EXHIBIT 5-A
[Berlack, Israels & Liberman LLP Letterhead]
January 11, 1999
Pennsylvania Electric Company
2800 Pottsville Pike
Reading, Pennsylvania 19605
Penelec Capital II, L.P.
Penelec Capital Trust
c/o GPU Service, Inc.
310 Madison Avenue
Morristown, New Jersey 07962
Re: Registration Statement on Form S-3
Ladies and Gentlemen:
Pennsylvania Electric Company (the "Company"), Penelec Capital II, L.P.
("Penelec Capital") and Penelec Capital Trust ("Penelec Trust") have filed with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended (the "1933 Act"), a Registration Statement on Form S-3
(the "Registration Statement"), dated August 26, 1998, and Amendment No. 1
thereto, dated today's date, of which this opinion is to be a part. The
Registration Statement relates to the proposed issuance and sale by the Company
of up to $725,000,000 aggregate principal amount of senior notes ("Senior
Notes"). The Senior Notes are to be issued by the Company pursuant to an
indenture between the Company and United States Trust Company of New York, as
Trustee (the "Senior Note Indenture"). The Senior Notes will be secured by first
mortgage bonds ("Senior Note First Mortgage Bonds") until a release date.
The Registration Statement also relates to the proposed issuance and sale
by Penelec Trust of up to $125,000,000 aggregate liquidation value of preferred
beneficial interests, in the form of trust securities ("Trust Securities"). Each
Trust Security represents a cumulative preferred limited partner interest (the
"Preferred Securities") of Penelec Capital, the proceeds of which, together with
the capital contribution of Penelec Capital's general partner, Penelec Preferred
Capital II, Inc., a wholly owned subsidiary of the Company, will be used to
purchase subordinated debentures issued by the Company (the "Subordinated
Debentures"). The Company will guarantee (the "Guarantee") the payment by
Penelec Capital of distributions on the Preferred Securities and of amounts due
upon liquidation of Penelec Capital or redemption of the Preferred Securities,
all to the extent set forth in the Guarantee. The Trust Securities are to be
issued by Penelec Trust pursuant to an Amended and Restated Trust Agreement (the
"Trust Agreement"), the Preferred Securities are to be issued by Penelec Capital
pursuant to an Amended and Restated Limited Partnership Agreement and one or
more Actions thereunder (collectively, the "Limited Partnership Agreement") and
the Subordinated Debentures are to be issued by the Company pursuant to an
indenture between the Company and United States Trust Company of New York, as
Trustee (the "Debenture Indenture").
We have been counsel to the Company for many years. In such
capacity, we are familiar with the affairs of the Company, Penelec Capital and
Penelec Trust and the transactions that are the subject matter of the
Registration Statement. We have examined such corporate records of the Company,
Penelec Capital and Penelec Trust and such other instruments, documents,
certificates and agreements, including the forms of Senior Note Indenture,
Limited Partnership Agreement, Trust Agreement and Debenture Indenture, and made
such further investigation as we have deemed necessary as a basis for this
opinion. With respect to all matters of Pennsylvania law, we have relied on the
opinion of Ballard Spahr Andrews & Ingersoll, LLP and with respect to all
matters of Delaware law, we have relied on the opinion of Richards, Layton &
Finger, P.A., which are being filed as Exhibits 5-B and 5-C, respectively, to
the Registration Statement.
For the purposes of this opinion, we have assumed that (1) the
proposed transactions are carried out on the basis set forth in the Registration
Statement and in conformity with the requisite authorizations, approvals,
consents or exemptions under the securities laws of the various States and other
jurisdictions of the United States, (2) all necessary corporate, partnership and
trust action required on the part of the Company, Penelec Preferred Capital II,
Inc., Penelec Capital and Penelec Trust shall have been duly taken, (3) the
Commission shall have issued an order declaring effective (a) the Registration
Statement under the 1933 Act and (b) the Company's related Application, as
amended, and as may be further amended, on Form U-1 under the Public Utility
Holding Company Act of 1935, as amended (the "1935 Act"), (4) the Senior Note
Indenture, the Debenture Indenture and the Trust Agreement shall have been
qualified under the Trust Indenture Act of 1939, as amended, and (5) the
issuance and sale of the Senior Notes, the Trust Securities, the Preferred
Securities and the Subordinated Debentures do not violate Section 12(f) of the
1935 Act or Rule 70 thereunder.
Based upon the foregoing, we are of the opinion that, subject to the
foregoing assumptions and qualifications, (1) when properly authenticated and
delivered by the Trustee under the Senior Note Indenture, the Senior Notes will
be legally issued and will be binding obligations of the Company, (2) the Trust
Securities to be issued and sold in accordance with the
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Registration Statement, when properly issued, delivered and paid for, will be
legally issued, fully paid and non-assessable preferred beneficial interests,
(3) the Preferred Securities to be issued and sold in accordance with the
Registration Statement, when properly issued, delivered and paid for, will be
legally issued, fully paid and non-assessable preferred limited partner
interests, (4) when properly authenticated and delivered by the Trustee under
the Debenture Indenture, the Subordinated Debentures will be legally issued and
will be binding obligations of the Company and (5) when properly executed and
delivered, the Guarantee will be legally issued and will be a binding obligation
of the Company, subject, in each case, to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other laws affecting
creditors' rights generally (including, without limitation, the Atomic Energy
Act and applicable regulations of the Nuclear Regulatory Commission thereunder)
and general equitable principles.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and as a part thereof. We also consent to the reference
to our firm under "Legal Matters" in the Prospectus which is a part of the
Registration Statement.
Very truly yours,
BERLACK, ISRAELS & LIBERMAN LLP
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