0000912057-01-537171.txt : 20011101
0000912057-01-537171.hdr.sgml : 20011101
ACCESSION NUMBER: 0000912057-01-537171
CONFORMED SUBMISSION TYPE: 424B3
PUBLIC DOCUMENT COUNT: 1
FILED AS OF DATE: 20011031
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: PSI ENERGY INC
CENTRAL INDEX KEY: 0000081020
STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911]
IRS NUMBER: 350594457
STATE OF INCORPORATION: IN
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 424B3
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-71316
FILM NUMBER: 1771602
BUSINESS ADDRESS:
STREET 1: 1000 EAST MAIN STREET
STREET 2: PO BOX 960
CITY: PLAINFIELD
STATE: IN
ZIP: 46168
BUSINESS PHONE: 3178399611
MAIL ADDRESS:
STREET 1: 1000 EAST MAIN STREET
STREET 2: 139 E FOURTH ST, PO BOX 960
CITY: PLAINFIELD
STATE: IN
ZIP: 46168
FORMER COMPANY:
FORMER CONFORMED NAME: PUBLIC SERVICE CO OF INDIANA INC
DATE OF NAME CHANGE: 19900509
424B3
1
a2062202z424b3.txt
424B3
PROSPECTUS
OCTOBER 30, 2001
PSI ENERGY, INC.
OFFER TO EXCHANGE
FIRST MORTGAGE BONDS
SERIES EEE, 6.65%, DUE JUNE 15, 2006
WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
FOR
ALL OUTSTANDING FIRST MORTGAGE BONDS SERIES EEE,
6.65%, DUE JUNE 15, 2006
------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON NOVEMBER 30, 2001, UNLESS EXTENDED.
------------------------
Terms of the Exchange Offer:
- We will exchange all outstanding bonds that are validly tendered and not
withdrawn prior to the expiration of the Exchange Offer.
- You may withdraw tenders of outstanding bonds at any time prior to the
expiration of the Exchange Offer.
- The exchange of bonds will not be a taxable exchange for United States
federal income tax purposes.
- We will not receive any proceeds from the Exchange Offer.
- The terms of the bonds to be issued are substantially identical to the
outstanding bonds, except for certain transfer restrictions, registration
rights and related additional interest provisions applicable to the
outstanding bonds.
------------------------
THE SECURITIES AND EXCHANGE COMMISSION AND STATE SECURITIES REGULATORS HAVE NOT
APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS
TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
TABLE OF CONTENTS
Where You Can Find More Information......................... 2
Incorporation of Certain Documents by Reference............. 2
Summary..................................................... 3
The Company............................................... 3
The Exchange Offer........................................ 4
Consequences of Exchanging Bonds Pursuant to the Exchange
Offer................................................... 5
The New Bonds............................................. 6
Selected Income Information............................... 8
Capitalization............................................ 9
Ratio of Earnings to Fixed Charges........................ 9
Use of Proceeds............................................. 10
Description of New Bonds.................................... 11
The Exchange Offer.......................................... 19
United States Federal Income Tax Consequences............... 26
Plan of Distribution........................................ 26
Legal Matters............................................... 26
Independent Public Accountants.............................. 26
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
any document that we file at the Public Reference Room of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549. Information on the operation of
the Public Reference Room may be obtained by calling the Commission at
1-800-SEC-0330. You may also read our filings on Internet at the Commission's
web site at http://www.sec.gov.
This prospectus constitutes part of a registration statement on Form S-4
filed with the SEC under the Securities Act of 1933 (the "Securities Act"). It
omits some of the information contained in the registration statement, and
reference is made to the registration statement for further information on PSI
Energy, Inc. and the New Bonds being offered. Any statement contained in this
prospectus concerning the provisions of any document filed as an exhibit to the
registration statement or otherwise filed with the Commission is not necessarily
complete, and in each instance reference is made to the copy of the document
filed.
INCORPORATION OF DOCUMENTS BY REFERENCE
Our Annual Report on Form 10-K for the year ended December 31, 2000 and our
Quarterly Reports on Form 10-Q for the quarters ended March 31 and June 30,
2001, filed under the Securities and Exchange Act of 1934 (the "Exchange Act")
are incorporated into this prospectus by reference.
We also incorporate by reference any filings made with the Commission under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
prospectus and before the termination of this Exchange Offer. You may request a
copy of these filings at no cost, by writing or telephoning the office of Wendy
L. Aumiller, Acting Treasurer, PSI Energy, Inc., 139 East Fourth Street,
Cincinnati, Ohio 45202, telephone number (513) 287-2367.
2
SUMMARY
THIS SUMMARY MAY NOT CONTAIN ALL THE INFORMATION THAT MAY BE IMPORTANT TO
YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS BEFORE MAKING AN INVESTMENT DECISION.
UNLESS THE CONTEXT INDICATES OTHERWISE, THE WORDS "PSI," "THE COMPANY," "WE,"
"OUR," "OURS" AND "US" REFER TO PSI ENERGY, INC. AND ITS SUBSIDIARIES AND JOINT
VENTURES, INCLUDING UNCONSOLIDATED ENTITIES.
THE COMPANY
We are an electric public utility company incorporated in Indiana. We are
primarily engaged in the production, transmission, distribution, and sale of
electric energy in north central, central and southern Indiana. The area we
serve has an estimated population of 2.2 million people located in 69 of the
state's 92 counties, and includes the cities of Bloomington, Columbus, Kokomo,
Lafayette, New Albany and Terre Haute. Our fully regulated generation portfolio
of approximately 6,000 megawatts currently serves a customer base of over
700,000. We currently have over 1,900 employees.
We are a wholly-owned subsidiary of Cinergy Corp., a registered holding
company under the Public Utility Holding Company Act of 1935. Our principal
operating utility affiliates are The Cincinnati Gas & Electric Company and The
Union Light, Heat and Power Company. Cincinnati Gas & Electric, an Ohio
corporation, is a combination electric and gas public utility company that
provides service principally in the southwestern portion of Ohio. Union Light is
a Kentucky corporation that provides electric and gas service in northern
Kentucky.
Our principal executive offices are located at 1000 East Main Street,
Plainfield, Indiana 46168; our telephone number is (513) 287-1099.
3
THE EXCHANGE OFFER
Securities Offered We are offering up to $325,000,000 aggregate principal
amount of First Mortgage Bonds Series EEE, 6.65%, due
June 15, 2006, which have been registered under the
Securities Act ("New Bonds").
The Exchange Offer We are offering to issue the New Bonds in exchange for a
like principal amount of outstanding First Mortgage Bonds
Series EEE, 6.65%, due June 15, 2006, issued by PSI on
June 22, 2001 ("Old Bonds"). We are offering to issue the
New Bonds to satisfy our obligations in a registration
rights agreement entered into when the Old Bonds were sold
in transactions exempt from registration under the
Securities Act. For procedures for tendering, see "The
Exchange Offer."
Tenders, Expiration Date, Withdrawal The Exchange Offer will expire at 5:00 p.m. New York City
time on November 30, 2001, unless it is extended. If you
decide to exchange your Old Bonds for New Bonds, you must
acknowledge that you are not engaging in, and do not intend
to engage in, a distribution of the New Bonds. If you decide
to tender your Old Bonds under the Exchange Offer, you may
withdraw them at any time before November 30, 2001. If we
decide for any reason not to accept any Old Bonds for
exchange, your Old Bonds will be returned to you without
expense promptly after the Exchange Offer expires.
Federal Income Tax Consequences Your exchange of Old Bonds for New Bonds in the Exchange
Offer will not result in any income, gain or loss to you for
Federal income tax purposes. See "United States Federal
Income Tax Considerations."
Use of Proceeds We will not receive any proceeds from the issuance of the
New Bonds under the Exchange Offer.
Exchange Agent LaSalle Bank National Association is the exchange agent for
the Exchange Offer.
