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IN THE MATTER OF

GENERAL PUBLIC UTILITIES CORPORATION
ASSOCIATED UTILITIES CORPORATION

File No. 70-1289. Promulgated September 16, 1946

(Public Utility Holding Company Act of 1935-Sections 9 (a), 10 and 12 (c))

ACQUISITION OF SECURITIES OF REGISTERED HOLDING COMPANY.

Application filed pursuant to Sections 9 (a) and 10 of the Public Utility Holding Company Act of 1935 with regard to the acquisition by a registered holding company from its subsidiary, also a registered holding company, of the securities held by the latter company, granted, when such securities are to be acquired in connection with the dissolution of the subsidiary registered holding company, the liquidation of which company will simplify the structure of the holding company system of the parent registered holding company.

ACQUISITION OF SECURITIES BY ISSUER.

Declaration filed by registered holding company pursuant to Section 12 (c) of the Public Utility Holding Company Act of 1935 and Rule U-42 promulgated thereunder with respect to its acquisition of its own securities, permitted to become effective.

APPEARANCES:

Solomon Freedman, of the Public Utilities Division of the Commission.

James B. Liberman, for the applicant-declarants.

FINDINGS AND OPINION OF THE COMMISSION

General Public Utilities Corporation ("GPU"), a registered holding company, and its wholly-owned subsidiary, Associated Utilities Corporation ("Aucorp"), also a registered holding company, have filed joint applications-declarations, as amended, pursuant to the provisions of the Public Utility Holding Company Act of 1935 (“Act"), with respect to the dissolution of Aucorp and the acquisition by GPU of virtually all the assets of Aucorp.

We

After appropriate notice, a public hearing was duly held. have considered the record, and, on the basis thereof, make the following findings:

THE COMPANIES INVOLVED

General Public Utilities Corporation, a New York corporation, is the surviving company emerging, as of January 1, 1946, from the

consummated joint reorganization, pursuant to the provisions of Chapter X of the Bankruptcy Act, as amended, of Associated Gas and Electric Company and Associated Gas and Electric Corporation.1 GPU is the top holding company in its holding company system. At the present time it controls four sub-holding companies, one of which is Aucorp.

Associated Utilities Corporation, a Delaware corporation, is a wholly-owned subsidiary of GPU. A corporate chart of the Aucorp holding company system, as at April 30, 1946, the percentage of common stock owned by Aucorp, the nature of the business of the companies, and the state of their incorporation, is as follows:

Associated Utilities Corporation (holding company) (Del.). 100 percent Associated Real Properties, Inc. (real estate) (Del.). 100 percent Dover Casualty Insurance Company (insurance) (Del.). 100 percent Gas and Electric Associates (investment) (a Mass. trust).

35.38 percent Keuka Lake Power Corporation (hydro-electric) (N. Y.).

THE PROPOSED TRANSACTIONS

Aucorp proposes to file a Certificate of Dissolution with the Secretary of State of the State of Delaware, and, in connection therewith, GPU will surrender to Aucorp for cancellation all of the outstanding shares of stock of Aucorp. Aucorp will thereafter, as promptly as may be practicable, distribute to GPU all its assets, or the proceeds thereof, subject to all its liabilities. Such distribution will be made in cash or in kind, except that the 2,450 shares of the common stock of Keuka Lake Power Corporation ("Keuka") now held by Aucorp will not be so distributed. There is presently pending before the New York Commission an application wherein New York State Electric & Gas Corporation proposes to acquire the 35.38 percent of the common stock of Keuka held by Aucorp as well as the remaining shares held by the general public. Upon obtaining such approval, applicants-declarants state a further application will be made to this Commission for its approval of the proposed transactions under the terms of the Holding Company Act.

1 See Stanley Clarke, Trustee of Associated Gas and Electric Company, et al., 15 S. E. C. 743 (1944) for Findings and Opinion of the Commission approving the plan of reorganization pursuant to Section 11 (f) of the Act.

Under the applicable laws of Delaware, a corporation which files a certificate of dissolution may nevertheless be continued for a period of three years for the purpose, among other things, of disposing and conveying its property.

New York State Electric & Gas Corporation is an affiliate of Keuka and purchases the entire output of Keuka's hydro-electric plant.

