Amendment No. 1 to
SEC File No. 70-9327
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM U-l
APPLICATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 ("Act")
PENNSYLVANIA ELECTRIC COMPANY ("Penelec")
2800 Pottsville Pike
Reading, Pennsylvania 19605
(Name of company filing this statement and address
of principal executive office)
GPU, INC. ("GPU")
(Name of top registered holding company parent of applicant)
Terrance G. Howson, Douglas E. Davidson, Esq.
Vice President and Treasurer Berlack, Israels & Liberman LLP
Mary A. Nalewako, Secretary 120 West 45th Street
Michael J. Connolly, New York, New York 10036
Assistant General Counsel
GPU Service, Inc.
300 Madison Avenue
Morristown, New Jersey 07962
Scott L. Guibord, Secretary Robert C. Gerlach, Esq.
Pennsylvania Electric Company Ballard Spahr Andrews &
2800 Pottsville Pike Ingersoll, LLP
Reading, Pennsylvania 19605 1735 Market Street - 51st Floor
Philadelphia, Pennsylvania
19103-7599
(Names and addresses of agents for service)
<PAGE>
Penelec hereby amends its Application on Form U-1, docketed in
SEC File No. 70-9327, as follows:
1. By amending Item 2 thereof to read in its entirety as follows:
ITEM 2. FEES, COMMISSIONS AND EXPENSES.
The estimated fees, commission and expenses to be incurred in
connection herewith are as follows:
Securities and Exchange Commission
Registration Fee................................. $213,875
NYSE Listing Fee...................................... $ 50,000
Blue Sky Fees......................................... $ 5,000
Accountants' Fees and Expenses........................ $ 25,000
Company Counsel's Fees and Expenses................... $300,000
Trustees' Fees and Expenses, including Counsel
and Authentication Fees.......................... $ 30,000
Printing of Registration Statement, Prospectus,
Prospectus Supplements, Supplemental
Indentures, etc.................................. $ 25,000
Rating Agencies' Fees................................. $ 50,000
Miscellaneous......................................... $ 41,125
Total Expenses......................................... $740,000
2. By deleting Exhibits A-1 through A-9 from Item 6(a) thereof.
3. By redesignating and filing the following exhibits in Item 6(a)
thereof:
1
<PAGE>
A-1 - Certificate of Incorporation of Investment Sub
-- Incorporated by reference to Exhibit 3-C,
Registration Statement on Form S-3, SEC
Registration Nos. 333-62295, 333-62295-01 and
333-62295-02.
A-2 - By-Laws of Investment Sub -- Incorporated by
reference to Exhibit 3-D, Registration Statement
on Form S-3, SEC Registration Nos. 333-62295,
333-62295-01 and 333-62295-02.
A-3 - Certificate of Limited Partnership of Penelec
Capital II, L.P. Incorporated by reference to
Exhibit 3E, Registration Statement on Form S-3,
SEC Registration Nos. 333-62295, 333-62295-01 and
333-62295-02.
A-4 - Form of Limited Partnership Agreement of
Penelec Capital II, L.P. -- Incorporated by
reference to Exhibit 3-F, Registration
Statement on Form S-3, SEC Registration Nos.
333-62295, 333-62295-01 and 333-62295-02.
A-5 - Form of Amended and Restated Limited
Partnership Agreement of Penelec Capital II,
L.P. -- Incorporated by reference to Exhibit
3-G, Registration Statement on Form S-3, SEC
Registration Nos. 333-62295, 333-62295-01 and
333-62295-02.
A-6 - Form of Action Creating Series A Preferred
Securities -- Incorporated by reference to Exhibit
3-H, Registration Statement on Form S-3, SEC
Registration Nos. 333-62295, 333-62295-01 and
333-62295-02.
A-7 - Form of Declaration of Trust of Penelec Capital
Trust -- Incorporated by reference to Exhibit 4-J,
Registration Statement on Form S-3, SEC
Registration Nos. 333-62295, 333-62295-01 and
333-62295-02.
2
<PAGE>
A-8 - Form of Trust Agreement of Penelec Capital Trust
-- Incorporated by reference to Exhibit 4-K,
Registration Statement on Form S-3, SEC
Registration Nos. 333-62295, 333-62295-01 and
333-62295-02.
A-9 - Form of Amended and Restated Trust Agreement of
Penelec Capital Trust -- Incorporated by reference
to Exhibit 4-L, Registration Statement on Form
S-3, SEC Registration Nos. 333-62295, 333-62295-01
and 333-62295-02.
A-10 - Form of Trust Securities Certificate of Penelec
Capital Trust -- Incorporated by reference to
Exhibit 4-M, Registration Statement on Form S-3,
SEC Registration Nos. 333-62295, 333-62295-01 and
333-62295-02.
A-11 - Form of Penelec Subordinated Debenture
Indenture - Incorporated by reference to
Exhibit 4-A, Registration Statement on Form
S-3, SEC Registration Nos. 333-62295,
333-62295-01 and 333-62295-02.
A-12 - Form of Subordinated Debenture instrument --
incorporated by reference to Exhibit A-11.
B-1 - Form of Guaranty -- Incorporated by reference to
Exhibit 4-I, Registration Statement on Form S-3,
SEC Registration Nos. 333-62295, 333-62295-01 and
333-62295-02.
B-2 - Form of Underwriting Agreement -- to be filed
by Form 8-K.
C - Registration Statement on Form S-3 under the
Securities Act of 1933 relating to the various
securities which are the subject hereof and all
amendments and exhibits thereto -- Incorporated by
reference to SEC Registration Nos. 333-62295,
333-62295-01 and 333-62295-02.
3
<PAGE>
D-1 - Copy of Securities Certificate filed by
Penelec with the PaPUC with respect to the
issuance of Subordinated Debentures and
Guaranties.
D-2 - Copy of Application under Section 1102(a)(4) of
the Code filed with the PaPUC.
D-3 - Copy of PaPUC Order registering Penelec's
Securities Certificate and approving the
Application under Section 1102(a)(4) of the Code.
E - Not Applicable.
F-l - Opinion of Berlack, Israels & Liberman LLP.
F-2 - Opinion of Ballard Spahr Andrews & Ingersoll,
LLP.
F-3 - Opinion of Richards, Layton & Finger P.A.
4
<PAGE>
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.
PENNSYLVANIA ELECTRIC COMPANY
By: /s/ T. G. Howson
------------------------------
T. G. Howson,
Vice President and Treasurer
Dated: November 24, 1998
5
EXHIBITS TO BE FILED BY EDGAR
Exhibits:
D-1 - Copy of Securities Certificate filed by Penelec with
the PaPUC with respect to the issuance of Subordinated
Debentures and Guaranties.
D-2 - Copy of Application under Section 1102(a)(4) of the Code
filed with the PaPUC.
D-3 - Copy of PaPUC Order registering Penelec's Securities
Certificate and approving the Application under Section
1102(a)(4) of the Code.
F-l - Opinion of Berlack, Israels & Liberman LLP.
F-2 - Opinion of Ballard Spahr Andrews & Ingersoll, LLP.
F-3 - Opinion of Richards, Layton & Finger P.A.
Exhibit D-1
BEFORE THE
PENNSYLVANIA PUBLIC UTILITY COMMISSION
In re:
SECURITIES CERTIFICATE OF PENNSYLVANIA )
ELECTRIC COMPANY IN THE MATTER OF THE ) SECURITIES
ISSUANCE AND SALE OF UP TO $130,000,000 ) CERTIFICATE NO.
