Post-Effective Amendment No. 24 to
SEC File No. 70-8593
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM U-1
APPLICATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 ("Act")
GPU, Inc. ("GPU")
GPU SERVICE, INC. ("gpus")
300 Madison Avenue
Morristown, New Jersey 07960
GPU INTERNATIONAL, INC. ("GPU International")
EI SERVICES, INC. ("EI Services")
One Upper Pond Road
Parsippany, New Jersey 07054
JERSEY CENTRAL POWER & LIGHT COMPANY ("JCP&L")
METROPOLITAN EDISON COMPANY ("Met-Ed")
PENNSYLVANIA ELECTRIC COMPANY ("Penelec")
P.O. Box 16001
Reading, Pennsylvania 19640
(Names of companies filing this statement
and addresses of principal offices)
GPU, INC.
(Names of top registered holding company
parent of the 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
W. Edwin Ogden, Esq.
Ryan, Russell, Ogden & Seltzer LLP
1100 Berkshire Boulevard
P.O. Box 6219
Reading, Pennsylvania 19601-0219
(Names and addresses of agents for service)
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GPU, GPU International, EI Services, JCP&L, Met-Ed, Penelec and GPUS
(collectively, "Applicants") hereby post-effectively amend their Application on
Form U-1, docketed in SEC File No. 70-8593, as heretofore amended as follows:
A. By orders of the Commission dated December 22, 1997 (HCAR No.
26800), November 5, 1997 ("November 1997 Order"),(1) March 6, 1996 (HCAR No.
26484), January 19, 1996 (HCAR No. 26457) and July 6, 1995 (HCAR No. 26326)
(collectively, the "Orders"), GPU is authorized, among other things, to invest
or commit up to 100% of GPU's "consolidated retained earnings", as defined in
Rule 53(a) under the Act, in exempt wholesale generators ("EWGs") and foreign
utility companies ("FUCOs" and, collectively with EWGs, "Exempt Entities").
Pursuant to the Orders, GPU is also authorized through December 31, 2000 to
acquire and own interests in Exempt Entities through GPU subsidiaries ("Project
Parents") that are not Exempt Entities, but are engaged, directly or indirectly,
and exclusively, in the business of owning and holding the interests and
securities of one or more Exempt Entities and related project development
activities.
B. GPU is authorized, through December 31, 2000, to make equity
investments in Project Parents in the form of capital stock or shares, trust
certificates, partnership interests or other equity or participation interests.
GPU is also authorized, through December 31, 2000, to make investments in one or
more Project Parents in the form of: loans evidenced by promissory notes;
guarantees by GPU of the principal of, or interest on, any promissory notes or
other evidence of indebtedness or obligations of any Project Parent or an
undertaking by GPU to contribute equity; assumption of liabilities of a Project
Parent; and reimbursement agreements with banks which support letters of credit
delivered as security for GPU's obligation to contribute equity to a Project
Parent or otherwise in connection with the project development activities of a
Project Parent.
C. In addition, GPU is also authorized, through December 31, 2000, to
make investments in Exempt Entities in the form of: guarantees of indebtedness
or other obligations of one or more Exempt Entities; assumption of liabilities
of one or more Exempt Entities; and guarantees and letter of credit
reimbursement agreements in support of equity contribution obligations or
otherwise in connection with project development activities of one or more
Exempt Entities.
D. Additionally Project Parents are authorized, through December 31,
2000, to guarantee or assume liabilities with respect to securities issued by,
or other obligations of, their
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1 After the November 1997 Order, the Commission separately issued a
memorandum opinion in connection with the November 1997 Order. HCAR No. 26779
(Nov. 17, 1997).
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direct or indirect subsidiaries in an aggregate amount outstanding at any one
time not to exceed $1 billion. Guarantees may include guarantees, support
instruments or bank letter of credit reimbursement agreements or similar
instruments or undertakings.
E. Applicants now propose to extend the authorizations under the Orders
through June 30, 2003. In all other respects, the transactions as heretofore
authorized by the Commission in this docket would remain unchanged.
F. Rule 54 Analysis.
(a) As described below, GPU meets all of the conditions of
Rule 53, except for Rule 53(a)(1). As discussed above, in the November 1997
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 1997 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.
