SEC File No.70-
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")
300 Madison Avenue
Morristown, New Jersey 07960
(Name of company filing this statement and addresses
of principal executive offices)
GPU, INC.
(Name of top registered holding company parent of applicants)
T. G. Howson, Douglas E. Davidson, Esq.
Vice President and Treasurer Berlack, Israels & Liberman LLP
S. L. Guibord, Secretary 120 West 45th Street
GPU Service, Inc. New York, New York 10036
300 Madison Avenue
Morristown, New Jersey 07960
D. C. Brauer
Vice President
GPU Service, Inc.
300 Madison Avenue
Morristown, New Jersey 07960
(Names and addresses of agents for service)
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ITEM 1. DESCRIPTION OF PROPOSED TRANSACTIONS.
A. GPU proposes to organize a new, wholly-owned subsidiary
company, ("Newco"), as a Delaware corporation whose initial purpose will be to
acquire from time to time limited partner interests in EnerTech Capital Partners
II, L.P., a Delaware limited partnership formed pursuant to an Agreement of
Limited Partnership ("Partnership Agreement"), and any successor or affiliated
limited partnership having substantially similar investment objectives and terms
(EnerTech Capital Partners II, L.P. and all such successor or affiliated limited
partnerships are herein collectively referred to as the "EnerTech Partnership").
The aggregate amount of such investments in the EnerTech Partnership will not
exceed $5 million.(1)
B. The targeted size of the EnerTech Partnership's investment
pool is $100 million, with a minimum commitment of $30 million necessary for an
initial closing (the "Initial Closing"). Additional commitments may be added
until the investment pool reaches a maximum not to exceed $150 million, unless
otherwise approved by a majority in interest of the Limited Partners. The
interests to be acquired by Newco will in the aggregate represent not more than
9.9% of the Limited Partner interests in any EnerTech Partnership.
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1 GPU has previously received Commission approval for investing in
a similar investment fund focusing on environmental technologies.
General Public Utilities Corporation, et al., HCAR No. 35-26230
(File No. 70-8537) (February 8, 1995).
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C. The sole general partner of the EnerTech Partnership
("General Partner") will be ECP II Management L.P., a Delaware limited
partnership of which EnerTech Capital Partners II LLC is the managing general
partner. The EnerTech Partnership fund will be managed by EnerTech Capital
Partners ("EnerTech"), a group of experienced investment professionals
associated with Safeguard Scientifics, Inc. and TL Ventures. The EnerTech
Partnership fund is the second fund managed by EnerTech. Its first fund was
formed in 1996 with $50,000,000 of capital and is currently invested in twelve
companies.
1. Investment Objectives
The EnerTech Partnership is being formed to invest in
companies (each a "Portfolio Company") engaged in activities primarily related
to the electric and natural gas utilities and their convergence into the broader
energy, communications and other utility-like services industries. The EnerTech
Partnership's objective is to deliver superior investment returns to the Limited
Partners by making private equity investments in companies benefiting from the
deregulation and convergence of the electric utility, communications and energy
marketplace. The EnerTech Partnership will invest in companies (none of which
will be an affiliate of GPU) engaged in the development of technologies in one
or more of the categories set forth below.
a. Information Technology and Systems Integration.
Continuing advances in information technology ("IT")
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will play a significant role in the restructuring of the deregulated marketplace
and will present significant opportunities for superior investment returns
resulting from the application of these technologies to the changes in that
marketplace. Traditionally, many of the IT applications and systems in the
utility industry have been internally developed, resulting in long development
cycles with little flexibility and significant expense. Today, the utilities'
increasing reliance on IT solutions for competitive advantage is resulting in a
commensurate increase in the use of off-the-shelf solutions. The EnerTech
Partnership's fund managers expect to see a proliferation of new companies
focused on innovative IT solutions and services for this market. The fund
managers are focusing their attention on enterprise software and networking, CIS
(customer information system) and billing applications, data mining and analysis
tools, systems integration and support, and the transition to interactive
e-commerce platforms. Other examples include transmission scheduling and sales,
transaction and risk management and energy trading systems.
b. Communications and Networking.
