SEC File No. 70-
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")
300 Madison Avenue
Morristown, NJ 07962
(Name of companies filing this statement and addresses of
principal executive offices)
GPU, INC.
(Name of top registered holding company parent of applicant)
Terrance G. Howson, Douglas E. Davidson, Esq.
Vice President and Treasurer Thelen Reid & Priest LLP
Scott L. Guibord, Secretary 40 West 57th Street
Michael J. Connolly, Esq. New York, New York 10019
Vice President - Law
GPU Service, Inc.
300 Madison Avenue
Morristown, New Jersey 07962
(Names and addresses of agents for service)
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ITEM 1. DESCRIPTION OF PROPOSED TRANSACTIONS.
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A. By Order dated April 14, 2000 (HCAR No. 27165), the Commission
authorized GPU to acquire for cash all of the issued and outstanding common
shares of MYR. On April 26, 2000, MYR was merged with and into GPU Acquisition
Corp., a wholly-owned subsidiary of GPU, and became a wholly-owned subsidiary of
GPU. MYR's principal business involves the providing of utility transmission and
distribution, infrastructure and related commercial and industrial electrical
contracting services to utility, industrial, mining, institutional and
governmental entities on a nationwide basis.
B. At the time of the acquisition, MYR was party to a Credit Agreement,
dated September 21, 1999 ("Old Credit Agreement"), with Harris Trust and Savings
Bank ("Harris Bank") and Comerica Bank providing for revolving credit borrowings
by MYR of up to $30 million outstanding at any one time, of which up to $10
million could be in the form of letter of credit (L/C) obligations. Effective
with GPU's acquisition of MYR, the Old Credit Agreement was amended to, among
other things, reduce the aggregate amount of available credit thereunder to $20
million to reflect Comerica's withdrawal as a lender under the facility. As a
temporary measure, pursuant to the Rule 45(a)(4) under the Act, GPU made open
account advances in the amount of $17.3 million, without interest, to MYR to
provide it with working capital. At September 30, 2000, $13,333,337.00 of
borrowings were outstanding under the Old Credit Agreement.
C. On November 28, 2000, MYR entered into a new Credit Agreement, dated
November 28, 2000 ("New Credit Agreement"), with Bank One, NA as administrative
agent and as the initial lender. The New Credit Agreement permits borrowings by
MYR from time to time in an aggregate amount not to exceed $50 million
outstanding at any one time. Bank One may assign a portion of its rights and
obligations to new lenders which will become parties to the New Credit
Agreement. As described below, GPU is proposing to guarantee MYR's obligations
under the New Credit Agreement.
D. Loans made under the New Credit Agreement ("Loans"), at MYR's election,
bear interest at either (i) the Eurodollar Rate, (ii) the Floating Rate or (iii)
a Fixed Rate.
The Eurodollar Rate for an interest period is the sum of a specified
British Bankers' Association Interest Settlement Rate for U.S. dollar deposits
(as adjusted for any applicable reserve requirements) and the Applicable Margin.
The Applicable Margin ranges from 50 to 200 basis points, depending upon the
credit rating of GPU's senior unsecured debt, plus, after the Non Guaranty Date,
10 basis points. The Non Guaranty Date is April 1, 2001 except that, if GPU
delivers the GPU Guaranty described below before April 1, 2001, the Non Guaranty
Date will not occur.
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The Floating Rate for each day is equal to (i) Alternate Base Rate, minus
(ii) 200 basis points, plus (iii) after the Non Guaranty Date, 10 basis points.
Alternate Base Rate for any day is the higher of (i) Bank One's prime rate and
(ii) the Federal Funds effective rate plus 50 basis points.
The Fixed Rate is a fixed rate for an interest period of up to 30 days
determined by mutual agreement of MYR and the lender under the New Credit
Agreement at such time as there is only one lender under the New Credit
Agreement.
E. MYR may borrow and repay Loans under the New Credit Agreement
through November 1, 2003. All Loans are payable on November 1, 2003.
F. Borrowing of the Loans is subject to certain conditions, and the Loans
will be subject to acceleration under certain circumstances, which conditions
and circumstances are customary for agreements similar to the New Credit
Agreement. The Loans are prepayable from time to time as provided in the New
Credit Agreement.
G. MYR paid Bank One a one time commitment fee at the initial closing of
$25,000. MYR will pay the lenders a facility fee on the unused commitment which
ranges from 10 basis points to 40 basis points, depending upon the credit rating
of GPU's senior unsecured debt, plus, after the Non Guaranty Date, 2.5 basis
points.
H. The New Credit Agreement includes a letter of credit ("L/C") facility.
Pursuant to this facility, MYR is able to request lenders which are parties to
the New Credit Agreement to issue an L/C, in a maximum aggregate face amount for
all L/Cs outstanding of up to $10 million. The aggregate amount that MYR may
borrow under the New Credit Agreement is reduced by the face amount of all
outstanding L/Cs. Drawings on an L/C would bear interest at the Floating Rate if
such amounts are repaid by MYR on the same day the drawing is made on the L/C
and, if repaid thereafter, the Floating Rate plus 200 basis points. If MYR
elects not to immediately reimburse the issuing bank and the conditions for a
borrowing under the New Credit Agreement are satisfied, a Loan could be made to
satisfy the reimbursement obligation. MYR would pay a letter of credit fee equal
to the Applicable Margin for Eurodollar Loans on the undrawn stated amount of
outstanding L/Cs.
