(As filed with the Securities and Exchange Commission on August 19, 2004)
File No. 70-10122
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POS AMC
Post-Effective Amendment No. 2
(Amendment No. 4)
FORM U-1
APPLICATION/DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
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FIRSTENERGY CORP.
MYR GROUP, INC. AND ITS SUBSIDIARIES
76 South Main Street
Akron, Ohio 44308
(Names of companies filing this statement and
address of principal executive office)
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FIRSTENERGY CORP.
(Name of top registered holding company parent of applicant)
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Leila L. Vespoli, Douglas E. Davidson, Esq.
Senior Vice President Thelen Reid & Priest LLP
and General Counsel 875 Third Avenue
FirstEnergy Corp. New York, New York 10022
76 South Main Street
Akron, Ohio 44308
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(Names and addresses of agents for service)
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION.
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A. Background. By order dated October 29, 2001 in File No. 70-9793
(Holding Co. Act Release No. 27459), as supplemented by supplemental orders
dated November 8, 2001 (Holding Co. Act Release No. 27463) and December 23, 2002
(Holding Co. Act Release No. 27628) (as so supplemented, the "Merger Order"),
the Commission approved the merger between FirstEnergy Corp. ("FirstEnergy"), an
Ohio corporation, and GPU, Inc. ("GPU"), a Pennsylvania corporation. The merger
became effective on November 7, 2001, with FirstEnergy as the surviving entity.
As a result of the merger, FirstEnergy, which is now a registered holding
company, directly or indirectly owns all of the outstanding common stock of ten
electric utility subsidiaries: Ohio Edison Company, The Cleveland Electric
Illuminating Company, The Toledo Edison Company, American Transmission Systems,
Incorporated, Jersey Central Power & Light Company, Pennsylvania Electric
Company, Metropolitan Edison Company, Pennsylvania Power Company, York Haven
Power Company, and The Waverly Electric Power & Light Company, which together
provide service to approximately 4.3 million retail and wholesale electric
customers in a 36,100 square-mile area in Ohio, New Jersey, New York and
Pennsylvania.
MYR Group, Inc. ("MYR"), which was acquired by GPU in 2000,/1/ is now a
direct wholly-owned non-utility subsidiary of FirstEnergy. MYR is a holding
company whose subsidiaries provide utility transmission and distribution,
infrastructure, and related commercial and industrial electrical (and some
mechanical) contracting services to utilities, industrial, mining, institutional
and governmental entities on a nationwide basis. MYR's transmission and
distribution services, which accounted for approximately 64% of MYR's 2003 gross
revenues, include the construction and maintenance of transmission and
distribution power lines, poles, towers and substations for utility, industrial,
institutional and governmental facilities. MYR also performs storm and other
emergency restoration services for utility networks. MYR's infrastructure
services also include installation and servicing of telecommunications and
traffic signalization equipment, which together accounted for about 4% of MYR's
2003 gross revenues. MYR also provides electric construction and maintenance
services to the commercial and industrial marketplace, often referred to as
"inside" electrical construction, which accounted for about 32% of MYR's 2003
gross revenues.
In the Merger Order, the Commission authorized certain non-utility
subsidiaries of FirstEnergy, referred to as "Energy Related Companies," to sell
goods and services to customers not only within the United States as permitted
by Rule 58 but also outside the United States./2/ Specifically, the Commission
authorized Energy Related Companies to sell "Energy Management Services" and
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1 The Commission approved GPU's acquisition of MYR by order dated April 14,
2000. See GPU, Inc., et al., Holding Co. Act Release No. 27165.
2 Energy Related Companies are defined in the Merger Order as non-utility
subsidiaries which, but for the non-U.S. nature of their business, would fall
within the definition of "energy-related companies" under Rule 58.