The evolution of the IT-enabled enterprise combined with
the convergence of energy and telecommunications services provides the EnerTech
Partnership with significant investment opportunities in communications and
networking. Given the utilities' significant size, financial strength and their
near-ubiquitous rights-of-way, the impact of utilities as both service providers
and consumers of communications services is substantial.
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The fund managers are focused on enabling technologies for
utility enterprise communications and also on the applications of e-commerce to
the utilities and their customers. Utilities are expected to look to e-commerce
applications to cut costs, enhance customer service, improve system
capabilities, better manage their assets, improve marketing capabilities and
retain customers. Interactive communications represent an opportunity for
utilities to gather valuable information on consumer demographics and
preferences and to integrate this information with real-time pricing and on-line
analytical processing tools to develop new product and sales strategies.
The EnerTech Partnership investment opportunities in
communications are expected to include fixed communication and data networks,
building automation and controls, integration of voice and data networks, remote
connectivity, supply chain and managed infrastructure applications.
c. Customer Premise Products and Services.
As utilities search for new ways to retain and serve
their current customer base, the demand for innovative and competitive offerings
will increase. In order to retain and attract their most valuable asset,
utilities are actively seeking new products and services to bind them to their
existing customers. Bundled offerings increase the "switching" costs for
customers, thus providing a greater barrier to entry for competitors. In
addition, a competitive, multi-service offering will allow utilities to attract
new customers in a given service area and to compete in newly opened markets.
Many of these
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products and services will be offered by new entrants, providing opportunities
for entrepreneurial companies to compete directly or to "private-label" their
products and services into the home, office and industrial markets.
Similar to the trends coming out of the deregulation of the
telephone industry, there has been a proliferation of new technologies, products
and services available to the utility customer. Examples include digital home
networks, electronic security alarm monitoring services, power quality and
efficiency devices, demand-side management tools, other energy conservation
devices and distributed generation technologies. The EnerTech Partnership's fund
managers expect to invest in companies developing new technologies and services
as well as in more traditional later stage opportunities, where economies of
scale and utility branding can leverage the EnerTech Partnership's
participation.
Consumer premise products and services represent one of the
largest opportunities for the EnerTech Partnership's fund managers to leverage
their experience for the benefit of the EnerTech Partnership's investments in
emerging companies and new technologies. Selling to the utility or creating
substantive business relationships requires a fundamental understanding of the
utility business model and decision making process. The domain expertise and
relationships with utilities of the EnerTech Partnership's fund managers
provides a distinct advantage for investments in this area.
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d. Industry Specific Content and Consulting Services.
Industries undergoing rapid and fundamental change
invariably require greater amounts of information and assistance from industry
specific service providers. Utility expenditures in 1998 for consulting
services, research and industry specific information are estimated to be $3
billion and are expected to grow dramatically as deregulation continues. The
fund managers are proactively looking to invest in companies taking advantage of
this growing need for timely and focused information and are pursuing
opportunities in consulting, publishing, research and information management
services.
e. Asset Utilization and Efficiency Improvement.
Many of today's utility infrastructure systems and equipment are based on
technologies designed and created in the mid-1990s. Furthermore, the systems
were designed and built for the purpose of providing "safe and reliable"
service. Since profits were based on the level of capital investment, this
historic focus on "safe and reliable" service resulted in redundant systems and
conservative engineering specifications. Many utilities are increasingly focused
on the optimal deployment of their infrastructure and are exploring strategies
that allow them to leverage their sizeable investments in fixed assets to
improve overall profitability.
As a result, a large market exists for companies that can
help utilities better utilize and increase the return on their
existinginfrastructure. These are technologies and services that
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improve the efficiency, speed, accuracy and flexibility of the utilities'
physical infrastructure. Today, these assets include power plants,
communications networks, transmission and distribution systems, rights-of-way
and even the utility's substantial base of human resources.
