SEC File No. 70-_____
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM U-1
APPLICATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 ("Act")
GENERAL PUBLIC UTILITIES CORPORATION ("GPU")
100 Interpace Parkway
Parsippany, New Jersey 07054
GENERAL PORTFOLIOS CORPORATION ("GPC")
Mellon Bank Center
Tenth and Market Streets
Wilmington, Delaware 19801
ENERGY INITIATIVES, INC. ("EI")
One Upper Pond Road
Parsippany, New Jersey 07054
(Names of companies filing this statement and addresses
of principal executive offices)
GENERAL PUBLIC UTILITIES CORPORATION
(Name of top registered holding company parent of applicants)
Don W. Myers, Vice President Douglas E. Davidson, Esq.
and Treasurer Berlack, Israels & Liberman
M.A. Nalewako, Secretary 120 West 45th Street
GPU Service Corporation New York, New York 10036
100 Interpace Parkway
Parsippany, NJ 07054
B.L. Levy, President
K.A. Tomblin, Secretary
Energy Initiatives, Inc.
One Upper Pond Road
Parsippany, New Jersey 07054
_________________________________________________________________
(Names and addresses of agents for service)
<PAGE>
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTIONS.
A. EI is a wholly-owned subsidiary of GPC, which is a
wholly-owned subsidiary of GPU. By orders dated June 26, 1990
(HCAR No. 35-25108) and December 18, 1992 (HCAR No. 35-25715) in
File No. 70-7727 the Commission, among other things, authorized
EI to engage in preliminary project development and
administrative activities in connection with its investment in
qualifying cogeneration facilities ("QF") and small power
production facilities, each as defined in the Public Utility
Regulatory Policies Act of 1978, as amended ("PURPA"), and in
exempt wholesale generators ("EWG"), as defined in the Act.
B. EI now proposes to acquire all of the issued and
outstanding common stock ("Stock") of a non-affiliated,
privately-held California corporation ("Cogen Corp.") which is
engaged exclusively in the business of owning or leasing and
operating five operating QFs (each, a "Project" and collectively,
the "Projects") and developing other QFs and EWGs. Cogen Corp.
is the wholly-owned subsidiary of a California corporation,
which, in turn, is a wholly-owned subsidiary of a publicly held
Canadian corporation which is engaged in oil and gas exploration,
development, production and sales (collectively, the "Sellers").
A description of Cogen's Corp.'s Projects is set forth in
paragraphs F and G below.
C. (i) In order to purchase the Stock, EI proposes
to enter into a stock purchase agreement ("Stock Purchase
Agreement") with the Sellers under which (1) EI would agree to
purchase the Stock for a total cash consideration which would not
exceed $80 million, subject to adjustment under certain
circumstances (the "Purchase Price"), and (2) GPU and/or EI would
1
<PAGE>
enter into one or more Assumption Agreements under which they
would agree to assume certain contingent obligations undertaken
by Cogen Corp.'s Canadian parent ("Parent") with respect to three
of Cogen Corp.'s projects, as described below, and indemnify the
Parent against any liabilities arising thereunder.
(ii) Upon execution of the Stock Purchase
Agreement, GPU would deposit into escrow cash in an amount equal
to the maximum estimated Purchase Price (including any possible
"Deferred Consideration" as described below) ("Escrow Cash") and
Cogen Corp.'s direct parent would deposit the Stock into escrow
under an Escrow Agreement between the parties and an independent
bank or trust company acting as escrow agent ("Escrow Agent").
Distribution of the Escrow Cash to Sellers and the Stock to EI by
the Escrow Agent (the "Closing") would be expressly conditioned
upon:
(1) receipt of a Commission order
authorizing the transaction,
(2) satisfaction of the requirements of the
Hart-Scott-Rodino Act,
(3) receipt of the required number of
necessary third-party consents to the transaction, and
(4) certain other specified conditions.
(iii) If the Closing conditions are not satisfied
by May 15, 1994, the Purchase Price is subject to increase by
$15,000 per day ("Deferred Consideration") for each day the
Closing or the termination of the Escrow Agreement is thereafter
delayed; provided, however, that either EI or Sellers may
terminate the Escrow Agreement if all such conditions are not
satisfied by August 15, 1994, in which case, the Escrow Agent
2
<PAGE>
will refund the Escrow Cash to GPU and return the Stock to
Parent, subject, however to payment to Sellers of any required
Deferred Consideration and a "stipulated damage payment" (as
described in paragraph C (vii), below), under certain
circumstances. In addition, if the third party consents with
respect to at least three Projects (including one of either
Project No. 1 or No. 2 which are generally described in paragraph
F below) are not received by May 15, 1994, the Sellers may, at
their option, terminate the Escrow Agreement, and the Escrow
Agent would thereupon refund the Escrow Cash to GPU and return
the Stock to Parent without further liability to either party.
