-----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, spRXCPkfi3kTzUPC3666z0DP7F40Ll6Mapl+PUG49wJh0sIrj+nIEyT5dxbpQzvY 1+R/dPqO2Gxebb0b/cvnNw== 0000950147-94-000014.txt : 19940225 0000950147-94-000014.hdr.sgml : 19940225 ACCESSION NUMBER: 0000950147-94-000014 CONFORMED SUBMISSION TYPE: 424B5 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19940224 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARIZONA PUBLIC SERVICE CO CENTRAL INDEX KEY: 0000007286 STANDARD INDUSTRIAL CLASSIFICATION: 4931 IRS NUMBER: 860011170 STATE OF INCORPORATION: AZ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 424B5 SEC ACT: 33 SEC FILE NUMBER: 033-61228 FILM NUMBER: 94512193 BUSINESS ADDRESS: STREET 1: 400 N FIFTH ST STREET 2: 18TH FLOOR MAIL STATION 9820 CITY: PHOENIX STATE: AZ ZIP: 85004 BUSINESS PHONE: 6022501000 424B5 1 FIRST MORTGAGE BONDS PROSPECTUS & SUPPLEMENT PROSPECTUS SUPPLEMENT Filed pursuant to Rule (To Prospectus Dated February 23, 1994) 424 (b)(5) (Form S-3 $100,000,000 Registration No. 33-61228) ARIZONA PUBLIC SERVICE COMPANY FIRST MORTGAGE BONDS, 65/8% SERIES DUE 2004 The Offered Bonds will mature on March 1, 2004. Interest on the Offered Bonds is payable semiannually on March 1 and September 1, commencing on September 1, 1994. For redemption provisions and other terms, see "Certain Terms of the Offered Bonds" herein and "Description of New Bonds -- Redemption" in the accompanying Prospectus. 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 PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. - ------------------------------------------------------------------------------ PRICE TO UNDERWRITING PROCEEDS TO PUBLIC (1) DISCOUNT COMPANY (1)(2) Per Bond.............. 99.531% .650% 98.881% Total................. $99,531,000 $650,000 $98,881,000 - ------------------------------------------------------------------------------ (1) Plus accrued interest from March 1, 1994 to date of delivery. (2) Before deduction of expenses payable by the Company estimated at $150,000. The Offered Bonds are offered subject to receipt and acceptance by the Underwriters, to prior sale and to the Underwriters' right to reject any order in whole or in part and to withdraw, cancel or modify the offer without notice. It is expected that delivery of the Offered Bonds will be made at the office of Salomon Brothers Inc, Seven World Trade Center, New York, New York, or through the facilities of The Depository Trust Company, on or about March 2, 1994. SALOMON BROTHERS INC CS FIRST BOSTON GOLDMAN, SACHS & CO. The date of this Prospectus Supplement is February 23, 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 A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. ------------ APPLICATION OF PROCEEDS The Company intends to use the net proceeds from the sale of the Offered Bonds for the repayment of short-term borrowings incurred for (i) the assumed redemption on March 1, 1994 of $14.21 million of the Company's $8.80 Cumulative Preferred Stock, Series K; and (ii) general corporate purposes. The estimated average interest rate of the short-term borrowings to be retired is 3.4%. Any proceeds not immediately so applied will be invested temporarily, pending such application, in United States government or agency obligations, commercial paper, bank certificates of deposit, or repurchase agreements collateralized by United States government or agency obligations, or will be deposited with banks. CERTAIN TERMS OF THE OFFERED BONDS The Offered Bonds will bear interest from March 1, 1994 or from the most recent Interest Payment Date (as defined below) to which interest has been paid at the rate of 65/8% per annum, payable semiannually on March 1 and September 1 of each year (each an "Interest Payment Date"), commencing September 1, 1994, to the persons in whose names the respective Offered Bonds shall have been registered at the close of business on the February 15 or August 15 next preceding such Interest Payment Date. The Offered Bonds will mature March 1, 2004, and will be limited to an aggregate principal amount of $100,000,000. The Offered Bonds are issuable in denominations of $1,000 or any integral multiple thereof. The Offered Bonds will not be redeemable prior to maturity, except that the Offered Bonds are subject to redemption at any time in whole, but only if all other first mortgage bonds of the Company then outstanding are also redeemed, within twelve months of (i) any merger or consolidation of the Company into or with any other corporation, or (ii) certain other transactions involving the transfer of substantially all of the property subject to the lien of the Mortgage, as then amended. The Offered Bonds may be redeemed in the circumstances described in the preceding sentence only at the applicable special redemption prices (expressed as percentages of the principal amount thereof) set forth in the table below, together with accrued interest to the date of redemption. SPECIAL REDEMPTION PRICES IF REDEEMED DURING REDEMPTION IF REDEEMED DURING REDEMPTION THE TWELVE MONTHS PRICE THE TWELVE MONTHS PRICE BEGINNING MARCH 1, -------------- BEGINNING MARCH 1, ------------- 1994................... 