Products and technologies that fall into this category
include power plant performance software and systems, distribution system
automation, automated mapping and facilities management, supervisory control and
data acquisition, system forecasting applications and work force management
tools. Additional services that can leverage the utility delivery infrastructure
include outage detection/notification, surge protection, power quality
monitoring, security monitoring, hazard detection, appliance monitoring,
electronic bill payment, messaging and many others.
In addition to the primary areas identified above, the
fund managers also expect to pursue investment opportunities arising out of the
utilities' response to increased competition and the resulting reduction in
margins. To counter these trends, utilities will focus on reducing costs and
increasing the operating performance of their generation and distribution
assets. Areas of expected interest will include alternative generation
technologies, power quality improvements, environmental remediation processes,
emission controls and waste disposal technologies.
2. Partnership Agreement.
The term of the EnerTech Partnership will commence on the
date of the execution of the Partnership Agreement and will
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continue until December 31, 2009. The General Partner may extend the term for up
to two one-year periods to permit the orderly liquidation of the EnerTech
Partnership's assets, upon written consent of the Limited Partners holding a
majority in interest of the commitments of all Limited Partners. (Partnership
Agreement, Sec. 1.4). The Partnership Agreement provides that, not later than
the date of becoming a Limited Partner, each Limited Partner must contribute to
the capital of the EnerTech Partnership up to 5% of the capital commitment of
such Limited Partner. Thereafter, contributions will be made upon fifteen (15)
days' notice, in increments necessary to fund investments and operating
expenses, up to a maximum of 20% of total commitments being contributed per
request. The General Partner will contribute an amount equal to 1.0% of the
total capital commitments of all Limited Partners. The General Partner will make
its capital commitments pari passu with the capital contributions of the Limited
Partners.
In addition, the General Partner, without the prior approval
of a majority in interest of the Limited Partners, may not cause or permit the
EnerTech Partnership to invest more than 15% of the EnerTech Partnership's total
capital commitments in the securities of any single Portfolio Company.
(Partnership Agreement, Sec. 1.7(b)).
Subject to certain limitations set forth in the Partnership
Agreement, the management, operation and implementation of policy of the
EnerTech Partnership will be vested exclusively in the General Partner.
(Partnership Agreement, Sec. 2.1(a)). The General Partner may delegate certain
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of its authority to an investment manager ("Investment Manager") pursuant to an
Investment Management Agreement. In addition, at the request of the General
Partner, a Limited Partner may provide advisory services to a Portfolio Company.
The EnerTech Partnership has an advisory board ("Advisory
Board") comprised of business leaders, professional advisors and industry
visionaries. Under the terms of the Partnership Agreement, the General Partner
may remove any member of the Advisory Board at any time, and may appoint new or
additional members from time to time. The Advisory Board will assist the General
Partner in evaluating potential investments and provide such other services as
the General Partner may from time to time request, but will have no authority to
bind the EnerTech Partnership or take part in its management. (Partnership
Agreement, Sec. 2.8).
The EnerTech Partnership will also have a valuation committee
("Valuation Committee"), which will consist of three representatives of the
Limited Partners, designated by the General Partner and approved by a majority
in interest of the Limited Partners. The Valuation Committee, among other
things, approves all valuations of securities by the General Partner and settles
all conflict of interest situations. Approval of the Valuation Committee will be
by a majority vote.
The Investment Manager will serve as the management company of
the EnerTech Partnership. The Investment Manager will be EnerTech Management
L.L.C., a Delaware limited liability company. All of the individual members of
the General Partner's
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managing general partner will be officers of the Investment Manager. The
Investment Manager will be responsible for identifying acquisition
opportunities, structuring and negotiating the terms of such acquisition,
arranging for all necessary financing, and monitoring the progress of and
providing managerial assistance to the Portfolio Companies. The Investment
Manager will also provide personnel, office space, telephone and utility
expenses, supplies and other administrative services to the Enertech
Partnership.