2
"Consulting Services" anywhere outside the United States,/3/ and to engage in
"Energy Marketing" in Canada and Mexico, subject to a reservation of
jurisdiction with respect to Energy Marketing elsewhere outside the United
States./4/
The Commission also reserved jurisdiction under the Merger Order over
FirstEnergy's request that Energy Related Companies be permitted to engage in
providing "Infrastructure Services" anywhere outside the United States. The term
"Infrastructure Services" is defined to include utility infrastructure services,
including the services provided by MYR and its subsidiaries, such as installing
and maintaining underground communications and energy networks, high voltage
transmission and distribution lines, substations and towers for electric and
telecommunications companies, construction and ongoing maintenance services to
industrial and municipal owners of complex electric and communications
infrastructures on a nationwide basis, management of large volumes of technical
service and repair work for communications and energy utilities and new
residential design and construction services, permitting a single point of
contact for the design and construction of all utility infrastructures
(including electric, gas, water, sewer, cable and telephone) and outdoor
lighting.
The Commission renewed the authorization of FirstEnergy's Energy Related
Companies, subject to the same reservations of jurisdiction, by order dated June
30, 2003 in this proceeding (Holding Co. Act Release No. 27694) (the "2003
Financing Order")./5/
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3 "Energy Management Services" are defined as energy management services,
including the marketing, sale, installation, operation and maintenance of
various products and services related to energy management and demand-side
management, including: energy and efficiency audits; meter data management,
facility design and process control and enhancements; construction,
installation, testing, sales and maintenance of (and training client personnel
to operate) energy conservation equipment; design, implementation, monitoring
and evaluation of energy conservation programs; development and review of
architectural, structural and engineering drawings for energy efficiencies,
design and specification of energy consuming equipment; general advice on
programs; the design, construction, installation, testing, sales, operation and
maintenance of new and retrofit heating, ventilating, and air conditioning
("HVAC"), electrical and power systems, fuel cells, uninterruptible power
systems, alarm, security, access control and warning systems, motors, pumps,
lighting, water, water-purification and plumbing systems, building automation
and temperature controls, installation and maintenance of refrigeration systems,
building infrastructure wiring supporting voice, video, data and controls
networks, environmental monitoring and control, ventilation system calibration
and maintenance, piping and fire protection systems, and design, sale,
engineering, installation, operation and maintenance of emergency or distributed
power generation systems, and related structures, in connection with
energy-related needs; and the provision of services and products designed to
prevent, control, or mitigate adverse effects of power disturbances on a
customer's electrical systems.
"Consulting Services" are defined as consulting services with respect to
energy- and gas-related matters for associate and nonassociate companies, as
well as for individuals. Such consulting services would include technical and
consulting services involving technology assessments, power factor correction
and harmonics mitigation analysis, meter reading and repair, rate schedule
design and analysis, environmental services, engineering services, billing
services (including consolidation or centralized billing, bill disaggregation
tools and bill inserts), risk management services, communications systems,
information systems/data processing, system planning, strategic planning,
finance, feasibility studies, and other similar related services.
4 "Energy Marketing" is defined as the brokering and marketing of electricity,
natural gas and other energy commodities, as well as providing incidental
related services, such as fuel management, storage and procurement.
5 The 2003 Financing Order was supplemented by order dated November 25, 2003
(Holding Co. Act Release No. 27769) to clarify the terms of the Commission's
reservation of jurisdiction over guarantees and other forms of credit support
provided by FirstEnergy.
3
B. Action Requested. In this Post-Effective Amendment, FirstEnergy is
requesting that the Commission issue a supplemental order releasing jurisdiction
over the performance of Infrastructure Services in Canada by MYR and other
Energy Related Companies and continue its reservation of jurisdiction over such
activities anywhere else outside the United States. It is expected that the
Infrastructure Services in Canada will consist chiefly of the transmission and
distribution services currently provided by MYR to electric utility network
owners.
ITEM 2. FEES, COMMISSIONS AND EXPENSES.
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FirstEnergy estimates that the additional fees, commissions and expenses
incurred or to be incurred in connection with the preparation of this
Post-Effective Amendment will not exceed $2,500.