(iv) The Stock Purchase Agreement and Escrow
Agreement will also provide that in the event that required third
party consents with respect to at least three Projects (including
at least one of Project No. 1 or Project No. 2) are obtained, the
Closing would occur, provided the other Closing conditions are
satisfied. In such event, the Purchase Price would be reduced,
based upon an agreed upon valuation of the Projects which would
be retained by Sellers ("Unsold Projects") and either retained in
the existing entities or transferred to a separate entity
("Unsold Project Corps."). EI would retain until December 31,
1994 the exclusive right to continue to seek such remaining third
party consents and purchase the related Unsold Projects and/or
the Unsold Project Corps. stock at the initially agreed upon
price. After that date, the Escrow Agreement would be terminated
with respect to the Unsold Projects, the balance of the Escrow
Cash (representing the unpaid Purchase Price relating to the
Unsold Projects) would be refunded to GPU and the stock of the
Unsold Project Corps. returned to Sellers. EI would then have a
3
<PAGE>
non-exclusive right until December 31, 1995 to purchase the
Unsold Project Corps. stock or, alternatively, its interests in
any of the Unsold Projects at the initially agreed upon price.
In addition, as noted in paragraph F below,
in order to comply with the Federal Energy Regulatory
Commission's 50% limitation on electric utility ownership under
PURPA, it will be necessary for EI to provide for the sale, at
the Closing, of at least a 50% ownership interest in Project No.
1 since 100% of that project is currently indirectly owned by
Cogen Corp. In the event such sale cannot be so accomplished,
EI's purchase of Project No. 1 at the Closing would be
effectively limited to 50% thereof and the balance of the Project
No. 1 ownership would be retained by Sellers and together with a
portion ($7 million) of the $10 million Purchase Price related
thereto would continue to be held by the Escrow Agent under the
Escrow Agreement or pursuant to another arrangement agreed to by
the parties. EI would retain an irrevocable option or similar
right to effect the sale of such remaining 50% interest within 12
months of the signing of the Stock Purchase Agreement; if EI is
unable to do so, the Project No. 1 interest would be returned to
Sellers and the related escrowed Purchase Price amount refunded
to GPU.
(v) Accrued interest on the Escrow Cash would be
payable to GPU except to the extent the Closing is delayed due
solely to the failure to satisfy a specified Closing condition,
in which case such accrued interest for the period of the delay
attributable to the condition failure and until the Closing would
be payable to Sellers.
4
<PAGE>
(vi) Following the execution of the Stock Purchase
and Escrow Agreements and pending the Closing, EI and Sellers
would jointly manage Cogen Corp.'s business and operations
subject to certain restrictions and limitations set forth in the
Stock Purchase Agreement. EI and Sellers would share equally in
Cogen Corp.'s expenses incurred from March 1, 1994 until the
earlier of the Closing or the date the Escrow Agreement is
otherwise terminated.
(vii) GPU and EI have agreed to pay Sellers a
"stipulated damage amount" of up to $7 million in the event the
Closing does not occur by August 15, 1994 due to the failure of a
specified condition as set forth in the Stock Purchase Agreement,
or $5 million if EI otherwise fails or refuses to purchase the
Cogen Corp. Stock, except for certain specified reasons.
D. In determining the Purchase Price for the Cogen
Corp. Stock, EI considered the following principal factors:
(i) the net present value of the cash
distributions which EI has projected that the Project
partnerships will make to Cogen Corp. in respect of Cogen Corp.'s
ownership interests in the Projects over their expected lives;
(ii) the potential for increasing over time the
cash distributions by the Project partnerships to Cogen Corp. by
increasing the efficiency and reducing the operating expenses of
the Projects;
(iii) the fees being paid to Cogen Corp. and its
affiliates by the Project partnerships as managing general
partner and the timing of the payment of such fees;
(iv) EI's assessment of the likelihood of Cogen
Corp. successfully developing its Development Projects, the
5
<PAGE>
development and other fees and cost reimbursements payable to
Cogen Corp. upon the successful financing of each Development
Project and the potential return on Cogen Corp.'s anticipated
investments in such Development Projects;
(v) EI's estimate of the reductions it believes
it can achieve, due to consolidation of operations with EI's
present organization, increased efficiency, and the like, in
Cogen Corp.'s future operating expenses after the Closing, in
addition to the possibility of obtaining additional cost savings
and efficiencies due to synergies (based on location, Project
participants and other factors) of Cogen Corp.'s Projects with
EI's existing projects;
(vi) Cogen Corp.'s working capital at February 28,
1994;
(vii) the amount and probability of receipt by
Cogen Corp. of certain contingent payments, including
entitlements as of December 31, 1993 to accrued cash
distributions not yet distributed at that date under the various
Project partnership agreements; and
(viii) EI's assessment of the likelihood and
extent that payments may be required to be made in the future
under the Assumption Agreement.
