Post-Effective Amendment No. 12 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 S.L. Guibord, Esq., Secretary
M. J. Connolly, Esq., Assistant Jersey Central Power & Light
General Counsel Company
GPU Service, Inc. Metropolitan Edison Company
100 Interpace Parkway Pennsylvania Electric Company
Parsippany, New Jersey 07054 P.O. Box 16001
Reading, Pennsylvania 19640
Wendy S. Greengrove, Secretary Douglas E. Davidson, Esq.
GPU International, Inc. Berlack, Israels & Liberman LLP
One Upper Pond Road 120 West 45th Street
Parsippany, New Jersey 07054 New York, New York 10036
_________________________________________________________________
(Names and addresses of agents for service)<PAGE>
GPU, GPUI, EI Services, JCP&L, Met-Ed, Penelec and GPUS
hereby post-effectively amend the Application on Form U-1, docket
in SEC File No. 70-8593, as heretofore amended, as follows:
1. By amending subparagraphs M(1)(a), (b), (c), (d) and
(e) of Post-Effective Amendment No. 10 to read in their entirety
as follows:
(a) Aggregate investments in Exempt Entities in amounts
up to 100% of GPU's "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 March 31, 1997. For example,
investments in this amount would be equal to only 29% of
GPU's total capitalization ($7.3 billion); 33% of
consolidated net utility plant ($6.3 billion); and 19% of
total consolidated assets ($11.0 billion).
(b) GPU's consolidated retained earnings have grown on
average approximately 4.7% per year over each of the
previous five years. Excluding certain non-recurring
charges to income,(2) consolidated retained earnings
increased $132 million from 1994 to 1995, a 7.4% increase;
and by $139 million for the year ended December 31, 1996, a
7.3% increase.
_________________________
2 Consolidated retained earnings have been adjusted to exclude
the following non-recurring items: net decrease in 1994
earnings of $164.7 million (after-tax), due to write-off of
certain future TMI-2 retirement costs ($104.9 million),
charges for costs related to early retirement programs
($76.1 million), write-off of Penelec s OPEB costs not
probable of recovery in rates ($10.6 million) and net
interest income from federal income tax refund ($26.9
million); a 1995 reversal of $104.9 million for TMI-2
retirement costs and charge of $8.4 million (after-tax) of
TMI-2 monitored storage costs deemed not probable if
recovery in rates; and a net decrease in 1996 earnings due
to charges related to costs for early retirement programs
($74.5 million).
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(c) Taken together with the credit strength of the
Operating Companies (which are presently rated at the
equivalent of BBB+ or higher by the three major credit
rating agencies), GPU's actual consolidated capitalization
and interest coverage ratios for 1996 are well within
industry ranges set by independent debt rating agencies for
BBB+ rated companies, as shown below:
Actual 1996 Capitalization and Interest Coverage Ratios
(Excluding Non-Recourse Project Debt):
Total Debt/Capital 50.3%
EBIT/Total Interest (times) 3.48
Operating Income/Interest (times) 3.29
1996 Industry Ratios for BBB+ Rated Investor-Owned
Utilities*
High Average Low
Total Debt/Capital 63.7% 51.3% 42.5%
EBIT/Total Interest (times) 4.92 3.35 2.51
Operating Income/Interest (times) 4.84 3.29 2.32
____________
*Source: Computed using Bloomberg's financial database.
(d) There is no indication that GPU's ability to raise
common equity has been adversely affected by investments in
Exempt Entities. In fact, just the opposite appears to be
true, relative to the rest of the industry. GPU sold an
aggregate of 5,000,000 shares of common stock during 1995
(excluding shares sold through its Dividend Reinvestment
Plan), with net proceeds (average of $31.51 per share) being
well above the then net book value per share of GPU's common
stock (average of $24.44), resulting in average market-to-
book ratios of 129%. The market's assessment of GPU's
future growth and earnings also compared favorably to other
electric utility issuers in the 1994 to 1996 time frame.
This can be shown by comparison of price-earnings and
market-to-book ratios, both of which were in line with the
electric utility industry averages in that period. These
measures indicate investor confidence in GPU's ability to
deliver shareholder value.
Twelve Months
1994 1995 1996 Ended 3/31/97
P/E Ratio:
GPU (3) 9.2 11.5 10.9 9.2
Electric 11.8 12 12.2 11.8
Industry*
__________________
3 Excludes effect of non-recurring charges discussed in note 2
above.