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
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A. General. Sections 9(a) and 10 of the Act are applicable to the
proposed Infrastructure Services. As indicated in Item 1, all of the services to
be provided by FirstEnergy through MYR or other subsidiaries will come within
the definition of Infrastructure Services under the Merger Order.
The Commission has not previously authorized the sale of infrastructure
services as a discrete non-utility business activity outside the United States,
although it has authorized other types of energy-related non-utility businesses
outside the United States. For example, the Commission has authorized
FirstEnergy (as well as many other registered holding companies) to engage in
the sale of Energy Management Services and Consulting Services (both of which
are specifically covered by Rule 58, if such business activity is conducted in
the United States) anywhere outside the United States. The Commission has also
authorized FirstEnergy (as well as several other registered holding companies)
to engage in energy marketing activities (also explicitly covered by Rule 58, if
such business activities are conducted in the United States) in Canada and
Mexico, and has also authorized at least two registered electric utility holding
companies to acquire or construct various types of non-utility "energy-related
assets" (specifically, natural gas production properties, gas gathering,
processing, transportation and storage facilities, liquid oil reserves and
storage facilities, and associated assets, facilities equipment) in Canada as an
incidental activity to energy marketing./6/
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6 See Alliant Energy Corporation, et al., Holding Co. Act Release No. 27448
(Oct. 3, 2001) (authorizing up to $800 million of investments in "energy-related
assets" in the United States and Canada); and Cinergy Corp., et al., Holding Co
Act Release No. 27717 (Aug. 29, 2003) (authorizing up to $1 billion of
investments in "energy-related assets" in the United States, Canada and Mexico).
4
The performance of Infrastructure Services by MYR and other Energy
Related Companies in Canada will not expose the FirstEnergy system to business
risks that are materially different from, or greater than, those that
FirstEnergy and other registered holding companies would face in connection with
providing Energy Management Services in Canada. In this regard, there is a
significant degree of overlap in the specific types of services or functions
covered by the definitions of Energy Management Services (see footnote 3 above)
and Infrastructure Services,/7/ the principal distinction being that Energy
Management Services appear to be focused on energy-utilization and other
customer-side-of-the-meter equipment and systems rather than utility
distribution networks. Moreover, the sale of Infrastructure Services outside the
United States would be much less risky than energy marketing (the risks of which
are well documented) or the investment of substantial amounts of capital in
energy-related assets. In this connection, it should be noted that, prior to
being acquired by GPU, MYR (or its predecessor, through various subsidiaries),
has undertaken transmission and distribution system projects from time to time
outside the United States, specifically in Canada and Saudi Arabia.
MYR and other FirstEnergy Energy Related Companies will generally
provide Infrastructure Services in Canada using many of the same resources,
i.e., personnel, equipment and technology, that are already used in connection
with performing these services in the United States. Where appropriate, MYR or
other Energy Related Companies will subcontract with local vendors, suppliers
and service providers to perform portions of the work. Finally, the extension of
Infrastructure Services into Canada is not expected to involve any significant
new capital investment by Energy Related Companies outside the United States./8/
B. Rule 54 Analysis. The proposed transaction is also subject to the
requirements of Rule 54. Rule 54 provides that in determining whether to approve
an application by a registered holding company which does not relate to any
"exempt wholesale generator" ("EWG") or "foreign utility company" ("FUCO"), the
Commission shall not consider the effect of the capitalization or earnings of
any subsidiary which is an EWG or a FUCO upon the registered holding company if
paragraphs (a), (b) and (c) of Rule 53 are satisfied.
FirstEnergy currently meets all of the conditions of Rule 53(a), except
for clause (1). Under the Merger Order, as modified by the 2003 Financing Order,
the Commission, among other things, authorized FirstEnergy to invest in EWGs and
FUCOs so long as FirstEnergy's "aggregate investment," as defined in Rule
53(a)(1), in EWGs and FUCOs does not exceed $5 billion, which $5 billion amount
is greater than the amount which would be permitted by clause (1) of Rule 53(a)
which, based on FirstEnergy's "consolidated retained earnings," also as defined
in Rule 53(a)(1), of $1.7 billion as of June 30, 2004, would be $850 million.
