Post-Effective Amendment No. 14 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.S. Greengrove, 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 redesignating Post-Effective Amendment No. 12,
filed on July 22, 1997 in this docket, as Post-Effective
Amendment No. 13.
2. By adding the following to the end of the first
paragraph of paragraph I(1)(d)("Financial Risks") of Post-
Effective Amendment No. 10:
As of June 30, 1997, the aggregate amount of non-
recourse debt applicable to Exempt Entities owned
directly or indirectly by GPU was approximately $2.396
billion, of which approximately $1.811 billion is
attributable to GPU's equity interest in such Exempt
Entities.
3. By amending the first two sentences of the tenth
paragraph under the subheading, "4. Midlands Electricity", in
paragraph I of Post-Effective Amendment No. 10, as amended by
Post-Effective Amendment No. 13, to read in their entirety as
follows:
Avon Holdings has borrowed approximately 1.04 billion
UK pounds (US $1.6 billion) through a non-recourse term
loan and revolving credit facility to provide for the
Midlands acquisition. EI UK Holdings, Inc. ("EI UK"),
a special purpose, wholly-owned subsidiary of GPU
Electric, has invested 332 million UK pounds (US$500
million), in Avon Holdings (50% of the equity), which
has been funded through a GPU guaranteed five-year bank
term loan facility.
4. By amending paragraph K of Post-Effective
Amendment No. 10 to read in its entirety as follows:
K. [Intentionally Left Blank.]
5. By amending subparagraph (1) of paragraph L of
Post-Effective Amendment No. 10, as amended by Post-Effective
Amendment No. 12, to read in its entirety as follows:
(1) The average consolidated retained earnings for
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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, 1996 and Quarterly
Report on Form 10-Q for the quarter ended June 30,
1997, as filed under the Securities Exchange Act of
1934, was approximately $2,142 million. As of June 30,
1997, GPU had invested, or committed to invest,
directly or indirectly, an aggregate of approximately
$242 million in EWGs and $712 million in FUCOs,
representing approximately 45% of such average
consolidated retained earnings.
6. By amending subparagraphs (8) and (9) of paragraph
L of Post-Effective Amendment No. 10 to read in their entirety as
follows:
(8) GPU's average consolidated retained earnings
for the four most recent quarterly periods
(approximately $2,142 million) represented an increase
of approximately $28 million (or approximately 1%)
compared to the average consolidated retained earnings
for the previous four quarterly periods (approximately
$2,114 million).
(9) GPU did not incur operating losses from
direct or indirect investments in EWGs and FUCOs in
1996 in excess of 5% of GPU's December 31, 1996
consolidated retained earnings.
7. By amending subparagraph (1)(a) of paragraph M of
Post-Effective Amendment No. 10 to read in its entirety as
follows:
(a) Aggregate investments in Exempt Entities in
amounts up to 100% of GPU "consolidated retained
earnings" would still represent a relatively small
commitment of capital for an enterprise the size of
GPU, based on various key financial ratios at June 30,
1997. For example, investments in this amount would be
equal to only 29.2% of GPU's total capitalization ($7.4
billion); 34.2% of consolidated net utility plant ($6.4
billion); and 19.4% of total consolidated assets ($11.2
billion). As of June 30, 1997, the amount of that
investment would represent about 49.8% of the market
value of GPU's outstanding common stock ($4.3 billion
based on 121 million shares outstanding and a closing
price of $35 7/8 per share).
GPU believes that the price of its common stock,
(as well as the market value of other electric
utilities in the Northeast) has been adversely impacted
by a variety of factors not affecting utilities
in most other parts of the country. In particular,
electric utilities such as GPU are now
undergoing major restructuring and thus
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potential exposure to unrecovered "stranded costs"
resulting from uneconomic generation, overmarket PURPA
power purchase agreements and other regulatory assets.
