Post-Effective Amendment No. 26 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")
300 Madison Avenue
Morristown, New Jersey 07960
(Name of company filing this statement
and address of principal office)
GPU, INC.
(Names of top registered holding company
parent of the applicant)
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 hereby post-effectively amends its post-effective amendment No.
25 to application on Form U-1, docketed on SEC File No. 70-8593, as heretofore
amended, as follows:
A. By order dated July 6, 1995 (HCAR No. 26326) (the "1995 Order"),
GPU, a Pennsylvania corporation, was authorized to acquire and hold the
interests or securities of one or more foreign utility companies ("FUCOs") and
exempt wholesale generators ("EWGs") (each, an "Exempt Entity"), as defined in
Sections 32 and 33 of the Act. The 1995 Order also authorized GPU, directly or
indirectly, to acquire from time to time and own interests in 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. The 1995 Order also authorized GPU to make investments in Project
Parents from time to time through December 31, 1997 in an aggregate amount of up
to $200 million. Investments could take the form of: (i) cash capital
contributions or open account advances; (ii) loans evidenced by promissory
notes; (iii) guarantees by GPU of the principal of, or interest on, any
promissory notes or other evidences of indebtedness or obligations of any
Project Parent, or of GPU's undertaking to contribute equity to a Project
Parent; (iv) assumption of liabilities of a Project Parent; and (v)
reimbursement agreements with banks entered into to support letters of credit
delivered as security for GPU's equity contribution obligation to a Project
Parent or otherwise in connection with a Project Parent's development
activities.
C. The 1995 Order also authorized GPU to make investments in Exempt
Entities from time to time, through December 31, 1997, in an aggregate amount
which, together with the amount invested in Project Parents would not exceed
$200 million outstanding at any one time (the "Investment Cap"). Such
investments could take the form of (i) guarantees of indebtedness, or other
obligations of one or more Exempt Entities; (ii) assumptions of liabilities of
one or more Exempt Entities; and (iii) guarantees and letter of credit
reimbursement agreements in support of equity contribution obligations or
otherwise in connection with project development activities for one or more
Exempt Entities.
D. The 1995 Order also authorized each Project Parent to issue equity
and debt securities in an aggregate principal amount of not more than $500
million, to persons other than GPU, including banks, insurance companies and
other financial institutions, exclusively for the purpose of financing or
refinancing investments in project development activities for Exempt Entities.
The Commission authorized the issuance of such securities in one or more
transactions from time to time through the earlier to occur of: (i) December 31,
1997, and (ii) the effective date of any rule or regulation under the Act
exempting such transactions from prior Commission authorization.
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E. By order dated January 19, 1996 (HCAR No. 26457) (the "January 1996
Order"), the Commission authorized an increase in the Investment Cap, which
would include all forms of equity or participation interests, to 50% of GPU's
consolidated retained earnings at the time any investment in a Project Parent or
Exempt Entity is made. The January 1996 Order also noted that under then-new
Rules 45(b)(4) and 52 under the Act, open account advances without interest
would no longer be subject to the limit of the Investment Cap, nor would cash
capital contributions to Project Parents to the extent they are made in
connection with the acquisition of a new subsidiary. This authorization has no
expiration date.
F. The January 1996 Order also authorized certain GPU subsidiaries to
provide goods and services to certain associate entities at fair market prices.
By Order dated March 6, 1996 (HCAR No. 26484) (the "March 1996 Order"), the
Commission expanded the class of GPU subsidiaries that could provide such goods
and services at such fair market prices. These authorizations have no expiration
date.
G. By order dated November 5, 1997 (the "November 1997 Order"),(1) the
Commission authorized an increase in the Investment Cap, which would include all
forms of equity and participation interests, to 100% of GPU's "consolidated
retained earnings", as defined in Rule 53(a) under the Act, at the time any
investment in a Project Parent or Exempt Entity is made. This authorization has
no expiration date.
H. By Order dated December 22, 1997 (HCAR No. 26800) (the "December
1997 Order"), the Commission extended, through December 31, 2000, the
authorization granted to GPU in the 1995 Order discussed above in paragraph B
(except with respect to the authorization of open account advances and cash
capital contributions, which, as discussed above in paragraph E, no longer
require prior Commission authorization).
I. The December 1997 Order also extended, through December 31, 2000,
the authorization granted in the 1995 Order discussed above in paragraph C,
although, as authorized by the November 1997 Order, GPU's "aggregate investment"
(as defined in Rule 53(a)) in Project Parents and Exempt Entities is now subject
to the revised Investment Cap described in paragraph G.
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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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J. Applicant now proposes to extend through June 30, 2003 its
authorization to make investments in Project Parents and Exempt Entities.(2) In
all other respects, the transactions as heretofore authorized by the Commission
in this docket would remain unchanged.
K. 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.
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2 The December 1997 Order also authorized Project Parents, through December 31,
2000, to guarantee or assume liabilities of the securities issued by, or other
obligations of, their direct or indirect subsidiaries in an aggregate amount
outstanding at any one time not to exceed $1 billion. No Project Parent is, nor
will any Project Parent be, a holding company, a public-utility company, an
investment company, or a fiscal or financing agency of a holding company, a
public-utility company or an investment company. Securities issued by these
subsidiaries will be solely for the purpose of financing the existing business
of the subsidiary company and the interest rates and maturity dates of any debt
security issued to an associate company will be designed to parallel the
effective cost of capital of that associate company. All guarantees would be
financial and not performance in nature. Issuance of these guarantees is now
exempt pursuant to Rules 45(b)(7) and 52(b) under the Act.
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(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 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
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GPU's electric utility subsidiaries.(3) In addition, GPU 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
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3 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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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 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 42.5% common equity and 50.8%
debt. As stated in the application that formed the basis for the November 1997
Order, GPU's June 30, 1997 pro forma capitalization, reflecting the November 6,
1997 acquisition of PowerNet Victoria, was 33.5% common equity and 60.7% debt.
At June 30, 2000, GPU's common equity and debt represented 31.4% and
64.6%, 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.(4)
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.
L. The estimated fees, commissions and expenses GPU expects to incur
in connection with the proposed transactions are
as follows:
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4 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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Legal Fees
Thelen Reid & Priest LLP $5,000
Ryan, Russell, Ogden & Seltzer LLP 500
Miscellaneous 500
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$6,000
M. 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.
N. No Federal or State commission, other than your
Commission, has jurisdiction with respect to the proposed transactions.
O. 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.
P. The following exhibits and financial statements are filed in Item 6.
(a) Exhibits:
F-1 - Opinion of Thelen Reid & Priest LLP.
F-2 - Opinion of Ryan, Russell, Ogden & Seltzer LLP.
Q. 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 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 O 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 COMPANY HAS DULY CAUSED THIS STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
GPU, INC.
By: /s/ T. G. Howson
----------------------
T. G. Howson,
Vice President and Treasurer
Date: December 26, 2000
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