Amendment No. 2 to
SEC File No. 70-9599
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM U-1
APPLICATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 ("Act")
GPU, INC. ("GPU")
GPX Acquisition Corp.
300 Madison Avenue
Morristown, New Jersey 07962
(Names of companies filing this statement and
addresses of principal executive offices)
GPU, INC.
(Name of top registered holding company parent of applicants)
S.L. Guibord, Secretary Douglas E. Davidson, Esq.
M.J. Connolly, Vice President- Berlack, Israels & Liberman LLP
Law 120 West 45th Street
D.C. Brauer, Vice President New York, New York 10036
GPU Service, Inc.
300 Madison Avenue
Morristown, New Jersey 07962
(Names and addresses of agents for service)
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GPU and its wholly-owned subsidiary, GPX Acquisition Corp. ("Acquisition
Corp." and, together with GPU, "Applicants"), hereby amend their Application on
Form U-1, as heretofore amended, docketed in SEC File No. 70-9599, as follows:
I. Item 1 thereof is hereby amended to read in its entirety as follows:
Item 1. Description of Proposed Transaction.
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A. GPU, through Acquisition Corp., proposes to acquire for
cash all of the issued and outstanding shares of common stock, $0.01 par value,
of MYR Group Inc., a Delaware corporation ("MYR"), as more fully described
below. MYR is a publicly-held utility infrastructure services and electrical
contracting company headquartered in Rolling Meadows, Illinois. MYR's common
stock is registered (SEC File No. 1-8325) under Section 12(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and is listed for trading
on the New York Stock Exchange.
GPU, a Pennsylvania corporation, is a holding company
registered under the Act. GPU does not directly operate any utility properties,
but owns all the outstanding common stock of three domestic electric utilities
serving customers in New Jersey -- Jersey Central Power & Light Company
("JCP&L") -- and Pennsylvania -- Metropolitan Edison Company ("Met-Ed") and
Pennsylvania Electric Company ("Penelec"). The customer service function,
transmission and distribution operations and the generation operations relating
to the remaining non-nuclear generating facilities of these electric utilities
are conducting business under the name GPU Energy. The remaining nuclear
generation operations of JCP&L are conducted by GPU Nuclear, Inc. GPU Capital,
Inc. and GPU Electric, Inc. and their subsidiaries own, operate and fund the
acquisition of electric and gas transmission and distribution systems in foreign
countries. GPU International, Inc. and GPU Power, Inc. and their subsidiaries
develop, own and operate generation facilities in the United States and foreign
countries. Other subsidiaries of GPU include GPU Advanced Resources, Inc., which
is involved in retail energy sales; GPU Telcom Services, Inc., which is engaged
in telecommunications-related businesses; and GPU Service, Inc., which provides
legal, accounting, financial and other services to entities within the GPU
System.
GPX Acquisition Corp. is a Delaware corporation that will be used
solely for the purpose of effecting the acquisition of MYR. It will cease to
exist after consummation of the acquisition.
B. Pursuant to a Plan and Agreement of Merger, dated as of
December 21, 1999 ("Merger Agreement"), GPU has agreed to pay MYR shareholders
$30.10 per share in cash for their shares of MYR common stock. MYR currently has
6,429,135 shares of common stock outstanding (including 335,927 shares issued
under MYR's
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restricted stock plans). An additional 882,086 MYR shares are issuable under
outstanding MYR convertible debt, 600,183 of which shares are repurchasable by
MYR at a price of $5.67954 per share, and a total of 756,650 MYR shares are
issuable under outstanding stock options(1). MYR does not have any other class
of voting securities outstanding. GPU has no present plans to retire any
outstanding MYR debt. Unless an option holder elects to convert such holder's
MYR options into options to purchase shares of GPU common stock, as described in
paragraph C below, a holder of an MYR stock option will receive in cash, subject
to compliance with vesting requirements, an amount per share equal to the
difference between $30.10 and the per share exercise price. Consequently, the
aggregate purchase price for all shares of MYR common stock outstanding and
issuable as aforesaid, at $30.10 per share, after taking into account the
offsetting payments attributable to the future exercise of stock options is
approximately $215 million. GPU will finance the purchase price with short-term
bank borrowings under its existing lines of credit.
GPU will account for the acquisition under the "purchase
method" of accounting. The expected acquisition premium, the amount of which has
not been quantified, will be amortized over a period yet to be determined.
C. GPU has also agreed, subject to Commission authorization,
to allow the holders of the 756,650 outstanding MYR stock options and the
335,927 outstanding shares of MYR restricted stock, if such holders so elect,
and in lieu of the cash payments referred to above, to substitute GPU common
stock for the MYR common stock issuable or outstanding, as the case may be, in
respect thereof, pursuant to a formula intended to provide such holders with
equivalent value in GPU common stock. The number of shares of GPU common stock
issuable in respect of any such assumed outstanding MYR stock option shall be
equal to the product of the number of shares of MYR common stock covered by such
option multiplied by the number (the "Exchange Ratio") determined by dividing
$30.10 by the average closing price of GPU common stock for the five trading
days immediately preceding the date of consummation of the merger discussed in
paragraph D below (the "Operative Price"), and the per share exercise price for
the GPU common stock so issuable shall be equal to the quotient determined by
dividing the exercise price per share specified for such MYR stock option by the
Exchange Ratio. The number of shares of GPU common stock issuable in respect of
any such assumed outstanding shares of MYR restricted stock shall be equal to
the product of the number of shares of such restricted stock multiplied by the
number determined by dividing $30.10 by the
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1 On March 5, 2000, MYR redeemed all of this outstanding convertible debt in
accordance with the optional redemption provisions of these securities, for a
total redemption price of $2,272,538.
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Operative Price. If the December 28, 1999 closing sales price of $29.875 for GPU
common stock on the New York Stock Exchange were the Operative Price for these
purposes, a maximum of 762,349 shares of GPU common stock would be issuable if
all MYR stock options were assumed and a maximum of 338,457 shares of GPU common
stock would be issuable if all shares of MYR restricted stock were assumed.
Accordingly, GPU seeks authority pursuant to Sections 6(a) and 7 of the Act to
issue shares of its common stock to holders of MYR stock options and restricted
stock to the extent such holders make the foregoing election.
D. The Merger Agreement provides that within five business
days following its execution, Acquisition Corp. will commence a cash tender
offer in accordance with Section 14 of the Exchange Act ("Tender Offer") to
acquire MYR common stock subject to the terms and conditions of the Tender
Offer. Consequently, on December 29, 1999 Acquisition Corp. commenced the Tender
Offer subject to the terms and conditions of Rule 51 under the Act, to acquire
all of the issued and outstanding shares of MYR common stock. Among other
things, pursuant to Rule 51 consummation of the Tender Offer is expressly
conditioned upon Commission approval under the Act. The Merger Agreement further
provides that following completion of the Tender Offer, Acquisition Corp. will
be merged with and into MYR pursuant to section 251 of the Delaware General
Corporation Law and that MYR will survive the merger. At the effective time of
the merger, each MYR shareholder (other than Acquisition Corp. and any
shareholders exercising their statutory dissenters' rights) will be entitled to
receive $30.10 per share upon surrender of their shares of MYR common stock.
Following completion of the merger, MYR will be a direct wholly-owned subsidiary
of GPU. On February 24, 2000, GPU and Acquisition Corp. extended the Tender
Offer expiration date from February 29, 2000 to March 24, 2000.
