[Federal Register Volume 63, Number 166 (Thursday, August 27, 1998)]
[Notices]
[Pages 45886-45892]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-23071]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 35-26908]


Filings Under the Public Utility Holding Company Act of 1935, as 
Amended (``Act'')

August 21, 1998.
    Notice is hereby given that the following filing(s) have been made 
with the Commission pursuant to provisions of the Act and rules 
promulgated under the Act. All interested persons are referred to the 
application(s) and/or declaration(s) for complete statements of the 
proposed transaction(s) summarized below. The application(s) and/or 
declaration(s) and any amendments is/are available for public 
inspection through the Commission's Office of Public Reference.
    Interested persons wishing to comment or request a hearing on the 
application(s) and/or declaration(s) should submit their views in 
writing by September 15, 1998, to the Secretary, Securities and 
Exchange Commission, Washington, D.C. 20549, and serve a copy on the 
relevant applicant(s) and/or declarant(s) at the address(es) specified 
below. Proof of service (by affidavit or, in case of an attorney at 
law, by certificate) should be filed with the request. Any request for 
hearing should 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 the 
matter. After September 15, 1998, the application(s) and/or 
declaration(s), as filed or as amended, may be granted and/or permitted 
to become effective.

[[Page 45887]]

Metropolitan Edison Company

[70-9329]

