-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, oeZ0VhipYh1fcIMQezaIybJl00BEDpjQgUyKmBltYI5HveLe+DSs+rNz0IjLap1F anSHuw9Kg6EMq4sJTPhy2g== 0000950130-94-000182.txt : 19940209 0000950130-94-000182.hdr.sgml : 19940209 ACCESSION NUMBER: 0000950130-94-000182 CONFORMED SUBMISSION TYPE: 424B2 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19940208 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CINCINNATI GAS & ELECTRIC CO CENTRAL INDEX KEY: 0000020290 STANDARD INDUSTRIAL CLASSIFICATION: 4931 IRS NUMBER: 310240030 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B2 SEC ACT: 33 SEC FILE NUMBER: 033-50443 FILM NUMBER: 94504992 BUSINESS ADDRESS: STREET 1: 139 E FOURTH ST, ROOM 362-ANNEX CITY: CINCINNATI STATE: OH ZIP: 45202 BUSINESS PHONE: 5132873852 424B2 1 PROSPECTUS SUPPLEMENT Rule No. 424(b)(2) Registration No. 33-50443 PROSPECTUS SUPPLEMENT (To Prospectus dated February 7, 1994) $220,000,000 The Cincinnati Gas & Electric Company $110,000,000 FIRST MORTGAGE BONDS, 5.80% SERIES DUE 1999 $110,000,000 FIRST MORTGAGE BONDS, 6.45% SERIES DUE 2004 --------------- Interest payable February 15 and August 15 --------------- THE $110,000,000 FIRST MORTGAGE BONDS, SERIES DUE 1999 (1999 BONDS) AND THE $110,000,000 FIRST MORTGAGE BONDS, SERIES DUE 2004 (2004 BONDS) ARE NOT REDEEMABLE PRIOR TO MATURITY. --------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. --------------- 1999 BONDS--PRICE 99.790% AND ACCRUED INTEREST, IF ANY 2004 BONDS--PRICE 99.818% AND ACCRUED INTEREST, IF ANY ---------------
UNDERWRITING PRICE TO DISCOUNTS AND PROCEEDS TO PUBLIC(1) COMMISSIONS(2) COMPANY(1)(3) --------- -------------- ------------- Per 1999 Bond......................... 99.790% .625% 99.165% Total............................... $109,769,000 $687,500 $109,081,500 Per 2004 Bond......................... 99.818% .650% 99.168% Total............................... $109,799,800 $715,000 $109,084,800
- ------- (1) Plus accrued interest, if any, from February 15, 1994. (2) The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933, as amended. (3) Before deduction of expenses payable by the Company, estimated at $250,000. --------------- The Offered Bonds are offered, subject to prior sale, when, as and if issued by the Company and accepted by the Underwriters, and subject to approval of certain legal matters by Davis Polk & Wardwell, counsel for the Underwriters. It is expected that delivery of the Offered Bonds will be made on or about February 15, 1994 at the office of Morgan Stanley & Co. Incorporated, New York, N.Y., against payment therefor in New York funds. --------------- MORGAN STANLEY & CO. MERRILL LYNCH & CO. Incorporated February 7, 1994 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE OFFERED BONDS AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER-MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. SUMMARY INFORMATION The following material is qualified in its entirety by the information and financial statements appearing elsewhere in this Prospectus and in the documents and information incorporated herein by reference. THE COMPANY Company.................... The Cincinnati Gas & Electric Company. Business................... Electric and gas utility serving approximately 700,000 electric customers and approximately 420,000 gas customers. Service Area............... 3,000 square miles in the southwestern portion of Ohio and adjacent areas in Kentucky and Indiana having an estimated population of 1.8 million. Electric Generation Fuel... 100% Coal. SELECTED INCOME INFORMATION
12 MONTHS ENDED DECEMBER 31, ----------------------------------------------------------- 1993 1992 1991 1990 1989 ----------- ---------- ---------- ---------- ---------- (UNAUDITED) (THOUSANDS, EXCEPT PER SHARE AMOUNTS) Operating Revenues...... $1,751,741 $1,553,426 $1,518,098 $1,438,468 $1,437,511 Operating Income........ $ 319,500 $ 259,701 $ 213,172 $ 226,629 $ 240,621 Allowance for Borrowed and Other Funds Used During Construction.... $ 6,740 $ 17,583 $ 68,130 $ 135,682 $ 112,598 Post-In-Service Carrying Costs and Phase-In De- ferred Return.......... $ 47,434 $ 63,264 $ 50,079 $ -- $ -- Net Income (loss)....... $ (8,724)(a) $ 202,261 $ 206,996 $ 234,736 $ 239,693 Preferred Dividends..... 25,160 27,610 24,529 22,165 20,259 ---------- ---------- ---------- ---------- ---------- Earnings (loss) on Com- $ (33,884)(a) $ 174,651 $ 182,467 $ 212,571 $ 219,434 mon Shares............. ========== ========== ========== ========== ========== Earnings (loss) per Com- mon Share.............. $ (.39)(a) $ 2.04 $ 2.21 $ 2.74 $ 2.89
- -------- (a) Reference is made to "RECENT DEVELOPMENTS--Rates" herein for information regarding the write-off of a portion of the Wm. H. Zimmer Generating Station amounting to approximately $223 million, net of taxes. CAPITALIZATION