PRINCIPAL AMOUNT OF SUBORDINATED )
DEBENTURES AND EXECUTION AND DELIVERY )
OF THE GUARANTY IN CONNECTION WITH THE )
ISSUANCE OF TRUST SECURITIES HAVING )
AN AGGREGATE LIQUIDATION VALUE NOT TO )
EXCEED $125,000,000 BY A SPECIAL PURPOSE )
BUSINESS TRUST SUBSIDIARY OF PENNSYLVANIA )
ELECTRIC COMPANY )
TO PENNSYLVANIA PUBLIC UTILITY COMMISSION:
1. The name and address of the public utility filing this Securities Certificate
are:
Pennsylvania Electric Company ("Penelec")
2800 Pottsville Pike
Reading, Pennsylvania 19605
2. The names and addresses of the public utility's attorneys are:
Scott L. Guibord
Secretary
Pennsylvania Electric Company
2800 Pottsville Pike
Reading, Pennsylvania 19605
Robert C. Gerlach, Esquire
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street - 51st Floor
Philadelphia, Pennsylvania 19103-7599
<PAGE>
3. Penelec is a public utility as defined in the Pennsylvania Public Utility
Code, as amended. Penelec was incorporated under the laws of the Commonwealth of
Pennsylvania on June 11, 1919, is governed by the Pennsylvania Business
Corporation Law of 1988 and pursuant to such law has corporate power and
authority to, among other things, render to the public, electric and steam heat
service throughout Pennsylvania. Penelec renders electric service to the public
in numerous municipalities in thirty-one counties in western, northern and
south-central Pennsylvania. 4. All the outstanding Common Stock of Penelec is
owned by GPU, Inc. (formerly known as General Public Utilities Corporation), a
Pennsylvania corporation. 5. This Securities Certificate pertains to the
issuance and sale by Penelec of up to $130,000,000 of its subordinated
debentures (the "Subordinated Debentures") and execution and delivery of a
guaranty agreement (the "Guaranty") in connection with the issuance and sale by
its subsidiaries of the Preferred Securities and the Trust Securities (each as
defined below) as described in this Securities Certificate. Penelec proposes to
organize a special purpose business trust under Delaware law ("Penelec Capital
Trust"), which will issue and sell from time to time in one or more series
through December 31, 2000 up to $125,000,000 aggregate liquidation value of
preferred beneficial interests, in the form of Trust Securities (having a
liquidation value per interest to be determined at the time of issuance based
<PAGE>
on market conditions) (the "Trust Securities")1. Each Trust Security will
represent a cumulative preferred security (the "Preferred Securities") of a
Delaware limited partnership ("Penelec Capital L.P."), which will be a special
purpose indirect subsidiary of Penelec. Penelec also proposes to form a special
purpose Delaware corporation ("Investment Sub"), for the sole purpose of acting
as general partner of Penelec Capital L.P. The sole purpose of Penelec Capital
Trust will be to acquire the Preferred Securities and to issue and sell the
Trust Securities evidencing the Preferred Securities. Penelec Capital Trust will
apply the proceeds from the sale of the Trust Securities to purchase the
Preferred Securities. Penelec Capital L.P. will, in turn, use the proceeds
received from the sale of the Preferred Securities to purchase Penelec's
Subordinated Debentures. The sole purpose of Penelec Capital L.P. is to issue
one or more series of Preferred Securities and to lend the proceeds thereof,
plus the capital contribution (in an amount not to exceed $5,000,000) made by
Penelec in Penelec Capital L.P., to Penelec, which loan will be evidenced by the
Subordinated Debentures issued by Penelec. Penelec will acquire the common stock
of
- --------
1 The transactions proposed herein are substantially the same as the
transactions approved by the Commission in the Securities Certificate No.
S-940427 and No. A-110400F0026 in connection with monthly income preferred
securities ("MIPS"), with the exception that the MIPS were issued by a limited
partnership subsidiary of Penelec and the Trust Securities will be issued by a
special purpose business trust subsidiary. The trust structure is being utilized
so that the buyers of the securities receive a Form 1099 for their income tax
purposes, rather than a Form K-1.
<PAGE>
Investment Sub for a nominal consideration and will capitalize Investment Sub
with (i) a capital contribution in the amount of up to $5,000,000, and (ii) a
demand promissory note in the principal amount of up to $13,000,000, such note
to accrue interest, compounded semi-annually, at a rate equal to the Citibank,
N.A. base rate as in effect from time to time. Investment Sub will acquire all
of the general partner interests in Penelec Capital L.P. for up to $5,000,000.
Penelec will execute and deliver the Guaranty for the benefit of the
holders of the Preferred Securities, pursuant to which it will make certain
payments to the holders of the Preferred Securities to the extent not paid by
Penelec Capital L.P. Such payment may include (A) accrued but unpaid
distributions on the Preferred Securities, if and to the extent Penelec Capital
L.P. has funds legally available therefor, (B) the redemption price payable for
any Preferred Securities called for redemption to the extent that Penelec
Capital L.P. has funds legally available therefor, (C) the aggregate liquidation
preference on the Preferred Securities, including all accrued but unpaid
distributions, whether or not declared, to the extent that Penelec Capital L.P.
has funds legally available therefor, and (D) certain additional amounts.
Each Subordinated Debenture will be issued under an Indenture to be
entered into with United States Trust Company of New York, as trustee (the
"Debenture Indenture"), and will have a maturity not to exceed 49 years. The
issuance of the Subordinated Debentures by Penelec will be subject to the
<PAGE>
restriction in Article 6th, Section 8(D) of Penelec's Restated Articles of
Incorporation which limits, without the consent of the holders of a majority of
Penelec's outstanding Cumulative Preferred Stock, the amount of unsecured
indebtedness which Penelec may have outstanding at any one time to 20% of the
aggregate of the total outstanding principal amount of all bonds and other
securities representing secured indebtedness issued or assumed by Penelec, plus
Penelec's capital stock, premiums thereon, and surplus of Penelec as stated on
its books of account. Prior to maturity, Penelec will pay only interest on the
Subordinated Debentures at a rate equal to the distribution rate on the
Preferred Securities (which distribution payments will then be distributed by
Penelec Capital Trust to the holders of the Trust Securities), with any excess
being distributed to Penelec as a distribution on Penelec's investment in
Penelec Capital L.P., thereby reducing the interest cost on the Subordinated
Debentures. Each Subordinated Debenture and Penelec's obligations under the
Guaranty will be subordinate to all other existing and future "Senior
Indebtedness," (as defined below) of Penelec and will have no cross-default
provisions with respect to other Penelec indebtedness -- i.e., a default under
any other outstanding Penelec indebtedness will not result in a default under
the Subordinated Debenture or the Guaranty. However, Penelec may not declare and
pay dividends on, or redeem or retire, its outstanding Cumulative Preferred
Stock or Common Stock unless all payments then due (whether or not previously
deferred) under the Subordinated Debentures and the Guaranty have been made.
"Senior Indebtedness" consists of (i) the principal of and premium (if any) in
respect of (A) indebtedness of Penelec for money borrowed and (B) indebtedness
evidenced by securities, debentures, bonds or other similar instruments
(including purchase money obligations) for payment of which Penelec is
responsible or liable; (ii) all capital lease obligations of Penelec; (iii) all
obligations of Penelec issued or assumed as the deferred purchase price of
property, all conditional sale obligations of Penelec and all obligations of
Penelec under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business); (iv) certain obligations of
Penelec for the reimbursement of any obligor on any letter of credit, banker's
acceptance, security purchase facility or similar credit transaction; (v) all
obligations of the type referred to in clauses (i) through (iv) of other persons
for the payment of which Penelec is responsible or liable as obligor, guarantor
or otherwise; and (vi) all obligations of the types referred to in clauses (i)
through (v) of other persons secured by any lien on any property or asset of
Penelec (whether or not such obligation is assumed by Penelec), except for any
such indebtedness that is by its terms subordinated to or pari passu with the
Subordinated Debentures. The Preferred Securities will be redeemed at the
maturity of the Subordinated Debentures or upon the redemption of such
Subordinated Debentures, but will not be subject to any mandatory sinking fund.
<PAGE>
The Preferred Securities may also be subject to redemption upon the occurrence
of certain events relating to the tax treatment of the Preferred Securities
and/or Penelec Capital L.P. and/or the treatment of Penelec Capital L.P. under
the Investment Company Act of 1940, as amended (the "1940 Act"). The redemption
of the Preferred Securities will cause a mandatory redemption of the Trust
Securities.
It is expected that Penelec's interest payments on the Subordinated
Debentures will be deductible for income tax purposes. When implemented,
Penelec's consolidated balance sheet will reflect the Trust Securities as
"Penelec-obligated mandatorily redeemable preferred securities." The
Subordinated Debentures will not appear on Penelec's consolidated balance sheet
because the principal and interest on the Subordinated Debentures will be
payable to a subsidiary. For the same reason, the interest payments on the
Subordinated Debentures and the distributions to Penelec on Penelec's investment
in Penelec Capital L.P. will not appear on Penelec's consolidated balance sheet
because Penelec Capital L.P. is a subsidiary. The distribution payments made on
the Trust Securities will be reported in Penelec's consolidated income
statements as "Interest Charges - Penelec-obligated mandatorily redeemable
preferred securities."
