Post Effective Amendment No. 12 to
SEC File No. 70-7926
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM U-l
DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 ("Act")
GPU, INC.("GPU")
300 Madison Avenue
Morristown, New Jersey 07962
JERSEY CENTRAL POWER & LIGHT COMPANY ("JCP&L")
METROPOLITAN EDISON COMPANY ("Met-Ed")
PENNSYLVANIA ELECTRIC COMPANY ("Penelec")
2800 Pottsville Pike
Reading, Pennsylvania 19640
(Names of companies filing this statement and
address of principal executive offices)
GPU, INC.
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(Name of top registered holding company parent of applicants)
T. G. Howson, Vice President and Douglas E. Davidson, Esq.
Treasurer Berlack, Israels & Liberman LLP
M. A. Nalewako, Secretary 120 West 45th Street
GPU Service, Inc. New York, New York 10036
300 Madison Avenue
Morristown, New Jersey 07962 W. Edwin Ogden, Esq.
Ryan, Russell, Ogden & Seltzer LLP
S. L. Guibord, Secretary 1100 Berkshire Boulevard
Jersey Central Power & P.O. Box 6219
Light Company Reading, Pennsylvania 19601-
Metropolitan Edison Company 0219
Pennsylvania Electric Company
2800 Pottsville Pike Robert C. Gerlach, Esq.
Reading, Pennsylvania 19640 Ballard Spahr Andrews
& Ingersoll, LLP
1735 Market Street
Philadelphia, Pennsylvania
19103
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(Names and addresses of agents for service)
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GPU, JCP&L, Met-Ed and Penelec (the "GPU Companies") hereby
post-effectively amend their Declaration on Form U-1, docketed in SEC File No.
70-7926, as follows:
A. By Orders dated December 22, 1997 (HCAR No. 35-26801) and July 17,
1996 (HCAR No. 35-26544) (the "Orders"), the Commission, among other things,
authorized (1) the GPU Companies to issue, sell and renew from time to time
through December 31, 2000 their respective unsecured promissory notes
("Unsecured Promissory Notes"), maturing not more than nine months after
issuance, to various commercial banks pursuant to loan participation
arrangements and informal lines of credit ("Lines of Credit") in amounts up to
the limitations on short-term indebtedness contained in their respective
charters, and in the case of GPU, up to $250 million; (2) JCP&L, Met-Ed and
Penelec to issue and sell from time to time through December 31, 2000 their
unsecured short-term promissory notes as commercial paper ("Commercial Paper")
in amounts up to the limits permitted by their respective charters; (3) the GPU
Companies to issue, sell and renew unsecured promissory notes to lenders other
than commercial banks, insurance companies or similar institutions ("Other
Short-Term Debt") from time to time through December 31, 2000 in amounts up to
the limitations on short-term indebtedness contained in their respective
charters and, in the case of GPU, $250 million, and (4) the GPU Companies to
issue, sell and renew from time to time through May 6, 2001 unsecured promissory
notes pursuant to an amended and restated credit agreement ("Credit
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Agreement") up to $250 million (borrowings under Lines of Credit, Commercial
Paper and Other Short-Term Debt are collectively referred to as "Short-Term
Borrowings").
B. At December 31, 1998, the GPU Companies had outstanding Short Term
Borrowings (in millions) (no borrowings were outstanding under the Credit
Agreement) as follows:
Lines of Commercial Other Short-
Credit Paper Term Debt Total
------------- -------------- ------------ --------------
GPU 69,100,000 - - $ 69,100,000
JCP&L 53,300,000 69,100,000 - $122,400,000
Met-Ed 16,400,000 63,200,000 - $ 79,600,000
Penelec 31,900,000 54,200,000 - $ 86,100,000
------------ ------------ --- ------------
Total $170,700,000 $186,500,000 - $357,200,000
C. At December 31, 1998, the charter limits of JCP&L, Met-Ed and Penelec
would have permitted them to have maximum Short-Term Borrowings outstanding at
any one time in the following amounts:
JCP&L - $285,693,380
Met-Ed - $125,678,085
Penelec - $145,504,371
D. Met-Ed and Penelec have called for the redemption on February 19, 1999
of all of their remaining shares of Cumulative Preferred Stock outstanding
($11.95 million and $16.55 million
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aggregate stated value, respectively).(1) Section 8(D) of the Met-Ed and Penelec
charters, among other things, restricts the amount of unsecured debt such
companies may have outstanding without the consent of a majority of the
preferred shareholders.(2) Accordingly, when such preferred stock is no longer
outstanding, the limitations contained in the charters on
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1 JCP&L has one series of preferred stock outstanding which may not be
redeemed before June 1, 2002. Accordingly, JCP&L is not at this time
seeking an amendment to its current Short-Term Borrowing limitation as its
existing charter limitations will remain in place.
