Post-Effective
Amendment No. 1 to
SEC File No. 70-8971
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM U-l
DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 ("Act")
GPU INTERNATIONAL, INC. ("GPU International")
GPU ELECTRIC, INC. ("GPU Electric")
One Upper Pond Road
Parsippany, New Jersey 07054
(Name of companies filing this statement and addresses
of principal executive office)
GPU, INC. ("GPU")
(Name of top registered holding company parent of applicants)
Wayne Thomson Douglas E. Davidson, Esq.
GPU International, Inc. Berlack, Israels & Liberman LLP
GPU Electric, Inc. 120 West 45th Street
One Upper Pond Road New York, New York 10036
Parsippany, New Jersey 07054
(Names and addresses of agents for service)
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GPU International and GPU Electric hereby post-effectively
amend their Declaration on Form U-1, docketed in SEC File No. 70-8971, as
follows:
A. By orders dated December 22, 1997 (HCAR No. 26800),
November 5, 1997 (HCAR No. 26773), January 19, 1996 (HCAR No. 26457) and July 6,
1995 (HCAR No. 26326), the Commission authorized GPU through December 31, 2000
to acquire the securities of subsidiary companies (each, a "Subsidiary
Company"), which would, in turn, acquire the securities or other interests of
one or more exempt wholesale generators ("EWGs") and/or foreign utility
companies ("FUCOs") (collectively "Exempt Entities"). The Subsidiary Companies
would not themselves be Exempt Entities. GPU Electric is a Subsidiary Company
and wholly owned subsidiary of GPU Capital, Inc., both of which have been
organized pursuant to these orders.
B. By orders dated December 22, 1997 (HCAR No. 26802),
November 16, 1995 (HCAR No. 26409), June 14, 1995 (HCAR No. 26307), September
12, 1994 (HCAR No. 26205), December 18, 1992 (HCAR No. 25715) and June 26, 1990
(HCAR No. 25108), the Commission authorized GPU International to: (i) engage in
preliminary project development activities in connection with its investments in
qualifying facilities as defined in the Public Utility Regulatory Policies Act
of 1978, as amended ("QFs"), and Exempt Entities (collectively, "Projects"), and
(ii) acquire the securities of Exempt Entities.
C. By order dated February 28, 1997 (HCAR No. 26678)
the Commission authorized all then existing Subsidiary Companies
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(including GPU Electric), GPU International and its non-Exempt Entity
subsidiaries to declare and pay dividends to GPU out of capital and unearned
surplus from time to time through December 31, 2001. The Commission reserved
jurisdiction, however, over the payment of dividends out of capital or unearned
surplus by any subsequently organized Subsidiary Company. GPU Electric and GPU
International now request that the Commission relinquish this reservation of
jurisdiction. In response to more recently filed applications under the Act, the
Commission has given blanket authorization for the payment of dividends out of
capital or unearned surplus by Subsidiary Companies which may be organized in
the future. See American Electric Power Co., HCAR No. 26760 (Sep. 18, 1997);
Cinergy Corp., HCAR No. 26691 (May 22, 1997); Northeast Utilities, HCAR No.
26691 (Mar. 25, 1997). Accordingly, the GPU applicants now request similar
flexibility so that GPU Capital and any future Subsidiary Company may declare
and pay dividends from capital or unearned surplus to the extent permitted by
applicable state law.
D. 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 December 31, 1998, GPU's average
consolidated retained earnings was approximately $2.183 billion, and GPU's
aggregate
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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.
(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
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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.
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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 or FUCO in which GPU directly or indirectly holds an
interest.
(iii) Copies of this Post Effective Amendment are being
provided to the New Jersey Board of Public Utilities and the
Pennsylvania Public Utility Commission, the only federal, state or
local regulatory agencies having jurisdiction over the retail rates of
GPU's electric utility subsidiaries.(1) In addition, GPU will submit to
each such commission copies of any amendments to this Declaration 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.
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(1) Pennsylvania Electric Company ("Penelec"), one of GPU's electric utility
subsidiaries, is also subject to retail rate regulation by the New York Public
Service Commission with respect to retail service to approximately 13,700
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%) in 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 1998 in
excess of 5% of GPU's December 31, 1998
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 60.7% 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 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.(2)
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
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(2) The first mortgage bonds of GPU's electric utility 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.
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contributed positively to consolidated earnings, excluding the impact of the
windfall profits tax on the Midlands Electricity plc investment.(3)
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 G filed herewith which sets forth
GPU's consolidated capitalization and earnings at December 31, 1998. As set
forth in such exhibit, the proposed transactions will not have a material impact
on GPU's capitalization or earnings.
E. The estimated fees, commission and expenses to be incurred
in connection herewith will be supplied by further post-effective amendment.
F. GPU Electric and GPU International believe that
Section 12 of the Act and Rules 46 and 54 are applicable to the transactions
proposed herein.
G. No Federal or State commission, other than your commission
has jurisdiction with respect to the proposed transactions.
H. 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 June 14, 1999. It is further requested that (i)
there not be a recommended
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1 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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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.
I. The following exhibits and financial statements are
filed in Item 6 thereof:
(a) Exhibits
A - Not Applicable.
B - Not Applicable.
C - Not Applicable.
D - Not Applicable.
F - Opinion of Berlack, Israels &
Liberman LLP -- to be filed by
further post-effective
amendment.
G - Financial Data Schedule - to be
filed by further post-effective
amendment.
(b) Financial Statements:
1
GPU International and GPU Electric
Financial Statements have
been omitted as the proposed
transactions will not have a
material affect thereto.
2 - GPU Consolidated Financial
Statements have been omitted as
the proposed transactions will
not have a material effect thereto.
3 - None.
4 - Not Applicable.
J. No Federal agency has prepared or is preparing
an environmental impact statement with respect to the subject
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transaction. Reference is made to paragraph H hereof regarding regulatory
approvals with respect to the proposed transactions.
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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 INTERNATIONAL, INC.
GPU ELECTRIC, INC.
By:
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R.P. Lantzy
Senior Vice President and
Chief Operating Officer
Date: April 1, 1999
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