OUTSTANDING DECEMBER 31, 1993 ----------------------------------- % OF AMOUNT CAPITALIZATION ----------------- ---------------- (UNAUDITED) (THOUSANDS) Long-term debt....................... $1,829,061 49.7% Cumulative preferred stock-- Subject to mandatory redemption.... 210,000 5.7 Not subject to mandatory redemp- tion.............................. 120,000 3.3 Common shareholders' equity.......... 1,519,257 41.3 ----------------- ------------ Total capitalization............. $3,678,318 100.0% ================= ============
S-2 USE OF PROCEEDS The net proceeds after underwriting commissions and estimated expenses from the sale of the Offered Bonds are expected to be $217,916,300. The Company will use the proceeds to refund the entire $60 million principal amount of First Mortgage Bonds, 8 5/8% Series due 2000 at a price of 101.96%, $75 million principal amount of First Mortgage Bonds, 8.55% Series due 2006 at a price of 102.74%, and $75 million principal amount of First Mortgage Bonds, 9 1/8% Series due 2008 at 105.03%, each plus accrued interest to the redemption date. RECENT DEVELOPMENTS MERGER AGREEMENT In December 1992, CG&E, PSI Resources, Inc. (PSI) and PSI Energy, Inc., PSI's principal subsidiary, an Indiana electric utility (PSI Energy), entered into an agreement which, as subsequently amended (the Merger Agreement) provides for the merger of PSI into a newly formed corporation named CINergy Corp. (CINergy) and the merger of a newly formed subsidiary of CINergy into CG&E. As a result of the merger, holders of CG&E Common Stock and PSI Common Stock will become the holders of CINergy Common Stock. CINergy will become a holding company required to be registered under the Public Utility Holding Company Act of 1935 (PUHCA) with two operating subsidiaries, CG&E and PSI Energy. Under the Merger Agreement, each share of CG&E Common Stock will be converted into the right to receive one share of CINergy Common Stock. Each share of PSI Common Stock will be converted into the right to receive that number of shares of CINergy Common Stock obtained by dividing $30.69 by the average closing price of CG&E Common Stock for the 15 consecutive trading days preceding the fifth trading day prior to the merger; provided that, if the actual quotient obtained thereby is less than .909, the quotient shall be .909, and if the actual quotient obtained thereby is more than 1.023, the quotient shall be 1.023. The merger will be accounted for as a "pooling of interests", and it is anticipated that the transaction will be completed in the third quarter of 1994. The merger is subject to approval by the Securities and Exchange Commission (SEC) and the Federal Energy Regulatory Commission (FERC). Shareholders of both companies approved the merger in November 1993. It is the belief of CG&E and PSI that no state utility commissions have jurisdiction over approval of the proposed merger. However, an application will be filed with the Kentucky Public Service Commission (KPSC) to comply with the KPSC's position that its authorization is required for the change in control of CG&E's Kentucky subsidiary, The Union Light, Heat and Power Company, to CINergy. FERC issued conditional approval of the CINergy merger in August 1993, but several intervenors filed for rehearing of that order. On January 12, 1994, FERC withdrew its conditional approval of the merger and ordered the setting of FERC-sponsored settlement procedures to be held on the merger. If the settlement conference ordered by FERC is not successful by mid-March, FERC said it would issue a further order setting appropriate issues for hearing. PUHCA imposes restrictions on the operations of registered holding company systems. Among these are requirements that securities issuances, sales and acquisitions of utility assets or of securities of utility companies and acquisitions of interests in any other business be approved by the SEC. PUHCA also limits the ability of registered holding companies to engage in non- utility ventures and regulates holding company system service companies and the rendering of services by holding company affiliates to the system's utilities. The SEC has interpreted the PUHCA to preclude registered holding companies, with some exceptions, from owning both electric and gas utility systems. The SEC may require that CG&E divest its gas properties within a reasonable time after the merger in order to approve the merger as it has done in many cases involving the acquisition by a holding company of a combination gas and electric company. In some cases, the SEC has allowed the retention of the gas properties or deferred the question of divestiture for a substantial period of time. In those cases in which divestiture has taken place, the SEC usually has allowed companies sufficient time to accomplish the divestiture in a manner that protects shareholder value. CG&E believes good arguments exist to allow retention of the gas assets, and CG&E will request that it be allowed to do so. S-3 Originally, the merger agreement provided that CG&E and PSI would be merged into CINergy as an Ohio corporation. Under this