2 Section 8(D) of the Met-Ed and Penelec charters provides in
pertinent part as follows:
(D) So long as any shares of the Preferred Stock of any series are
outstanding, the Company shall not, without the consent of the holders of
a majority of the total voting power of shares of the Preferred Stock of
all series then outstanding:
(a) Issue any unsecured notes, debentures or other securities
representing unsecured indebtedness or assume any such unsecured
securities (other than for the purpose of refunding or renewing
outstanding unsecured securities theretofore issued or assumed by
the Company resulting in equal or longer maturities or redeeming or
otherwise retiring all outstanding shares of the Preferred Stock of
all series, or of any other class of stock ranking prior to or on a
parity with the Preferred Stock as to dividends or other
distributions) if immediately after such issuance or assumption and
the application of the proceeds of the securities thus issued or
assumed:
(i) the total outstanding principal amount of all such
unsecured securities issued or assumed by the Company would exceed
twenty per cent (20%) of the aggregate of (I) the total principal
amount of all bonds and other securities representing secured
indebtedness issued or assumed by the Company and then to be
outstanding plus (II) the capital stock, premiums therein, and
surplus of the Company as stated on its books of account, or
(ii) the total outstanding principal amount of all such
unsecured securities issued or assumed by the Company of maturities
of less than ten years will thereby exceed ten percent (10%) of the
aggregate referred to in subclause (i) of this clause (a).
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the issuance of unsecured debt will no longer be applicable by their terms.
Since the December 22, 1997 order limited the amount of Short-Term Borrowings
which Met-Ed and Penelec may have outstanding to the maximum amounts permitted
by their respective charters, Met-Ed and Penelec now propose that, in lieu
thereof, they be permitted to issue and sell Short-Term Borrowings from time to
time through December 31, 2000 of up to $150 million and $150 million,
respectively, outstanding at any one time.
E. The GPU Companies further propose to extend the period during which
they may issue unsecured promissory notes under the Credit Agreement or in the
form of Short-Term Borrowings to December 31, 2003.
F. In addition, GPU proposes to issue and sell from time to time
commencing with the granting of the authorization herein sought through December
31, 2003, commercial paper ("GPU Commercial Paper") in the aggregate amount of
up to $100 million outstanding at any time, provided, however, that the amount
of GPU Commercial Paper outstanding and of Short-Term Borrowings under the
authorization sought herein will not exceed $250 million. The GPU Commercial
Paper would be issued either in the form of book-entry unsecured promissory
notes evidenced by a master note or in certificated form, and will be issued in
minimum denominations of $100,000 with integral increments of $1,000 in excess
thereof. The notes will have maturities of up to 270 days and would not be
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prepayable prior to maturity. GPU proposes to issue and sell the GPU Commercial
Paper in the following manner:
1. GPU may utilize one or more commercial paper placement agents
through whom it would sell the GPU Commercial Paper directly to one or
more institutional investors. The placement agent would arrange for the
sale of GPU Commercial Paper and would be compensated for its services at
such rates as GPU and such placement agent may agree from time to time.
GPU will offer and sell the GPU Commercial Paper in such a manner as to
not constitute a public offering under the Securities Act of 1933.
2. The GPU Commercial Paper may also be sold directly to one or more
commercial paper dealers at a discount rate prevailing at the date of
issuance for commercial paper of comparable quality and of the particular
maturity sold by other issuers of commercial paper. No fee or commission
would be payable by GPU in connection with such issuance and sale of GPU
Commercial Paper. The GPU Commercial Paper will be reoffered by the
purchasing dealer or dealers to institutional investors at a discount of
not more than 1/8 of 1% per annum less than the prevailing discount rate
to GPU. The commercial paper dealers will reoffer such GPU Commercial
Paper in such a manner as to not constitute a public offering under the
Securities Act of 1933.
G. The GPU Commercial Paper will bear interest at a rate (after giving
effect to any fee) not exceeding 125% of the base
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rate for commercial borrowings offered by The Chase Manhattan Bank in effect
from time to time. However, the effective interest cost of the GPU Commercial
Paper is based on the supply of, and demand for, that and similar commercial
paper at the time of sale. Specifically, on occasion short-term money markets
have become very volatile during brief periods, and the interest costs of
commercial paper have during such periods exceeded bank base rates. Because such
volatile market conditions usually exist for brief periods, it is not
anticipated that any sale of GPU Commercial Paper with interest costs in excess
of bank base rates would have a significant marginal impact on the annual
interest cost to GPU. Therefore, while it is not anticipated that the effective
annual cost of borrowing through GPU Commercial Paper will exceed 125% of the
annual base rate from The Chase Manhattan Bank, in order to obtain maximum
flexibility during the periods described above, GPU Commercial Paper may be
issued with a maturity of not more than 90 days with an effective cost in excess
of 125% of the base rate for commercial borrowings offered by The Chase
Manhattan Bank.
H. The net proceeds from the issuance of the GPU Commercial Paper would be
used by GPU for general corporate purposes, including to acquire exempt
wholesale generators and foreign utility companies.
I. GPU has previously filed an application in Docket No. 70-9435
seeking the authorization to issue and sell GPU Commercial
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Paper that GPU now seeks in this application. Accordingly, GPU hereby
withdraws its application in Docket No. 70-9435.