E. Additional authorization is being herein requested
for EI to issue, sell and renew from time to time through
December 31, 2004 its promissory notes ("EI Notes") to one or
more commercial banks representing borrowings in the aggregate
principal amount of up to $25 million outstanding at any one
time. The proceeds of such borrowings would be used to pay a
portion of the Purchase Price, and the balance of the Purchase
6
<PAGE>
Price would be supplied through cash capital contributions from
GPU and/or GPC. The EI Notes, which would be issued pursuant to
loan agreements with the bank lenders, would mature not later
than December 31, 2004, would bear interest at varying rates as
provided in the loan agreements, but in any event not in excess
of (a) 250 basis points above the lending bank's prime or base
rate as in effect from time to time (the prime rate being 6% at
the date hereof), (b) 400 basis points above the specified London
Interbank Offered Rate, as in effect from time to time (such
London Interbank Offered Rate being from 3 3/4 to 4 1/4 on the
date hereof), or (c) a negotiated fixed rate which, in any event,
would not exceed 12.0%. The EI Notes would be prepayable to the
extent provided therein. Payment of principal and interest
thereon, together with EI's other obligations under the loan
agreements, may be unconditionally guaranteed by GPU and/or may
be secured by a pledge by GPC of the EI common stock to the bank
lenders. Alternatively, GPU may enter into a support agreement
with the lending banks with respect to repayment of the EI Notes.
F. Cogen Corp.'s operating Projects and the nature of
Cogen Corp.'s interests in each such Project, are described
below:
(i) Project No. 1 is a 102 MW (net) natural gas
fired qualifying cogeneration facility located in Florida. The
Project is owned by a Florida limited partnership in which Cogen
Corp. presently holds, indirectly through wholly-owned
subsidiaries, 100% of the general and limited partnership
interests. In order to comply with the ownership limitations for
qualifying cogeneration facilities pursuant to the FERC's
regulations under PURPA, simultaneous with its purchase of the
7
<PAGE>
Stock, EI will either (x) sell at the Closing not less than a 50%
interest in Project No. 1 to an unaffiliated third-party which is
not an electric utility affiliate, or (y) otherwise effectively
limit at the Closing its acquisition in the Project to 50%
thereof, pending such sale. (As noted in paragraph C (iv) above,
in the latter event, EI would have 12 months from the signing of
the Stock Purchase Agreement to sell such 50% interest; absent
such sale, the remaining 50% Project No. 1 interest would be
retained by Sellers and the related portion of the escrowed
Purchase Price refunded to GPU.)
The Project sells its entire net capacity and
energy to a Florida utility under a long-term power purchase
contract and provides steam under a long-term steam sales
contract to an agricultural cooperative for food processing,
packaging and cold storage.
Project construction financing was provided
by a construction loan in the principal amount of $100 million.
On August 30, 1993, after completion of construction, the Project
was sold to an owner-trustee and leased back to the Project
partnership. The net proceeds from the sale (approximately $102
million) were used to pay the construction loan and certain other
obligations incurred during construction and to fund a working
capital reserve of approximately $2 million. The lease term is
11 years with an option to extend for five years on the same
terms and conditions. Rent is payable in equal quarterly
installments and was calculated based on a 16 year lease term.
In the event the Project partnership elects not to extend the
lease for the 5 year option period, rent which would otherwise
have been paid during the option period, equal to approximately
8
<PAGE>
$7 million, will become immediately due and payable. The
obligation to pay such rent in the event the lease term is not
extended has been guaranteed (the "Rent Guarantee") by Parent.
In addition to the Rent Guarantee, in connection with the sale
and lease back financing Parent has also guaranteed until July 1,
1995 payment of any cost incurred by it becomes necessary to
correct a defect in the Project's steam turbine foundation, up to
$2 million (the "Foundation Guarantee"), and the payment under
certain circumstances of certain state taxes which might be
deemed payable in the future in connection with the Project's
construction financing (the "Tax Guarantee"). In connection with
EI's acquisition of the Stock, GPU and EI will enter into an
Assumption Agreement under which they would assume Parent's
obligations under the Rent Guarantee, the Foundation Guarantee,
and the Tax Guarantee (as well as the Repurchase Guarantee and
the Catalyst Guarantee described below) and would agree to
indemnify Parent against any liabilities arising thereunder.
Except with respect to obligations which may
arise under the Rent Guarantee, the Foundation Guarantee and the
Tax Guarantee, Project partnership obligations under the lease
and all other Project partnership obligations are non-recourse to
Cogen Corp.
The Project partnership has entered into
long-term gas purchase agreements under which all of the
Project's base load gas requirement is available at a fixed
price, escalated based on the energy payments made under the
Project's power purchase contract. The partnership has also
entered into gas transportation contracts for gas transportation
services from the Project's gas suppliers to the Project for all
9
<PAGE>
of the gas required by the Project. The Project may also operate
on oil for limited periods.
The Project is operated and maintained under
a contract with an unaffiliated operations and maintenance
contractor.
