studies of the TMI
site, including both Units 1 and 2, and of Oyster Creek, that considered
various decommissioning methods and estimated the cost of decommissioning the
radiological portions and the cost of removal of the nonradiological portions
of each plant, using the prompt removal/dismantlement method. GPUN management
has reviewed the methodology and assumptions used in the site-specific
studies, is in agreement with them, and believes the results are reasonable as
follows (in 1996 dollars):
<PAGE>
Financial Statements
Item 6(b)
Page 26 of 40
(Millions)
Oyster
GPU System Creek TMI-1 TMI-2
Radiological decommissioning $351 $299 $363
Nonradiological cost of removal 34 74 37
*
Total $385 $373 $400
* Net of $4 million spent as of March 31, 1996.
(Millions)
Oyster
JCP&L Creek TMI-1 TMI-2
Radiological decommissioning $351 $75 $ 91
Nonradiological cost of removal 34 18 9
*
Total $385 $93 $100
* Net of $1 million spent as of March 31, 1996.
(Millions)
Met-Ed TMI-1 TMI-2
Radiological decommissioning $149 $181
Nonradiological cost of removal 38 19 *
Total $187 $200
* Net of $2 million spent as of March 31, 1996.
(Millions)
Penelec TMI-1 TMI-2
Radiological decommissioning $75 $ 91
Nonradiological cost of removal 18 9 *
Total $93 $100
* Net of $1 million spent as of March 31, 1996.
The ultimate cost of retiring the GPU System's nuclear facilities may be
different from the cost estimates contained in these site-specific studies.
Such costs are subject to (a) the quarterly escalation of various cost
elements (including, but not limited to, general inflation), (b) the further
development of regulatory requirements governing decommissioning, (c) the
technology available at the time of decommissioning, and (d) the availability
of nuclear waste disposal facilities.
In February 1996 the Financial Accounting Standards Board (FASB) issued
an Exposure Draft titled "Accounting for Certain Liabilities Related to
Closure or Removal of Long-Lived Assets," which includes nuclear plant
retirement costs. If the Exposure Draft's current provisions are finalized,
Oyster Creek and TMI-1 future retirement costs will have to be recognized as a
liability currently, rather than recorded over the life of the plants (as is
currently the practice), with an offsetting asset recorded for amounts
collectible through rates. Any amounts not collectible through rates will
have to be charged to expense. For TMI-2, a liability has already been
recognized, based on the 1995 site-specific study (in 1996 dollars) since the
<PAGE>
Financial Statements
Item 6(b)
Page 27 of 40
plant is no longer operating (see TMI-2 Future Costs). A final statement is
expected to be effective for fiscal years beginning after December 15, 1996.
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 its share ($3.83 million)
of an estimate 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 ($37.5 million) of the NRC funding target and nonradiological cost
of removal estimated in an earlier 1988 site-specific study to be $75 million
(in 1996 dollars). The PaPUC also permitted Penelec to increase 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
expenditure of these funds has been made in accumulated depreciation,
amounting to $80 million (JCP&L, Met-Ed and Penelec's shares are $25 million,
$39 million and $16 million, respectively) for TMI-1 and $146 million for
Oyster Creek at March 31, 1996. TMI-1 and Oyster Creek retirement costs are
charged to depreciation expense over the expected service life of each nuclear
plant, and amounted to $4 million (JCP&L, Met-Ed and Penelec's shares are $1
million, $2 million and $1 million, respectively) and $3 million,
respectively, for the first quarter of 1996.
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 estimated liabilities for TMI-2 Future Costs (reflected as Three Mile
Island Unit 2 Future Costs on the Balance Sheet) as of March 31, 1996 and
December 31, 1995 are as follows:
(Millions)
GPU JCP&L Met-Ed Penelec
March 31, 1996
Radiological Decommissioning $363 $ 91 $181 $ 91
Nonradiological Cost of Removal 37* 9 19 9
Incremental Monitored Storage 18 4 9 5
Total $418 $104 $209 $105
* Net of $4 million (JCP&L, Met-Ed and Penelec's shares are $1 million, $2
million and $1 million, respectively) spent as of March 31, 1996.