    Metropolitan Edison Company (``Met-Ed''), 2800 Pottsville Pike, 
Reading, Pennsylvania 19605, a public utility subsidiary of General 
Public Utilities Corporation (``GPU''), a registered holding company, 
has filed an application-declaration under sections 6(a), 7, 9(a), 10, 
12(b) and 12(c) of the Act and rules 45 and 54 under the Act.
    Met-Ed proposes to organize a special purpose subsidiary (Met-Ed 
Capital Trust) as a business trust under Delaware law, which will issue 
and sell from time to time in one or more series through December 31, 
2000, up to $125 million aggregate liquidation value of preferred 
beneficial interests, in the form of trust securities (``Trust 
Securities'').\1\ Each Trust Security will represent a cumulative 
preferred security (``Preferred Securities'') of a Delaware limited 
partnership (``Met-Ed Capital L.P.''), a special purpose indirect 
subsidiary of Met-Ed. Met-Ed also proposes to form a special purpose 
Delaware corporation (``Investment Sub''), to act as general partner of 
Met-Ed Capital L.P.
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    \1\ The Trust Securities' liquidation value per interest is to 
be determined.
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    Met-Ed Capital Trust will acquire the Preferred Securities and 
issue the Trust Securities evidencing the Preferred Securities. Met-Ed 
Capital L.P. will issue one or more series of Preferred Securities and 
lend the proceeds thereof, plus a capital contribution (in an amount 
not to exceed $5 million) made by Met-Ed in Met-Ed Capital L.P., to 
Met-Ed, the loan will be evidenced by the ``Subordinated Debentures'' 
(defined below) issued by Met-Ed.
    Met-Ed will acquire all of 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 million, and (ii) a 
demand promissory note in the principal amount of up to $13 million, 
that will bear interest, compounded semi-annually at Citibank's N.A. 
base rate as announced from time to time.
    Investment Sub will acquire all of the general partner interests in 
Met-Ed Capital L.P. for up to $5 million (``L.P. Equity 
Contribution''). Met-Ed Capital Trust will apply the proceeds from the 
sale of the Trust Securities to purchase the Preferred Securities. Met-
Ed Capital L.P. will, in turn, use the proceeds received from the sale 
of the Preferred Securities, together with the L.P. Equity 
Contribution, to purchase Met-Ed's subordinated debentures 
(``Subordinated Debenture(s)'').
    Met-Ed will also guarantee (``Guarantee'') the payment by Met-Ed 
Capital L.P. of: (1) Accrued but unpaid distributions on the Preferred 
Securities, if and to the extent Met-Ed Capital L.P. has declared these 
distributions out of funds legally available therefor; (2) the 
redemption price for any redemption of the Preferred Securities; (3) 
the aggregate liquidation preference on the Preferred Securities, 
including all accrued but unpaid distributions, whether or not 
declared; and (4) certain additional amounts.
    Met-Ed Capital Trust's activities will be limited to the issuance 
and sale of Trust Securities and applying the proceeds to purchase 
Preferred Securities. Met-Ed Capital Trust's constituent instruments 
will not include any interest or distribution coverage or 
capitalization ratio restrictions on its ability to issue and sell 
Trust Securities as each issuance will be supported by a Subordinated 
Debenture and Guarantee. Therefore, Met-Ed states that these 
restrictions would not be relevant or necessary for Met-Ed Capital 
Trust to maintain an appropriate capital structure. Moreover, the 
issuance of Subordinated Debentures by Met-Ed will be subject to Met-
Ed's Articles of Incorporation, which limits, without the consent of 
the holders of a majority of Met-Ed's outstanding Cumulative Preferred 
Stock, the amount of unsecured indebtedness which Met-Ed 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 Met-Ed plus Met-
Ed's capital stock, premiums, and surplus of Met-Ed as stated on its 
books of account. Met-Ed Capital Trust's constituent instruments will 
further state that Met-Ed Capital will be responsible for all 
liabilities and obligations of Met-Ed Capital Trust.
    Each Subordinated Debenture will have an initial term of up to 49 
years. Prior to maturity, Met-Ed will pay only interest on the 
Subordinated Debentures at a rate equal to the distribution rate on the 
Preferred Securities. The interest payments will constitute Met-Ed 
Capital Trust's only income and will be used by it to pay distributions 
on the Trust Securities, with any excess being distributed indirectly 
to Met-Ed as a distribution on Met-Ed's investment in Met-Ed Capital 
L.P., thereby reducing the interest cost on the Subordinated 
Debentures.
    Distributions on the Trust Securities will be made not less than 
semi-annually, and will be cumulative and must be made to the extent 
that Met-Ed Capital Trust has legally available funds and cash 
sufficient for these purposes. However, Met-Ed will have the right to 
defer payment of interest on the Subordinated Debentures for up to five 
years in which event Met-Ed Capital Trust may similarly defer payment 
of distributions on the Trust Securities, but in no event may 
distributions be deferred beyond the maturity date of the Subordinated 
Debentures. The distribution rates, payment dates, redemption and other 
similar provisions of each series of Trust Securities will be identical 
to the interest rates, payment dates, redemption and other provisions 
of the Subordinated Debentures issued by Met-Ed.
    Each Subordinated Debenture and related Guarantee will be 
subordinate to all other existing and future ``Senior Indebtedness,'' 
as defined below, of Met-Ed and will have no cross-default provisions 
with respect to other Met-Ed indebtedeness--i.e., a default under any 
other outstanding Met-Ed indebtedness will not result in a default 
under the Subordinated Debenture or the Guarantee. However, Met-Ed 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 Guarantees have been made. ``Senior Indebtedness'' consists of 
(i) the principal of and premium (if any) in respect of (A) 
indebtedness of Met-Ed for money borrowed and (B) indebtedness 
evidenced by securities, debentures, bonds or other similar instruments 
(including purchase money obligations) for payment of which Met-Ed is 
responsible or liable; (ii) all capital lease obligations of Met-Ed; 
(iii) all obligations of Met-Ed issued or assumed as the deferred 
purchase price of property, all conditional sale obligations of Met-Ed 
and all obligations of Met-Ed under any title retention agreement (but 
excluding trade accounts payable arising in the ordinary course of 
business); (iv) certain obligations of Met-Ed 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 Met-Ed 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 Met-Ed (whether or not the

