Post-Effective Amendment No. 19 to
SEC File No. 70-8593
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM U-1
APPLICATION UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 ("Act")
GPU, INC. ("GPU")
100 Interpace Parkway
Parsippany, New Jersey 07054
GPU INTERNATIONAL, INC. ("GPUI")
EI SERVICES, INC. ("EI Services")
One Upper Pond Road, Parsippany, New Jersey 07054
JERSEY CENTRAL POWER & LIGHT COMPANY ("JCP&L")
METROPOLITAN EDISON COMPANY ("Met-Ed")
PENNSYLVANIA ELECTRIC COMPANY ("Penelec")
P.O. Box 16001, Reading, Pennsylvania 19640
GPU SERVICE, INC. ("GPUS")
100 Interpace Parkway, Parsippany, New Jersey 07054
---------------------------------------------------
(Names of companies filing this statement
and addresses of principal offices)
GPU, INC.
---------
(Name of top registered holding company parent of the applicants)
M.A. Nalewako, Secretary Douglas E. Davidson, Esq.
M.J. Connolly, Esq. Berlack, Israels & Liberman LLP
GPU Service, Inc. 120 West 45th Street
100 Interpace Parkway New York, New York 10036
Parsippany, New Jersey 07054
W. Thomson, Secretary
GPU International, Inc.
One Upper Pond Road
Parsippany, New Jersey 07054
--------------------------------------------------------------
(Names and addresses of agents for service)
<PAGE>
GPU, GPUI, EI Services, JCP&L, Met-Ed, Penelec and GPUS
hereby post-effectively amend their Application on Form U-1, docketed
in SEC File No. 70-8593, as heretofore amended, as follows:
1. By amending paragraph I of Post-Effective Amendment No. 10, as
heretofore amended, to include the following additional information at
the end thereof:
PowerNet
--------
On October 12, 1997, GPU announced that it was the winning bidder
for the purchase of the assets of PowerNet Victoria ("PowerNet") from
the Government of the State of Victoria, Australia, for an aggregate
purchase price of A$2,555 million (US$1,880 million). PowerNet owns
and maintains the existing high voltage electricity grid in Victoria,
serving an area of approximately 227,600 square kilometers and a
population of approximately 4.5 million. A copy of GPU's related press
release is filed as an exhibit hereto.
GPU anticipates that the transaction will close on or about
November 6, 1997. The purchase price will be paid with a combination
of recourse debt, non-recourse debt and a GPU cash capital
contribution, as follows ($-millions):
Recourse Debt (Equity Facility): US$450
Non-Recourse Debt US$1,380
Capital Contribution: US$50
The non-recourse Senior Debt Credit Facility is provided by an
Australian banking syndicate in an amount of up to approximately
US$1.4 billion (A$1.945 billion). This loan will be made to Austran
Holdings, Inc. ("Austran"), a newly formed, indirect subsidiary of GPU
Electric (which in turn is a wholly-owned subsidiary of GPU). Austran
is the parent of Australian Transmission Corporation Pty. Ltd., which
has been formed to acquire the assets of PowerNet. This loan is
non-recourse to GPU.
The equity bridge facility ("Equity Facility") permits borrowings
of up to a maximum of US$450 million. GPU has agreed to guaranty
borrowings under this facility in an initial amount of US$50 million
and has further agreed to guaranty additional amounts up to 90% of GPU
s remaining aggregate investment authority under Rule 53, as the
Commission may authorize from time to time in this Docket. This loan
will be made to GPU Australia Holdings, Inc., a newly formed wholly
owned subsidiary of GPU Electric, and the parent of Austran. It is
currently expected that the entire amount of the Equity Facility will
be borrowed at closing. The loan must be reduced to a maximum of
US$250 million within six months of closing. If the Commission grants
GPU's pending request in this Docket, the GPU guaranty will convert to
a full guaranty of all borrowings outstanding under the Equity
Facility and the loan term will be extended from 2.5 to 5 years.
GPU intends to finance its $50 million cash capital
contribution with short term debt from existing credit lines.
