0000912057-01-533702.txt : 20011009
0000912057-01-533702.hdr.sgml : 20011009
ACCESSION NUMBER: 0000912057-01-533702
CONFORMED SUBMISSION TYPE: S-4/A
PUBLIC DOCUMENT COUNT: 3
FILED AS OF DATE: 20010927
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: EDISON MISSION ENERGY
CENTRAL INDEX KEY: 0000930835
STANDARD INDUSTRIAL CLASSIFICATION: COGENERATION SERVICES & SMALL POWER PRODUCERS [4991]
IRS NUMBER: 954031807
STATE OF INCORPORATION: CA
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: S-4/A
SEC ACT: 1933 Act
SEC FILE NUMBER: 333-68630
FILM NUMBER: 1746643
BUSINESS ADDRESS:
STREET 1: 18101 VON KARMAN AVE
STREET 2: STE 1700
CITY: IRVINE
STATE: CA
ZIP: 92612
BUSINESS PHONE: 9497525588
MAIL ADDRESS:
STREET 1: 18101 VON KARMAN AVE
STREET 2: STE 1700
CITY: IRVINE
STATE: CA
ZIP: 92612
FORMER COMPANY:
FORMER CONFORMED NAME: MISSION ENERGY CO
DATE OF NAME CHANGE: 19941003
S-4/A
1
a2059726zs-4a.txt
S-4/A
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 27, 2001.
REGISTRATION NO. 333-68630
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
EDISON MISSION ENERGY
(Exact name of Registrant as specified in its charter)
CALIFORNIA 4911 95-4031807
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
18101 VON KARMAN AVENUE, SUITE 1700
IRVINE, CALIFORNIA 92612
(949) 752-5588
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------------
STEVEN D. EISENBERG, ESQ.
EDISON MISSION ENERGY
18101 VON KARMAN AVENUE, SUITE 1700
IRVINE, CALIFORNIA 92612
(949) 752-5588
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
COPY TO:
ROBERT M. CHILSTROM, ESQ.
HAROLD F. MOORE, ESQ.
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP
FOUR TIMES SQUARE
NEW YORK, NEW YORK 10036
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
--------------------------
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SUBJECT TO COMPLETION, DATED SEPTEMBER 27, 2001
THE INFORMATION CONTAINED IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS
OFFER TO EXCHANGE $400 MILLION 10% SENIOR NOTES DUE AUGUST 15, 2008 FOR $400
MILLION
10% SENIOR NOTES DUE AUGUST 15, 2008, WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, OF
[EDISON MISSION ENERGY LOGO]
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON [30 DAYS AFTER COMMENCEMENT OF EXCHANGE OFFER], 2001, UNLESS EXTENDED.
---------------------
Terms of the exchange offer:
- The new notes are being registered with the Securities and Exchange
Commission and are being offered in exchange for the original notes that
were previously issued in an offering exempt from the Securities and
Exchange Commission's registration requirements. The terms of the exchange
offer are summarized below and more fully described in this prospectus.
- We will exchange all original notes that are validly tendered and not
withdrawn prior to the expiration of the exchange offer.
- You may withdraw tenders of original notes at any time prior to the
expiration of the exchange offer.
- We believe that the exchange of original notes will not be a taxable event
for U.S. federal income tax purposes, but you should see "Material United
States Federal Income Tax Considerations" on page 115 for more
information.
- We will not receive any proceeds from the exchange offer.
- The terms of the exchange notes are substantially identical to the
original notes, except that the exchange notes are registered under the
Securities Act and the transfer restrictions and registration rights
applicable to the original notes do not apply to the exchange notes.
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 12 FOR A DISCUSSION OF THE RISKS THAT
SHOULD BE CONSIDERED BY HOLDERS PRIOR TO TENDERING THEIR ORIGINAL NOTES.
PRINCIPAL AMOUNT ANNUAL INTEREST RATE FINAL DISTRIBUTION DATE
---------------- -------------------- -----------------------
$400,000,000................................ 10% August 15, 2008
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
------------------------
The date of this prospectus is , 2001.