Description of MYR
E. As described in detail below, MYR's business consists of
providing utility transmission and distribution, infrastructure and related
commercial and industrial electrical (and some mechanical) contracting services.
MYR is the fifth largest specialty contractor in the United States and has eight
operating subsidiaries across the country.(2)
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2 MYR operates through the following subsidiary companies: the L.E. Myers
Co. in the Southeast, Midwest and Northeast; the Harlan Electric Company in
Michigan, the Northeast and the Ohio Valley; the Sturgeon Electric Company, Inc.
in the West; Hawkeye Construction, Inc. in the Pacific Northwest; the D. W.
Close Company, Inc. in Seattle; the Power Piping Company in Pennsylvania,
Virginia and the Ohio River Valley; ComTel Technology, Inc. in Colorado and
Arizona; and MYRcom in the Southeast and Southwest.
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F. The transmission and distribution ("T&D") portion of MYR's
infrastructure services ("Infrastructure Services"), represented approximately
54% of MYR's 1999 gross revenues and is MYR's predominant business activity. T&D
Infrastructure Services principally consist of electric and gas utility
transmission, distribution and substation construction. MYR is also engaged in
telecommunications infrastructure, construction and traffic signalization, each
of which represented less than 10% of MYR's 1999 gross revenues(3). Finally, MYR
provides commercial and industrial services ("C&I Services"), which consist of
electrical, mechanical and maintenance contracting; in 1999, C&I Services
accounted for approximately 33% of gross revenues. MYR's business activities are
limited to providing electrical construction, maintenance and installation and
related services (including heavy mechanical construction of piping systems for
power plants and industrial facilities). Accordingly, MYR does not engage in
civil construction as part of any of its business.
G. MYR's total Infrastructure Services are comprised of
Transmission and Distribution Construction, as well as Telecommunications
Installation Services and Traffic Signalization. Transmission and Distribution
Construction activities include the construction and maintenance of transmission
and distribution power lines and substations for utility, industrial, mining,
institutional and governmental facilities.(4) MYR also performs storm and other
emergency restoration services for utility networks. Telecommunications
Installation Services, which are provided to primary telecommunications
carriers, regional service providers and commercial clients, include the
construction of telecommunications towers, installation of overhead and
underground copper and fiber optic cables and installation and maintenance of
LAN/WAN, telephone, video, voice, data, security and alarm systems. Traffic
Signalization encompasses electrical construction and maintenance in traffic and
light rail signalization, including ramp metering, signalized intersections and
fiber optic interconnections for traffic management systems, as well as highway
and bridge lighting installation and maintenance. Customers include government
transportation agencies, regional transit districts and municipalities.
C&I Services overwhelmingly consist of electrical construction
activities such as the installation of complete
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3 GPU believes that the telecommunications construction segment of
MYR's business is an exempt activity under Section 34 of the Act, and could be
conducted by GPU Telcom, Inc., which itself is an exempt telecommunications
company.
4 MYR also provides pipeline construction services to gas utilities
affiliated with its electric utility customers.
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electrical system wiring (both high and low voltage) for utilities(5) and
commercial and industrial facilities.
The utility-related types of C&I Services MYR provides are as follows:
- Installation of electric power substations as
large as 138KV;
- Installation of high voltage step down
transformers.
- Installation of high voltage and low
voltage facility cabling and equipment.
- Installation of switchgear, control wiring
and SCADA systems;
- Provision of on-site power generation
capabilities as large as 20 MW;
- Installation of un-interrupted power supply
systems;
- Provision of distributed generation systems
and equipment;
- Energy management services such as energy
management control systems and lighting
retrofits and replacements;
- Power plant construction services;
- Power plant environmental control equipment
installation such as SCR's and fluegas
scrubbers;
- Facility power usage monitoring and control
systems;
- Facility power quality monitoring and control
systems; and
- Service to utility's customers on an
outsourced basis, such as preventative
electrical maintenance, infrared testing and
monitoring of switch gear, and construction
and maintenance of customer owned high
voltage facilities.
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5 During 1999, MYR's C&I Services utility customers included Pacificorp, Public
Service of Colorado, Portland General Electric and Salt River Project.
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Electrical construction services, which generally involve
discrete aspects of larger construction projects performed by others, are
provided in connection with power plants, "high tech" manufacturing facilities,
"clean rooms", airports, petrochemical facilities, mining operations, prisons,
biotechnology laboratories, health care facilities, sports complexes, food
processing facilities, bottling plants, government installations, hotels,
casinos and office complexes as well as heavy mechanical construction services
involving the installation of complex piping systems and related mechanical
equipment and instrumentation for major new construction projects. For example,
MYR performed essentially all of the electrical work at the new Denver
International Airport. This work involved the procurement and installation of
all necessary electrical equipment and materials as well as runway lighting,
electrifying passenger rail transportation facilities and baggage handling
systems, garage lighting systems and all other electrical requirements for the
terminals. MYR, in conjunction with another electrical contractor in a joint
venture, performed all of the electrical work at the new Nashville arena. An MYR
subsidiary performs electrical construction and installation services at
switching stations for two major telephone companies. Certain of MYR's
subsidiaries involved in its electrical C&I work frequently bid on projects to
perform all of the required electrical construction for new sports stadiums and
facilities. This work is typically performed by the subsidiary as a
subcontractor to a general contractor. On new facilities, MYR's subsidiaries
involved in the C&I electrical construction can be responsible for the
procurement and installation of all required electrical equipment and materials
to bring the power from the nearest electrical utility access point to and
distribute it through the facility. These subsidiaries also perform extensive
upgrading of existing electrical systems in facilities such as hospitals,
universities and manufacturing plants to meet new electric power demands.
MYR provides services to the steel industry, electric utility
industry, power generation/co-generation industry, chemical industry, food
processors and other industrial customers and entail work on boiler components,
fuel and combustion systems, feedwater equipment, flue gas and air pollution
systems and other process equipment. MYR also modifies and maintains existing
systems and equipment. MYR seeks, through the performance of its C&I Services,
among other things, to enhance the energy efficiency of its customers.
In sum, MYR's Commercial and Industrial business segment
consists entirely of electrical contracting - i.e., installing conduits, cables,
switches, transformers and the like and some limited amount of mechanical and
piping installation. MYR does not lay building foundations, construct exterior
or interior walls, floors, ceilings or the like.
MYR conducts the business activities described above through one or
more subsidiaries, which operate in different
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geographical regions. Attached hereto as Exhibit J is a schedule showing the
annual revenue contributions made by each of MYR's business segments as
described above for 1996 through 1999.
As Exhibit J demonstrates, the T&D portion of MYR's
Infrastructure Services segment represents MYR's principal business activity,
and has become increasingly predominant as a percentage of MYR's gross revenues.
Indeed, MYR forecasts that T&D Infrastructure Service activities will continue
to grow to account for as much as 60% of MYR's projected gross revenues in 2003,
while C&I revenues are anticipated to fall to about 21% of 2003 gross
revenues(6).
