Post-Effective Amendment No. 21 to
SEC File No. 70-7727
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM U-1
APPLICATION UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 ("Act")
GPU, INC. ("GPU")
310 Madison Avenue
Morristown, New Jersey 07962
GPU INTERNATIONAL, INC. ("GPU International")
One Upper Pond Road, Parsippany, New Jersey 07054
(Names of companies filing this statement
and addresses of principal offices)
GPU, INC.
(Name of top registered holding company
parent of the applicants)
M.A. Nalewako, Secretary Douglas E. Davidson, Esq.
M. J. Connolly, Esq., Berlack, Israels & Liberman LLP
Assistant General Counsel 120 West 45th Street
GPU Service Corporation New York, New York 10036
100 Interpace Parkway
Parsippany, New Jersey 07054
W. S. Greengrove, Secretary
GPU International, Inc.
One Upper Pond Road
Parsippany, New Jersey 07054
(Names and addresses of agents for service)
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GPU and GPU International hereby post-effectively amend their
Application on Form U-1, docketed in SEC File No. 70-7727, as follows:
1. By amending paragraph H of Post-Effective Amendment No.
20 to read in its entirety as follows:
H. Rule 53 Analysis (i) As described below, GPU meets all of the
conditions of Rule 53, except for Rule 53(a)(1). By Order dated November 5, 1997
(HCAR No. 35-26773) (the "100% Order"), the Commission authorized GPU to
increase to 100% of average consolidated retained earnings, as defined in Rule
53, the aggregate amount which it may invest in EWGs and FUCOs. At September 30,
1997, GPU's average consolidated retained earnings was approximately $2,164
million, and at November 6, 1997 (after giving effect to the acquisition of
PowerNet Victoria) GPU's aggregate investment in EWGs and FUCOs was
approximately $1,430 million, or 66% of average consolidated retained earnings.
Accordingly, under the 100% Order, GPU may invest up to an additional $734
million in EWGs and FUCOs. GPU will not utilize the $500 million guaranty
authorization requested herein for purposes of guaranteeing investments in EWGs
or FUCOs (or any other authorization under Rule 53 which would increase GPU's
aggregate investment in EWGs and FUCOs) if it would result in GPU's aggregate
investment exceeding the limitation set forth in the 100% Order, without prior
Commission authorization.
(ii) GPU maintains books and records to identify investments in, and
earnings from, each EWG and FUCO in which it directly or indirectly
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holds an interest.
(A) For each United States EWG in which GPU directly or
indirectly holds an interest:
(1) the books and records for such EWG will be kept in
conformity with United States generally accepted accounting
principles ("GAAP");
(2) the financial statements will be prepared in accordance
with the GAAP; and
(3) GPU directly or through its subsidiaries undertakes to
provide the Commission access to such books and records and
financial statements as the Commission may request.
(B) For each FUCO or foreign EWG which is a majority
owned subsidiary of GPU:
(1) the books and records for such subsidiary will be kept in
accordance with GAAP;
(2) the financial statements for such subsidiary will be prepared
in accordance with GAAP; and
(3) GPU directly or through its subsidiaries undertakes to provide
the Commission access to such books and records and financial
statements, or copies thereof in English, as the Commission
may request.
(C) For each FUCO or foreign EWG in which GPU owns 50% or less
of the voting securities, GPU directly or through its
subsidiaries will proceed in good faith, to the extent reasonable
under the circumstances, to cause (1) such entity
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to maintain books and records in accordance with GAAP;
(2) the financial statements of such entity to be prepared
in accordance with GAAP; and
(3) access by the Commission to such books and records and
financial statements (or copies thereof) in English as the
Commission may request and, in any event, GPU will provide the
Commission on request copies of such materials as are made
available to GPU and its subsidiaries. If and to the extent that
such entity's books, records or financial statements are not
maintained in accordance with GAAP, GPU will, upon request of the
Commission, describe and quantify each material variation
therefrom as and to the extent required by subparagraphs
(a) (2) (iii) (A) and (a) (2) (iii) (B) of Rule 53.
(iii) No more than 2% of GPU's domestic public utility
subsidiary employees will render any services, directly or
indirectly, to any EWG and FUCO in which GPU directly or indirectly
holds an interest. (iv) Copies of this Post-Effective Amendment are
being provided to the New Jersey Board of Public Utilities and the
Pennsylvania Public Utility Commission, the only federal, state or
local regulatory agencies having jurisdiction over the retail rates of
GPU's electric utility subsidiaries.(1)
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1 Pennsylvania electric Company ("Penelec") is also subject to retail rate
regulation by the New York Public Service Commission with respect to retail
service to approximately 11,300 customers in Waverly, New York served by Waverly
electric Power & Light Company, a penelec subsidiary. Waverly electric's
revenues are immaterial, accounting for less than 1% of Penelec's total
operating revenues.