(ii) Project No. 2 is a 102 MW (net) natural gas
fired qualifying cogeneration facility located in Florida. The
Project is owned by a Florida limited partnership in which Cogen
Corp. holds, indirectly through wholly-owned subsidiaries, 50% of
the general and limited partnership interests and of which Cogen
Corp. is the managing general partner. The other 50% of the
general and limited partnership interests are held, indirectly
through wholly-owned subsidiaries, by an unaffiliated privately-
held diversified industrial corporation ("Investor 2") which,
among other businesses, is engaged in natural gas supply and
transportation. Investor 2, through subsidiary companies,
provides a portion of the Project's gas transportation services
and peaking gas requirements and is the Project's steam host.
The Project sells its entire net capacity and
energy to a Florida electric utility under a long-term power
purchase contract and provides steam to a subsidiary of Investor
2 for citrus processing under a long-term steam sales agreement.
Project construction financing was provided
by equity contributions from the general and limited partners
aggregating approximately $11 million, of which Cogen Corp.
contributed approximately $5.5 million, and non-recourse debt in
the principal amount of approximately $93 million provided by two
financial institutions. The principal amount of the loan is
amortized in quarterly installments and matures on December 31,
10
<PAGE>
2008. Of the total principal amount of the loan, approximately
$77 million bears interest at a fixed rate of 9.125% per annum
and approximately $16 million bears interest at floating rates of
between 1.25% and 1.5% above the London Interbank Offered Rate.
The loan and all other Project partnership obligations are non-
recourse to Cogen Corp. In connection with the construction
financing, Cogen Corp. agreed to contribute up to an additional
$1 million in equity to the Project partnership to fund a portion
of the cost of installing an oxidation catalyst, if required
prior to a certain date. The obligation to make such equity
contribution has been guaranteed (the "Catalyst Guarantee") by
Parent.
The Project partnership has entered into
long-term contracts with gas suppliers for all of the Project's
base load gas requirements, approximately 75% of which are fixed
price, escalating based on the energy payments received by the
Partnership under its power purchase contract, and approximately
25% of which are priced at spot prices plus a fixed premium, and
with certain other suppliers, including a subsidiary of Investor
2, for peaking gas. The Project partnership has entered into
long-term contracts with gas pipeline companies, including a
subsidiary of Investor 2, for transportation services from the
Project's gas suppliers to the Project for all of the Project's
gas requirements at scheduled rates. The Project may also
operate on oil for limited periods.
The Project is operated and maintained under
a contract with an unaffiliated operations and maintenance
contractor.
11
<PAGE>
(iii) Project No. 3 is an 80 MW (net) natural gas
fired qualifying cogeneration facility located in New York. The
Project is owned by a Delaware limited partnership in which Cogen
Corp. holds, indirectly through wholly-owned subsidiaries,
approximately 33% of the general and limited partnership
interests and of which Cogen Corp. is the managing general
partner. The balance of the partnership interests is held by an
institutional insurance company, the Project's operations and
maintenance contractor and an unaffiliated energy project
developer.
The Project sells its entire net capacity and
energy to a New York utility under a long-term power purchase
agreement and sells steam to an adjacent educational institution
primarily for space heating under a long-term steam sales
contract.
Project construction financing was provided
by equity contributions aggregating approximately $30 million, of
which $14.5 million was contributed by Cogen Corp., and non-
recourse debt in the principal amount of $175 million provided by
a group of commercial banks and other financial institutions.
The principal amount of the loan is amortized in quarterly
installments, matures on December 24, 2006 and bears interest at
8.905% per annum, increasing by 1/8% per annum on December 24,
1997 and December 24, 2002. The loan was implemented through the
sale to the banks of taxable of notes of the local industrial
development agency ("IDA"). The IDA holds title to the Project
and leases it to the Project partnership under a lease, the
payment and other terms and conditions of which substantially
mirror the related terms and conditions of the bank loan and the
12
<PAGE>
IDA notes. Upon termination of the lease, which coincides with
the maturity of the loan, the Project partnership may purchase
the Project from the IDA for a nominal sum. The IDA financing
afforded the Project an exemption from mortgage recording fees
and state and local sales and use taxes during construction and
exempts the Project from real property taxes so long as title to
the Project is held by the IDA. The Project partnership has
agreed to make certain payments to the local taxing authorities
in lieu of taxes. Interest on the IDA notes is not exempt from
federal, state or local income taxes. The loan and all other
Project partnership obligations are non-recourse to Cogen Corp.
In connection with the Project financing, the
Project partnership purchased and paid $88 million for 120 mmbtu
of natural gas under a long-term gas supply agreement. The gas
purchased is expected to be sufficient for approximately 16 years
of Project operation. The Project has arranged for
transportation of gas to the Project under long-term gas
transportation agreements.
Also in connection with the Project
financing, Parent has guaranteed the Partnership obligation to
repurchase the institutional insurance company's limited
partnership interest in the Partnership if the Partnership's
managing general partner (currently a wholly-owned subsidiary of
Cogen Corp.) is replaced with another party not acceptable to it
("Repurchase Guarantee").