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Market-to-Book Ratio:
GPU 118% 138% 133% 121%
Electric 133% 137% 145% 140%
Industry*
____________
*Source: Historical - Compustat Electric Utilities Database.
Current - Utility Focus, Regulatory Research Associates, Inc.
(e) In recent years, GPU's dividend payout policy has
been more conservative than that of the industry as a whole.
Thus, GPU's dividend payout ratio (percentage of earnings
paid out in dividends), has consistently been below the
electric utility industry average. The implication of a
relatively conservative payout policy is that GPU's earnings
are more than adequate to cover current dividend levels and
to support the growth in dividend levels needed to attract
common stock investors, while continuing to strengthen the
equity base through retained earnings growth.
12(4)
Months
Ended
1993 1994(4) 1995(4) 1996(4) 3/31/97(4)
GPU Payout Ratio (%) 62.4 62.2 62.7 62.2 56.2
Electric Industry* 78.6 81.4 81 75 75
*Source: Historical - Compustat Electric Utilities Database.
1995 and 1996 - Merrill Lynch & Co., Utility Data Sheet
2. By amending subparagraphs M (2)(b),(c) and (e) of Post-
Effective Amendment No. 10 to read in their entirety as follows:
(b) Debt (including short-term debt) ratios of the
Operating Companies have been and continue to be consistent
with industry averages for BBB+ rated electric utilities.
The current industry average for BBB+ rated electric
utilities is 53%*.
Debt as % of 1992 1993 1994 1995 1996
Capitalization
JCP&L 44% 46% 46% 41% 43%
Met-Ed 42% 47% 44% 44% 45%
Penelec 47% 48% 48% 46% 47%
__________
*Source: An industry average-calculated using Merrill Lynch
& Co., Utility Data Sheet - Electric and Combination
Utilities Companies.
__________________
4 Excludes non-recurring charges described in note 2 above.
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Debt levels of the Operating Companies are projected to
remain in the low-to mid-40% range through the year 2000.
(c) Additional investments in Exempt Entities will not
have a negative impact on the Operating Companies' ability
to fund operations and growth. Over the past five years,
the Operating Companies have funded substantially all of
their construction expenditures from internal sources of
cash and from sales of senior securities and other
borrowings. The only significant equity infusion by GPU in
the Operating Companies over the last five years was made in
1995 ($120 million). Present projections indicate that GPU
will not have to make any significant equity investment in
any Operating Company for at least the next five years.
Operating Companies - Construction Expenditures:
Actual (1992-1996) and projected 1997 expenditures, net of
Allowance for Funds Used During Construction ($ million):
1992 1993 1994 1995 1996 1997*
$460 $490 $578 $461 $391 $395
___________
* Estimated
Percent internally generated:
1992 1993 1994 1995 1996
76% 69% 73% 80% 75%
GPU presently estimates that for 1997 and 1998 the cash flow
from operations and proceeds from the sale of senior
securities will be sufficient to fund expected construction
expenditures.
(e) The senior securities of the Operating Companies
are presently rated at an equivalent of BBB+ or higher by
the three major credit rating agencies. The Operating
Companies' bond ratings have been BBB+ or higher as set by
the major rating agencies for the last five years. The
Operating Companies continue to show strong financial
statistics as measured by the rating agencies (pre-tax
interest coverage, debt ratio, funds from operations to
debt, funds from operations to interest coverage, and net
cash flow to capital expenditures).
Bond Rating: 1993 1994 1995 1996 Current
JCP&L A- BBB+ BBB+ BBB+ BBB+
Met-Ed A- BBB+ BBB+ BBB+ BBB+
Penelec A A- A- A- A-
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As of March 31, 1997, mortgage indenture earnings
coverages for the Operating Companies range from about 4.0x
to 4.9x, in each case well above the required coverages of
2.0x necessary to issue additional first mortgage bonds.
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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 UNDERSIGNED
THEREUNTO DULY AUTHORIZED.
GPU, INC.
JERSEY CENTRAL POWER & LIGHT COMPANY
METROPOLITAN EDISON COMPANY
PENNSYLVANIA ELECTRIC COMPANY
GPU SERVICE, INC.
By:/s/ T. G. Howson
T. G. Howson
Vice President and Treasurer
GPU INTERNATIONAL, INC.
EI SERVICES, INC.
By: /s/ B. L. Levy
B. L. Levy
President
Date: July 1, 1997
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