APPENDIX A--Continued Consolidated Capitalization Including Surplus of Philadelphia Company And Its Subsidiaries --Continued CEarned Surplus adjusted to eliminate the following items: Excess of book value over original cost of properties of Equitable Gas Company $206,546 Gas properties of Philadelphia Co. leased to Equitable Gas Company 5,733,094 Amount contained in Account 100.5 of Duquesne Light Co. being amortized 3,508,672 Total Adjustment 9,448,312 For the purposes of these computations no consideration has been given to $9,552,052 of excess of original cost over book value of properties of Pittsburgh and West Virginia Gas Co. The staff of the Federal Power Commission, as indicated below in footnote 4, has, for the purposes of a rate proceeding, restored a major portion of the above-mentioned amount to plant in service. The Federal Power Commission, however, has not as yet passed upon the original cost entries of the company. dIn its Answer at p. 21, Philadelphia Co. has adjusted a similar table of capitalization and surplus in the following manner: (1) No adjustment was made for the amounts indicated for Equitable Gas Co., the leased gas properties, or Duquesne Light Co. in footnote 3 above; (2) On the basis of an exhibit prepared by the staff of the Federal Power Commission in a pending rate proceeding involving Pittsburgh and West Virginia Gas Co., Philadelphia Co. restored $6,999,219 of excess of original cost over book value to Earned Surplus and recognized a deficiency of $1,810,382 in the reserve for depreciation of Pittsburgh and West Virginia by eliminating that amount from Earned Surplus. Such adjustment amounted to $5,188,837 net. On the basis of these adjustments the pertinent ratios would be as follows: Debt 47.35%, Preferred Stock 27.63%, and Common Stock and Surplus 25.02%. APPENDIX B PHILADELPHIA COMPANY AND SUBSIDIARY COMPANIES IN GAS GROUP Consolidating Statement of Operating Revenues, Operating Revenue Deductions and Gross Income for the Year Ended December 31, 1946 Source: Schedule D to Exhibit D of 1946 Annual Supplement to Registration Statement of Philadelphia Company, File No. 30-156-2 8,029,065.28 882,242.86 16,563.82 9,319,949.68 960.39 108, 136.39 917,253.41 181.01 64,000.00 96.28 16,327.08 1,635,072.08 1,660.42 1,700.00 48,000.00 390.00 6,500.00 79.60 250,287.10 $4,754,889.42 $20,312, 339.69 $3,655, 779.69(a) $16,656, 560.00 1,274, 320.58 991, 339.64 3,481, 167.12 113,700,00 6,986.28 657,658.18 APPENDIX B--Continued Note: This consolidating statement includes all items of operating revenue, operating expense (operating revenue deductions) and other income which are directly applicable to the operations of the gas properties in the Philadelphia Company holding company system and it eliminates all inter-company accounts for the companies in the gas group. Included for the Philadelphia Company are the amounts which it recorded for appropriations to retirement and depletion reserves and amortization of leaseholds and which are applicable to gas property owned by Philadelphia Company but operated under lease by a subsidiary company; we have included under other income for Philadelphia Company all revenues received from companies in the gas group (which, however, are eliminated in consolidation) and we have excluded all revenues from other sources and all non-operating revenue deductions (comprising provision for Federal income taxes of $315,000.00 and other non-operating revenue deductions of $532, 092. 17, or a total of $847,092. 17) since these items are not applicable to the operations of the gas group but to other interests of Philadelphia Company or its activities as a holding company. It has not been possible to derive a figure for the consolidated net income of the gas group since the interest charges of the subsidiary companies comprising the gas group rep- In the "Eliminations" column we have eliminated all intra-system payments and accounts between companies in the gas group and between those companies and Philadelphia (a) To eliminate from operating revenues and operating revenue deductions sales of gas in the amount of $39,099.40 by Finleyville Oil and Gas Company to Equitable Gas (b) To eliminate from revenues from lease of other physical property and from operating revenue deductions rents received by Philadelphia Company from Equitable Gas (c) To eliminate to deferred credits dividends received by Finleyville Oil and Gas Company representing payments made by Philadelphia Company under guarantees. () Denotes red figure. KANSAS CITY POWER & LIGHT COMPANY File No. 70-1830 Promulgated June 2, 1948. (Public Utility Holding Company Act of 1935--Sections 6, 7, 12, Rules U-42 and U-50) ISSUE AND SALE OF SECURITIES BY SUBSIDIARY OF REGISTERED HOLDING COMPANY Application-declaration by utility subsidiary of a registered holding company under Sections 6, 7, and 12 of the Public Utility Holding Company Act of 1935 with respect to the issue and sale, at competitive bidding, of First Mortgage Bonds and Cumulative Preferred Stock, granted and permitted to become effective, the Commission reserving jurisdiction with respect to the issues