[[Page 45888]]

obligation is assumed by Met-Ed), except for any indebtedness that is 
by its terms subordinated to or pari passu with the Subordinated 
Debentures.
    It is expected that Met-Ed's interest payments on the Subordinated 
Debentures will be deductible for income tax purposes and that Met-Ed 
Capital Trust will be treated as a trust for federal income tax 
purposes. Consequently, distributions from Met-Ed Capital Trust to the 
holders of Trust Securities, and indirectly to Met-Ed, will be deemed 
to constitute distributions of the interest income received by Met-Ed 
Capital Trust on the Subordinated Debentures. Consequently, the holders 
of the Trust Securities and Met-Ed will not be entitled to any 
``dividend received deduction'' under the Internal Revenue Code with 
respect to the distributions.
    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 Preferred Securities will be subject to 
mandatory redemption upon the maturity or prior redemption of the 
corresponding series of the Subordinated Debentures, but will not be 
subject to any mandatory sinking fund. A series of Preferred Securities 
may also be redeemable at the option of Met-Ed 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) Met-Ed Capital L.P. is required by applicable tax laws to 
withhold or deduct certain amounts in connection with distributions or 
other payments, or (II) Met-Ed Capital L.P. or Met-Ed Capital Trust is 
subject to federal income tax with respect to interest received on the 
Subordinated Debentures, or (III) it is determined that the interest 
payments by Met-Ed on the Subordinated Debentures are not deductible 
for federal income tax purposes or (IV) Met-Ed Capital L.P. is subject 
to more than a de minimis amount of other taxes, duties or other 
governmental charges, or (V) Met-Ed Capital L.P. becomes subject to 
regulation as an ``investment company'' under the Investment Company 
Act of 1940. Upon occurrence of any of the events set forth in clause 
(ii) above, Met-Ed Capital L.P. and Met-Ed Capital Trust could be 
dissolved and the Subordinated Debentures distributed directly to the 
holders of the Trust Securities and to Met-Ed 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 Met-Ed will be canceled.
    In the event that Met-Ed Capital Trust is required by applicable 
tax laws to withhold or deduct certain amounts in connection with 
distributions or other payments, Met-Ed Capital Trust may also have the 
obligation, if the Trust Securities are not redeemed or Subordinated 
Debentures are not distributed to the holders, to ``gross up'' payments 
so that the Trust Securities holders will receive the same payment 
after withholding or deduction as they would have received if no 
withholding or deduction were required. In the latter event, Met-Ed's 
obligations under the Subordinated Debentures and the Guarantees would 
also cover any ``gross up'' obligations.
    Upon receipt by Met-Ed Capital Trust of any distribution from Met-
Ed Capital L.P. upon any voluntary or involuntary liquidation, 
dissolution or winding up of Met-Ed Capital L.P., the holders of the 
Trust Securities will be entitled to receive amounts in proportion to 
the respective number of Preferred Securities represented by the Trust 
Securities, out of the assets of Met-Ed Capital L.P. available for 
distribution after satisfaction of liabilities to creditors of Met-Ed 
Capital Trust.
    In the event of any voluntary or involuntary dissolution or winding 
up of Met-Ed Capital L.P., the holders of Preferred Securities will be 
entitled to receive out of the assets of Met-Ed Capital L.P., after 
satisfaction of liabilities to creditors and before any distribution of 
assets is made to the Investment Sub, 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 Met-Ed 
Capital L.P. remaining after payment of the liquidation distribution to 
the holders of Preferred Securities will be distributed to the 
Investment Sub.
    Upon any liquidation, dissolution or winding up of Met-Ed, the 
amount payable on each series of the Preferred Securities would be 
limited to a pro rata portion of any amount recovered by Met-Ed Capital 
L.P. in its capacity as a subordinated debt holder of Met-Ed. The 
Subordinated Debentures and the payment obligations under the Guarantee 
will be subordinate to all other existing and future Senior 
Indebtedness, except for any indebtedness that is by its terms 
subordinated to or pari passu with the Subordinated Debentures.
    Met-Ed will use the net proceeds of the sale to Met-Ed Capital L.P. 
of Subordinated Debentures to redeem outstanding senior securities, to 
repay outstanding short-term debt, for construction purposes, and for 
other general corporate purposes, including to reimburse Met-Ed's 
treasury for funds previously expended for the above purposes.