106.16% 1999.............. 103.08% 1995................... 105.54 2000.............. 102.46 1996................... 104.92 2001.............. 101.85 1997................... 104.31 2002.............. 101.23 1998................... 103.69 2003.............. 100.62 See "Description of New Bonds" in the Prospectus for additional interest payment provisions and other terms of the Offered Bonds. UNDERWRITING The Underwriters named below, for whom Salomon Brothers Inc, CS First Boston Corporation, and Goldman, Sachs & Co. are acting as Representatives, have severally agreed to purchase from the Company the following respective principal amounts of Offered Bonds: Principal Amount Underwriter -------------------- Salomon Brothers Inc ................................... $ 28,000,000 CS First Boston Corporation ............................ 28,000,000 Goldman, Sachs & Co. ................................... 28,000,000 Citicorp Securities, Inc. .............................. 5,500,000 J.P. Morgan Securities Inc. ............................ 5,500,000 Chemical Securities Inc................................. 5,000,000 ------------------ Total........................................... $ 100,000,000 ================== The Underwriting Agreement provides 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. The Company has been advised by the Representatives that the Underwriters propose to offer the Offered Bonds to the public initially at the public offering price set forth on the cover page of this Prospectus Supplement and, through the Representatives, to certain dealers at such price less a concession of .40% of the principal amount of the Offered Bonds; that the Underwriters and such dealers may reallow a discount of .25% of such principal amount on sales to certain other dealers; and that after the initial public offering, the public offering price and concession and discount to dealers may be changed by the Representatives. The Offered Bonds are a new issue of securities with no established trading market. The Company has been advised by the Representatives that they intend to make a market in the Offered Bonds but are not obligated to do so and may discontinue market making at any time without notice. No assurance can be given as to the liquidity of the trading market for the Offered Bonds. Certain of the Underwriters have provided various investment banking services, including serving as commercial paper dealers under the Company's commercial paper program, to the Company and its affiliates from time to time, for which they have received customary compensation. The Company is a borrower under credit facilities pursuant to which Chemical Bank, Citibank, N.A. and Morgan Guaranty Trust Company of New York, each an affiliate of an Underwriter, are lenders. To the extent the proceeds from the sale of the Offered Bonds are used to repay borrowings under such facilities, such banks will receive their share of such payments. Chemical Bank, an affiliate of an Underwriter, is the trustee with respect to secured lease obligation bonds which are secured by the Company's rental payments. In addition, certain of the Underwriters have provided various investment banking and commercial banking services to Pinnacle West Capital Corporation, the Company's parent ("Pinnacle West"), from time to time, for which they have received customary compensation. The Company has agreed to indemnify the several Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. ARIZONA PUBLIC SERVICE COMPANY FIRST MORTGAGE BONDS Arizona Public Service Company (the "Company") intends from time to time to issue up to $200,000,000 aggregate principal amount of its First Mortgage Bonds (the "New Bonds") on terms to be determined at the time of sale. For each issue of the New Bonds for which this Prospectus is being delivered (the "Offered Bonds"), there is an accompanying Prospectus Supplement (the "Prospectus Supplement") that sets forth the aggregate principal amount, maturity, rate and time of payment of interest, purchase price, any terms for redemption, the names of any underwriters or agents, the principal amounts, if any, to be purchased by the underwriters, and the compensation of such underwriters or agents, 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. The date of this Prospectus is February 23, 1994. AVAILABLE INFORMATION Arizona Public Service Company (the "Company") is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act"), and in accordance therewith files reports, proxy statements, and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements, and other information can be obtained at prescribed rates from the Public Reference Section of the Commission or may be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at certain of its regional offices located at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661; and 7 World Trade Center, 13th Floor, New York, New York 10048. Certain securities of the Company are listed on the New York Stock Exchange. Reports, proxy materials, and other information concerning the Company can be inspected at the office of this exchange at 20 Broad Street, 7th Floor, New York, New York 10005. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents previously filed with the Commission by the Company (File No. 1-4473) are incorporated by reference in this Prospectus: 1. The Company's Form 10-K Report for the fiscal year ended December 31, 1992 (the "1992 10-K Report"). 2. The Company's Form 10-Q Reports for the fiscal quarters ended March 31, June 30, and September 30, 1993 (the "September 10-Q Report"). 3. The Company's Form 8-K Reports, dated February 2, March 1, June 2, June 25, July 18, July 31, August 1, August 3, September 1, September 24, October 4, and December 15, 1993 (the "December 8-K Report"). All documents filed by the Company pursuant to Sections 13(a), 13(c), 14, or 15(d) of the 1934 Act after the filing date of the December 8-K Report and prior to the termination of the offering of the securities offered hereby shall be deemed to be incorporated by reference in this Prospectus and to be a part hereof from the date of filing of such documents. Any statement contained in a document 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 also incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not be deemed, except as modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to each person, including any beneficial owner, to whom a copy of this Prospectus is delivered, upon the oral or written request of 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. Request for such copies should be directed to Arizona Public Service Company, Office of the Secretary, Station 9068, P.O. Box 53999, Phoenix, Arizona 85072-3999, (602) 250-3252. SELECTED INFORMATION The following material is qualified in its entirety by reference to the detailed information and financial statements incorporated by reference in this Prospectus.
THE OFFERING Security Offered......................... Up to $200,000,000 of First Mortgage Bonds. Application of Proceeds.................. Except as otherwise described in the Prospectus Supplement, the net proceeds of the First Mortgage Bonds will be applied primarily to the redemption, repurchase, repayment, or retirement of outstanding indebtedness; and temporary investment pending such application. THE COMPANY Business................................. Electric utility servicing approximately 654,000 customers in an area that includes all or part of 11 of Arizona's 15 counties. Generating Fuel Mix (estimated for the twelve months ended December 31, 1993). Coal -- 62.3%; Nuclear -- 32.4%; Gas -- 5.1%; Other -- 0.2%.
FINANCIAL DATA (THOUSANDS OF DOLLARS):
Twelve Months Ended ----------------------------------------------- December 31, ----------------------------------------------- 1993 1992 1991 -------------- -------------- --------------- Electric Operating Revenues......................... $ 1,686,290 $ 1,669,679 $ 1,515,289 Refund Obligation (1)............................... -- -- (53,436) -------------- -------------- --------------- Net Operating Revenues............................ $ 1,686,290 $ 1,669,679 $ 1,461,853 ============== ============== =============== Net Income (Loss)................................... $ 250,386 $ 246,805 $ (222,649) ============== ============== =============== Ratio of Earnings to Fixed Charges.................. 2.99 2.73 (2)
CAPITALIZATION DATA (THOUSANDS OF DOLLARS):
As Adjusted(3) As of ------------------------------ December 31, 1993 Amount Percentage ------------------------ -------------- -------------- Long-Term Debt (excluding current maturities). $ 2,124,654 $ 2,224,654 53.9% Redeemable Preferred Stock.................... 197,610 183,400 4.5 Non-Redeemable Preferred Stock................ 193,561 193,561 4.7 Common Stock Equity........................... 