-----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, bFoV0a7NT7ECLtKb4foCEy3UrY8M5IuZQ/APdRkDDp8S68z0Mrk6nucoZnmtQ8X9 Ve1AIV1Bue/QUgDj6dr7iw== 0000950123-94-001023.txt : 19940609 0000950123-94-001023.hdr.sgml : 19940609 ACCESSION NUMBER: 0000950123-94-001023 CONFORMED SUBMISSION TYPE: 424B5 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19940608 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LONG ISLAND LIGHTING CO CENTRAL INDEX KEY: 0000060251 STANDARD INDUSTRIAL CLASSIFICATION: 4931 IRS NUMBER: 111019782 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B5 SEC ACT: 1933 Act SEC FILE NUMBER: 033-52963 FILM NUMBER: 94533426 BUSINESS ADDRESS: STREET 1: 175 E OLD COUNTRY RD CITY: HICKSVILLE STATE: NY ZIP: 11801 BUSINESS PHONE: 5169334590 424B5 1 PROSPECTUS SUPPLEMENT DATED JUNE 7, 1994 1 Filed pursuant to Rule 424(b)(5) Registration No. 33-52963 PROSPECTUS SUPPLEMENT (TO PROSPECTUS DATED APRIL 19, 1994) $285,000,000 LONG ISLAND LIGHTING COMPANY $100,000,000 GENERAL AND REFUNDING BONDS, 7 5/8% SERIES DUE 1998 $185,000,000 GENERAL AND REFUNDING BONDS, 8 5/8% SERIES DUE 2004 --------------------------- Interest on the General and Refunding Bonds, 7 5/8% Series Due 1998 (the "1998 Series Bonds"), and the General and Refunding Bonds, 8 5/8% Series Due 2004 (the "2004 Series Bonds") (collectively, the "New Bonds"), is payable semi-annually on April 15 and October 15, beginning October 15, 1994. The New Bonds may not be redeemed prior to maturity, except, as a whole, at 100% of their principal amount, in the event (i) all of the Company's Common Stock is acquired by a governmental body or instrumentality or (ii) substantially all of the Company's property is released from the lien of the General and Refunding Indenture. Any such redemption may occur upon at least 30 days' notice and upon payment of the applicable percentage of the principal amount so redeemed, together with interest accrued thereon to the redemption date. See "Supplemental Description of the New Bonds." --------------------------- An application will be made to list the New Bonds on the New York Stock Exchange. --------------------------- 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 SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- ---------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------- Underwriting Price to Discounts Proceeds to Public(1) and Commissions(2) Company(1)(3) - ---------------------------------------------------------------------------------------------------- Per 1998 Series Bond............... 99.624% .525% 99.099% - ---------------------------------------------------------------------------------------------------- Per 2004 Series Bond............... 99.536% .675% 98.861% - ---------------------------------------------------------------------------------------------------- Total.............................. $283,765,600 $1,773,750 $281,991,850 - ---------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------
(1) Plus accrued interest, if any, from date of issuance to date of delivery. (2) The Company has agreed to indemnify the Underwriters against certain liabilities under the Securities Act of 1933, as amended. (3) Before deducting expenses payable by the Company estimated at $4,107,151. --------------------------- The New Bonds offered by this Prospectus Supplement are offered by the Underwriters subject to prior sale, withdrawal, cancellation or modification of the offer without notice, to delivery to and acceptance by the Underwriters and to certain further conditions. It is expected that delivery of the New Bonds will be made at the offices of Lehman Brothers Inc., New York, New York on or about June 14, 1994. --------------------------- LEHMAN BROTHERS BEAR, STEARNS & CO. INC. CHEMICAL SECURITIES INC. DILLON, READ & CO. INC. GOLDMAN, SACHS & CO. MERRILL LYNCH & CO. PAINEWEBBER INCORPORATED June 7, 1994 2 IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES OFFERED HEREBY OR OTHER GENERAL AND REFUNDING BONDS OF THE COMPANY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. --------------------------- SERVICE TERRITORY MAP [MAP] S-2 3 FINANCIAL INFORMATION (IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE AMOUNTS AND OTHER DATA)
FOR THE THREE MONTHS FOR THE YEAR ENDED DECEMBER 31, ENDED MARCH 31, -------------------------------------- ------------------------ 1993 1992 1991 1994 1993 ---------- ---------- ---------- ---------- ---------- (UNAUDITED) SUMMARY OF OPERATIONS: Electric Revenues................ $2,352,109 $2,194,632 $2,196,568 $ 587,266 $ 536,342 Gas Revenues..................... 528,886 427,207 351,161 284,877 224,109 ---------- ---------- ---------- ---------- ---------- Total Revenues................... 2,880,995 2,621,839 2,547,729 872,143 760,451 Operating Income................. 755,551 741,105 785,280 183,865 192,391 Net Income....................... 296,563 301,974 305,538 69,620 67,861 Earnings for Common Stock........ 240,455 238,020 239,144 56,348 53,286 Earnings per Common Share........ $2.15 $2.14 $2.15 $.50 $.48 Dividends declared per Common Share......................... $1.76 $1.72 $1.60 $.445 $.435 Average Common Shares Outstanding (in thousands)................ 112,057 111,439 111,348 112,536 111,779 Book Value per Common Share (at end of period):............... $19.88 $19.58 $19.13 $19.94 $19.65 Utility Plant, net (at end of period)....................... $3,347,557 $3,161,148 $3,002,733 $3,327,964 $3,183,530 OTHER DATA (UNAUDITED): Electric System Sales (millions of kWh)............. 15,824 15,440 15,814 4,092 3,938 Firm Gas Sales (thousands of dth)............ 59,183 56,292 48,689 30,324 28,068
