I'm going to quote this from a guide on GameFAQs simply because it is quicker than typing it all out myself:

Quote Originally Posted by Kao Megura's guide
take the elevator at the west end of town up to the
upper level of the city. Here, head west. In case you're wondering
about the scene with Cloud in which he asks if something is missing,
he's referring to the fact that the Sister Ray (Junon's large cannon)
is now gone.

Head west until you reach the path that runs north-south (it's right
in the middle of the city, in the passage beneath the trolleys). Head
south until you reach the end of the passage, then take the door on the
northwest wall.

Inside the elevator, you'll have to fight two Submarine Crew enemies.
It will then take you down to the Submarine Dock area. Once you leave
the elevator, you'll have to fight two more enemies. From here, just
follow the paths until you reach a Save Point. Now ride the elevator
down to reach the Underwater Reactor. If you head north, you'll reach
a large glass tube that leads to the reactor. I suggest hanging around
here until you encounter a Ghost Ship enemy, which you can morph into
the Guide Book.
Hope that is of some help.