Penelec desires to maintain the flexibility to issue and sell the Trust
Securities in one or more sales either publicly, through negotiated
<PAGE>
underwritings, or privately, through direct placements, with amounts of the
offering, annual distribution rate, redemption provisions and other terms, along
with the terms of the Subordinated Debentures to be determined later at the time
of issuance. Penelec believes that this flexibility will enable it to react
effectively to various changes in market conditions. Penelec will provide to
your Honorable Commission (the "Commission") reports, within 60 days after each
issuance of the securities described herein, listing the terms and conditions of
all the Trust Securities, Preferred Securities and the corresponding
Subordinated Debentures and the related Guaranty issued during that period
pursuant to this Securities Certificate together with a calculation of the
cumulative liquidation value of the Trust Securities and the Preferred
Securities and principal amount of Subordinated Debentures so issued.
Exact Title of Security
-----------------------
Trust Securities of Penelec Capital Trust, each representing a ---%
Cumulative Income Preferred Security, Series --- of Penelec Capital L.P.; ---%
Subordinated Debentures, Series --- of Pennsylvania Electric Company; and the
Guaranty Agreement executed and delivered by Pennsylvania Electric Company for
the benefit of the holders of the Preferred Securities and the payments
thereunder.
Aggregate Number of Securities to be Issued and Aggregate Principal
------------------------------------------------------------------------
Amount
- ------
<PAGE>
Penelec Capital Trust will issue and sell up to $125,000,000 aggregate
liquidation value of the Trust Securities. The aggregate principal amount of the
Guaranty will also be up to $125,000,000, plus, in the event of a redemption or
liquidation, accrued and unpaid distributions on the Trust Securities and
certain additional amounts. Penelec will issue and sell up to $130,000,000
aggregate principal amount of the Subordinated Debentures. The principal amount
of the Subordinated Debentures will correspond to the aggregate liquidation
value of the Preferred Securities, plus Penelec's capital contribution in
Penelec Capital L.P. of up to $5,000,000.
Par Value
---------
Without par value.
Nominal Date(s) of Issue
------------------------
From time to time through December 31, 2000, to be determined by market
conditions.
Date of Maturity
----------------
A series of the Preferred Securities, along with the Guaranty thereof, will
be redeemed at the maturity or redemption of the corresponding series of the
Subordinated Debentures. Upon a redemption of Preferred Securities, the
corresponding Trust Securities will be redeemed. The maturity dates of the
Subordinated Debentures will not exceed 49 years from the date of issuance.
Interest Rate(s) and Payment Date(s) (Subordinated Debentures)
--------------------------------------------------------------
<PAGE>
The interest payments on the Subordinated Debentures will be Penelec
Capital L.P.'s sole source of funds to make distributions on the Preferred
Securities. The interest rates and payment dates on the Subordinated Debentures
will be determined at the time of issuance based on then existing market
conditions. The interest payments on the Subordinated Debentures will be at
least equal to the distribution payments on the Preferred Securities (and the
corresponding Trust Securities) and will have interest payment dates which
correspond to the distribution dates on the Preferred Securities (and the
corresponding Trust Securities). Distributions, if declared, and correspondingly
all interest payments, will be made at least semi-annually. Penelec will have
the ability to defer interest payments on the Subordinated Debentures to Penelec
Capital L.P. for a period of up to five years but not beyond the maturity date
or any redemption date of the Subordinated Debentures (the "Deferral Period"),
in which event Penelec Capital L.P. may similarly defer payment of distributions
on the Trust Securities. In no event may distributions be deferred beyond the
maturity date of the Subordinated Debentures. However, Penelec may be required
to pay interest on the deferred interest payments to the extent required by law.
Distribution Rates and Payment Dates (Trust Securities, Preferred
------------------------------------------
Securities and Guaranty)
Whenever Penelec Capital Trust receives any cash distribution representing
a distribution on the Preferred Securities or payment under the Guaranty,
<PAGE>
Penelec Capital Trust will distribute such amount to the holders of the Trust
Securities. The Preferred Securities will entitle the holders thereof to receive
cumulative distributions, paid at least semi-annually in arrears, at the amount
per security per annum fixed for the particular series. However, as stated
above, Penelec will have the ability to defer interest payments on the
Subordinated Debentures to Penelec Capital L.P. during the Deferral Period, in
which event no distributions will be made on the Preferred Securities or,
accordingly, on the Trust Securities. The payments under the Guaranty will be in
the same amounts as the distributions on the Preferred Securities, but only to
the extent such payments are not made by Penelec Capital L.P. from funds on hand
legally available therefor.
Extent to Which Taxes on Securities Are Assumed by the Issuer
-------------------------------------------------------------
No taxes on the Subordinated Debentures are to be assumed by Penelec;
however, Penelec may pay additional interest on the Subordinated Debentures
equal to taxes imposed on the Penelec Capital L.P. or Penelec Capital Trust. The
extent to which Penelec may assume taxes under the Guaranty will be negotiated
at the time of issuance subject to market conditions.
Redemption Provisions
---------------------
A series of the Trust Securities will be subject to mandatory redemption
upon redemption of the corresponding series of the Preferred Securities. A
series of the Preferred Securities will be subject to mandatory redemption upon
<PAGE>
the maturity or prior redemption of the corresponding series of the Subordinated
Debentures and may also be redeemable at the option of Penelec at a price equal
to their liquidation value plus any accrued and unpaid distributions plus any
premium negotiated in connection with the marketing of the Trust Securities, (i)
at any time after a specified no-call period (if any) which could be up to the
life of the issuance, or (ii) in the event that (I) Penelec Capital L.P. is
required by applicable tax laws to withhold or deduct certain amounts in
connection with distributions or other payments, or (II) Penelec Capital L.P. or
Penelec Capital Trust is subject to federal income tax with respect to interest
received on the Subordinated Debentures for federal income tax purposes, or
(III) it is determined that the interest payments by Penelec on the Subordinated
Debentures are not deductible for federal income tax purposes or (IV) Penelec
Capital L.P. is subject to more than a de minimis amount of other taxes, duties
or other governmental charges, or (V) Penelec Capital L.P. becomes subject to
regulation as an "investment company" under the 1940 Act. Upon occurrence of any
of the events set forth in clause (ii) of the immediately preceding sentence,
Penelec Capital Trust and Penelec Capital L.P. could be dissolved and the
Subordinated Debentures distributed directly to the holders of the Trust
Securities and to Penelec on a pro rata basis, resulting in direct ownership of
the Subordinated Debentures by the holders of the Trust Securities. The
Subordinated Debentures distributed to Penelec would be canceled.
<PAGE>
Sinking Fund
------------
None.
Liquidation Value (Trust Securities and Preferred Securities)
------------------
The liquidation value of the Trust Securities and the Preferred
Securities will be determined at the time of issuance . Upon receipt by Penelec
Capital Trust of any distribution from Penelec Capital L.P. upon any voluntary
or involuntary liquidation, dissolution or winding up of Penelec Capital L.P.,
the holders of the Trust Securities will be entitled to receive such amounts in
proportion to the respective number of Preferred Securities represented by such
Trust Securities, out of the assets of Penelec Capital L.P. available for
distribution after satisfaction of creditors of Penelec Capital Trust as
required by law. However, the holders of the Trust Securities would not be
entitled to share further in the assets of Penelec Capital Trust.
Upon voluntary or involuntary dissolution or winding up of Penelec Capital
L.P., the holders of Preferred Securities will be entitled to receive out of the
assets of Penelec Capital L.P., after satisfaction of liabilities to creditors
and before any distribution of assets is made to holders of its general partner
interests, the sum of their stated liquidation preference and all accumulated
and unpaid distributions to the date of payment of the Preferred Securities. All
assets of Penelec Capital L.P. remaining after payment of the liquidation
distribution to the holders of Preferred Securities will be distributed to the
General Partner.
<PAGE>
Upon any liquidation, dissolution or winding up of Penelec, the amount
payable on each series of the Preferred Securities would be limited to a pro
rata portion of any amount recovered by Penelec Capital L.P. in its capacity as
a subordinated debt holder of Penelec. The Subordinated Debentures and the
payment obligations under the Guaranty will be subordinate to all other existing
and future Senior Indebtedness, except for any such indebtedness that is by its
terms subordinated to or pari passu with the Subordinated Debentures.
Name and Address of Trustee and Whether Affiliated
--------------------------------------------------
The Subordinated Debentures will be issued under the Debenture Indenture
with United States Trust Company of New York, as trustee. United States Trust
Company of New York is not and will not be affiliated with either Penelec,
Penelec Capital L.P. or Penelec Capital Trust.