4
CONSEQUENCES OF EXCHANGING BONDS PURSUANT TO THE EXCHANGE OFFER
Based on interpretations contained in no-action letters issued from the
Commission's staff to third parties, we believe that New Bonds issued in
exchange for Old Bonds under the Exchange Offer may be offered for resale,
resold or otherwise transferred by you without registering the New Bonds under
the Securities Act or delivering a prospectus:
- so long as you are not one of our "affiliates," as defined in Rule 405 of
the Securities Act;
- so long as you acquire the New Bonds in the ordinary course of your
business; and
- unless you are a broker-dealer, so long as you do not have any arrangement
with any person to participate in the distribution of the New Bonds.
Unless you are a broker-dealer, you must acknowledge that:
- you are not engaged in, and do not intend to engage in, a distribution of
the New Bonds; and
- you have no arrangement or understanding to participate in a distribution
of the New Bonds.
If you are an affiliate of PSI, or you are engaged in, intend to engage in
or have any arrangement or understanding with respect to, the distribution of
New Bonds acquired in the Exchange Offer, you should not rely on our
interpretations of the position of the Commission's staff and must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction.
If you are a broker-dealer and receive New Bonds for your own account in the
Exchange Offer:
- you must acknowledge that you will deliver a prospectus in connection with
any resale of those New Bonds; and
- you may use this prospectus, as it may be amended or supplemented from
time to time, in connection with the resale of New Bonds received in
exchange for Old Bonds acquired by you as a result of market-making or
other trading activities.
For a period of 90 days after the expiration of the Exchange Offer, we will
make this prospectus available to any broker-dealer for use in connection with
any such resale.
You may offer or sell the New Bonds in certain jurisdictions only if they
have been registered or qualified for sale there, or an exemption from
registration or qualification is available and is complied with. Subject to the
limitations specified in the registration rights agreement, we will register or
qualify the New Bonds for offer or sale under the securities laws of any
jurisdictions upon your reasonable written request. Unless you request that the
sale of the New Bonds be registered or qualified in a jurisdiction, we currently
do not intend to register or qualify the sale of the New Bonds in any
jurisdiction. If you do not comply with the requirement described in this
paragraph, you could incur liability under the Securities Act, and we will not
indemnify you in those circumstances.
5
THE NEW BONDS
The terms of the New Bonds and the Old Bonds are identical in all material
respects, except that the New Bonds have been registered under the Securities
Act and some transfer restrictions, registration rights and related additional
interest provisions applicable to the Old Bonds do not apply to the New Bonds.
Issuer............................... PSI Energy, Inc.
New Bonds offered.................... $325,000,000 aggregate principal amount of First Mortgage
Bonds Series EEE, 6.65%, due June 15, 2006.
Maturity............................. June 15, 2006.
Interest payment dates............... June 15 and December 15, beginning December 15, 2001.
Ranking.............................. The New Bonds will be secured senior obligations and rank
equally with our secured senior indebtedness. As of
June 30, 2001, we had outstanding $1,520.7 million of
indebtedness, of which $822.5 million was secured senior
indebtedness, including the Old Bonds.
Ratings.............................. The New Bonds will be rated the same as the Old Bonds, A- by
Standard & Poor's Ratings Group, A3 by Moody's Investor
Service, Inc. and A- by Fitch IBCA, Inc. Security ratings
are not recommendations to buy, sell or hold the New Bonds.
Ratings are subject to revision or withdrawal at any time by
the rating agencies.
Optional redemption.................. We may redeem some or all of the New Bonds at any time at a
redemption price equal to the sum of
- the principal amount of the New Bonds being redeemed plus
accrued and unpaid interest, and
- the excess, if any, of (1) the sum of the present value of
the principal amount of the New Bonds to be redeemed,
together with the remaining scheduled payments of interest
on the New Bonds (not including any portion of such
payments of interest accrued as of the redemption date),
discounted to the redemption date on a semi-annual basis
(assuming a 360-day year consisting of twelve 30-day
months) at the treasury rate plus 25 basis points over
(2) 100% of the principal amount of the New Bonds to be
redeemed.
Certain rights to require repurchase
of New Bonds by PSI.................. If an unaffiliated third party acquires us or our parent
company, Cinergy Corp., and both Moody's and S&P lower their
credit rating on the New Bonds to less than Investment Grade
within 30 calendar days of the event, then each holder of
New Bonds will have the right, at the holder's option, to
require us to repurchase all or any part of the holder's New
Bonds. We will purchase the New Bonds at a price equal to
100% of the principal amount of the New Bonds, plus accrued
and unpaid interest, to the repurchase date.
6
Interest rate adjustment............. The interest rate payable on the New Bonds will be subject
to adjustment from time to time if either Moody's or S&P
reduces the rating ascribed to our senior secured debt below
Baa3 or BBB-, respectively.
Use of proceeds...................... We will not receive any proceeds from the issuance of the
New Bonds.
Form and denomination................ The New Bonds will be issued in denominations of $1,000 and
integral multiples of $1,000.
7
SELECTED INCOME INFORMATION
The following table gives selected financial information for PSI. This
information is derived from our historical results. See "Where You Can Find More
Information." All amounts are in thousands.
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED ------------------------------------
JUNE 30, 2001 2000 1999(1) 1998(2)
-------------- ---------- ---------- ----------
Operating Revenues.......................... $2,099,937 $2,684,197 $2,135,706 $2,403,038
Depreciation and Amortization............... 73,995 142,584 136,402 130,604
Operating Income............................ 151,288 297,472 272,024 161,244
Interest.................................... 38,537 78,250 86,265 89,359
Income Taxes................................ 42,662 88,547 69,215 23,147
Net Income.................................. 75,649 135,398 117,199 52,038
Preferred Dividend Requirement.............. 1,293 3,738 4,601 5,659
Net Income Applicable to Common Stock....... 74,356 131,660 112,598 46,379
------------------------
Notes:
(1) In the third quarter of 1999, we experienced extreme weather conditions
which resulted in a reduction in net income of $41 million, after tax.
(2) In 1998, we incurred charges against income relating to:
- a one-time charge of $80 million (before taxes) reflecting the
implementation of a 1989 settlement of a dispute with the Wabash Valley
Power Association, Inc. that resulted from the cancellation of the Marble
Hill nuclear power station in 1984; and
- the recording of $62 million (before taxes) of unrealized losses related
to energy marketing and trading operations.
8
CAPITALIZATION
OUTSTANDING OUTSTANDING
JUNE 30, 2001 DECEMBER 31, 2000
---------------------------- ----------------------------
% OF % OF
AMOUNT CAPITALIZATION AMOUNT CAPITALIZATION
----------- -------------- ----------- --------------
(THOUSANDS) (THOUSANDS)
Total Debt................................ $1,520,698 54.9% $1,445,865 55.2%
Cumulative Preferred Stock Not Subject to
Mandatory Redemption.................... 42,347 1.5 42,348 1.6
Common Stock Equity....................... 1,207,923 43.6 1,133,695 43.2
---------- ----- ---------- -----
Total Capitalization.................. $2,770,968 100.0% $2,621,908 100.0%
========== ===== ========== =====
RATIO OF EARNINGS TO FIXED CHARGES
Listed below is the ratio of earnings to fixed charges for the six months
ended June 30, 2001 and each year of the five year period ended December 31,
2000.
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED ----------------------------------------------------------------
JUNE 30, 2001 2000 1999 1998 1997 1996
-------------- -------- -------- -------- -------- --------
3.66 3.58 2.99 1.78 3.31 3.35
For the purpose of computing the ratio of earnings to fixed charges,
earnings consist of pretax income from continuing operations plus fixed charges.
Fixed charges consist of:
- interest expense;
- amortized premiums, discounts and capitalized expenses related to
indebtedness; and
- an estimate of the interest within rental expense.