arising under Rule U-50 and with respect to legal fees. EXEMPTION FROM RULE U-42 Exemption from requirements of Rule U-42 as to acquisition in any calendar year, pursuant to Purchase Fund provisions, of such number of shares of --% Cumulative Preferred Stock as may be necessary to meet the Purchase Fund requirements for such year, granted. Appearances: John Dern and Robert L. Foote, of Sidley, Austin, Burgess & Harper, Chicago, Illinois, and Ludwick Graves, of Johnson, Lucas, Graves & Fane, for applicant. George R. Lashnits of Chadbourne, Hunt, Jaeckel & Brown, New York, N. Y., for prospective underwriters. Louis E. Clevenger, of the Division of Public Utilities of the Commission. FINDINGS AND OPINION Kansas City Power & Light Company ("Kansas City"), a public utility company and a subsidiary of Continental Gas & Electric Corporation (Continental'), a registered holding company subsidiary of United Light & Railways Company ("United"), a registered holding company, has filed an application-declaration and amendments thereto designating Sections 6 (b) and 12 (c) of the Public Utility Holding Company Act of 1935 ("Act") and Rules U-42 and U-50 promulgated thereunder as applicable with respect to the issuance and sale, at competitive bidding, of $12,000,000 principal amount of First Mortgage Bonds, % Series, due 1978 and 80,000 shares of--% Cumulative Preferred Stock ($100 par value). The price, exclusive of accrued interest, to be paid the company for the bonds (which shall not be less than 100% nor more than 102-3/4% of the principal amount of the bonds) and the interest rate thereof (which shall be a multiple of 1/8 of 1%) are to be determined by competitive bidding. The dividend rate on the new preferred stock (which shall be a multiple of 1/20 of 1%) and the price to be paid the company (which price, exclusive of accrued dividends, shall be not less than $100 per share and not more 28 S. E. C.--35----8240 105 than $102.75 per share) are likewise to be determined by competitive bidding. The proceeds from the sale of the proposed bonds and preferred stock (after deduction of expenses) will be applied to finance, in part, the acquisition and construction of additional property, to reimburse the company for expenditures heretofore made from other funds for such purposes, and to pay off and retire $3,860,000 principal amount of 1-3/4% short-term notes issued to provide temporary financing for such purposes. It is stated that approximately $2,000,000 of the proceeds from the sale of the new bonds will be deposited with the trustee and the remaining $10,000,000 will be withdrawn on the basis of net property additions.1 The proposed issue and sale of bonds and preferred stock have been authorized by the Public Service Commission of the State of Missouri, and the State Corporation Commission of the State of Kansas has issued a memorandum opinion indicating that its certificate with relation to such issuance and sale will issue when the results of competitive bidding are known. 2 After appropriate notice a public hearing was held with respect to the application and, having examined the record, we make the following findings: Kansas City, a Missouri corporation, is engaged principally in the generation, transmission, distribution, and sale of electric energy in the States of Missouri, Kansas and Iowa. Water, gas, and heating services are furnished in certain portions of the company's service area. For the twelve months ended March 31, 1948, the company derived 91.3% of its operating revenues of $26,540,525 from the sale of electricity, 5.7% from the sale of natural gas, and the remainder from the sale of heating and water service. Attached hereto as Appendix A are condensed balance sheets of Kansas City as at March 31, 1948, per books, and pro forma giving effect to the issuance and sale of the proposed bonds and preferred stock. The pro forma financial data are based on the assumptions, made by the applicant for illustrative purposes only, that the bonds will have a 3% coupon and will be sold at a price to net the company the principal amount thereof and that the preferred stock will bear a dividend rate of 4-3/4% and will be sold at a price to net the company the par value. The capitalization and surplus of Kansas City as shown by such balance sheets, together with pertinent ratios, are set forth below in Table I: 1 As of May 31, 1948, the company estimates that it will have $16,013,314 of net bondable property additions available for withdrawal of cash, ? The Certificate issued by the State Corporation Commission of the State of Kansas certifies as to the truth of the facts stated in the application filed by a utility company with respect to the amount, character, purposes for which and terms on which it is proposed to issue securities. See Sec. 66-125 General Statutes. Kansas, 1935. We have heretofore reserved jurisdiction over the retention of Kansas City in the holding company systems of United and Continental, and over retention by Kansas City of all of the utility and non-utility properties owned by it. United Light and Power Company et al, 9 S. E. C. 833,854. (1941). |