The Project is operated and maintained under
a contract with an operations and maintenance contractor.
(iv) Project No. 4 is a 29.4 MW (net) qualifying
cogeneration facility located in Michigan. The Project is owned
13
<PAGE>
by a Michigan limited partnership in which Cogen Corp. holds,
indirectly through a wholly-owned subsidiary, a 1% general
partnership interest and of which Cogen Corp. is the managing
general partner. The balance of the partnership interests is
held indirectly by the local gas distribution company ("Investor
4") which, through a separate subsidiary, is the Project's gas
supplier. Cogen Corp. also leases the project site from the
Project's steam host and, through a subsidiary, subleases the
site to the partnership, for which it receives sublease payments
from the Partnership under a sublease. The Project sells its
entire net capacity and energy to a Michigan utility and sells
steam for process use to an industrial corporation under a long-
term steam sales contract.
Project construction financing was provided
by equity contributions from the Project's general and limited
partners totalling $18.4 million, of which Cogen Corp.
contributed $3.4 million, and by non-recourse debt in the
principal amount of approximately $26 million provided by a
commercial bank and an insurance company. Of the total principal
amount of the loan, $14.5 million bears interest at the London
Interbank Offered Rate plus from 0.8% to 1.0% per annum and $11.5
million accrues interest at a fixed rate of 9.46% per annum. The
principal amount of the loan is amortized in semi-annual payments
and matures on December 31, 2005. The loan and all other Project
partnership obligations are non-recourse to Cogen Corp.
The Project partnership has entered into
long-term gas supply and transportation agreements with a
subsidiary of Investor 4 under which 75% of the Project's gas
14
<PAGE>
requirements may be obtained at fixed prices and 25% at spot
prices through 2006.
The Project is operated and maintained under
a contract with an unaffiliated operations and maintenance
contractor.
(v) Project No. 5 is a 26 MW (net) qualifying
cogeneration facility located in California. The Project is
owned by a California limited partnership in which Cogen Corp.
holds, indirectly through wholly-owned subsidiaries, a 30%
interest in the partnership as a general partner. The balance of
the partnership interests is held by an unaffiliated energy
project developer and the financing subsidiary of a large
industrial corporation.
The Project provides all of the electric
energy required by its steam host, up to 4 MW, and sells the
balance of its net capacity and energy to a California utility
under a long-term power purchase agreement. The steam host is an
industrial corporation which purchases steam under a long-term
steam sales contract for use in certain manufacturing processes.
Project construction financing was provided
by equity contributions from the Project's partners totalling
$9.3 million, of which $3.3 million was contributed by Cogen
Corp., and non-recourse debt in the principal amount of
approximately $20 million from three banks. A portion of the
loan bears interest at the fixed rate of 10.07%; the balance
bears interest at specified amounts above the lender's prime rate
or the London Interbank Offered Rate, at the partnership's
election from time to time. The principal amount of the loan is
amortized by quarterly payments and matures in 2003. The loan
15
<PAGE>
and all other Project partnership obligations are non-recourse to
Cogen Corp.
The Project partnership has entered into a
gas supply contract which expires on January 1, 2004 and a gas
transportation agreement with the local gas utility which expires
in July 1995 under which all gas required by the Project is
available.
The Project is operated and maintained under
a long-term contract with one of the partnership's general
partners which is not affiliated with Cogen Corp.
G. Cogen Corp. also has projects under active
development ("Development Projects"), principally:
(i) a 28.5 MW gas-fired qualifying cogeneration
facility located in New York ("Development Project No. 1") for
which a power purchase contract with a New York electric and gas
utility has been executed and a steam sales agreement is being
negotiated; and
(ii) a number of other natural gas-fired
qualifying cogeneration facilities or EWGs, totalling
approximately 275 MW, with respect to which proposals to supply
electric power have been submitted in response to utility
requests for proposals.
H. EI will not acquire, either directly or
indirectly, any interest in any of the Projects' steam hosts by
virtue of the proposed transactions.
I. Accordingly, authority is herein requested as
follows:
(i) For EI to (a) acquire the Cogen Corp. Stock
and the Unsold Project Corps.' stock from time to time through
16
<PAGE>
December 31, 1995 and (b) enter into one or more Assumption
Agreements under which it would be obligated to make payments
from time to time under the Rent Guarantee, the Foundation
Guarantee, the Tax Guarantee, the Catalyst Guarantee and the
Repurchase Guarantee in an aggregate amount not to exceed $25
million.
(ii) For GPU to (a) make cash capital
contributions and/or loans from time to time through December 31,
1995 in an aggregate amount of up to $80 million either directly
to EI or to GPC, which would, in turn, contribute up to such
amounts to EI, to pay the Purchase Price and (b) assume the Rent,
Foundation, Tax, Catalyst and Repurchase Guarantees, and/or
unconditionally guaranty EI's obligations to be assumed
thereunder pursuant to the Assumption Agreements and to make
additional cash capital contributions either directly to EI or to
GPC which GPC would, in turn, contribute such amounts to EI to
make any required payments from time to time thereunder, up to a
maximum amount of $25 million, in the aggregate.