AT MARCH 31, 1994 ----------------------------------------------- (UNAUDITED) ACTUAL (AS ADJUSTED)(3) ------------------- ------------------------ BALANCE SHEET DATA: Net Utility Plant................................. $ 3,327,964 $ 3,327,964 Regulatory Assets................................. 7,586,947 7,586,947 Other Assets...................................... 2,470,188 2,381,848 ----------- ------------ Total Assets................................. $13,385,099 $ 13,296,759 ========== ============ Long-term Debt and Unamortized Premium and Discount(1)................................ $ 5,470,642 65% $ 5,295,584 63% Preferred Stock--Redemption Required(2)........... 653,950 8 653,950 8 Preferred Stock--No Redemption Required........... 64,005 1 64,005 1 Total Common Shareowners' Equity.................. 2,244,559 26 2,331,277 28 ----------- ---- ------------ ---- Total Capitalization......................... $ 8,433,156 100% $ 8,344,816 100% ========== ==== ============ ====
- --------------- (1) Includes current maturities of long-term debt. (2) Includes current redemption requirements of Preferred Stock. (3) Adjusted to reflect (i) the issuance of the New Bonds offered hereby; (ii) the issuance of 4,500,000 shares of common stock, par value $5 per share ("Common Stock") and the receipt of net proceeds of approximately $86.7 million; (iii) the repayment at maturity of $25 million aggregate principal amount of First Mortgage Bonds, 4 5/8% Series N Due June 1, 1994; and (iv) the application of the net proceeds from the issuance of the New Bonds and the Common Stock as described herein under "Use of Proceeds". S-3 4 THE COMPANY GENERAL The Company supplies electric and gas service in Nassau and Suffolk Counties and to the Rockaway Peninsula in Queens County, all on Long Island, New York. The principal executive offices of the Company are located at 175 East Old Country Road, Hicksville, New York 11801 and the general telephone number is (516) 755-6650. The Company's service territory covers an area of approximately 1,230 square miles. The population of the service area, according to the Company's 1993 estimate, is approximately 2.7 million persons, including approximately 98,000 persons who reside in Queens County within the City of New York. The 1993 population estimate reflects a .14% increase since the 1990 census. This is a larger population than in each of 20 of the 50 states. The area served is predominantly residential, but the Company receives approximately one-half of its electric revenues from commercial and industrial customers. Although electronics and aerospace are the largest manufacturing industries in the area, about 88% of total employment is non-manufacturing. Industrialization is gradually increasing in Suffolk County which, with three times the land area, has only one-third the population density of Nassau County. SIGNIFICANT INFORMATION RESPECTING THE COMPANY The following is a summary of certain information regarding the Company and is therefore subject to and should be read in conjunction with the detailed information concerning the Company appearing in the documents incorporated by reference in this Prospectus Supplement and the accompanying Prospectus. RESULTS OF RECENT OPERATIONS Earnings for common stock for the quarter ended March 31, 1994 were $56.3 million or 50 cents per common share, compared to $53.3 million or 48 cents per common share for the same period last year. Quarterly earnings are not necessarily indicative of earnings in other quarters. The Company experienced an increase in earnings for the electric business, partially offset by lower earnings for the gas business for the three months ended March 31, 1994 compared to the same period in 1993. The increase in electric earnings reflects lower operations and maintenance expenses resulting from the Company's continuing efforts to control costs. Gas revenues continued to increase as a result of the Company's aggressive gas expansion program. However, gas earnings declined primarily due to the recognition of previously deferred storm costs affecting gas operations and a lower allowed rate of return on common equity as determined by the Public Service Commission of the State of New York ("PSC"). Although earnings cannot be predicted with certainty, the Company currently anticipates that its earnings for the first six months of 1994 will be significantly less than earnings for the same period in 1993. While the Company can give no assurances, it is expecting that the items described below, affecting the comparability