From the date of the Partnership Agreement until five years
after the Initial Closing, the EnerTech Partnership will pay to the Investment
Manager quarterly in advance a management fee equal to 0.5% of the EnerTech
Partnership's total capital commitments (assuming all commitments were in effect
upon the initial formation of the EnerTech Partnership). Thereafter, the
quarterly management fee shall equal 0.5% of an amount equal to total capital
commitments less the cost of all securities disposed of or written off by the
EnerTech Partnership. Partners admitted after the Initial Closing will be
required to bear their proportionate share of the management fee and other
operating and formation expenses form the Initial Closing date. Fifty percent
(50%) of all fees or compensation accepted from Portfolio Companies by the
Investment Manager will offset the management fee.
The management fee will cover all expenses associated with
administering the EnerTech Partnership, including but not limited to,
compensation of all professional employees and the
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cost of providing certain support and general services (e.g., office rental,
secretarial, clerical and bookkeeping expenses).
The EnerTech Partnership will be responsible for all other
expenses related to its operations, including, but not limited to, its legal and
auditing fees, costs related to the purchase or sale of securities whether or
not purchased or sold, interest on borrowed funds, taxes, commissions and
brokerage fees, the cost of directors' and officers' liability insurance,
extraordinary expenses such as litigation and "broken deal" expenses, expenses
resulting from due diligence and the normal course of activities related to the
investments and prospective investments of the EnerTech Partnership, expenses
associated with annual meetings of the EnerTech Partnership and the activities
of the Valuation Committee and Advisory Board and expenses incurred in
organizing the EnerTech Partnership.
Profits, gains and losses (both realized and unrealized)will
generally be allocated 80% to all Partners, pro rata in accordance with their
capital contributions, and 20% to the General Partner. Net short-term investment
income (or loss) and expenses, represented by the excess or deficit of income on
cash equivalent securities over operating expenses, will be allocated to the
Limited Partners pro rata according to their respective capital contributions.
In addition, if the capital account of the General Partner is reduced to the
amount of its capital contribution, then remaining losses shall be specially
allocated 1% to the General Partner and 99% to the Limited Partners. In the
event the capital account of the Limited
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Partners is reduced to zero, then 100% of remaining losses shall be specially
allocated to the General Partner. Subsequent gains shall be specially allocated
to reverse any such special allocations of losses.
Distributions will be made at the General Partner's
discretion. Net short-term investment income (net of expenses), will be
distributed to all Partners pro rata in accordance with their capital
contributions. Securities in kind (or net cash proceeds from their sale) will be
distributed, until such time as the Limited Partners shall have received
distributions totaling their respective capital contribution, in the following
manner:
(a) an amount equaling the sum of (i) the EnerTech
Partnership's cost for the total amount of such securities being
distributed or which were sold; (ii) the aggregate amount of net losses
previously realized by the EnerTech Partnership; (iii) the cost basis
of the securities of all Portfolio Companies previously written off as
a result of bankruptcy, liquidation or termination of operations of
such Portfolio Company; and (iv) the allocable amount of cumulative
operating expenses paid by the EnerTech Partnership, will be
distributed to all Partners pro rata in accordance with their capital
contributions;
(b) the balance of such distribution will be
distributed 80% to the Partners pro rata in accordance with their
respective capital contributions and 20% to the General Partners.
After the Limited Partners have received distributions
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equaling their respective capital contributions, any further distributions of
securities in kind or the proceeds from the sale of securities will be made 80%
to the Partners pro rata in accordance with their respective capital
contributions and 20% to the General Partners.
GPU will, on or by May 1 of each year, report to the
Commission any distributions received from the EnerTech Partnership during the
previous calendar year. Such report will be included as an appendix to the
Annual Report on Form U-5-S filed pursuant to the Act. The foregoing reports
shall be in lieu of any Certificates of Completion or Partial Completion
otherwise required by Rule 24 under the Act.
Rule 54 Analysis.
The proposed transactions contemplate, among other things, the
acquisition of securities by the GPU which do not relate to exempt wholesale
generators ("EWGs") and foreign utility companies ("FUCOs") (the
"Transactions"). Accordingly, the Transactions are subject to Rule 54, which
provides that, in determining whether to approve an application which does not
relate to any EWG or FUCO, the Commission shall not consider the effect of the
capitalization or earnings of any such EWG or FUCO which is a subsidiary of a
registered holding company if the requirements of Rule 53 (a), (b) and (c) are
satisfied.