1,522,941 1,522,941 36.9 ------------------- -------------- ------------ Total Capitalization...................... $ 4,038,766 $ 4,124,556 100.0% =================== ============== ============ ------- (1) The Company recorded a refund obligation to customers relating to and included in the write-off described in "Regulatory Matters -- Rate Case Settlement" in Note 2 of Notes to Financial Statements in Part II, Item 8 of the 1992 10-K Report and in Note 5 of Notes to Financial Statements in Part I, Item 1 of the September 10-Q Report. (2) The write-off resulting from the Arizona Corporation Commission order settling the Company's rate case (see "Regulatory Matters -- Rate Case Settlement" in Note 2 of Notes to Financial Statements in Part II, Item 8 of the 1992 10-K Report and in Note 5 of Notes to Financial Statements in Part I, Item 1 of the September 10-Q Report) resulted in a negative coverage ratio and an earnings coverage deficiency of approximately $317 million for the twelve months ended December 31, 1991. Excluding the effects of the write-off, the coverage ratio would have been 2.11 for the same period. (3) For the Company's (i) assumed issuance of $100 million of New Bonds; and (ii) assumed redemption on March 1, 1994 of $14.21 million of the Company's $8.80 Cumulative Preferred Stock, Series K. It is assumed that all or a substantial portion of the net proceeds of the issuance of $100 million of the New Bonds (the balance of the New Bonds remaining after the assumed issuance of New Bonds referenced in the preceding sentence) will be used for the redemption, repurchase, repayment, or retirement of a similar amount of outstanding long-term debt.
THE COMPANY The Company was incorporated in 1920 under the laws of Arizona and is principally engaged in providing electricity in the State of Arizona. The principal executive offices of the Company are located at 400 North Fifth Street, Phoenix, Arizona 85004 and its telephone number is (602) 250-1000. APPLICATION OF PROCEEDS Except as otherwise described in the Prospectus Supplement, the net proceeds of the New Bonds will be applied primarily to the redemption, repurchase, repayment, or retirement of outstanding indebtedness. Any proceeds not immediately so applied when received may be invested temporarily, pending such application, in United States government or agency obligations, commercial paper, bank certificates of deposit, or repurchase agreements collateralized by United States government or agency obligations, or will be deposited with banks. CONSTRUCTION AND FINANCING PROGRAMS The major components of the Company's capital requirements are refunding obligations and anticipated construction expenditures. Construction expenditures are anticipated to be $279 million, $302 million, and $293 million for 1994, 1995, and 1996, respectively. These amounts include nuclear fuel expenditures, but exclude capitalized property taxes and capitalized interest costs. For the period 1994 through 1996, the Company currently estimates that it will fund substantially all of its capital expenditures with internally generated funds, after the payment of dividends. In addition to funds required for construction expenditures, refunding obligations for preferred stock, long-term debt, a capitalized lease obligation, and certain anticipated early redemptions are expected to total approximately $187 million, $135 million, and $4 million for the years 1994, 1995, and 1996, respectively. For additional details with respect to the Company's construction and financing programs, see "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources" in Part II, Item 7 of the 1992 10-K Report and in Part I, Item 2 of the September 10-Q Report. EARNINGS RATIOS The following table sets forth the Company's historical ratio of earnings to fixed charges for each of the indicated periods: Twelve months ended - ---------------------------------------------------- December 31, - ---------------------------------------------------- 1993 1992 1991 1990 1989 2.99 2.73 (1) 2.05 2.29 - ---------- (1) The write-off resulting from the Arizona Corporation Commission ("ACC") order settling the Company's rate case (see "Regulatory Matters -- Rate Case Settlement" in Note 2 of Notes to Financial Statements in Part II, Item 8 of the 1992 10-K Report and in Note 5 of Notes to Financial Statements in Part I, Item 1 of the September 10-Q Report) resulted in a negative coverage ratio and an earnings coverage deficiency of approximately $317 million for the twelve months ended December 31, 1991. Excluding the effects of the write-off, the coverage ratio would have been 2.11 for the same period. For the purposes of these computations, "earnings" are defined as the sum of pre-tax income plus fixed charges of the Company and its subsidiaries; "fixed charges" consist of interest on debt, amortization of debt discount, premium, and expense and an estimated interest factor in rentals. DESCRIPTION OF NEW BONDS GENERAL The New Bonds will be issued in one or more new series under the Mortgage and Deed of Trust dated as of July 1, 1946 between the Company and Bank of America National Trust and Savings Association, as successor by merger to Security Pacific National Bank, as Trustee ("Trustee"), which as heretofore amended and supplemented is herein referred to as the "Mortgage," and which is to be further amended and supplemented by appropriate Supplemental Indentures ("Supplemental Indentures"). The statements herein concerning the New Bonds, the Mortgage, and the Supplemental Indentures are a summary and do not purport to be complete. They make use of terms defined in the Mortgage and are qualified in their entirety by reference to such documents. The New Bonds will be limited to a principal amount of $200 million. 