Indeed, within the last few months, GPU's electric
utilities have filed restructuring plans --
Metropolitan Edison Company and Pennsylvania Electric
Company in Pennsylvania and Jersey Central Power &
Light Company in New Jersey -- with their respective
state commissions identifying stranded assets totalling
about $4.5 billion for which full recovery will
ultimately be sought but is not entirely assured. These
restructuring and stranded cost recovery issues are for
the most part not of significant concern elsewhere
except in California. In addition, as shown, GPU has
over the last 15 years consistently maintained a much
lower dividend payout ratio than the industry average.
GPU believes that these two factors principally account
for the lower market value (and price earnings and
market to book ratios) and thus relatively high
percentage that 100% of its consolidated retained
earnings represents of its market value. At the same
time, however, GPU submits that as the current
uncertainty regarding industry restructuring in the
Northeast is resolved and its already successful EWG
and FUCO investments make further positive
contributions to earnings, that percentage should
become smaller as the market begins to more
appropriately value GPU's inherent future earning
power.
8. By amending subparagraph (1)(c)of paragraph M of
Post-Effective Amendment No. 10, as amended by Post-Effective
Amendment No. 12, to add at the end thereof the following:
GPU's consolidated capitalization ratio as of June 30,
1997 reflected components of 49.2% common and preferred
equity and 50.8% debt (including approximately $443
million of short term debt and $97 million of non-
recourse debt related to Exempt Entities that is
consolidated for financial reporting purposes).(1)
This June 30, 1997 ratio is also within industry ranges
set by independent debt rating agencies for BBB+ rated
companies.
_______________________
1 If non-recourse project debt is excluded, the consolidated
capitalization ratio would be approximately 49.9% equity and
50.1% debt as of June 30, 1997.
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9. By amending the tables relating to price-earnings
ratio and market to book ratio included in subparagraph (1)(d) of
paragraph M of Post-Effective Amendment No. 10, as amended by
Post-Effective Amendment No. 12, to read in its entirety as
follows:
Twelve Months
1994 1995 1996 Ended 6/30/97
P/E Ratio:
GPU(3) 9.2 11.5 10.9 10.4
Electric
Industry* 11.8 12.0 12.2 12.6
Market-to-Book Ratio
GPU 118% 138% 133% 138%
Electric
Industry* 133% 137% 145% 145%
__________
* Source: Historical - Compustat Electric Utilities Database.
Current - Utility Focus, Regulatory Research Associates, Inc.
10. By amending the table included in subparagraph
(1)(e) of paragraph M of Post-Effective Amendment No. 10, as
amended by Post-Effective Amendment No. 12, to read in its
entirety as follows:
12(4)
Months
Ended
1993 1994(4) 1995(4) 1996(4) 6/30/97(4)
GPU Payout
Ratio (%) 62.4 62.2 62.7 62.2 57.3%
Electric
Industry* 78.6 81.4 81.0 75.0 75%
11. By amending the last sentence of subparagraph
(2)(f) of paragraph M of Post-Effective Amendment No. 10, as
amended by Post-Effective Amendment No. 12, to read in its
entirety as follows:
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More recently, in May 1996, the GPU International Group
completed $132.6 million of non-recourse financing for
its 300 MW Mid-Georgia Cogeneration Project and, as a
50/50 partner with Cinergy, acquired Midlands supported
by approximately US$1.6 billion of non-recourse bank
financing.
12. By amending the table relating to construction
expenditures included in subparagraph (2)(C) of paragraph M Post-
Effective Amendment No. 10, as amended by Post-Effective
Amendment No. 12, to read in its entirety as follows:
1992 1993 1994 1995 1996 1997*
$460 $490 $578 $461 $391 $402
___________
* Estimated
13. By amending the last sentence of subparagraph
(2)(e) of paragraph M of Post-Effective Amendment No. 10, as
amended by Post-Effective Amendment No. 12, to read in its
entirety as follows:
As of June 30, 1997, mortgage indenture earnings
coverages for the Operating Companies range from about
4.0x to 4.7x, in each case well above the required
coverages of 2.0x necessary to issue additional first
mortgage bonds.