TABLE OF CONTENTS
FORWARD-LOOKING STATEMENTS.................................. ii
AVAILABLE INFORMATION....................................... ii
INCORPORATION OF DOCUMENTS BY REFERENCE..................... iii
NOTICE TO NEW HAMPSHIRE RESIDENTS........................... iv
PROSPECTUS SUMMARY.......................................... 1
RISK FACTORS................................................ 12
USE OF PROCEEDS............................................. 20
CAPITALIZATION.............................................. 21
SELECTED CONSOLIDATED FINANCIAL DATA........................ 22
THE EXCHANGE OFFER.......................................... 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS................................. 32
BUSINESS.................................................... 70
MANAGEMENT.................................................. 99
CERTAIN TRANSACTIONS AND RELATIONS WITH AFFILIATES.......... 102
DESCRIPTION OF THE NOTES.................................... 103
EXCHANGE OFFER; REGISTRATION RIGHTS......................... 113
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS.... 115
PLAN OF DISTRIBUTION........................................ 118
LEGAL MATTERS............................................... 119
EXPERTS..................................................... 119
i
FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements. We have based these
forward-looking statements on our current expectations and projections about
future events based upon our knowledge of facts as of the date of this
prospectus and our assumptions about future events. These forward-looking
statements are subject to various risks and uncertainties that may be outside
our control, including, among other things:
- the direct and indirect effects of the current California power crisis on
us and on our investments, as well as the measures adopted and being
contemplated by federal and state authorities to address the crisis;
- general political, economic and business conditions in the countries in
which we do business;
- governmental, statutory, regulatory or administrative changes or
initiatives affecting us or the electricity industry generally;
- political and business risks of international projects, including
uncertainties associated with currency exchange rates, currency
repatriation, expropriation, political instability, privatization efforts
and other issues;
- supply, demand and price for electric capacity and energy in the markets
served by our generating units;
- competition from other power plants, including new plants and technologies
that may be developed in the future;
- operating risks, including equipment failure, dispatch levels,
availability, heat rate and output;
- the cost, availability and pricing of fuel and fuel transportation
services for our generating units;
- our ability to complete the development or acquisition of current and
future projects or the sale of the Ferrybridge and Fiddlers' Ferry plants;
- our ability to maintain an investment grade rating; and
- our ability to refinance short-term debt or raise additional financing for
our future cash requirements, including funds to pay down or refinance our
three credit facilities maturing in October 2001.
We use words like "anticipate," "estimate," "projected," "plan," "expect,"
"will," "believe," "intend," "may," "should" and similar expressions to help
identify forward-looking statements in this prospectus.
For additional factors that could affect the validity of our forward-looking
statements, you should read "Risk Factors" beginning on page 12. In light of
these and other risks, uncertainties and assumptions, actual events or results
may be very different from those expressed or implied in the forward-looking
statements in this prospectus, or may not occur. We have no obligation to
publicly update or revise any forward-looking statement, whether as a result of
new information, future events or otherwise.
AVAILABLE INFORMATION
We are subject to the informational requirements of the Securities Exchange
Act of 1934 and, in accordance with these requirements, file reports and
information statements and other information with the Securities and Exchange
Commission. These reports and information statements and other information filed
by us with the SEC can be inspected and copied at the Public Reference Section
of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the
ii
regional offices of the SEC located at 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of this material can be obtained from the Public
Reference Room of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at
prescribed rates. You may obtain information on the operation of the Public
Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a Web
site that contains reports, proxy and information statements and other materials
that are filed through the SEC's Electronic Data Gathering, Analysis and
Retrieval (EDGAR) system. This Web site can be accessed at http://www.sec.gov.
This prospectus constitutes a part of a registration statement on Form S-4
filed by us with the SEC under the Securities Act. As permitted by the rules and
regulations of the SEC, the prospectus does not contain all the information
contained in the registration statement and the exhibits and schedules to the
registration statement. Reference is made to the registration statement and its
exhibits and schedules for further information with respect to us and the
securities offered through this exchange offer. Statements contained in this
prospectus concerning the provisions of any documents filed as an exhibit to the
registration statement or otherwise filed with the SEC are not necessarily
complete, and in each instance reference is made to the copy of the document so
filed. Each of those statements is qualified in its entirety by reference to
that document.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents filed with the SEC are incorporated by reference
into this prospectus:
(i) Our Annual Report on Form 10-K for the year ended December 31, 2000;
(ii) Our Quarterly Reports on Form 10-Q for the periods ended March 31, 2001
and June 30, 2001; and
(iii) Our Current Reports on Form 8-K, dated March 22, 2001 and August 1,
2001.