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 on which such Offered Bonds mature; (iii) the rate per annum at which such Offered Bonds will bear interest; (iv) the times at which such interest will be payable; (v) the date, if any, after which such Offered Bonds may be redeemed at the option of the Company and the redemption price; and (vi) any other special terms. Interest will be paid to the person in whose names the Offered Bonds are registered at the close of business on the record date, as established in the Supplemental Indenture relating thereto, preceding the interest payment date in respect thereof. The New Bonds will be issued as fully registered bonds, without coupons, in denominations of $1,000 and multiples thereof. The New Bonds will be transferable at any time without any service or other charge, except transfer taxes and other governmental charges, if any. Except as otherwise described under "Issuance of Additional Bonds" or in the Prospectus Supplement, the covenants contained in the Mortgage and the New Bonds would not afford holders of the New Bonds protection in the event of a highly-leveraged transaction involving the Company. REDEMPTION The Offered Bonds are redeemable as set forth in the Prospectus Supplement relating thereto and, subject to any qualifications or variations set forth in any such Prospectus Supplement, are also subject to redemption, in each case at the principal amount of the Offered Bonds to be redeemed together with accrued interest to the date fixed for redemption, (i) in whole or in part with the proceeds from mortgaged property of the Company taken under eminent domain by, or otherwise sold to, a governmental body or agency; (ii) in whole or in part with the Proceeds of Released Property, including proceeds from the sale or other disposition (including a sale and leaseback) of property released from the lien of the Mortgage as specified in section (b) of the second to the last paragraph under "Security" below; and (iii) in whole, together with all other first mortgage bonds of the Company then outstanding, within twelve months of certain mergers or other transactions involving the transfer of substantially all of the property subject to the lien of the Mortgage, as then amended. In addition, after the date and at the price set forth in the Prospectus Supplement, Offered Bonds may be redeemed in whole or in part with cash deposited in the replacement fund discussed below. SECURITY The New Bonds will rank pari passu, except as to any sinking fund or similar fund provided for a particular series, with all bonds at any time outstanding under the Mortgage. The Mortgage constitutes a first mortgage lien on substantially all the fixed property owned by the Company (which does not include a combined cycle plant or certain interests in Unit 2 of the Palo Verde Nuclear Generating Station being leased), other than property specifically excepted by the Mortgage. Such lien and the Company's title to certain of its properties are subject to Excepted Encumbrances, to minor leases, defects, irregularities, and deficiencies, and to the considerations discussed below with respect to the Four Corners and Navajo Plant locations. The lien of the Mortgage will also extend to all after-acquired property (other than the excepted classes) located in the jurisdictions in which the necessary recordations or filings have been accomplished, subject to Excepted Encumbrances and to liens existing or placed on such property at the time of its acquisition by the Company. Both the Four Corners and the Navajo Plants are located on property held by the plant participants under leases from the Navajo Tribe and easements from the Secretary of the Interior. The leases extend from their respective effective dates in 1966 and 1969 for terms of 50 years with rights of renewal for up to 25 additional years. The easements are for 50-year terms from the same effective dates. While the Company owns the rights conferred upon it by the leases from the Navajo Tribe, the Company does not make any representation with respect to the Tribe's title to the lands leased (but is not aware of any assertion of a contesting claim to such lands) or with respect to the enforceability of the leases against the Tribe. The Mortgage requires the Company to keep the property