(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;
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(2) the financial statements for such
subsidiary will be prepared in accordance with
GAAP; and
(3) GPU directly or through its
subsidiaries undertakes to provide the Commission
access to such books and records and financial
statements, or copies thereof in English, as the
Commission may request.
(C) For each FUCO or foreign EWG in which GPU owns
50% or less of the voting securities, GPU directly or
through its subsidiaries will proceed in good faith, to
the extent reasonable under the circumstances, to cause
(1) such entity to maintain books
and records in accordance with GAAP;
(2) the financial statements of such
entity to be prepared in accordance with GAAP; and
(3) access by the Commission to such
books and records and financial statements (or
copies thereof) in English as the Commission may
request and, in any event, GPU will provide the
Commission on request copies of such materials as
are made available to GPU and its subsidiaries. If
and to the extent that such entity's books,
records or financial statements are not maintained
in accordance with GAAP, GPU will, upon request of
the Commission, describe and quantify each
material variation therefrom as and to the extent
required by subparagraphs (a) (2) (iii) (A) and
(a) (2) (iii) (B) of Rule 53.
(ii) No more than 2% of GPU's domestic public utility
subsidiary employees will render any services, directly or
indirectly, to any EWG and FUCO in which GPU directly or
indirectly holds an interest.
(iii) Copies of this Application on Form U-1 are being
provided to the New Jersey Board of Public Utilities and the
Pennsylvania Public Utility Commission, the only federal,
state or local regulatory agencies having jurisdiction over
the retail rates of GPU's electric utility subsidiaries.(2) In
addition, GPU
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2 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.
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will submit to each such commission copies of any amendments
to this Application and a copy of Item 9 of GPU's Form U5S and
Exhibits H and I thereof (commencing 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 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 1997 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 Application.
The transactions would not, by themselves, or even considered in conjunction
with the effect of the capitalization and earnings of GPU's subsidiary EWGs and
FUCOs, have a material adverse effect on the financial integrity of the GPU
system, or an adverse impact on GPU's public utility subsidiaries, their
customers, or the ability of State commissions to protect such public utility
customers.
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The November 1997 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 1997 Order,
GPU's consolidated capitalization consisted of 49.2% equity and 50.8% debt. As
stated in the November 1997 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 1997 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.(3)
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 1997 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.
G. GPU's estimated fees, commissions and expenses in connection with
the proposed transactions will be filed by further post-effective
amendment.
H. GPU believes that Sections 6(a), 7, 9(a), 10, 12, 32, and 33 of the
Act and Rules 43, 45, 53 and 54 thereunder are applicable to the proposed
transactions.
I. No Federal or State commission, other than your Commission,
has jurisdiction with respect to the proposed transactions.
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3 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.
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J. 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.
K. The following exhibits and financial statements are filed in Item 6
hereof.
(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.
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.
(b) Financial Statements:
1(a) - GPU (corporate) Balance Sheets, actual and pro
forma, as of June 30, 2000, Statements of Income
and Retained Earnings, actual and pro forma, for
the twelve months ended June 30, 2000 pro forma
journal entries - to be filed by amendment.
1(b) - GPU Consolidated Balance Sheets, actual and pro
forma, as of June 30, 2000, Consolidated
Statements of Income and Retained Earnings, actual
and pro forma, for the twelve months ended June
30, 2000; pro forma journal entries-to be filed by
amendment.
L. Information as to Environmental Effects.
(a) The issuance of an order by your Commission with respect to the
transactions contemplated herein is not a major Federal
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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 I 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, INC.
JERSEY CENTRAL POWER & LIGHT COMPANY
METROPOLITAN EDISON COMPANY PENNSYLVANIA
ELECTRIC COMPANY GPU SERVICE, INC.
By: /s/ T. G. Howson
-----------------------------------------
T. G. Howson,
Vice President and Treasurer
GPU INTERNATIONAL, INC.
EI SERVICES, INC.
By: /s/ R. P. Lantzy
-----------------------------------------
R. P. Lantzy
Senior Vice President and
Chief Operating Officer
Date: September 19, 2000
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