Post-Effective Amendment No. 22 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")
GPU SERVICE, INC. ("GPUS")
310 Madison Avenue
Morristown, New Jersey 07962
GPU INTERNATIONAL, INC.("GPU International")
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
(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
Assistant General Counsel 120 West 45th Street
GPU Service, Inc. New York, New York 10036
310 Madison Avenue
Morristown, New Jersey 07962
W. S. Greengrove, Secretary S.L. Guibord, Esq.
GPU International, Inc. Secretary
GPU Electric, Inc. Jersey Central Power &
One Upper Pond Road Light Company
Parsippany, New Jersey 07054 Metropolitan Edison Company
Pennsylvania Electric Company
P.O. Box 16001
Reading, Pennsylvania 19640
(Names and addresses of agents for service)
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GPU, GPU International, EI Services, JCP&L, Met-Ed, Penelec and GPUS
hereby amend Post-Effective Amendment No. 20 to their Application on Form U-1,
docketed in SEC File No. 70-8593, as heretofore amended, as follows:
1. By amending paragraph B thereof to read in its entirety as follows:
B. Rule 53 Analysis.
(i) As described below, GPU meets all of the conditions of
Rule 53, except for Rule 53(a)(1). By Order dated November 5, 1997
(HCAR No. 35-26773) (the "100% Order"), the Commission authorized GPU
to increase to 100% of average consolidated retained earnings, as
defined in Rule 53, the aggregate amount which it may invest in EWGs
and FUCOs. At September 30, 1997, GPU's average consolidated retained
earnings was approximately $2,164 million, and at November 6, 1997
(after giving effect to the acquisition of PowerNet Victoria) GPU's
aggregate investment in EWGs and FUCOs was approximately $1,430
million, or 66% of average consolidated retained earnings. Accordingly,
under the 100% Order, GPU may invest up to an additional $734 million
in EWGs and FUCOs. GPU will not utilize the authorization requested
herein for purposes of guaranteeing investments in EWGs or FUCOs (or
any other authorization under Rule 53 which would increase GPU's
aggregate investment in EWGs and FUCOs) if it would result in GPU's
aggregate investment exceeding the limitation set forth in the 100%
Order, without prior Commission authorization.
(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.
<PAGE>
(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 the GAAP; and
(3) GPU directly or through its subsidiaries
undertakes to provide the Commission access to such
books and records and financial statements as the
Commission may request.
(B) For each FUCO or foreign EWG which is a
majority owned subsidiary of GPU:
(1) the books and records for such subsidiary
will be kept in accordance with GAAP;
(2) the financial statements for such
subsidiary will be prepared in accordance with GAAP;
and
(3) GPU directly or through its subsidiaries
undertakes to provide the Commission access to such
books and records and financial statements, or copies
thereof in English, as the Commission may request.
(C) For each FUCO or foreign EWG in which GPU owns
50% or less of the voting securities, GPU directly or through
its subsidiaries will proceed in good faith, to the extent
reasonable under the circumstances, to cause
(1) such entity to maintain books and records
in accordance with GAAP;
<PAGE>
(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, GPU 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 accor dance 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, directly or indirectly,
to any EWG and 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 and the
Pennsylvania Public Utility Commission, the only federal, state or
local regulatory agencies having jurisdiction over the retail rates of
GPU's electric utility subsidiaries.(1)
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1 Pennsylvania Electric Company ("Penelec") is also subject to retail rate
regulation by the New York Public Service Commission with respect to retail
service to approximately 11,300 customers in Waverly, New York served by Waverly
Electric Power & Light Company, a Penelec subsidiary. Waverly Electric's
revenues are immaterial, accounting for less than 1% of Penelec's total
operating revenues.
<PAGE>
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 H and I 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 $2,164 million)
represented an increase of approximately $22 million in the average
consolidated retained earnings for the previous four quarterly periods
(approximately $2,142 million).
(C) 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.
As described above, GPU meets all the conditions of Rule 53(a), except
for clause (1). With respect to clause (1), the Commission determined in the
100% Order that GPU's financing of investments in EWGs and FUCOs in an amount
greater than 50% of GPU's average consolidated retained earnings as otherwise
permitted by Rule 53(a)(1) would not have either of the adverse effects set
forth in Rule 53(c).
<PAGE>
Moreover, even if the effect of the capitalization and earnings of
subsidiary EWGs and FUCOs were considered, there is no basis for the Commission
to withhold or deny approval for the transactions proposed in this Application.
