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File No. 70-8893
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
AMENDMENT NO. 2
TO
FORM U-1
APPLICATION OR DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
ALLEGHENY GENERATING COMPANY
10435 DOWNSVILLE PIKE
HAGERSTOWN, MD 21740
(Name of company or companies filing this statement and addresses of
principal executive offices)
Allegheny Power System, Inc.
(Name of top registered holding company parent of each applicant or
declarant)
Thomas K. Henderson, Esq.
Vice President
Allegheny Power Service Corporation
10435 Downsville Pike
Hagerstown, MD 21740
(Name and address of agent for service)
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1. Applicant hereby amends Item 1, Description of the
Transaction, by filing the following to be inserted as the next to last
paragraph of Item 1 of the July 29, 1996 Application or Declaration on Form
U-1:
Since the Company has only one asset and the owners, which are its
only customers, take all of the capacity from that asset, the
Company, by design, has no growth opportunity. That asset has a
net book value of $669 million and was financed with $210 million
of equity and $243 million of debt in combination with deferred
taxes and investment tax credit at June 30, 1996. The Company's
total revenues of about $80 million are primarily equal to the
owner's return on investment (as determined by FERC tariff) plus
operating expenses (about $40 million) and depreciation (about $17
million). Cash received from revenues exceeds the cash
requirements for operating expenses and return primarily because
of the recovery of depreciation expense. Since the Company has no
growth prospects, the owners expect a return on their investment
as well as a return of their investment. Thus, by design, the
annual dividends, currently about $37 million, must exceed the
annual earnings, currently about $26 million, to avoid a cash
buildup approximately equal to the annual depreciation. Dividends
paid and to be paid (about $37 million currently), however, are
less than the total of earnings and depreciation (about $43
million currently). Estimated capitalization at December 31, 1996
is $244 million debt and $203 million equity declining to about
$232 million debt and $193 million equity at December 31, 1997 and
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about $219 million debt and $183 million equity at December 31,
1998. No dividends will be paid which will cause cash to be less
than the amount required to meet operating expense and debt
service. By this design, the capitalization is systematically
reduced each year as the asset depreciates. Debt is retired and
dividends are paid in amounts necessary to maintain a 45% equity
position.
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.
ALLEGHENY GENERATING COMPANY
By:
PHILIP J. BRAY
Philip J. Bray
Attorney
Dated: September 18, 1996