structure CG&E and PSI would have become operating divisions of CINergy, ceasing to exist as separate corporations, and CINergy would not have been subject to the restrictions imposed by PUHCA. However, The Indiana Utility Regulatory Commission (IURC) dismissed PSI's application for approval of the transfer of its license or property to a non-Indiana corporation. The IURC's decision has been appealed and the original merger structure could be reinstated if the appeal is successful. RATES On November 3, 1993, the Supreme Court of Ohio issued a decision on CG&E's appeal of an electric rate order issued by The Public Utilities Commission of Ohio (the "PUCO") in May 1992. In the rate order, the PUCO authorized an increase in electric revenues of $116.4 million to be phased in over a three- year period. The PUCO order also disallowed from rate base approximately $230 million representing costs related to Wm. H. Zimmer Generating Station ("Zimmer Station") nuclear fuel, nuclear wind-down activities during the conversion to a coal-fired facility and a portion of the allowance for funds used during construction ("AFC") accrued by CG&E on Zimmer Station. The Supreme Court of Ohio ruled that the PUCO does not have the authority to order a phase-in of amounts granted in a rate proceeding and remanded the case to the PUCO to set rates that provide the gross annual revenues determined in accordance with Ohio statutes. The Court also said the PUCO must provide a mechanism by which CG&E may recover costs already deferred under the phase-in plan through the date of the order on remand. At December 31, 1993, CG&E had deferred $70 million of costs, net of taxes, related to the phase-in plan. The Court also ruled that the PUCO properly determined CG&E's cash working capital allowance and properly excluded costs related to nuclear fuel, nuclear wind- down activities, and AFC from rate base. As a result of the Supreme Court decision, CG&E wrote off Zimmer Station costs of approximately $223 million, net of tax, in November 1993. In August 1993, the PUCO approved a Stipulation and Recommendation providing for annual increases of approximately $41 million (5%) in electric revenues and $19 million (6%) in gas revenues, effective immediately. CG&E had filed applications in September 1992, requesting annual increases in electric and gas revenues of $86 million and $35 million, respectively. As part of the Stipulation, CG&E agreed, among other things, not to increase electric or gas base rates prior to June 1, 1995. This would not include rate filings made under certain circumstances, such as to address financial emergencies or to reflect any savings associated with the merger with PSI. S-4 CERTAIN TERMS OF THE OFFERED BONDS The following description of the particular terms of the Offered Bonds supplements the description of the general terms and provisions of the Offered Bonds set forth in the accompanying Prospectus. The 1999 Bonds and the 2004 Bonds will be issued as a two separate series of First Mortgage Bonds under the First Mortgage dated as of August 1, 1936 between CG&E and The Bank of New York, Trustee, as supplemented to date and as proposed to be supplemented by a Thirty-sixth Supplemental Indenture dated as of February 15, 1994. Each series of Offered Bonds will be designated as specified on the cover of this Prospectus Supplement and will be limited to a total of $220,000,000 aggregate principal amount. The 1999 Bonds and the 2004 Bonds will mature on February 15, 1999 and 2004, respectively, and will bear interest at the rates per annum specified in their titles, payable semi-annually February 15 and August 15 to registered holders of record on the applicable record date. REDEMPTION The 1999 Bonds and the 2004 Bonds will not be redeemable prior to maturity. OTHER The First Mortgage does not contain any covenants or other provisions that are specifically intended to afford holders of the Offered Bonds protection in the event of a highly leveraged transaction. UNDERWRITERS Under the terms of and subject to the conditions contained in an Underwriting Agreement dated February 7, 1994, Morgan Stanley & Co. Incorporated and Merrill Lynch, Pierce, Fenner & Smith Incorporated (the Underwriters) have agreed to purchase, and CG&E has agreed to sell to them, severally, the respective principal amounts of the Offered Bonds set forth below:
NAME 1999 BONDS 2004 BONDS ---- ------------ ------------ Morgan Stanley & Co. Incorporated.................... $ 55,000,000 $ 55,000,000 Merrill Lynch, Pierce, Fenner & Smith Incorporated...................................... $ 55,000,000 $ 55,000,000 ------------ ------------ Total............................................... $110,000,000 $110,000,000 ============ ============