9
USE OF PROCEEDS
We will not receive any cash proceeds from the issuance of the New Bonds
offered by this prospectus. New Bonds will be exchanged for Old Bonds as
described in this prospectus on our receipt of Old Bonds in like principal
amount. The Old Bonds surrendered in exchange for the New Bonds will be retired
and cancelled. Accordingly, the issuance of the New Bonds will not result in any
change in our indebtedness.
The net proceeds to us from the sale of the Old Bonds was approximately
$322 million (after discounts and commissions and other expenses of the
offering). We used these net proceeds to repay a portion of our outstanding
short-term indebtedness.
10
DESCRIPTION OF NEW BONDS
GENERAL
The Old Bonds were, and the New Bonds will be, issued under a First Mortgage
Indenture dated as of September 1, 1939, between the Company and LaSalle Bank
National Association, as Trustee, as amended and as supplemented by a
Fifty-Third Supplemental Indenture dated June 15, 2001. The following summary
does not purport to be complete and is subject in all respects to the provisions
of, and is qualified in its entirety by reference to, the First Mortgage
Indenture and the specific terms of the New Bonds. Whenever particular
provisions or defined terms in those documents are referred to in this
description, those provisions or terms are incorporated by reference from the
applicable document.
The terms of the New Bonds are identical in all material respects to the
terms of the Old Bonds, except for the removal of the transfer restrictions and
the registration rights and related additional interest provisions applicable to
the Old Bonds because they were not registered under the Securities Act. The New
Bonds will rank equally, except as to any sinking fund or similar fund provided
for in any outstanding series of First Mortgage Bonds, with all First Mortgage
Bonds now or hereafter issued and outstanding under the First Mortgage
Indenture. The New Bonds, together with all other outstanding First Mortgage
Bonds of PSI, will be secured by a mortgage on substantially all of the
Company's properties.
We will issue New Bonds in an aggregate principal amount of up to
$325,000,000. Just as the Old Bonds were, the New Bonds will be a series of
First Mortgage Bonds designated Series EEE and will mature on June 15, 2006. The
New Bonds will be issued only in fully registered form in denominations of
$1,000 and integral multiples of $1,000.
INTEREST
We will pay interest on the New Bonds initially at a rate of 6.65%, subject
to increase as discussed below. Payments will occur on June 15 and December 15
of each year beginning December 15, 2001. Interest will accrue from June 22,
2001.
The amount of interest payable for any period will be computed based on a
360-day year of twelve 30-day months. Interest will be paid to holders of record
on the business day immediately preceding the interest payment date.
If any interest payment date is not a business day, then interest payable on
that date will be paid on the next business day. No additional interest or other
payment will be paid due to the delay.
INTEREST RATE ADJUSTMENT
The interest rate payable on the New Bonds will be subject to adjustment
from time to time if either Moody's or S&P reduces the rating ascribed to our
senior secured debt below Investment Grade, which is Baa3 in the case of Moody's
and BBB- in the case of S&P. In this event, the interest rate payable on the New
Bonds will be increased by .25% for such a reduction by either Moody's or S&P,
with a maximum increase of .50% if both rating agencies reduce their ratings
below Investment Grade. If Moody's or S&P subsequently increases the rating
ascribed to our senior secured debt above Ba1 in the case of Moody's or above
BB+ in the case of S&P, then the interest rate payable on the New Bonds will be
decreased by .25% for such an upgrade by either Moody's or S&P, as the case may
be, with a maximum decrease of .50% if both rating agencies upgrade their
ratings to Investment Grade, but in no event will the interest rate be reduced
to below the initial interest rate. Any such interest rate increase or decrease
will take effect from the interest payment date following the related rating
downgrade or upgrade, as the case may be. There is no limit to the number of
times the interest rate payable on the New Bonds can be adjusted. However, the
interest rate payable on the New Bonds will not exceed the initial interest rate
of 6.65%, plus a maximum adjustment of .50% for rating agency downgrades.
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CERTAIN RIGHTS TO REQUIRE REPURCHASE OF NEW BONDS BY PSI
If an unaffiliated third party acquires us or our parent company, Cinergy
Corp. (an "Acquisition Event"), and both Moody's and S&P lower their credit
rating on the New Bonds to less than Investment Grade within 30 calendar days of
the Acquisition Event, then each holder of New Bonds will have the right, at the
holder's option, to require us to repurchase all or any part of the holder's New
Bonds. We will purchase the New Bonds on the Repurchase Date at a price equal to
100% of the principal amount of the New Bonds, plus accrued and unpaid interest,
to the Repurchase Date.
We are obligated to give notice to the Trustee and holders of the New Bonds
within 30 calendar days after the New Bonds become subject to repurchase. The
date on which we give notice to the Trustee is called the "Notice Date." To
require us to repurchase the New Bonds, a holder must, on or before the close of
business on the 20th business day prior to the Repurchase Date, notify the
Trustee of the holder's exercise of this option and complete and submit
appropriate documentation. We may hold, re-market or retire the New Bonds that
we purchase from the holders.
The "Repurchase Date" means the 45th calendar day after the Notice Date. A
"business day" is any day other than a Saturday or Sunday or a day that banking
institutions in the City of New York or the City of Chicago are authorized or
obligated to close.
As of the date of this prospectus, our current senior secured long-term debt
(which includes the New Bonds) rating by Moody's is A3 and by S&P is A-.
However, on December 12, 2000, S&P placed us, Cinergy Corp. and all of our
affiliates on CreditWatch with negative implications. On January 22, 2001,
Moody's assigned negative outlooks to our debt and preferred stock securities
and those of Cinergy Corp. and all of our affiliates.
Our failure to repurchase the New Bonds on the Repurchase Date will be an
event of default under the First Mortgage Indenture upon 60 days following
notice to us from the Trustee of our failure to perform or observe our covenant
to repurchase the New Bonds.
OPTIONAL REDEMPTION BY PSI
Subject to the terms of the First Mortgage Indenture, we will have the right
to redeem the New Bonds, in whole or from time to time in part, until maturity
(such redemption, a "Make-Whole Redemption," and the date thereof, the
"Redemption Date"), upon not less than 30 nor more than 60 days notice to the
holders, at a redemption price equal to the sum of (i) the principal amount of
the Bonds being redeemed plus accrued and unpaid interest thereon to the
Redemption Date, and (ii) the Make-Whole Amount (as defined below), if any, with
respect to the New Bonds being redeemed.
"Make-Whole Amount" means the excess, if any, of (i) the sum, as determined
by a Quotation Agent, of the present value of the principal amount of the New
Bonds to be redeemed, together with scheduled payments of interest thereon from
the Redemption Date to June 15, 2006 (not including any portion of such payments
of interest accrued as of the Redemption Date), in each case discounted to the
Redemption Date on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months) at the Adjusted Treasury Rate over (ii) 100% of the
principal amount of the New Bonds to be redeemed.
"Adjusted Treasury Rate" means the rate per annum equal to the semi-annual
equivalent yield to maturity of the Comparable Treasury Issue, calculated using
a price for the Comparable Treasury Issue (expressed as a percentage of its
principal amount) equal to the Comparable Treasury Price for the Redemption
Date, calculated on the third business day preceding the Redemption Date, plus
in each case .25% (25 basis points).
"Comparable Treasury Issue" means the United States Treasury security
selected by the Quotation Agent as having a maturity comparable to the remaining
term from the Redemption Date to the stated maturity of the New Bonds that would
be utilized, at the time of selection and in accordance with
12
customary financial practice, in pricing new issues of corporate debt securities
of comparable maturity to the remaining term of the New Bonds.
"Quotation Agent" means the Reference Treasury Dealer selected by the
Trustee after consultation with the Company. "Reference Treasury Dealer" means a
primary U.S. Government securities dealer.