of earnings between the six-month period ended June 30, 1994 and June 30, 1993, should be offset during the balance of the year by certain positive factors. These factors include a continuation of reductions in operations and maintenance expenses and the impact of improved cash flow from operations. Comparative earnings for the six-month period are expected to be affected by certain factors including: (1) the recognition in 1993 of the benefits associated with certain tax credits that the Company does not anticipate in 1994; (2) the recognition of previously deferred storm costs, mentioned above; (3) a provision in the Company's gas rate structure that was not in effect prior to December 1, 1993 that requires earnings in excess of a 10.6% rate of return on common equity to be shared equally between the Company's firm gas customers and its shareowners; (4) a lower allowed rate of return on common equity for the Company's gas business; and (5) lower gas revenues for the three months ended June 30, 1994, resulting from a refinement in the Company's procedures used to estimate revenues not yet billed, which will in turn increase gas revenues in the second six-month period of 1994. S-4 5 RATE MATTERS Electric Rates Overview: Nearly five years have passed since the Company and the State of New York (by its Governor) entered into an agreement, the 1989 Settlement, which was designed to eliminate the controversy surrounding the Shoreham Nuclear Power Station ("Shoreham"). Over this period of time, the Company has attempted to manage costs and improve operating efficiencies. The Company's efforts, coupled with six electric rate increases, lower than anticipated fuel and financing costs and significantly lower production expenses, have helped to improve the Company's financial health. Since the 1989 Settlement became effective, the Company has refinanced approximately $4.6 billion of its high-cost debt and preferred stock, resulting in annual cash savings of approximately $88 million. The Company's focus on managing costs and improving operating efficiencies has also enabled the Company to file with the PSC a three-year electric rate plan, described in greater detail below, that requests a freeze of base rates for the two-year period beginning December 1, 1994. The Company's proposal to freeze base rates is designed to moderate the rate increases that were originally contemplated in the 1989 Settlement. The base rate freeze for the initial two years of the plan, if approved, will help better position the Company to respond to competitive challenges and to assist in Long Island's economic recovery. Electric Rate Case: In December 1993, the Company filed a three-year electric rate plan with the PSC for the period beginning December 1, 1994 (the "Rate Proposal"). The Rate Proposal, which may be approved, modified or rejected by the PSC, requests an allowed rate of return on common equity of 11.0% and provides for zero percent base rate increases in years one and two of the plan and an overall rate increase of 4.3% in the third year. Although base electric rates would be frozen during the first two years of the Rate Proposal, annual rate increases of approximately 1% to 2% are expected to result in these years from the operation of a fuel cost adjustment ("FCA") mechanism. The FCA captures, among other amounts, any increases in the cost of fuel above the level recovered in base rates, and any amounts to be recovered or refunded to ratepayers in excess of $15 million which result from the reconciliation of revenue, certain expenses and earned performance incentive components. The Rate Proposal reflects four underlying objectives: (i) to limit the balance of the Rate Moderation Component ("RMC"), discussed in greater detail under the heading "Ratio of Earnings" in the accompanying Prospectus, during the three-year period to no more than its 1992 peak balance of $652 million; (ii) to recover the RMC within no more than 13 years of its 1989 inception; (iii) to minimize, beginning in the third year of the Rate Proposal, the final three rate increases contemplated in the 1989 Settlement that follow the two-year rate freeze period; and (iv) to continue the Company's gradual return to financial health. On May 19, 1994, the staff of the PSC ("Staff") and other intervening parties filed testimony in response to the Rate Proposal. Staff concurs with the Company's proposal for an 11.0% return on common equity in each of the three years. However, Staff has recommended an overall zero percent rate increase for the first two years, contrasted with the Company's proposal for a zero percent base rate increase and FCA adjustments of 1% to 2% in each of these years as described above. Staff has not yet made a firm recommendation for the level of rate relief in the third year, but has reaffirmed its commitment to the principles of the Rate Moderation Agreement ("RMA"), including the full recovery of the RMC. In addition, Staff supports both the Company's proposed continuation of its current FCA mechanism and the continuation of the Long Island Lighting Company Ratemaking