The Underwriting Agreement provides that the obligations of the Underwriters to pay for and accept delivery of the Offered Bonds are subject to the approval of certain legal matters by their counsel and to certain other conditions. The Underwriters are committed to take and pay for all of the Offered Bonds if any are taken. The Underwriters initially propose to offer part of the Offered Bonds directly to the public at the public offering price set forth on the cover page hereof and part to dealers at a price which represents a concession of .375% and .400% of the principal amount under the public offering price of the 1999 Bonds and 2004 Bonds, respectively, and any Underwriter may allow, and such dealers may reallow, a concession not in excess of .250% of the principal amount to certain other dealers. All sales to dealers will be made pursuant to dealer agreements. After the initial offering of the Offered Bonds, the offering price and other selling terms may, from time to time, be varied by the Underwriters. CG&E has agreed to indemnify the Underwriters against certain civil liabilities, including liabilities under the Securities Act of 1933, as amended. S-5 PROSPECTUS The Cincinnati Gas & Electric Company FIRST MORTGAGE BONDS --------------- THE CINCINNATI GAS & ELECTRIC COMPANY INTENDS FROM TIME TO TIME TO ISSUE UP TO $300,000,000 AGGREGATE PRINCIPAL AMOUNT OF ITS FIRST MORTGAGE BONDS (NEW BONDS) IN ONE OR MORE SERIES ON TERMS TO BE DETERMINED AT THE TIME OR TIMES OF SALE. FOR EACH ISSUE OF THE NEW BONDS FOR WHICH THIS PROSPECTUS IS BEING DELIVERED (OFFERED BONDS), THERE IS AN ACCOMPANYING PROSPECTUS SUPPLEMENT (PROSPECTUS SUPPLEMENT) THAT SETS FORTH THE AGGREGATE PRINCIPAL AMOUNT, MATURITY, RATE AND TIME OF PAYMENT OF INTEREST, PURCHASE PRICE, ANY TERMS FOR REDEMPTION AND ANY OTHER SPECIAL TERMS OF THE OFFERED BONDS. --------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. --------------- CG&E may sell the New Bonds through underwriters, dealers or agents, or directly to one or a limited number of purchasers. The Prospectus Supplement will set forth the names of underwriters, dealers or agents, if any, any applicable commissions or discounts and the net proceeds to CG&E from the sale of the Offered Bonds. February 7, 1994 THE CINCINNATI GAS & ELECTRIC COMPANY (CG&E) IS SUBJECT TO THE INFORMATIONAL REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934 (EXCHANGE ACT) AND ACCORDINGLY FILES REPORTS AND OTHER INFORMATION WITH THE SECURITIES AND EXCHANGE COMMISSION. INFORMATION CONCERNING DIRECTORS AND OFFICERS, THEIR REMUNERATION, AND ANY MATERIAL INTEREST OF SUCH PERSONS IN TRANSACTIONS WITH CG&E, AS OF PARTICULAR DATES, IS DISCLOSED IN PROXY STATEMENTS DISTRIBUTED TO CG&E'S SHAREHOLDERS AND FILED WITH THE COMMISSION. SUCH REPORTS, PROXY STATEMENTS, AND OTHER INFORMATION CAN BE INSPECTED AND COPIED AT THE PUBLIC REFERENCE FACILITIES MAINTAINED BY THE COMMISSION AT ROOM 1024, 450 FIFTH STREET, N.W., WASHINGTON, D.C.; SUITE 1400, CITICORP CENTER, 500 WEST MADISON STREET, CHICAGO, ILLINOIS; AND SEVEN WORLD TRADE CENTER, 13TH FLOOR, NEW YORK, N.Y. COPIES OF SUCH MATERIAL CAN ALSO BE OBTAINED AT PRESCRIBED RATES FROM THE PUBLIC REFERENCE SECTION OF THE COMMISSION AT ITS PRINCIPAL OFFICE AT 450 FIFTH STREET, N.W., WASHINGTON, D.C. 20549. SUCH MATERIAL CAN ALSO BE INSPECTED AT THE OFFICES OF THE NEW YORK STOCK EXCHANGE, THE CHICAGO STOCK EXCHANGE, THE PACIFIC STOCK EXCHANGE, AND THE CINCINNATI STOCK EXCHANGE. CG&E'S PRINCIPAL EXECUTIVE AND BUSINESS OFFICE IS LOCATED AT 139 EAST FOURTH STREET, CINCINNATI, OHIO 45202 (TELEPHONE 513-381-2000). ---------------- NO DEALER, SALESMAN, OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS IN CONNECTION WITH THE OFFER CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY CG&E OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY STATE TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN SUCH STATE. THE DELIVERY OF THIS PROSPECTUS AT ANY TIME DOES NOT IMPLY THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF. ---------------- INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE There are hereby incorporated in this Prospectus by reference the following documents heretofore filed with the Securities and Exchange Commission: 1. CG&E's Annual Report on Form 10-K for the year ended December 31, 1992 filed pursuant to the Exchange Act, as amended and supplemented by a Form 10-K/A filed on November 29, 1993. 2. CG&E's Quarterly Reports on Form 10-Q for the quarters ended March 31, 1993, June 30, 1993 and September 30, 1993 filed pursuant to the Exchange Act. 3. CG&E's Current Reports on Form 8-K dated March 3, 1993 (the financial information for CG&E included therein has been superseded by financial information for CG&E included in its Forms 10-K and 10-K/A for the year ended December 31, 1992), March 15, 1993, July 2, 1993, September 8, 1993, October 20, 1993 and October 26, 1993. All documents filed by CG&E pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to the termination of this offering shall be deemed to be incorporated in this Prospectus by reference and to be a part hereof from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which is deemed to be incorporated by reference herein or in the Prospectus Supplement modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. CG&E HEREBY UNDERTAKES TO PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM A COPY OF THIS PROSPECTUS HAS BEEN DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A COPY OF ANY OR ALL OF THE DOCUMENTS REFERRED TO ABOVE WHICH HAVE BEEN OR MAY BE INCORPORATED IN THIS PROSPECTUS BY REFERENCE, OTHER THAN EXHIBITS TO SUCH DOCUMENTS. REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO MR. WILLIAM L. SHEAFER, TREASURER, THE CINCINNATI GAS & ELECTRIC COMPANY, 139 EAST FOURTH STREET, CINCINNATI, OHIO 45202 (TELEPHONE 513-381-2000). 