"Comparable Treasury Price" means (1) the average of the bid and asked
prices for the Comparable Treasury Issue (expressed in each case as a percentage
of its principal amount) on the third business day preceding the Redemption
Date, as set forth in the daily statistical release designated "H.15" (or any
successor release) published by the Board of Governors of the Federal Reserve
System or (2) if that release (or any successor release) is not published or
does not contain those prices on that business day, (A) the average of the
Reference Treasury Dealer Quotations for the Redemption Date, after excluding
the highest and lowest of such Reference Treasury Dealer Quotations, or (B) if
the Trustee obtains fewer than three Reference Treasury Dealer Quotations, the
average of those Quotations.
"Reference Treasury Dealer Quotations" means the average, as determined by
the Trustee (after consultation with the Company), of the bid and asked prices
for the Comparable Treasury Issue (expressed in each case as a percentage of its
principal amount) quoted in writing to the Trustee by the Reference Treasury
Dealer at 5:00 p.m., New York City time, on the third business day preceding the
Redemption Date.
Notice of any redemption will be mailed by us at least 30 days but not more
than 60 days before any Redemption Date to each holder of New Bonds to be
redeemed. If less than all the New Bonds are to be redeemed at our option, the
Trustee will select, in such manner as it deems fair and appropriate, the New
Bonds to be redeemed.
Unless we default in payment of the Redemption Price, on and after any
Redemption Date, interest will cease to accrue on the New Bonds or portions
thereof called for redemption.
NO OPTIONAL REDEMPTION BY HOLDERS
The New Bonds will not be redeemable at the option of any holder prior to
maturity. As set forth under "Certain Rights to Require Repurchase of New Bonds
by PSI," any holder will have the right, under certain circumstances, to require
us to repurchase all or any part of the holder's New Bonds.
SINKING FUND
The New Bonds are not entitled to the benefits of a sinking fund.
MAINTENANCE AND RENEWAL
The New Bonds are not entitled to the benefits of a Maintenance and Renewal
Fund. However, with respect to all series of bonds issued prior to Series BBB,
the following provisions of the First Mortgage Indenture will apply:
During each calendar year, so long as any bonds are outstanding thereunder,
we must expend sums equal to the greater of (a) 15% of our gross operating
revenues (which, as defined in the First Mortgage Indenture, excludes revenues
received after January 1, 1976 which are attributable to increases in the unit
cost of fuel over the average unit cost of fuel used in 1975) for such calendar
year or (b) 2.25% of our depreciable property on January 1 of such year for
(i) the maintenance and repair of the mortgaged properties, (ii) the
construction or acquisition of bondable property, or (iii) the retirement of
bonds issued under the First Mortgage Indenture. We must deposit annually with
the First Mortgage Trustee cash to the extent that such aggregate amount is not
so expended, less any credits for excess expenditures for such purposes in prior
years. Any cash so deposited may be withdrawn by us or applied by the First
Mortgage Trustee as provided in the First Mortgage Indenture (including the
redemption at the optional redemption price of bonds which are then redeemable
at our
13
option). Excess expenditures may be used to comply with the requirements of any
subsequent year or years, and gross expenditures (as defined and limited in the
First Mortgage Indenture) for bondable property may be certified to comply with
the provisions of clause (ii) above. Expenditures so used, and bonds retired
through expenditures so used, cannot be used for other purposes under the First
Mortgage Indenture; and expenditures used or bonds retired for other purposes
under the First Mortgage Indenture cannot be used for the purpose of complying
with said maintenance and renewal provisions. The First Mortgage Indenture does
not require that any notice be given to bondholders in connection with these
maintenance and renewal requirements, unless and until an event of default under
the First Mortgage Indenture occurs by reason of our failure to meet the
requirements. The maintenance and renewal provisions of the First Mortgage
Indenture do not require the retirement annually of any specific amount of
outstanding first mortgage bonds.
We will maintain the mortgaged properties in good repair and working order.
SECURITY
The New Bonds will rank PARI PASSU, except as to any sinking fund,
Maintenance and Renewal Fund or similar fund provided for in any outstanding
series of bonds, with all bonds now or subsequently issued and outstanding under
the First Mortgage Indenture. The First Mortgage Indenture constitutes a first
mortgage lien, subject only to permitted liens (as defined in the First Mortgage
Indenture), on all or substantially all of our permanent fixed properties.
ISSUE OF ADDITIONAL FIRST MORTGAGE BONDS
Additional new series of bonds, without limitation as to aggregate principal
amount, may be issued under, and in accordance with the terms of, the First
Mortgage Indenture from time to time on any one or more of the following bases:
1. For or on account of the "retirement" of an equal principal amount
of bonds of any one or more other series previously authenticated under the
First Mortgage Indenture; but we have covenanted that, so long as any bonds
issued under the First Mortgage Indenture remain outstanding, bonds issued
for or on account of such "retirement" will be issued only in respect of
bonds issued after August 31, 1945.
2. In principal amount not greater than 60% of "net expenditures" made
by the Company after September 26, 1945 for the construction or acquisition
of "bondable property" (which includes construction work in progress to the
extent actually construed or erected) which has become subject to the lien
of the First Mortgage Indenture and is not subject to any lien or mortgage
equal or prior in lien or mortgage securing obligations for the payment or
redemption of which the necessary funds shall have been deposited
irrevocably in trust with instructions to apply such funds to the payment or
redemption of such obligations.
3. To an aggregate principal amount of bonds equal to the amount of
cash deposited with the First Mortgage Trustee under the First Mortgage
Indenture, which "deposited cash" may be applied to the redemption or
purchase of bonds of any series issued under the First Mortgage Indenture or
may be withdrawn by us to an amount equal to the principal amounts of any
bonds which could be authenticated for the purposes and under the conditions
stated in 1 and 2 above.
No additional bonds may be authenticated for or on account of "net
expenditures" for "bondable property" or for "deposited cash," and no additional
bonds bearing a higher rate of interest than the bonds for or on account of the
"retirement" of which they are issued may be authenticated more than five years
prior to the stated maturity of the bonds for or on account of the "retirement"
of which they are issued, unless "net earnings" requirements (i.e., net earnings
for the twelve months ended prior to such issuance must be two times the
interest on all bonds outstanding after giving effect to such issuance) are
satisfied. For purposes of the First Mortgage Indenture, the "net earnings" of
PSI for any period means an amount, computed in accordance with accepted
principles of accounting, determined
14
by deducting from the total gross earnings and income for PSI derived from all
sources for such period all operating expenses of PSI for such period, the
remainder being adjusted, if necessary, so that no more than ten per centum
(10%) thereof consists of the aggregate of (a) net non-operating income,
(b) net operating revenues derived from the operation by PSI of any properties
other than electric, gas or water properties, and (c) net earnings from any
properties not owned by PSI.
The Supplemental Indenture relating to the New Bonds provides that, at any
time when no First Mortgage Bonds of any series prior to Series BBB are
outstanding, the 60% "bonding ratio" referred to in subsection 2 of the first
paragraph above will increase to 66 2/3%.
ACQUISITION OF PROPERTY SUBJECT TO PRIOR LIEN
The First Mortgage Indenture provides that after having acquired properties,
other than the properties acquired on April 9, 1941 from Dresser Power
Corporation, of a value in the aggregate of $500,000, without regard to the
limitations referred to in this paragraph, we will not, so long as any bonds are
outstanding under the First Mortgage Indenture, acquire any properties which at
the time of the acquisition are subject to a lien or liens equal or prior to the
lien of the First Mortgage (other than "permitted liens") if at the date of
acquisition the principal amount of outstanding obligations secured by such
liens exceeds 60% of the "value" of "bondable property" so acquired, or if the
"net earnings" of such property for twelve consecutive months ending within
90 days next preceding the date of acquisition has been less than two times the
interest charges for one year on all outstanding obligations secured by such
lien at the time of acquisition, except obligations for the payment or
redemption of which the necessary funds have been deposited irrevocably in trust
with instructions to apply such funds to the payment or redemption of such
obligations. The First Mortgage Indenture further provides that upon the
acquisition of any property subject to a lien or liens equal or prior to the
lien of the First Mortgage, we will cause all such mortgages then existing on
such property to be closed and, after such acquisition, will permit no
additional indebtedness to be secured by those mortgages.