<PAGE>
As reported in Post-Effective Amendment No. 15, GPU's
aggregate investment in EWGs and FUCO's as of June 30, 1997 was US$
954 million, and its average consolidated retained earnings,
determined in accordance with Rule 53(a), was approximately $2,142
million. At the closing of the acquisition of PowerNet, GPU's
aggregate investment will be increased by $100 million (consisting of
the $50 million cash capital contribution and the $50 million guaranty
of the Equity Facility), to US$1,054 million, or 49.2 percent of
average consolidated retained earnings. Accordingly, pending
Commission approval of GPU s application in this Docket to increase
its Rule 53 authorization to 100 percent of average consolidated
retained earnings, GPU s aggregate investment in PowerNet will be
limited to $100 million which is within its current Rule 53 limit.
Under the Victorian Government's cross-ownership restrictions in
the Electric Industry Act, the owner of a transmission license (such
as PowerNet) may not own more than 20 percent of an electric
distribution company or an electric generator. Accordingly, GPU will
be required to sell down its 50 percent interest in Solaris Power (a
distribution company which it acquired in 1995 in partnership with
Australian Gas Light Company) and will have 6 months to do so under
the legislation. GPU currently anticipates that it will sell its
entire interest in Solaris, which had a book value of about US$125
million at June 30, 1997. The proceeds would be used to repay the
approximately US$57 million of outstanding borrowings under a loan
agreement (which GPU has guaranteed) ("Solaris Equity Facility") used
to finance a portion of the Solaris purchase price. The balance of the
expected Solaris sale proceeds (about US$68 million) together with a
portion of the proceeds from GPU's sale of up to 7 million shares of
additional common stock in early 1998, will be used to reduce the
outstanding amount of the Equity Facility to not more than the
required maximum of US$250 million by May 1998.
While GPU ordinarily seeks to engage a local partner for its
foreign investments, GPU did not consider that to be a necessary risk
mitigation measure for its PowerNet acquisition. This is principally
because GPU has gained considerable knowledge and experience in
Australia as a result of its acquisition of a 50 percent interest in
Solaris Power in 1995. As a result, over the past two years, GPU
personnel have been closely involved in virtually all aspects of the
electric utility business in Victoria and have become quite familiar
with the local business, economic, regulatory and political
environments. Indeed, GPUI maintains a permanent office and staff in
Melbourne.
Moreover, the regulatory regime and political climate in Victoria
is relatively predictable and stable. Given these factors, GPU did not
feel that PowerNet represented any particular foreign investment risk
that should be mitigated through joint ownership with a local partner.
GPU may in the future, however, decide to sell a small minority equity
interest in PowerNet to a strategic investor.
2
<PAGE>
After giving effect to the acquisition of PowerNet, GPU
anticipates that as of June 30, 1997 on a pro forma basis, its
consolidated debt and equity would constitute 61 percent and 39
percent, respectively, of its total consolidated capitalization.
2. By filing the following additional exhibits in Item 6 thereof:
J - GPU News Release, dated October 12, 1997.
K - GPU Pro Forma Capitalizations -- filed
separately pursuant to a request for confidential
treatment.
L-1 - Standard & Poor's Press Release relating to
PowerNet
L-2 - Moody's Press Release relating to PowerNet
L-3 - Duff & Phelps Press Release Relating to
PowerNet
M - Standard & Poor's Press Release relating to
ratings' increase
3
<PAGE>
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.
GPU, INC.
JERSEY CENTRAL POWER & LIGHT COMPANY
METROPOLITAN EDISON COMPANY
PENNSYLVANIA ELECTRIC COMPANY
By: /s/ T.G. Howson
T. G. Howson
Vice President and Treasurer
GPU INTERNATIONAL, INC.
By: /s/ B.L. Levy
B. L. Levy
President
Date: November 5, 1997
EXHIBITS TO BE FILED BY EDGAR
2. By filing the following additional exhibits in Item 6 thereof:
J - GPU News Release, dated October 12, 1997.
L-1 - Standard & Poor's Press Release relating to
PowerNet
L-2 - Moody's Press Release relating to PowerNet
L-3 - Duff & Phelps Press Release Relating to
PowerNet
M - Standard & Poor's Press Release relating to
ratings' increase
EXHIBIT J
NEWS RELEASE
Date: October 12, 1997
Further Info.: Gary D. Plummer 610-921-6636/Pager 888-510-7067
Ray E. Dotter 610-921-6814/Pager 717-237-8313
For Release: Immediate
Release No.: 83-97
GPU ANNOUNCES ACQUISITION OF AUSTRALIAN COMPANY, PLANNED SALE OF
----------------------------------------------------------------
GENERATION ASSETS
-----------------
PARSIPPANY, NJ, Oct. 12 GPU, Inc., announced today that
the Australian State of Victoria has named it the winning bidder
for PowerNet, the state's electrical transmission company. The
purchase price is $1.88 billion US.