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In addition, GPU will submit to each such commission copies of any Rule
24 certificates required hereunder, as well as a copy of Item 9 of
GPU's Form U5S and Exhibits H and I thereof (commencing with the Form
U5S to be filed for the calendar year in which the authorization herein
requested is granted). (v) None of the provisions of paragraph (b) of
Rule 53 render paragraph (a) of that Rule unavailable for the proposed
transactions.
(A) Neither GPU nor any subsidiary of GPU is the subject of
any pending bankruptcy or similar proceeding.
(B) GPU's average consolidated retained earnings for the four
most recent quarterly periods (approximately $2,164 million)
represented an increase of approximately $22 million in the average
consolidated retained earnings for the previous four quarterly periods
(approximately $2,142 million).
(C) GPU did not incur operating losses from direct or indirect
investments in EWGs and FUCOs in 1996 in excess of 5% of GPU's December
31, 1996 consolidated retained earnings.
Rule 54 Analysis. The proposed transactions also contemplate,
among other things, the issuance by GPU of Guarantees which do not relate to
EWGs and FUCOs (the "Other Transactions"). Accordingly, the Other Transactions
are subject to Rule 54, which provides that, in determining whether to approve
an application which does not relate to any EWG or FUCO, the Commission shall
not consider the effect of the capitalization or earnings of any such EWG or
FUCO which is a subsidiary of a registered holding company
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if the requirements of Rule 53 (a), (b) and (c) are satisfied.
As described above, GPU meets all the conditions of Rule 53(a), except
for clause (1). With respect to clause (1), the Commission determined in the
100% Order that GPU's financing of investments in EWGs and FUCOs in an amount
greater than 50% of GPU's average consolidated retained earnings as otherwise
permitted by Rule 53(a)(1) would not have either of the adverse effects set
forth in Rule 53(c).
Moreover, even if the effect of the capitalization and earnings of
subsidiary EWGs and FUCOs were considered, there is no basis for the Commission
to withhold or deny approval for the Other Transactions proposed in this
Application. The Other Transactions would not, by themselves, or even considered
in conjunction with the effect of the capitalization and earnings of GPU's
subsidiary EWGs and FUCOs, have a material adverse effect on the financial
integrity of the GPU system, or an adverse impact on GPU's public utility
subsidiaries, their customers, or the ability of State commissions to protect
such public utility customers.
The 100% Order was predicated, in part, upon the assessment of GPU's
overall financial condition which took into account, among other factors, GPU's
consolidated capitalization ratio and the recent growth trend in GPU's retained
earnings. As of June 30, 1997, the most recent period for which financial
statement information was evaluated in the 100% Order, GPU's consolidated
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capitalization consisted of 49.2% equity and 50.8% debt. As previously reported,
on November 6, 1997, GPU acquired PowerNet Victoria. GPU's June 30, 1997 pro
forma capitalization, reflecting the PowerNet acquisition, was 60.7% debt and
39.3% equity.
GPU's September 30, 1997 consolidated capitalization consists of 49.5%
debt and 50.5% equity, and GPU's pro forma capitalization as of such date,
giving effect to the PowerNet acquisition, is 59.9% debt and 40.1% equity. Thus,
since the date of the 100% Order, there has been no material change in GPU's
consolidated capitalization ratio, which remains within acceptable ranges and
limits as evidenced by the credit ratings of GPU's electric utility
subsidiaries.(2)
The GPU guaranty authorization requested herein is for an extension of
the period during which GPU may issue Guarantees, which authorization was in
effect at the time of the issuance of the 100% Order. Furthermore, inasmuch as
such authorization relates to Guarantees (which are not recorded on GPU's
balance sheet), the proposed transactions are not expected to affect GPU's
capitalization ratio. In the event that GPU is required to make payment under
any such Guarantee, GPU anticipates that, depending on the amount which it
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2 The debt ratings of GPU's electric utility subsidiaries have not changed since
the issuance of the 100% Order.
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may be required to fund at any particular time, it would use a combination of
debt, equity and/or internally generated funds.(3)
GPU's consolidated retained earnings grew on average approximately 4.7%
per year from 1991 through 1996. Earnings attributable to GPU's investments in
EWGs and FUCOs have contributed positively to consolidated earnings, excluding
the impact of the windfall profits tax on the Midlands plc investment.(4)
Accordingly, since the date of the 100% Order, the capitalization and
earnings attributable to GPU's investments in EWGs and FUCOs have not had any
adverse impact on GPU's financial integrity. In addition, inasmuch as the
authorization requested herein relates to Guarantees (which are not recorded on
GPU's income statement), the proposed transactions are not expected to impact
GPU's earnings.