MYR has entered into a letter of intent ("LOI") to acquire
from the two sole stockholders all of the issued and outstanding stock (5,000
shares of common stock, par value $1.00 per share) of a relatively small,
privately-held transmission and distribution electrical contracting company
located in Colorado ("T&D Co."). T&D Co. is a regional utility infrastructure
contractor engaged solely in the construction and installation of electrical
substation, transmission and distribution facilities for both investor-owned and
municipal utility systems as well as governmental entities(7). In addition, T&D
Co. constructs and installs fibre optic lines. For 1999, T&D Co.'s gross
revenues were approximately $18 million. MYR currently expects to complete its
acquisition of T&D Co. prior to GPU's acquisition of MYR. MYR intends to fund
the entire purchase price (approximately $5 million) from internal sources. In
the event, however, that the T&D Co. transaction is not completed prior to GPU's
acquisition of MYR common stock pursuant to the Tender Offer (at which time MYR
will become a subsidiary company of GPU), further authorization is hereby
requested for MYR to acquire the T&D Co. common stock for an aggregate purchase
price not to exceed $5 million.
H. MYR is also one of the top fleet operators of specialty
equipment in the United States and manages a national fleet of approximately
5,000 pieces of construction equipment including trucks, trailers, tractors,
tension stringing machines, bulldozers, bucket trucks, digger derricks and
cranes. A significant portion of this specialty equipment is used exclusively in
electric utility construction activities and similar to the equipment used by
the GPU Companies in their
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6 The substantial increase during 1997 and 1998 in Sturgon
Electric's C&I Services revenues was the result of a major commercial electrical
contracting project for the Bellagio hotel which has since been completed.
7 T&D Co.'s largest customers during 1998 (accounting for about 72%
of its gross revenues) were Bonneville Power Administration; Intermountain Rural
Electric Ass'n; M&A Electric Ass'n; Tri-State G&T ; Luke Air Force Base; Lea
County Electric; Texas-New Mexico Power; and Western Area Power Administration.
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transmission and distribution businesses. MYR is able to draw quickly on its
extensive equipment resources in order to bring the proper equipment to the
right location to meet its customers' needs. As an example, when Hurricane
George struck the southeast coast of the United States in 1998, MYR was called
upon to perform emergency utility infrastructure repair work. Within 48 hours
MYR had over 170 pieces of equipment drawn from eight different locations
working on-site to meet the critical needs of its electric utility customers.
Due to its large, national base of customers and the breadth of its operations,
MYR is able to achieve high equipment utilization rates while still assuring
that the appropriate equipment is available for critical applications.
I. MYR is one of only a few nationwide infrastructure
construction companies and is managed using a decentralized operation structure
with strong centralized corporate controls and support. This operating
philosophy allows MYR to benefit from the economies of scale and scope of a
large national organization while maintaining close contact with its local
markets. MYR's strategy includes efforts to increase business from utilities by
forming alliances which establish repeat business, in addition to capturing
outsourcing business from utilities. MYR has achieved an annual revenue growth
of just under 20% since 1995, generated principally by internal growth.
J. Every MYR utility customer has a single local contact
person. As a result, customers receive the focused attention they expect while
benefiting from the broad capability and expertise of a large national
organization.
Business Positioning of MYR
K. Through its unique combination of skills, size, people and
resources, MYR is well positioned to continue to benefit from deregulation of
the electric utility industry and growth of the telecom industry. Ongoing
deregulation in the electric utility industry has encouraged electric
distribution companies ("EDCs") to intensify their focus on competitive issues,
cost structure, return on capital and profitability. As a result, EDCs are
increasingly outsourcing a portion of their required distribution network
construction and maintenance work to reliable, cost-effective contractors.(8)
MYR's large fleet size and large, flexible workforce allow it to provide its EDC
customers with better construction services at a lower cost than they can
provide on their own. Furthermore, in emergency
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8 This trend has been discussed in numerous trade journals and
other publication. See, e.g., "The Top 600 Specialty Contractors", Energy News
Record (ENR), October 11, 1999, at pp. 58-61; "Turning to Outsiders", Utility
Business, December 1999, at pp. 53-55; "Surveying the Changing Landscape",
Electrical Contractor, January 2000, at pp. 65-74; "Energy Industry Outlook
2000", a report of PHB Hagler Bailly, at p. 14.
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situations, such as storm repair, MYR is able to quickly marshal substantial
assets from around the country to repair and restore transmission and
distribution systems. This allows the EDC to have fewer linemen and less
equipment in reserve for emergency situations.
L. In addition, merger activity among EDCs continues to
increase the size, scale and geographical coverage area of many electric
utilities. This consolidation favors outsourcing EDC construction and
maintenance to entities with better scale and capabilities than that available
from most local providers. Consequently, company-wide construction outsourcing
decisions are being made at higher levels of management where a contractor's
reputation for quality and reliability, overall resources and expertise,
geographical presence and cost advantages are paramount. MYR, with its national
presence and expansive capabilities, can offer EDC clients high quality,
flexible service at lower cost and is uniquely positioned to increase its
revenue from EDC consolidations.
M. Following Federal Energy Regulatory Commission initiatives
to modify or re-regulate the transmission segment of the utility industry, new
owners of transmission may emerge and MYR expects that they will not have major
transmission-level construction and maintenance capabilities. Transmission
construction requires unique construction skills and significant investment in
equipment. MYR's proven expertise in transmission construction and maintenance
will allow it to have a leading market share in outsourced transmission projects
in the future.
N. Deregulation of the electric utility industry has led to a
flurry of merchant power plant activity. Merchant power plants require
construction contractors with significant electrical, heavy mechanical and
transmission construction capabilities - all of which are proven, core strengths
of MYR. MYR believes it is one of the few contractors that has the capability to
perform all facets of power plant construction including turbine/piping hook up,
electrical wiring and transmission construction build-out and tie-ins.
Currently, developers and engineers source such capabilities from numerous
separate contractors. MYR believes it is well positioned to earn mechanical and
electrical construction contracts on new plants being bid. With the potential
for substantial maintenance revenue to follow, MYR expects merchant power plant
construction and maintenance to be a significant new revenue growth area over
the next several years.
O. Many utilities wish to become total energy solutions and
service providers to their customers "on both sides of the meter". In such
capacity, utilities not only deliver electricity to their customers' premises
over the utilities' own facilities, but also seek to provide additional services
by constructing, modifying, repairing or maintaining facilities owned by their
customers and located inside their customers' premises,
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to enable the customers to use energy more efficiently. However, servicing "the
other side of the meter" means that utilities will need to provide electrical
and mechanical construction services that few have the capability to provide
internally. MYR, with its strong existing utility relationships and proven
expertise in commercial and industrial construction services, is a natural
outsourcing partner to help these utilities achieve their "both sides of the
meter" objectives. This allows the utility to offer such service without having
to acquire and/or build electrical and mechanical construction capabilities.
This industry trend and opportunity highlight the natural synergies that exist
between MYR's Infrastructure Services and C&I Services businesses. MYR currently
provides outsourced electrical and mechanical services to several of its utility
alliance partners, in each case under the utility's brand name.
Indeed, this trend was highlighted as recently as February 13,
2000 in a New York Times article describing the growing trend of electric
utility companies, including GPU, First Energy, Conectiv, PECO Energy, KeySpan
Energy and Duke Energy, to acquire specialty infrastructure construction
contractors (such as MYR) in an effort to generate additional business "beyond
the meter"(9). (GPU notes in this regard that both KeySpan and PECO Energy have
indicated they intend to register under the Act in connection with their pending
mergers. Accordingly, the Commission will presumably also be asked to determine
whether these utility systems may retain their substantial electrical
construction businesses under Section 11(b)(1) of the Act.) As detailed in
Exhibit L hereto, numerous other electric utilities are engaged in and are
rapidly expanding their specialty construction businesses, which involve a
variety of electrical, mechanical, plumbing and other construction related
activities for residential, commercial and industrial customers.
