Post-Effective Amendment No. 22 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")
300 Madison Avenue
Morristown, New Jersey 07960
GPU INTERNATIONAL, INC. ("GPU International")
One Upper Pond Road
Parsippany, New Jersey 07054
(Name of companies filing this statement and addresses
of principal executive offices)
GPU, INC.
(Name of top registered holding company
parent of the applicants)
T. G. Howson, Douglas E. Davidson, Esq.
Vice President and Treasurer Thelen Reid & Priest LLP
M. J. Connolly, 40 West 57th Street
Vice President - Legal New York, New York 10019
S. L. Guibord, Secretary
GPU Service, Inc.
300 Madison Avenue
Morristown, New Jersey 07960
W. Edwin Ogden, Esq.
Ryan, Russell, Ogden & Seltzer LLP
1100 Berkshire Boulevard
P.O. Box 6219
Reading, Pennsylvania 19601-0219
(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 heretofore
amended, as follows.
A. By orders dated December 22, 1997 (HCAR No. 26802), November 16,
1995 (HCAR No. 26409), June 14, 1995 (HCAR No. 26307), December 28, 1994 (HCAR
No. 26205), September 12, 1994 (HCAR No. 26123) and June 26, 1990 (HCAR No.
25108) in SEC File No. 70-7727 (collectively, the "Orders"), the Commission,
among other things, authorized GPU International to engage in preliminary
project development and administrative activities ("Project Activities") in
connection with its investment in (i) qualifying facilities ("QFs"), as defined
in the Public Utility Regulatory Policies Act of 1978, as amended; (ii) exempt
wholesale generators (EWGs"), as defined in Section 32 of the Act; and (iii)
foreign utility companies ("FUCOs"), as defined in Section 33 of the Act.
B. The Orders also authorized GPU from time to time through December
31, 2000 to, among other things, (i) enter into Guarantees(1) to secure or
support GPU International's agreement with any person (including, without
limitation, project lenders) in connection with Project Activities and the
acquisition of ownership or participation interests in QF, EWG or FUCO projects,
including guarantees of any security or other obligation of GPU International or
a subsidiary of GPU International ("GPUI Subsidiary"), provided the issuance and
sale of any such security is exempt from the requirement of prior Commission
approval under Section 6(a) of the Act under Rule 52, or has been otherwise
authorized by the Commission; (ii) guarantee the securities or other obligations
of EWGs and FUCOs; and (iii) assume liabilities of EWGs and FUCOs. The aggregate
amount of outstanding face or principal amount of Guarantee obligations and
liabilities assumed will not exceed $500 million. In addition, the Orders
authorized GPU International from time to time through December 31, 2000 to
enter into Guarantees, and to assume the liabilities of EWGs and FUCOs, in an
aggregate amount of up to $150 million and authorized any GPU Subsidiary which
is not an EWG or a FUCO to guarantee the securities or other obligations of
their direct or indirect subsidiaries from time to time through December 31,
2000 in an aggregate amount not to exceed, together with the aggregate amount of
GPU International guarantees outstanding, $150 million.
C. Applicants now request that the authority granted by the Orders be
extended until June 30, 2004. In all other respects, the transactions heretofore
authorized by the Commission in this docket would remain unchanged.
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1 "Guarantees" include guarantees, support instruments and bank letters of
credit reimbursement agreements or similar financial instruments or
undertakings.
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D. Rule 54 Analysis.
(a) As described below, GPU meets all of the conditions of
Rule 53, except for Rule 53(a)(1). By Order dated November 5, 1997 (HCAR No.
35-26773) (the "November 5 Order"), the Commission authorized GPU to increase to
100% of its "average consolidated retained earnings," as defined in Rule 53, the
aggregate amount which it may invest in EWGs and FUCOs. At June 30, 2000, GPU's
average consolidated retained earnings was approximately $2.4 billion and GPU's
aggregate investment in EWGs and FUCOs was approximately $1.8 billion.
Accordingly, under the November 5 Order, GPU may invest up to an additional $614
million in FUCOs and EWGs as of June 30, 2000.
(i) GPU maintains books and records to identify
investments in, and earnings from, each EWG and FUCO in which
it directly or indirectly holds an interest.