2 THE COMPANY CG&E (incorporated in Ohio in 1837) and its subsidiaries are primarily engaged in providing electric and gas service in the southwestern portion of Ohio and adjacent areas in Kentucky and Indiana. The area served with electricity or gas, or both, covers approximately 3,000 square miles with an estimated population of 1.8 million and includes the cities of Cincinnati and Middletown in Ohio, Covington and Newport in Kentucky, and Lawrenceburg in Indiana. USE OF PROCEEDS The net proceeds after underwriting commissions and estimated expenses from the sale of the New Bonds will be used for general corporate purposes, including additional construction. Reference is made to the Prospectus Supplement for the use of the net proceeds from the sale of the Offered Bonds. RATIO OF EARNINGS TO FIXED CHARGES The ratio of earnings to fixed charges for each of the years ended December 31, 1989 through 1993 were 3.20, 2.84, 2.45, 2.57 and 1.48, respectively. DESCRIPTION OF NEW BONDS The New Bonds will be issued in one or more series under the First Mortgage dated as of August 1, 1936 between CG&E and The Bank of New York, Trustee, as supplemented to date and as proposed to be supplemented by one or more supplemental indentures (the Mortgage). The New Bonds may be presented for transfer or exchange at the office of the Trustee, 101 Barclay Street, New York, New York. The statements herein concerning the New Bonds and the Mortgage are merely an outline and do not purport to be complete. They are qualified in their entirety by the provisions of the Mortgage, to which reference is hereby made. The New Bonds will be limited to a principal amount of $300,000,000. Reference is made to the Prospectus Supplement relating to any particular issue of Offered Bonds for the following terms: (i) the aggregate principal amount of the Offered Bonds; (ii) the date or dates on which such Offered Bonds mature; (iii) the rate or rates per annum at which such Offered Bonds will bear interest; (iv) the times at which such interest will be payable; (v) the redemption terms of such Offered Bonds; and (vi) any other special terms. Interest will be paid to registered holders of record on the applicable record date as established in the supplemental indenture relating to the Offered Bonds. Each record date for the payment of interest will be the first day of the month for an interest payment date occurring on the fifteenth day of the same month or the fifteenth day of the month for an interest payment date occurring on the first day of the following month. Both principal and interest will be payable by check in New York, N.Y. Unless otherwise specified in the Prospectus Supplement, the New Bonds will be issued only in fully registered form in denominations of $1,000 and integral multiples thereof. The New Bonds may be exchanged without charge for New Bonds of other denominations, unless otherwise specified in the Prospectus Supplement. The New Bonds are not entitled to the benefits of an Improvement and Sinking Fund. MAINTENANCE AND REPLACEMENT FUND The New Bonds are not entitled to the benefits of a Maintenance and Replacement Fund. However, with respect to all series of Bonds issued prior to 1976, the Mortgage provides that CG&E will pay to the Trustee on or before April 30 of each year, in cash or principal amount of Bonds of any series issued under 3 the Mortgage (Bonds), an amount equal to the minimum provision for depreciation for the preceding calendar year, less 100% of the cost of unfunded property additions which it may desire to deduct in satisfaction thereof. The minimum provision for depreciation consists of (1) 15% of operating revenues derived from the operation of CG&E's plant and properties after deducting the cost of purchased electricity and gas and rentals paid for the use of property owned by others and leased to or operated by CG&E and the maintenance of which and depreciation on which are borne by the owners, less (2) expenditures for maintenance and repairs. CG&E has covenanted to maintain its properties in thorough repair, working order and condition, and to provide adequate reserves for depreciation. SECURITY The New Bonds will be secured by the Mortgage equally and ratably with all other Bonds now or hereafter issued under the