P. In response to new technology and the economy's increasing
dependence on ever-expanding information services, telecom companies and
non-regulated telecommunications subsidiaries of electric utilities have
committed significant capital to build infrastructure and increase bandwidth
capacity. MYR has historically derived significant revenues from telecom
infrastructure projects and has recently formed a new subsidiary, MYRcom, in
order to increase its focus on the telecom sector. The strategic push by many
electric utility companies into telecommunications provides strategic synergies
with MYR's growing EDC outsourced services business. MYR expects to continue to
benefit from significant high growth, high margin telecom infrastructure
business into the future, as it maintains and expands its telecom company
relationships and derives more telecom related business from electric utility
clients.
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9 "In Search of Profit, Outside the Power Grid", NY Times, Section BU at
p. 4, Feb. 13, 2000.
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GPU
Q. For many years, GPU operated as a traditional, vertically
integrated electric utility holding company with operating subsidiaries that
provided generation, transmission and distribution of electricity to wholesale
and retail customers. In late 1996, Pennsylvania adopted the Consumer Choice Act
which provided for the fundamental restructuring and disaggregation of
vertically integrated electric utility systems in Pennsylvania. This was
followed in 1997 by New Jersey's adoption of an Energy Master Plan and
subsequent implementing legislation providing for the similar restructuring of
New Jersey's public utilities. In the interim, GPU successfully acquired the
PowerNet high voltage transmission system from the State of Victoria, Australia
in November 1997 as part of the Victorian Government's privatization process. In
light of these developments and the dramatic changes in the utility industry,
GPU determined to exit the generation business and reposition itself as an
"infrastructure services company" focusing almost exclusively on the delivery of
energy and its associated products and services to end use customers, rather
than on energy production or supply. In arriving at this business model, GPU
determined to lower its overall risk profile by limiting its exposure to
fluctuating power prices. It was GPU's judgment that only very large generators
with the resources to absorb these types of market risks could be successful in
this arena, and that GPU did not have sufficient size or resources to compete
successfully as a major energy supplier.
Implementing this strategy, in 1999, GPU completed the sales of
substantially all of its fossil fuel and hydroelectric generating facilities and
of the Three Mile Island Unit 1 nuclear station; GPU also entered into
agreements to sell its one remaining nuclear power plant. As a result, GPU has
completed the process of converting itself from a vertically integrated electric
utility to a "horizontal" enterprise focused on one line of business -- the
provision of reliable energy delivery services to its customer base. As an
integral part of its new core business, GPU must pursue opportunities that would
both enhance its current position in the infrastructure services area, and
provide opportunities for growth in areas functionally related to its core
business activity.
An infrastructure company, as GPU envisions it, is one
focusing exclusively on energy delivery and the services and products, such as
telecommunications and electrical contracting which naturally complement such
delivery, rather than the production or supply of energy. In GPU's case, this
necessarily means providing not only the traditional electric delivery services,
but also meeting customer "demand" on the "other side of the meter" by extending
GPU's service business past the point of delivery and directly into the
customer's facility. Servicing the other side of the meter is a natural
outgrowth and evolution of the delivery of electric energy. Indeed, as Exhibit L
to the Application demonstrates, a number of other electric
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utilities are already engaged in these or similar activities. GPU believes that
in order for it to succeed as a "horizontal" delivery service business, it is
vital that it be able to extend its reach to end use customers by servicing
their "demand" side requirements. In other contexts, the Commission has
expressly recognized industry trends and competitive pressures which make it
important for registered system companies to be able to compete with other
utilities not subject to the Act in new markets as they are created (see, e.g.,
Entergy Corp. HCAR No. 26812, Jan. 6, 1998; SEI Holdings, Inc., HCAR No. 26581,
Sept. 26, 1996; and Release No 35-2667 Feb. 14, 1997, at note 65, adopting Rule
58 under the Act). GPU has determined that by acquiring MYR, it will better
position GPU and its regulated domestic utility transmission and distribution
operating subsidiaries -- JCP&L, Penelec and Met-Ed -- to serve their customers
more effectively and to implement their business strategy, which is to devote
their full resources to developing an infrastructure services business.
R. In response to the requests of state regulators and the
needs of its customer base, GPU has recently announced its commitment to spend
an additional $40-50 million over the next two years to improve reliability and
enhance the distribution services of the GPU network. GPU believes that its
position as an infrastructure company, particularly with respect to the
maintenance of a reliable transmission and distribution system, is a necessary
growth area. The acquisition of MYR presents GPU with a unique opportunity both
to address the GPU System's existing reliability concerns and to position GPU
and its subsidiaries to compete in today's energy services market. The
acquisition will enable GPU to enhance its existing infrastructure support
capacity and to offer more reliable services to its customers immediately,
without the need slowly (and less efficiently) to expand internally.
Importantly, the addition of MYR to the GPU System will enable JCP&L, Met-Ed and
Penelec to take advantage of MYR's variable work force. This will permit the GPU
utility subsidiaries to reduce the costs of maintaining a full time work force
to meet peak demands and rely, instead, on MYR to provide the necessary
resources to meet system emergencies and high activity periods. In sum, MYR is a
fully integrated infrastructure services operation which fits well within GPU's
business plans.
S. Following its acquisition by GPU, MYR will provide
Infrastructure Services to JCP&L, Penelec and Met-Ed. While GPU would, of
course, be able to outsource these services, GPU has determined that the MYR
acquisition will be a far more effective way to meet the needs of GPU customers
and GPU investors. For example, ownership of MYR will assure that the GPU System
will have first priority access to the MYR Infrastructure Services during times
of high demand, such as after storms and during heatwaves, and will thus be able
to address its system reliability concerns in a timely fashion. The MYR
acquisition will also afford GPU investors an important new source of revenues
and an
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opportunity for growth and profits and will provide GPU with personnel having an
understanding of the pricing, marketing and management of competitive utility
services and the management of a variable work force. With its conversion from a
vertically integrated utility to an infrastructure service enterprise,
development of non-rate regulated service businesses has become the keystone in
GPU's strategy to compete successfully in the changing energy industry. There
are substantial synergies between the services MYR offers and the services and
the needs of the GPU System. MYR provides services in areas where GPU has
recognized the need to enhance its infrastructure service capabilities.
T. JCP&L, Penelec and Met-Ed have in the past used, are
presently using, and fully expect in the future to continue to make use of, the
MYR services. If GPU is successful in ultimately acquiring MYR, MYR would
continue to offer its Infrastructure Services and C&I Services both to the GPU
System and on a nationwide basis. While GPU cannot now estimate the full extent
to which MYR would provide Infrastructure Services to GPU's utility
subsidiaries, GPU anticipates that the level of such services would continue to
increase over time as MYR begins to augment GPU's emergency restoration efforts
and provide other seasonal services. Furthermore, as part of the GPU System, MYR
could more readily provide both Infrastructure Services and C&I Services within
the GPU service territory and the surrounding service territories. All services
provided by MYR to affiliates within the GPU System will be provided at cost
pursuant to Rules 90 and 91 under the Act except to the extent the Commission
may grant an exemption from such rules or as otherwise provided in the Act. All
services provided to non-affiliates would be offered at market-based rates.