The Merger Order, as modified by the 2003 Financing Order, also specifies that
this $5 billion amount may include amounts invested in EWGs and FUCOs by
FirstEnergy and GPU at the time of the Merger Order ("Current Investments") and
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7 For example, both Infrastructure Services and Energy Management Services
involve elements of installation, design, construction, management and
maintenance of customer equipment and facilities, as well as wiring and
plumbing.
8 Under the terms of the Merger Order and the 2003 Financing Order, any new
investment by FirstEnergy in Energy Related Companies is counted against the
investment limit in Rule 58.
5
amounts relating to possible transfers to EWGs of certain generating facilities
owned by certain of FirstEnergy's operating utilities ("GenCo Investments").
FirstEnergy has made the commitment that through December 31, 2005, its
aggregate investment in EWGs and FUCOs other than the Current Investments and
GenCo Investments ("Other Investments") will not exceed $1.5 billion (the
"Modified Rule 53 Test"). Under the Merger Order and 2003 Financing Order, the
Commission reserved jurisdiction over Other Investments that exceed such $1.5
billion amount.
As of June 30, 2004, and on the same basis as set forth in the Merger
Order, FirstEnergy's "aggregate investment" in EWGs and FUCOs was approximately
$984 million,/9/ an amount significantly below the $5 billion amount authorized
in the Merger Order, as modified by the 2003 Financing Order. Additionally, as
of June 30, 2004, "consolidated retained earnings" were $1.7 billion. By way of
comparison, FirstEnergy's consolidated retained earnings as of December 31, 2001
were $1.52 billion.
In any event, even taking into account the capitalization of and
earnings from EWGs and FUCOs in which FirstEnergy currently has an interest,
there would be no basis for the Commission to withhold approval of the
transactions proposed herein. With respect to capitalization, since the date of
the Merger Order, there has been no material adverse impact on FirstEnergy's
consolidated capitalization resulting from FirstEnergy's investments in EWGs and
FUCOs. As of June 30, 2004, FirstEnergy's consolidated capitalization consisted
of 41.7% common equity, 1.6% cumulative preferred stock, 56.3% long-term debt
and .4% short-term debt. As of December 31, 2001, those ratios were as follows:
30.3% common equity, 3.1% cumulative preferred stock, 63.1% long term debt and
3.5% short-term debt. Additionally, the proposed transactions will not have any
material impact on FirstEnergy's capitalization. Further, since the date of the
Merger Order, FirstEnergy's investments in EWGs and FUCOs have contributed
positively to its level of earnings, other than for the negative impact on
earnings due to FirstEnergy's writedowns of its investments in Avon Energy
Partners Holdings ("Avon") and GPU Empresa Distribuidora Electrica Regional S.A.
("Emdersa")./10/
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9 This $984 million amount represents Current Investments only. As of June 30,
2004, FirstEnergy had no GenCo Investments.
10 At the time of the Merger Order, FirstEnergy identified certain former GPU
EWG and FUCO investments for divestiture within one year. Among those identified
were Avon, a holding company for Midlands Electricity plc, an electric
distribution business in the United Kingdom and Emdersa and affiliates, an
electric distribution business in Argentina. In May 2002, FirstEnergy sold 79.9%
of its interest in Avon, and in the fourth quarter of 2002, recorded a $50
million charge to reduce the carrying value of its remaining 20.1% interest. On
January 16, 2004, FirstEnergy announced that it had completed the sale of its
remaining 20.1% interest in Avon. Additionally, FirstEnergy did not reach a
definitive agreement to sell Emdersa as of December 31, 2002, and therefore, the
Emdersa assets could no longer be treated as "assets pending sale" on the
FirstEnergy consolidated balance sheets. In April 2003, FirstEnergy abandoned
its ownership interest in Emdersa. As a result of this divestiture, FirstEnergy
recognized a one-time, non-cash charge of $67.4 million in the second quarter of
2003. In addition, FirstEnergy reflected the results of this business (after-tax
loss of $87.5 million) as discontinued operations in the restated Consolidated
Statement of Income for the year ended December 31, 2002. FirstEnergy also
recognized a currency translation adjustment in other comprehensive income of
$91.5 million in 2002. On February 2, 2004, FirstEnergy announced that it had
completed the sale of all of its remaining operating FUCO assets.
