Capital stock, no par value, 69,250 shares outstanding, stated at....... 692, 500 285, 233 IN THE MATTER OF VIRGINIA ELECTRIC AND POWER COMPANY File No. 70-1502. Promulgated May 15, 1947 (Public Utility Holding Company Act of 1935) ACQUISITION BY SUBSIDIARY OF REGISTERED HOLDING COMPANY Securities Proposed acquisition, by public-utility subsidiary of registered holding company, of all the common stock and debt of a public-utility company, which is a subsidiary of another registered holding company, serving neighboring areas in the same state, approved, under Sections 9 (a) and 10, subject to certain conditions. APPEARANCES: T. Justin Moore, of Hunton, Williams, Anderson, Gay & Moore, Richmond, Virginia, for Virginia Electric and Power Company. Bernard S. Kanton, for the Public Utilities Division of the Commission. FINDINGS AND OPINION OF THE COMMISSION Virginia Electric and Power Company (VEPCO), a public-utility subsidiary of Engineers Public Service Company (Engineers), a registered holding company, has filed an application pursuant to Sections 9 and 10 of the Public Utility Holding Company Act of 1935 requesting qualification as a bidder for 60,000 shares of common stock, $10 par value, and $1,300,000 principal amount of First Mortgage Bonds, Series A, due January 1, 1977, being all the securities of East Coast Electric Company (East Coast),1 a public-utility subsidiary of East Coast Public Service Company, a registered holding company. VEPCO states that in view of the fact that the securities of East Coast are to be offered for sale at competitive bidding, pursuant to the provisions of Rule U-50 promulgated under the Act, it would not be practicable for it to divulge the price it proposes to pay for such securities at this time. However, in the event this proposal is approved and VEPCO is the successful bidder, the amounts proposed 1 See East Coast Public Service Company, 25 S. E. C. 459 (1947), where the Commission approved a plan filed pursuant to Section 11 (e) providing, among other things, for the recapitalization of East Coast and the issue and sale by it of $1,300,000 of First Mortgage Bonds and 60,000 shares of new common stock. 25 S. E. C.-35-7413 to be paid for such securities will be submitted to the Commission for approval. If VEPCO is the successful bidder for the securities of East Coast, it intends, subsequent to the acquisition of such securities, to acquire all of the properties of East Coast, eliminate East Coast's outstanding securities and thereafter dissolve East Coast as a corporate entity. A public hearing was held after appropriate notice. The Commission having considered the record makes the following findings: OPERATIONS OF VEPCO AND EAST COAST VEPCO is a Virginia corporation engaged in the generation, transmission, sale and distribution of electric energy in the cities of Richmond, Norfolk, Portsmouth, Alexandria, and approximately 1,000 other communities and surrounding areas throughout the major part of Virginia, the northeastern portion of North Carolina and a small area in the eastern part of West Virginia. In addition, VEPCO manufactures gas and distributes it in Norfolk and three other communities. East Coast is a Virginia corporation engaged in the purchase, generation, transmission, distribution and sale of electric energy exclusively within the State of Virginia. The territory served by this company is divided into three geographical sections, namely, the Northern Neck Division, the Gloucester Peninsula Division and the Southern Division. The electric systems of these three divisions are not interconnected except through transmission lines owned by VEPCO. At the present time, East Coast purchases substantially all of its electric energy requirements from VEPCO, and, in turn, sells some of this power to three cooperatives which are located in its Northern Neck and Southern Divisions. PLANT AND PROPERTY ACCOUNT OF VEPCO AND EAST COAST The total utility plant and property account of VEPCO as at December 31, 1946, was carried at $144,378,937 and, together with applicable reserves, was classified in the following manner: "The three divisions of property of East Coast are physically connected with VEPCO's properties at Oak Ridge, West Point, and Wakefield, Virginia. 25 S. E. C. The plant and property at original cost of East Coast as at December 31, 1946 was stated at $2,779,609. The depreciation reserve amounted to $435,238. Upon completion of the merger, the plant and property at original cost and the reserve for depreciation before and after the transactions are shown below: • Electric, gas and common utility plant are stated on a basis of original cost in accordance with the orders of the Federal Power Commission and the State Corporation Commission of Virginia. Provision is being made for the amortization of plant acquisition adjustments by annual charges to income over a period ending in 1959. Does not include $1,039 of miscellaneous intangible plant. 25 S. E. C. BALANCE SHEET A condensed corporate balance sheet of VEPCO, actual and pro forma, as at December 31, 1946, giving effect to the proposed transactions, is shown below: • For the purpose of preparing its pro forma statements VEPCO has assumed a purchase price for the common stock of $1,298,048, representing the net book worth of East Coast after charging off by East Coast of organization expense and expenses of issuance of new bonds. VEPCO has a standby agreement with The Chase National Bank of the City of New York to borrow $5,000,000. At the present time, VEPCO has sufficient funds on hand to purchase the securities of East Coast; however, in view of a large anticipated construction program, additional funds will be required at a later date. 25 S. E. C. |