<PAGE>
Financial Statements
Item 6(b)
Page 28 of 40
(Millions)
GPU JCP&L Met-Ed Penelec
December 31, 1995
Radiological Decommissioning $358 $90 $179 $89
Nonradiological Cost of Removal 37* 9 19 9
Incremental Monitored Storage 18 4 9 5
Total $413 $103 $207 $103
* Net of $3 million spent (JCP&L, Met-Ed and Penelec's shares are $.75
million, $1.5 million and $.75 million, respectively) as of
December 31, 1995.
Offsetting the $418 million liability is $273 million (JCP&L, Met-Ed and
Penelec's shares are $51 million, $147 million and $75 million, respectively)
which is probable of recovery from customers and included in Three Mile Island
Unit 2 Deferred Costs on the Balance Sheet, and $151 million (JCP&L, Met-Ed
and Penelec's shares are $63 million, $61 million and $27 million,
respectively) in trust funds for TMI-2 and included in Nuclear Decommissioning
Trusts on the Balance Sheet. Earnings on trust fund deposits collected from
customers are included in amounts shown on the Balance Sheet under Three Mile
Island Unit 2 Deferred Costs. TMI-2 decommissioning costs charged to
depreciation expense for the first quarter of 1996 amounted to $3 million
(JCP&L, Met-Ed and Penelec's shares are $0.8 million, $2 million and $0.2
million, respectively).
The NJBPU and PaPUC have granted JCP&L and Met-Ed, respectively,
decommissioning revenues for the remainder of the NRC funding target and
allowances for the cost of removal of nonradiological structures and
materials. Based on Met-Ed's rate order, Penelec has recorded a regulatory
asset for that portion of such costs which it believes to be probable of
recovery.
At March 31, 1996 the accident-related portion of TMI-2 radiological
decommissioning costs is considered to be $64 million (JCP&L, Met-Ed and
Penelec's shares are $16 million, $32 million and $16 million, respectively),
which is the difference between the 1995 TMI-1 and TMI-2 site-specific study
estimates (in 1996 dollars) of $299 million and $363 million, respectively
(JCP&L, Met-Ed and Penelec's shares are $75 million and $91 million, $149
million and $181 million, and $75 million and $91 million, respectively). In
connection with rate case resolutions at the time, JCP&L, Met-Ed and Penelec
made contributions to irrevocable external trusts relating to their shares of
the accident-related portions of the decommissioning liability. In 1990,
JCP&L contributed $15 million and in 1991, Met-Ed and Penelec contributed
$40 million and $20 million respectively, to irrevocable external trusts.
These contributions were not recovered from customers and have been expensed.
The Subsidiaries will not pursue recovery from customers for any of these
amounts contributed in excess of the $64 million accident-related portion
referred to above.
JCP&L intends to seek recovery for any increases in TMI-2 retirement
costs, and Met-Ed and Penelec intend to seek recovery for any increases in the
nonaccident-related portion of such costs, but recognize that recovery cannot
be assured.
As a result of TMI-2's entering long-term monitored storage in 1993, the
Subsidiaries are incurring incremental storage costs of approximately
<PAGE>
Financial Statements
Item 6(b)
Page 29 of 40
$1 million (JCP&L, Met-Ed and Penelec's shares are $.25 million, $.5 million,
and $.25 million, respectively) annually. The Subsidiaries estimate that the
remaining storage costs will total $18 million through 2014, the expected
retirement date of TMI-1. JCP&L's rates reflect its 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, subject to an annual maximum payment of
$10 million per incident per reactor. In addition to the retrospective
premiums payable under Price-Anderson, the GPU System is also subject to
retrospective premium assessments of up to $68 million (JCP&L, Met-Ed and
Penelec's shares are $41 million, $18 million and $9 million, respectively) 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 to 80 percent of such amounts
for years two and three.