Pennsylvania Electric Company

[70-9327]

    Pennsylvania Electric Company (``Penelec''), 2800 Pottsville Pike, 
Reading Pennsylvania 19605, a public utility subsidiary of General 
Public Utilities Corporation (``GPU''), a registered holding company, 
has filed an application-declaration under sections 6(a), 7, 9(a), 10, 
12(b) and 12(c) of the Act and rules 45 and 54 under the Act.
    Penelec proposes to organize a special purpose subsidiary (Penelec 
Capital Trust) as a business trust under Delaware law, which will issue 
and sell from time to time in one or more series through December 31, 
2000, up to $125 million aggregate liquidation value of preferred 
beneficial interests, in the form of trust securities (``Trust 
Securities'').\2\ Each Trust Security will represent a cumulative 
preferred security (``Preferred Securities'') of a Delaware limited 
partnership (``Penelec Capital L.P.''), a special purpose indirect 
subsidiary of Penelec. Penelec also proposes to form a special purpose 
Delaware corporation (``Investment Sub''), to act as general partner of 
Penelec Capital L.P.
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    \2\ The Trust Securities' liquidation value per interest is to 
be determined.
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    Penelec Capital Trust will acquire the Preferred Securities and 
issue the Trust Securities evidencing the Preferred Securities. Penelec 
Capital L.P. will issue one or more series of Preferred Securities and 
lend the proceeds thereof, plus a capital contribution (in an amount 
not to exceed $5 million) made by Penelec and Penelec Capital L.P., to 
Penelec, the loan will be evidenced by the ``Subordinated Debentures'' 
(defined below) issued by Penelec.
    Penelec will acquire all of 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 million, and (ii) a 
demand promissory note in the principal amount of up to $13 million, 
that will bear interest, compounded semi-annually at Citibank's N.A. 
base rate as announced from time to time.
    Investment Sub will acquire all of the general partner interests in 
Penelec

[[Page 45889]]

