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Net plant and property--
119, 527, 771 The plant and property ' at original cost of East Coast as at December 31, 1946 was stated at $2,779,609. The depreciation reserve amounted to $435,238.
Upon completion of the merger, the plant and property at original cost and the reserve for depreciation before and after the transactions are shown below:
Total Plant and property at original cost - $133, 048, 095 $2,779, 609 $135, 827, 704 Reserve for depreciation.-
21, 496, 775 435, 238 21, 932, 013
Net plant and property at
111, 551, 320
2, 344, 371
113, 895, 691
Percent of reserve to property---
• Electric, gas and common utility plant are stated on a basis of original cost in accordance with the orders of the Federal Power Commission and the State Corporation Commission of Virginis. Provision is being made for the amortization of plant acquisition adjustments by annual charges to income over a period ending in 1959. Does not include $1,039 of miscellaneous intangible plant.
25 S. E.C.
A condensed corporate balance sheet of VEPCO, actual and pro forma, as at December 31, 1946, giving effect to the proposed transactions, is shown below:
163, 554, 568 164, 172, 965 • For the purpose of preparing its pro for ma statements VEPCO has assumed a purchase price for the common stock of $1,298,048, representing the net book worth of East Coast after charging off by East Coast of organization expense and expenses of issuance of new bonds.
• VEPCO has a standby agreement with The Chase National Bank of the City of New York to borrow $6,000,000. At the present time, VEPCO has sufficient funds on hand to purchase the securities of East Coast; bowever, in view of a large anticipated construction program, additional funds will be required at a later date.
25 S. E.C.
The corporate earnings of VEPCO for the twelve months ended December 31, 1946, actual and pro forma, giving effect to the proposed transactions are shown below:
It will be noted from the above table that the balance applicable to common stock of VEPCO will be increased $142,391, as a result of the proposed transactions, without considering the possible future cost of financing the proposed acquisition.
VEPCO has indicated that the accounting entries proposed to be made are subject to the approval of the Federal Power Commission and the State Corporation Commission of Virginia, in addition to our jurisdiction. Since the record is incomplete with respect to the proposed accounting entries we will reserve jurisdiction with respect thereto.
We have pointed out above that the three divisions of East Coast properties are physically interconnected with the transmission lines and power sources of VEPCO. Accordingly, we find that the proposed acquisition of East Coast securities by VEPCO would tend toward the economical and efficient development of an integrated public utility system as required by Section 10 (c) (2).
As the purchase price for the East Coast securities is still to be determined by competitive bidding, we shall reserve jurisdiction as to
whether, in the event VEPCO is the successful bidder, the consideration is not reasonable or does not bear a fair relation to the sums invested in or the earning capacity of the utility assets underlying the securities to be acquired in accordance with the standards of Section 10 (b) (2). Also, since the record does not contain sufficient data as to the reasonableness of all fees and expenses in connection with this proposal, we shall reserve jurisdiction to consider them under the standards of Section 10 (b) (2).
We observe no basis for making adverse findings under Section 10 (b) (1) and 10 (b) (3) and find that the proposed acquisition satisfies the requirements of Section 10 (c) (1).
VEPCO has submitted an opinion of counsel that the proposed transactions will satisfy the requirements of all applicable State laws. On the basis of such opinion we find that the requirements of Section 10 (f) are satisfied.
The record also indicates that in the event VEPCO is the successful bidder for the East Coast securities, it will subsequently acquire the electric utility assets of East Coast and thereafter dissolve East Coast as a corporate entity. We shall make no findings as to appropriateness of these proposals because the record is not yet complete on this phase of the proposed transactions.
An appropriate order will issue granting the application of VEPCO to submit a bid for the East Coast securities, subject, however, to the terms and conditions prescribed in Rule U-24 and the following additional conditions:
1. That the proposed acquisition of the securities of East Coast shall not be consummated until the proposed purchase prices for such securities shall have been made a matter of record in this proceeding and a further order shall have been entered by the Commission in the light of the record as so completed.
2. That jurisdiction is reserved to approve the reasonableness of all fees and expenses claimed by any persons in connection with these transactions.
3. That in the event the securities of East Coast are acquired by VEPCO, jurisdiction is reserved to consider the acquisition of the electric utility assets of East Coast, cancellation of the East Coast securities and dissolution of East Coast as a corporate entity.
4. Jurisdiction is reserved over all proposed accounting entries to be made in connection with these transactions.
By the Commission (Chairman Caffrey and Commissioners McConnaughey and McEntire), Commissioners Hanrahan and McDonald being absent and not participating.