Mortgage. The Mortgage constitutes, in the opinion of Taft, Stettinius & Hollister, counsel for CG&E, a first mortgage lien on all of the real estate, the personal property and franchises of CG&E, subject to excepted encumbrances as defined therein and except as hereinafter stated. There are also excepted from the lien (1) except in case of a Completed Default, as defined (followed by a taking possession of the mortgaged property), revenues, earnings, rents, issues, income and profits of the mortgaged property, cash, bills, notes and accounts receivable, contracts and choses in action, materials, supplies and construction equipment; and (2) in any case, bonds, notes, evidences of indebtedness, shares of stock and other securities, except such as may be specifically subjected to the lien thereof. The principal properties in which CG&E has undivided interests are not subject to partition of such interests for at least twenty-one years. The Mortgage contains provisions which subject after-acquired property (subject to pre-existing liens) to the lien thereof. These provisions may not be effective as to property acquired subsequent to the filing of a case with respect to CG&E under the federal Bankruptcy Reform Act of 1978, which became effective October 1, 1979. Certain covenants prohibiting the disposition by CG&E of equity securities of, and limiting the creation of indebtedness by, subsidiaries other than CG&E's Kentucky subsidiary, The Union Light, Heat and Power Company (Union Light), applicable in respect of certain outstanding Bonds will not apply in respect of the New Bonds. ISSUANCE OF ADDITIONAL BONDS Additional Bonds in one or more series may be issued in principal amounts equal to (1) 60% of the cost or the then fair value to CG&E (whichever shall be less) of unfunded property additions acquired, made or constructed subsequent to September 30, 1945, less the excess, if any, of retirements over the minimum provision for depreciation, (2) the principal amount of Bonds previously issued under the Mortgage and retired (otherwise than under a sinking fund and in certain other cases) or deposited with the Trustee for retirement, or (3) amounts of cash deposited with the Trustee, which cash may be withdrawn as CG&E becomes entitled to the issuance of further amounts of Bonds. The supplemental indentures relating to the New Bonds will provide that, at any time when no Bonds of any Series created prior to 1986 are outstanding, CG&E may amend the Mortgage without the consent of holders of then outstanding Bonds to increase the 60% figure of unfunded property additions referred to in clause (1) of the preceding sentence to 66 2/3%. Bonds may be issued upon the basis of property additions and cash deposits only if net earnings (as defined in Section 5 of Article Five of the Mortgage) for any 12 consecutive calendar months within the 15 calendar months immediately preceding such issuance are at least twice the annual interest charges on all outstanding indebtedness having an equal or prior lien, including the additional issue. For the 12 months ended December 31, 1993, based on bonds outstanding on that date, such coverage was sufficient to issue the entire amount of the New Bonds. No Bonds may be issued against property additions if (1) prior lien bonds outstanding against such property additions exceed 35% of the cost or fair value (whichever shall be less) of such property additions, or (2) the aggregate principal amount of all prior lien bonds exceeds 15% of the principal amount of all Bonds issued and outstanding under the Mortgage plus Bonds proposed to be issued. 4 The New Bonds will be issued on the basis of unfunded property additions or against the retirement of Bonds. MODIFICATIONS OF THE MORTGAGE The rights and obligations of CG&E and of the Bondholders may be modified only with the consent of the holders of at least 75% in principal amount of the Bonds then outstanding and affected thereby. No such modification shall extend the maturity of or reduce the rate of interest on or otherwise modify the terms of payment of principal or interest on any Bond without the express consent of the holder of such Bond or permit the creation of any lien ranking prior to or equal with the lien of the Mortgage on any of the mortgaged property. The supplemental indentures relating to the New Bonds will provide that, at any time when no Bonds of any Series created prior to 1986 are outstanding, CG&E may amend the Mortgage without the consent of holders of then outstanding Bonds to reduce the 75% figure in principal amount of Bonds referred to in the first sentence of this paragraph to 66 2/3%. Notice of a proposed modification must be published in newspapers of general circulation in New York, New York and Cincinnati, Ohio and the Mortgage provides that the modification must be consented to in writing within twelve months after the first publication of such notice. The Twelfth Supplemental Indenture and all