All reports and other documents we subsequently file under Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this prospectus
and prior to the date on which the exchange offer described in this prospectus
is terminated shall be deemed to be incorporated by reference into this
prospectus and to be part of this prospectus from the date we subsequently file
these reports and documents.
Copies of our Annual Report on Form 10-K for the year ended December 31,
2000, Quarterly Reports for the periods ended March 31, 2001 and June 30, 2001
and Current Reports on Form 8-K, dated March 22, 2001 and August 1, 2001, are
available, without charge, from us. You may request a copy of any of these
filings, at no cost, by writing or telephoning us at the following address or
phone number:
Edison Mission Energy
18101 Von Karman Avenue, Suite 1700
Irvine, California 92612
(949) 752-5588
Attention: Corporate Secretary
IN ORDER TO OBTAIN TIMELY DELIVERY, YOU MUST REQUEST THIS INFORMATION NO
LATER THAN 5 BUSINESS DAYS BEFORE YOU MAKE YOUR INVESTMENT DECISION.
Any statement contained in a document incorporated by reference in this
prospectus will be deemed to be modified or superseded for purposes of this
prospectus to the extent that a statement contained in this prospectus modifies
or supersedes this statement. Any statement so modified or
iii
superseded will not be deemed to constitute a part of this prospectus except as
so modified or superseded.
------------------------
NOTICE TO NEW HAMPSHIRE RESIDENTS
NEITHER THE FACT THAT A REGISTRATION STATEMENT OR AN APPLICATION FOR A
LICENSE HAS BEEN FILED UNDER CHAPTER 421-B OF THE NEW HAMPSHIRE REVISED STATUTES
WITH THE STATE OF NEW HAMPSHIRE NOR THE FACT THAT A SECURITY IS EFFECTIVELY
REGISTERED OR A PERSON IS LICENSED IN THE STATE OF NEW HAMPSHIRE CONSTITUTES A
FINDING BY THE SECRETARY OF STATE THAT ANY DOCUMENT FILED UNDER RSA 421-B IS
TRUE, COMPLETE AND NOT MISLEADING. NEITHER ANY SUCH FACT NOR THE FACT THAT AN
EXEMPTION OR EXCEPTION IS AVAILABLE FOR A SECURITY OR A TRANSACTION MEANS THAT
THE SECRETARY OF STATE HAS PASSED IN ANY WAY UPON THE MERITS OR QUALIFICATIONS
OF, OR RECOMMENDED OR GIVEN APPROVAL TO, ANY PERSON, SECURITY OR TRANSACTION. IT
IS UNLAWFUL TO MAKE, OR CAUSE TO BE MADE, TO ANY PROSPECTIVE PURCHASER, CUSTOMER
OR CLIENT ANY REPRESENTATION INCONSISTENT WITH THE PROVISIONS OF THIS PARAGRAPH.
------------------------
iv
PROSPECTUS SUMMARY
The following summary highlights selected information from this prospectus
and may not contain all of the information that is important to you. This
prospectus includes specific terms of the exchange notes we are offering, as
well as information regarding our business and detailed financial data. We
encourage you to read this prospectus in its entirety. You should pay special
attention to the "Risk Factors" section beginning on page 12 of this prospectus.
SUMMARY OF THE EXCHANGE OFFER
On August 10, 2001, we completed the private offering of $400 million
aggregate principal amount of 10% Senior Notes due August 15, 2008. As part of
that offering, we entered into a registration rights agreement with the initial
purchasers of these original notes in which we agreed, among other things, to
deliver this prospectus to you and to complete an exchange offer for the
original notes. Below is a summary of the exchange offer.