(a) 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 "November 5 Order"), the Commission
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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 June 30, 1999, GPU's average consolidated retained earnings
was approximately $2.316 billion and GPU's aggregate investment in EWGs and
FUCOs was approximately $2.168 billion. Accordingly, under the November 5 Order,
GPU may invest up to an additional $148 million in EWGs and FUCOs as of June 30,
1999.(2)
(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.
(B) For each FUCO or foreign EWG which is a
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2 Including the effect of the July 1999 Midlands Electricity plc purchase.
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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, GPU will provide the Commission on request copies
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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 and FUCO in which GPU directly or
indirectly holds an interest.
(iii) Copies of this Application on Form U-1 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.(3) In
addition, GPU will submit to each such commission copies of
any amendments to this Application and a copy of Item 9 of
GPU's Form U5S and Exhibits H and I thereof (commencing
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3 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 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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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 transactions.
(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 $2.316 billion) represented an increase of
approximately $96.9 million (or approximately 4%) compared to
the average consolidated retained earnings for the previous
four quarterly periods (approximately $2.219 billion).
(C) GPU did not incur operating losses from
direct or indirect investments in EWGs and FUCOs in 1997 in
excess of 5% of GPU's December 31, 1997 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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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 61.7% debt.
GPU's June 30, 1999 consolidated capitalization consists of
43.1% equity and 56.9% debt. Thus, since the date of the November 5 Order, there
has been no material adverse change in GPU's consolidated capitalization ratio,
which remains within acceptable ranges and limits as evidenced by the credit
ratings
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of GPU's electric utility subsidiaries.(4)
GPU's consolidated retained earnings grew on average
approximately 4.5% per year from 1991 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.
Reference is made to Exhibit H which sets forth GPU's
consolidated capitalization at June 30, 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.
ITEM 2. FEES, COMMISSIONS AND EXPENSES.
The estimated fees, commissions and expenses expected to be
incurred in connection with the proposed transactions will be filed by
amendment.
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4 The mortgage bonds of Jersey Central Power & Light Company,
Metropolitan Edison Company and Pennsylvania Electric Company are rated
A+ by Standard & Poors Corporation, and Baa1, A3 and A2, respectively,
by Moody's Investors Service, 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 1997 windfall
profits tax imposed on Midlands Electricity, plc.
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ITEM 3. APPLICABLE STATUTORY PROVISIONS.
GPU believes that Sections 9(a)(1), 10 and 12(b) of the Act
and Rules 45 and 54 thereunder may be applicable to the proposed Transactions.
GPU believes that the authorization sought herein is consistent with the
requirements of Sections 10 and 11(b) of the Act which permit public utility
holding company subsidiaries to engage in other businesses "as are reasonably
incidental, or economically necessary or appropriate to the operations" of an
integrated public utility system.
ITEM 4. REGULATORY APPROVALS.
No state commission has jurisdiction with respect to any
aspect of the proposed transactions and, assuming your Commission authorizes and
approves all aspects of the transactions (including the accounting therefor), no
Federal commission, other than your Commission, has jurisdiction with respect to
any aspect thereof.
ITEM 5. PROCEDURE.
GPU requests that the Commission issue an order with respect
to the transactions proposed herein at the earliest practicable date, but in no
event no later than January 15, 2000. 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
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which it is to become effective.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.
(a) Exhibits:
A - EnerTech Capital Partners L.P.
Limited Partnership Agreement --
to be filed by
amendment.
B - Not applicable
C - Not applicable
D - Not applicable
E - Not applicable
F - Opinion of Berlack, Israels &
Liberman LLP -- to be filed
by amendment.
G - Financial Data Schedules -- to be
filed by amendment.
H - Form of public notice
(b) Financial Statements:
1-A - GPU and Subsidiary Companies
Consolidated Balance Sheets, actual
and pro forma, as at June 30, 1999,
and Consolidated Statement of Income
and Retained Earnings, actual and
pro forma, for the twelve months
ended June 30, 1999; pro forma
journal entries -- to be filed by
amendment.