14. By adding new subparagraph (2)(h) following sub-
paragraph (2)(g) in paragraph M of Post-Effective Amendment No. 10:
(h) GPU has complied, and will continue to comply,
with the requirements of Rule 53(a)(2) concerning
books, records and financial reports of EWGs and FUCOs;
Rule 53 (a)(3), concerning the use of employees of the
Operating Companies to provide services to EWGs and
FUCOs; and Rule 53(a)(4), concerning delivery of copies
of filings to other regulators.
15. By adding the following new subparagraph (1)(g)
after subparagraph (1)(f) in paragraph M of Post-Effective
Amendnemtn No. 10:
(g) To date, revenues and income from Exempt
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Entities have made a positive contribution to GPU's
consolidated revenues and earnings. Apart from the
impact of the windfall profits tax on the Midlands
investment for 1997 (see subparagraph (9) of paragraph
(L), as amended by Post-Effective Amendment No. 13),
GPU expects that this trend will continue.
16. By adding the following to the end of paragraph O
of Post-Effective Amendment No. 10:
GPU represents that it will remain in compliance with
the requirements of Rule 53(a), other than Rule
53(a)(1), at all times during the period of
authorization of this order. GPU also undertakes to
file a post-effective amendment in this docket in the
event that any of the circumstances described in Rule
53(b) should occur during the period. GPU further
undertakes to file certificates pursuant to rule 24
within 60 days after the end of the first three
calendar quarters, and 90 days after the end of the
final calendar quarter, beginning with the quarter
ending September 30, 1997 setting forth:
(1) a computation in accordance with rule 53(a) (as
modified by the Commission's order in this proceeding)
of GPU's aggregate investment in Exempt Entities;
(2) a statement of such aggregate investment as a
percentage of the following: total capitalization, net
utility plant, total consolidated assets, and market
value of common equity, all as of the end of such
quarter;
(3) consolidated capitalization ratios as of the end
of such quarter, with consolidated debt to include all
short-term and non-recourse debt of Exempt Entities to
the extent normally consolidated under applicable
financial reporting rules;
(4) the market-to-book ratio of GPU s common stock at
the end of such quarter;
(5) an analysis of the growth in consolidated retained
earnings which segregates total earnings growth
attributable to Exempt Entities from that attributable
to other subsidiaries of GPU; and
(6) a statement of revenues and net income of each
Exempt Entity for the twelve months ended as of the end
of such quarter.
17. By amending paragraph R of Post-Effective
Amendment No. 10 to read in its entirety as follows:
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It is further requested that upon the effectiveness of
the authorization herein sought, the following
Commission orders be amended to permit the transactions
therein authorized notwithstanding the increase in the
Investment Cap to 100% of GPU's consolidated retained
earnings: Docket No. 70-8877, HCAR No. 35-26591 (Oct.
10, 1996); Docket No. 70-8369, HCAR No. 35-26419 (Nov.
28, 1995); Docket No. 70-7926, HCAR No. 35-26544 (July
17, 1996); and Docket No. 70-7727, HCAR No. 35-26409
(Nov. 16, 1995).
18. The following additional exhibit if filed in Item
6 hereof:
(a) Exhibits:
F-3 - GPU Capitalization Summary as of June
30, 1997
I - Revised Capitalization and pro forma
Capitalization Ratios -- to be filed
under request for confidential treatment
pursuant to Rule 104
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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.
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: August 11, 1997
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EXHIBIT TO BE FILED
18. The following additional exhibit if filed in Item
6 hereof:
(a) Exhibits:
F-3 - GPU Capitalization Summary as of June 30,
1997
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EXHIBIT F-3
GPU CAPITALIZATION
June 30, 1997
$ Millions Percentage
Debt:
First Mortgage Bonds $2,513
Other Long-Term Debt 815
Short-Term Debt 443
$3,771 50.8%
Preferred:
Stock $ 171
Securities 330
$ 501 6.7%
Common Equity:
Common Stock $ 314
Reacquired Common Stock (84)
Capital Surplus 754
Retained Earnings 2,172
$3,156 42.5%
Total Capitalization $7,428 100.0%
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