Post-Effective
Amendment No. 1 to
SEC File No. 70-7607
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM U-l
APPLICATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 ("Act")
GPU, INC. ("GPU")
300 Madison Avenue
Morristown, New Jersey 07962
(Name of company filing this statement and address of principal executive
office)
Terrance G. Howson, Douglas E. Davidson, Esq.
Vice President and Treasurer Berlack, Israels & Liberman LLP
Mary A. Nalewako, Secretary 120 West 45th Street
Michael J. Connolly, Esq. New York, New York 10036
Vice President - Law
GPU Service, Inc.
300 Madison Avenue
Morristown, New Jersey 07962
(Names and addresses of agents for service)
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GPU hereby post-effectively amends its Application on Form U-1,
docketed in SEC File No. 70-7607, as follows:
A. By Order dated March 30, 1989 (HCAR No. 24851) (the "1989
Order"), the Commission authorized GPU to, among other things, issue, through
December 31, 1998, and subsequently to reaquire, up to 40,000(1) shares of GPU
common stock, $2.50 par value ("Common Stock"), under a Restricted Stock Plan
for Outside Directors ("Plan").(2) GPU now requests that such authorization be
extended until December 31, 2008. In all other respects, the transactions as
heretofore authorized by the Commission would remain unchanged. Through December
31, 1998, a total of 27,100 shares had been issued to directors under the Plan.
B. The Common Stock to be issued under the Plan will be from
authorized and unissued shares, and will be subject to certain restrictions.
Under the Plan, all members of GPU's Board of Directors ("Board") who are not
employees of GPU or any of its subsidiaries ("Outside Directors") would be
eligible to receive shares of GPU Common Stock in addition to the annual
retainer, committee fees and benefits under any other then-existing applicable
benefits plan, as further compensation for their service as members of the
Board. The Plan is administered by a Committee ("Committee"). The stated purpose
of the Plan is to enable GPU to attract and retain persons of outstanding
competence to serve on its Board by paying such persons a portion of their
compensation in GPU Common Stock pursuant to the terms of the Plan.
C. Under the Plan, an Outside Director may not sell, exchange,
transfer, pledge, hypothecate, or otherwise dispose of shares of Common Stock
awarded under the Plan during the period commencing with the date of an award
and continuing until
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(1) The 1989 Order initially authorized the issuance and reaquisition of 20,000
shares. On May 29, 1991, however, GPU effected a two-for-one stock split.
(2) Additionally, by Order dated February 27, 1997 (HCAR No. 2l6676), the
Commission separately authorized GPU to issue up to an additional 200,000 shares
of Common Stock under a new deferred unit stock plan for payment of a portion of
outside directors' compensation.
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termination of service because of that Outside Director's: (i) death or
disability, (ii) retirement not earlier than the first day of the month
following the director's 72nd birthday, (iii) resignation or retirement before
the first day of the month following the director's 72nd birthday with the
consent of the Board, or (iv) failure to be reelected to the Board after being
duly nominated. Until termination of service, an Outside Director may not
dispose of any shares of GPU Common Stock awarded under the Plan, but has all
other rights of a shareholder with respect to such shares, including voting
rights and the right to receive all cash dividends paid with respect to awarded
shares. Shares of Common Stock held by an Outside Director who fails to satisfy
the above stated conditions will be subject to forfeiture by that Outside
Director and reaquisition by GPU of all shares awarded. GPU therefore also
proposes to reaquire such shares of Common Stock that may be forfeited.
D. Under the Plan, each Outside Director is currently awarded 300
shares of stock annually. Future awards will be determined by the Board only in
accordance with the recommendations of the Committee under the Plan.
E. Rule 53 Analysis.
(a) As described below, GPU meets all of the conditions of Rule 53
under the Act, except for Rule 53(a)(1). By Order dated November 5, 1997 (HCAR
No. 35-26773) (the "November 5 Order"), the Commission authorized GPU to
increase to 100% of its "average consolidated retained earnings," as defined in
Rule 53, the aggregate amount which it may invest in EWGs and FUCOs. At March
31, 1999, GPU's average consolidated retained earnings was approximately $2.219
billion, and GPU's aggregate investment in EWGs and FUCOs as approximately
$1.597 billion. Accordingly, under the November 5 Order, GPU may invest up to an
additional $622 million in EWGs and FUCOs as of March 31, 1999.
(i) 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.
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(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;
(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.
(ii) No more than 2% of GPU's domestic public utility subsidiary
employees will render any services, directly or indirectly,
to any EWG or FUCO in which GPU directly or indirectly holds
an interest.
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(iii) Copies of this Post-Effective Amendment are being
provided to the New Jersey Board of Public Utilities
("BPU") 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.(3) In addition, GPU will
submit to each such commission copies of any amendments
to this Application and 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).