Securities Offered..................... Up to $400,000,000 aggregate principal amount of new 10%
Senior Notes due August 15, 2008, which have been
registered under the Securities Act. The form and terms of
these exchange notes are identical in all material
respects to those of the original notes. The exchange
notes, however, will not contain transfer restrictions and
registration rights applicable to the original notes.
The Exchange Offer..................... We are offering to exchange new $1,000 principal amount of
our 10% Senior Notes due August 15, 2008, which have been
registered under the Securities Act, for $1,000 principal
amount of our outstanding 10% Senior Notes due August 15,
2008.
In order to be exchanged, an original note must be
properly tendered and accepted. All original notes that
are validly tendered and not withdrawn will be exchanged.
As of the date of this prospectus, there are $400 million
principal amount of original notes outstanding. We will
issue exchange notes promptly after the expiration of the
exchange offer.
Resales................................ Based on interpretations by the staff of the SEC, as
detailed in a series of no-action letters issued by the
SEC to third parties, we believe that the exchange notes
issued in the exchange offer may be offered for resale,
resold or otherwise transferred by you without compliance
with the registration and prospectus delivery requirements
of the Securities Act as long as:
- you are acquiring the exchange notes in the ordinary
course of your business;
- you are not participating, do not intend to participate
and have no arrangement or understanding with any person
to participate, in a distribution of the exchange notes;
and
- you are not an "affiliate" of ours.
If you are an affiliate of ours, are engaged in or intend
to engage in or have any arrangement or understanding with
any person to participate in the distribution of the
exchange notes:
(1) you cannot rely on the applicable interpretations of
the staff of the SEC; and
1
(2) you must comply with the registration requirements of
the Securities Act in connection with any resale
transaction.
Each broker or dealer that receives exchange notes for its
own account in exchange for original notes that were
acquired as a result of market-making or other trading
activities must acknowledge that it will comply with the
registration and prospectus delivery requirements of the
Securities Act in connection with any offer to resell,
resale, or other transfer of the exchange notes issued in
the exchange offer, including the delivery of a prospectus
that contains information with respect to any selling
holder required by the Securities Act in connection with
any resale of the exchange notes.
Furthermore, any broker-dealer that acquired any of its
original notes directly from us:
-may not rely on the applicable interpretation of the
staff of the SEC's position contained in Exxon Capital
Holdings Corp., SEC no-action letter (April 13, 1988),
Morgan, Stanley & Co. Inc., SEC no-action letter (June 5,
1991) and Shearman & Sterling, SEC no-action letter (July
2, 1983); and
-must also be named as a selling noteholder in connection
with the registration and prospectus delivery requirements
of the Securities Act relating to any resale transaction.
Expiration Date........................ 5:00 p.m., New York City time, on , 2001
unless we extend the expiration date.
Accrued Interest on the Exchange Notes
and Original Notes................... The exchange notes will bear interest from the most recent
date to which interest has been paid on the original
notes. If your original notes are accepted for exchange,
then you will receive interest on the exchange notes and
not on the original notes.
Conditions to the Exchange Offer....... The exchange offer is subject to customary conditions. We
may assert or waive these conditions in our sole
discretion. If we materially change the terms of the
exchange offer, we will resolicit tenders of the original
notes. See "The Exchange Offer--Conditions to the Exchange
Offer" for more information regarding conditions to the
exchange offer.
Procedures for Tendering Original
Notes................................ Except as described in the section titled "The Exchange
Offer--Guaranteed Delivery Procedures," a tendering holder
must, on or prior to the expiration date:
-transmit a properly completed and duly executed letter of
transmittal, including all other documents required by
the letter of transmittal, to The Bank of New York at the
address listed in this prospectus; or
-if original notes are tendered in accordance with the
book-entry procedures described in this prospectus, the
tendering holder must transmit an agent's message to the
exchange agent at the address listed in this prospectus.
2
See "The Exchange Offer--Procedures for Tendering."
Special Procedures for Beneficial
Holders.............................. If you are the beneficial holder of original notes that
are registered in the name of your broker, dealer,
commercial bank, trust company or other nominee, and you
wish to tender in the exchange offer, you should promptly
contact the person in whose name your original notes are
registered and instruct that person to tender on your
behalf. See "The Exchange Offer--Procedures for
Tendering."