6. (i) Subject to the receipt from the Commission of a Notice of
Registration with respect to this Securities Certificate and of orders from the
Securities and Exchange Commission ("SEC") declaring effective the Application
on Form U-1 and the Registration Statement referred to in Item 8 hereof, in the
case of a public offering, Penelec proposes to issue and sell the Trust
<PAGE>
Securities either (a) in one or more public sales through negotiated
underwritings to or through non- affiliated underwriters, purchasers or agents,
or (b) in one or more private placement sales through non-affiliated banks or
investment banking firms acting as agents of Penelec or directly to
non-affiliated agents, purchasers or underwriters. The names of the
underwriters, purchasers or agents will be included in the Underwriting
Agreement or Purchase Agreement and will be filed at a later time. To the best
of Penelec's knowledge and belief, there is no person, firm or corporation
ordinarily engaged in underwriting securities or acting as an agent for the sale
of securities, which is an "affiliated interest" of Penelec, nor is Penelec an
"affiliated interest" of any such person, firm or corporation as the term is
defined in Section 2101 of the Pennsylvania Public Utility Code, as amended.
Penelec expects that the commissions payable to the underwriters or
selling agents for selling the Trust Securities will be approximately 1% of the
liquidation value of the Trust Securities sold through such agents or
underwriters for an institutional offering and approximately 3.15% of the
liquidation value of the Trust Certificates sold through such agents or
underwriters for a retail offering.
(ii) An estimate of the expenses of issuance of the various
securities described in this Securities Certificate and the Securities
Certificate relating to the issuance of the Senior Notes, described in another
Securities Certificate being filed concurrently, all of which are proposed to be
<PAGE>
issued and sold under a new financing program, assuming that an aggregate
principal amount of $725,000,000 of such securities is sold, is as follows:
Filing Fees - SEC $240,000
Printing Fees 25,000
New York Stock Exchange Fees 50,000
Legal Fees 300,000
Trustee Fees and Expenses 30,000
Rating Agencies Fees and Expenses 50,000
Accounting Fees 25,000
Miscellaneous Expenses 20,000
Total $740,000
The expenses incurred in connection with issuance and sale of each
series of the Trust Securities, together with the terms and conditions of the
corresponding series of the Preferred Securities and the Senior Notes, will be
provided to the Commission within 60 days after issuance of such series.
7. The net proceeds (after deduction of underwriting discounts and
commissions and the expenses of the offering) of the Trust Securities will be
applied by Penelec: (i) to redeem other outstanding securities of Penelec,
including preferred securities, preferred stock and first mortgage bonds, (ii)
to repay outstanding short-term bank loans or other unsecured indebtedness,
(iii) for construction purposes (see Penelec's 1998 Construction Budget attached
as Exhibit M), (iv) for other corporate purposes and (v) to reimburse Penelec's
treasury for funds previously expended therefrom for the above purposes.
8. An Application on Form U-1 will be filed and one or more Registration
Statements will be filed with the SEC with respect to the issuance and sale of
the Trust Securities, the related securities and the related transactions.
<PAGE>
Concurrently with the filing of this Securities Certificate, Penelec is
filing another Securities Certificate with the Commission relating to the
proposed issuance and sale of Senior Notes secured by "fall away" first mortgage
bonds. The securities of Penelec described in these Securities Certificates are
proposed to be issued as a part of Penelec's new financing program, pursuant to
which program Penelec contemplates the issuance and sale of either the Senior
Notes and/or Subordinated Debentures and execution and delivery of the Guaranty
described in this Securities Certificate in one or more series; provided,
however, that the total principal amount of the Senior Notes and total
liquidation value of the Trust Securities to be issued and sold may not in the
aggregate exceed $725,000,000; and provided, further, that the total principal
amount of the Trust Securities may not in the aggregate exceed $125,000,000.
Accordingly, Penelec requests that the Commission take action on both Securities
Certificates simultaneously.
9. There are appended hereto and made part hereof the following Exhibits:
Exhibit A - Balance Sheet of Penelec per books as at March 31, 1998.
Exhibit B-1 - Statement of Income of Penelec for the 12 months ended
March 31, 1998.
Exhibit B-2 - Statement of Retained Earnings and Statement of Capital
Surplus of Penelec for the 12 months ended March 31, 1998.
<PAGE>
Exhibit C - Statement of Utility Plant by Classified Accounts of
Penelec as at March 31, 1998.
Exhibit D - Statement of Securities of Other Corporations Owned by
Penelec as at March 31, 1998.
Exhibit E - Statement of Status of Funded Debt Outstanding of Penelec
as at March 31, 1998.
Exhibit F - Statement of Status of Capital Stock Outstanding of
Penelec as at March 31, 1998.
Exhibit G-1 - Copy of Registration Statements filed by Penelec on Form
S-3 with the SEC under the Securities Act of 1933, as amended,
with respect to the proposed issuance and sale of, among other
things, the Trust Securities, the Preferred Securities, the
Guaranty and the Subordinated Debentures (to be filed
supplementally).
Exhibit G-2- Copy of the Application on Form U-1 with the SEC under
the Public Utility Holding Company Act of 1935 (to be filed
supplementally).
Exhibit H - Not applicable.
Exhibit I - Copy of Resolutions of the Board of Directors of Penelec
authorizing, among other things, the proposed issuance and
sale of the Subordinated Debentures and the Guaranty.
Exhibit J-1 - Proposed form of Underwriting Agreement (to be filed
supplementally).
Exhibit J-2 - Proposed form of Trust Agreement for Penelec Capital
Trust (to be filed supplementally).
Exhibit J-3 - Proposed form of Guaranty by Penelec (to be filed
supplementally).
Exhibit J-4 - Proposed form of Subordinated Debenture Indenture,
including the form of the Subordinated Debentures (to be filed
supplementally).
Exhibit K - Journal Entries of Penelec, showing all charges and
credits to be made on the books of account of Penelec as a
result of the issuance of securities described herein.
Exhibit L - Source and Application Funds.
Exhibit M - Penelec's 1998 Construction Budget.
<PAGE>
WHEREFORE, Pennsylvania Electric Company prays your Honorable
Commission to register this Securities Certificate pursuant to Chapter 19 of the
Public Utility Code, as amended, and to grant any other approvals your
Commission deems appropriate to further the consummation of the financing
program described herein.
PENNSYLVANIA ELECTRIC COMPANY
Dated: June 30, 1998
By:
--------------------------
Vice President
<PAGE>
STATE OF NEW JERSEY )
) ss.:
COUNTY OF MORRIS )
----------------------, being duly sworn according to law, deposes and
says that he is a ------------------- of Pennsylvania Electric Company, that he
is authorized to and does make this affidavit for it; and that the facts set
forth above are true and correct (or are true and correct to the best of his
knowledge, information and belief) and he expects the said Pennsylvania Electric
Company to be able to prove the same at any hearing hereof.
PENNSYLVANIA ELECTRIC COMPANY
By:
--------------------------------
Sworn to and subscribed before
me this --- day of ------, 1998.
- --------------------------------
Notary Public
Exhibit D-2
BEFORE
PENNSYLVANIA PUBLIC UTILITY COMMISSION
In re: APPLICATION OF PENNSYLVANIA )
ELECTRIC COMPANY FOR APPROVAL )
OF THE ACQUISITION OF MORE )
THAN 5% OF THE VOTING CAPITAL )
INTEREST OF ANOTHER ENTITY ) APPLICATION DOCKET NO.
UNDER SECTION 1102(a)(4) OF )
THE PENNSYLVANIA PUBLIC )
UTILITY CODE )
TO PENNSYLVANIA PUBLIC UTILITY COMMISSION:
1. The name and address of the public utility filing this Application are:
Pennsylvania Electric Company ("Penelec")
2800 Pottsville Pike
Reading, Pennsylvania 19605
2. The names and addresses of the public utility's attorneys are:
Scott L. Guibord, Esq. Robert C. Gerlach, Esq.
Secretary Ballard Spahr Andrews & Ingersoll, LLP
Pennsylvania Electric Company 1735 Market Street, 51st Floor
2800 Pottsville Pike Philadelphia, PA 19103-7599
Reading, Pennsylvania 19605
3. Penelec is a public utility as defined in the Pennsylvania Public
Utility Code, as amended. Penelec was incorporated under the laws of the
Commonwealth of Pennsylvania on June 11, 1919, is governed by the Pennsylvania
Business Corporation Law of 1988 and pursuant to such law has corporate power
and authority to, among other things, render to the public, electric and steam
heat service throughout Pennsylvania. Penelec renders electric service to the
public in numerous municipalities in thirty-one counties in western, northern
and south-central Pennsylvania.
