SEC File No. 70-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM U-l
DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935 ("Act")
FirstEnergy Corp. ("FirstEnergy")
76 South Main Street
Akron, Ohio 44308
(Name of company filing this statement and address of principal executive
office)
FirstEnergy corp.
(Name of top registered holding company parent of applicant)
Leila L. Vespoli Douglas E. Davidson, Esq.
Senior Vice President Thelen Reid & Priest LLP
and General Counsel 40 West 57th Street
FirstEnergy Corp. New York, New York 10019
76 South Main Street
Akron, Ohio 44308
(Names and addresses of agents for service)
ITEM 1. DESCRIPTION OF PROPOSED TRANSACTION.
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A. By Order dated October 29, 2001 (HCAR No. 27459) (the "Merger
Order"), the Commission authorized, among other things, the consummation of an
Agreement and Plan of Merger, dated as of August 8, 2000, between FirstEnergy
Corp. ("FirstEnergy"), an Ohio corporation and GPU, Inc. ("GPU"), a Pennsylvania
corporation, pursuant to which FirstEnergy and GPU were to merge. The merger
became effective on November 7, 2001 (the "Merger"), with FirstEnergy being the
surviving entity. Among other things, the Merger Order also authorized
FirstEnergy to issue up to 30 million shares of FirstEnergy common stock under
its employee benefit and incentive plans and its dividend reinvestment plans,
including the FirstEnergy Corp. Executive and Director Incentive Compensation
Plan (the "Plan"). The Merger Order did not, however, expressly authorize
FirstEnergy to solicit proxies from its shareholders to approve the issuance of
additional shares of FirstEnergy common stock under the Plan.
B. The purpose of the Plan is to link the personal interests of key
employees and directors to the long-term financial success of FirstEnergy and
the growth of shareholder value. The Plan gives FirstEnergy the ability to
attract and retain the people upon whose judgment and special skills the success
of FirstEnergy is largely dependent and to use stock-based incentive
compensation to align the interests of key employees and directors to those of
FirstEnergy and its shareholders. Because FirstEnergy is a much larger company
as a result of the Merger and has many more employees, the present limit on the
number of shares that may be issued under the Plan, which is currently
15,000,000 shares, is restrictive and will inhibit the Plan from serving the
function for which it was designed.
C. Therefore, FirstEnergy intends to solicit proxies from its
shareholders ("Solicitation") seeking approval to increase the aggregate number
of authorized shares issuable under the Plan from 15,000,000 to 22,500,000. (1)
As of February 28, 2002, 8,540,876 shares of FirstEnergy common stock had been
issued under the Plan. A copy of the Plan is filed as Exhibit A-2 hereto.
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(1) Shares purchased by FirstEnergy on the open market for issuance under the
Plan are included in these tools.
D. FirstEnergy intends to seek shareholder approval to amend the
Plan for this purpose at the 2002 annual meeting of shareholders, which will be
held on May 21, 2002. In order to maintain its schedule for timely receipt of
proxies for the annual meeting, FirstEnergy plans to mail definitive proxy
materials to shareholders on April 8, 2002. FirstEnergy filed its definitive
proxy materials with the Commission under Section 14 of the Securities Exchange
Act of 1934 on April 1, 2002.
E. Rule 53 Analysis.
The proposed transactions are 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). In the Merger Order, the Commission, among other things,
authorized FirstEnergy to invest in EWGs and FUCOs so that FirstEnergy's
"aggregate investment," as defined in Rule 53(a)(1), in EWGs and FUCOs does not
exceed $5 billion, which amount is above the level which would be permitted by
clause (1) of Rule 53(a) if such amount were to be currently calculated. The
Merger 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 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 June 30, 2003, its aggregate investment in EWGs and FUCOs other than the
Current Investments and GenCo Investments ("Other Investments") will not exceed
$1.5 billion. The Commission has reserved jurisdiction over investments that
exceed such amount.
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As of December 31, 2001, and on the same basis as set forth in the
Merger Order, FirstEnergy's aggregate investment in EWGs and FUCOs was
approximately $2.04 billion, an amount significantly below the $5 billion amount
authorized in the Merger Order. (2)
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. Additionally, the proposed transactions will not have any material impact
on FirstEnergy's capitalization. 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 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. Finally,
Rule 53(c) by its terms is inapplicable since the proposed transaction does not
involve the issue or sale of a security to finance the acquisition of an EWG or
FUCO.
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(2) Since the date of the Merger, FirstEnergy has agreed to sell an 79.9%
interest in Midlands Electricity plc. In addition, in December 2001, First
Energy disposed of its ownership of GPU GasNet Pty Ltd through an initial public
offering in Australia. These assets represent a substantial portion of the
GPU-related FUCO investments.
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ITEM 2. FEES, COMMISSIONS AND EXPENSES.
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A. FirstEnergy estimates that the total amount of all fees and
expenses to be incurred in connection with the Solicitation will not exceed
$25,000. FirstEnergy has engaged the services of Innisfree M&A Incorporated to
assist in the Solicitation and has agreed to pay Innisfree M&A Incorporated a
fee for its services of $12,500, together with reimbursement of its
out-of-pocket expenses.
B. Solicitation will also be made in person or by telephone,
mail or other electronic means, and may be made by officers and employees of
FirstEnergy.
ITEM 3. APPLICABLE STATUTORY PROVISIONS.
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Section 12(e) and Rule 62 are applicable to the Solicitation.
ITEM 4. REGULATORY APPROVALS.
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The Solicitation is not subject to the jurisdiction of any State
commission or any federal commission, other than your Commission.
ITEM 5. PROCEDURE.
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FirstEnergy requests that the Commission issue an order with respect
to the Solicitation at the earliest practicable date, but in no event no later
than April 8, 2002. 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 Office of Public Utility Regulation 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:
A-1 - Definitive proxy materials of FirstEnergy
(incorporated by reference to Schedule 14A of
FirstEnergy, SEC File No. 333-21011).
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A-2 - FirstEnergy Corp. Executive and Director Incentive
Compensation Plan (incorporated by reference to
Exhibit 10-15 of FirstEnergy's 2001 10-K, SEC File
No. 333-21011).
B - Not Applicable.
C - Not Applicable.
D - Not Applicable.
E - Not Applicable.
F-1 - Opinion of Thelen Reid & Priest LLP.
F-2 - Opinion of Michael R. Beiting, Esq.
(b) Financial Statements:
Omitted as not relevant to the Solicitation.
ITEM 7. INFORMATION AS TO ENVIRONMENTAL EFFECTS.
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(a) As such, the issuance of an order by your Commission with
respect to the Solicitation is not 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 Solicitation which are the subject hereof.
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SIGNATURE
PURSUANT TO THE REQUIREMENTS OF THE PUBLIC UTILITY HOLDING COMPANY ACT OF
1935, THE UNDERSIGNED COMPANY HAS DULY CAUSED THIS STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
FirstEnergy corp.
By: /s/ Harvey L. Wagner
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Harvey L. Wagner
Vice President and Controller
Date: April 2, 2002
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