encumbered thereby as an operating system or systems in good repair and working order, but permits the permanent discontinuance or reduction in capacity of any such properties which, in the judgment of the Board of Directors of the Company, is desirable in the conduct of its business or which is ordered by a regulatory authority or which properties are to be sold or disposed of by the Company. When not in default under the Mortgage, the Company may obtain the release from the lien thereof of (a) property that has become unserviceable, obsolete, or unnecessary for use in the Company's operations, provided that it replaces such property with, or substitutes for the same, an equal value of other property, and (b) other property that has been sold or otherwise disposed of, provided that the Company deposits with the Trustee cash in an amount, waives the right to issue additional bonds on the basis of retired bonds previously issued in an amount, or utilizes as a credit net Property Additions acquired by the Company within the preceding five years and having a fair value (not more than Cost), equal to the fair value of the property to be released. The Trustee may, and upon request of the Company shall, cancel and discharge the lien of the Mortgage and all indentures supplemental thereto whenever all indebtedness secured by the Mortgage has been paid. ISSUANCE OF ADDITIONAL BONDS Additional bonds may be issued under the Mortgage in a principal amount equal to (a) 60% of net Property Additions, (b) the principal amount of certain redeemed or retired bonds previously issued, and/or (c) deposited cash, provided that the Company's Adjusted Net Earnings over a twelve-month period are at least two times the annual interest on all bonds to be outstanding under the Mortgage after the issuance and on indebtedness secured by prior liens. Exceptions to this earnings coverage requirement apply to bonds issued on the basis of redeemed or retired bonds where the redeemed or retired bonds bore a higher rate of interest and where certain other conditions are satisfied. In addition, the Company's articles of incorporation allow the Company to issue additional preferred stock when certain earnings coverage requirements are met. Exceptions to this earnings coverage requirement apply to preferred stock issued for the purpose of redeeming or retiring other preferred stock. Assuming 8% as the rate of interest on bonds that might have been issued on December 31, 1993, and the issuance on that date of $200 million in aggregate principal amount of the New Bonds, the coverage afforded by earnings for the twelve months ended December 31, 1993, would have allowed the issuance of approximately $2.22 billion in aggregate principal amount of additional bonds, as compared to approximately $282 million of first mortgage bonds on the basis of property additions and approximately $819 million of first mortgage bonds on the basis of redeemed or retired bonds. In addition to the Mortgage restrictions on the Company's issuance of additional bonds, the Company must obtain ACC approval before issuing equity securities or incurring long-term debt. Existing ACC orders allow the Company to have approximately $501 million in aggregate par value of preferred stock and approximately $2.6 billion in principal amount of long-term debt outstanding at any one time. The Company does not expect these provisions or authorizations to limit the Company's ability to meet its capital requirements. Property Additions, and in many instances redeemed or retired bonds, as well as deposited cash, may be used for certain alternative purposes under the Mortgage, including the release of property from the lien thereof or the satisfaction of sinking or replacement fund requirements. The Mortgage contains restrictions on the issuance of bonds, withdrawal of cash, or release of property on the basis of property subject to prior liens. Property located on leaseholds or easements (as, for example, the Four Corners and Navajo Plants) will constitute fundable Property Additions if the leasehold or easement has an unexpired term of, or the term is extendable at the Company's option for, at least 30 years after the time of funding, or if the property may be removed by the Company without compensation. REPLACEMENT FUND So long as any of the New Bonds are outstanding, the Company is required for each calendar year to deposit with the Trustee cash in a formularized amount related to net additions to the Company's mortgaged utility plant; however, the Company may satisfy all or any part of the requirement by utilizing redeemed or retired bonds, net Property Additions, or property retirements. For 1993 such requirement amounted to approximately $122,000,000. Any cash that may be deposited by the Company pursuant to the requirement may, upon