(iii) For EI to issue, sell and renew from time to
time through December 31, 2004 the EI Notes (with the terms and
conditions, including the collateral security, as herein
described) in the aggregate principal amount of $25 million
outstanding at any one time, and for GPU to unconditionally
guaranty payment of principal and interest thereon and EI's other
obligations with respect thereto under any related loan
agreements, or to enter into support agreements with the lending
banks.
(iv) For EI, either directly or indirectly through
Cogen Corp. and/or its affiliated subsidiaries and partnerships
17
<PAGE>
to provide project management, administrative and similar
services as managing general partner of the Projects from time to
time and to sublease the Project No. 4 site to the Project No. 4
partnership and in the manner and under such terms and
conditions, including with respect to the fees payable by the
Project partnership for such services, as may be provided in the
related Project partnership agreements and Project No. 4
sublease. Each Project is now and will, following the
consummation of the proposed transactions, remain a "qualifying
facility" under PURPA and the FERC's regulations thereunder.
Moreover, the amount of such management fees and sublease
payments payable to EI by the Project partnership will in no way
effect the rates to be paid for the Project's energy and capacity
by the purchasing electric utility and thus by the utility's
ratepayers, since those rates have been established based upon
the purchasing utility's "avoided costs" of obtaining energy and
capacity which costs are unrelated to the Project partnership's
operating expenses. Accordingly, GPU and EI believe that it is
not necessary or appropriate for the protection of investors or
consumers that such management services or sublease arrangements
be performed at cost. See, In the Matter of New England Electric
System, HCAR No. 22309 (1981).
ITEM 2. FEES, COMMISSIONS AND EXPENSES.
The estimated fees, commissions and expenses to be
incurred by the applicants in connection with the proposed
transactions will be supplied by amendment.
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
18
<PAGE>
It is believed that Section 6(a), 7, 9(a), 10, 12(b)
and 13(b) of the Act and Rules 45, 50, 51, 90 and 91 thereunder
are applicable to the transactions proposed herein.
It is requested that the Commission exempt the proposed
issuance and sale of the EI Notes from the provisions of Rule 50
under the Act, pursuant to the provisions of paragraph (a)(5)
thereof, since such issuance and sale is not a transaction with
respect to which it would be appropriate to aid the Commission
(in carrying out the provisions of Section 7 of the Act) in
determining whether the fees, commissions, or other remuneration
to be paid directly or indirectly in connection therewith are
reasonable, or whether any term or condition of such transaction
is detrimental to the public interest or the interest of
investors or consumers.
GPU and EI may request that the Commission reserve
jurisdiction with respect to the provision by EI of management
services to the Project partnerships to the extent such services
are not limited to the cost thereof if and to the extent
necessary pending completion of the record herein.
ITEM 4. REGULATORY APPROVALS.
No state commission has jurisdiction with respect to
any aspect of the proposed transactions and, assuming your
Commission authorizes and approves all aspects of the
transactions (including the accounting therefor), no Federal
commission other than your Commission has jurisdiction with
respect to any aspect thereof, except that the proposed
transactions require compliance with the Hart-Scott-Rodino Act
and may therefore not be carried out until expiration of the
19
<PAGE>
required waiting period thereunder. GPU, EI and the Sellers will
request that the Department of Justice and the Federal Trade
Commission permit early termination of such waiting period.
ITEM 5. PROCEDURE.
It is requested that the Commission issue an order with
respect to the transactions proposed herein at the earliest
practicable date, but in any event not later than May 10, 1994.
It is further requested that (v) there not be a recommended
decision by an Administrative Law Judge or other responsible
officer of the Commission, (vi) the Office of Public Utility
Regulation be permitted to assist in the preparation of the
Commission's decision, and (vii) 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.
(a) Exhibits:
A-1 Certificate of Incorporation of Cogen Corp.-
-to be filed by amendment.
A-2 By-laws of Cogen Corp.--to be filed by
amendment.
A-3 Certificate for Cogen Corp. capital stock--
to be filed by amendment.
B-1 Form of Stock Purchase Agreement--to be filed
by amendment.
B-2 Form of Escrow Agreement--to be filed by
amendment.
B-3 Project No. 1 Agreement of Limited
Partnership, Financing Agreement, Power
Purchase Agreement, Steam Sales Agreement,
Gas Supply Agreements and Gas Transportation
Agreements--to be filed by amendment.
20
<PAGE>
B-4 Project No. 2 Agreement of Limited
Partnership, Financing Agreement, Power
Purchase Agreement, Steam Sales Agreement,
Gas Supply Agreements and Gas Transportation
Agreements--to be filed by amendment.