Statutory Analysis
U. The MYR acquisition satisfies the standards of Section 10
of the Act, including, in particular, Section 10(c)(1) which requires that the
acquisition of an interest in a business not be "detrimental to the carrying out
of the provisions of Section 11" of the Act. Section 11(b)(1), in turn, directs
the Commission to limit the retention by registered holding companies of
non-utility businesses to those that are "reasonably incidental, or economically
necessary or appropriate" to the utility operations, including non-utility
businesses which are "necessary or appropriate in the public interest or for the
protection of investors or consumers and not detrimental to the proper
functioning" of the holding company system. The Commission has interpreted these
statutory provisions to require that the acquisition by a registered holding
company of a non-utility business bear a "functional relationship" to the
utility operations. See Jersey Central Power & Light Company, HCAR No. 24348
(March 18, 1987); Southern Company, HCAR No. 26211 (December 30, 1994). Previous
Commission orders provide ample precedent for GPU's proposed acquisition of MYR.
There follows an analysis of the Commission's prior orders authorizing: (1)
activities which
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<PAGE>
appear to be identical in many respect or at least substantially similar to
MYR's Infrastructure Services and C&I Services; (2) services which use expertise
developed over the course of utility operations; and (3) activities where the
Commission has permitted the provision of services which represent "excess
capacity".
Similar Activities
V. The Commission has previously authorized registered holding
companies to engage in activities which are similar to those offered by MYR. For
instance, in New England Electric System, HCAR No. 26681 (Mar. 7, 1997)
("NEES"), the Commission permitted NEES to offer, among other things,
transmission line services, maintenance and construction services and mechanical
and repair services. Expanding on a 1992 order (HCAR No. 25621), the Commission
granted NEES permission to perform "electrical related services (designing,
engineering, assisting in licensing and permitting, procuring materials and
equipment, and installing, removing or constructing electrical related
materials)(10). The authorized activities would include installing "electrical
poles, insulated wire, metering equipment [and] turnkey installation service for
small generators, as well as "high voltage duct current work" which the
Commission determined to be "functionally related" to NEES's utility operations.
These activities are either identical or substantially similar to MYR's
Infrastructure Services and C&I Services. Similarly, in the New Century Energies
merger order (HCAR No. 26748 (Aug. 1, 1997)), the Commission permitted New
Century to retain a business which, among other things, provides services
related to power plant and cooling
- -------------------
10 Applicants note that the revenues derived from certain of the activities
authorized in the NEES order (i.e., other than high voltage, direct current
work) were subject to a 50% limitation on revenues earned from services
performed outside of the system service territories and surrounding areas.
Applicants submit that such a limitation is no longer appropriate in light of
the Commission's current policy to move away from such limitations. Indeed, the
Commission has in recent years removed the 50% limitation initially imposed on
non-utility subsidiaries or simply not imposed it at all. In Eastern Util.
Assocs., HCAR No. 26232 (Feb. 15, 1995) the Commission removed a 50% revenue
limitation applicable to a non-utility subsidiary for a number of reasons which
also apply to the MYR acquisition: the subsidiary was financially healthy, the
services offered by the subsidiary provided significant benefits to system
consumers and the expansion would not have an adverse effect on system
consumers, nor would it divert management time and attention away from core
utility operations. In more recent orders, such as the Cinergy and Interstate
orders discussed below, the Commission has authorized nonutility subsidiaries to
engage in activities without imposing a revenue limitation.
- 14 -
<PAGE>
tower construction, and collects, processes and sells scrap metal by-products of
utility operations. We also note that the Commission has permitted at least one
registered holding company system to provide "engineering, design, construction,
construction management, operation, maintenance and other services" to
independent power production facilities, whether or not affiliated. The Southern
Company (HCAR Nos. 35-24476, Oct. 20, 1987; and 35-262212, Dec. 30, 1999).
Again, while each aspect of these services may not be precisely the same as the
services which MYR offers, these orders nonetheless demonstrate that the
Commission will authorize registered holding company systems to engage in
business activities, substantially identical to MYR's Infrastructure Services
and C&I Services, and which are reasonably related to the utility's core
business.
W. In Interstate, Cinergy and Conectiv, the Commission
permitted the applicants to engage in activities which, in accordance with
Section 11, bear a functional relationship to traditional utility activities.
MYR's activities and GPU's core utility business also share an even closer
relationship - both are primarily devoted to construction and maintenance of
electric utility transmission and distribution systems and related energy
delivery services. MYR's business activities are no less "functionally related"
to the GPU System's core utility business, as it has now been reconstituted,
than these HVAC and related activities are to Interstate's, Cinergy's and
Conectiv's utility businesses. In short, the Infrastructure Services and C&I
Services represent less of a departure from traditional utility operations than
do the HVAC mechanical and plumbing activities the Commission has authorized in
the Interstate, Cinergy and Conectiv orders. Commission authorization of GPU's
acquisition of MYR would therefore be entirely consistent with the Interstate,
Cinergy and Conectiv decisions.
X. Other Commission decisions are also relevant on this score.
In Interstate Energy Corp., HCAR No. 27069 (Aug. 26, 1999) ("Interstate"), the
Commission authorized Alliant Energy Resources, Inc. to offer internationally
services which are similar to MYR's Infrastructure Services and C&I Services
and, in some cases, extending even beyond these Services. These authorized
services include "the design, construction, installation, testing, sales and
maintenance of new and retrofit heating, ventilating, and air conditioning
("HVAC"), electrical and power systems, alarm and warning systems, motors,
pumps, lighting, water, water-purification and plumbing systems, and related
structures, in connection with energy-related needs". In an earlier order, the
Commission also permitted the construction and maintenance of similar systems by
a registered holding company subsidiary. See Cinergy Corp., HCAR No. 26662 (Feb.
7, 1997) ("Cinergy") (permitting subsidiary to offer, among other things, energy
management services related to the "design, management or direct construction
and installation of new and retrofit heating, ventilating, and air conditioning
("HVAC"), electrical and power systems, motors, pumps, lighting, water and
plumbing systems, and
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<PAGE>
related structures". And, more recently, in Conectiv (HCAR No. 26832, Feb. 25,
1998), the Commission permitted Conectiv to retain a subsidiary involved in the
design, construction and installation, and the maintenance of new and retrofit
heating, ventilating and air conditioning ("HVAC") electrical and power systems,
motors, pumps, lighting and plumbing systems and related structures...."
Y. The fact is, however, that MYR's Infrastructure Services
are much more than tangentially related to the GPU System's core utility
business. Indeed, they represent the core of the GPU System's current business
activities. The business of offering such core services to non-affiliates is a
natural and necessary outgrowth of GPU's current operations and fits squarely
within its business strategy. Just as important, development of enhanced
infrastructure and energy-related service resources is essential to maintaining
and enhancing GPU's ability to serve its utility customers and address their
reliability needs.