and Performance Plan ("LRPP") mechanisms and proposes to continue the performance incentives, with some modifications. Staff is also recommending demand side management ("DSM") expenditures that exceed those proposed by the Company. The Company is reviewing the proposals submitted by Staff and the intervenors, discussed below, in preparation for hearings expected to commence in mid-June. The Consumer Protection Board and Long Island Power Authority ("CPB/LIPA") jointly filed testimony in which they proposed that total electric bills be cut by 2.6% for the first rate year, 1.2% for the second rate year, and 1.2% for the third rate year. CPB/LIPA also proposed higher sales forecasts, reductions S-5 6 in forecasted expenses, and a reduction in return on common equity from the Company's proposed 11.0% to 10.6%. Other intervenors proposed various adjustments to the Rate Proposal, including increasing DSM expenditures and reducing the authorized return on common equity. The CPB/LIPA response to the Company's Rate Proposal is unrelated to a CPB/LIPA petition filed in December 1993 also seeking to reduce the Company's electric rates. The Commission has not acted upon this prior CPB/LIPA petition. The Commission is expected to issue a final order in the Company's rate proceeding in November 1994. The Company is unable to predict the ultimate outcome of this rate proceeding. The RMA and the LRPP: The RMA, one of the constituent documents of the 1989 Settlement, contemplated that the Company would apply to the PSC for targeted annual electric rate increases of 4.5% to 5.0% for an eight-year period beginning December 1, 1991. For additional information about the RMA and definitions of the terms used herein, see "Ratios of Earnings" in the accompanying Prospectus. In response to the Company's electric rate filing in December 1990, which requested a three-year rate increase with annual increases consistent with the RMA, the PSC approved, and the Company accepted, the LRPP. The LRPP provides that the Company receive, for each of the three years beginning December 1, 1991, annual electric rate increases of 4.15%, 4.1% and 4.0%, respectively, with an allowed return on common equity from electric operations of 11.6%. The LRPP contains three major components--revenue reconciliation, expense attrition and reconciliation, and performance incentives. Revenue reconciliation is provided through a mechanism that reduces the impact of experiencing electric sales that are above or below the annual net margin level (defined as sales revenues, net of fuel and gross receipts taxes) that the Company is forecasted to receive in each of the three rate years under the LRPP. The expense attrition and reconciliation component permits the Company to make adjustments for certain expenses recognizing that certain cost increases are unavoidable due to inflation and changes in the business. The LRPP includes the annual reconciliation of certain expenses for wage rates, property taxes, interest charges and DSM costs, the deferral and amortization of certain costs for enhanced reliability, production operations and maintenance expenses, and the application of an inflation index to other expenses for the rate years beginning December 1, 1992 and 1993. Under the performance incentive component of the LRPP, the Company is allowed to earn up to 60 additional basis points, or forfeit up to 38 basis points, of the allowed return on common equity as a result of its performance within certain incentive and/or penalty programs. These programs consist of a customer service performance plan, a DSM program, a time-of-use program, a partial pass through fuel cost incentive plan and, effective December 1, 1993, an electric transmission and distribution reliability plan. The LRPP also contains a mechanism whereby earnings in excess of the allowed rate of return on common equity, excluding the impacts of the various incentive and/or penalty programs, will be shared equally between ratepayers and shareowners. In the past, the PSC has taken actions which have been consistent with the establishment and recovery from ratepayers of the 1989 Settlement-deferred charges provided by the RMA. In addition, the PSC has granted the Company six of the 11 electric rate increases contemplated by the RMA (including the three rate increases provided by the LRPP) and has publicly confirmed its commitment to the effectuation of the 1989 Settlement. Therefore, the Company has no reason to believe that the PSC will not honor its commitments, contained in the RMA, respecting the recovery of the FRA and other 1989 Settlement-deferred charges. Gas Rates In December 1993, the PSC approved a three-year gas rate settlement between the Company and Staff. The gas rate settlement provides that the Company receive, for each of the rate years beginning December 1, 1993, 1994 and 1995, annual gas rate increases of 4.7%, 3.8% and 2.8%, respectively. In the determination of the revenue requirements for the first year of the gas rate settlement an allowed rate of return on equity of 10.1% was used. The gas rate decision also provides