CAPITAL CONTRIBUTION TO NEW YORK STATE To enable New York State to take steps to effect a refinancing of its outstanding bonds and preferred stock thereby reducing its interest charges and preferred dividend requirements and to increase the common stock equity in New York State, GPU proposes to donate $7,500,000 in cash to New York State. Financial data submitted by GPU indicates its ability to make the capital contribution without impairing its financial integrity." FEES AND EXPENSES Fees and expenses to be paid by New York State have been estimated by it as follows: Filing fees___. Federal issue tax---- New York State mortgage tax--- New York State tax on changes in capitalization.... Trustees, transfer agents and Registrar's charges---. Auditors fees and expenses-. Miscellaneous_. Total____ $6, 140 30, 800 65,000 1,500 65,000 12, 500 55,000 10,000 29, 060 275,000 New York State has designated the firm of Davis, Polk, Wardwell, Sunderland & Kiendl as independent counsel for prospective underwriters. Their fees and expenses are estimated at $19,000, of which $10,500 will be applicable to the bonds and $8,500 to the preferred stock. Because services of counsel for New York State and independent counsel for prospective underwriters are not completed, we shall reserve jurisdiction over the payment of all legal fees and expenses of counsel. The proposed purchase contracts provide that any reduction in the fees to be paid independent counsel shall enure to the benefit of New York State. The remaining fees and expenses enumerated above do not appear unreasonable and we make no adverse findings with respect thereto. CONCLUSIONS On the basis of the record, we find that the proposed issue and sale by New York State of $13,000,000 principal amount of First Mortgage . $2,209,435.03 of the capital contribution represents a portion of the proceeds realized from the sale for the account of GPU of its interest in the common stock of Florida Power Corporation. See Florida Power Corporation et al., Holding Company Act Release No. 6151. Bonds and 150,000 shares of cumulative preferred stock are solely for the purpose of financing the business of New York State. The Public Service Commission of the State of New York, the State in which the company is organized and doing business, has passed resolutions indicating that subject to compliance with certain conditions, the issue and sale of the bonds and preferred stock will be expressly authorized by its order. Subject to the receipt of such express authorization, we find that the application, pursuant to Section 6 (b) of the Act for exemption from the provisions of Section 6 (a) thereof should be granted. In addition, our order will reserve jurisdiction over all fees and disbursements of all counsel and will contain a condition that New York State report the results of competitive bidding pursuant to Rule U-50 and that the proposed issue and sale of the new bonds and new preferred stock shall not be consummated until further order of the Commission shall have been entered in light of the results of competitive bidding. Said order may contain such further terms and conditions as may then be deemed appropriate and jurisdiction will be reserved for this purpose. The donation by GPU to New York State of $7,500,000 is subject to the requirements of Section 12 (b) of the Act and Rule U-45 of the Rules and Regulations promulgated thereunder. Having examined the proposed donation in the light of the Section and Rule, we observe no basis for adverse findings. The adjustment of the accounts by New York State and changes in the provisions of its indenture and Articles of Incorporation affecting its outstanding bonds and common stock are subject to the requirements of Sections 6 (a) (2) and 7 (e) of the Act. We do not believe the adjustments of its accounts by New York State and the changes of the rights and privileges of the outstanding debentures and common stock will result in an unfair and inequitable distribution of voting power among the security holders of New York State. Furthermore, it does not appear that such proposals are detrimental to the public interest or the interests of investors or consumers. We, therefore, need enter no adverse findings under Section 7 (e) and since no State commission has informed us that State laws have not been complied with the requirements of Section 7 (g) are satisfied. The redemption by New York State of its outstanding preferred stock is subject to the provisions of Section 12 (c) and Rule U-42 promulgated thereunder. The requirements of such Section and Rule appear to be satisfied. The redemption by New York State of its outstanding First Mortgage Bonds is exempt from the requirements 25 S. E. C. of Section 12 (c) and Rule U-42 by virtue of the provisions of Paragraph (b) (2) of such Rule. Applicants-declarants have requested that our order recite, in conformity with the provisions of Sections 371 and 373 (a) of the Internal Revenue Code, as amended, that the expenditure of $7,500,000 by GPU includes $2,209,435.03 of funds derived by GPU from the sale of its holdings of the common stock of Florida Power Corporation, and that this expenditure is necessary or appropriate to effectuate the provisions of Section 11 (b) of the Act. Since the utilization by GPU of the sum of $2,209,435.03 for the purposes set forth herein is an appropriate step in order to effectuate the provisions of Section 11 (b) (2) of the Act and the simplification of its GPU holding company system, we shall grant the request. We shall, therefore, approve the application, as amended, and permit the declaration, as amended, to become effective, subject to the conditions prescribed in Rule U-24 and to the additional conditions and reservation of jurisdiction noted above. An appropriate order will issue. By the Commission (Chairman Caffrey and Commissioners McConnaughey and McEntire), Commissioner Hanrahan being absent and not participating. 25 S. E. C. |