GPU, continuing its focus on its core delivery business,
separately announced that it intends to begin a process that
would lead to the sale of up to all of its non-nuclear generation
assets through an auction.
Referring to the Australian purchase, Fred D. Hafer, GPU
chairman, president and CEO, said, "The PowerNet acquisition
further implements our strategy of expanding our ongoing efforts
to grow our core infrastructure business in new markets. The
purchase also better positions GPU to participate further in the
Australian market."
GPU Electric, which is part of the GPU International Group,
will acquire PowerNet's assets early in November. GPU Electric is
the GPU subsidiary that owns 50 percent of Solaris Power in
Australia and 50 percent of Midlands Electricity in the United
Kingdom.
<PAGE>
J. P. Morgan is the financial adviser to GPU. Debt financing
for the acquisition has been arranged through a banking syndicate
led by Chase, Dresdner and J.P. Morgan banks. At closing, equity
funding will be provided through a cash contribution from GPU and
a non-recourse equity loan underwritten by Chase Manhattan Bank.
Because of Victoria's cross-ownership restrictions, GPU
plans to seek to dispose of its 50 percent ownership of Solaris
Power.
PowerNet transmits electricity throughout Victoria and is
interconnected with the neighboring states of New South Wales and
South Australia. It had 1996 revenues of about $215 million.
"We expect the PowerNet acquisition to be accretive to GPU s
earnings in 1998," Hafer said.
GPU also announced today its intention to proceed with the
sale of approximately seven million shares of common stock in
early 1998 with Goldman, Sachs & Co. as lead underwriter. The
sale proceeds will be used to pay down acquisition debt
associated with the Midlands and PowerNet acquisitions.
With reference to the planned generation sale, Hafer said
GPU had been exploring the option of selling the generation
assets owned by its three utility subsidiaries, who do business
as GPU Energy.
"This approach reflects our belief that we must concentrate
on our core business of delivering electricity to customers,
rather than using our resources to expand our generation
capability enough to be a successful competitor in the merchant
generation business," Hafer said.
GPU's fossil and hydro generating facilities, which are
operated by GPU Generation, total about 5,300 megawatts (MW) and
2
<PAGE>
have a book value of about $1.1 billion.
"We believe the generation assets will be able to grow in
the hands of a firm which intends to pursue the generation
segment of the business in our restructured industry," he said.
GPU anticipates that the existing GPU Generation employees
would largely be assumed by the new owner or owners of the
plants, but recognizes that the final determination will depend
on the business needs of the successful buyer.
The process for the sale of non-nuclear generation assets is
expected to take about a year to complete and is subject to
approvals by several state and federal regulatory agencies. GPU
Energy s restructuring filings in Pennsylvania and New Jersey
will have to be amended to reflect this decision. GPU has
retained Goldman, Sachs as its adviser on the asset sale.
Decisions on the future of GPU's nuclear facilities will be
independent of the sale of the fossil and hydro generation, Hafer
said.
GPU previously announced that its Oyster Creek Nuclear
Generating Station was a candidate for sale, early retirement or
continued operation and that the Three Mile Island Unit 1 nuclear
plant was a candidate for sale or continued operation. GPU
recently confirmed the fact that a confidentiality agreement has
been executed with a potential purchaser.
One of the nation's largest electric utility systems, GPU
reported net income of $298 million on operating revenues of
$3.92 billion in 1996.
GPU's three operating utility subsidiaries, Jersey Central
Power & Light, Metropolitan Edison and Pennsylvania Electric, doing
3
<PAGE>
business as GPU Energy, serve nearly two million customers
in Pennsylvania and New Jersey.
The GPU International Group has ownership interests in
electricity distribution and supply businesses in England and
Australia serving about 2.4 million customers; 9 operating
cogeneration plants in North America, totaling 877 MW (of which
GPUI's equity interest is 304 MW); and 12 operating generating
facilities located abroad, totaling 3,750 MW (of which GPUI's
equity interest is 2,270 MW).
GPU Generation, Inc., and GPU Nuclear, Inc., operate and
maintain the GPU companies' non-nuclear and nuclear generation
facilities, respectively. Corporate functions are performed by
GPU Service, Inc.