B-5 Project No. 3 Agreement of Limited
Partnership, Financing Agreement, Power
Purchase Agreement, Steam Sales Agreement,
Gas Supply Agreements and Gas Transportation
Agreements--to be filed by amendment.
B-6 Project No. 4 Agreement of Limited
Partnership, Financing Agreement, Power
Purchase Agreement, Steam Sales Agreement,
Gas Supply Agreements and Gas Transportation
Agreements--to be filed by amendment.
B-7 Project No. 5 Agreement of Limited
Partnership, Financing Agreement, Power
Purchase Agreement, Steam Sales Agreement,
Gas Supply Agreements and Gas Transportation
Agreements--to be filed by amendment.
B-8 Power Purchase Contracts for Development
Project No. 1--to be filed by amendment.
B-9 Development Agreement for Development Project
No. 1--to be filed by amendment.
B-10 Form of Loan Agreement with respect to EI
borrowings--to be filed by amendment.
B-11 Form of EI Note--included in Exhibit B-10.
B-12 Form of GPU Guaranty of EI Notes--to be filed
by amendment.
B-13 Form of Pledge Agreement for EI Stock--to be
filed by amendment.
B-14 Form of GPU Support Agreement with respect to
EI Notes--to be filed by amendment.
C None.
D None.
E None.
F Opinion of Berlack, Israels & Liberman--to be
filed by amendment.
G Proposed form of public notice.
H Description of Sellers, Projects and Project
participants--filed under request for
confidential treatment pursuant to Rule 104.
21
<PAGE>
I Project financial data for each Project--to
be filed by amendment.
(b) Financial Statements:
1-A GPU (Corporate) Balance Sheets, actual and
pro forma, as at December 31, 1993, and
Consolidated Statements of Income, actual and
pro forma, and Statement of Retained
Earnings, for the twelve months ended
December 31, 1993; pro forma journal entries-
-to be filed by amendment.
1-B EI Consolidated Balance Sheets, actual and
pro forma, as at December 31, 1993, and
Consolidated Statements of Income, actual and
pro forma, and Statement of Retained
Earnings, for the twelve months ended
December 31, 1993; pro forma journal entries-
-to be filed by amendment.
2. GPU Consolidated Balance Sheets, actual and
pro forma, as at December 31, 1993, and
Consolidated Statements of Income, actual and
pro forma, and Statement of Retained
Earnings, for the twelve months ended
December 31, 1993; pro forma journal entries-
-to be filed by amendment.
3. Cogen Corp. consolidated financial statements
as of December 31, 1993 and for year then
ended--to be filed by amendment.
4. None.
22
<PAGE>
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.
(a) The proposed transactions are for the purpose of
carrying out and financing EI's business activities. As such,
the issuance of an order by your Commission with respect to the
proposed transactions which are the subject hereof is not a major
Federal action significantly affecting the quality of the human
environment.
(b) No Federal agency has prepared or is preparing an
environmental impact statement with respect to the proposed
transactions which are the subject hereof. Reference is made to
Item 4 hereof regarding regulatory approvals with respect to the
proposed transactions.
23
<PAGE>
SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE PUBLIC UTILITY
HOLDING COMPANY ACT OF 1935, THE UNDERSIGNED COMPANIES HAVE DULY
CAUSED THIS STATEMENT TO BE SIGNED ON THEIR BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
GENERAL PUBLIC UTILITIES CORPORATION
GENERAL PORTFOLIOS CORPORATION
By:______________________________
Don W. Myers
Vice President and Treasurer
ENERGY INITIATIVES, INC.
By:______________________________
Bruce L. Levy
President
Date: March 4, 1994
<PAGE>
EXHIBIT TO BE FILED BY EDGAR
Exhibit:
G - Proposed form of public notice.
<PAGE>
1
<PAGE>
EXHIBIT G
SECURITIES AND EXCHANGE COMMISSION
(RELEASE NO. 35-________; 70-________)
GENERAL PUBLIC UTILITIES CORPORATION
GENERAL PORTFOLIOS CORPORATION
ENERGY INITIATIVES, INC.
NOTICE OF PROPOSAL TO ACQUIRE SECURITIES OF NON-UTILITY
GENERATION COMPANY AND TO ISSUE AND SELL SECURITIES AND GUARANTEE
OLIGATIONS
General Public Utilities Corporation, 100 Interpace Parkway,
Parsippany, New Jersey 07054 ("GPU"), a registered holding
company, and its wholly-owned direct and indirect subsidiaries,
General Portfolios Corporation, Mellon Bank Center, Tenth and
Market Streets, Wilmington, Delaware 10801 ("GPC") and Energy
Initiatives, Inc., One Upper Pond Road, Parsippany, New Jersey,
07054 ("EI"), have filed an application with the Commission
pursuant to Sections 6(a), 7, 9(a), 10, 12(b) and 13(b) of the
Public Utility Holding Company Act of 1935 (the "Act") and Rules
45, 50, 51, 90 and 91 thereunder.