J. Rule 54 Analysis.
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The proposed transactions contemplate, among other things, the issuance of
securities by the GPU Companies 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 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 December 31, 1998,
GPU's average consolidated retained earnings was approximately $2.183 billion
and GPU's aggregate investment in EWGs and FUCOs was approximately $1.204
billion. Accordingly, under the November 5 Order, GPU may invest up to an
additional $979 million in EWGs and FUCOs as of December 31, 1998.
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(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 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
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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 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.
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(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, 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
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.
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3 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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(B) GPU's average consolidated retained earnings for the
four most recent quarterly periods (approximately $2.183 billion)
represented an increase of approximately $22.4 million (or
approximately 1.0%) compared to the average consolidated retained
earnings for the previous four quarterly periods (approximately
$2.160 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).
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 Declaration.
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
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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 December 31, 1998 consolidated capitalization consists of
45.4% equity and 54.6% 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 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
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4 The mortgage bonds of JCP&L, Met-Ed and Penelec are rated A+ by Standard &
Poors Corporation, and Baa1, A3 and A2, respectively, by Moody's Investors
Service, Inc.
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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 filed herewith which sets forth GPU's
consolidated capitalization at December 31, 1998 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.
K. The estimated fees, commissions and expenses expected to be incurred by
the GPU Companies in connection with the proposed transactions will be supplied
by further post-effective amendment.
L. No state commission has jurisdiction with respect to any aspect of the
proposed transactions and no Federal commission other than your Commission has
jurisdiction with respect to any aspect thereof.
M. It is requested that the Commission issue an order with respect to the
transactions proposed herein at the earliest
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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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practicable date but, in any event not later than April 15, 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.
N. The following exhibits and financial statements are filed in Item 6
thereof: (a) Exhibits:
A-1(a) - Forms of unsecured promissory notes to be
issued and sold under New Lines of Credit and
Other Short-Term Debt -- incorporated by
reference to Exhibit A-1, Declaration on Form
U-1, SEC File No. 70-7926.
A-1(b) - Form of unsecured promissory notes to be
issued and sold as GPU Commercial Paper -- to
be filed by further post-effective amendment.
B - None.
C - None.
D - None.
E - None.
F-l(d) - Opinion of Berlack, Israels & Liberman
LLP -- to be filed by further post-effective
amendment.
F-2(d) - Opinion of Ryan, Russell, Ogden & Seltzer
LLP -- to be filed by further post-effective
amendment.
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F-3(d) - Opinion of Ballard Spahr Andrews & Ingersoll,
LLP -- to be filed by further post-effective
amendment.
G - Charter Restrictions on Unsecured
Indebtedness -- incorporated by reference to
Exhibit C, Declaration on Form U-l, SEC File
No. 70-7926.
H - Actual and Pro Forma Capitalization Table at
December 31, 1998 -- to be filed by further
post-effective amendment.
I - Financial Data Schedule -- to be filed
by further post-effective amendment.
(b) Financial Statements:
1-A - GPU (Corporate) Balance Sheets, actual and
pro forma, as at December 31, 1998, and
Statements of Income and Retained Earnings,
actual and pro forma, for the twelve months
ended December 31, 1998; pro forma journal
entries -- to be filed by further
post-effective amendment.
l-B - GPU and Subsidiary Companies Consolidated
Balance Sheets, actual and pro forma, as at
December 31, 1998, and Consolidated Statements
of Income and Retained Earnings, actual and pro
forma, for the twelve months ended December 31,
1998; pro forma journal entries -- to be filed
by further post-effective amendment.
l-C - JCP&L Consolidated Balance Sheets, actual and
pro forma, as at December 31, 1998, and
Statements of Income and Retained Earnings,
actual and pro forma, for the twelve months
ended December 31, 1998; pro forma journal
entries -- to be filed by further
post-effective amendment.
l-D - Met-Ed Consolidated Balance Sheets, actual
and pro forma, as at December 31, 1998, and
Consolidated Statements of Income and
Retained Earnings,
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actual and pro forma, for the twelve months
ended December 31, 1998; pro forma journal
entries -- to be filed by further
post-effective amendment.
l-E - Penelec Consolidated Balance Sheets, actual
and pro forma, as at December 31, 1998, and
Consolidated Statements of Income and Retained
Earnings, actual and pro forma, for the twelve
months ended December 31, 1998; pro forma
journal entries -- to be filed by further
post-effective
amendment.
2 - Not Applicable.
3 - Not Applicable.
4 - Statement of Material Changes since the date
of the balance sheets which are not
reflected in the Notes to the Financial
Statements -- None.
O. The proceeds from the issuance and sale of the unsecured promissory
notes as proposed herein will be used by the GPU Companies to finance their
businesses. 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.
P. No Federal agency has prepared or is preparing an environmental impact
statement with respect to the proposed transactions which are the subject
hereof. Reference is made to paragraph I hereto 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 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
By: /s/ T. G. Howson
-----------------------------------
T. G. Howson, Vice President and
Treasurer
Date: March 30, 1999