GPU will thus receive, subject to the liabilities of Aucorp, the following securities and open account:

Name of issuer and title of issue

Associated Real Properties, Inc.:

Common capital stock, no par---.

6 percent convertible obligations due 1963_.

Gas and Electric Associates:

Common capital shares

1st preferred shares

$1.00 par value a share_‒‒

8 percent demand notes___

2nd preferred shares

8 percent income note due 1960_.

Dover Casualty Insurance Co., Common capital stock_‒‒‒‒
Atlantic Utility Service Corporation, Common capital stock, $1
par value a share____

Keuka Lake Power Corporation 6 percent Bonds due 1960---
New England Gas and Electric Association, $5.50 preferred stock_
Schenectady Railway Company 5 percent non-cumulative sinking
fund income notes due 1958----

Utilities Investment Trust 8 percent income note due 1967---
Open account_.

Shares or Principal Amount

130 shares

$65, 383. 52

10,000 shares

$16, 602, 700.00 $552, 514. 22 900 shares

2,360 shares $245,000.00 6,000 shares

$73, 200.00

$18, 687, 300.00 $114,908.85

BALANCE SHEET

Attached hereto as Appendix A is a balance sheet of GPU and Aucorp, as at April 30, 1946, per books and pro forma giving effect to the acquisition by GPU of the assets and the assumption of the liabilities of Aucorp upon the latter's dissolution.

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As will be noted in the statement of the investment account of Aucorp attached hereto as Appendix A-1, the investments of Aucorp are carried, as at April 30, 1946, at $917,608, which is based upon the estimated value of Aucorp's investments at October 31, 1944, at which date an accounting reorganization was effected with the approval of the Commission. Included in such investments are 2,450 shares of the common stock of Keuka carried by Aucorp at the nominal value of $1. Upon the acquisition by GPU of all the investments of Aucorp, except the common stock of Keuka, GPU will increase. its investment account by $917,607 representing, as indicated, the carrying value of such investments by Aucorp less the $1 assigned to the common stock of Keuka. At the same time, GPU will decrease its investment account by $1,226,454 representing its carrying value for its investment in the common stock of Aucorp. Further, GPU

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4 See Denis J. Driscoll and Willard L. Thorp, etc., et al., 17 S. E. C. 51 (1944). In connection with the reorganization of Associated Gas and Electric Company and Associated Gas and Electric Corporation, the initial balance sheet of GPU was set forth as at December 31, 1945. At that time, GPU established, with the approval of this Commission, the carrying value of its investment in the common stock of Aucorp at $1,216,658, which figure was subsequently adjusted to $1,226,454. See Stanley Clarke, Trustee of Associated Gas and Electric Company, et al., 22 S. E. C. 187 (1946).

will receive other assets in a net amount of $321.537. Thus the underlying book value of the investment account and the net other assets to be acquired by GPU amounts to $1,239,144. The difference between the $1,239,144 and $1,226,454 will be disposed of by debiting $5,135 to GPU's deficit in earned surplus and by crediting $17,825 to a reserve for adjustments of assets acquired from Aucorp, all as reflected in Appendix A.

CONCLUSIONS

The acquisition by GPU of the investments of Aucorp proposed to be transferred to GPU are subject to Sections 9 (a) and 10 of the Act. Such acquisitions are necessary in connection with the dissolution of Aucorp. Since Aucorp is a wholly-owned subsidiary of GPU, its dissolution will simplify the structure of the holding company system of GPU. Viewed in this light, the proposed acquisitions have the tendency required by Section 10 (c) (2). Further, no adverse findings need be entered under Section 10 (c) (1) with respect thereto.

The transfer of its investments by Aucorp to GPU is subject to the provisions of Section 12 (f) of the Act and Rule U-43 promulgated thereunder. No adverse findings need be entered pursuant to such section or rule.

The acquisitions for cancellation by Aucorp of its common stock and its convertible obligation are subject to Section 12 (c) of the Act and Rule U-42 promulgated thereunder. No adverse findings need be entered pursuant to such section or rule. Similarly, no adverse findings need be entered under Section 12 (d) or Rule U-44 promulgated thereunder as to the transfer by GPU to Aucorp of the common stock of the latter company.

Applicants-declarants have requested that we enter an order in these proceedings which will conform to the pertinent requirements of the Internal Revenue Code, as amended, including Sections 373 (a)