The transactions would not, by themselves, or even considered in conjunction
with the effect of the capitalization and earnings of GPU's subsidiary EWGs and
FUCOs, have a material adverse effect on the financial integrity of the GPU
system, or an adverse impact on GPU's public utility subsidiaries, their
customers, or the ability of State commissions to protect such public utility
customers.
The 100% Order was predicated, in part, upon the assessment of GPU's
overall financial condition which took into account, among other factors, GPU's
consolidated capitalization ratio and the recent growth trend in GPU's retained
earnings. As of June 30, 1997, the most recent period for which financial
statement information was evaluated in the 100% Order, GPU's consolidated
capitalization consisted of 49.2% equity and 50.8% debt. As previously reported,
on November 6, 1997, GPU acquired PowerNet Victoria. GPU's June 30, 1997 pro
forma capitalization, reflecting the PowerNet acquisition, was 60.7% debt and
39.3% equity.
GPU's September 30, 1997 consolidated capitalization consists of 49.5%
debt and 50.5% equity, and GPU's pro forma capitalization as of such date,
giving effect to the PowerNet acquisition, is 59.9% debt and 40.1% equity. Thus,
since the date of the 100% Order, there has been no material change in GPU's
consolidated capitalization ratio, which remains within acceptable ranges and
<PAGE>
limits as evidenced by the credit ratings of GPU's electric utility
subsidiaries.(2)
The authorization requested herein is for an extension of the period
during which GPU may, among other things, issue guarantees, which authorization
was in effect at the time of the issuance of the 100% Order. Furthermore,
inasmuch as such authorization relates to guarantees (which are not recorded on
GPU's balance sheet), the proposed transactions are not expected to affect GPU's
capitalization ratio. In the event that GPU is required to make payment under
any such guarantee, GPU anticipates that, depending on the amount which it may
be required to fund at any particular time, it would use a combination of debt,
equity and/or internally generated funds.(3)
GPU's consolidated retained earnings grew on average approximately 4.7%
per year from 1991 through 1996. Earnings attributable to GPU's investments
in EWGs and FUCOs have contributed positively to consolidated earnings,
excluding the impact of the windfall profits tax on the Midlands Electricity,
plc investment.(4)
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(2) The debt ratings of GPU's electric utility subsidiaries have not changed
since the issuance of the 100% Order.
(3)GPU is not herein requesting authorization to issue any such debt or equity.
The impact of any such new issuance will be addressed in filings with the SEC
requesting such authorization.
(4) As discussed in the 100% Order, GPU expects to incur a loss for 1997 from
its investments in EWGs and FUCOs as a result of the windfall profits tax
imposed on Midlands Electricity, plc.
<PAGE>
Accordingly, since the date of the 100% Order, the capitalization and
earnings attributable to GPU's investments in EWGs and FUCOs has not had any
adverse impact on GPU's financial integrity. In addition, inasmuch as the
authorization requested herein relates to guarantees (which are not recorded on
GPU's income statement), the proposed transactions are not expected to impact
GPU's earnings.
Reference is made to Exhibit H filed herewith which sets forth GPU's
consolidated capitalization at September 30, 1997 and after giving effect to the
transactions proposed herein.
2. By amending paragraph C of Post-Effective Amendment
No. 20 thereof, to read in its entirety as follows:
The estimated fees, commissions and expenses expected to be
incurred in connection with the proposed transactions will be as
follows:
Legal Fees
Berlack, Israels & Liberman LLP $ 5,000
Ballard Spahr Andrews & Ingersoll 500
Miscellaneous 4,500
TOTAL $10,000
3. By filing the following exhibits in Item 6 thereof:
<PAGE>
Exhibits
F-1(c) - Opinion of Berlack, Israels & Liberman LLP
F-2(c) - Opinion of Ballard Spahr Andrews & Ingersoll
H - GPU Statement of Capitalization and Pro Forma
Adjustments - Filed separately pursuant to a
request for confidential treatment
Financial Statements
1 GPU financial statements are omitted since the
proposed transactions will not have a material
impact thereon.
<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 undersigned thereunto duly authorized.
Dated: December 17, 1997 GPU, INC.
JERSEY CENTRAL POWER & LIGHT COMPANY
METROPOLITAN EDISON COMPANY
PENNSYLVANIA ELECTRIC COMPANY
GPU SERVICE, INC.
By:
T.G. Howson
Vice President and Treasurer
GPU INTERNATIONAL, INC.
EI SERVICES, INC.