------------------------------------------
4. Penelec has previously filed a Securities Certificate relating to the
proposed issuance and sale by Penelec of up to $130,000,000 of its subordinated
debentures (the "Subordinated Debentures") and execution and delivery of a
guaranty agreement (the "Guaranty") in connection with the issuance and sale by
its subsidiaries of the Preferred Securities and the Trust Securities (each as
defined below). In connection with the proposed issuance and sale of the Trust
Securities, Penelec proposes to organize a special purpose business trust under
Delaware law ("Penelec Capital Trust") which will issue and sell from time to
time in one or more series through December 31, 2000 up to $125,000,000
aggregate liquidation value of preferred beneficial interests, in the form of
Trust Securities (having a liquidation value per interest to be determined at
the time of issuance based on market conditions) (the "Trust Securities"). Each
Trust Security will represent a cumulative preferred security (the "Preferred
Securities") of a Delaware limited partnership ("Penelec Capital L.P.") which
will be formed by Penelec as a special purpose indirect subsidiary of Penelec.
The sole purpose of Penelec Capital L.P. will be to issue one or more series of
Preferred Securities and to lend the proceeds thereof, plus the capital
contribution (in an amount not to exceed $5,000,000) made by Penelec in Penelec
Capital L.P., to Penelec, which loan will be evidenced by the Subordinated
Debentures issued by Penelec. Penelec also proposes to form a special purpose
Delaware corporation ("Investment Sub") for the sole purpose of acting as
general partner of Penelec Capital L.P. The sole purpose of Penelec Capital
Trust will be to issue and sell the Trust Securities evidencing the Preferred
Securities and to purchase the Preferred Securities with the proceeds thereof.
This Application requests authority from your Honorable Commission for Penelec
to acquire all of the capital stock of Investment Sub. Information concerning
the proposed issuance and sale of the Trust Securities and the Preferred
Securities by Penelec
2
<PAGE>
Capital Trust and Penelec Capital L.P., respectively, is contained in the
Securities Certificate previously filed on June 30, 1998 (Docket No. S-00980688)
(the "Securities Certificate"), which information is incorporated in this
Application by reference.
------------------------------------------
5. As stated above, Penelec Capital L.P. will be a limited partnership to
be formed under the laws of the State of Delaware. All of its general partner
interests will be owned by Investment Sub, a wholly owned subsidiary of Penelec,
as the general partner (the "General Partner"). As a limited partnership, all of
the business and affairs of Penelec Capital L.P. will be managed (directly or
indirectly through Investment Sub) by Penelec. The Subordinated Debentures will
be the only assets of Penelec Capital L.P. and the only revenues of Penelec
Capital L.P. will be interest on the Subordinated Debentures. Investment Sub, as
the General Partner, will pay all of Penelec Capital L.P.'s operating expenses
and will have general liability for all of Penelec Capital L.P.'s obligations.
The general partner interests of Penelec Capital L.P. will not be transferable.
Penelec Capital L.P. will have no material liabilities. Penelec Capital L.P.
will be treated for federal income tax purposes as a partnership. Penelec
Capital L.P. will have no directors or officers.
Investment Sub will hold all of the general partner interests of Penelec
Capital L.P. Investment Sub would have one class of common stock, all of which
would be held by Penelec, and would have no material liabilities. The Board of
Directors and the officers of Investment Sub would be employees of Penelec who
would not receive any additional compensation for serving in such capacities.
Investment Sub would have a perpetual existence.
3
<PAGE>
6. Penelec will acquire the common stock of Investment Sub for a nominal
consideration and will capitalize Investment Sub with (i) a capital contribution
in the amount of up to $5,000,000, and (ii) a demand promissory note in the
principal amount of up to $13,000,000, such note to accrue interest, compounded
semi-annually, at a rate equal to the Citibank, N.A. base rate as in effect from
time to time. Investment Sub will acquire all of the general partner interests
in Penelec Capital L.P. for up to $5,000,000.
------------------------------------------
7. Certified copies of the resolutions of the Board of Directors of
Penelec authorizing the acquisition of the capital stock of Investment Sub will
be filed by amendment.
------------------------------------------
8. Penelec requests authority from your Honorable Commission to acquire
all of the capital stock of Investment Sub which would then acquire general
partner interests of Penelec Capital L.P.
Prior to the filing of this Application, Penelec has filed with the
Commission the Securities Certificate. The securities of Penelec described in
the Securities Certificate are proposed to be issued as a part of Penelec's new
financing program and the formations of the Investment Sub, Penelec Capital L.P.
and Penelec Capital Trust are intended to facilitate such financing program.
Accordingly, Penelec requests that the Commission take action on this
Application and the Securities Certificate simultaneously.
------------------------------------------
9. Exhibits
Exhibit A - Limited Partnership Agreement (to be filed by
amendment)
Exhibit B - Certificate of Incorporation of Investment Sub
(to be filed by amendment)
4
<PAGE>
Exhibit C - By-laws of Investment Sub (to be filed by
amendment)
Exhibit D - Resolutions of the Board of Directors of
Penelec (to be filed by amendment)
5
<PAGE>
WHEREFORE, Pennsylvania Electric Company prays your Honorable
Commission to approve the aforesaid acquisition pursuant to Section 1102(a)(4)
of the Public Utility Code, as amended, and to grant any other approvals your
Commission deems appropriate to further the consummation of the financing
program described herein.
PENNSYLVANIA ELECTRIC COMPANY
By
---------------------------
6
<PAGE>
AFFIDAVIT
STATE OF NEW JERSEY :
COUNTY OF MORRIS :
T. G. Howson, being duly sworn according to law, deposes and says that
he is ------------------- of Pennsylvania Electric Company; that he is
authorized to and does make this affidavit for it; and that the facts set forth
in the foregoing Application are true and correct (or are true and correct to
the best of his knowledge, information and belief) and he expects the said
Pennsylvania Electric Company to be able to prove the same at any hearing
hereof.
PENNSYLVANIA ELECTRIC COMPANY
By:
-----------------------------
Sworn to and subscribed before
me this ---- day of ----, 1998
- --------------------------
Notary Public
7
Exhibit D-3
PENNSYLVANIA
PUBLIC UTILITY COMMISSION
Harrisburg, PA 17105-3265
Public Meeting held August 27, 1998
Commissioners Present:
John M. Quain, Chairman
Robert K. Bloom, Vice Chairman
David W. Rolka
Nora Mead Brownell
Aaron Wilson, Jr.
Securities Certificate of Pennsylvania S-00980688
Electric Company for the issuance of
its subordinated debentures in a principal
amount not to exceed $130 million and its
guaranty in connection with the issuance
through a special purpose subsidiary of
trust securities having and aggregate
principal amount not to exceed $125 million.
Application of Pennsylvania Electric Company A-110400F0037
for the approval of its acquisition of a
special-purpose corporation to act as the
general partner in a partnership involved in
the issuance of certain preferred securities
OPINION AND ORDER
BY THE COMMISSION:
On July 1, 1998, Pennsylvania Electric Company (Penelec) filed for
registration pursuant to Chapter 19 of the Pennsylvania Public utility Code, 66
Pa. C.S. ss.ss.1901, et seq., the above-captioned securities certificate for the
issuance of its subordinated debentures (Debentures) in a principal amount not
to exceed $130 million and its guaranty (Guaranty) in connection with the
issuance through a special purpose subsidiary (Trust) of securities (Trust
Securities) having an aggregate principal amount not to exceed $125 million. On
July 24, 1998, Penelec
<PAGE>
filed the above-captioned application for the acquisition of a special-purpose
corporation (Investment Sub) to act as the general partner in a partnership
involved in the issuance of the Trust Securities. Penelec voluntarily extended
the statutory consideration period for the securities certificate to August 28,
1998. All of the outstanding common stock of Penelec is owned by GPU, Inc., a
Pennsylvania corporation. Notice of the application was not required to be
published.
Concurrently, with the filing of the instant securities certificate,
Penelec filed a securities certificate docketed at S-00980687 for the issuance
of senior notes (Notes), secured by "fall away" first mortgage bonds each in an
aggregate principal amount not to exceed $725 million. The total principal
amount of Notes and total liquidation value of the Trust Securities may not in
the aggregate exceed $725 million, and the total principal amount of the Trust
Securities may not in the aggregate exceed $125 million.