Capital L.P. for up to $5 million (``L.P. Equity Contribution''). 
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, together with the L.P. Equity Contribution, to 
purchase Penelec's subordinated debentures (``Subordinated 
Debenture(s)'').
    Penelec will also guarantee (``Guarantee'') the payment by Penelec 
Capital L.P.: (1) accrued but unpaid distributions on the Preferred 
Securities, if and to the extent Penelec Capital L.P. has declared the 
distributions out of funds legally available therefor; (2) the 
redemption price for any redemption of the Preferred Securities; (3) 
the aggregate liquidation preference on the Preferred Securities, 
including all accrued but unpaid distributions, whether or not 
declared; and (4) certain additional amounts.
    Penelec Capital Trust's activities will be limited to the issuance 
and sale of Trust Securities and applying the proceeds to purchase 
Preferred Securities. Penelec Capital Trust's constituent instruments 
will not include any interest or distribution coverage or 
capitalization ratio restrictions on its ability to issue and sell 
Trust Securities as each issuance will be supported by a Subordinated 
Debenture and Guarantee. Therefore, Penelec states that these 
restrictions would not be relevant or necessary for Penelec Capital 
Trust to maintain an appropriate capital structure. Moreover, the 
issuance of Subordinated Debentures by Penelec will be subject to 
Penelec's 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, and surplus of Penelec as stated on 
its books of account. Penelec Capital Trust's constituent instruments 
will further state that Penelec Capital will be responsible for all 
liabilities and obligations of Penelec Capital Trust.
    Each Subordinated Debenture will have an initial term of up to 49 
years. Prior to maturity, Penelec will pay only interest on the 
Subordinated Debentures at a rate equal to the distribution rate on the 
Preferred Securities. The interest payments will constitute Penelec 
Capital Trust's only income and will be used by it to pay distributions 
on the Trust Securities, with any excess being distributed indirectly 
to Penelec as a distribution on Penelec's investment in Penelec Capital 
L.P., thereby reducing the interest cost on the Subordinated 
Debentures.
    Distributions on the Trust Securities will be made not less than 
semi-annually, and will be cumulative and must be made to the extent 
that Penelec Capital Trust has legally available funds and cash 
sufficient for these purposes. However, Penelec will have the right to 
defer payment of interest on the Subordinated Debentures for up to five 
years in which event Penelec Capital Trust may similarly defer payment 
of distributions on the Trust Securities, but in no event may 
distributions be deferred beyond the maturity date of the Subordinated 
Debentures. The distribution rates, payment dates, redemption and other 
similar provisions of each series of Trust Securities will be identical 
to the interest rates, payment dates, redemption and other provisions 
of the Subordinated Debentures issued by Penelec.
    Each Subordinated Debenture and related Guarantee will be 
subordinate to all other existing and future ``Senior Indebtedness,'' 
as defined below, of Penelec and will have not 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 Guarantee. 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 Guarantees 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 sales 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 
the obligation is assumed by Penelec), except for any indebtedness that 
is by its terms subordinated to or pari passu with the Subordinated 
Debentures.
    It is expected that Penelec's interest payments on the Subordinated 
Debentures will be deductible for income tax purposes and that Penelec 
Capital Trust will be treated as a trust for federal income tax 
purposes. Consequently, distributions from Penelec Capital Trust to the 
holders of Trust Securities, and indirectly to Penelec, will be deemed 
to constitute distributions of the interest income received by Penelec 
Capital Trust on the Subordinated Debentures. Consequently, the holders 
of Trust Securities and Penelec will not be entitled to any ``dividend 
received deduction'' under the Internal Revenue Code with respect to 
the distributions.
    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 Preferred Securities will be subject to 
mandatory redemption upon the maturity or prior redemption of the 
corresponding series of the Subordinated Debentures, but will not be 
subject to any mandatory sinking fund. A series of Preferred Securities 
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, 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''

[[Page 45890]]

under the Investment Company Act of 1940. Upon occurrence of any of the 
events set forth in clause (ii) above, Penelec Capital L.P. and Penelec 
Capital Trust 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 will be canceled.
    In the event that Penelec Capital Trust is required by applicable 
tax laws to withhold or deduct certain amounts in connection with 
distributions or other payments, Penelec Capital Trust may also have 
the obligation, if the Trust Securities are not redeemed or 
Subordinated Debentures are not distributed to the holders, to ``gross 
up'' the payments so that the Trust Securities holders will receive the 
same payment after withholding or deduction as they would have received 
if no withholding or deduction were required. In the latter event, 
Penelec's obligations under the Subordinated Debentures and the 
Guarantees would also cover any ``gross up'' obligations.
    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 amounts in proportion to 
the respective number of Preferred Securities represented by the Trust 
Securities, out of the assets of Penelec Capital L.P. available for 
distribution after satisfaction of liabilities to creditors of Penelec 
Capital Trust.
    In the event of any 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 the Investment Sub, the sum of their stated 
liquidation preference and all accumulated and unpaid distributions of 
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 
Investment Sub.
    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 
Guarantee will be subordinate to all other existing and future Senior 
Indebtedness, except for any indebtedness that is by its terms 
subordinated to or Pari passu with the Subordinated Debentures.
    Penelec will use the net proceeds of the sale to Penelec Capital 
L.P. of Subordinated Debentures to redeem outstanding senior 
securities, to repay outstanding short-term debt, for construction 
purposes, and for other general corporate purposes, including to 
reimburse Penelec's treasury for funds previously expended for the 
above purposes.

Cinergy Corp., et al.