(A) For each United States EWG in which GPU
directly or indirectly holds an interest:
(1) the books and records for such EWG
will be kept in conformity with United States
generally accepted accounting principles ("GAAP");
(2) the financial statements will be
prepared in accordance with GAAP; and
(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.
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(C) For each FUCO or foreign EWG in which GPU owns
50% or less of the voting securities, GPU directly or through
its subsidiaries will proceed in good faith, to the extent
reasonable under the circumstances, to cause
(1) such entity to maintain books and
records in accordance with GAAP;
(2) the financial statements of such
entity to be prepared in accordance with GAAP; and
(3) access by the Commission to such
books and records and financial statements (or
copies thereof) in English as the Commission may
request and, in any event, GPU will provide the
Commission on request copies of such materials as
are made available to GPU and its subsidiaries. If
and to the extent that such entity's books,
records or financial statements are not maintained
in accordance with GAAP, GPU will, upon request of
the Commission, describe and quantify each
material variation therefrom as and to the extent
required by subparagraphs (a) (2) (iii) (A) and
(a) (2) (iii) (B) of Rule 53.
(ii) No more than 2% of GPU's domestic public utility
subsidiary employees will render any services, directly or
indirectly, to any EWG and FUCO in which GPU directly or
indirectly holds an interest.
(iii) Copies of this Application on Form U-1 are
being provided to the New Jersey Board of Public Utilities and
the Pennsylvania Public Utility Commission, the only federal,
state or local regulatory agencies having jurisdiction over
the retail rates of GPU's electric utility subsidiaries.(2) In
addition, GPU will submit to each such commission copies of
any amendments to this Application and a copy of Item 9 of
GPU's Form U5S and Exhibits H and I thereof (commencing with
the Form U5S to be filed for the calendar year in which the
authorization herein requested is granted).
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2 One of GPU's operating subsidiaries, the Pennsylvania Electric Company
("Penelec"), is also subject to retail rate regulation by the New York Public
Service Commission with respect to retail service to approximately 3,700
customers in Waverly, New York served by Waverly Electric Power & Light Company,
a Penelec subsidiary. Waverly Electric's revenues are immaterial, accounting for
less than 1% of Penelec's total operating revenues.
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(iv) None of the provisions of paragraph (b) of Rule
53 render paragraph (a) of that Rule unavailable for the
proposed transactions.
(A) Neither GPU nor any subsidiary of GPU having a
book value exceeding 10% of GPU's consolidated retained
earnings is the subject of any pending bankruptcy or similar
proceeding.
(B) GPU's average consolidated retained earnings
for the four most recent quarterly periods (approximately
$2.44 billion) represented a decrease of approximately $13.7
million (or approximately .5%) compared to the average
consolidated retained earnings for the previous four quarterly
periods (approximately $2.45 billion). The decrease in
retained earnings results primarily from a non-recurring loss
of $295 million, after tax, from the sale during the second
quarter of 2000 of GPU PowerNet, which provides transmission
services in the State of Victoria, Australia.
(C) GPU did not incur operating losses from direct
or indirect investments in EWGs and FUCOs in 1999 in excess of
5% of GPU's December 31, 1999 consolidated retained earnings.
As described above, GPU meets all the conditions of Rule 53(a), except
for clause (1). With respect to clause (1), the Commission determined in the
November 5 Order that GPU's financing of investments in EWGs and FUCOs in an
amount greater than 50% of GPU's average consolidated retained earnings as
otherwise permitted by Rule 53(a)(1) would not have either of the adverse
effects set forth in Rule 53(c).
Moreover, even if the effect of the capitalization and earnings of
subsidiary EWGs and FUCOs were considered, there is no basis for the Commission
to withhold or deny approval for the transactions proposed in this Application.
The transactions would not, by themselves, or even considered in conjunction
with the effect of the capitalization and earnings of GPU's subsidiary EWGs and
FUCOs, have a material adverse effect on the financial integrity of the GPU
system, or an adverse impact on GPU's public utility subsidiaries, their
customers, or the ability of State commissions to protect such public utility
customers.