###
Mr. Hafer and other GPU officers will be available at 1 p.m.
EDT Monday for a conference call for the media. The toll-free
number for US media to dial is 1-888-558-0548. Media outside the
US should call 201-986-0914.
4
EXHIBIT L-1
New York -- (BUSINESS WIRE) -- S&P CreditWire 10/14/97 --
Standard & Poor's today affirmed its ratings on GPU Inc.
subsidiaries Jersey Central Power & Light Co., Metropolitan
Edison Co. and Pennsylvania Electric Co. following the
announcement by GPU that it will purchase PowerNet, the high-
voltage transmission company for the Australia State of Victoria,
for U.S. $1.88 billion.
The outlook on Jersey Central Power and Pennsylvania Electric remains
stable; the outlook on Metropolitan Edison remains positive. GPU will
finance this acquisition initially with $1.405 billion of non-recourse
bank debt, a $425 million bridge equity loan, and $50 million of cash
equity. While this incremental debt load is significant, management
has indicated its intent to pay it down rapidly, principally with the
proceeds from six to seven million new shares of common stock (about
$37 current share price), perhaps issued as soon as early 1998, and
from divesting its fossil and hydro generating facilities. Under
current regulatory requirements, GPU must also sell down to no more
than 20% its 50% ownership interest in Solaris Power, a distribution
company in Victoria. Any net proceeds from this sale would also be
applied against outstanding debt.
The purchase of PowerNet is consistent with GPU's stated strategy of
exiting the higher-risk generation business and focusing on the more
stable transmission and distribution businesses, both domestically and
in mature international markets. Standard & Poor's believes that the
success of this strategy will improve the overall business risk
profile of GPU. PowerNet itself generates a very stable revenue
stream, which varies only marginally with usage. This company is
expected to be self- financing with respect to the acquisition-related
debt that will reside on its balance sheet.
RATINGS AFFIRMED
Jersey Central Power & Light Co.
Corp credit rtg BBB+
Sr secd debt BBB+
Pfd stk BBB
Metropolitan Edison Co.
Corp credit rtg BBB+
Sr secd debt BBB+
Sr unsecrd debt BBB
Pfd stk BBB
Pennsylvania Electric Co.
Corp credit rtg A-
Sr secd debt A-
Pfd stk BBB+
EXHIBIT L-2
MOODY'S CONSIDERS DOWNGRADE OF GPU, INC. (Bas2SR.UNSEC.)
AND OPERATING SUBSIDIARIES IN POWERNET ACQUISITION
--------------------------------------------------
Approximately $2.3 Billion of Debt Affected
-------------------------------------------
New York, October 13, 1997 -- Moody's Investors Service has placed the
securities ratings of GPU, Inc. and its operating subsidiaries on
review for possible downgrade following today's announcement that GPU
plans to acquire PowerNet for $1.88 billion. PowerNet is a
high-voltage power network in the Australia State of Victoria.
Ratings under review include:
GPU, Inc.'s Baa2 debentures;
Jersey Central Power & Light Company's (JCP&L) Baa1 first
mortgage, secured medium-term notes and secured pollution control
revenue bonds; Baa2 counterparty rating; (P) Baa1/(P) "baa2" shelf
registration of secured debt/preferred securities; and "baa2"
preferred securities;
Metropolitan Edison Company's (Met-Ed) Baa1 first mortgage,
secured medium-term notes and secured pollution control revenue bonds;
Baa2 counterparty rating; (P) Baa1/(P) "baa2" shelf registration of
secured debt/preferred securities; and "baa2" preferred securities;
Pennsylvania Electric Company's (Penelec) A3 first mortgage,
secured medium-term notes and secured pollution control revenue bonds;
Baa1 counterparty rating; "baa1" preferred securities; and (P)"baa1"
shelf registration of preferred securities;
However, JCP&L's Met-Ed's and Penelec's Prime-2 short term rating for
commercial paper is not under review.
To finance the $1.88 billion proposed acquisition of PowerNet, GPU
plans to borrow $1.405 billion of non-recourse bank debt, and to
secure a $425 million equity bridge loan. GPU will provide a guarantee
for the equity loan upon receiving the Securities and Exchange
Commissions' approval to increase its non-regulated 6investments from
50% to 100% of its consolidated retained earnings. It also plans to
contribute $50 million in common equity and to issue seven million
common shares publicly in early 1998. GPU also intends to divest its
domestic fossil and hydro generating facilities (5,346 megawatts),
currently owned by its three electric operating subsidiaries, as well
as to sell its 50% share in Solaris Power, an electric distribution
utility in Australia. Proceeds from the divestitures and the common
stock sale will be used to refinance debt at GPU's international
subsidiary -- GPU Electric.