[70-9319]

    Cinergy Corp., a registered holding company (``Cinergy''),\3\ and 
its nonutility subsidiaries, Cinergy Investments, Inc. (``Cinergy 
Investments'') and Cinergy Global Resources, Inc. (``Cinergy Global 
Resources'' and, together with Cinergy and Cinergy Investments, 
``Applicants''), each of 139 East Fourth Street, Cincinnati Ohio 45202, 
have filed an application-declaration under sections 6(a), 7, 9(a), 10, 
12(b), 12(c), 12(f), 13, 32, 33 and 34 of the Act and rules 43, 45, 46, 
53, 54, 83, 87, 90 and 91 under the Act.
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    \3\ Through its six domestic retail public utility companies, 
PSI Energy, Inc., The Cincinnati Gas & Electric Company, The Union 
Light, Heat and Power Company, Lawrenceburg Gas Company, The West 
Harrison Gas and Electric Company and Miami Power Corporation, 
Cinergy provides retail electric service in north central, central 
and southern Indiana and retail electric and gas service in the 
southwestern portion of Ohio and adjacent areas of Indiana and 
Kentucky.
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    By Commission order dated September 21, 1995 (HCAR No. 26376), as 
supplemented by Commission order dated March 8, 1996 (HCAR No. 26486) 
(together, ``Project Parent Orders''), Cinergy and Cinergy Investments 
were granted authority, from time to time through December 31, 1999, 
(i) to acquire directly or indirectly in one or more transactions, the 
securities of one or more special-purpose subsidiaries organized to 
engage directly or indirectly, and exclusively, in the business of 
acquiring, owning and holding the securities of, and/or providing 
services to, one or more foreign utility companies (``FUCOs'')\4\ and 
exempt wholesale generators (``EWGs'' \5\ and, together with FUCOs, 
``Exempt Projects''), and (ii) to invest in and issue guarantees in 
respect of these special-purpose subsidiaries, provided that Cinergy's 
total investment in these subsidiaries, together with any investments 
in Exempt Projects, did not exceed a specified ceiling, recently 
increased to 100% of Cinergy's consolidated retained earnings by 
Commission order dated March 23, 1998 (HCAR No. 26848) (``100% 
Order'').
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    \4\ FUCOs are defined in section 33 of the Act.
    \5\ EWGs are defined in section 32 of the Act.
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    Applicants now propose to establish one or more special-purpose 
subsidiaries to hold Cinergy's direct or indirect interests in any or 
all of Cinergy's existing and future nonutility businesses (excluding 
the three existing nonutility interests held by Cinergy's utility 
subsidiaries \6\) and to engage in various financing and related 
transactions from time to time through December 31, 2003 
(``Authorization Period'').
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    \6\ KO Transmission Company (``KO'') and Tri-State Improvement 
Company (``Tri-State'') are nonutility subsidiaries of The 
Cincinnati Gas & Electric Company, and South Construction Company, 
Inc. (``South Construction'') is a nonutility subsidiary of PSI 
Energy, Inc.
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Intermediate Parents

    To the extent not otherwise exempt under the Act, Applicants 
request authority during the Authorization Period to organize and hold 
securities of one or more special-purpose subsidiaries (each an 
``Intermediate Parent'') to be formed for the exclusive purpose of 
acquiring, owning and holding, directly or indirectly (including 
through one or more additional Intermediate Parents), securities of or 
interests in, and/or providing services to, any or all of Cinergy's 
existing and future nonutility associate companies (other than KO, Tri-
State and South Construction) listed below:
    1. existing and future Exempt Projects;
    2. special-purpose subsidiaries organized to engage directly or 
indirectly, and exclusively, in the business of acquiring, owning and 
holding the securities of, and/or providing services to, one or more 
Exempt Projects under the Project Parent Orders, prior to the date of 
the requested order (``EWG/FUCO Project Parents'');
    3. existing and future exempt telecommunications companies 
(``ETCs'') \7\
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    \7\ ETCs are defined in section 34 of the Act.
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    4. existing and future ``energy-related companies'' as defined in 
rule 58 (``Rule 58 Companies''); and/or
    5. other nonutility companies in which Cinergy (i) holds an 
interest under certain prior Commission orders \8\