<PAGE>
Financial Statements
Item 6(b)
Page 30 of 40
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 (NUGs) for
the purchase of energy and capacity for periods up to 25 years each for JCP&L
and Penelec, and 26 years for Met-Ed. The majority of these agreements
contain certain contract limitations and subject the NUGs 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 March 31, 1996,
facilities covered by these agreements having 1,624 MW (JCP&L, Met-Ed and
Penelec's shares are 892 MW, 335 MW and 397 MW, respectively) of capacity were
in service. Actual payments from 1993 through 1995, and estimated payments
from 1996 through 2000 to NUGs, assuming that all facilities which have
existing agreements, or which have obtained orders granting them agreements,
enter service, are as follows:
Payments Under NUG Agreements
(Millions)
Total JCP&L Met-Ed Penelec
1993 $ 491 $ 292 $ 95 $ 104
1994 528 304 101 123
1995 670 381 131 158
* 1996 695 368 151 176
* 1997 719 379 156 184
* 1998 794 385 212 197
* 1999 882 391 213 278
* 2000 933 405 219 309
* Estimate
Of these amounts, payments to the projects which are not in service at
March 31, 1996 are estimated as follows:
Payments Under NUG Agreements Not In Service
(Millions)
Total JCP&L Met-Ed Penelec
1997 $ 17 $ 1 $16 $ -
1998 76 3 68 5
1999 149 3 69 77
2000 175 3 74 98
In the year 2000 NUG agreements, in the aggregate, will provide
approximately 1,962 MW (JCP&L 902 MW, Met-Ed 485 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
<PAGE>
Financial Statements
Item 6(b)
Page 31 of 40
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 generation facilities now in
service is currently and is expected to continue to be priced below the costs
of new supply sources, at least for some time. The projected cost of energy
from new generation supply sources has also decreased due to improvements in
power plant technologies and reduced forecasted fuel prices. As a result of
these developments, the rates under virtually all of the Subsidiaries' NUG
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
NUG agreements by (1) attempting to convert must-run agreements to
dispatchable agreements; (2) attempting to renegotiate prices of the
agreements; (3) offering contract buyouts while seeking to recover the costs
through their energy adjustment clauses and (4) initiating proceedings before
federal and state agencies, and in the courts, where appropriate. In addition,
the Subsidiaries intend to avoid, to the maximum extent practicable, entering
into any new NUG 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 the extent to which the
Subsidiaries' efforts will be successful in whole or in part.
While the Subsidiaries thus far have been granted recovery of their NUG
costs (including substantially all buyout costs) from customers by the PaPUC
and NJBPU, there can be no assurance that the Subsidiaries will continue to be
able to recover similar costs which may be incurred in the future. The GPU
System currently estimates that for 1998, when substantially all of these NUG
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 $225 million to $330 million (JCP&L $85 to
$130 million; Met-Ed $50 million to $80 million; and Penelec $90 million to
$120 million). The amount of these estimated above-market payments may
increase or decrease substantially based upon, among other things, payment
escalations in the contract terms, changes in fuel prices and changes in the
capital and operating cost of new generating equipment.
Regulatory Assets and Liabilities:
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 regulation. 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
<PAGE>
Financial Statements
Item 6(b)
Page 32 of 40
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.
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.
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 of March 31, 1996 and December 31, 1995,
were as follows:
GPU System Assets (in thousands)
March 31, December 31,
1996 1995
Income taxes recoverable/refundable
through future rates $ 515,057 $ 527,584
TMI-2 deferred costs 366,561 368,712
Unamortized property losses 104,390 105,729
NUG contract termination costs 84,132 84,132
Other postretirement benefits 63,695 58,362
N.J. unit tax 50,146 51,518
Unamortized loss on reacquired debt 48,980 50,198
Load and demand-side management programs 47,412 48,071
DOE enrichment facility decommissioning 37,728 38,519
Manufactured gas plant remediation 30,134 29,608
Nuclear fuel disposal fee 21,974 21,946
N.J. low-level radwaste disposal 20,415 21,778
Storm damage 19,558 18,294
Other 12,778 15,257
Total $1,422,960 $1,439,708
Liabilities (in thousands)
March 31, December 31,
1996 1995
Income taxes recoverable/refundable
through future rates $93,254 $94,931
Other 3,546 3,068
Total $96,800 $97,999
<PAGE>
Financial Statements
Item 6(b)
Page 33 of 40
Assets (in thousands)
JCP&L March 31, December 31,
1996 1995
Income taxes recoverable/refundable
through future rates $134,110 $134,787
TMI-2 deferred costs 135,548 138,472
Unamortized property losses 98,827 100,176
