Exhibit 5-B
[LETTERHEAD OF BALLARD SPAHR ANDREWS & INGERSOLL, LLP]
January 11, 1999
Pennsylvania Electric Company
2800 Pottsville Pike
Reading, PA 19605
Re: Registration Statement on Form S-3
(Nos. 333-62295, 333-62295-01 and 333-62295-02)
Ladies and Gentlemen:
Pennsylvania Electric Company (the "Company"), Penelec Capital II, L.P.
("Penelec Capital II") 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 dated August 26, 1998, and Amendment No. 1 thereto, dated today's date
(as so amended, the "Registration Statement"), of which this opinion is to be a
part. The Registration Statement relates to the proposed issuance and sale, in
one or more series, by (i) the Company of up to $725,000,000 aggregate principal
amount of its Senior Notes (the "Senior Notes") under the Senior Note Indenture
(as defined in the Registration Statement), which Senior Notes will be secured
by the Company's Senior Note Mortgage Bonds (as defined in the Registration
Statement) until the Release Date (as defined in the Registration Statement),
(ii) Penelec Trust of up to $125,000,000 aggregate liquidation value of
preferred beneficial interests, in the form of trust securities (the "Trust
Securities"), representing cumulative preferred limited partner interests of
Penelec Capital II (the "Preferred Securities") and (iii) the Company of up to
$130,000,000 of its subordinated debentures (the "Subordinated Debentures") and
the Guarantee (as defined below). Penelec Trust will apply the proceeds from the
sale of the Trust Securities to purchase the Preferred Securities. Penelec
Capital II will, in turn, lend the proceeds from the sale of its Preferred
Securities, plus the capital contribution made by Penelec Preferred Capital II,
Inc., a Delaware special purpose corporation and the sole general partner of
Penelec Capital II, to the Company, which loan will be evidenced by the
Subordinated Debentures of the Company. The Company will guarantee (the
"Guarantee") the payment by Penelec Capital II of distributions on the Preferred
Securities and of amounts due upon liquidation of Penelec Capital II 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 II 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 Pennsylvania counsel to the Company for many years. In such
capacity, we are familiar with the affairs of the Company and Penelec Capital II
and the transactions that are the subject matter of the Registration Statement.
We have examined such records of the Company and Penelec Capital II and such
other instruments, documents, certificates and agreements, including the forms
of Trust Agreement, Limited Partnership Agreement, Senior Note Indenture and
Debenture Indenture, and made such further investigation as we have deemed
necessary as a basis for this opinion.
The opinions expressed below are based on the following assumptions:
(a) The proposed transactions are carried out on the basis set forth
in the Registration Statement and in conformity with the authorizations,
approvals, consents or exemptions under the securities laws of various states
and other jurisdictions of the United States;
(b) Prior to issuance of any series of the Senior Notes or the
Senior Note Mortgage Bonds, all necessary corporate action required on the part
of the Company shall have been duly taken and all necessary documents relating
thereto shall have been executed and delivered;
(c) Prior to issuance of any series of the Trust Securities, the
Preferred Securities, the Guarantee or the Subordinated Debentures, all
necessary corporate, partnership and trust action required on the part of the
Company, Penelec Preferred Capital II, Inc., Penelec Capital II and Penelec
Trust shall have been duly taken and all necessary documents relating thereto,
including, without limitation, the Trust Agreement, the Limited Partnership
Agreement, the Guarantee and the Debenture Indenture, shall have been executed
and delivered;
(d) The Commission shall have issued an order declaring
effective
(i) the Registration Statement under the 1933 Act; and
(ii) 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");
(e) The issuance and sale of the Trust Securities, the Preferred
Securities and Subordinated Debentures do not violate Section 12(f) of the 1935
Act or Rule 70 thereunder; and
(f) The Debenture Indenture, the Senior Note Indenture and the Trust
Agreement will be qualified in accordance with the provisions of the Trust
Indenture Act of 1939, as amended.
Based on the foregoing, insofar as the laws of the Commonwealth of
Pennsylvania are concerned, we are of the opinion that:
(1) when properly executed, authenticated, delivered and paid
for as provided in the Senior Note Indenture, the Senior Notes will
be legally issued and binding obligations of the Company subject 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; and
(2) when properly executed, authenticated, delivered and paid
for as provided in the Debenture Indenture, the Subordinated
Debentures will be legally issued and binding obligations of the
Company and, when properly executed and delivered by the Company,
the Guarantee will be legally issued and 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 consent to the filing of this opinion as an Exhibit to the Registration
Statement and to the references to this firm under the heading "Legal Matters"
in the Prospectus which is a part of the Registration Statement. In addition,
we consent to the reliance by Berlack, Israels & Liberman LLP upon this opinion.
Very truly yours,
BALLARD SPAHR ANDREWS & INGERSOLL, LLP