Guaranteed Delivery Procedures......... If you wish to tender your original notes and you cannot
deliver your notes, the letter of transmittal or any other
required documents to the exchange agent before the
expiration date, you may tender your original notes by
following the guaranteed delivery procedures under the
heading "The Exchange Offer--Guaranteed Delivery
Procedures."
Withdrawal Rights...................... Tenders may be withdrawn at any time before 5:00 p.m., New
York City time, on the expiration date.
Acceptance of Original Notes and
Delivery of Exchange Notes........... Subject to the conditions stated in the section "The
Exchange Offer--Conditions to the Exchange Offer" of this
prospectus, we will accept for exchange any and all
original notes which are properly tendered in the exchange
offer before 5:00 p.m., New York City time, on the
expiration date. The exchange notes will be delivered
promptly after the expiration date. See "The Exchange
Offer--Terms of the Exchange Offer."
Material United States Federal Income
Tax Considerations................... We believe that your exchange of original notes for
exchange notes to be issued in connection with the
exchange offer will not result in any gain or loss to you
for U.S. federal income tax purposes. See "Material United
States Federal Income Tax Considerations."
Exchange Agent......................... The Bank of New York is serving as exchange agent in
connection with the exchange offer. The address and
telephone number of the exchange agent are listed under
the heading "The Exchange Offer--Exchange Agent."
Use of Proceeds........................ We will not receive any proceeds from the issuance of
exchange notes in the exchange offer. We will pay all
expenses incident to the exchange offer. See "Use of
Proceeds" and "--The Company--Recent
Developments--Offering of Original Notes."
3
SUMMARY OF TERMS OF THE EXCHANGE NOTES
The form and terms of the exchange notes and the original notes are
identical in all material respects, except that transfer restrictions and
registration rights applicable to the original notes do not apply to the
exchange notes. The exchange notes will evidence the same debt as the original
notes and will be governed by the same indenture. Where we refer to "notes" in
this document, we are referring to both original notes and exchange notes.
Exchange Notes Offered................. Up to $400 million principal amount of 10% Senior Notes
due August 15, 2008.
Maturity............................... August 15, 2008.
Interest............................... Interest accrues on the principal amount of the notes at
10% per year. Interest is payable on the notes, and
interest payments will be made semi-annually in arrears on
February 15 and August 15 of each year. The first payment
will be made on February 15, 2002.
Ranking................................ The notes are senior unsecured obligations of ours and
rank equally with all of our senior unsecured indebtedness
and rank senior to our subordinated indebtedness. All
existing and future liabilities of our subsidiaries will
be effectively senior to the notes.
The indenture permits us to incur significant additional
indebtedness. See "Description of the Notes."
Ratings................................ The notes are currently rated "BBB-" by Standard & Poor's
Ratings Services and "Baa3" by Moody's Investors Service,
Inc.
Optional Redemption.................... We may redeem any or all of the notes at a redemption
price equal to the greater of:
- 100% of the principal amount of the notes being
redeemed; or
- the sum of the present values of the remaining scheduled
payments on the notes being redeemed discounted to the
date of redemption on a semiannual basis at a rate based
on the rates of U.S. Treasury securities with average
lives comparable to the remaining lives of the notes
plus 75 basis points;
plus accrued and unpaid interest on the notes being
redeemed.
4
THE COMPANY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION APPEARING ELSEWHERE IN THIS
PROSPECTUS. REFERENCE IS MADE TO "RISK FACTORS" FOR A DISCUSSION OF SEVERAL
ISSUES THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE NOTES. IN
THIS PROSPECTUS, THE TERMS "THE COMPANY," "WE," "OUR," "OURS" AND "US" REFER TO
EDISON MISSION ENERGY AND ITS DIRECT AND INDIRECT SUBSIDIARIES UNLESS THE
CONTEXT OTHERWISE REQUIRES.