(iv) None of the provisions of paragraph (b) of Rule 53 render
paragraph (a) of that Rule unavailable for the proposed
transaction.
(A) Neither GPU nor any subsidiary of GPU having a book value
exceeding 10% of GPU's consolidated retained earnings 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 $2.219 billion)
represented an increase of approximately $36.7 million (or
approximately 1.7%) in the average consolidated retained
earnings for the previous four quarterly periods
(approximately $2.183 billion).
(C) GPU did not incur operating losses from direct or indirect
investments in EWGs and FUCOs in 1998 in excess of 5% of
GPU's March 31, 1999 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 November 5 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).
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(3) Pennsylvania Electric Company ("Penelec"), one of GPU's operating
subsidiaries, is also subject to retail rate regulation by the New York
Public Service Commission with respect to retail service to approximately
3,700 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.
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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 November 5 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 quarterly period for
which financial statement information was evaluated in the November 5 Order,
GPU's consolidated capitalization consisted of 49.2% equity and 50.8% debt. As
stated in the November 5 Order, GPU's June 30, 1997 pro forma capitalization,
reflecting the November 6, 1997 acquisition of PowerNet Victoria, was 39.3%
equity and 60.7% debt.
GPU's March 31, 1999 consolidated capitalization consists of 44.7%
equity and 55.3% debt. Thus, since the date of the November 5 Order, there has
been no adverse change in GPU's consolidated capitalization ratio, which remains
within acceptable ranges and limits as evidenced by the credit ratings of GPU's
electric utility subsidiaries.(4)
GPU's consolidated retained earnings grew on average approximately
4.5% per year from 1992 through 1998. 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.(5)
Accordingly, since the date of the November 5 Order, the
capitalization and earnings attributable to GPU's investments in EWGs and FUCOs
have not had any adverse impact on GPU's financial integrity.
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(4) The first mortgage bonds of GPU's operating subsidiaries, Penelec, Jersey
Central Power & Light Company and Metropolitan Edison Company, are rated A+ by
Standard & Poors Corporation, and A2, Baa1 and A3, respectively, by Moody's
Investor Services, Inc.
(5) As discussed in the November 5 Order, GPU incurred a loss for 1997 from its
investments in EWGs and FUCOs as a result of the windfall profits tax imposed on
Midlands Electricity, plc.
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Reference is made to Exhibit G filed herewith which sets forth GPU's
consolidated capitalization at March 31, 1999 and after giving effect to the
transactions proposed herein. As set forth in such exhibit, the proposed
transactions will not have a material impact on GPU's capitalization or
earnings.
F. The estimated fees, commission and expenses to be incurred in
connection herewith will be filed by further post-effective amendment.
G. GPU believes that the proposed transactions may be subject to
Sections 6(a), 7, 9(a), 10 and 12(c) of the Act and Rule 42 thereunder.
H. No Federal or State commission, other than your commission, has
jurisdiction with respect to the proposed transactions.
I. 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 July 23, 1999. 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 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.
J. The following exhibits and financial statements are filed in Item
6 thereof.
(a) Exhibits
A - GPU, Inc. Restricted Stock Plan for Outside
Directors dated June 4, 1998 - Incorporated by
reference to Exhibit 10-O, 1998 Annual Report on
Form 10-K, SEC File No. 1-6047.
B - Not Applicable.
C - Not Applicable.
D - Not Applicable.
E - Not Applicable.
F-l - Opinion of Berlack, Israels & Liberman LLP -- to
be filed by further post-effective amendment.
F-2 - Opinion of Ryan, Russell, Ogden & Seltzer LLP to
be filed by further post-effective amendment.
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G - Financial Data Schedule -- to be filed by
amendment.
(b) Financial Statements:
1 - None.
Note: GPU Corporate and Consolidated actual and pro
forma financial statements are omitted because
they are not deemed to be material or relevant or
necessary for a proper disposition of the proposed
transactions.
2 - None.
3 - None.
4 - None.
K. The proposed transactions are for the purpose of carrying out the
Applicants' business activities. Consequently, the issuance of an order by your
Commission with respect to the proposed transactions is not a major Federal
action significantly affecting the quality of the human environment.
No Federal agency has prepared or is preparing an environmental
impact statement with respect to the subject transaction. Reference is made to
paragraph H hereof regarding regulatory approvals with respect to the proposed
transactions.
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SIGNATURE
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PURSUANT TO THE REQUIREMENTS OF THE PUBLIC UTILITY HOLDING COMPANY ACT OF
1935, THE UNDERSIGNED COMPANY HAS DULY CAUSED THIS STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
GPU, INC.
By: /s/ T. G. Howson
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T. G. Howson
Vice President and Treasurer
Date: June 16, 1999
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