-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R6AsBHbEbyGGhK2r48Y9eR7EMoKCkeq0vYVkp5H+IhLOUoSeNbotg53QU2gc+ZQE LR3F3d+P1vdkL0PTyW/oAg== 0000053456-00-000004.txt : 20000501 0000053456-00-000004.hdr.sgml : 20000501 ACCESSION NUMBER: 0000053456-00-000004 CONFORMED SUBMISSION TYPE: U-1/A PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20000428 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JERSEY CENTRAL POWER & LIGHT CO CENTRAL INDEX KEY: 0000053456 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 210485010 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: U-1/A SEC ACT: SEC FILE NUMBER: 070-09529 FILM NUMBER: 613101 BUSINESS ADDRESS: STREET 1: 2800 POTTSVILLE PIKE CITY: READING STATE: PA ZIP: 19640-0001 BUSINESS PHONE: 6109293601 MAIL ADDRESS: STREET 1: C/O GPU ENERGY STREET 2: 2800 POTTSVILLE PIKE CITY: READING STATE: PA ZIP: 19640-0001 U-1/A 1 U-1/A Amendment No. 3 to SEC File No. 70-9529 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM U-l APPLICATION UNDER THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 ("Act") Jersey Central Power & Light Company ("JCP&L") 2800 Pottsville Pike Reading, Pennsylvania 19605 (Name of company filing this statement and address of principal executive office) GPU, INC. ("GPU") (Name of top registered holding company parent of applicant) Terrance G. Howson, Douglas E. Davidson, Esq. Vice President and Treasurer Berlack, Israels & Liberman LLP Scott L. Guibord, Secretary 120 West 45th Street Michael J. Connolly, Esq. New York, New York 10036 Vice President - Law GPU Service, Inc. 300 Madison Avenue Morristown, New Jersey 07962 Scott L. Guibord, Secretary Jersey Central Power & Light Company 2800 Pottsville Pike Reading, Pennsylvania 19605 (Names and addresses of agents for service) JCP&L hereby amends its Application on Form U-1, docketed in SEC File No. 70-9529, as heretofore amended, as follows: 1. By amending the second paragraph of Paragraph O of Item 1 thereof to read in its entirety as follows: The Special Purpose Issuer may issue transition bonds in one or more series, and each such series may be issued in one or more classes. Different series may have different maturities and interest rates and each series may have classes with such maturities, interest rates and other terms as JCP&L shall determine from time to time in the future. The transition bonds of each series and class will bear interest at rates determined based on prevailing market conditions at the time of sale. The rates will be comparable to those on transition bonds having similar terms, conditions and features issued under similar market conditions by issuers of comparable credit quality similarly situated. The TBC for each series will be structured to provide for the recovery of the principal amount of the related transition bonds and the related interest, fees and expenses. There will be a date on which each of the transition bonds is expected to be repaid and a legal final maturity date by which the transition bonds must be repaid. Neither the expected final maturity nor the legal final maturity will be later than 15 years and 17 years, respectively, from the date of issuance of the related transition bonds. The expected final maturity date must be earlier than the legal final maturity date to meet rating agency requirements because the TBC is calculated by taking into account projections of such variables as the anticipated level of charge-offs, delinquencies, and usage, which may differ from the amounts actually experienced. 2. By amending Paragraph Q of Item 1 thereof to read in its entirety as follows: Q. JCP&L will receive a servicing fee for its servicing activities and reimbursement for certain of its expenses in the manner set forth in the Servicing Agreement. JCP&L's servicing fee will be set at an amount equal to a fixed percentage of the initial principal amount of the transition bonds, designed to collect approximately $400,000 annually. This fee may not reflect JCP&L's actual costs of providing the related services and therefore may not meet the "at cost" requirements of Section 13(b) of the Act and Rules 90 and 91 thereunder. Thus, JCP&L is seeking an exemption from these requirements. The credit rating agencies will require that the servicing fee be set at a level comparable to one negotiated at arms-length and which would thus be reasonable and sufficient for a third party performing similar services.