<PAGE>
The rating review will consider the final organizational structure
after the divestitures, the financial flexibility of the operating
subsidiaries, and the ability of PowerNet to service significantly
greater debt leverage under GPU's ownership.
GPU, Inc. is headquartered in Parsippany, New Jersey; PowerNet is
headquartered in the Australia State of Victoria.
2
Exhibit L-3
DCR Reaffirms the Ratings of GPU, Inc. and Subsidiaries
Following Australian Acquisition and Generation
Divestiture Announcements
Chicago (October 13, 1997) -- Duff & Phelps Credit Rating Co. (DCR)
has reaffirmed the ratings of the fixed income securities of GPU, Inc.
(GPU), Jersey Central Power and Light (JCPL), Metropolitan Edison
(MetEd) and Pennsylvania Electric (Penelec) following GPU's
announcements regarding the acquisition of PowerNet, the owner of the
existing high-voltage transmission grid in Victoria, Australia, and
the company's intent to sell its fossil and hydro generation assets.
GPU announced that, through its subsidiary, GPU Electric, it will
acquire PowerNet in November 1997 for US$1.88 billion. PowerNet owns
and maintains the high-voltage electricity transmission grid in
Victoria. PowerNet has a low business-risk profile with highly
predictable revenues; rates are demand-based with a revenue cap over
the current five-year regulatory period until 2002. The acquisition of
PowerNet will require GPU to sell its interest in Solaria Power, an
Australian distribution business (book value US$50 million) within six
months.
GPU also formally announced its decision to sell its fossil and hydro
generating facilities owned by its U.S. utility operating
subsidiaries. The net book value of these plants is approximately $1.1
billion, and the divestiture is expected to take up to a year to
complete. In addition, the company is continuing to pursue the sale of
Three Mile Island 1 with a potential purchaser and is considering the
sale or early retirement of its Oyster Creek Nuclear Generating
Station. The company's successful exit from electric generation will
greatly improve the business-risk profile of each utility subsidiary
and that of GPU. The sale of the generation assets will also help
identify the level of stranded costs under the subsidiaries'
restructuring proceedings.
The PowerNet acquisition will be initially financed through
non-recourse project debt (US$1.4 billion), a non-recourse equity
bridge loan (US$425 million) and GPU equity (US$50 million). The
equity bridge loan will be guaranteed by GPU upon approval of the SEC
of GPU's application to increase its investment in GPU International
Group from 50 percent to 100 percent of retained earnings; GPU expects
to receive SEC approval by yearend 1997.
The acquisition will further temporarily increase GPU's already
leveraged capital structure. DCR's reaffirmation is predicated on
the expectation the PowerNet equity bridge loan and the Midlands
equity bridge loan will be repaid in a timely manner from the
proceeds of the sale of generating assets, the issuance of
7 million shares of GPU common stock and the sale of Solaris Power.
GPU also expects it will be able to issue transition bonds to
securitize stranded costs at JCPL, MetEd and Penelec. DCR expects
<PAGE>
a greater portion of the proceeds will be used to retire debt
and improve the consolidated equity capitalization at GPU. The
inability to return leverage to preacquisition (i.e. Midlands and
PowerNet) levels could pressure credit quality.
The acquisition of foreign transmission assets follows GPU's ongoing
strategy of growing its infrastructure businesses both domestically
and internationally. Although temporarily leveraging, DCR views the
acquisition of PowerNet positively from a business risk standpoint as
the addition of a relatively stable stream of cash flow to GPU's
growing international portfolio helps to diversify and reduce business
risk. Furthermore, the divestiture of generation assets will improve
the business-risk profile of its domestic operations. The combination
of these activities clearly demonstrates GPU's commitment to lowering
business risk and improving the capitalization of GPU and its
operating subsidiaries.