Utility Expertise
Z. There have also been a number of instances where the
Commission has authorized registered holding companies to provide to third
parties "consulting" services, which offer management, technical and training
services that draw on the expertise developed by the holding company's operating
subsidiaries for use within their own systems. This line of Commission precedent
evidences the Commission's response to industry change reflecting the utility
industry's movement from the traditional production and distribution functions
to more broadly based competitive energy services business. See American
Electric Power Co., HCAR No. 22468 (Apr. 21, 1982) (management, technical and
training services); Southern Co., HCAR No. 22132 (Jul. 17, 1981) (same). In
these orders, the Commission has recognized that full utilization of the
utility's development of various management, technical and training services
would not be detrimental to the interests protected by the Act.
AA. The GPU System has over 50 years of experience performing
infrastructure services on an intrasystem level, just as these other utilities
had experience offering intrasystem consulting services before receiving
Commission authorization to offer such services to non-affiliates. GPU's
acquisition of MYR represents an enhancement of the transmission and
distribution type services which is the GPU System's core utility business
activity, as well as an extension of these activities into electrical services
which are integrally related to these activities. GPU's' expertise in these
areas is derived from its core utility activities; MYR's business is within the
"functionally related" parameters the Commission has already established for the
acquisition of other necessary related or incidental business activities under
Section 11(b)(1) of the Act.
- 16 -
<PAGE>
Excess Capacity
BB. In another category of orders, the Commission has
authorized registered holding companies to provide a variety of energy
management, consulting or other goods and services to non-affiliates where the
relevant expertise had originally been developed by the utility system and
"excess capacity" was available. These orders are relevant to GPU's acquisition
of MYR inasmuch as many of the services MYR will market to third parties are
those which have been developed by the GPU System which will be in excess of the
system's needs. For example, in Southern Co., HCAR No. 26211 (Dec. 30, 1994),
the Commission authorized Southern to develop a communications system to service
both system companies and non-affiliates. In another "excess capacity" case,
Consolidated Natural Gas ("CNG") obtained permission to expand the scope of
authorized services that its non-utility subsidiary could provide. Consolidated
Natural Gas Co., HCAR No. 26757 (Aug. 27, 1997). There, the applicants stated in
support of their request that the additional services "will lead to increased
and more efficient utilization of existing [utility company] personnel and
facilities and additional revenues to offset the cost of maintaining such
personnel and facilities."
CC. These "excess capacity" cases involved the sale to
non-affiliates of excess capacity that had initially been developed by the
registered holding company. While GPU's proposed acquisition of MYR involves the
acquisition of "excess capacity" at times, GPU will require MYR's resources for
its own utility purposes. This acquisition will eliminate the need to develop
such capacity internally, which would then ultimately be marketed to third
parties. Moreover, internal development would, as noted, be slow and inefficient
and would likely leave GPU with "excess capacity" (required to meet its own peak
needs) that could not be effectively marketed to non-affiliates due to a lack of
the necessary "critical mass" of personnel and resources. In addition, these
excess capacity cases clearly indicate that the Commission has recognized that
the sale of excess utility goods and services by registered holding companies is
permissible within the parameters of the Act.
Evolving Commission Perspective
DD. The Commission orders discussed above indicate that, over
time, the Commission has recognized the progression of the utility industry to
one with increasing emphasis on energy management, competition and
diversification. Indeed, as observed in the Division of Investment Management's
("Division") 1995 Report on the Regulation of Public Utility Holding Companies
("1995 Report"), the Commission's administration and interpretation of Section
11(b)(1) has likewise evolved.
The SEC's administration and interpretation of
section 11 has also progressed through the years to
attempt to meet the needs of the
- 17 -
<PAGE>
changing utility industry, from strict construction of the
statutory requirements in light of the original goals of the
Act, to more flexible interpretation to reflect the increasing
effectiveness of state regulation and the growing obsolescence
of the utility as purely a local monopoly.(11)
EE. Additionally, in its discussion of Rule 58 in the 1995 Report,
the Division recommended
a more flexible interpretation of the provisions of the Act
concerning diversification [for diversified activities that
fall outside the scope of Rule 58]. Specifically, the Division
contemplates an interpretation of the language of Section
11(b)(1) that would allow registered holding companies to
engage in non-utility businesses that are economically
appropriate and in the public interest, regardless of whether
such activities are ancillary to the utility business.
(citations omitted).(12)
FF. Thus, given the general trend toward a more flexible,
broader interpretation of the functional relationship test and based on the
precedent discussed in this Application, the Commission should authorize GPU's
acquisition of MYR.
GG. Rule 54 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 exempt wholesale
generations ("EWGs") and foreign utility companies ("FUCOs"). At December 31,
1999, GPU's average consolidated retained earnings was approximately $2.416
billion, and GPU's aggregate investment in EWGs and FUCOs was approximately
$2.172 billion. Accordingly, under the November 5 Order, GPU may invest up to an
additional $244 million in EWGs and FUCOs as of December 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:
- -------------------
11 1995 Report at pp. 81-82.
12 1995 Report at p. 91.
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<PAGE>
(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 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
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<PAGE>
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.
(iii) Copies of this Application 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.(13) 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 $2.146 billion) represented an
increase of approximately $49 million (or
approximately 2%) in the average consolidated
retained earnings for the previous four quarterly
periods (approximately $2.367 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, 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
- -------------------
13 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.
- 20 -
<PAGE>
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
Application. The transactions would not, by themselves, or even when 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.
At December 31, 1999, GPU's common equity and debt represented
30.2% and 66.2% respectively, of its consolidated capitalization. As set forth
in Exhibit H-1 hereto, GPU expects its common equity ratio to increase during
2000 to approximately 35% of consolidated capitalization, principally as a
result of the planned sale of certain FUCO investments. 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.(14)
GPU's consolidated retained earnings grew on average
approximately 6.5% per year from 1994 through 1999. Earnings attributable to
GPU's investments in EWGs and FUCOs have contributed positively to consolidated
earnings,
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.
- -------------------
14 The first mortgage bonds of GPU's public utility subsidiaries--Penelec,
JCP&L and Met-Ed -- are rated A+ by Standard & Poors Corporation, and A2, Baa1
and A3, respectively, by Moody's Investor Services, Inc.
- 21 -
<PAGE>
Reference is made to Exhibit H-1 filed herewith which sets
forth GPU's consolidated capitalization at December 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.
II. Item 3 thereof is hereby amended to read in its entirety as follows:
Item 3. Applicable Statutory Provisions.
Sections 6(a), 7, 9(a), 10, 11(b)(1), 12 and 13(b) of the Act
and Rules 51, 54, 90 and 91 thereunder are applicable to the transactions
proposed herein.
II. The following exhibits are filed under Items 6(a) thereof:
H-1 - GPU Capitalization and Capitalization Ratios as at
December 31, 1999, actual and pro forma.
J - Schedule of MYR revenues by business activity.
K - Schedule of Forecast MYR Revenues - Applicants are
filing this exhibit with a request for confidential
treatment pursuant to Rule 104.
L - List of Electric Utilities Engaged in Electrical
Construction or Contracting or Similar Businesses.
- 22 -
<PAGE>
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE PUBLIC UTILITY HOLDING
COMPANY ACT OF 1935, THE UNDERSIGNED COMPANIES HAVE DULY CAUSED THIS STATEMENT
TO BE SIGNED ON THEIR BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
GPU, INC.
By: /s/ T. G. Howson
----------------
T. G. Howson, Vice President
and Treasurer
GPX ACQUISITION CORP.
By: /s/ T. G. Howson
----------------
T. G. Howson, Treasurer
Date: March 6, 2000
- 23 -
EXHIBITS TO BE FILED
Exhibits:
H-1 - GPU Capitalization and Capitalization Ratios as at
December 31, 1999, actual and pro forma.