6
Further, since the date of the Merger Order, and, after taking into
account the effects of the merger, there has been no material change in
FirstEnergy's level of earnings from EWGs and FUCOs.
FirstEnergy's operating public-utility subsidiaries remain financially
sound companies as indicated by their investment grade ratings from the
nationally recognized rating agencies for their senior secured debt. The
following chart includes a breakdown of the senior, secured credit ratings for
those public-utility subsidiaries of FirstEnergy that have ratings:
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Subsidiary Standard Moody's12 Fitch13
& Poors11
--------------------- ------------ ------------ ----------
Ohio Edison BBB Baa1 BBB+
Cleveland Electric BBB- Baa2 BBB-
Toledo Edison BBB- Baa2 BBB-
Penn Power BBB- Baa1 BBB+
JCP&L BBB Baa1 BBB+
Met-Ed BBB Baa1 BBB+
Penelec BBB Baa1 BBB+
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FirstEnergy satisfies all of the other conditions of paragraphs (a) and
(b) of Rule 53. With respect to Rule 53(a)(2), FirstEnergy maintains books and
records in conformity with, and otherwise adheres to, the requirements thereof.
With respect to Rule 53(a)(3), no more than 2% of the employees of FirstEnergy's
domestic public utility companies render services, at any one time, directly or
indirectly, to EWGs or FUCOs in which FirstEnergy directly or indirectly holds
an interest. With respect to Rule 53(a)(4), FirstEnergy will continue to provide
a copy of each application and certificate relating to EWGs and FUCOs and
relevant portions of its Form U5S to each regulator referred to therein, and
will otherwise comply with the requirements thereof concerning the furnishing of
information. With respect to Rule 53(b), none of the circumstances enumerated in
subparagraphs (1), (2) and (3) thereunder have occurred. For the reasons given
above, the requirements of Rule 53(c) are satisfied.
ITEM 4. REGULATORY APPROVALS.
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No State commission, and no Federal commission, other than this
Commission has jurisdiction over the proposed transaction.
ITEM 5. PROCEDURE.
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FirstEnergy requests that the Commission issue a supplemental order
releasing jurisdiction previously reserved under the 2003 Financing Order over
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11 Standard & Poor's Rating Services
12 Moody's Investors Service, Inc.
13 Fitch, Inc.
7
the performance of Infrastructure Services in Canada and continue to reserve
jurisdiction over the performance of Infrastructure Services elsewhere outside
the United States. It is further requested that: (i) there not be a recommended
decision by an Administrative Law Judge or other responsible officer of the
Commission, (ii) the Division of Investment Management be permitted to assist in
the preparation of the Commission's decision and (iii) there be no waiting
period between the issuance of the Commission's order and the date on which it
is to become effective.
ITEM 6. EXHIBITS AND FINANCIAL STATEMENTS.
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(a) Exhibits:
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No additional exhibits filed herewith.
(b) Financial Statements:
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Omitted as not relevant to the proposed transaction.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.
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(a) The proposed transaction does not involve a major Federal
action significantly affecting the quality of the human environment.
(b) No federal agency has prepared or is preparing an
environmental impact statement with respect to the proposed transaction.
SIGNATURES
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, as amended, the undersigned companies have duly caused this statement
to be signed on their behalves by the undersigned thereunto duly authorized.
FIRSTENERGY CORP.
MYR GROUP, INC.
By: /s/ Harvey L. Wagner
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Harvey L. Wagner
Vice President and Controller
Date: August 19, 2004