Penelec proposes to acquire a special purpose Delaware corporation
(Investment Sub) by making a capital contribution of up to $5 million and
issuing a demand promissory note. Investment Sub will invest up to $5 million to
acquire all of the general partner interests in a limited partnership
(Partnership), a special purpose indirect subsidiary of Penelec. The sole
purpose of Partnership will be to issue preferred securities (Preferred
Securities).
2
<PAGE>
Penelec proposes to organize Trust for the purpose of issuing and selling
to the public from time to time in one or more series through December 31, 2000
up to $125 million liquidation value of preferred beneficial interests, in the
form of Trust Securities. The Trust will apply the proceeds from the sale of the
Trust Securities to purchase the Preferred Securities from Partnership.
Partnership will use the proceeds from the sale of its Preferred Securities, up
to $125 million, and the proceeds from Investment Sub's capital investment of up
to $5 million, to purchase Penelec's Debentures. The principal amount of the
Debentures will correspond to the aggregate liquidation value of the Preferred
Securities, plus the up to $5 million capital contribution in Partnership, and
will not exceed $130 million.
The maturity date of the Debentures will not exceed 49 years. The interest
payments and principal dates on the Debentures will be a least equal to the
distribution payments to be made on the Preferred Securities. Penelec has the
ability to defer interest payments on the Debentures for a period up to sixty
consecutive months. If payments of principal or interest are not made on the
Debentures, distributions on the Preferred Securities and Trust Receipts may
similarly be deferred. The Debentures will be redeemable prior to maturity at
the option of Penelec after an initial no-call period, or may be redeemed if the
advantages for income tax deductibility disappear. The Trust Securities are
subject to mandatory redemption, in whole or in
3
<PAGE>
part, upon redemption of the corresponding series of the Preferred
Securities.
Penelec will execute and deliver the Guaranty, for the benefit of the
holders of the Preferred Securities, under which Penelec will make certain
payments to the holders of Preferred Securities to the extent not paid by
Partnership.
Penelec will execute and deliver the Guaranty, for the benefit of the
holders of the Preferred Securities, under which Penelec will make certain
payments to the holders of Preferred Securities to the extent not paid by
Partnership.
The proceeds from the Debentures to be issued in conjunction with the
Preferred Securities and Trust Securities, will be used by Penelec to redeem
other outstanding securities of Penelec, to repay outstanding short-terms bank
loans or other unsecured indebtedness, and to provide funds for construction and
general corporate purposes.
Our review of the subject securities certificate leads us to conclude that
the proposed issuance is necessary or proper for the present and probable future
capital needs of Penelec, and that the related application is necessary or
proper for the service, accommodation, convenience, or safety of the public. As
a result, the securities certificate should be registered and the application
should be approved; THEREFORE,
4
<PAGE>
IT IS ORDERED:
1. That the securities certificate of Pennsylvania Electric Company for
the issuance of its subordinated debentures in a principal amount not to exceed
$130 million and its guaranty in connection with the issuance through a special
purpose subsidiary of trust securities having an aggregate principal amount not
to exceed $125 million, is hereby registered.
2. That the application of Pennsylvania Electric Company for the approval
of its acquisition of a special-purpose corporation to act as the general
partner in a partnership involved in the issuance of certain preferred
securities is approved.
BY THE COMMISSION,
James J. McNulty
Secretary
(SEAL)
ORDER ADOPTED: August 27, 1998
ORDER ENTERED: August 27, 1998
5
Exhibit F-1
November 24, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Pennsylvania Electric Company -
Application on Form U-1
SEC File No. 70-9327
Ladies and Gentlemen:
We have examined the Application on Form U-1, dated July 13, 1998,
under the Public Utility Holding Company Act of 1935 (the "Act"), filed by
Pennsylvania Electric Company ("Penelec") with the Securities and Exchange
Commission and docketed in SEC File No. 70-9327, as amended by Amendment No. 1
thereto, dated this date, of which this opinion is to be a part. (The
Application, as so amended and as thus to be amended, is hereinafter referred to
as the "Application".)
The Application contemplates, among other things, the organization
by Penelec of a special purpose Delaware business trust ("Penelec Trust"), which
will issue and sell up to $125 million aggregate liquidation value of preferred
beneficial interests, in the form of Trust Securities (the "Trust Securities").
Each Trust Security will represent a cumulative preferred security ("Preferred
Securities") of a Delaware limited partnership ("Penelec Capital"), which will
be a special purpose indirect subsidiary of Penelec. The proceeds, together with
the capital contribution of Penelec Capital's general partner, Penelec Preferred
Capital II, Inc., a wholly owned subsidiary of Penelec, will be used to purchase
subordinated debentures issued by Penelec (the "Subordinated Debenture").
Penelec will guarantee (the "Guarantee") the payment by Penelec Capital of
distributions on the Preferred Securities and of amounts due upon liquidation of
Penelec Capital or redemption of the Preferred Securities, all to the extent set
forth in the Guarantee. The Trust Securities are to be issued by Penelec Trust
pursuant to an Amended and Restated Trust Agreement (the "Trust Agreement"), the
<PAGE>
Preferred Securities are to be issued by Penelec Capital pursuant to an Amended
and Restated Limited Partnership Agreement and one or more Actions thereunder
(collectively, the "Limited Partnership Agreement") and the Subordinated
Debentures are to be issued by the Company pursuant to an indenture between the
Company and United States Trust Company of New York, as Trustee (the "Debenture
Indenture").
For many years, we have participated in various proceedings related
to the issuance and sale of securities by Penelec, its parent, GPU, Inc., and
its affiliates, Jersey Central Power & Light Company and Metropolitan Edison
Company, and we are familiar with the terms of the outstanding securities of the
corporations comprising GPU, Inc.
We have examined such records of Penelec, Penelec Capital and
Penelec Trust and such other instruments, documents, certificates and
agreements, including the forms of Limited Partnership Agreement, Trust
Agreement and Debenture Indenture, and made such further investigation as we
have deemed necessary as a basis for this opinion. With respect to all matters
of Pennsylvania law, we have relied on the opinion of Ballard Spahr Andrews &
Ingersoll, LLP, and with respect to all matters of Delaware law, we have relied
upon the opinion of Richards, Layton & Finger, P.A., which are being filed as
Exhibits F-2 and F-3, respectively, to the Application.
Based upon the foregoing, and assuming that the transactions therein
proposed are carried out in accordance with the Application, we are of the
opinion that when (i) the Commission shall have entered an order forthwith
granting the Application, (ii) all necessary corporate, trust and partnership
action required on the part of Penelec, Penelec Trust, Penelec Preferred Capital
II, Inc., and Penelec Capital shall have been duly taken, (iii) all action under
state "Blue Sky" laws to permit the consummation of the proposed transactions
shall have been completed, and (iv) the certificates representing the Trust
Securities, Preferred Securities and Subordinated Debentures are, upon issuance
thereof, duly signed, countersigned and authenticated, as may be necessary, and
assuming that the Trust Securities, Preferred Securities and Subordinated
Debentures are issued and sold under circumstances which are permitted under
Section 12(f) of the Act and Rule 70 of the General Rules and Regulations under
the Act.
(a) all State laws applicable to the proposed transactions
will have been complied with;
(b) Penelec Trust, the proposed issuer of the Trust
Securities, has been duly formed and is validly existing in good standing as a
trust;
<PAGE>
(c) Penelec Capital, the proposed issuer of the Preferred
Securities, has been duly formed and is validly existing in good standing as a
limited partnership;
(d) Penelec, the proposed issuer of the Subordinated
Debentures and the Guarantee, is validly organized and duly existing;
(e) upon payment of the purchase price therefor by the
purchasers thereof, the Trust Securities will be validly issued, fully paid and
non-assessable beneficial interests, and holders thereof will be entitled to the
rights and privileges appertaining thereto set forth in the Trust Agreement;
(f) upon payment of the purchase price therefor by the
purchasers thereof, the Preferred Securities will be validly issued, fully paid
and non-assessable limited partner interests, and the holders thereof will be
entitled to the rights and privileges appertaining thereto set forth in the
Limited Partnership Agreement;
(g) upon payment of the purchase price therefor by the
purchasers thereof, the Subordinated Debentures will be the valid and binding
obligations of Penelec in accordance with their terms, and the Guarantee will be
the valid and binding obligation of Penelec in accordance with its terms
subject, in each case, to applicable bankruptcy, insolvency, reorganization,
moratorium and other laws affecting creditors rights generally (including,
without limitation, the Atomic Energy Act and applicable regulations of the
Nuclear Regulatory Commission thereunder) and general equitable principles; and
(h) the consummation of the proposed transactions will not
violate the legal rights of the holders of any securities issued by Penelec or
any "associate company" thereof, as defined in the Act.