that earnings in excess of a 10.6% return on equity in any of the three rate years covered by the settlement be shared equally between the Company's firm gas customers S-6 7 and its shareowners. The allowed rate of return on equity for the rate year that began December 1, 1992 was 11.0%. ENERGY SUPPLY The Company's current electric load forecasts indicate that, with implementation of its conservation and load management programs and with the availability of electricity provided by the Company's existing generating facilities, by its portion of nuclear energy generated at Nine Mile Point Nuclear Power Station, Unit 2 and by power purchased from other electric systems and from certain non-Company owned facilities, located within the Company's service territory, Long Island has adequate generating sources to meet its energy demands for the next ten years. COMPETITIVE ENVIRONMENT The Company believes that competitive forces are a factor in the electric utility industry. Some of the factors affecting competition, applicable to the Company, are discussed below. Current Competitive Factors: The development of the non-utility generator ("NUG") industry has been encouraged by federal and state legislation. There are two ways that NUGs can negatively impact the Company: first, NUGs may locate on a customer's site, providing part or all of that customer's electric energy requirements. The Company estimates that in 1993, it lost sales to on-site NUGs generating a total of 234 gigawatt-hours ("GWh") representing approximately $20 million in revenues, net of fuel, or approximately 1.0% of the Company's 1993 net revenues. Second, in accordance with the Public Utility Regulatory Policies Act of 1978 ("PURPA"), the Company is required to purchase all the power offered by NUGs that are Qualified Facilities ("QF"). QFs have the choice of pricing these sales at either (i) PSC published estimates of the Company's long run avoided costs ("LRAC") or (ii) the Company's tariff rates which reflect the Company's actual avoided cost. Additionally, until repealed in 1992, New York State law set a minimum price of six cents per kilowatt-hour ("kWh") for certain categories of QFs, considerably above the Company's avoided cost. The six-cent minimum now only applies to contracts entered into before June 1992. The Company believes that the repeal of the six-cent law, coupled with the PSC's updates which resulted in lower LRAC estimates, has significantly reduced the economic benefits to QF's seeking to sell power to the Company. As of December 31, 1993, 39 QFs were on line and selling approximately 200 megawatts ("MW") of power to the Company. The Company estimates that in 1993, purchases from QFs required by federal and state law cost the Company $47 million more than it would have cost had the Company generated this power itself. However, with the exception of approximately 40 MW of power to be produced annually at the Stony Brook Campus of the State University of New York ("Stony Brook") beginning in early 1995, the Company does not expect any significant new NUGs to be built on Long Island in the foreseeable future. The Company had been ordered by the PSC to enter into a contract with Mayflower Energy Partners, L.P. ("Mayflower"), to purchase, on an energy-only basis, power for 15 years from a 300 MW facility originally scheduled to begin commercial operation in 1995. However, a New York State appellate court upheld a lower court's decision to annul the PSC order and also affirmed the lower court's finding that the PSC had violated PURPA and the New York Public Service Law and that it acted arbitrarily when it ordered the Company to execute the agreement. On April 28, 1994, the New York State Court of Appeals denied Mayflower's motion for leave to appeal the appellate court's decision. In addition, on May 4, 1994, the Company notified Mayflower that it was exercising its right to terminate the agreement as a result of Mayflower's failure to meet certain construction commencement milestone dates. After the anticipated loss of the Stony Brook load, the Company expects that load losses to cogeneration will stabilize. The Company believes that a number of factors will mitigate load loss, including customer load characteristics, such as a lack of a significant industrial base and accompanying large thermal load, which would make cogeneration economically attractive. Also, the Company's geographic location and the limited electrical interconnections to Long Island limit the accessibility of its transmission grid to potential competitors. S-7 8 For over a decade, the Company has voluntarily provided wheeling of New York Power Authority ("NYPA") power for economic development. As a result, NYPA power has displaced approximately 400 GWh of energy sales. The net revenue loss associated with this amount of sales is approximately $27 million or 1.3% of the Company's 1993 net revenues. Currently, the potential loss of additional load is limited by conditions in the Company's transmission agreements with NYPA. Competition for customer loads also comes from other electric utilities (including those in Connecticut, New York, and New Jersey) which seek to attract commercial and industrial customers to relocate within their service territories by offering reduced rates and other incentives. In order to retain existing and attract new commercial and industrial customers, the Company offers an Economic Development Rate which provides rate abatement to new or existing customers that qualify under the program approved by the PSC. Potential Competitive Factors: In the pending rate proceeding discussed above, Staff expressed concern over the competitive position of New York State utilities and their ability to meet competition. In order to address competitive opportunities generally available to electric and gas customers, the PSC has instituted a generic proceeding in which they have adopted guidelines for allowing New York State utilities to negotiate flexible rates with individual customers in order to avoid additional loss of sales. The Company generally supports this objective although the Company opposes Staff's proposal to share the difference in revenues between the flexible rate and the higher conventional rate between ratepayers and shareholders. The PSC is also considering whether to expand this proceeding in order to address retail competition in the State of New York. Until the scope of any such proposal relating to retail wheeling is known, the Company is unable to predict what impact it may have on the Company. Recently, the Long Island Power Authority ("LIPA") indicated that it would hold public hearings to discuss proposals to build a 400-450 MW natural gas-powered generating plant at Shoreham scheduled for operation as early as 1996, which reportedly would result in ratepayer savings of between $283 million and $458 million over 20 years. However, based on previous LIPA and Company studies analyzing the feasibility of building a gas-powered plant at Shoreham, the Company continues to believe that such a facility would not result in ratepayer savings. This view is supported by the February 1994 draft State Energy Plan issued by the New York State Energy Planning Board which states that bringing a gas-powered facility at Shoreham on line before the turn of the century would raise the Company's rates. The Company is unable, however, to predict the likelihood of a generating unit operating at the Shoreham site. The impact, if any, on the Company of the operation of such a plant would depend on the nature of the project, the price at which it would propose to sell power and other factors. In addition, on May 12, 1994, a petition was filed with the PSC by the Education/Electric Buying Group asking the PSC to require the Company to transport power purchased from other electricity producers to member school districts on Long Island. The Company believes that the proposed request is in conflict with existing federal and state policy and will oppose this petition. The Company is currently unable to predict the action, if any, that the PSC may take regarding this petition, or the impact on the Company if this proposal were ultimately approved. FINANCING PLANS The nature, timing and amount of the Company's future financings will be determined in light of various factors, including, among others, market conditions, the adequacy of rate relief experienced by the Company and the Company's financial condition. The Company has a total of approximately $1.1 billion of debt securities maturing during the three-year period beginning January 1, 1994, with a total of $600 million maturing in June and November of 1994. Subject to market conditions, the Company currently intends to fund these requirements with the proceeds from the sale of equity and debt securities in addition to the use of cash. RATINGS OF THE COMPANY'S SECURITIES As part of its review of the Company's proposed sale of long-term debt, Moody's Investors Service, Inc. ("Moody's") has downgraded the long-term credit ratings of the Company's securities. In addition to S-8 9 Moody's, the Company's securities are also rated by Standard & Poor's Corporation ("S&P"), Fitch Investors Service, Inc. ("Fitch") and Duff and Phelps, Inc. ("D&P"). The current ratings of the Company's securities are as follows:
MOODY'S S&P FITCH D&P ------- ---- ----- ----- First Mortgage Bonds..................................... Baa3 BBB- BBB BBB General and Refunding Bonds.............................. Baa3 BBB- BBB BBB 1985 Pollution Control Revenue Bonds* ("PCRBs").......... Aaa NR NR NR 1993 Electric Facilities Revenue Bonds* ("EFRBs")........ Aa2 NR NR NR Other PCRBs and EFRBs (unsecured)........................ Ba1 BB+ NR NR Debentures (unsecured)................................... Ba1 BB+ BBB- BB+ Preferred Stock.......................................... "ba1" BB+ BBB- BB MINIMUM INVESTMENT GRADE................................. Baa3 BBB- BBB- BBB-
