Earnings.-Attached hereto as Appendix II is St. Joseph's income statement for the year ended December 31, 1945, per books adjusted 3 and pro forma reflecting the proposed refinancing. As shown in the pro forma income statement, St. Joseph will, as a result of the refinanc ing, effect an increase in net income in the amount of $19,131, on the basis of filing a consolidated Federal income tax return.

It should be noted that the coverages of interest on long-term debt, fixed charges, and fixed charges and preferred dividend requirements of 3.61, 3.35 and 2.49 times, respectively, on a per books adjusted basis will become, on a pro forma basis, 5.45, 4.84 and 3.14 times, respectively.

The bond indenture.-The new bonds are to be issued as the initial series of bonds under and secured by an indenture and supplemental indenture (hereinafter referred to collectively as the "indenture") dated April 1, 1946 between St. Joseph and Harris Trust and Savings Bank, Chicago, Illinois (hereinafter referred to as "trustee") and Bartlett Boder, as trustees. In the opinion of counsel for the applicant, the new bonds will constitute at the time of issuance a first lien on substantially all the fixed property owned by St. Joseph. The indenture also contains provision for subjecting after-acquired property to the lien thereof, with certain exceptions set forth in the indenture.

The indenture provides that additional bonds may be issued to the extent of 60 percent of the cost or fair value (whichever is less) of unfunded net property additions provided net earnings, before charges for interest, income taxes and amortization of debt discount and expense, are at least twice the annual interest charges on all bonds to be outstanding under the indenture and on all other indebtedness of prior rank. The indenture also provides that all transportation properties presently owned or hereafter acquired shall be disregarded in making computations of property additions and retirements.

The indenture contains provisions for a sinking fund, maintenance and replacement fund and a covenant with respect to the payment of dividends. The sinking fund covenant provides in substance for annual payments to the trustee on April 1 of each year from 1947 to 1975, inclusive, in an amount equal to 1 percent of the greatest principal amount of 1976 bonds at any one time outstanding. Such payments may be made in cash or by the delivery of bonds.

The maintenance and replacement fund requires that the company shall annually expend for maintenance, renewals and replacements of,

"Per books adjusted" reflects on an annual basis the interest and preferred dividend requirements on the senior securities outstanding at December 31, 1945 and related tax adjustments on the assumption that the capital structure of the company at the end of the year had existed for the entire year.

6

or additions to, the mortgaged property (excluding transportation properties) 4.1 percent of the average amount of the gross property account provided that any deficiency in such expenditure may be made by deposit with the trustee of cash or bonds or by the certification of net property additions (excluding net additions of transportation properties) not theretofore bonded.

The divided covenant provides in effect that the company will not pay any dividends on its common stock (other than dividends payable solely in such stock) nor make any other distribution on or purchase any shares of such stock except out of earned surplus accumulated subsequent to March 31, 1946 and unless, after giving effect to such dividend, distribution or purchase, there shall remain in earned surplus an amount at least equal to the amount by which the aggregate of charges from April 1, 1946 for maintenance and for depreciation of the mortgaged property (excluding transportation properties) shall be less than the cumulative maintenance and replacement fund requirement, heretofore described.

The indenture will be qualified under the provisions of the Trust Indenture Act of 1939.

Fees and expenses.-The fees and expenses to be paid in connection with the issuance and sale of the new bonds have been estimated by the company as shown below:

Miscellaneous (Federal taxes, traveling expenses, etc.) –

15, 719

Total--

63, 719

St. Joseph has designated the law firm of Isham, Lincoln & Beale of Chicago as counsel for the successful bidder for the bonds. Their estimated fee of $5,500 is to be paid by the successful bidder. The fees and expenses referred to above, if they do not exceed the estimates, do not appear to be unreasonable.

Conclusions and statutory compliance.-On the basis of the record we find that St. Joseph's proposed issue and sale of the $3,750,000 principal amount of first mortgage bonds are solely for the purpose

For the purpose of computation of the maintenance and replacement fund requirement the "amount of the gross property account" as at March 31, 1948 shall be deemed $7,483,000 and at any other date shall be $7,483,000 plus the amount of net additions (excluding additions and retirements of transportation properties).

of financing the business of St. Joseph and have been expressly authorized by the State commission of the State in which St. Joseph is organized and is doing business. Accordingly, we find that the application pursuant to Section 6 (b), for exemption from the provisions of Section 6 (a), should be granted.

As previously stated, St. Joseph proposes to use a portion of the proceeds of the issue and sale of the new bonds to redeem its bonds presently outstanding at the redemption price thereof as provided for in the bond indenture. Accordingly, such redemption is exempt from the requirements of Section 12 (c) by virtue of the provisions of Rule U-42 (b) (2).

An appropriate order will issue granting the application, as amended, subject to the terms and conditions contained in Rule U-24, and subject to the further condition that the proposed issue and sale of the bonds shall not be consummated until the results of the competitive bidding pursuant to Rule U-50 have been made a matter of record in this proceeding and a further order shall have been entered by this Commission in the light of the record so completed, which order may contain further terms or conditions as may then be deemed appropriate, jurisdiction being reserved for this purpose.

By the Commission: (Commissioners Healy, Pike, McConnaughey, and Caffrey) Chairman Purcell being absent and not participating.

APPENDIX I

ST. JOSEPH LIGHT & POWER COMPANY

Condensed balance sheets at Dec. 31, 1945 per books, and pro forma giving effect to the proposed transactions

APPENDIX I—Continued

ST. JOSEPH LIGHT & POWER COMPANY-Continued

Condensed balance sheets at Dec. 31, 1945—Continued

APPENDIX II

ST. JOSEPH LIGHT & POWER COMPANY

Condensed statements of income for the year ended Dec. 31, 1945, per books adjusted and pro forma reflecting the proposed transactions

• Reflects on an annual basis the interest and preferred dividend requirements on the senior securities outstanding at Dec. 31, 1945, and related tax adjustments on the assumption that the capital structure of the company at the end of the year had existed for the entire year.

Authorized by the Public Service Commission of the State of Missouri.

• Federal income and excess-profits taxes have been computed on the basis of the rates in effect during 1945 and the filing of a consolidated return. The record indicates that such taxes would have been $77,962 and $87,578 higher per books adjusted and pro forma, respectively, if computed on a separate return basis.

22 S. E. C.