The Supplemental Indenture relating to the New Bonds provides that, at any
time when no First Mortgage Bonds of any series prior to Series BBB are
outstanding, the 60% figure in principal amount of outstanding obligations
secured referred to in the previous paragraph above will increase to 66 2/3%.
MODIFICATION OF FIRST MORTGAGE INDENTURE
In general, modifications or alterations of the First Mortgage Indenture,
and of the rights or obligations of PSI and of the bondholders, as well as
waivers of compliance with the First Mortgage Indenture, may with the approval
of our Board of Directors be made at bondholders' meetings with the affirmative
vote of 75% of the bonds entitled to vote at the meeting with respect to matters
involved; PROVIDED, HOWEVER, that no modifications or alterations may be made
which will permit (1) the extension of the time or times of payment of the
principal of, or the interest or the premium (if any) on, any bond, or the
reduction in the principal amount thereof or in the rate of interest or the
amount of any premium thereon, or any other modification in terms of payment of
such principal, interest or premium, which terms shall always be unconditional,
or (2) the creation of any lien ranking prior to or on a parity with the lien of
the First Mortgage with respect to any of the mortgaged properties, or (3) the
depriving of any bondholder of a lien upon the mortgaged properties, or (4) the
reduction of the percentage of bonds required for the taking of action with
respect to any such modification or alteration.
The Supplemental Indenture relating to the New Bonds provides that, at any
time when no First Mortgage Bonds of any series prior to Series BBB are
outstanding, the 75% vote requirement referred to in the previous paragraph will
decrease to 66 2/3%.
DIVIDEND RESTRICTIONS
The First Mortgage Indenture provides that, so long as any bonds are
outstanding under the First Mortgage Indenture, PSI may not declare or pay any
dividends or make any distributions on shares of
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any class of its capital stock (other than on preferred stock or dividends
payable in shares of its Common Stock or dividends which are applied to the
purchase of shares of its Common Stock by the shareholder receiving such
dividends) or purchase, retire or otherwise acquire for a consideration any
shares of its Common Stock, except out of our earned surplus or net profits
determined in accordance with generally accepted principles of accounting and
lawfully available for that purpose. For the purpose of this covenant only, in
computing the amount of such earned surplus or net profits, there shall have
been, subsequent to September 1, 1939, and up to the date as of which the
computation is made, charged to operating expenses for maintenance or as a
reserve for depreciation or retirements, the aggregate amounts required to be
expended or deposited with the First Mortgage Trustee under the provisions
described under the caption "Maintenance and Renewal" for such period. The First
Mortgage Indenture does not require that any notice be given to bondholders in
connection with the foregoing restrictions on dividends, unless and until an
event of default under the First Mortgage Indenture occurs by reason of the
company's violation of that dividend restriction.
CONCERNING THE FIRST MORTGAGE TRUSTEE
The First Mortgage Indenture provides that the holders of a majority in
principal amount of the outstanding bonds have the right to require the First
Mortgage Trustee to take action on behalf of the bondholders, but under certain
circumstances the First Mortgage Trustee may decline to follow such directions
or to exercise certain of its powers. Prior to taking such action, the First
Mortgage Trustee is entitled to indemnity satisfactory to it against costs,
expenses and liabilities that may be incurred in the course of such action. Such
right to indemnification does not impair the absolute right of any bondholder to
enforce payment of the principal of and interest on his bonds when due.
Certain affiliates of the First Mortgage Trustee provide various financial
services for us and our affiliates in the normal course of business.
DEFAULTS, NOTICES AND CERTIFICATES
The First Mortgage Indenture provides generally that failure for 30 days to
pay interest on any bond, failure to pay the principal of any bond, whether at
maturity or upon redemption or declaration, failure to pay principal or interest
on any prior lien obligations, failure for 60 days after notice to perform or
observe other covenants of the First Mortgage Indenture, default under any
mortgage or other instrument securing any prior lien obligations and the
occurrence of insolvency, bankruptcy or similar proceedings constitute events of
default. The First Mortgage Trustee is required to give notice to the
bondholders of the occurrence of any event which constitutes, or which, with the
giving of notice or the lapse of time or both, would constitute, an event of
default, except that the First Mortgage Trustee may withhold such notice if the
First Mortgage Trustee determines that to do so is in the interests of the
bondholders unless such event relates to the payment of principal of or interest
on or any sinking fund obligation for the benefit of any of the bonds. Upon the
occurrence of an event of default, the First Mortgage Trustee may, and upon
written request of the holders of a majority in principal amount of all bonds
then outstanding under the First Mortgage Indenture due and payable, must
enforce the lien of the First Mortgage by foreclosure or exercise such other
remedies as are provided in the First Mortgage Indenture.
Compliance with certain provisions of the First Mortgage Indenture is
required to be evidenced by various written statements or certificates filed
with the First Mortgage Trustee, and various certificates and other papers are
required to be filed with the First Mortgage Trustee annually and upon the
happening of various events. However, no periodic evidence is required to be
furnished as to the absence of events of default or compliance with the terms of
the First Mortgage Indenture.
BOOK ENTRY; DELIVERY AND FORM
The New Bonds will be issued in fully registered form, without coupons.
Except as described below, the New Bonds will be deposited with, or on behalf
of, the Depository Trust Company, New
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York, New York ("DTC"), and registered in the name of DTC's nominee, in the form
of a global bond (the "Global New Bond").
We expect that pursuant to procedures established by DTC:
- upon deposit of the Global New Bond, DTC or its custodian will credit on
its internal system interests in the Global New Bond to the accounts of
persons who have accounts with DTC ("Participants"); and
- ownership of interests in the Global New Bond will be shown on, and the
transfer of those interests will be effected only through, records
maintained by DTC or its nominee (with respect to interests of
Participants) and the records of Participants (with respect to interests
of persons other than Participants). Ownership of beneficial interests in
the Global New Bond will be limited to Participants or persons who hold
interests through Participants.
So long as DTC or its nominee is the registered owner of the New Bonds, DTC
or the nominee will be considered the sole owner of the New Bonds represented by
the Global New Bond for all purposes under the First Mortgage Indenture. No
beneficial owner of an interest in the Global New Bond will be able to transfer
that interest except in accordance with DTC's procedures, in addition to those
provided for under the First Mortgage Indenture with respect to the New Bonds.
Payments of the principal of and interest on the Global New Bond will be
made to DTC or its nominee, as the case may be, as the registered owner thereof.
None of PSI, the Trustee or any paying agent under the First Mortgage Indenture
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in the Global
New Bond or for maintaining, supervising or reviewing any records relating to
those beneficial ownership interests.
We expect that DTC or its nominee, upon receipt of any payment of the
principal of or interest on the Global New Bond, will credit Participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of the Global New Bond as shown on the records
of DTC or its nominee. We also expect that payments by Participants to owners of
beneficial interests in the Global New Bond held through such Participants will
be governed by standing instructions and customary practice as is now the case
with securities held in nominee accounts. These payments will be the
responsibility of the Participants.
Transfers between Participants in DTC will be effected in accordance with
DTC's rules and will be settled in immediately available funds. If a holder
requires physical delivery of a certificated New Bond for any reason, including
to sell New Bonds to persons in states which require physical delivery of the
New Bonds or to pledge such securities, the holder must transfer its interest in
the Global New Bond in accordance with the normal procedures of DTC and with the
procedures set forth in the First Mortgage Indenture.