J - Schedule of MYR revenues by business activity.
L - List of Electric Utilities Engaged in Electrical
Construction or Contracting or Similar Businesses.
EXHIBIT H-1
Page 1 of 3
<TABLE>
GPU, INC. CONSOLIDATED
ACTUAL AND PRO FORMA
CAPITALIZATION
(IN THOUSANDS)
<CAPTION>
The actual and pro forma
capitalization of GPU, Inc. and
Subsidiary Companies at
December 31, 1999 is as follows:
Actual Pro Forma (1)
Amount % Amount %
<S> <C> <C> <C> <C>
Long-term debt $6,420,910 56.0% $5,365,228 56.5%
Notes payable 1,171,869 10.2% 375,832 4.0%
Trust preferred securities 200,000 1.7% 200,000 2.1%
Subsidiary-oblidgated mandatorily redeemable
preferred securities 125,000 1.1% 125,000 1.3%
Preferred stock 96,649 0.8% 96,649 1.0%
Common Equity 3,464,953 30.2% 3,339,953 35.1%
Total $11,479,381 100.0% $9,502,662 100.0%
(1) Reflects the following adjustments:
(a) The sale in April 2000 of GPU Powernet and GPU Gasnet for their book
value of $2,389 million (which amount includes the related acquisition
and other debt).
(b) GPU's acquisition of MYR Group Inc., for $225 million (including $10
million for estimated transaction costs) in cash for which
authorization is being sought in SEC File No. 70-9599.
(c) The issuance through a JCP&L affiliate of asset securitization bonds
for $587 million in the third quarter of 2000.
(d) GPU common stock repurchases of up to $125 million from time to time as
subject to favorable market conditions following the sale of the
Australian assets.
</TABLE>
<TABLE>
EXHIBIT H-1
Page 2 of 3
<CAPTION>
GPU ENERGY SUBSIDIARIES
ACTUAL AND PRO FORMA CAPITALIZATION
(IN THOUSANDS)
The actual and pro forma
capitalization of JCP&L, Met-Ed, and
Penelec Companies at
December 31, 1999 are as follows:
JCP&L
Actual Pro Forma (1)
Capitalization Amount % Amount %
<S> <C> <C> <C> <C>
Long-term debt $1,173,773 42.2% $1,561,773 52.6%
Notes payable - 0.0% - 0.0%
Trust preferred securities - 0.0% - 0.0%
Subsidiary-oblidgated mandatorily redeemable
Preferred securities 125,000 4.5% 125,000 4.2%
Preferred stock 96,649 3.5% 96,649 3.3%
Common Equity 1,385,367 49.8% 1,185,367 39.9%
Total $2,780,789 100.0% $2,968,789 100.0%
(1) - Includes the Asset Securitization Issuance of
$587 million less a paydown on debt of $199
million.
</TABLE>
<TABLE>
EXHIBIT H-1
Page 3 of 3
<CAPTION>
Met-Ed
Actual Pro Forma
Capitalization Amount % Amount %
<S> <C> <C> <C> <C>
Long-term debt $546,908 47.6% $596,908 52.0%
Notes payable - 0.0% 105,000 9.1%
Trust preferred securities 100,000 8.7% 100,000 8.7%
Subsidiary-oblidgated mandatorily redeemable
preferred securities - 0.0% - 0.0%
Preferred stock - 0.0% - 0.0%
Common Equity 501,417 43.7% 346,417 30.2%
Total $1,148,325 100.0% $1,148,325 100.0%
Penelec
Actual Pro Forma
Capitalization Amount % Amount %
<S> <C> <C> <C> <C>
Long-term debt $424,654 40.9% $474,654 45.7%
Notes payable 53,600 5.2% 148,600 14.3%
Trust preferred securities 100,000 9.6% 100,000 9.6%
Subsidiary-oblidgated mandatorily redeemable
preferred securities - 0.0% - 0.0%
Preferred stock - 0.0% - 0.0%
Common Equity 461,182 44.4% 316,182 30.4%
Total $1,039,436 100.0% $1,039,436 100.0%
</TABLE>
EXHIBIT J
Page 1 of 2
<TABLE>
MYR Group Inc
Segment Revenues
($000's)
1996 - 1999
<CAPTION>
Transmission Traffic Commerical/ Consolidated
1999 - Preliminary & Distribution Telecomm Signalization Industrial
<S> <C> <C> <C> <C> <C>
Myers 126,569 2,911 - - 129,480
MYRcom - 4,600 - - 4,600
Hawkeye 9,750 - - - 9,750
Harlan 48,970 - 4,288 - 53,258
Power Piping - - - 17,650 17,650
Sturgeon 74,256 24,026 11,018 114,422 223,722
D.W. Close - - 2,049 28,481 30,530
ComTel - 10,982 - - 10,982
Contract Revenue $259,545 $42,519 $17,355 $160,553 $479,972
Transmission Traffic Commerical/ Consolidated
1998 & Distribution Telecomm Signalization Industrial
<S> <C> <C> <C> <C> <C>
Myers 92,379 2,857 - - 95,236
Hawkeye 12,849 - - - 12,849
Harlan 46,263 - 4,169 - 50,432
Power Piping - - - 22,418 22,418
Sturgeon 52,440 22,418 9,228 151,308 235,394
D.W. Close - - 2,544 33,591 36,135
ComTel - 6,879 - - 6,879
Contract Revenue $203,931 $32,154 $15,941 $207,317 $459,343
<PAGE>
EXHIBIT J
Page 2 of 2
Transmission Traffic Commerical/ Consolidated
1997 & Distribution Telecomm Signalization Industrial
<S> <C> <C> <C> <C> <C>
Myers 76,441 2,361 - - 78,802
Hawkeye 16,088 - - - 16,088
Harlan 52,406 - 3,921 - 56,327
Power Piping - - - 23,115 23,115
Sturgeon 48,797 21,637 6,438 157,352 234,224
D.W. Close * - - 1,212 15,317 16,529
ComTel - 6,191 - - 6,191
Contract Revenue $193,732 $30,189 $11,571 $195,784 $431,276
* Includes revenue since
acquisition date of May 1,
1997.
Transmission Traffic Commerical/ Consolidated
1996 & Distribution Telecomm Signalization Industrial
<S> <C> <C> <C> <C> <C>
Myers 74,246 1,515 - - 75,761
Hawkeye 16,401 - - - 16,401
Harlan 58,039 - 2,244 - 60,283
Power Piping - - - 20,055 20,055
Sturgeon 28,210 13,604 4,772 87,975 134,561
ComTel - 3,516 - - 3,516
Contract Revenue $176,896 $18,635 $7,016 $108,030 $310,577
</TABLE>
Exhibit L
Page 1 of 7
<TABLE>
<CAPTION>
Electric Utility Name of Entity Acquired Type of Construction Services
or Subsidiary Engaged in
Construction Services
<S> <C> <C>
Conectiv Conectiv Services, Inc. Full service heat ventilation and air
conditioning ("HVAC") construction
business.
Conectiv Thermal Systems Develops, constructs, and operates
thermal energy systems which provide
heating, cooling, and other energy
services to large commercial,
industrial, and institutional
customers.(1)
Duke Energy Duke Engineering & Specializes in energy and environmental
Corporation Services, Inc. projects and provides comprehensive
engineering, quality assurance,
project and construction management
and operating and maintenance
services for all phases of
hydroelectric, nuclear and
renewable power generation projects
worldwide.