(1) These rating agencies are accustomed to evaluating securitization transactions that include servicing fees based on a fixed percentage of the initial principal amount of the related bonds, rather than a fee based on actual costs as would otherwise be required by the Act when JCP&L is the servicer. The lack of certainty engendered by a fee that is not fixed, with the potential to fluctuate with costs, could have a negative impact on the credit rating of the transition bonds. In addition to the certainty provided by the pre-set fee, an "arms-length" fee helps to assure that the Special Purpose Issuer would be able to operate independently and thus strengthens the position that it is a "bankruptcy remote"(2) entity. JCP&L is the most logical and cost-effective choice for servicer for a number of reasons. JCP&L is already performing many of the servicer's tasks in its capacity as the local distribution utility, such as metering and billing, and, thus, the servicing fee JCP&L collects, even when determined on an "arms-length" basis, will be substantially lower than the fee any other entity would charge. Having JCP&L act as servicer is therefore beneficial to ratepayers because, ultimately, it is the ratepayers who will pay the servicing fee through the TBC. 3. By filing the following exhibits on Item 6 thereof. F - Opinion of Berlack, Israels & Liberman, LLP - ------------------ 1 Of course, as noted in the following paragraph, an arms-length fee for an entity that also serves as the local distribution utility is likely to be less than an arms-length fee for another entity. 2 A "bankruptcy remote" entity would not be impacted by a bankruptcy of JCP&L and is, therefore, expected to have a credit rating different from (and, indeed, higher than) that of JCP&L. 2 SIGNATURE PURSUANT TO THE REQUIREMENTS OF THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935, THE UNDERSIGNED COMPANY HAS DULY CAUSED THIS STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED. Jersey Central Power & Light Company By:/s/ T. G. Howson ---------------- T. G. Howson Vice President and Treasurer Date: April 28, 2000 3 EX-99 2 EXHIBIT INDEX EXHIBIT TO BE FILED BY EDGAR Exhibit: F - Opinion of Berlack, Israels & Liberman, LLP EX-99 3 EXHIBIT F Exhibit F-1 April 28, 2000 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Re: SEC File No. 70-9529 --------------------- Ladies and Gentlemen: We have examined the Application on Form U-1, dated July 15, 1999, under the Public Utility Holding Company Act of 1935, as amended (the "Act"), filed by Jersey Central Power & Light Company ("JCP&L") with the Securities and Exchange Commission and docketed in SEC File No. 70-9529, as amended by Amendment No. 1 thereto, dated September 24, 1999, Amendment No. 2 thereto, dated February 18, 2000, and Amendment No. 3 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 contemplates, among other things, the organization by JCP&L of a Delaware limited liability company (the "Special Purpose Issuer"), which will be a direct or indirect subsidiary of JCP&L and will issue and sell up to $587 of transition bonds ("Transition Bonds"), in accordance with the New Jersey Electric Discount and Energy Competition Act of 1999. We have been counsel to JCP&L and its parent, GPU, Inc. and its subsidiaries for many years. In such capacity, we have participated in various proceedings relating to JCP&L, GPU and its other subsidiaries, and we are familiar with the terms of the outstanding securities of the corporations comprising the GPU holding company system. Securities and Exchange Commission April 28, 2000 Page 2 We have examined such records of JCP&L and its subsidiaries including the Special Purpose Issuer, and have made such further investigation as we have deemed necessary as a basis for this opinion. We are members of the Bar of the State of New York and do not purport to be experts on 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 General Corporation Law of the State of Delaware, the applicable provisions of the Delaware Constitution and the reported judicial decisions interpreting those laws to the extent required to express the opinions set forth herein. We have assumed that (i) all necessary action, corporate or otherwise, required on the part of JCP&L, and other relevant entities, including the Special Purpose Issuer, shall have been duly taken; (ii) the Commission shall have entered an order forthwith granting the Application; and (iii) all action under the Federal securities laws and state "Blue Sky" laws to permit the proposed transaction shall have been completed. 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 that: (a) all State laws applicable to the proposed transactions will have been complied with; (b) the Special Purpose Issuer is validly organized and duly existing; (c) upon payment of the purchase price therefor by the purchasers thereof, the Transition Bonds will be the valid and binding obligations of the Special Purpose Issuer in accordance with their terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and other laws affecting creditors rights generally and general equitable principles; and Securities and Exchange Commission April 28, 2000 Page 3 (d) the consummation of the transactions proposed in the Application will not violate the legal rights of the holders of any securities issued by GPU or any "associate company" thereof, as defined in the Act. 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, BERLACK, ISRAELS & LIBERMAN LLP -----END PRIVACY-ENHANCED MESSAGE-----