More Equities for the Public

First electric utility to float new-money common stock since 1932 was Indianapolis Power & Light, whose $17,000,000 issue was oversubscribed in less than two hours (TIME, April 15). Last week came the second. The issuer: West Penn Power Co., biggest operating subsidiary of American Water Works & Electric. The amount: $4,000,000 (160,000 shares), coupled with $3,500,000 in bonds. The purpose: a new 60,000-kilowatt steam generator in Windsor, Ohio. As with the Indianapolis issue, the public gobbled it up.

The West Penn flotation reflected 1940's major change in utility financing. Two months ago, Water Works' 75-year-old chairman, aristocratic, silver-mustached H. Hobart Porter, suggested selling $5,000,000 of new West Penn bonds, $2,500,000 of preferred stock. SEC told him that since West Penn's common stock amounted to only 22.9% of its $121,383,501 of capital and surplus he ought to freshen the kitty. Instead of fighting or calling it all off, Water Works and SEC traded, compromised. The $4,000,00 of new stock raises the common-stock share of West Penn's capital to 24.6%, gives the public a 5.5% minority interest in Water Works' biggest baby.

The offering price of the West Penn common was no less than $27 a share, nearly 16 times 1939 earnings. Underwriters handling this high-priced risk money got a generous $2-a-share spread.

Among them: Bonbright & Co. ($800,000 of bonds, 36,500 shares of stock), Dillon, Read (32,000 shares of stock), both until this deal wary of utility common stock financing possibilities.

Last week utility investors got a whiff of further equity offerings to come. Answering SEC's demand for an integration plan, far-flung Standard Gas & Electric announced "partial compliance." It proposed to sell control of its properties in California and the Northwest to holders of (and in exchange for) its own notes and debentures, thus freeing three subsidiaries, retiring part of its debt, reducing its own size. Last month SECommissioner Mathews accepted a job with the Standard Gas system because Standard's management had convinced him that it was trying to comply with the spirit of the Holding Company Act. Last week's plan indicated that Standard was keeping its bargain.

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