NUG contract termination costs 17,482 17,482
Other postretirement benefits 35,311 32,390
N.J. unit tax 50,146 51,518
Unamortized loss on reacquired debt 33,573 34,285
Load and demand side management programs 47,412 48,071
DOE enrichment facility decommissioning 24,008 24,503
Manufactured gas plant remediation 30,134 29,608
Nuclear fuel disposal fee 23,314 23,165
N.J. low-level radwaste disposal 20,415 21,778
Storm damage 19,558 18,294
Other 7,699 10,199
Total $677,537 $684,728
Liabilities (in thousands)
March 31, December 31,
1996 1995
Income taxes recoverable/refundable
through future rates $35,522 $36,343
Other 1,112 1,254
Total $36,634 $37,597
Assets (in thousands)
Met-Ed March 31, December 31,
1996 1995
Income taxes recoverable/refundable
through future rates $168,276 $178,513
TMI-2 deferred costs 148,831 149,004
Unamortized property losses 3,241 3,273
NUG contract termination costs 66,650 66,650
Other postretirement benefits 28,384 25,972
Unamortized loss on reacquired debt 6,764 6,945
DOE enrichment facility decommissioning 9,147 9,344
Nuclear fuel disposal fee (1,080) (1,025)
Other 1,285 1,299
Total $431,498 $439,975
Liabilities (in thousands)
March 31, December 31,
1996 1995
Income taxes recoverable/refundable
through future rates $24,396 $24,765
Other 2,149 1,696
Total $26,545 $26,461
<PAGE>
Financial Statements
Item 6(b)
Page 34 of 40
Assets (in thousands)
Penelec March 31, December 31,
1996 1995
Income taxes recoverable/refundable
through future rates $212,671 $214,284
TMI-2 deferred costs 82,182 81,236
Unamortized property losses 2,322 2,280
Unamortized loss on reacquired debt 8,643 8,968
DOE enrichment facility decommissioning 4,573 4,672
Nuclear fuel disposal fee (260) (194)
Other 3,794 3,759
Total $313,925 $315,005
Liabilities (in thousands)
March 31, December 31,
1996 1995
Income taxes recoverable/refundable
through future rates $33,336 $33,823
Other 285 118
Total $33,621 $33,941
Income taxes recoverable/refundable through future rates: Represents amounts
deferred due to the implementation of FAS 109, "Accounting for Income Taxes,"
in 1993.
TMI-2 deferred costs: Represents costs that are recoverable through rates for
the Subsidiaries' remaining investment in the plant and fuel core,
radiological decommissioning and the cost of removal of nonradiological
structures and materials in accordance with the 1995 site-specific study (in
1996 dollars) and JCP&L's share of long-term monitored storage costs. For
additional information, see TMI-2 Future Costs.
Unamortized property losses: Consists mainly of costs associated with JCP&L's
Forked River Project, which are included in rates.
NUG contract termination costs: Represents one-time costs incurred for
terminating power purchase contracts with NUGs, for which rate recovery has
been granted or is probable.
Other postretirement benefits: Includes costs associated with the adoption of
FAS 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions," which are deferred in accordance with Emerging Issues Task Force
Issue 92-12, "Accounting for OPEB Costs by Rate-Regulated Enterprises."
N.J. unit tax: JCP&L received NJBPU approval in 1993 to recover, with
interest, 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 early redemption of long-term debt. In accordance with FERC
regulations, reacquired debt costs are amortized over the remaining original
life of the retired debt.
<PAGE>
Financial Statements
Item 6(b)
Page 35 of 40
Load and demand-side management (DSM) programs: Consists of load management
costs that are currently being recovered, with interest, through JCP&L's
retail base rates pursuant to a 1993 NJBPU order, and other DSM program
expenditures that are recovered annually, with interest. Also includes
provisions for lost revenues between base rate cases and performance
incentives.
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.
Manufactured gas plant remediation: Consists of costs which are probable of
recovery, with interest, 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.
N.J. low-level radwaste disposal: Represents the accrual of the estimated
assessment for the siting of a disposal facility for low-level waste from
Oyster Creek, less amortization as allowed in JCP&L's rates.
Storm damage: Relates to incremental 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.
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. However, in the event that either all or a portion of their
operations are no longer subject to these provisions, the related regulatory
assets, net of regulatory liabilities, would have to be written off. In
addition, any above market costs of purchased power commitments would have to
be expensed (see Nonutility Generation Agreements), and additional
depreciation expense would have to be recorded for any differences created by
the use of a regulated depreciation method that is different from that which
would have been used under generally accepted accounting principles for
enterprises in general. At this time, the Corporation is unable to determine
when and to what extent FAS 71 may no longer be applicable.
