EXHIBIT H-1
[▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LETTERHEAD]
June, 25, 1997
Board of Directors
PP&L Resources, Inc.
Two North Ninth Street
Allentown, Pennsylvania 18101
Members of the Board:
We understand that Penn Fuel Gas, Inc. ("PFG" or the
"Company"), PP&L Resources, Inc. ("Resources") and
Keystone Merger Corp. a wholly owned subsidiary of
Resources ("Keystone"), propose to enter into an
Agreement and Plan of Merger, substantially in the form
of the draft dated June 20, 1997 (the "Merger") of
Keystone with and into PFG. Pursuant to the Merger, the
Company will become a wholly owned subsidiary of
Resources and each outstanding share of common stock, par
value $1.00 per share (the "PFG Common Stock"), of the
Company other than shares held in treasury or held by any
subsidiaries of PFG, will be converted into the right to
receive 7,665 (the "Common Stock Exchange Ratio") shares
of common stock, par value $0.01 per share ("Resources
Common Stock"), of Resources subject to adjustment in
certain circumstances pursuant to a certain formula set
forth in the Merger Agreement. The terms and conditions
of the Merger are more fully set forth in the Merger
Agreement.
You have asked for our opinion as to whether the Common
Stock Exchange Ratio pursuant to the Merger Agreement is
fair from a financial point of view to Resources.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available
financial statements and other information
of Resources;
(ii) reviewed certain internal financial
statements and other financial and
operating data concerning the Company
prepared by the management of the Company,
including information relating to certain
strategic and operational benefits
anticipated from the Merger;
(iii) analyzed certain financial projections
prepared by the management of the Company;
(iv) discussed the past and current operations
and financial condition and the prospects
of the Company with senior executives of
the Company and Resources;
(v) reviewed certain internal financial
statements concerning Resources prepared by
the management of Resources;
(vi) discussed the past and current operations
and financial condition and the prospects
of Resources with senior executives of
Resources, and analyzed the pro forma
impact of the Merger on Resources' earnings
per share, consolidated capitalization and
financial ratios;
(vii) reviewed and discussed with senior
executives of Resources their assessment of
the cost savings and revenue enhancements
to be realized in the Merger;
(viii) reviewed the reported prices and trading
activity of Resources Common Stock;
(ix) compared the financial performance of the
Company with that of certain comparable
publicly-traded companies and their
securities;
(x) reviewed the financial terms, to the extent
publicly available, of certain comparable
acquisition transactions;
(xi) participated in discussions and
negotiations among representatives of the
Company and Resources and their financial
and legal advisors;
(xii) reviewed the Merger Agreement and certain
related documents;
(xiii) reviewed certain environmental analyses
provided by Resources; and
(xiv) performed such other analyses and
considered such other factors as we have
deemed appropriate.
We have assumed and relied upon, without independent
verification, the accuracy and completeness of the
information reviewed by us for the purposes of this
opinion. With respect to the financial projections,
including estimates of the strategic, financial and
operational benefits anticipated from the Merger, we have
assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and
judgments of the future financial performance of the
Company and Resources. We have not made any independent
valuation or appraisal of the assets or liabilities of
the Company or Resources; however, we have reviewed the
environmental analyses provided by Resources and have
relied without independent verification upon such
analyses for purposes of this opinion. We have assumed
that the Merger will be accounted for as a "pooling-of-
interests" business combination in accordance with U.S.
generally accepted accounting principles and will qualify
as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code of 1986. Our opinion
is necessarily based on economic, market and other
conditions as in effect on, and the information made
available to us as of, the date hereof.
In connection with this opinion, we have relied on the
Company's and Resources' assessment of costs savings and
revenue enhancements to be realized by the Merger.
We have acted as financial advisor to the Board of
Directors of Resources in connection with this
transaction and will receive a fee for our services. In
the past, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated and its
affiliates have provided financial advisory and financing
services for Resources and have received fees for the
rendering of these services.
It is understood that this letter is for the information
of the Board of Directors of Resources only and may not
be used for any other purpose without our prior written
consent.
Based upon and subject to the foregoing, we are of the
opinion on the date hereof that the Common Stock Exchange
Ratio pursuant to the Merger Agreement is fair from a
financial point of view to Resources.
Very truly yours,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & CO.
INCORPORATED
By: /s/ ▇▇▇▇▇▇ ▇. More
___________________
▇▇▇▇▇▇ ▇. ▇▇▇▇
Managing Director