By:
B.L. Levy
President
EXHIBIT TO BE FILED BY EDGAR
3. By filing the following exhibits in Item 6 thereof:
Exhibits
F-1(c) - Opinion of Berlack, Israels & Liberman LLP
F-2(c) - Opinion of Ballard Spahr Andrews & Ingersoll
Exhibit F-1(c)
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December 17, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: GPU, Inc. ("GPU")
GPU International, Inc. ("GPUI")
EI Services, Inc.
Jersey Central Power & Light Company
Metropolitan Edison Company
Pennsylvania Electric Company
GPU Service, Inc.
Application on Form U-1
SEC File No. 70-8593
--------------------
Ladies and Gentlemen:
We have examined Post-Effective Amendment No. 18, dated
October 22, 1997, to the Application on Form U-1, dated March 15, 1995, under
the Public Utility Holding Company Act of 1935 ("Act") filed with the Securities
and Exchange Commission ("Commission"), and docketed by the Commission in SEC
File No. 70-8593, as amended by Post-Effective Amendment No. 20, dated November
6, 1997 and as to be amended by Post-Effective Amendment No. 22 thereto, dated
this date, of which this opinion is to be a part. (The Application, as so
amended and as thus to be amended, is hereinafter referred to as the
"Application").
The Application now contemplates, among other things,
extending until December 31, 2000 the period during which GPU may invest in: (I)
one or more subsidiary companies (each, a "Subsidiary Company") which will be
engaged in the business of owning interests in and securities of foreign utility
companies ("FUCOs") and/or exempt wholesale generators ("EWGs") (each, an
"Exempt Entity"), and (ii) Exempt Entities. Such investment by GPU in Subsidiary
Companies and Exempt Entities may take the form of, among other things, direct
investments in Subsidiary Company securities ("Subsidiary Securities"),
guarantees or other similar undertakings ("Guarantees") by GPU entered into to
support obligations of Subsidiary Companies and Exempt Entities, loans evidenced
by promissory notes of Subsidiary Companies ("Subsidiary Company Notes"), and
the assumption of liabilities of Subsidiary Companies and Exempt Entities.
<PAGE>
Securities and Exchange Commission
December 17, 1997
Page 2
In addition to the matters set forth in our previous opinion
dated June 23, 1997 and filed as Exhibit F-1(b) to the Application, we have
examined a copy of the Commission's Order dated November 5, 1997 and Memorandum
Opinion dated November 17, 1997 granting the Application, as then amended. We
have also examined such other documents and made such further investigation as
we have deemed necessary as a basis for this opinion.
We have been counsel to GPU and its subsidiaries for many
years. In that connection, we have participated in various pro ceedings relating
to the issuance of securities by GPU and its subsidiaries, and we are familiar
with the terms of the outstanding securities of the corporations comprising the
GPU holding company system.
We are members of the Bar of the State of New York and do not
purport to be expert in the laws of any jurisdiction other than the laws of the
State of New York and the Federal laws of the United States. The opinions
expressed herein are limited to matters governed by the laws of the State of New
York and the Federal laws of the United States. As to all matters which are
covered by the laws of the Commonwealth of Pennsylvania, we have relied on the
opinion of Ballard Spahr Andrews & Ingersoll which is being filed as Exhibit
F-2(c) to the Application.
We have assumed that (i) each Subsidiary Company will be duly
formed and validly existing in accordance with the respective laws of the
jurisdiction of incorporation of such Subsidiary Company; (ii) at the time of
their issuance and delivery, the Subsidiary Securities, Guarantees and
Subsidiary Company Notes will have been duly authorized, executed and delivered
by the issuer thereof; (iii) the execution, delivery and performance of each
Subsidiary Security, Guarantee and Subsidiary Company Note will not violate any
applicable law or any restriction imposed by any court or governmental body
having jurisdiction over the issuer thereof; (iv) with respect to any Subsidiary
Securities, the issuer will have received consideration therefor at least equal
to the par or stated value (or equivalent amount) of such security; and (v) GPU
and GPUI will comply with the applicable limitations on guarantees and unsecured
debt contained in the credit facilities and guarantees to which they are
subject.
Based upon and subject to the foregoing, and assuming that the
transactions therein proposed are carried out in accordance with the
Application, we are of the opinion that when the Commission shall have entered
an order forthwith granting the Application,
<PAGE>
Securities and Exchange Commission
December 17, 1997
Page 3
(a) all State laws applicable to the proposed
transactions will have been complied with,
(b) GPU is validly organized and existing,
(c) in the case of Subsidiary Securities which constitute
equity securities, such securities will be validly
issued, fully paid and nonassessable,
(d) in the case of (i) Subsidiary Securities which
constitute debt securities, (ii) Subsidiary Company
Notes, and (iii) Guarantees, such instruments will
be valid and binding obligations of the respective
issuers or guarantors thereof in accordance with
their terms, subject to the effect of any
applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance, moratorium or other similar
laws affecting creditors' rights generally and
general principles of equity limiting the avail
ability of equitable remedies,
(e) GPU will legally acquire the Subsidiary Securities
and Subsidiary Company Notes, and
(f) the consummation of the transactions proposed in the
Application will not violate the legal rights of the
holders of any securities issued by GPU or any
"associate company" thereof, as defined in the Act.
