Montana labor news., 1944-05-11
POWER HEARING
REACHES CLIMAX
CONTINUED From Page One)

Continued From Page One
Co.'S books before the Merger?
A. Yes. AS a matter of fact, Montana,
in my opinion, started its career with
a write-up in plant and securities of
approximately $22,S 800, 900, and that
write-up is still there.
@. Are you familiar with the trans
actions whereby Mr.. Ryan acquired the
stock of Great Falls Water Power &
Townsite Co. and sold one-half of that
stock to the Butte Electric & Power Co?
A. am.
Q. Will you explain your understand
ing of those t~ransactions2
A. In 1908, John D. Ryan purchased
the stock of Great Falls Water Power g.
Townsite Co. from James J. Hill and
associate. Mr.. Ryan paid 81, 500, 600 for
the stock.
The Great Falls Water Power & Town
site Co. owned certain power sites and
in addition was engaged in the real
estate business. These were its primary
interests, 1 believe.
In 1909, shortly after Ryan acquired
the stock, he sold one-half thereof to
the Butte Electric & Power Co., receiv-
ing $l5O,OOO in cash, $4,000 0 par value
of bonds, and 81. 900, 600 par value Of
common stock of Butte.
@. Did you speak as you intended to
in giving the first date you gave with
respect to the acquisition by Ryan Of
the stock of the Great Falls Water
Power & Townsite Co. from the Hill
interests?
A. 1t is my opinion it was in 1903.
@. 1903?
A. Yes.
@. When and how was the Great Falls
Power Co. formed?
A. Great Falls Power Co. was formed
in 1910. Great Falls Water Power &
Townsite Co. transferred certain power
sites and a constructed hydro plant
known as Rainbow to a newly-created
subsidiary, the Great Falls Power Co.
1t received $4,000 par value of Sc
curities of the new subsidiary in ex-
change. The new company, the Great
Falls Power Co, entered the plant on its
books at SIS, 700, 900 more than the cost
to the Great Falls Water Power q Town
site Co. This amount in my opinion rep
resents a write-up for the reasons pre-
viously given.
I might note that the Great Falls
Power Co. had contracts to supply power,
considerable power, to the Anaconda
Copper Mining Co. of which Mr.. Ryan
was president, and he was also president
Of the Great Falls Power Co.
@. How have you and the staff
treated the purchase Of the first one
half interest of the stock of Great Falls
Water Power & Townsite Co. by Butte
Electric & Power Co.
A. We have treated this transaction
as an arms length purchase, although
to me the transaction is not completely
free from doubt in that respect.
Accordingly, I have considered the
cost to Butte the cash equivalent which
Butte paid for the one-half interest,
namely, s15O,OOO cash, $1,000, 900 bonds,
and a million dollars Of common stock.
The cash equivalent, as Mr.. O'Neil has
testified, is $3.50, 600 and I believe this
to be the cost to Butte Of the first one-
half interest.
@. When did Butte's successor, Mon
tana Power Co, acquire the remaining
interest in the Great Falls Water Power
& Townsite Co.'S stock?
A. on February IL, 1913.
@. From whom?
A. From Mr.. John D. Ryan.
@. What did Montana Power Co. give
in exchange for that second half-inter-
est in Great Falls Water Power & Town
site Co.'S stock?
A. Montana gave IS, ZOO, 900 par value
of its own preferred stock, and $780,
900 par value of its common stock, but
the common stock was an unusual type
of security. 1 have never in my expert
ence run into a similar type of common
stock. 1t was restricted as to dividends
and its earnings we're contingent upon
the happenings of certain things, all OF
which 1 think are set forth in Exhibits
filed in this proceeding.
@. What did Montana Power Co
change to it's assets account with respect
to the acquisition of the stock Of Great
Falls Water Power g. Townsite Co?
A. Montana, or rather its predecessor
Butte, charged 3d. 100000 as the cost Of
the first one-half interest. That amount
of course, was the par value of the Sc
~curities issued. Montana charged s22,-
SOC, 900 as the cost of the second half
interest, this again being the par value
of the securities issued.
SO thus, the total investment figure
becomes $25, 0 10000.
From this investment figure we mus
deduct SO, 900 900 which was assigned al
an investment to the Great Falls Town.
site Company, another subsidiary of thu
Great Falls Water Power g. Townsitt
Co., leaving $22, 900, 900 which we ma!
say was applicable to the electric enc
Of the investment.
@. Did the amount of 500, 900, 0Ol
entered by Montana Power Co. in it
assets account with respect to the &C
QUESTION of the Great Falls Water Powe.
& Townsite Co.'S stock, represent boni
fide cost to the Montana Power Co. Il
that amount?
A. No, it did not.