subsequent supplemental indentures provide that CG&E may, without the consent of holders of Bonds issued under such supplemental indentures, amend the Mortgage to remove this time limitation and to provide that any consent of holders of a particular Series of Bonds may be evidenced by the supplemental indenture establishing the terms and provisions of such Bonds. The supplemental indentures relating to the New Bonds will contain similar provisions. However, such an amendment would have to be approved by the consent of holders of 75% of any outstanding Bonds issued under supplemental indentures prior to the Twelfth Supplemental Indenture. REDEMPTION The New Bonds may be redeemable in whole or in part at the election of CG&E on 30 days' notice. Reference is made to the Prospectus Supplement for the redemption terms of the Offered Bonds. In the event that CG&E elects to redeem less than all of the New Bonds, the New Bonds to be redeemed will be drawn by lot in such manner as the Trustee may elect. EVENTS OF DEFAULT A Completed Default is defined in the Mortgage as being: default in payment of principal; default for 90 days in payment of any interest; default for 90 days in making any Improvement and Sinking Fund or Maintenance and Replacement Fund payment; default in certain cases in payment of interest or principal of outstanding prior lien bonds beyond the period of grace specified in the Mortgage or other lien constituting a prior lien; default for 90 days after notice in the performance of any other covenants in the Mortgage; and certain events of bankruptcy, insolvency, or reorganization. The Mortgage provides that the Trustee may withhold notice to the Bondholders of any default (except in payment of principal of, or interest on the Bonds, or in making any Improvement and Sinking Fund or Maintenance and Replacement Fund payment) if the Trustee considers it in the interest of the Bondholders to do so. The Mortgage provides that, if a Completed Default specified therein shall have occurred, either the Trustee or the holders of 25% in principal amount of the Bonds then outstanding may declare the principal of and accrued interest on all the Bonds to be due and payable, but in certain cases the holders of a majority in principal amount of the Bonds then outstanding may annul such declaration and its consequences, and may waive past defaults if the mortgage agreements in respect to which the default occurred have been fully performed and all arrears of interest, principal of any Bonds then due, and Trustee's expenses have been paid. Evidence of compliance with certain conditions and covenants of the Mortgage is periodically furnished by CG&E. 5 The holders of a majority in principal amount of the Bonds at the time outstanding will have the right to direct the method and place of conducting any proceeding for any sale, foreclosure, or other proceeding under the Mortgage, and the right to direct the Trustee to exercise any trust or power with respect to entry or sale conferred on the Trustee, provided that such direction is in accordance with the Mortgage and applicable law and such holders offer to the Trustee indemnity satisfactory to it against its costs, expenses, and liabilities. Subject to the right of any holder to enforce the payment of the principal of and interest on his Bonds at and after the maturity thereof, no holder of any Bond shall have any right to institute any proceeding to enforce the Mortgage unless such holder shall have previously given the Trustee notice of a Completed Default and unless also the holders of at least 25% in principal amount of the Bonds then outstanding have (i) made written request to the Trustee, (ii) offered the Trustee reasonable opportunity to exercise its powers or institute action in its own name, and (iii) offered to the Trustee indemnity satisfactory to it against its costs, expenses, and liabilities. CONCERNING THE TRUSTEE The Bank of New York is the Trustee under the Mortgage. It is also Trustee under the mortgage indenture covering outstanding First Mortgage Bonds of Union Light. The Bank of New York makes loans to CG&E, acts as depositary for funds of, and performs other services for CG&E and Union Light in the normal course of business. PLAN OF DISTRIBUTION CG&E may sell the New Bonds in any of three ways: (i) through underwriters or dealers; (ii) directly to a limited number of purchasers or to a single purchaser; or (iii) through agents. The Prospectus Supplement with respect to the Offered Bonds sets forth the terms of the offering of the Offered Bonds, including the name or names of any underwriters, dealers or agents, the purchase price of such Offered Bonds and the proceeds to CG&E from such sale, any underwriting discounts and other items constituting underwriters' compensation, any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers. Any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time. If underwriters are used in the sale, the