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
<PAGE>
Financial Statements
Item 6(b)
Page 36 of 40
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 of 1990 (Clean Air
Act), the Subsidiaries expect to spend up to $410 million (JCP&L, Met-Ed and
Penelec's shares are $42 million, $163 million, and $205 million,
respectively) for air pollution control equipment by the year 2000, of which
approximately $237 million (JCP&L, Met-Ed and Penelec's shares are $42
million, $96 million, and $99 million, respectively) has already been spent.
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
Subsidiaries expect that the U.S. Environmental Protection Agency (EPA) will
approve state implementation plans consistent with the proposal, and that as a
result, they will spend an estimated $60 million (Met-Ed and Penelec's shares
are $14 million and $46 million, respectively) (included in the Clean Air Act
total), beginning in 1997, to meet the seasonal reductions agreed upon by the
OTC. The OTC has stated that it anticipates that additional NOx reductions
will be necessary to meet the Clean Air Act's 2005 National Ambient Air
Quality Standard 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 formally 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 11 hazardous and/or toxic
waste sites, broken down by company as follows:
JCP&L MET-ED PENELEC GPUN GPU TOTAL
PRPs 6 4 2 1 1 11*
* In some cases, the Subsidiaries are named separately for the same site.
In addition, the Subsidiaries have been requested to participate in the
remediation or supply information to the EPA and state environmental
authorities on several other sites for which they have not been formally named
as PRPs, although the EPA and state authorities may nevertheless consider the
Subsidiaries 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 GPU System companies.
JCP&L has entered into agreements with the New Jersey Department of
Environmental Protection (NJDEP) for the investigation and remediation of 17
formerly owned manufactured gas plant (MGP) sites. JCP&L has also entered
into various cost-sharing agreements with other utilities for most of the
<PAGE>
Financial Statements
Item 6(b)
Page 37 of 40
sites. As of March 31, 1996 JCP&L has an estimated environmental liability of
$29 million recorded on its Balance Sheet relating to these sites, as well as
two other properties. 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 future costs may range as
high as $50 million. Estimates of these costs are subject to significant
uncertainties because: 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 $50 million.
In 1993, the NJBPU approved a mechanism similar to JCP&L's Levelized
Energy Adjustment Clause (LEAC) for the recovery of future MGP remediation
costs when expenditures exceed prior collections. The NJBPU decision also
provided for interest on any overrecovery to be credited to customers until
the overrecovery is eliminated and for future costs to be amortized over seven
years with interest. 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 MGP 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.
OTHER COMMITMENTS AND CONTINGENCIES
In 1994, the energy services and delivery businesses of Met-Ed and
Penelec were functionally combined. In March 1996, plans were announced to
combine the operations of JCP&L and certain divisions of GPUSC with those of
Met-Ed/Penelec.
In connection with this combination, in April 1996, management announced
that it intends to offer a voluntary enhanced retirement program to more than
400 non-bargaining employees in Pennsylvania and New Jersey, and that a
similar program will be discussed with the bargaining units. If between 60%
and 80% of the eligible bargaining and non-bargaining employees were to accept
the offer, depending on the age and years of service of those employees, the
program could result in a 1996 pre-tax charge to earnings of between $90
million and $125 million.
The GPU System's construction programs, for which substantial commitments
have been incurred and which extend over several years, contemplate
expenditures of $491 million (JCP&L, Met-Ed, Penelec and GPUSC's shares are
$256 million, $97 million, $124 million and $14 million, respectively) during
1996. As a consequence of reliability, licensing, environmental and other
requirements, additions to 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.
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Financial Statements
Item 6(b)
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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 at various
dates between 1996 and 2004, 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 of
Penelec's contracts for the Homer City station also includes a provision for
the payment of postretirement benefit costs. The Subsidiaries' share of the
cost of coal purchased under these agreements is expected to aggregate $116
million (JCP&L, Met-Ed and Penelec's shares are $22 million, $18 million and
$76 million, respectively) for 1996.
JCP&L has entered into agreements with other utilities to purchase
capacity and energy for various periods through 2004. These agreements will
provide for up to 1,085 MW in 1996, declining to 878 MW in 1999 and 696 MW in
2004. Payments pursuant to these agreements are estimated to be $174 million
in 1996, $164 million in 1997, $147 million in 1998, $123 million in 1999 and
$105 million in 2000.