[[Page 45891]]

or (ii) acquires in the future (or is authorized to retain) an interest 
under one or more (a) Commission orders issued in subsequent 
proceedings or (b) exemptions from the requirement of prior Commission 
approval subsequently adopted under the Act (collectively, ``Authorized 
Companies'' and, together with the companies included in the preceding 
categories ``1'' through ``4'', ``Nonutility Companies'').
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    \8\ Cinergy presently holds interest in three of these 
companies: (i) Cinergy Investments (see HCAR No. 26146, October 21, 
1994); (ii) Cinergy Solutions, Inc. (``Cinergy Solutions''), formed 
pursuant to Commission order dated February 7, 1997 (HCAR No. 26662) 
(``Cinergy Solutions Order'') to market an array of energy-related 
products and services and to develop, acquire, own and operate 
certain energy-related projects; and (iii) Nth Power Technologies 
Fund I, L.P. (``Nth Power Fund''), in which Cinergy holds a minority 
limited partnership interest under Commission order dated August 28, 
1996 (HCAR No. 26562) (``Nth Power Fund Order''). Nth Power Fund is 
not an affiliate or subsidiary company of Cinergy; see Nth Power 
Fund Order.
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Services by Intermediate Parents

    Any services provided by Intermediate Parents to other Intermediate 
Parents or to Nonutility Companies would include project development 
and administrative services and other support services. Without further 
Commission approval, Intermediate Parents would not provide services to 
any associate companies other than Intermediate Parents and Nonutility 
Companies. To the extent not exempt under rule 90(d)(1) or otherwise 
under the Act, Applicants request an exemption under section 13(b) from 
the ``at cost'' requirements of rules 90 and 91 with respect to the 
provision of services among the Intermediate Parents and Nonutility 
Companies. Cinergy Services, Inc., Cinergy's service company 
subsidiary, would continue to provide services to Intermediate Parents 
and Nonutility Companies under the existing Cinergy system nonutility 
service agreement.\9\
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    \9\ See Commission order dated October 21, 1994 (HCAR No. 26146) 
(``Merger Order'') (approving original nonutility service 
agreement); Cinergy Solutions Order, supra note 6 (approving 
amendment to nonutility service agreement).
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Organization and Capitalization of Intermediate Parents

    Intermediate Parents may be wholly or partly owned direct or 
indirect subsidiaries of Cinergy, Cinergy Investments or Cinergy Global 
Resources. Initial capitalization by Applicants of Intermediate Parents 
would involve: (1) purchases of shares of capital stock, partnership 
interests, limited liability company member interests, trust 
certificates or other forms of equity interests; (2) capital 
contributions or open account advances without interest; and/or (3) 
debt financing.
    Cinergy would obtain funds for initial and subsequent investments 
in Intermediate Parents from available internal sources or from 
external sources involving sales or short-term notes and commercial 
paper or additional shares of Cinergy common stock under Commission 
order dated January 20, 1998 (HCAR No. 26819) (``January 1998 
Order'').\10\ Cinergy Investments and Cinergy Global Resources would 
obtain funds for initial and subsequent investments in Intermediate 
Parents from available cash, capital contributions or loans from 
Cinergy, or external borrowings or sales of capital stock.
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    \10\ The January 1998 Order authorizes Cinergy to issue and sell 
from time to time through December 31, 2002, subject to certain 
terms and conditions, (1) an aggregate principal amount of debt 
securities not to exceed $2 billion (``$2 Billion Debt Cap''), 
including short-term notes and commercial paper, together with (a) 
guarantees issued by Cinergy under the Commission's order dated May 
30, 1997, HCAR No. 26723, and (b) debentures issued by Cinergy under 
authorization presently being sought in S.E.C. File No. 70-8993, 
notice for which was issued on May 2, 1997 (HCAR No. 26714); and (2) 
up to 30 million additional shares of Cinergy common stock, plus 
certain other shares of Cinergy common stock (totaling approximately 
867,000) authorized, but not issued.
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    To the extent that Applicants provide funds to Intermediate Parents 
which in turn are applied to: (1) investments in Exempt Projects or 
Rule 58 Companies, the amount of the investments would be included in 
Cinergy's ``aggregate investment'' in these entities, as calculated in 
accordance with rule 53 or rule 58 under the Act, as applicable; or (2) 
investments in Authorized Companies, the investments would conform to 
applicable rules under the Act (including rules 52 and 45(b)(4)) and 
applicable terms and conditions of any relevant Commission orders.
    To the extent not exempt under rule 43(b) or otherwise under the 
Act, Applicants request authority on behalf of themselves and 
Intermediate Parents and Nonutility Companies to sell to and purchase 
from each other (but to or from no other associate companies) 
securities or other interests in the businesses of Intermediate Parents 
and Nonutility Companies.