request by the Company, be applied to the redemption or purchase of bonds and, if not withdrawn against Property Additions or retired bonds within five years, must be so applied, subject in each case to any restrictions on any such redemption or purchase as set forth in the Prospectus Supplement relating to the issue of bonds to be redeemed or purchased. For example, the cash deposited with the Trustee by the Company in partial satisfaction of its 1992 replacement fund requirements was used to redeem $47,430,000 in aggregate principal amount of the Company's First Mortgage Bonds, 9% Series due 2017, at their principal amount plus accrued interest, on April 30, 1993. MODIFICATION OF THE MORTGAGE The Mortgage and the rights of bondholders may be modified with the consent of the Company, and of the Trustee if deemed affected, and the vote or assent of the holders of not less than 70% in principal amount of the Eligible bonds, and of not less than 70% in principal amount of the Eligible bonds of any one or more series (less than all) affected by any such modification; except that the bondholders, without the consent of the holder of each bond affected, have no power to (a) reduce the principal thereof, or the premium, if any, or rate of interest thereon or otherwise modify the terms of payment of principal, premium, or interest, or extend the maturity of any bonds, (b) permit the creation of any lien ranking prior to or on a parity with the lien of the Mortgage with respect to any of the mortgaged property, (c) deprive any nonassenting bondholder of a lien upon the mortgaged property for the security of his bonds, or (d) reduce the percentage of bondholders authorized to effect any such modification. EVENTS OF DEFAULT The following are defaults under the Mortgage: (a) failure to pay the principal of any bond outstanding under the Mortgage when due and payable; (b) failure to pay interest on any bond outstanding under the Mortgage within 60 days after the same is due and payable; (c) failure to pay any installment of any fund required to be applied to the purchase or redemption of bonds outstanding under the Mortgage within 60 days after the same is due and payable; (d) certain events in bankruptcy, insolvency, or reorganization; and (e) failure to perform any other covenant of the Mortgage continuing for 90 days after notice by the Trustee or holders of 15% in principal amount of Eligible bonds. The Mortgage allows the Trustee to withhold notice of certain defaults, not including any default in the payment of principal of, or interest on, any bond outstanding, or in the payment of any sinking, improvement, replacement, or purchase fund installment, if it in good faith determines that the withholding of such notice is in the interests of the bondholders. The holders of not less than a majority in principal amount of Eligible bonds may direct the time, method, and place of conducting any proceeding for any remedy available to the Trustee under the Mortgage; provided, however, that the Trustee may decline to follow any such direction under certain circumstances, including a determination made in good faith by the Trustee that it will not be sufficiently indemnified for any expenditures, including its own charges, in any action or proceeding so directed. The Company is required to file with the Trustee, on or before July 1 of each year, a certificate to the effect that, except as otherwise stated therein, the Company has complied with all of the provisions of the Mortgage and is not then in default thereunder. OTHER The Mortgage restricts the payment of dividends on common stock of the Company under certain conditions which have not existed in the past and do not currently exist. The Trustee under the Mortgage is Bank of America National Trust and Savings Association ("Bank of America"), Los Angeles, California. The Transfer Agent and Paying Agents are Bank of America and BankAmerica National Trust Company, New York, New York. The Company maintains normal banking arrangements with Bank of America, which include (i) a commitment by Bank of America to lend the Company up to $25 million under a revolving credit agreement, none of which was outstanding at December 31, 1993, and (ii) two commitments in the aggregate principal amount of approximately $140 million by Bank of America pursuant to reimbursement agreements related to letters of credit issued on behalf of the Company in connection with issuances of tax exempt bonds, the proceeds of which were made available to the Company, none of which was outstanding at December 31, 1993. In addition, Pinnacle West maintains normal banking arrangements with Bank of America. PLAN OF DISTRIBUTION The Company intends to sell up to $200 million in aggregate principal amount of the New Bonds to or through underwriters or dealers, and