We hereby consent to the filing of this opinion as an exhibit
to the Application and in any proceedings before the Commission that may be held
in connection therewith.
Very truly yours,
BERLACK, ISRAELS & LIBERMAN LLP
Exhibit F-2(c)
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December 17, 1997
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Re: GPU, Inc. ("GPU")
GPU International, Inc.
EI Services, Inc.
Jersey Central Power & Light Company
Metropolitan Edison Company
Pennsylvania Electric Company ("Penelec")
GPU Service, Inc.
Application on Form U-1
SEC File No. 70-8593
--------------------
Ladies and Gentlemen:
We have examined Post-Effective Amendment No. 18, dated
October 22, 1997, to the Application on Form U-1, dated March 15, 1995, under
the Public Utility Holding Company Act of 1935 ("Act") filed with the Securities
and Exchange Commission ("Commission"), and docketed by the Commission in SEC
File No. 70-8593, as amended by Post-Effective Amendment No. 20, dated November
6, 1997 and as to be amended by Post-Effective Amendment No. 22 thereto, dated
this date, of which this opinion is to be a part. (The Application, as so
amended and as thus to be amended, is hereinafter referred to as the
"Application").
The Application now contemplates, among other things,
extending until December 31, 2000 the period during which GPU may invest in: (i)
one or more subsidiary companies (each, a "Subsidiary Company") which will be
engaged in the business of owning interests in and securities of foreign utility
companies ("FUCOs") and/or exempt wholesale generators ("EWGs") (each, an
"Exempt Entity"), and (ii) Exempt Entities. Such investment by GPU in Subsidiary
Companies and Exempt Entities may take the form of, among other things, direct
investments in Subsidiary Company securities ("Subsidiary Securities"),
guarantees or other similar undertakings ("Guarantees") by GPU entered into to
support obligations of Subsidiary Companies and Exempt Entities, loans evidenced
by promissory notes of Subsidiary Companies ("Subsidiary Company Notes"), and
the assumption of liabilities of Subsidiary Companies and Exempt Entities.
<PAGE>
Securities and Exchange Commission
December 17, 1997
Page 2
We have acted as Pennsylvania counsel to GPU and Penelec for
many years. In connection with the delivery of this opinion, we have also
examined such documents and made such investigation as we have deemed necessary
as a basis for this opinion.
We have assumed that (i) each Subsidiary Company will be duly
formed and validly existing in accordance with the respective laws of the
jurisdiction of incorporation of such Subsidiary Company; (ii) at the time of
their issuance and delivery, the Subsidiary Securities, Guarantees and
Subsidiary Company Notes will have been duly authorized, executed and delivered
by the issuer thereof; (iii) the execution, delivery and performance of each
Subsidiary Security, Guarantee and Subsidiary Company Note will not violate any
applicable law or any restriction imposed by any court or governmental body
having jurisdiction over the issuer thereof; (iv) with respect to any Subsidiary
Securities, the issuer will have received consideration therefor at least equal
to the par or stated value (or equivalent amount) of such security; and (v) GPU
will comply with the applicable limitations on guarantees and unsecured debt
contained in the GPU revolving credit facility and guaranties to which it is a
party.
Based upon and subject to the foregoing, and assuming that the
transactions therein proposed are carried out in accordance with the
Application, we are of the opinion that when the Commission shall have entered
an order forthwith granting the Application,
(a) all Pennsylvania laws applicable to the proposed
transactions will have been complied with,
(b) GPU is validly organized and existing,
(c) GPU will legally acquire the Subsidiary Securities
and Subsidiary Company Notes, and
(d) the consummation of the transactions proposed in the
Application will not violate the legal rights of the
holders of any securities issued by GPU, Penelec,
Ninevah Water Company, Penelec Capital, L.P. or
Penelec Preferred Capital, Inc.
We hereby consent to the filing of this opinion as an exhibit
to the Application and in any proceedings before the Commission that may be held
in connection therewith.
Very truly yours,
BALLARD SPAHR ANDREWS & INGERSOLL