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1-B - GPU (Corporate) Balance Sheets,
actual and pro forma, as at June 30,
1999 and Statements of Income and
Retained Earnings, actual and pro
forma, for the twelve months ended
June 30, 1999; pro forma journal
entries -- to be filed by amendment.
2 - Reference is made to the financial
statements included in 1 above.
3 - None.
4 - None, except as set forth in the
Notes to the Financial Statement.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.
(a) The proposed Transactions contemplate the formation by GPU
of a subsidiary for the purpose of investing in a limited partnership that will
invest in companies engaged in the development of energy-related and information
technologies. As such, the issuance of an order by your Commission with respect
thereto is not a major Federal action significantly affecting the quality of the
human environment.
(b) No Federal agency has prepared or is preparing an
environmental impact statement with respect to the proposed Transactions which
are the subject hereof.
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SIGNATURE
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 THEIR BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
GPU, INC.
By: /s/ T. G. Howson
T. G. Howson,
Vice President and Treasurer
Date: October 25, 1999
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EXHIBITS TO BE FILED BY EDGAR
Exhibit:
H - Form of public notice
Exhibit H
SECURITIES AND EXCHANGE COMMISSION
(RELEASE NO. 35-________); 70-
GPU, Inc., 300 Madison Avenue, Morristown, New Jersey 07960, a
registered holding company, has filed with the Commission an Application
pursuant to Sections 9(a)(1), 10, 12(b) of the Public Utility Holding Company
Act of 1935 ("Act") and Rules 45 and 54 thereunder.
GPU proposes to organize a new, wholly-owned subsidiary
company, ("Newco"), as a Delaware corporation whose initial purpose will be to
acquire from time to time limited partner interests in EnerTech Capital Partners
II, L.P., a Delaware limited partnership formed pursuant to an Agreement of
Limited Partnership ("Partnership Agreement"), and any successor or affiliated
limited partnership having substantially similar investment objectives and terms
(EnerTech Capital Partners II, L.P. and all such successor or affiliated limited
partnerships are herein collectively referred to as the "EnerTech Partnership").
The aggregate amount of such investments in the EnerTech Partnership will not
exceed $5 million.(1)
The targeted size of the EnerTech Partnership's investment
pool is $100 million, with a minimum commitment of $30 million necessary for an
initial closing (the "Initial Closing"). Additional commitments may be added
until the investment pool reaches a maximum not to exceed $150 million, unless
otherwise approved by a majority in interest of the Limited Partners. The
interests to be acquired by Newco will in the aggregate represent not more than
9.9% of the Limited Partner interests in any EnerTech Partnership.
The sole general partner of the EnerTech Partnership ("General
Partner") will be ECP II Management L.P., a Delaware limited partnership of
which EnerTech Capital Partners II LLC is the managing general partner. The
EnerTech Partnership fund will be managed by EnerTech Capital Partners
("EnerTech"), a group of experienced investment professionals associated with
Safeguard Scientifics, Inc. and TL Ventures. The EnerTech Partnership fund is
the second fund managed by EnerTech. Its first fund was formed in 1996 with
$50,000,000 of capital and is currently invested in twelve companies.
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1 GPU has previously received Commission approval for investing in
a similar investment fund focusing on environmental technologies. General
Public Utilities Corporation, et al., HCAR No. 35-26230 (File No. 70-8537)
(February 8, 1995).