We hereby consent to the filing of this opinion as an exhibit to the
Application and in any proceedings before the Commission that may be held in
connection therewith.
Very truly yours,
BERLACK, ISRAELS & LIBERMAN LLP
Exhibit F-2
[Letterhead of Ballard Spahr Andrews & Ingersoll, LLP]
November 24, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Re: Pennsylvania Electric Company
Application on Form U-1 SEC File No. 70-9327
--------------------------------------------
Ladies and Gentlemen:
We have examined the Application on Form U-1, dated July 13,
1998, under the Public Utility Holding Company Act of 1935 (the "Act"), filed by
Pennsylvania Electric Company ("Penelec") with the Securities and Exchange
Commission (the "Commission") and docketed in SEC File No. 70-9327, as amended
by Amendment No. 1 thereto, dated this date, of which this opinion is to be a
part. (The Application, as so amended is hereinafter referred to as the
"Application").
The Application contemplates, among other things, the
organization by Penelec of a special purpose Delaware corporate subsidiary
("Penelec Preferred Capital II, Inc.") to become the sole general partner of a
newly formed Delaware limited partnership, Penelec Capital II, L.P. ("Penelec
Capital II"), the issuance and sale by Penelec Capital Trust ("Penelec Trust")
of up to $125,000,000 aggregate liquidation value of preferred beneficial
interests, in the form of trust securities (the "Trust Securities"),
representing cumulative preferred limited partner interests of Penelec Capital
II (the "Preferred Securities"), and the issuance and sale by Penelec of up to
$130,000,000 of its subordinated debentures (the "Subordinated Debentures") and
the Guarantee (as defined below). Penelec Trust will apply the proceeds from the
sale of the Trust Securities to purchase the Preferred Securities. Penelec
Capital II will, in turn, lend the proceeds from the sale of its Preferred
Securities, plus the capital contribution made by Penelec Preferred Capital II,
Inc. to Penelec, which loan will be evidenced by the Subordinated Debentures of
Penelec. Penelec will guarantee (the "Guarantee") the payment by Penelec Capital
II of distributions on the Preferred Securities and of amounts due upon
liquidation of Penelec Capital II or redemption of the Preferred Securities, all
to the extent set forth in the Guarantee. The Trust Securities are to be issued
by Penelec Trust pursuant to an Amended and Restated Trust Agreement (the "Trust
Agreement"), the Preferred
<PAGE>
Securities and Exchange Commission
November 24, 1998
Page 2
Securities are to be issued by Penelec Capital II pursuant to an Amended and
Restated Limited Partnership Agreement and one or more Actions thereunder
(collectively, the "Limited Partnership Agreement") and the Subordinated
Debentures are to be issued by Penelec pursuant to an indenture between Penelec
and United States Trust Company of New York, as Trustee (the "Indenture").
We have been Pennsylvania counsel to Penelec for many years,
and have participated in various proceedings related to the issuance and sale of
securities by Penelec and its parent, GPU, Inc., and we are familiar with the
terms of their outstanding securities.
We have examined copies, signed, certified or otherwise proven
to our satisfaction, of the Restated Articles of Incorporation and By-Laws of
Penelec and the forms of Trust Agreement, Limited Partnership Agreement and
Indenture. We have also examined the securities certificate and application
filed by Penelec with the Pennsylvania Public Utility Commission ("PaPUC") and
the Opinion and Order of the PaPUC, dated August 27, 1998 registering the
securities certificate and the formation of Penelec Preferred Capital II, Inc.
We have also examined such other instruments, agreements and documents and made
such further investigation as we have deemed necessary as a basis for this
opinion.
Based upon the foregoing, and assuming that the transactions
therein proposed are carried out in accordance with the Application, we are of
the opinion that insofar as the laws of the Commonwealth of Pennsylvania are
concerned, when (i) the Commission shall have entered an order forthwith
granting the Application, (ii) all necessary corporate, trust and partnership
action required on the part of Penelec, Penelec Preferred Capital II, Inc.,
Penelec Capital II and Penelec Trust shall have been duly taken, (iii) all
action under state "Blue Sky" laws to permit the consummation of the proposed
transactions shall have been completed, and (iv) the certificates representing
the Trust Securities, the Preferred Securities and the Subordinated Debentures
are, upon issuance thereof, duly signed, countersigned and authenticated, as may
be necessary, and assuming that the Trust Securities, the Preferred Securities
and the Subordinated Debentures are issued and sold under circumstances which
are permitted under Section 12(f) of the Act and Rule 70 of the General Rules
and Regulations under the Act:
(a) all Pennsylvania laws applicable to the proposed
transactions will have been complied with;
<PAGE>
Securities and Exchange Commission
November 24, 1998
Page 3
(b) Penelec, the proposed issuer of the Subordinated
Debentures and the Guarantee, is validly organized and duly existing;
(c) upon payment of the purchase price therefor by the
purchasers thereof, the Subordinated Debentures will be the valid and
binding obligations of Penelec in accordance with their terms, and the
Guarantee will be the valid and binding obligation of Penelec in
accordance with its terms subject, in each case, to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws
affecting creditors rights generally (including, without limitation,
the Atomic Energy Act and applicable regulations of the Nuclear
Regulatory Commission thereunder) and general equitable principles; and
(d) the consummation of the proposed transactions will not
violate the legal rights of the holders of any securities issued by
Penelec or its subsidiaries, Ninevah Water Company, Penelec Capital,
L.P. and Penelec Capital II, L.P.
We hereby consent to the filing of this opinion as an exhibit
to the Application and in any proceedings before the Commission that may be held
in connection therewith. In addition, we hereby consent to the reliance by
Berlack, Israels & Liberman LLP on this opinion as to all matters of
Pennsylvania law in rendering their opinion to you which will also be an exhibit
to the Application.
Very truly yours,
Ballard Spahr Andrews & Ingersoll, LLP
Exhibit F-3
[Letterhead of Richards, Layton & Finger, P.A.]
November 24, 1998
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Pennsylvania Electric Company
Application on Form U-1
SEC File No. 70-9327
--------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel for Penelec
Preferred Capital II, Inc., a Delaware corporation (the "General Partner"),
Penelec Capital II, L.P., a Delaware limited partnership (the "Partnership"),
and Penelec Capital Trust, a Delaware business trust (the "Trust"), in
connection with the matters set forth herein. At the Partnership's and the
Trust's request, this opinion is being furnished to you. Capitalized terms used
herein and not otherwise defined are used as defined in the LP Agreement (as
defined below).
The Application (as defined below) contemplates, among other
things, (i) the issuance and sale by the Partnership of cumulative preferred
limited partner interests in the Partnership (each, a "Preferred Partner
Interest" and collectively, the "Preferred Partner Interests"), and (ii) the
issuance and sale by the Trust of up to $125 million aggregate liquidation value
of preferred beneficial interests (each, a "Trust Security" and collectively,
the "Trust Securities"). The issuance and sale by the Partnership of the
Preferred Partner Interests pursuant to the LP Agreement and the issuance and
sale by the Trust of the Trust Securities pursuant to the Trust Agreement (as
defined below) are hereinafter referred to as the "Transaction."
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of originals or
copies of the following:
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Securities and Exchange Commission
November 24, 1998
Page 2
(a) The Certificate of Incorporation of the General Partner,
dated August 20, 1998 (the "Certificate of Incorporation"), as filed in the
office of the Secretary of State on August 20, 1998;
(b) The By-Laws of the General Partner (the "By-Laws");
(c) A certificate of an officer of the General Partner;
(d) The Certificate of Limited Partnership of the Partnership,
dated as of August 20, 1998 (the "Partnership Certificate"), as filed in the
office of the Secretary of State of the State of Delaware (the "Secretary of
State") on August 20, 1998;
(e) The Limited Partnership Agreement of the Partnership,
dated as of August 20, 1998;
(f) The Application on Form U-1, dated July 13, 1998 (the
"Original Application"), under the Public Utility Holding Company Act of 1935,
filed by Pennsylvania Electric Company with the Securities and Exchange
Commission and docketed in SEC File No. 70-9327, as amended by Amendment No. 1
to the Original Application, dated November 24, 1998 ("Amendment No.1") (the
Original Application as amended by Amendment No. 1 being hereinafter referred to
as the "Application");
(g) A form of Amended and Restated Limited Partnership
Agreement of the Partnership (the "Partnership Agreement"), filed as an exhibit
to the Application;
(h) A form of Action of the General Partner, relating to the
Preferred Partner Interests (as defined below) (the "Action");
(i) The Certificate of Trust of the Trust, dated as of August
20, 1998 (the "Trust Certificate"), as filed in the office of the Secretary of
State on August 20, 1998;
(j) The Trust Agreement of the Trust, dated as of August 20,
1998, among the Partnership and the trustees of the Trust named therein;
<PAGE>
Securities and Exchange Commission
November 24, 1998
Page 3
(k) A form of Amended and Restated Trust Agreement of the
Trust (the "Trust Agreement"), to be entered into among the Partnership, the
trustees named therein and, for limited purposes, the General Partner, filed as
an exhibit to the Application;
(l) A Certificate of Good Standing for the Partnership, dated
November 24, 1998, obtained from the Secretary of State; and
(m) A Certificate of Good Standing for the Trust, dated
November 24, 1998, obtained from the Secretary of State.
