Post-Effective Amendment No. 1 to
SEC File No. 70-8937
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM U-1
DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 ("Act")
GPU, Inc. ("GPU")
GPU SERVICE, INC. ("GPUS")
300 Madison Avenue
Morristown, New Jersey 07960
GPU INTERNATIONAL, INC., ("GPUI")
One Upper Pond Road
Parsippany, New Jersey 07054
(Name of company filing this statement and address
of principal executive offices)
GPU, INC.
(Name of top registered holding company parent of Applicants)
T. G. Howson, Douglas E. Davidson, Esq.
Vice President and Treasurer Thelen Reid & Priest LLP
M. J. Connolly, 40 West 57th Street
Vice President - Legal New York, New York 10019
S. L. Guibord, Secretary
GPU Service, Inc.
300 Madison Avenue
Morristown, New Jersey 07960
(Names and addresses of agents for service)
<PAGE>
GPU, GPUS and GPUI hereby post-effectively amend their application on Form
U-1, docketed in SEC File No. 70-8937, as heretofore amended as follows:
A. By orders dated April 10, 1997 (HCAR No. 26702) and March 26, 1997
(HCAR No. 26694) (the "Orders"), the Commission, among other things, authorized
GPU, through December 31, 2000, to guarantee the debt of each of their direct
and indirect subsidiaries that engage in brokering and marketing of electricity,
natural gas and other energy commodities throughout the United States ("Energy
Subsidiaries") pursuant to Rule 58 under the Act. The guarantees may take the
form of bid bonds or performance or other direct or indirect guarantees of
contractual or other obligations. The maximum amount of debt and other
obligations proposed to be guaranteed at any one time is $150 million.
B. The Orders also authorize GPU and GPUI to invest, through December 31,
2000, in the aggregate no more than $20 million in the energy commodities
business either by the acquisition of securities or by making capital
contributions to existing subsidiaries of GPU and/or GPUI. The energy
commodities business includes the brokering and wholesale and retail marketing
of various energy commodities (including, but not limited to, electricity, gas,
oil, natural gas and coal) anywhere in the United States.
C. GPU and GPUI now request an extension of time during which GPU may
guarantee the debt of the Energy Subsidiaries and GPU and GPUI may invest in the
energy commodities business until December 31, 2003.
D. In all other respects, the transactions as heretofore authorized
by the Commission in this docket would remain unchanged.
E. Rule 54 Analysis.
(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 June 30, 2000, GPU's
average consolidated retained earnings was approximately $2.4 billion and GPU's
aggregate investment in EWGs and FUCOs was approximately $1.8 billion.
Accordingly, under the November 5 Order, GPU may invest up to an additional $614
million in FUCOs and EWGs as of June 30, 2000.
(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.
<PAGE>
(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 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
2
<PAGE>
will provide the Commission on request copies of such
materials as are made available to GPU and its
subsidiaries. If and to the extent that such entity's
books, records or financial statements are not
maintained in accordance with GAAP, GPU will, upon
request of the Commission, describe and quantify each
material variation therefrom as and to the extent
required by subparagraphs (a) (2) (iii) (A) and (a) (2)
(iii) (B) of Rule 53.
(ii) No more than 2% of GPU's domestic public utility
subsidiary employees will render any services, directly or
indirectly, to any EWG and FUCO in which GPU directly or indirectly
holds an interest.
(iii) Copies of this Declaration 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.(1) In addition, GPU will
submit to each such commission copies of any amendments to this
Declaration and 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.
(B) GPU's average consolidated retained earnings for the
four most recent quarterly periods (approximately $2.44 billion)
represented a decrease of approximately $13.7 million (or
approximately .5%) compared to the average consolidated retained
earnings for the previous four quarterly periods (approximately
$2.45 billion). The decrease in retained earnings
-------------------
1 One of GPU's operating subsidiaries, the Pennsylvania Electric Company
("Penelec"), is also subject to retail rate regulation by the New York Public
Service Commission with respect to retail service to approximately 3,700
customers in Waverly, New York served by Waverly Electric Power & Light Company,
a Penelec subsidiary. Waverly Electric's revenues are immaterial, accounting for
less than 1% of Penelec's total operating revenues.
3
<PAGE>
results primarily from a non-recurring loss of $295 million, after
tax, from the sale during the second quarter of 2000 of GPU
PowerNet, which provides transmission services in the State of
Victoria, Australia.
(C) GPU did not incur operating losses from direct or
indirect investments in EWGs and FUCOs in 1999 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 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 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.
At June 30, 2000, GPU's common equity and debt represented 31.4% and
68.6%, respectively, of its consolidated capitalization, as set forth in
Exhibit H hereto. 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.(2)
-------------------
2 The first mortgage bonds of GPU's operating subsidiaries, Jersey Central
Power & Light Company, Metropolitan Edison Company and Penelec are rated A+ by
Standard & Poors Corporation, and A2 by Moody's Investors Service, Inc. 4
<PAGE>
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.
Reference is made to Exhibit H which sets forth GPU's consolidated
capitalization at June 30, 2000 and after giving effect to the transactions
proposed herein. As set forth in such exhibit, the proposed transactions will
not have a material impact on GPU's capitalization or earnings.
F. GPU's estimated fees, commissions and expenses in connection with
the proposed transactions will be filed by further post-effective amendment.
G. GPU believes that Sections 6(a), 7, 9(a) 10 and 12(b) of the Act
and Rules 45 and 54 thereunder are applicable to the proposed transactions.
H. No Federal or State commission, other than your Commission, has
jurisdiction with respect to the proposed transactions.
I. It is requested that the Commission issue an order with respect to the
transactions proposed herein at the earliest practicable date but, in any event,
not later than December 1, 2000. It is further requested that (iii) there not be
a recommended decision by an Administrative Law Judge or other responsible
officer of the Commission, (iv) the Office of Public Utility Regulation be
permitted to assist in the preparation of the Commission's decision, and (v)
there be no waiting period between issuance of the Commission's order and the
date on which it is to become effective.
J. The following exhibits are filed in Item 6.
(a) Exhibits:
F-1 - Opinion of Thelen Reid & Priest LLP - To be
filed by amendment.
F-2 - Opinion of Ryan, Russell, Ogden & Seltzer LLP -
To be filed by amendment.
G - Financial Data Schedule.
5
<PAGE>
5
H - Capitalization and Capitalization Ratios as at
June 30, 2000, actual and pro forma - To be filed
by amendment.
I - Proposed form of public notice.
K. (a) The issuance of an order by your Commission with respect to
the transaction contemplated herein is not a major Federal action
significantly affecting the quality of the human environment.
(b) No Federal agency has prepared or is preparing an environmental impact
statement with respect to the various proposed transactions which are the
subject hereof. Reference is made to Paragraph H hereof regarding regulatory
approvals with respect to the proposed transactions.
6
<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.
GPU SERVICE, INC.
By: /s/ T. G. Howson
---------------------------------
T. G. Howson,
Vice President and Treasurer
GPU INTERNATIONAL, INC.
By: /s/ R. P. Lantzy
---------------------------------
Name: R. P. Lantzy
Title: Senior Vice President
and Chief Operating Officer
Date: September 19, 2000
7