DCR currently rates GPU and it subsidiaries as follows:
GPU Senior Unsecured Debt BBB+
JCPL First Mtge Bonds/Sec. MTNs BBB+
Mnthly Inc. Pfd. Securities BBB
Preferred Stock BBB
Commercial Paper D-2
MetEd First Mtge Bonds/Sec. MTNs A-
Mnthly Inc. Pfd. Securities BBB+
Preferred Stock BBB+
Commercial Paper D-1-
Penelec First Mtge Bonds/Sec. MTNs A-
Collateralized PCRBs A-
Mnthly Inc. Pfd. Securities BBB+
Preferred Stock BBB+
Commercial Paper D-1-
GPU is a utility company that wholly owns three electric utility
operating subsidiaries, JCPL, MetEd and Penelec, which serve customers
in New Jersey and Pennsylvania. GPU also owns GPU International, GPU
Electric and GPU Power, which collectively develop, own and operate
power and distribution facilities in the U.S. and abroad.
DCR Contacts: Jason T. Todd Daniel R. Kastholm, CFA
(312) 368-3217 (312) 368-2070
[email protected] [email protected]
2
EXHIBIT M
STANDARD & POOR'S REVISES RATINGS
OF UTILITY FIRST MORTGAGE BONDS
-------------------------------
[Dated October 20, 1997]
Standard & Poor's has incorporated into its ratings of corporate
issues a more vigorous analysis of ultimate recovery potential to
supplement the analysis of default risk. This is consistent with the
policies recently established for all secured debt. The incorporation
of ultimate recovery risk is particularly important for ratings of
electric, gas and water utility first mortgage bonds, general and
refunding bonds, or otherwise-designated senior secured debt. If, in
Standard & Poor's analytical conclusion, full recovery of principal
can be anticipated in a post-default scenario-albeit delayed -- an
issue's rating may be enhanced one or two notches above the corporate
credit rating (CCR), or default rating. (Please refer to the attached
list.) Until now, a utility's first mortgage bond rating has been
determined by the CCR.
For highly-rated issuers, the probability of default is low, so the
relevance of post-default recovery and, consequently, its weighting in
the analysis are relatively small. In these cases, it would be unusual
to find first mortgage bonds enhanced by a rating of more than one
notch above the CCR.
First mortgage bondholders benefit from a first position priority lien
on substantially all of the utility's property and franchises owned or
thereafter acquired. Besides the asset protection, the mortgage
indenture contains a fairly restrictive covenant package, including a
limitation on the issuance of additional secured bonds based on
interest coverage and debt level tests.
The extent of any enhancement of a utility's first mortgage bond
rating depends on collateral values relative to the maximum amount of
first mortgage bonds that may be outstanding at any one time under the
terms of the indenture (more specifically, the bonding ratio and
retired bond credit mechanisms). Because the outcome for creditors
going into the workout process is ultimately a function of the value
of their collateral, developing a sense of this value acts as an
appropriate proxy for just how well the creditors are secured.
The analysis does not attempt to specifically predict the ultimate
outcome of any bankruptcy proceeding. Rather, the recovery risk
profile is established by assessing the characteristics of various
types of utility assets used as collateral: electric generation,
transmission, distribution, gas transmission and distribution, water,
etc. Higher collateral coverage levels increase confidence that asset
values will cover the secured debt.
Utility assets are vested with a particular value because of the
fundamental role that they perform in the health of all phases of
the economy, especially the transmission and distribution delivery
system infrastructure. There is an inherent value in these assets
<PAGE>
that is largely independent of the owner's financial condition.
Therefore, in stressing asset values, Standard & Poor's is more
liberal in its attribution of collateral value to the electric, gas
and water delivery assets than to production assets. Furthermore,
distinctions are made to differentiate companies on the basis of the
relative efficiency of their nonnuclear generating plants, as measured
by total variable production costs. Nuclear assets are given zero
collateral value.
Standard & Poor's will address the appropriateness of an upgrade for
any company whose first mortgage bond rating is on CreditWatch with
negative implications at the time that the CreditWatch listing is
resolved. Also, there may be companies that are excluded from the list
because of indenture and collateral information that is insufficient
to make an ultimate recovery decision.
All CCRs and outlooks of the following companies are affirmed.
Standard & Poor's will maintain ongoing surveillance regarding the
issue ratings.
SENIOR SECURED DEBT RATING REVISIONS(*)
Electric Utilities To From
------------------ -- ----
...
Jersey Central Power & Light Co. A- BBB+
...
...
Metropolitan Edison Co. A- BBB+
...
...
Pennsylvania Electric Co. A A-
...
----------
* [Ratings of other issues have been omitted from this Exhibit.]