The Partnership Agreement as amended and supplemented by the
Action is hereinafter referred to as the "LP Agreement."
For purposes of this opinion, we have not reviewed any
documents other than the documents listed in paragraphs (a) through (m) above.
In particular, we have not reviewed any document (other than the documents
listed in paragraphs (a) through (m) above) that is referred to in or
incorporated by reference into the documents reviewed by us. We have assumed
that there exists no provision in any document that we have not reviewed that is
inconsistent with the opinions stated herein. We have conducted no independent
factual investigation of our own, but rather have relied solely upon the
foregoing documents, the statements and information set forth therein and the
additional matters recited or assumed herein, all of which we have assumed to be
true, complete and accurate in all material respects.
With respect to all documents examined by us, we have assumed
(i) the authenticity of all documents submitted to us as authentic originals,
(ii) the conformity with the originals of all documents submitted to us as
copies or forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the LP
Agreement constitutes the entire agreement among the parties thereto with
respect to the subject matter thereof, including with respect to the admission
of partners to, and the creation, operation and termination of, the Partnership,
and that the LP Agreement and the Partnership Certificate are in full force and
effect and have not been amended, (ii) that the Trust Agreement constitutes the
entire agreement among the parties
<PAGE>
Securities and Exchange Commission
November 24, 1998
Page 4
thereto with respect to the subject matter thereof, including with respect to
the creation, operation and termination of the Trust, and that the Trust
Agreement and the Trust Certificate are in full force and effect and have not
been amended, (iii) that the Certificate of Incorporation and the By-Laws are in
full force and effect and have not been amended, (iv) that the Board of
Directors of the General Partner has duly adopted resolutions (collectively, the
"Resolutions") authorizing the General Partner's execution and delivery of, and
the performance of its obligations under, the LP Agreement, (v) except to the
extent provided in paragraph 2 below, the due creation or the due organization
or due formation, as the case may be, and valid existence in good standing of
each party to the documents examined by us under the laws of the jurisdiction
governing its creation or organization or formation, (vi) the legal capacity of
natural persons who are signatories to the documents examined by us, (vii)
except to the extent provided in paragraphs 3 and 4 below, that each of the
parties to the documents examined by us has the power and authority to execute
and deliver, and to perform its obligations under, such documents, (viii) the
due authorization, execution and delivery by all parties thereto of all
documents examined by us, (ix) the receipt by each Person to whom a Preferred
Partner Interest is to be issued by the Partnership (each, a "Preferred Partner"
and collectively, the "Preferred Partners") of a Certificate and the payment for
the Preferred Partner Interests acquired by it, in accordance with the LP
Agreement, (x) that the books and records of the Partnership set forth all
information required by the LP Agreement and the Delaware Revised Uniform
Limited Partnership Act (6 Del. C. ' 17-101, et seq.) (the "Partnership Act"),
including all information with respect to all Persons to be admitted as Partners
and their contributions to the Partnership, (xi) that the Preferred Partner
Interests are issued and sold to the Preferred Partners in accordance with the
LP Agreement, (xii) the receipt by each Person to whom a Trust Security is to be
issued by the Trust (collectively, the "Holders") of a certificate substantially
in the form of the trust certificate attached to the Trust Agreement as Exhibit
A and the payment for the Trust Security acquired by it, in accordance with the
Trust Agreement, (xiii) that the Trust Securities are issued and sold to the
Holders in accordance with the Trust Agreement, and (xiv) that neither the
Partnership, the General Partner, the Trust nor Pennsylvania Electric Company
derive income from or connected with sources within the State of Delaware or
have any assets, activities (other than the Partnership's and the General
Partner's maintaining a registered office and registered agent in the State of
Delaware and the Trust's having a Delaware trustee)
<PAGE>
Securities and Exchange Commission
November 24, 1998
Page 5
or employees within the State of Delaware. We have not participated in the
preparation of the Application and assume no responsibility for its contents.
This opinion is limited to the laws of the State of Delaware
(excluding the securities laws of the State of Delaware), and we have not
considered and express no opinion on the laws of any other jurisdiction,
including federal laws and rules and regulations relating thereto. Our opinions
are rendered only with respect to Delaware laws and rules, regulations and
orders thereunder that are currently in effect.
Based upon the foregoing, and upon our examination of such
questions of law and statutes of the State of Delaware as we have considered
necessary or appropriate, and subject to the assumptions, qualifications,
limitations and exceptions set forth herein, we are of the opinion that:
1. The Transaction does not violate applicable Delaware law.
2. The Trust has been duly created and is validly existing in
good standing as a business trust under the Delaware Business Trust Act (12 Del.
C. ' 3801, et seq.). The Partnership has been duly formed and is validly
existing in good standing as a limited partnership under the Partnership Act.
3. Upon issuance and payment as contemplated by the Trust
Agreement, the Trust Securities will be validly issued and, subject to the
qualifications set forth herein, will be fully paid and nonassessable beneficial
interests in the Trust. Each Holder will be entitled to the rights and
privileges of a Holder that are set forth in the Trust Agreement. The Holders,
in their capacity as such, will be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware (8 Del. C. ' 101, et
seq.) (the "GCL"). We note that the Holders may be obligated to make payments as
set forth in the Trust Agreement. The Partnership has the requisite partnership
power and authority under the Partnership Act and the LP Agreement to execute
and deliver, and to perform its obligations under, the Trust Agreement.
4. Assuming that the Preferred Partners, as limited partners
of the Partnership, do not participate in the control of the business of the
Partnership, upon issuance and payment as contemplated by the LP Agreement, the
Preferred Partner Interests
<PAGE>
Securities and Exchange Commission
November 24, 1998
Page 6
will be validly issued and, subject to the qualifications set forth herein, will
be fully paid and nonassessable limited partner interests in the Partnership, as
to which the Preferred Partners, as limited partners of the Partnership, will
have no liability in excess of their obligations to make payments provided for
in the LP Agreement and their share of the Partnership's assets and
undistributed profits (subject to the obligation of a Preferred Partner to repay
any funds wrongfully distributed to it). Each Preferred Partner will be entitled
to the rights and privileges of a Preferred Partner that are set forth in the LP
Agreement. The General Partner has the requisite corporate power and authority
under the GCL, the Certificate of Incorporation, the By-Laws and the Resolutions
to execute and deliver, and to perform its obligations under, the LP Agreement.
5. The consummation of the Transaction will not violate the
legal rights of Pennsylvania Electric Company, in its capacity as the sole
stockholder of the General Partner, the General Partner, in its capacity as
general partner of the Partnership, the Partnership, in its capacity as grantor
of the Trust, or the Holders, in their capacities as beneficial owners of the
Trust.
In rendering the opinions expressed herein, we express no
opinion regarding applicable law relating to fiduciary duties.
The opinions expressed in the second sentences of paragraphs 3
and 4 above are subject to (i) bankruptcy, insolvency, moratorium, receivership,
reorganization, liquidation, fraudulent transfer and other similar laws relating
to or affecting the rights and remedies of creditors generally, and (ii)
principles of equity, including applicable law relating to fiduciary duties
(regardless of whether considered and applied in a proceeding in equity or at
law).
We consent to the filing of this opinion with the Securities
and Exchange Commission as an exhibit to the Application. We also consent to
Berlack, Israels & Liberman LLP's relying as to matters of Delaware law upon
this opinion in connection with an opinion to be rendered by it to you in
connection with the Application. Except as stated above, without our prior
written consent, this opinion may not be furnished or quoted to, or relied upon
by, any other Person for any purpose.
Very truly yours,
Richards, Layton & Finger, P.A.
BJK/DLD