Guarantees

    Cinergy also proposes to issue guarantees in respect of 
Intermediate Parents and Nonutility Companies and certain other 
subsidiaries of Cinergy. Specifically, to the extent not otherwise 
exempt under the Act, Cinergy requests authority from time to time 
through the Authorization Period to guarantee the debt or other 
securities or obligations of (i) any and all existing and future 
Intermediate Parents (including Cinergy Investments and Cinergy Global 
Resources) and Nonutility Companies (excluding Cinergy's investment in 
Nth Power Fund), (ii) Cinergy Services, and (iii) KO, Tri-State and 
South Construction. The terms and conditions of any guarantees would be 
established at arm's length based upon market conditions.
    Any guarantees issued and outstanding by Cinergy during the 
Authorization Period would be subject to the $2 Billion Debt Cap; in 
addition (1) any guarantees of Exempt Projects would conform to the 
aggregate investment limitation prescribed in the 100% Order, (2) any 
guarantees of Rule 58 Companies would conform to the aggregate 
investment limitation of rule 58, and (3) any Cinergy guarantees in 
respect of Cinergy Solutions, Inc. would remain subject to the separate 
$250 million ceiling prescribed in the Cinergy Solutions Order.
    The requested order is intended to supersede certain Commission 
orders now in effect, in whole or in part.\11\
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    \11\ Specifically, Applicants proposes that, upon issuance of 
the requested order, the Project Parent Orders and Commission order 
dated May 22, 1997 (HCAR No. 26719) (authorizing Cinergy Investments 
and certain other Cinergy nonutility subsidiaries to pay dividends 
out of capital or unearned surplus to their respective parent 
companies through December 31, 2002), be rescinded in their 
entirety. Applicants also request that the Cinergy Solutions Order 
and Commission order dated May 30, 1997 (HCAR No. 26723) 
(authorizing Cinergy and/or Cinergy Investments to issue guarantees 
on behalf of Cinergy Services, certain Cinergy nonutility 
subsidiaries, and future rule 58 companies in which Cinergy or its 
subsidiaries acquires an interest), be rescinded in part and 
superseded by the requested order to the extent that those prior 
authorizations relate to guarantees issued by Cinergy.
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Payment of Dividends Out of Capital and Unearned Surplus

    Finally, to the extent not otherwise exempt under the Act, 
Applicants request authorization for all of Cinergy's existing and 
future nonutility subsidiaries--Cinergy Investments, Cinergy Global 
Resources, all existing and future Intermediate Parents and Nonutility 
Companies (other than Nth Power Fund), and KO, Tri-State and South 
Construction--to declare and pay dividends out of capital or unearned 
surplus to their respective parent companies from time to time through 
the Authorization Period, where permitted under applicable corporate 
law and agreements with lenders or other third parties.


[[Page 45892]]


    For the Commission, by the Division of Investment Management, 
under delegated authority.
Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 98-23071 Filed 8-26-98; 8:45 am]
BILLING CODE 8010-01-M