<PAGE>
The EnerTech Partnership is being formed to invest in
companies (each a "Portfolio Company") engaged in activities primarily related
to the electric and natural gas utilities and their convergence into the broader
energy, communications and other utility-like services industries. The EnerTech
Partnership's objective is to deliver superior investment returns to the Limited
Partners by making private equity investments in companies benefiting from the
deregulation and convergence of the electric utility, communications and energy
marketplace. The EnerTech Partnership will invest in companies (none of which
will be an affiliate of GPU) engaged in the development of technologies in one
or more of the following categories:
a. Information Technology and Systems Integration. This
includes enterprise software and networking, CIS (customer information system)
and billing applications, data mining and analysis tools, systems integration
and support, and the transition to interactive e-commerce platforms. Other
examples include transmission scheduling and sales, transaction and risk
management and energy trading systems.
b. Communications and Networking. Investment opportunities in
communications are expected to include fixed communication and data networks,
building automation and controls, integration of voice and data networks, remote
connectivity, supply chain and managed infrastructure applications.
c. Customer Premise Products and Services. Examples include
digital home networks, electronic security alarm monitoring services, power
quality and efficiency devices, demand-side management tools, other energy
conservation devices and distributed generation technologies.
d. Industry Specific Content and Consulting Services. The fund
managers are pursuing opportunities in consulting, publishing, research and
information management services.
e. Asset Utilization and Efficiency Improvement.
Products and technologies that fall into this category include power plant
performance software and systems, distribution system automation, automated
mapping and facilities management, supervisory control and data acquisition,
system forecasting applications and work force management tools. Additional
services that can leverage the utility delivery infrastructure include outage
detection/notification, surge protection, power quality monitoring, security
monitoring, hazard detection, appliance monitoring, electronic bill payment,
messaging and many others.
The term of the EnerTech Partnership will commence on the date
of the execution of the Partnership Agreement and will continue until December
31, 2009. The General Partner may extend the term for up to two one-year periods
to permit the orderly liquidation of the EnerTech Partnership's assets, upon
written
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<PAGE>
consent of the Limited Partners holding a majority in interest of the
commitments of all Limited Partners. The Partnership Agreement provides that,
not later than the date of becoming a Limited Partner, each Limited Partner must
contribute to the capital of the EnerTech Partnership up to 5% of the capital
commitment of such Limited Partner. Thereafter, contributions will be made upon
fifteen (15) days' notice, in increments necessary to fund investments and
operating expenses, up to a maximum of 20% of total commitments being
contributed per request. The General Partner will contribute an amount equal to
1.0% of the total capital commitments of all Limited Partners. The General
Partner will make its capital commitments pari passu with the capital
contributions of the Limited Partners.
In addition, the General Partner, without the prior approval
of a majority in interest of the Limited Partners, may not cause or permit the
EnerTech Partnership to invest more than 15% of the EnerTech Partnership's total
capital commitments in the securities of any single Portfolio Company.
Subject to certain limitations set forth in the Partnership
Agreement, the management, operation and implementation of policy of the
EnerTech Partnership will be vested exclusively in the General Partner. The
General Partner may delegate certain of its authority to an investment manager
("Investment Manager") pursuant to an Investment Management Agreement. In
addition, at the request of the General Partner, a Limited Partner may provide
advisory services to a Portfolio Company.
The EnerTech Partnership has an advisory board ("Advisory
Board") comprised of business leaders, professional advisors and industry
visionaries. Under the terms of the Partnership Agreement, the General Partner
may remove any member of the Advisory Board at any time, and may appoint new or
additional members from time to time. The Advisory Board will assist the General
Partner in evaluating potential investments and provide such other services as
the General Partner may from time to time request, but will have no authority to
bind the EnerTech Partnership or take part in its management.
The EnerTech Partnership will also have a valuation committee
("Valuation Committee"), which will consist of three representatives of the
Limited Partners, designated by the General Partner and approved by a majority
in interest of the Limited Partners. The Valuation Committee, among other
things, approves all valuations of securities by the General Partner and settles
all conflict of interest situations. Approval of the Valuation Committee will be
by a majority vote.
The Investment Manager will serve as the management company of
the EnerTech Partnership. The Investment Manager will be EnerTech Management
L.L.C., a Delaware limited liability company. All of the individual members of
the General Partner's
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<PAGE>
managing general partner will be officers of the Investment Manager. The
Investment Manager will be responsible for identifying acquisition
opportunities, structuring and negotiating the terms of such acquisition,
arranging for all necessary financing, and monitoring the progress of and
providing managerial assistance to the Portfolio Companies. The Investment
Manager will also provide personnel, office space, telephone and utility
expenses, supplies and other administrative services to the EnerTech
Partnership.