I. As described above, the New Credit Agreement provides that if GPU does
not enter into a guaranty of MYR's obligations under the New Credit Agreement
(the "GPU Guaranty") by April 1, 2001, the interest rate on Loans and fees
payable would increase. Accordingly, GPU now proposes to enter into the GPU
Guaranty. Under the GPU Guaranty, GPU would unconditionally and irrevocably
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guarantee the punctual payment when due of all obligations of MYR under the New
Credit Agreement.
J. MYR will use the proceeds of the Loans to refinance borrowings under
the Old Credit Agreement, repay outstanding open account advances made by GPU,
for working capital, acquisition financing and other general corporate purposes.
MYR has used the proceeds of initial Loans to repay approximately $18 million of
outstanding borrowings under the Old Credit Agreement and to repay outstanding
open account advances of GPU in the aggregate amount of $15 million. There
remains outstanding $2.3 million of open account advances. (MYR would seek
separate Commission authorization for any proposed acquisition if and to the
extent required by the Act and the Commission's regulations thereunder.)
K. It is requested that the filing of Certificates Pursuant to Rule 24
under the Act required to be filed hereunder be filed quarterly within ten days
of the end of each calendar quarter beginning with the quarter in which the
authorization herein requested is granted. Such certificates will include the
principal amount of indebtedness and face amount of L/Cs that MYR has
outstanding under the New Loan Agreement.
L. 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 September 30, 2000,
GPU's average consolidated retained earnings was approximately $2.4 billion and
GPU's aggregate investment in EWGs and FUCOs was approximately $1.9 billion.
Accordingly, under the November 5 Order, GPU may invest up to an additional $527
million in FUCOs as of September 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
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(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 will provide the Commission on request copies of
such materials as are made available to GPU and its
subsidiaries. If and to the extent that such entity's
books, records or financial statements are not
maintained in accordance with GAAP, GPU will, upon
request of the Commission, describe and quantify each
material variation therefrom as and to the extent
required by subparagraphs (a) (2) (iii) (A) and (a) (2)
(iii) (B) of Rule 53.
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(ii) No more than 2% of GPU's domestic public utility
subsidiary employees will render any services, directly or
indirectly, to any EWG 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 $2.40 billion)
represented a decrease of approximately $41.2 million (or
approximately 1.7%) compared to the average consolidated retained
earnings for the previous four quarterly periods (approximately
$2.44 billion).
(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).
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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.
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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 GPU PowerNet, was 39.3% equity
and 60.7% debt.
As set forth in Exhibit H hereto, at September 30, 2000, GPU's common
equity ratio represented 31.8% of consolidated capitalization and debt and
preferred stock comprised 68.2%. 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)
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 September 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.
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2 The first mortgage bonds of JCP&L, Met-Ed and Penelec are rated A+ by
Standard & Poors Corporation, and A2 by Moody's Investors Service, Inc.
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ITEM 2. FEES, COMMISSIONS AND EXPENSES.
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The estimated fees, commissions and expenses expected to be incurred in
connection with the proposed transactions are:
Legal fees
Thelen Reid & Priest LLP $ 8,000
Ryan, Russell, Ogden & Seltzer LLP 2,000
Lender's Counsel 5,000
Miscellaneous 2,000
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Total $17,000
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
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GPU believes that Sections 6(a), 7 and 12 of the Act and Rules 45 and 54
thereunder may be applicable to the proposed transactions.
ITEM 4. REGULATORY APPROVALS.
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No state commission has jurisdiction with respect to any aspect of the
transactions and no Federal commission, other than your Commission, has
jurisdiction with respect to any aspect thereof.
ITEM 5. PROCEDURE.
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GPU requests that the Commission issue an order with respect to the
transactions proposed herein at the earliest practicable date, but in no event
no later than March 15, 2000. It is further requested that: (i) there not be a
recommended decision by an Administrative Law Judge or other responsible officer
of the Commission, (ii) the Office of Public Utility Regulation be permitted to
assist in the preparation of the Commission's decision and (iii) there be no
waiting period between the issuance of the Commission's order and the date on
which it is to become effective.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.
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Exhibits:
A - Not applicable.
B-1 - New Credit Agreement.
B-2 - Form of GPU Guaranty - included in Exhibit B-1.
C - Not applicable.
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D - Not applicable.
E - Not applicable.
F-1 - Opinion of Thelen Reid & Priest LLP.
F-2 - Opinion of Ryan, Russell, Ogden & Seltzer LLP.
G - Not applicable.
H - Capitalization and Capitalization Ratios as at
September 30, 2000, actual and pro forma.
I - Form of public notice.
Financial Statements:
1-A - GPU and Subsidiary Companies Consolidated
Balance Sheets, actual and pro forma, as at
September 30, 2000, and Consolidated Statement of
Income and Retained Earnings, actual and pro
forma, for the twelve months ended September 30,
2000; pro forma journal entries.
1-B - GPU (Corporate) Balance Sheets, actual and pro
forma, as at September 30, 2000 and Statements of
Income and Retained Earnings, actual and pro
forma, for the twelve months ended September 30,
2000; pro forma journal entries.
2 - Reference is made to the financial statements
included in 1 above.
3 - None, except as set forth in the Notes to
the Financial Statements.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.
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The proposed transactions are for the purposes of carrying out GPU's and
MYR's business activities. As such, the issuance of an order by your Commission
with respect thereto is not a major Federal action significantly affecting the
quality of the human environment.
No Federal agency has prepared or is preparing an environmental impact
statement with respect to the proposed transactions which are the subject
hereof.
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SIGNATURE
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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
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T. G. Howson
Vice President and Treasurer
Date: January 18, 2001