DTC has advised us that:
- it will take any action permitted to be taken by a holder of New Bonds
(including the presentation of New Bonds for exchange as described below)
only at the direction of one or more Participants to whose account at DTC
interests in the Global New Bond are credited and only in respect of that
portion of the aggregate principal amount of New Bonds as to which the
Participant or Participants has or have given direction. However, if there
is an Event of Default under the First Mortgage Indenture, DTC will
exchange the Global New Bonds for certificated New Bonds, which it will
distribute to its Participants;
- it is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the Uniform Commercial Code and a
"clearing agency" registered pursuant to the provisions of Section 17A of
the Exchange Act; and
17
- it was created to hold securities for its Participants and facilitate the
clearance and settlement of securities transactions between Participants
through electronic book-entry changes in accounts of its Participants,
thereby eliminating the need for physical movement of certificates.
Participants include securities brokers and dealers, banks, trust
companies and clearing corporations and certain other organizations.
Indirect access to the DTC system is available to others such as banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a Participant, either directly or indirectly
("Indirect Participants").
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interest in the Global New Bond among Participants, it is under no
obligation to perform those procedures, and the procedures may be discontinued
at any time. Neither PSI nor the Trustee will have any responsibility for the
performance by DTC or its Participants or Indirect Participants of their
respective obligations under the rules and procedures governing their
operations.
EXCHANGE OF INTERESTS IN GLOBAL NEW BOND FOR CERTIFICATED NEW BONDS
The entire Global New Bond may be exchanged for definitive New Bonds in
registered, certificated form ("Certificated New Bonds") if:
- DTC:
- notifies us that it is unwilling or unable to continue as depositary
for the Global New Bond and we fail to appoint a successor depositary
within 90 days, or
- has ceased to be a clearing agency registered under the Exchange Act;
- we notify the Trustee in writing that we elect to cause the issuance of
Certificated New Bonds; or
- there shall have occurred and be continuing a Default or an Event of
Default with respect to the New Bonds.
Beneficial interests in the Global New Bond may be exchanged for
Certificated New Bonds only upon at least 20 days' prior written notice given to
the Trustee by or on behalf of DTC in accordance with customary DTC procedures.
Certificated New Bonds delivered in exchange for any beneficial interest in the
Global New Bond will be registered in the names, and issued in any approved
denominations, requested by DTC on behalf of its Direct or Indirect
Participants.
Neither PSI nor the Trustee will be liable for any delay by the holder of
the Global New Bond or DTC in identifying the beneficial owners of New Bonds,
and PSI and the Trustee may conclusively rely on, and will be protected in
relying on, instructions from the holder of the Global New Bond or DTC for all
purposes.
TITLE
PSI, the Trustee, and any agent of PSI or the Trustee may treat the person
in whose name a New Bond is registered as the absolute owner of the New Bond
(whether or not that New Bond may be overdue) for the purpose of making payment
and for all other purposes.
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THE EXCHANGE OFFER
Pursuant to a Registration Rights Agreement among PSI and the initial
purchasers of the Old Bonds (the "Registration Rights Agreement"), we agreed to
use our reasonable best efforts to register the New Bonds with the Commission
and to offer the holders of Old Bonds the opportunity to exchange their Old
Bonds for New Bonds. This prospectus is a part of the registration statement
filed for that purpose (the "Exchange Offer Registration Statement"). The
Registration Rights Agreement also provides that if any holders of Old Bonds,
other than affiliates of ours and certain other holders, who participate in the
Exchange Offer cannot receive New Bonds that may be sold without restriction
under federal and state securities laws, we will file a registration statement
covering resale of those Old Bonds (a "Shelf Registration Statement") and will
use our reasonable best efforts to cause the Shelf Registration Statement to
become effective and to keep it effective for two years from June 22, 2001, the
date on which we delivered the Old Bonds to the initial purchasers (the "Closing
Date").
If either:
- we have not exchanged New Bonds for all Old Bonds validly tendered in
accordance with the terms of the Exchange Offer on or prior to 35 days
after the date on which the Exchange Offer Registration Statement was
declared effective, or
- if applicable, the Shelf Registration Statement has been declared
effective but ceases to be effective at any time prior to two years from
the Closing Date,
the Registration Rights Agreement provides that additional interest ("Additional
Interest") will accrue on the Old Bonds at a rate of .25% per annum, beginning
immediately following the relevant event.
Additional Interest on the Old Bonds will cease to accrue:
- upon the exchange of New Bonds for all Old Bonds tendered, or
- upon the effectiveness of the Shelf Registration Statement which had
ceased to remain effective prior to two years from the Closing Date, or
- upon the termination of transfer restrictions on the Old Bonds in
accordance with Rule 144(k) under the Securities Act.
Any Additional Interest will be payable in cash, on the same original
payment dates of the Old Bonds. The amount of Additional Interest will be
determined by multiplying the applicable Additional Interest rate by the
principal amount of the Old Bonds, multiplied by a fraction, the numerator of
which is the number of days the Additional Interest rate was applicable during
the period (determined on the basis of a 360-day year comprised of twelve 30-day
months), and the denominator of which is 360.
Old Bonds not tendered in the Exchange Offer will bear interest at the same
rates as in effect at the time of issuance of the Old Bonds.
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD BONDS
Upon the terms and subject to the conditions set forth in this prospectus
and in the accompanying letter of transmittal (the "Letter of Transmittal"), we
will:
- accept for exchange Old Bonds which are properly tendered on or prior to
the Expiration Date and not withdrawn as permitted below, and
- keep the Exchange Offer open for not less than 30 days.
The "Expiration Date" will be 5:00 p.m., New York City time, on
November 30, 2001, unless we extend the period of time for which the Exchange
Offer is open, in which case the "Expiration Date"
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will be the latest time and date to which the Exchange Offer is extended. As of
the date of this prospectus, $325,000,000 in aggregate principal amount of the
Old Bonds were outstanding. The Exchange Offer is not conditioned upon any
minimum principal amount of Old Bonds being tendered. This prospectus, together
with the Letter of Transmittal, is first being sent on or about the date set
forth on the cover page to all holders of Old Bonds at the addresses set forth
in the security register for the Old Bonds.
We expressly reserve the right:
- at any time or from time to time, to extend the period of time during
which the Exchange Offer is open, and thereby delay acceptance of any Old
Bonds, and
- to amend or terminate the Exchange Offer, and not to accept for exchange
any Old Bonds not previously accepted, upon the occurrence of any of the
conditions of the Exchange Offer specified below under "Certain Conditions
to the Exchange Offer."
We will give oral or written notice of any extension, amendment,
non-acceptance or termination to holders of Old Bonds as promptly as
practicable. In the case of any extension, notice will be given by means of a
press release or other public announcement no later than 9:00 a.m., New York
City time, on the next business day after the previously scheduled Expiration
Date. Subject to applicable law, we shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
issuing a release to the Dow Jones News Service.
Holders of Old Bonds do not have appraisal or dissenters' rights in
connection with the Exchange Offer. Old Bonds which (1) are not tendered for
exchange or (2) are tendered but not accepted in connection with the Exchange
Offer and are not entitled to be included in a Shelf Registration Statement will
remain outstanding and be entitled to the benefits of the First Mortgage
Indenture, but will not be entitled to any further registration rights under the
Registration Rights Agreement.
PROCEDURES FOR TENDERING OLD BONDS
The tender to us of Old Bonds by a holder as set forth below and our
acceptance of those Old Bonds will constitute a binding agreement between the
tendering holder and us upon the terms and subject to the conditions set forth
in this prospectus and in the accompanying Letter of Transmittal. Except as set
forth below, a holder who wishes to tender Old Bonds for exchange pursuant to
the Exchange Offer must:
- transmit a properly-completed and duly-executed Letter of Transmittal,
including all other documents required by the Letter of Transmittal, to
LaSalle Bank National Association at the address given below under the
heading "Exchange Agent," or
- if Old Bonds are tendered in accordance with the book-entry procedures
described below, transmit an Agent's Message to the Exchange Agent at the
address given below under the heading "Exchange Agent."
