Long-Term Debt



Puget Sound Energy (Dollars in Thousands)
First Mortgage Bonds, Pollution Control Bonds , Senior Notes and Junior Subordinated Notes
				At December 31,								At December 31,
Series			Due	2012		2011		Series			Due	2012			2011
6.830	%		2013	$	3,000	$	3,000	5.000	%	¹	2031	$	138,460		$	138,460
6.900	%		2013	10,000		10,000		5.100	%	¹	2031	23,400			23,400
5.197	%		2015	150,000		150,000		5.483	%		2035	250,000			250,000
7.350	%		2015	10,000		10,000		6.724	%		2036	250,000			250,000
7.360	%		2015	2,000		2,000		6.274	%		2037	300,000			300,000
6.750	%		2016	250,000		250,000		5.757	%		2039	350,000			350,000
5.500	%	²	2017	2,412		—		5.764	%		2040	250,000			250,000
6.740	%		2018	200,000		200,000		5.795	%		2040	325,000			325,000
7.150	%		2025	15,000		15,000		4.434	%		2041	250,000			250,000
7.200	%		2025	2,000		2,000		5.638	%		2041	300,000			300,000
7.020	%		2027	300,000		300,000		4.700	%		2051	45,000			45,000
7.000	%		2029	100,000		100,000		6.974	%	³	2067	250,000			250,000
Total PSE long-term debt												$	3,776,272		$	3,773,860
Unamortized discount on senior notes												(14		)	(15		)
Net PSE long-term debt												$	3,776,258		$	3,773,845

_______________


¹	Pollution Control Bonds


²	Puget Western, Inc., a wholly owned subsidiary of PSE, Promissory Note


³	Junior Subordinated Notes



Puget Energy		At December 31,
(Dollars in Thousands)	Due	2012			2011
PSE long-term debt	Various	$	3,776,258		$	3,773,845
Fair value adjustment of PSE long-term debt		(264,017		)	(276,322		)
Term-loan	2014	—			298,000
Capital expenditures facility	2014	—			545,000
Senior secured credit facility	2017	434,000			—
6.500% senior secured note	2020	450,000			450,000
6.000% senior secured note	2021	500,000			500,000
5.625% senior secured note	2022	450,000			—
Original discount on Puget Energy term-loan and capital expenditures facility	N/A	—			(13,144		)
Unamortized discount on senior secured note	N/A	(41		)	(12		)
Total Puget Energy long-term debt		$	5,346,200		$	5,277,367

Puget Sound Energy Long-Term Debt

PSE has in effect a shelf registration statement under which it may issue, from time to time, senior notes secured by first mortgage bonds. The Company remains subject to the restrictions of PSE’s indentures and credit agreements on the amount of first mortgage bonds that PSE may issue.

On November 22, 2011, PSE issued $45.0 million of senior notes secured by first mortgage bonds. The notes have a term of 40 years and an interest rate of 4.700%. Net proceeds from the offering were used to repay a $25.0 million PSE bond maturing in 2020, with an interest rate of 9.570%

On November 16, 2011, PSE issued $250.0 million of senior notes secured by first mortgage bonds. The notes have a term of 30 years and an interest rate of 4.434%. Net proceeds from the offering were used to repay short-term indebtedness under PSE’s capital expenditure credit facility.

On March 25, 2011, PSE issued $300.0 million of senior notes secured by first mortgage bonds. The notes have a term of 30-years and an interest rate of 5.638%. Net proceeds from the note offering were used by PSE to repay short-term debt outstanding under its capital expenditures credit facility, which debt was incurred to fund utility capital expenditures and replenish cash used to repay the February 2011 maturity of $260.0 million of medium-term notes with a 7.69% interest rate.

Substantially all utility properties owned by PSE are subject to the lien of the Company’s electric and natural gas mortgage indentures. To issue additional first mortgage bonds under these indentures, PSE’s earnings available for interest must exceed certain minimums as defined in the indentures. At December 31, 2012, the earnings available for interest exceeded the required amount.

Puget Sound Energy Pollution Control Bonds

PSE has two series of Pollution Control Bonds outstanding. Amounts outstanding were borrowed from the City of Forsyth, Montana who obtained the funds from the sale of Customized Pollution Control Refunding Bonds issued to finance pollution control facilities at Colstrip Units 3 & 4.

Each series of bonds is collateralized by a pledge of PSE’s first mortgage bonds, the terms of which match those of the Pollution Control Bonds. No payment is due with respect to the related series of first mortgage bonds so long as payment is made on the Pollution Control Bonds.

Puget Energy Long-Term Debt

On June 15, 2012, Puget Energy issued $450.0 million of senior secured notes. Proceeds from the note offering were used to pay down $425.0 million of the revolving $859.0 million senior secured credit facility balance resulting in an outstanding balance of $434.0 million as of December 31, 2012.

On June 3, 2011, Puget Energy issued $500.0 million of senior secured notes. The notes are secured by an interest in substantially all of Puget Energy’s assets, which consists mainly of all the issued and outstanding stock of PSE and the stock of Puget Energy held by Puget Equico LLC (Puget Equico). The notes mature on September 1, 2021 and have an interest rate of 6.0%. Net proceeds from the note offering were used by Puget Energy to repay $484.0 million of its 5-year term-loans and $9.9 million to unwind three outstanding interest rate swaps.

At the time of the merger in February 2009, Puget Energy entered into a $1.225 billion 5-year term-loan and a $1.0 billion five-year capital expenditure credit facility for funding capital expenditures. On February 10, 2012, Puget Energy entered into a $1.0 billion five-year revolving senior secured credit facility. As a revolving facility, amounts borrowed may be repaid without a reduction in the size of the facility. Initial borrowings under this facility were used to repay debt outstanding under the term loan and capital expenditure credit facility and those agreements were terminated.

The Puget Energy revolving senior secured credit facility contains usual and customary affirmative and negative covenants. The agreement also contains two financial covenants based on the following ratios: Group Funds From Operations (FFO) Coverage Ratio and Maximum Leverage Ratio, as defined in the agreement governing the senior secured credit facility.

Long-Term Debt Maturities

The principal amounts of long-term debt maturities for the next five years and thereafter are as follows:



(Dollars in Thousands)	2013		2014		2015		2016		2017		Thereafter		Total
Maturities of:
PSE long-term debt	$	13,000	$	—	$	162,000	$	250,000	$	2,412	$	3,348,860	$	3,776,272
Puget Energy long-term debt	—		—		—		—		434,000		1,400,000		1,834,000
Puget Energy long-term debt	$	13,000	$	—	$	162,000	$	250,000	$	436,412	$	4,748,860	$	5,610,272

Financial Covenants

Puget Energy's credit facility contains financial covenants related to group FFO coverage and maximum leverage. PSE's credit facilities contain financial covenants related to cash flow interest coverage, cash flow to net debt outstanding and debt service coverage, each as specified in the facilities. As of December 31, 2012, the Company is in compliance with its long-term debt financial covenants.