EI proposes to acquire all of the outstanding stock
("Stock") of a non-affiliated, privately-held California
corporation ("Cogen Corp.") engaged in the business of owning
interests in or leasing and operating five operating qualifying
cogeneration facilities in the United States (the "Projects") and
developing other non-utility generation projects in domestic and
foreign locations. The Projects aggregate approximately 340 MW
of installed net electric generation capacity and Cogen Corp.'s
interests in the Projects range from approximately 33% to 100%.
EI proposes to enter into a stock purchase agreement
("Agreement") with Cogen Corp. and its direct and indirect parent
1
<PAGE>
corporations (collectively, "Sellers"). Under the Agreement, EI
would purchase all of the Cogen Corp. Stock for up to $80
million, subject to adjustment under certain circumstances
("Purchase Price"), and GPU and/or EI would assume certain
guarantees of contingent obligations which are now undertaken by
an indirect parent ("Parent") corporation of Cogen Corp. GPU
and/or EI would also agree to indemnify such Parent against
liabilities arising under such guarantees. The Agreement
provides that if certain conditions to the consummation of the
acquisition are not satisfied or waived by EI by a specified
date, the Purchase Price would be increased by $15,000 per day,
until such conditions are satisfied or waived and the acquisition
is consummated ("Closing"). In the event the Closing fails to
occur by a specified date EI would be obligated to pay Sellers a
stipulated damage amount if EI fails or refuses to purchase the
stock of Cogen Corp., except for certain specified reasons.
The Agreement also provides that if the conditions are
satisfied which would allow a Closing to occur with respect to at
least three Projects (the "Sold Projects"), including at least
one of two specified Projects, then the Closing would occur, the
Purchase Price would be reduced pro rata, based upon agreed
valuations of the Projects, and EI would acquire the Sold
Projects. EI would retain an exclusive right to acquire the
Projects retained by Cogen Corp. at the agreed price through
December 31, 1994 and would have a non-exclusive right to acquire
such Projects at the agreed price through December 31, 1995.
In order to maintain the qualifying status under the Public
Utility Regulatory Policies Act of 1978, of the Project in which
2
<PAGE>
Cogen Corp. holds a 100% interest, EI would be required to limit
its acquisition thereof to 50% of Cogen Corp.'s interest.
Accordingly, the Agreement also provides that Sellers would
retain 50% of Cogen Corp.'s interest in that Project pending EI's
arrangement of an acquisition of that interest by a third-party.
EI would have the right to arrange such an acquisition for 12
months following the signing of the definitive Agreement.
All funds required to pay the Purchase Price, as it may be
adjusted, and all documents required to transfer the Stock or the
interests in the Projects to be acquired by EI would be deposited
into escrow upon execution of the Agreement. Such funds and
documents would be distributed by the escrow agent, which would
be a bank or trust company, upon each Closing as provided in the
escrow agreement governing the escrow.
EI seeks authorization under Section 13(b) to provide
certain management and administrative services to the Projects
through affiliated entities which are general partners of the
Project partnerships and to sublease the Project site to one such
partnership at above cost.
To fund payment of the balance of the Purchase Price,
additional authorization is being requested for EI to issue, sell
and renew from time to time its promissory notes ("EI Notes") to
commercial banks representing borrowings of up to $25 million
outstanding at any time. The balance of the Purchase Price would
be funded through capital contributions from GPU and/or GPC. The
EI Notes, which would be issued pursuant to loan agreements with
bank lenders, would mature not later than December 31, 2004,
would bear interest at varying rates as provided in the loan
3
<PAGE>
agreements, but in any event not in excess of (a) 250 basis
points above the lending bank's prime or base rate as in effect
from time to time, (b) 400 basis points above the specified
London Interbank Offered Rate, as in effect from time to time, or
a negotiated fixed rate which, in any event, would not exceed
12.0%. The EI Notes would be prepayable to the extent provided
therein. Payment of principal and interest thereon, together
with EI's other obligations under the loan agreements, may be
unconditionally guaranteed by GPU and/or may be secured by a
pledge of the EI common stock to the bank lenders.
Alternatively, GPU may enter into a support agreement with the
lending banks with respect to repayment of the EI Notes.
The Application and any amendments thereto are available for
public inspection through the Commission's Office of Public
Reference. Interested persons wishing to comment or request a
hearing should submit their views in writing by May 9, 1994 to
the Secretary, Securities and Exchange Commission, Washington,
D.C. 20549, and serve a copy on the applicant at the address
specified above. Proof of service (by affidavit, or in case of
an attorney at law, by certificate) should be filed with the
request. Any request for a hearing shall identify specifically
the issues of fact or law that are disputed. A person who so
requests will be notified of any hearing, if ordered, and will
receive a copy of any notice or order issued in this matter.
After said date, the Application, as it may be amended, may be
granted.
Jonathan G. Katz
Secretary
4
<PAGE>
<PAGE>