In addition:
- the Exchange Agent must receive, on or before the Expiration Date, either
(1) certificates for the Old Bonds, or
(2) a timely confirmation of book-entry transfer of the Old Bonds into
the Exchange Agent's account at DTC, along with the Letter of
Transmittal or an Agent's Message, or
- the holder must comply with the guaranteed delivery procedures described
below.
The term "Agent's Message" means a message, transmitted to DTC and received
by the Exchange Agent and forming a part of a book-entry transfer, that states
that DTC has received an express
20
acknowledgment that the tendering holder agrees to be bound by the Letter of
Transmittal and that we may enforce the Letter of Transmittal against this
holder.
THE METHOD OF DELIVERY OF OLD BONDS, LETTERS OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. IF DELIVERY IS BY
MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED, WITH RETURN
RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR OLD BONDS SHOULD BE SENT TO
PSI.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Old Bonds surrendered for exchange are
tendered:
- by a registered holder of the Old Bonds who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery
Instructions" on the Letter of Transmittal, or
- for the account of an Eligible Institution (as defined below).
If the signature on a Letter of Transmittal or a notice of withdrawal is
required to be guaranteed, the guarantee must be by a firm which is a member of
a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States which participates in the
Medallion Signature Guarantee Program (each an "Eligible Institution"). If Old
Bonds are registered in the name of a person other than the person signing the
Letter of Transmittal, the Old Bonds surrendered for exchange must be endorsed
by, or be accompanied by a written instrument or instruments of transfer or
exchange, in satisfactory form as determined by us in our sole discretion, duly
executed by the registered holder with the signature guaranteed by an Eligible
Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Bonds tendered for exchange will be determined by
PSI in its sole discretion and will be final and binding. We reserve the
absolute right:
- to reject any and all tenders of any Old Bonds not properly tendered or to
not accept any Old Bonds if acceptance might, in our judgment or the
judgment of our counsel, be unlawful, and
- to waive any defects or irregularities or conditions of the Exchange Offer
as to any particular Old Bonds either before or after the Expiration Date
(including the right to waive the ineligibility of any holder who seeks to
tender Old Bonds in the Exchange Offer).
Unless waived, any defects or irregularities in connection with the tender
of Old Bonds for exchange must be cured within such reasonable period of time as
we determine. Neither PSI, the Exchange Agent nor any other person will be under
any duty to give notification of any defect or irregularity with respect to any
tender of Old Bonds for exchange, nor will any of them incur any liability for
failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than the
registered holder or holders of the Old Bonds, those Old Bonds must be endorsed
or accompanied by appropriate powers of attorney, in either case signed exactly
as the name or names of the registered holder or holders that appear on the Old
Bonds.
If the Letter of Transmittal or any Old Bonds or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers or corporations or others acting in a fiduciary or representative
capacity, those persons should so indicate when signing and, unless waived by
PSI, submit proper evidence satisfactory to PSI of their authority to so act.
By executing, or otherwise becoming bound by a Letter of Transmittal, each
holder of the Old Bonds (other than certain specified holders) will represent
that:
- it is not our affiliate,
21
- any New Bonds to be received by it are being acquired in the ordinary
course of business, and
- it has no arrangement with any person to participate in the distribution
(within the meaning of the Securities Act) of the New Bonds.
If the tendering holder is a broker-dealer that will receive New Bonds for its
own account in exchange for Old Bonds that were acquired as a result of
market-making activities or other trading activities, it will be required to
acknowledge that it will deliver a prospectus in connection with any resale of
those New Bonds. See "--Resale of the New Bonds."
ACCEPTANCE OF OLD BONDS FOR EXCHANGE; DELIVERY OF NEW BONDS
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
promptly after the Expiration Date we will accept all Old Bonds properly
tendered and will issue the New Bonds. See "Certain Conditions to the Exchange
Offer" below. For purposes of the Exchange Offer, we will be deemed to have
accepted properly tendered Old Bonds for exchange if and when we have given oral
or written notice thereof to the Exchange Agent.
In all cases, issuance of New Bonds for Old Bonds that are accepted for
exchange pursuant to the Exchange Offer will be made only after timely receipt
by the Exchange Agent of certificates for the Old Bonds or a timely Book-Entry
Confirmation of the Old Bonds into the Exchange Agent's account at DTC pursuant
to the book-entry transfer procedures described below, a properly completed and
duly executed Letter of Transmittal and all other required documents. If any
tendered Old Bonds are not accepted for any reason set forth in the terms and
conditions of the Exchange Offer or if certificates representing Old Bonds are
submitted for a greater principal amount than the holder desires to exchange,
the unaccepted or non-exchanged Old Bonds will be returned without expense to
the tendering holder (or, in the case of Old Bonds tendered by book-entry
transfer into the Exchange Agent's account at DTC pursuant to the book-entry
transfer procedures described below, will be credited to an account maintained
with DTC) as promptly as practicable after the expiration or termination of the
Exchange Offer.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Old Bonds at DTC for purposes of the Exchange Offer promptly after the
date of this prospectus. Any financial institution that is a Participant in
DTC's systems may execute the exchange and make book-entry delivery of Old Bonds
by causing DTC to transfer those Old Bonds into the Exchange Agent's account in
accordance with DTC's Automated Tender Offer Program ("ATOP") procedures for
transfer. DTC Participants that are accepting the exchange should transmit their
acceptance to DTC, which will edit and verify the acceptance and execute a
book-entry delivery to the Exchange Agent's account at DTC. DTC will then send
an Agent's Message to the Exchange Agent for its acceptance. Delivery of the
Agent's Message by DTC will satisfy the terms of the exchange as to the
execution and delivery of a Letter of Transmittal by the Participant identified
in the Agent's Message. DTC Participants also may accept the exchange by
submitting a notice of guaranteed delivery through ATOP. The exchange for the
Old Bonds so tendered will only be made after timely confirmation of such
book-entry transfer of Old Bonds into the Exchange Agent's account, and timely
receipt by the Exchange Agent of the Agent's Message and any other documents
required by the Letter of Transmittal.
DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH ITS PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
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GUARANTEED DELIVERY PROCEDURES
If a holder of the Old Bonds desires to tender those Old Bonds and the Old
Bonds are not immediately available, or time will not permit the holder's Old
Bonds or other required documents to reach the Exchange Agent before the
Expiration Date, or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if:
- the tender is made through an Eligible Institution;
- prior to the Expiration Date, the Exchange Agent receives from the
Eligible Institution a properly completed and duly executed Letter of
Transmittal (or a facsimile thereof) and Notice of Guaranteed Delivery,
substantially in the form provided by us (by telegram, telex, facsimile
transmission, mail or hand delivery), setting forth the name and address
of the holder of Old Bonds and the amount of Old Bonds tendered, stating
that the tender is being made thereby and guaranteeing that within five
New York Stock Exchange ("NYSE") trading days after the date of execution
of the Notice of Guaranteed Delivery, the certificates of all physically
tendered Old Bonds, in proper form for transfer, or a Book-Entry
Confirmation, as the case may be, and any other documents required by the
Letter of Transmittal will be deposited by the Eligible Institution with
the Exchange Agent; and
- the certificates for all physically tendered Old Bonds, in proper form for
transfer, or a Book-Entry Confirmation, as the case may be, and all other
documents required by the Letter of Transmittal, are received by the
Exchange Agent within five NYSE trading days after the date of execution
of the Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Bonds may be withdrawn at any time prior to the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
"Exchange Agent." Any notice of withdrawal must specify:
- the name of the person having tendered the Old Bonds to be withdrawn,
- the Old Bonds to be withdrawn (including the principal amount of such Old
Bonds), and
- (where certificates for Old Bonds have been transmitted) the name in which
the Old Bonds are registered, if different from that of the withdrawing
holder.