From the date of the Partnership Agreement until five years
after the Initial Closing, the EnerTech Partnership will pay to the Investment
Manager quarterly in advance a management fee equal to 0.5% of the EnerTech
Partnership's total capital commitments (assuming all commitments were in effect
upon the initial formation of the EnerTech Partnership). Thereafter, the
quarterly management fee shall equal 0.5% of an amount equal to total capital
commitments less the cost of all securities disposed of or written off by the
EnerTech Partnership. Partners admitted after the Initial Closing will be
required to bear their proportionate share of the management fee and other
operating and formation expenses form the Initial Closing date. Fifty percent
(50%) of all fees or compensation accepted from Portfolio Companies by the
Investment Manager will offset the management fee.
The EnerTech Partnership will be responsible for all other
expenses related to its operations, including, but not limited to, its legal and
auditing fees, costs related to the purchase or sale of securities whether or
not purchased or sold, interest on borrowed funds, taxes, commissions and
brokerage fees, the cost of directors' and officers' liability insurance,
extraordinary expenses such as litigation and "broken deal" expenses, expenses
resulting from due diligence and the normal course of activities related to the
investments and prospective investments of the EnerTech Partnership, expenses
associated with annual meetings of the EnerTech Partnership and the activities
of the Valuation Committee and Advisory Board and expenses incurred in
organizing the EnerTech Partnership.
Profits, gains and losses (both realized and unrealized) will
generally be allocated 80% to all Partners, pro rata in accordance with their
capital contributions, and 20% to the General Partner. Net short-term investment
income (or loss) and expenses, represented by the excess or deficit of income on
cash equivalent securities over operating expenses, will be allocated to the
Limited Partners pro rata according to their respective capital contributions.
In addition, if the capital account of the General Partner is reduced to the
amount of its capital contribution, then remaining losses shall be specially
allocated 1% to the General Partner and 99% to the Limited Partners. In the
event the capital account of the Limited Partners is reduced to zero, then 100%
of remaining losses shall
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<PAGE>
be specially allocated to the General Partner. Subsequent gains shall be
specially allocated to reverse any such special allocations of losses.
Distributions will be made at the General Partner's
discretion. Net short-term investment income (net of expenses), will be
distributed to all Partners pro rata in accordance with their capital
contributions. Securities in kind (or net cash proceeds from their sale) will be
distributed, until such time as the Limited Partners shall have received
distributions totaling their respective capital contribution, in the following
manner:
(a) an amount equaling the sum of (i) the EnerTech
Partnership's cost for the total amount of such securities being
distributed or which were sold; (ii) the aggregate amount of net losses
previously realized by the EnerTech Partnership; (iii) the cost basis
of the securities of all Portfolio Companies previously written off as
a result of bankruptcy, liquidation or termination of operations of
such Portfolio Company; and (iv) the allocable amount of cumulative
operating expenses paid by the EnerTech Partnership, will be
distributed to all Partners pro rata in accordance with their capital
contributions;
(b) the balance of such distribution will be
distributed 80% to the Partners pro rata in accordance with their
respective capital contributions and 20% to the General Partners.
After the Limited Partners have received distributions
equaling their respective capital contributions, any further distributions of
securities in kind or the proceeds from the sale of securities will be made 80%
to the Partners pro rata in accordance with their respective capital
contributions and 20% to the General Partners.
The Application, as amended, is available for public
inspection through the Commission's Office of Public Reference. Interested
persons wishing to comment or request a hearing should submit their views in
writing by ________________, 1999 to the Secretary, Securities and Exchange
Commission, Washington, D.C. 20549, and serve a copy on the applicant at the
address specified above. Proof of service (by affidavit, or in case of an
attorney at law, by certificate) should be filed with the request. Any request
for a hearing shall identify specifically the issues of fact or law that are
disputed. A person who so requests will be notified of any hearing, if ordered,
and will receive a copy of any notice or order issued in this matter. After said
date, the Application, as amended, may be granted.
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