Evening star., 1939-04-23
Note Acceptable
For Gas Merger,
Hearing Told
Condition Made for
Amortization in 10 Years,
Banker Asserts

Amortization in 10 Years,
Banker Asserts
BY DON S. WARREN.
Subject to certain conditions, the
Chase National Bank would accept
an unsecured note of the Washing
ton Gas Light Co. in payment for
the Alexandria and Hyattsville gas
concerns, the Public Utilities Com
mission was advised yesterday as 1t
concluded hearings on the proposed
merger Of the three operating COM
panies.
The conditions were that the note
be amortized in 10 years and that
during the first half of that period
only the earnings of the two sub
urban concerns be used in payment
toward the note, which would have
IN interest rate of per cent under
present conditions, but which would
be subject to revised judgment.
The statement came from j. D.
Whittemore, a vice president of the
Chase Bank, which is one of the
dominant banking interests repre-
sented by the Washington & Sub
urban Co.'S, the Massachusetts, COM
mon-law trust which owns "a per
cent of the common stock of the
Washington company.
Tantamount to Cash Payment.
Commission Vice Chairman Rich
mond B. Keech brought out in ques-
tioning OF Mr.. Whittemore that the
latter'S substitute plan for payment
OF the trust would be tantamount to
cash payment. Mr.. Whittemore
said his bank would be willing to
make loan on the unsecured note
and have the cash paid to the trust
and distributed to the holders of its
beneficial shares, subject to the 10
year amortization limit.
Mr.. Keech indicated by his oues-
tions that he felt such plan would
increase the demand on the WASH
1ngton company from the two SUBJ
salaries it proposed to buy from the
trust IN the sums needed to be ad-
Vanced for necessary additions and
petterments to the suburban plants,
since all the clear earnings of the
suburban plants in the next five
years would 60 toward retirement of
the note.
The commission has before it a
wloe variety of estimates as to the
value" OF the two suburban con-
Germs. Company witnesses said thev
1elt the values ranged between
$l,3OO,OO0 and 81 l,550, 900. B. M. Bach
man, commission chief accountant.
oy use OF a capitalization theory.
found that some 100000 should be
cut from these maximum or mini
mum company figures and agreed
that the Washington company could
pay as high as $950,OO0 without
causing undue strain" on the
Washington company.
Value of S1,261 ,5S6.
Fred A. Sager, the commissions
chief engineer, who took the stand
late yesterday, surprised the COM
mission with statement that he
mad found that the value of the tan
glble property of the two suburban
concerns, deprecated, plus the addi-
ton of current assets over current
naolnties, amounted to $1,261 ,586, or
slightly more than the Washington
company proposed to pay its owner
ship trust for the securities of the
nearby plants.
On MIR. Sager's testimony there
was no cross-questioning by counsel
Tor the Washington company, or its
parent trust. or by commission conn
sci. Commission Vice Chairman
keech, however, brought from the
witness a statement that he felt
there would be, and should be, con-
slderation of rate reductions for
consumers OF the suburban concerns,
and that the effect might be a re-
ductlon OF the net earnings by the
subsidiaries.
Col. David McCoach, jr., the Dis
trlct Engineer Commissioner who is
member of the utilities body, re-
called to the stand C. F. Elmes. New
YORK consulting engineer, who had
supported the Washington COM
pany's case by the use of various ap-
praisal formulae. Col. McCoach
wanted to know why these formulae
could not be applied to the situation
.of the Washington company both
before and after its purchase Of the
securities Of the suburban plants.
Mr.. Elmes replied he did not think
ne could apply the same formulae to
such a large operating plant as the
washington Gas Light Co.. as he
has used for the much smaller sub-
urban concerns.
The debate wound up with Col.
McCoach asking the witness to sup-
ply figures on the application of the
'1ormulae to the Washington COM
pany both before and after the pro-
spective merger. These theories
dealt with a multiplication of the
gross receipts of the plants by three
and the net receipts by 10 as q
measure of value.
Mr.. Elmes testified he had DIR
chased utility plants on this basis in
years prior to 1929, but had not used
them since that year preceding the
depression. Under questioning. he
agreed that the ratios used would
be less when money was hard to
get He was asked by Col. Nc
Coach to supply figures as to the
washington company using both 3
and 3ls times the gross receipts and
10 and IL times the net receipts of
the Washington company before and
after the proposed merger.