The November 5 Order was predicated, in part, upon the assessment of
GPU's overall financial condition which took into account, among other factors,
GPU's consolidated capitalization ratio and the recent growth trend in GPU's
retained earnings. As of June 30, 1997, the most recent quarterly period for
which
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financial statement information was evaluated in the November 5 Order, GPU's
consolidated capitalization consisted of 49.2% equity and 50.8% debt. As stated
in the November 5 Order, GPU's June 30, 1997 pro forma capitalization,
reflecting the November 6, 1997 acquisition of PowerNet Victoria, was 39.3%
equity and 61.7% debt.
At June 30, 2000, GPU's common equity and debt represented 31.4% and
68.6%, respectively, of its consolidated capitalization, as set forth in Exhibit
H hereto. Thus, since the date of the November 5 Order, there has been no
material adverse change in GPU's consolidated capitalization ratio, which
remains within acceptable ranges and limits as evidenced by the credit ratings
of GPU's electric utility subsidiaries.(3)
GPU's consolidated retained earnings grew on average approximately 6.5%
per year from 1994 through 1999. Earnings attributable to GPU's investments in
EWGs and FUCOs have contributed positively to consolidated earnings.
Accordingly, since the date of the November 5 Order, the capitalization
and earnings attributable to GPU's investments in EWGs and FUCOs have not had
any adverse impact on GPU's financial integrity.
Reference is made to Exhibit H which sets forth GPU's consolidated
capitalization at June 30, 2000 and after giving effect to the transactions
proposed herein. As set forth in such exhibit, the proposed transactions will
not have a material impact on GPU's capitalization or earnings.
E. GPU's estimated fees, commissions and expenses in connection with
the proposed transactions will be filed by further post-effective amendment.
F. GPU believes that Sections 6(a), 7, 9(a) 10, 12, 32, and 33 of the
Act and Rules 45, 53 and 54 thereunder are applicable to the proposed
transactions.
G. No Federal or State commission, other than your Commission, has
jurisdiction with respect to the proposed transactions.
H. 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 December 1, 2000. It is further requested that (iii) there
not be a
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3 The first mortgage bonds of GPU's operating subsidiaries, Jersey Central
Power & Light Company, Metropolitan Edison Company and Penelec are rated A+ by
Standard & Poors Corporation, and A2 by Moody's Investors Service, Inc.
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recommended decision by an Administrative Law Judge or other responsible officer
of the Commission, (iv) the Office of Public Utility Regulation be permitted to
assist in the preparation of the Commission's decision, and (v) there be no
waiting period between issuance of the Commission's order and the date on which
it is to become effective.
I. The following exhibits and financial statements are filed in
Item 6.
(a) Exhibits:
F-1 - Opinion of Thelen Reid & Priest LLP - To be filed by
amendment.
F-2 - Opinion of Ryan, Russell, Ogden & Seltzer LLP - To be
filed by amendment.
H - Capitalization and Capitalization Ratios as at June 30,
2000, actual and pro forma - To be filed by amendment.
I - Proposed form of public notice.
(b) Financial Statements:
1(a)- GPU (corporate) Balance Sheets, actual and pro forma, as
of June 30, 2000, Statements of Income and Retained
Earnings, actual and pro forma, for the twelve months
ended June 30, 2000; pro forma journal entries - To be
filed by amendment.
1(b)- GPU Consolidated Balance Sheets, actual and pro forma,
as of June 30, 2000, Consolidated Statements of Income
and Retained Earnings, actual and pro forma, for the
twelve months ended June 30, 2000; pro forma journal
entries - To be filed by amendment.
1(c)- GPU International (Corporate) Balance Sheets, actual and
pro forma, as at June 30, 2000 and Statements of Income
and Retained Earnings, actual and pro forma for the
twelve months ended June 30, 2000; pro forma journal
entries - To be filed by amendment.
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J. (a) The issuance of an order by your Commission with respect to the
transactions contemplated herein 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 various proposed transactions which are the
subject hereof. Reference is made to paragraph G hereof regarding regulatory
approvals with respect to the proposed transactions.
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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.
GPU, INC.
By: /s/ T. G. Howson
-----------------------------------------
T. G. Howson,
Vice President and Treasurer
GPU INTERNATIONAL, INC.
By: /s/ R. P. Lantzy
-----------------------------------------
R. P. Lantzy
Senior Vice President and
Chief Operating Officer
Date: September 19, 2000
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