may also sell the New Bonds directly to other purchasers or through agents, as described in the Prospectus Supplement relating to an issue of Offered Bonds. The distribution of the Offered Bonds may be effected from time to time in one or more transactions at a fixed price or prices, which may be changed, or at market prices prevailing at the time of sale, at prices related to such prevailing market prices, or at negotiated prices. In connection with the sale of the Offered Bonds, underwriters may receive compensation from the Company or from purchasers of Offered Bonds for whom they may act as agents in the form of discounts, concessions, or commissions. Underwriters may sell Offered Bonds to or through dealers, and such dealers may receive compensation in the form of discounts, concessions, or commissions from the underwriters and/or commissions from the purchasers for whom they may act as agents. Underwriters, dealers, and agents that participate in the distribution of Offered Bonds may be deemed to be underwriters, and any discounts or commissions received by them from the Company and any profit on the resale of Offered Bonds by them may be deemed to be underwriting discounts and commissions under the Securities Act of 1933 (the "1933 Act"). Any such person who may be deemed to be an underwriter will be identified, and any such compensation received from the Company will be described, in the Prospectus Supplement. Under agreements which may be entered into by the Company, underwriters, dealers, and agents who participate in the distribution of the Offered Bonds may be entitled to indemnification by the Company against certain liabilities, including liabilities under the 1933 Act. EXPERTS The financial statements and the related financial statement schedules incorporated in this Prospectus by reference to the Company's 1992 Annual Report on Form 10-K have been audited by Deloitte & Touche, independent auditors, as stated in their report, which is incorporated herein by reference, and have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. With respect to the unaudited interim financial information for the periods ended March 31, June 30, and September 30, 1993 and 1992, which is incorporated herein by reference, Deloitte & Touche have applied limited procedures in accordance with professional standards for a review of such information. However, as stated in their reports included in the Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30, and September 30, 1993, and incorporated by reference herein, they did not audit and they do not express an opinion on that interim financial information. Accordingly, the degree of reliance on their reports on such information should be restricted in light of the limited nature of the review procedures applied. Deloitte & Touche are not subject to the liability provisions of Section 11 of the Securities Act of 1933 for their reports on the unaudited interim financial information because those reports are not "reports" or a "part" of the registration statement prepared or certified by an accountant within the meaning of Sections 7 and 11 of the Act. LEGAL OPINIONS The validity of the New Bonds offered hereby will be passed upon for the Company by Snell & Wilmer, One Arizona Center, Phoenix, Arizona 85004, and, it is currently anticipated, for any underwriters of New Bonds by Sullivan & Cromwell, 444 South Flower Street, Los Angeles, California 90071. In giving their opinions, Sullivan & Cromwell and Snell & Wilmer may rely as to matters of New Mexico law upon the opinion of Keleher & McLeod, P.A., 1200 Public Service Building, Albuquerque, New Mexico 87102, and Sullivan & Cromwell may rely as to all matters of Arizona law upon the opinion of Snell & Wilmer. 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 AN 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 SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE SUCH DATE. ---------- TABLE OF CONTENTS PAGE -------- PROSPECTUS SUPPLEMENT Application of Proceeds.......... S-2 Certain Terms of the Offered Bonds.......................... S-2 Underwriting..................... S-3 PROSPECTUS Available Information............ 2 Incorporation of Certain Documents by Reference......... 2 Selected Information............. 3 The Company...................... 4 Application of Proceeds.......... 4 Construction and Financing Programs....................... 4 Earnings Ratios.................. 4 Description of New Bonds......... 5 Plan of Distribution............. 8 Experts.......................... 9 Legal Opinions................... 9 $100,000,000 ARIZONA PUBLIC SERVICE COMPANY FIRST MORTGAGE BONDS, 65/8% SERIES DUE 2004 [LOGO] SALOMON BROTHERS INC CS FIRST BOSTON GOLDMAN, SACHS & CO. PROSPECTUS SUPPLEMENT DATED FEBRUARY 23, 1994 -----END PRIVACY-ENHANCED MESSAGE-----