Genco is constructing a 141 MW gas-fired combustion turbine at JCP&L's
Gilbert generating station. This estimated $50 million project, of which $35
million has been spent, is expected to be in-service by mid-1996. In 1995,
the NJDEP issued an air permit for the facility based, in part, on the NJBPU's
1994 order which found that New Jersey's Electric Facility Need Assessment Act
is not applicable and that construction of this facility, without a market
test, is consistent with New Jersey energy policies. An industry trade group
representing NUGs 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.
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 NUG projects. The proceeding was initiated, in part, to respond to
contentions of the Division of the Ratepayer Advocate that by permitting
utilities to recover such costs through the LEAC, an excess or "double"
recovery may result when combined with the recovery of the utilities' embedded
capacity costs through their base rates. In 1994, the NJBPU ruled that the
LEAC periods prior to March 1991 were 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 refund
liability for the LEAC periods from March 1991 through February 1996, the end
of the most recent LEAC period, is $55 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 $10 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. Legislation has been proposed in New Jersey which would
require the NJBPU to conduct a formal investigation whenever a nuclear plant
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Financial Statements
Item 6(b)
Page 39 of 40
is, or is anticipated to be, out of service for more than three months, to
determine whether costs associated with the outage should be excluded from
rates.
As of March 31, 1996, approximately 53% of the GPU System's workforce was
represented by unions for collective bargaining purposes. JCP&L employees'
collective bargaining agreement is due to expire in October 1996, representing
44% of the GPU System's union employees.
Niagara Mohawk Power Corporation (NIMO) has filed with the New York
Public Service Commission a proposed restructuring plan that it claims may be
needed to avoid seeking reorganization under Chapter XI of the Bankruptcy
Code. Energy Initiatives has ownership interests, with an aggregate book
value of approximately $35 million, in three NUG projects which have long-term
purchase power agreements with NIMO. In the restructuring plan, NIMO has
insisted on renegotiating all of its contracts with NUGs, and has claimed that
it has the right to use eminent domain to condemn NUG facilities, if such
negotiations are not successful. There can be no assurance as to the outcome
of this matter.
NIMO has also initiated actions in federal and state court seeking to
invalidate numerous NUG contracts or limit the amount of annual generation
produced by the NUG, and is withholding allegedly "excess" payments made in
respect of "over generation" under these contracts, including the contracts
for one of Energy Initiatives' projects. NIMO alleges to have overpaid Energy
Initiatives approximately $7 million for the years 1993 through 1995. Energy
Initiatives has filed motions to dismiss the complaint and is vigorously
defending these actions. There can be no assurance as to the outcome of these
proceedings.
At March 31, 1996, the EI Group had investments totalling $163 million in
facilities located in four foreign countries. Although management attempts to
mitigate the risk of investing in certain foreign countries by securing
political risk insurance, the EI Group faces additional risks inherent to
operating in such locations, including foreign currency fluctuations.
In 1995, the FASB issued FAS 121, "Accounting for the Impairment of Long-
Lived Assets," which is effective for fiscal years beginning after June 15,
1995. FAS 121 requires that long-lived assets, identifiable intangibles,
capital leases and goodwill be reviewed for impairment whenever events occur
or changes in circumstances indicate that the carrying amount of the assets
may not be recoverable. In addition, FAS 121 requires that regulatory assets
meet the recovery criteria of FAS 71, "Accounting for the Effects of Certain
Types of Regulation," on an ongoing basis in order to avoid a writedown (see
Regulatory Assets and Liabilities).
The implementation of FAS 121 by the GPU System in 1995 did not have an
impact on results of operations because management believes the carrying
amounts of all assets are probable of recovery from customers. However, as
the Subsidiaries enter a more competitive environment, some assets could be
subject to impairment, thereby necessitating writedowns, which could have a
material adverse effect on the GPU System's results of operations and
financial condition.
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Financial Statements
Item 6(b)
Page 40 of 40
The FASB exposure draft relating to closure and removal of long-lived
assets (see NUCLEAR PLANT RETIREMENT COSTS), applies to all long-lived assets,
including fossil-fueled generating plants. For these assets, a liability will
have to be recognized whenever a legal or constructive obligation exists to
perform dismantlement or removal activities.
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 the
public, customers, contractors, vendors and other suppliers of equipment and
services and by employees alleging unlawful employment practices. While
management does not expect that the outcome of these matters will have a
material effect on the GPU System's financial position or results of
operations, there can be no assurance that this will continue to be the case.
<PAGE>