If certificates for Old Bonds have been delivered or otherwise identified to
the Exchange Agent, then the withdrawing holder must also submit the serial
numbers of the particular certificates to be withdrawn and a signed notice of
withdrawal with signatures guaranteed by an Eligible Institution unless the
holder is an Eligible Institution. If Old Bonds have been tendered pursuant to
the procedure for book-entry transfer described above, any notice of withdrawal
must specify the name and number of the account at DTC to be credited with the
withdrawn Old Bonds and otherwise comply with DTC's procedures. All questions as
to the validity, form and eligibility (including time of receipt) of a notice of
withdrawal will be determined by us, and our determination will be final and
binding on all parties. Any Old Bonds that are withdrawn will be deemed not to
have been validly tendered for exchange for purposes of the Exchange Offer. Any
Old Bonds which have been tendered for exchange but which are not exchanged for
any reason will be returned to the holder without cost to the holder (or, in the
case of Old Bonds tendered by book-entry transfer into the Exchange Agent's
account at DTC pursuant to the book-entry transfer procedures described above,
the Old Bonds will be credited to an account maintained with DTC for the Old
Bonds) as soon as practicable after withdrawal, rejection of tender or
termination of the Exchange Offer. Properly withdrawn Old Bonds may be
re-entered by following one
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of the procedures described under "Procedures for Tendering Old Bonds" above at
any time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provisions of the Exchange Offer, we are not
required to accept for exchange, or to issue New Bonds in exchange for, any Old
Bonds and may terminate or amend the Exchange Offer, if at any time before
acceptance of those Old Bonds for exchange or the exchange of the New Bonds for
Old Bonds, the acceptance or issuance would violate applicable law or any
interpretation of the Commission's staff.
The condition in the paragraph immediately above is for our sole benefit and
may be asserted by us regardless of the circumstances giving rise to such
condition. Our failure at any time to exercise this right is not to be deemed a
waiver of the right, which is an ongoing right that may be asserted at any time
and from time to time.
In addition, we will not accept for exchange any Old Bonds tendered, and no
New Bonds will be issued in exchange for Old Bonds, if at the time a stop order
is threatened or in effect with respect to either the Registration Statement of
which this prospectus is a part or the qualification of the First Mortgage
Indenture under the Trust Indenture Act.
EXCHANGE AGENT
LaSalle Bank National Association has been appointed as the Exchange Agent
for the Exchange Offer. All executed Letters of Transmittal should be directed
to the Exchange Agent at one of the addresses described below. Questions and
requests for assistance, requests for additional copies of this prospectus or of
the Letter of Transmittal and requests for notices of guaranteed delivery should
be directed to the Exchange Agent, addressed as follows:
DELIVER TO:
LaSalle Bank National Association, Exchange Agent
BY MAIL OR BY HAND:
LaSalle Bank National Association
135 South LaSalle Street
Suite 1960
Chicago, Illinois 60603
Attention: Corporate Trust Administration
BY FACSIMILE:
(312) 904-2236
CONFIRM BY TELEPHONE:
(312) 904-5619
Delivery to an address other than as described above or transmission of
instructions via facsimile other than as described above does not constitute a
valid delivery.
FEES AND EXPENSES
The principal solicitation is being made by mail; however, additional
solicitation may be made by telegraph, telephone or in person by our officers,
regular employees and affiliates. We will not pay any additional compensation to
officers and employees who engage in soliciting tenders or make any payment to
brokers, dealers or others soliciting acceptances of the Exchange Offer.
However, we will
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pay the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses relating to those
services.
The cash expenses of making the Exchange Offer will be paid by us and are
estimated to be $75,000.
TRANSFER TAXES
Holders who tender their Old Bonds for exchange will not be obligated to pay
any transfer taxes in connection therewith, except that holders who instruct us
to register New Bonds in the name of, or request that Old Bonds not tendered or
not accepted in the Exchange Offer to be returned to, a person other than the
registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
RESALE OF THE NEW BONDS
Under existing interpretations of the Commission's staff contained in
several no-action letters to third parties, the New Bonds will be freely
transferable after the Exchange Offer without further registration under the
Securities Act. However, any purchaser of Old Bonds who is an "affiliate" of PSI
or who intends to participate in the Exchange Offer for the purpose of
distributing the New Bonds:
- will not be able to rely on these interpretations by the Commission's
staff, and
- must comply with the registration and prospectus delivery requirements of
the Securities Act in connection with any sale or transfer of those New
Bonds unless the sale or transfer is made under an exemption from those
requirements.
By executing, or otherwise becoming bound by, the Letter of Transmittal,
each holder of Old Bonds (other than certain specified holders) will represent
that:
- it is not our "affiliate";
- any New Bonds to be received by it are being acquired in the ordinary
course of its business; and
- it has no arrangement with any person to participate in the distribution
(within the meaning of the Securities Act) of the New Bonds.
In addition, in connection with any resales of New Bonds, any participating
broker-dealer who acquired bonds for its own account as a result of
market-making or other trading activities must deliver a prospectus meeting the
requirements of the Securities Act. The Commission has taken the position that
participating broker-dealers may fulfill their prospectus delivery requirements
with respect to the New Bonds (other than a resale of an unsold allotment from
the original sale of the Old Bonds) with this prospectus. Under the Registration
Rights Agreement, we are required to allow participating broker-dealers and
other persons, if any, subject to similar prospectus delivery requirements to
use this prospectus as it may be amended or supplemented from time to time, in
connection with the resale of such New Bonds.
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UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The exchange of Old Bonds for New Bonds pursuant to the Exchange Offer will
not result in any United States federal income tax consequences to holders. When
a holder of the Old Bonds exchanges an Old Bond for a New Bond pursuant to the
Exchange Offer, that holder will have the same adjusted basis and holding period
in the New Bond as in the Old Bond immediately before the exchange.
PLAN OF DISTRIBUTION
Each participating broker-dealer pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in connection with any resale of
New Bonds. This prospectus, as it may be amended or supplemented from time to
time, may be used by a participating broker-dealer in connection with resales of
New Bonds received in exchange for Old Bonds where the Old Bonds were acquired
as a result of market-making activities or other trading activities. We have
agreed that we will make this prospectus, as amended or supplemented, available
to any participating broker-dealer for use in connection with any such resale
and participating broker-dealers will be authorized to deliver this prospectus
for a period not exceeding 90 days after the Expiration Date.
We will not receive any proceeds from any sales of the New Bonds by
participating broker-dealers. New Bonds received by participating broker-dealers
for their own account pursuant to the Exchange Offer may be sold from time to
time, in one or more transactions in the over-the-counter market, in negotiated
transactions, through the writing of options on the New Bonds or a combination
of those methods of resale, at market prices prevailing at the time of resale,
at prices related to the prevailing market prices or at negotiated prices. Any
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
participating broker-dealer that resells the New Bonds that were received by it
for its own account pursuant to the Exchange Offer. Any broker or dealer that
participates in a distribution of New Bonds may be deemed to be an "underwriter"
within the meaning of the Securities Act. The Letter of Transmittal states that
by acknowledging that it will deliver and by delivering a prospectus, a
participating broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
We will promptly send additional copies of this prospectus and any amendment
or supplement to this prospectus to any participating broker-dealer that
requests those documents in the Letter of Transmittal. See "The Exchange Offer."
LEGAL MATTERS
The validity of the bonds in respect of which this prospectus is being
delivered will be passed on for PSI by Taft, Stettinius & Hollister LLP,
Cincinnati, Ohio.
INDEPENDENT PUBLIC ACCOUNTANTS
PSI's financial statements and schedules incorporated by reference in this
prospectus, to the extent and for the periods indicated in their report, have
been audited by Arthur Andersen LLP, independent public accountants, and are
incorporated by reference in reliance upon the authority of such firm as experts
in accounting and auditing in giving said report.
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$325,000,000
PSI ENERGY, INC.
FIRST MORTGAGE BONDS
SERIES EEE, 6.65%,
DUE JUNE 15, 2006
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PROSPECTUS
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OCTOBER 30, 2001
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