- --------------- * -- Secured by Letters of Credit. NR -- Not rated. USE OF PROCEEDS The Company plans to apply the net proceeds from the sale of the New Bonds toward the repayment, at maturity, of $400 million aggregate principal amount of Debentures, 10.25% Series Due June 15, 1994 and toward the redemption of approximately $30.5 million aggregate principal amount of Debentures, 10.875% Series Due June 15, 1999, and approximately $4.5 million aggregate principal amount of Debentures, 11.375% Series Due June 15, 2019, and to pay approximately $1.9 million of redemption premiums. The balance of the funds needed to repay this maturing series and to accomplish these redemptions will be provided from cash on hand and from the sale, on June 6, 1994, subject to delivery on June 13, 1994, of 4,500,000 shares of Common Stock, the net proceeds of which will amount to approximately $86.7 million. SUPPLEMENTAL DESCRIPTION OF THE NEW BONDS The following description of the particular terms of the New Bonds offered hereby supplements, and to the extent inconsistent therewith replaces, the description of the general terms and provisions of New Bonds set forth in the accompanying Prospectus. General: The New Bonds are the thirtieth and thirty-first series of bonds to be issued under the Company's General and Refunding Indenture, dated as of June 1, 1975, as supplemented by twenty-six supplemental indentures and to be supplemented by a Twenty-seventh Supplemental Indenture (the "G&R Mortgage"), with United States Trust Company of New York, as Trustee (the "G&R Trustee"). The 1998 Series Bonds are limited to $100 million aggregate principal amount, and the 2004 Series Bonds are limited to $185 million aggregate principal amount. Interest and Payment: The 1998 Series Bonds will mature April 15, 1998, and the 2004 Series Bonds will mature April 15, 2004. The New Bonds will bear interest from the date of issuance, at the rate shown in their title, payable on April 15 and October 15, beginning October 15, 1994. Redemption Provisions: The New Bonds may not be redeemed prior to maturity except as set forth below under the heading "Extraordinary Redemption". Extraordinary Redemption: The New Bonds of each series may be redeemed at 100% of their principal amount, together with interest accrued thereon to the redemption date, upon at least 30 days' notice, as a whole, (i) at the Company's election within 120 days of the acquisition date if all of the Company's Common Stock is acquired by a governmental body or instrumentality, or (ii) at any time that all or substantially all of the Company's property is released from the lien of the G&R Mortgage. S-9 10 SUPPLEMENTAL DESCRIPTION OF THE PLEDGED BONDS The following description of the particular terms of the Pledged Bonds to be issued concurrently with the issuance of the New Bonds supplements and, to the extent inconsistent therewith, replaces the description of the general terms and provisions of Pledged Bonds set forth in the accompanying Prospectus. General: The G&R Mortgage prohibits the issuance of additional bonds under the Company's Indenture of Mortgage and Deed of Trust, dated as of September 1, 1951, as supplemented (the "First Mortgage"), except as Pledged Bonds. The Company anticipates that it will issue $264 million aggregate principal amount of Pledged Bonds, the maximum amount of Pledged Bonds that the Company is able to issue concurrently with the issuance of the New Bonds, based upon approximately $400 million of Net Bondable Additions and $25 million of retired First Mortgage Bonds. For a description of the circumstances under which additional Pledged Bonds of the same series of First Mortgage Bonds are required to be issued, see the discussion under the headings "Description of the New Bonds and the G&R Mortgage -- Pledged Bonds" and "Description of the Pledged Bonds and the First Mortgage -- Issuance of Pledged Bonds" in the accompanying Prospectus. Interest and Payment: In connection with the issuance of the New Bonds, the Company anticipates that it will, as required by the G&R Mortgage and to the extent permitted by the First Mortgage, issue a total of $264 million of First Mortgage Bonds, all to be pledged with the G&R Trustee, consisting of: $100 million of a new series of First Mortgage Bonds, designated Series DDD, 7 5/8% Due 1998 and $164 million of a new Series of First Mortgage Bonds, designated Series EEE, 8 5/8% Due 2004. See the discussion under the heading "New Bonds and the G&R Mortgage -- Pledged Bonds" in the accompanying Prospectus. The Series DDD and the Series EEE, to be issued pursuant to a Fiftieth Supplemental Indenture to the First Mortgage, will mature April 15, 1998, and April 15, 2004, respectively, and will bear interest at the rate shown in their titles until maturity. In the event of default, these Pledged Bonds will bear interest at the rate of 6% per annum thereafter. However, the G&R Mortgage provides that, except during the continuance of a Completed Default under the G&R Mortgage, no payment by way of interest, principal or otherwise shall be demanded or received on any Pledged Bonds. S-10 11 UNDERWRITING Subject to the terms and conditions set forth in the Underwriting Agreement, the Company has agreed to sell to the underwriters named below (the "Underwriters") and the Underwriters have severally agreed to purchase from the Company the principal amount of New Bonds set forth opposite their names below:
PRINCIPAL AMOUNT OF ---------------------------- 1998 2004 ------------ ------------ UNDERWRITERS SERIES BONDS SERIES BONDS -------------------------------------------------- ------------ ------------ Lehman Brothers Inc. ............................. $ 16,000,000 $ 29,000,000 Bear, Stearns & Co. Inc. ......................... 14,000,000 26,000,000 Chemical Securities Inc. ......................... 14,000,000 26,000,000 Dillon, Read & Co. Inc. .......................... 14,000,000 26,000,000 Goldman, Sachs & Co. ............................. 14,000,000 26,000,000 Merrill Lynch, Pierce, Fenner & Smith Incorporated......................... 14,000,000 26,000,000 PaineWebber Incorporated.......................... 14,000,000 26,000,000 Total........................................ $100,000,000 $185,000,000 =========== ===========
The Company has been advised that the several Underwriters propose initially to offer the New Bonds to the public at the public offering prices set forth on the cover page of this Prospectus Supplement, and to certain dealers at such prices less a concession of not in excess of .375% of the principal amount of the 1998 Series Bonds and .400% of the principal amount of the 2004 Series Bonds. Underwriters may allow, and such dealers may re-allow, a concession not in excess of .125% of the principal amount of the 1998 Series Bonds and .250% of the principal amount of the 2004 Series Bonds, to certain other dealers. After the initial public offering of the New Bonds, the public offering prices and concessions may be changed. Chemical Securities Inc. is an affiliate of Chemical Bank, which is (i) a lender under the Company's Revolving Credit Agreement; (ii) the trustee under the Company's Indenture, dated as of November 1, 1992, as supplemented and amended, under which various series of the Company's debentures have been issued; and (iii) paying agent under the Company's G&R Mortgage, under which various series of the Company's G&R bonds have been issued. In addition, Chemical Bank, or its affiliates, participate on a regular basis in various general financing and banking transactions for the Company. The Underwriting Agreement provides that the Company will indemnify the several Underwriters against certain civil liabilities, including liabilities arising under the Securities Act of 1933, as amended. S-11 12 - ------------------------------------------------------ - ------------------------------------------------------ No dealer, salesman or other person has been authorized to give any information or to make any representation not contained in this Prospectus Supplement or the accompanying Prospectus and, if given or made, such information or representation must not be relied upon as having been authorized by the Company or any underwriter. This Prospectus Supplement and the accompanying Prospectus do not constitute an offer to sell or a solicitation of any offer to buy any of the securities offered hereby in any jurisdiction to any person to whom it is unlawful to make such offer in such jurisdiction. Neither the delivery of this Prospectus Supplement or the accompanying Prospectus nor any sale made hereunder or thereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Company since the date hereof. ------------------------ TABLE OF CONTENTS PROSPECTUS SUPPLEMENT
PAGE ---- Financial Information................. S-3 The Company........................... S-4 Significant Information Respecting the Company......................... S-4 Use of Proceeds....................... S-9 Supplemental Description of the New Bonds........................... S-9 Supplemental Description of the Pledged Bonds....................... S-10 Underwriting.......................... S-11 PROSPECTUS Available Information................. 1 Incorporation of Certain Documents by Reference.............. 2 The Company........................... 3 Use of Proceeds....................... 3 Ratios of Earnings.................... 4 Description of the Securities......... 6 Experts............................... 19 Legality.............................. 19 Plan of Distribution.................. 19
- ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ $285,000,000 LONG ISLAND LIGHTING COMPANY $100,000,000 GENERAL AND REFUNDING BONDS, 7 5/8% SERIES DUE 1998 $185,000,000 GENERAL AND REFUNDING BONDS, 8 5/8% SERIES DUE 2004 ------------------------ PROSPECTUS SUPPLEMENT June 7, 1994 ------------------------ LEHMAN BROTHERS BEAR, STEARNS & CO. INC. CHEMICAL SECURITIES INC. DILLON, READ & CO. INC. GOLDMAN, SACHS & CO. MERRILL LYNCH & CO. PAINEWEBBER INCORPORATED - ------------------------------------------------------ - ------------------------------------------------------ 13 APPENDIX TO ELECTRONIC FORMAT DOCUMENT A map outlining the Company's service territory is displayed on page S-2 of this prospectus supplement. This map appears in the paper format version of the document and not in this electronic filing. -----END PRIVACY-ENHANCED MESSAGE-----