New Bonds will be acquired by the underwriters for their own account and may be resold from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. The underwriters with respect to a particular Underwritten Offering of Offered Bonds will be named in the Prospectus Supplement relating to such offering and, if an underwriting syndicate is used, the managing underwriter or underwriters will be set forth on the cover page of such Prospectus Supplement. In connection with the sale of Offered Bonds, the underwriters may receive compensation from CG&E or from purchasers in the form of discounts, concessions or commissions. The underwriters will be, and any dealers participating in the distribution of the Offered Bonds may be, deemed to be underwriters within the meaning of the Securities Act of 1933. CG&E has agreed to indemnify the underwriters against certain civil liabilities, including liabilities under the Securities Act of 1933. The underwriting agreement pursuant to which any Offered Bonds are to be sold will provide that the obligations of the underwriters are subject to certain conditions precedent and that the underwriters will be obligated to purchase all of the Offered Bonds if any are purchased. Offered Bonds may be sold directly by CG&E or through agents designated by CG&E from time to time. The Prospectus Supplement sets forth the name of any agent involved in the offer or sale of the Offered Bonds in respect of which the Prospectus Supplement is delivered as well as any commissions payable by CG&E to such agent. Unless otherwise indicated in the Prospectus Supplement, any such agent will be acting on a best efforts basis for the period of its appointment. 6 If so indicated in the Prospectus Supplement, CG&E will authorize agents, underwriters or dealers to solicit offers by certain specified institutions to purchase Offered Bonds from CG&E at the public offering price set forth in the Prospectus Supplement pursuant to delayed delivery contracts providing for payment and delivery on a specified date in the future. Such contracts will be subject to those conditions set forth in the Prospectus Supplement, and the Prospectus Supplement will set forth the commission payable for solicitation of such contracts. STATEMENT CONCERNING EXPERTS The statements made in CG&E's Annual Report on Form 10-K for the year ended December 31, 1992 under "Rate Matters", "Regulation" and "Environmental Matters", under "OTHER INFORMATION--Environmental Matters" in Part II of CG&E's Quarterly Report on Form 10-Q for the quarter ended March 31, 1993 (which documents are incorporated in this Prospectus by reference), and under "Description of New Bonds" in this Prospectus, have been reviewed by Taft, Stettinius & Hollister, counsel for CG&E. The statements therein as to matters of law and legal conclusions are made on the authority of that firm as experts. The members and associates of the firm and their immediate families own directly or indirectly an aggregate of 6,926 shares of CG&E's Common Stock and 1,940 shares of CG&E's Preferred Stock. The consolidated balance sheet and schedules of common shareholders' equity and cumulative preferred shares and long-term debt of CG&E and subsidiaries as of December 31, 1992 and 1991 and the related consolidated statements of income, changes in common shareholders' equity, and cash flows and schedule of taxes for each of the three years in the period ended December 31, 1992, included in CG&E's Annual Report on Form 10-K for the year ended December 31, 1992, as amended, have been audited by Arthur Andersen & Co., independent public accountants, as indicated in their report with respect thereto, and are incorporated herein by reference in reliance upon the authority of said firm as experts in accounting and auditing in giving said report. The consolidated financial statements of PSI Resources, Inc. included in CG&E's Current Report on Form 8-K dated March 3, 1993, have been audited by Arthur Andersen & Co., independent public accountants, as indicated in their report with respect thereto, and are incorporated herein by reference in reliance upon the authority of said firm as experts in accounting and auditing in giving said report. Reference is made to said report dated January 27, 1993, on the consolidated financial statements which includes explanatory paragraphs that describe the litigation and rate appeals described in Notes 3 and 4, respectively, to the consolidated financial statements therein. LEGAL OPINIONS The legality of the New Bonds will be passed upon for CG&E by Taft, Stettinius & Hollister, Star Bank Center, Cincinnati, Ohio 45202, and for the Underwriters by Davis Polk & Wardwell, 450 Lexington Avenue, New York, New York 10017, who may rely as to matters of Ohio law on the opinion of Taft, Stettinius & Hollister or other Ohio counsel. In the past, Davis Polk & Wardwell has acted as counsel in certain matters for CG&E. 7 -----END PRIVACY-ENHANCED MESSAGE-----