Duke/Fluor Daniel Operating through several entities,
provides full service siting,
permitting, licensing, engineering,
procurement, construction, start-up,
operating and maintenance services for
fossil-fired plants.(2)
- -------------------
1 Annual Report of Conectiv on Form 10-K for the Year 1998.
2 Annual Report of Duke Energy Corporation on Form 10-K for the Year 1998.
<PAGE>
Exhibit L
Page 2 of 7
Electric Utility Name of Entity Acquired Type of Construction Services
or Subsidiary Engaged in
Construction Services
<S> <C> <C>
Duke Energy DukeSolutions, Inc. Provides integrated energy solutions to
Corporation industrial, commercial, institutional,
governmental and wholesale customers
and focuses on increasing customers'
efficiency, productivity and
profitability through energy
cost savings.
Edison International G. H. V. Refrigeration, Engages in the business of providing
Inc. refrigeration/HVAC operations,
maintenance and installations.
Mission Energy Provides construction services.(3)
Construction Services,
Inc.
Unisource Energy Southwest Energy A wholly-owned, indirect subsidiary
Corporation Solutions of Unisource Energy Corporation,
providing energy support services
to retail electric customers including
lighting equipment, service
Tucson Electric Power restoration, design engineering and
Corporation construction services.(4)
- -------------------
3 Annual Report of Edison International on Form 10-K for the Year 1998.
4 Annual Report of Unisource Energy Corporation on Form 10-K for the Year 1998.
<PAGE>
Exhibit L
Page 3 of 7
Electric Utility Name of Entity Acquired Type of Construction Services
or Subsidiary Engaged in
Construction Services
<S> <C> <C>
CMP Group, Inc. Union Water Power Company Provides management of rivers and
recreational facilities, locating of
underground utility facilities and
Central Maine infrared photography, real estate
Power Company brokerage and management, modular
housing, engineering and
environmental services, integrated
energy solutions and utility
construction services.(5)
Tampa Electric Company Power Engineering & A wholly-owned subsidiary of Tampa
Construction, Inc. Electric Company, engaged in engineering
and construction services.(6)
MDU Resources Connolly-Pacific Corp. Provides marine construction
services.(7)
Knife Corporation Knife Corporation, through its wholly
owned subsidiary, KRC Holdings, Inc.,
operates construction materials and
mining businesses in Alaska, California,
Oregon and Hawaii.(8)
Harp Line Constructors Provides various construction and
and Harp Engineering, engineering services to electric,
Inc. natural gas and telecommunication
utilities.(9)
- -------------------
5 Annual Report of CMP Group, Inc. on Form 10-K for the Year 1998.
6 Annual Report of Tampa Electric Company on Form 10-K for the Year 1998.
7 Proxy Statement of MDU Resources, dated February 14, 2000.
8 Annual Report of MDU Resources on Form 10-K for the Year 1998.
9 Current Report of MDU Resources on Form 8-K, dated July 7, 1998.
<PAGE>
Exhibit L
Page 4 of 7
Electric Utility Name of Entity Acquired Type of Construction Services
or Subsidiary Engaged in
Construction Services
<S> <C> <C>
MDU Resources Morse Bros., Inc. and Construction materials companies.
S2-F Corp.
International Line Install and repair electric transmission
Builders, Inc. and High and distribution lines and provide
Line Equipment related construction supplies and
equipment.
Northwestern Corp. Blue Dot Services, Inc. Provides maintenance, repair and
replacement services for HVAC, plumbing
and other related systems.(10)
Teco Energy, Inc. Bosek, Gibson & Provides engineering, construction
Associates management and energy services to more
than 300 customers, including public
schools, universities and other
governmental facilities.(11)
KeySpan Energy Paulus, Sokolowski & Engineering-consulting work.
KeySpan Services, Inc. Sartor, Inc.
WDF, Inc. Plumbing and mechanical contracting.
Roy Kay, Inc. Specializes in mechanical contracting as
well as HVAC services.(12)
- -------------------
10 Annual Report of Northwestern Corp. on Form 10-K for the Year 1998.
11 Annual Report of Teco Energy, Inc. on Form 10-K for the Year 1998.
12 KeySpan Energy Subsidiary Acquires Three Companies, PR Newswire
(February 4, 2000).
<PAGE>
Exhibit L
Page 5 of 7
Electric Utility Name of Entity Acquired Type of Construction Services
or Subsidiary Engaged in
Construction Services
<S> <C> <C>
PECO Chowns Communications Provides contracting services in
telecommunications.
Exelon Infrastructure Fischbach & Moore Works on commercial and industrial
Services Electric infrastructure, telecommunications
and utility projects.
MRM Technical Group Gas contracting firm.
OSP Consultants Inc. Provides engineering and design
services, construction-related services,
craft services and project management.
Syracuse Merit
Electric Provides industrial and commercial
contracting services.
Trinity Industries Underground utility contractor.(13)
Semco Energy Semco Energy Ventures Gas engineering, pipeline construction
services, propane distribution,
intrastate pipelines and natural gas
storage.(14)
- -------------------
13 PECO's Exelon Buys 6 Contractors in Utility, Telecom Infrastructure, Energy
Services & Telecom Report (November 4, 1999).
14 Dr. Jack Albertine Named to Semco Energy Board of Directors, PR Newswire
(January 18, 2000).
<PAGE>
Exhibit L
Page 6 of 7
Electric Utility Name of Entity Acquired Type of Construction Services
or Subsidiary Engaged in
Construction Services
<S> <C> <C>
PSEG Energy Holdings Thomas H. Barham Company Specializes in pharmaceutical,
educational, medical and correctional
facility mechanical construction.
PSEG Energy Arden Engineering Mechanical service contractor.
Technologies Constructors of Rhode
Island
Frank A. McBride Co. Mechanical service contractor.
Struble Air Specializes in commercial, industrial
Conditioning and institutional mechanical service
work.
Fluidics Mechanical service contractor.(15)
PP&L Resources Western Massachusetts Mechanical contracting group which
Holdings provides construction, maintenance
and technical services.
Burns Mechanical Mechanical contracting group.(16)
- -------------------
15 PSEG Energy Technologies Acquires Thomas H, Burham Co., PR Newswire
(January 6, 2000).
16 PP&L Buys Western Mass. Holdings, Expanding Presence in New England, Energy
Services & Telecom Support (July 29, 1999).
<PAGE>
Exhibit L
Page 7 of 7
Electric Utility Name of Entity Acquired Type of Construction Services
or Subsidiary Engaged in
Construction Services
<S> <C> <C>
Utilicorp United Quanta Services Utilicorp owns a 28% share of Quanta
Services, which performs construction
and maintenance of wire, cable, fiber
and pipeline networks.(17)
FirstEnergy Corp. Dubar Mechanical Inc. Mechanical contractor.
L.H. Cranston & Sons Electrical and mechanical contractor.
Webb Technologies Refrigeration and HVAC contractor.(18)
- -------------------
17 Utilicorp Banks On Networks, Energy Services, Megawatt Daily
(January 14, 2000).
18 First Energy Buys 3 Companies, The Oily Daily (January 7, 1999).
</TABLE>