Reference is made to Exhibit H filed herewith which sets forth GPU's
consolidated capitalization at September 30, 1997 and after giving effect to the
transactions proposed herein.
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3 GPU is not herein requesting authorization to issue any such debt or equity.
The impact of any such new issuance will be addressed in filings with the SEC
requesting such authorization. 4 As discussed in the 100% Order, GPU expects to
incur a loss for 1997 from its investments in EWGs and FUCPs as a result of the
windfall profits tax imposed on Midlands Electricity, plc.
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2. By amending paragraph I of Post-Effective Amendment No. 20 thereof
to read in its entirety as follows:
The estimated fees, commissions and expenses expected to be
incurred in connection with the proposed transactions are as follows:
Legal Fees:
Berlack, Israels & Liberman LLP $ 5,000
Ballard Spahr Andrews & Ingersoll 500
Miscellaneous 4,500
TOTAL $10,000
3. By filing the following exhibits and financial statements in Item 6
thereof:
Exhibits
F-1(e) - Opinion of Berlack, Israels & Liberman LLP.
F-2(c) - Opinion of Ballard Spahr Andrews & Ingersoll.
H - GPU Capitalization as at September 30,
1997 and Pro Forma Adjustments.
Financial Statements
1 - GPU and GPU International Financial Statements
are omitted since the proposed transactions
will not have a material impact thereon.
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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.
Dated: December 17, 1997 GPU, INC.
By:
T.G. Howson
Vice President and Treasurer
GPU INTERNATIONAL, INC.
By:
B.L. Levy
President
EXHIBIT TO BE FILED BY EDGAR
3. By filing the following exhibits and financial statements
in Item 6 thereof:
Exhibits
F-1(e) - Opinion of Berlack, Israels & Liberman LLP.
F-2(c) - Opinion of Ballard Spahr Andrews & Ingersoll.
H - GPU Capitalization as at September 30, 1997
and Pro Forma Adjustments.
Exhibit F-1(e)
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December 17, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: GPU, Inc. ("GPU)
GPU International, Inc. ("GPUI")
Application on Form U-1
SEC File No. 70-7727
--------------------
Ladies and Gentlemen:
We have examined Post-Effective Amendment No. 19, dated
September 24, 1997, to the Application on Form U-1, dated December 13,
1989, under the Public Utility Holding Company Act of 1935 (the "Act") filed
with the Securities and Exchange Commission (the "Commission"), and docketed by
the Commission in SEC File No. 70-7727, as amended by Post-Effective Amendment
No. 20, dated November 7, 1997, and as to be amended by Post-Effective Amendment
No. 21 thereto, dated this date, of which this opinion is a part. (The
Application, as amended and thus to be amended, is hereinafter referred to as
the "Application").
The Application now contemplates, among other things:
(i) expanding the purposes for which GPU may enter
into guarantees ("Guarantees") to include
Guarantees of any security or other obligation of
GPUI or a GPUI subsidiary;
(ii) extending until December 31, 2000, the period
during which GPU and GPUI may enter into
Guarantees; and
(iii) increasing to $150 million the aggregate amount of
obligations which GPUI may incur under Guarantees
issued by it.
In addition to the matters set forth in our previous opinion
dated November 9, 1995 and filed as Exhibit F-1(d) to the Application, we have
examined copies of the Commission's Supplemental Order, dated November 16, 1995
<PAGE>
granting the Application, as then amended. We have also examined such other
documents and made such further investigation as we have deemed necessary as a
basis for this opinion.
We have been counsel to GPU and GPUI for many years. In that
connection, we have participated in various proceedings relating to the issuance
of securities by GPU and its subsidiaries, and we are familiar with the terms of
the outstanding securities of the corporations comprising the GPU holding
company system.
We are members of the Bar of the State of new York and do not
purport to be expert in the laws of any jurisdiction other than the laws of the
State of New York and the Federal laws of the United States. We have, however,
reviewed the Delaware General Corporation Law ("GCL") to the extent required to
express the opinions hereinafter set forth. The opinions expressed herein are
limited to matters governed by the laws of the State of New York, the GCL and
the Federal laws of the United States. As to all matters which are governed by
the laws of the Commonwealth of Pennsylvania, we have relied on the opinion of
Ballard Spahr Andrews & Ingersoll which is being filed as Exhibit F-2(b) to the
Application.
Based upon the foregoing, and assuming (i) that at the time of
their issuance and delivery, the Guarantees will have been duly authorized,
executed and delivered by GPU and GPUI, as the case may be, (ii) compliance by
GPU and GPUI with the applicable limitations on guarantees and unsecured debt
contained in the GPU and GPUI credit facilities and guarantees to which they are
parties, and (iii) that the transactions therein proposed and other outstanding
guarantees to which they are parties are carried out in accordance with the
Application, we are of the opinion that when the Commission shall have entered a
supplemental order forthwith granting the Application,
(a) all State laws applicable to the proposed
transactions will have been complied with,
(b) each of GPU and GPUI is validly organized and
existing,
(c) the Guarantees will be valid and binding
obligations of GPU and GPUI, as applicable, in
accordance with their terms, in each such case
subject to the effect of any applicable
bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws
affecting creditors' rights generally and general
principles of equity limiting the availability of
equitable remedies, and
(d) the consummation of the transactions proposed in
the Application will not violate the legal rights
of the holders of any securities issued by the GPU
or GPUI or any "associate company" thereof, as
defined in the Act.
We hereby consent to the filing of this opinion as an
<PAGE>
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(c)
December 17, 1997
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Re: GPU, Inc. ("GPU")
GPU International, Inc. ("GPUI")
Application on Form U-1
SEC File No. 70-7727
--------------------
Ladies and Gentlemen:
We have examined Post-Effective Amendment No. 19, dated
September 24, 1997, to the Application on Form U-1, dated December 13, 1989,
under the Public Utility Holding Company Act of 1935 ("Act") filed with the
Securities and Exchange Commission ("Commission"), and docketed by the
Commission in SEC File No. 70- 7727, as amended by Post-Effective Amendment No.
20, dated November 7, 1997 and as to be amended by Post-Effective Amendment No.
21 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 now contemplates, among other things,
(i) expanding the purposes for which GPU may enter into
guarantees ("Guarantees") to include Guarantees of
any security or other obligation of GPUI or a GPUI
subsidiary;
(ii) extending until December 31, 2000 the period during
which GPU and GPUI may enter into Guarantees; and
(iii) increasing to $150 million the aggregate amount of
obligations which GPUI may incur under Guarantees
issued to it.
We have acted as Pennsylvania counsel to GPU for many years.
In connection with the delivery of this opinion, we have also examined such
other documents and made such investigation as we have deemed necessary as a
basis for this opinion.
We have assumed that (i) at the time of their issuance and
delivery, the Guarantees will have been duly authorized, executed and delivered
by GPU; and (ii) compliance by GPU with the applicable limitations on guarantees
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Securities and Exchange Commision
December 17, 1997
Page 2
and unsecured debt contained in the GPU revolving credit facility and
guaranties to which it is a party.
Based upon and subject to the foregoing, and assuming that the
transactions therein proposed are carried out in accordance with the
Application, we are of the opinion, insofar as Pennsylvania law is concerned,
that when the Commission shall have entered a supplemental order forthwith
granting the Application,
(a) all Pennsylvania laws applicable to the proposed
transactions will have been complied with,
(b) GPU is validly organized and existing, and
(c) the consummation of the transactions proposed in
the Application will not violate the legal rights
of the holders of any securities issued by GPU,
Pennsylvania Electric Company, Ninevah Water
Company, Penelec Capital, L.P. or Penelec
Preferred Capital, Inc.
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,
BALLARD SPAHR ANDREWS & INGERSOLL
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<CAPTION>
Exhibit H
GPU, Inc. and Subsidiary Companies
Capitalization Ratios at September 30, 1997
(In Thousands)
Actual Actual Per 10-Q Pro Forma
Per 10-Q Pro Forma (1) Equity Debt Equity Debt
----------- ------------- -------- ------ ------- -----
Capitalization:
<S> <C> <C> <C> <C> <C> <C>
Common stock $ 314,458 $ 314,458 $ 314,458
Capital surplus 753,082 753,082 753,082
Retained earnings 2,188,770 2,188,770 2,188,770
Reacquired common stock, at cost (82,391) (82,391) (82,391)
Cumulative preferred stock
(incl. due within one year) 170,478 170,478 170,478
Subsidiary-obligated mandatorily
redeemable preferred securities 330,000 330,000 330,000
Long-term debt (incl. due within
one year) 3,262,825 $ 1,830,000 $ 3,262,825 $5,092,825
Notes payable 334,685 50,000 334,685 384,685
------- ------ ------- -------
Total (incl. due within one year) $ 7,271,907 $ 1,880,000 $ 3,674,397 $3,597,510 $ 3,674,397 $5,477,510
=========== =========== =========== ========== ============ ==========
Capitalization Ratios: 100.0% 50.5% 49.5% 40.1% 59.9%
=========== =========== ========== ============ ==========
(1) To give effect to the November 1997 acquisition of PowerNet Victoria, for $1,880,000, which was financed through a
combination of recourse ($500,000) and non-recourse ($1,380,000) debt.
Note: Pro forma entries have not been included for SEC File 70-7727 since it
is not anticipated that any transactions subject to the limitation of
the GPU International, Inc. Guarantee Cap would require any adjustments
in the financial statements, but would require only footnote
disclosure.
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