OUR BUSINESS
We are among the largest independent producers of electricity in the world
based on megawatts, or "MW," generated, with operations in North America, Europe
and the Asia Pacific region. We develop, acquire, lease and operate electric
power generation facilities that sell power both under long-term contracts and
to wholesale markets. Our portfolio of power projects as of June 30, 2001
consisted of 33 domestic and 39 international power projects with aggregate
generation capacity of 27,798 MW, our share of which was 22,923 MW. To
complement our generation capabilities, we also market energy and manage risks
associated with energy price fluctuations in power markets open to competition.
We believe our portfolio of power projects, operating and development experience
and marketing and risk management activities enable us to meet the broad range
of our customers' needs and to maximize the value of our power projects.
We play an active role in all phases of power generation, from planning and
development to construction and commercial operation. We believe that this
involvement allows us to better ensure, with our experienced personnel, that our
projects are well-planned, structured and managed. Our portfolio of power
projects is strategically located in domestic and international power markets
and is diversified by fuel type. A significant portion of the capacity and
energy output from our facilities is sold under long-term contracts, which
generally provide predictable revenue streams during the contract term and
reduce our exposure to fluctuations in market prices for electricity.
The table below summarizes, as of June 30, 2001, our portfolio of power
projects.
CAPACITY (IN MW)
---------------------------------
AGGREGATE
NUMBER OF GENERATION OUR
REGION PROJECTS CAPACITY SHARE
------ --------- ---------- --------
North America................................... 33 15,221 13,302
Europe.......................................... 26 7,284 6,840
Asia Pacific.................................... 13 5,293 2,781
-- ------ ------
Total......................................... 72 27,798 22,923
== ====== ======
Subsequent to June 30, 2001, we sold our 50% interest in the Saguaro project
for $67 million. We have also entered into agreements, subject to obtaining
consents from third parties and other conditions precedent to closing, for the
sale of our interests in the EcoElectrica, Gordonsville, Commonwealth Atlantic,
James River and Nevada Sun-Peak projects. In addition, we are currently offering
for sale our interest in the Brooklyn Navy Yard project. We expect the proceeds
from the sale of our interests in the above projects, if completed, will be in
excess of their book value with respect to those projects ($482 million at
June 30, 2001). We are also offering for sale the Ferrybridge and Fiddler's
Ferry plants in the United Kingdom. If we are successful in selling our
Ferrybridge and Fiddler's Ferry plants, it is likely that we will not recover
any of our investment in the subsidiary that owns these assets. At June 30,
2001, that investment was approximately $974 million. The aggregate generation
capacity set forth in the above table will be reduced by 5,800 MW, of which our
share is 4,892 MW, if we are successful in completing the sale of our interests
in all of these projects.
5
OUR MARKET OPPORTUNITY
Historically, electric utility monopolies were vertically integrated,
meaning that they were responsible for building and maintaining power generation
facilities, building and maintaining transmission and distribution
infrastructure and selling power to residential, commercial and industrial
customers, generally referred to as "retail sales," at regulated rates. However,
governmental and regulatory initiatives have caused significant changes in this
historical model of the electric power industry. For example, in the United
States, the passage of the Public Utility Regulatory Policies Act of 1978
encouraged the development of independent power producers by removing regulatory
constraints relating to the production and sale of electric energy by certain
non-utilities and requiring electric utilities to buy electricity from
non-utility power producers, known as qualifying facilities, under specified
conditions. The passage of the Energy Policy Act of 1992 further encouraged the
development of independent power producers by significantly expanding the
options available to independent power producers with respect to their
regulatory status and by liberalizing transmission access. As a result, a
significant market for electric power produced by independent power producers,
such as us, has developed in the United States. In 1998, utility deregulation in
several states led utilities to divest generating assets, which has created
additional new opportunities for growth of independent power producers in the
United States. For example, we acquired fossil fuel power generating plants
located in Illinois after deregulation in that state. Finally, there has been a
movement in many foreign countries toward privatization of the power generation
industry.
These initiatives have changed the fundamental structure of the electric
power industry in the affected markets by replacing vertically integrated
operations with stratified businesses organized by power generation,
transmission, distribution and retail sales operations. We conduct most of our
operations within the power generation business line. We believe that we are
well-positioned to continue to realize opportunities as a result of these
changes in the industry.
In addition to the opportunities created by the governmental and regulatory
initiatives described above, the demand for power continues to increase as a
result of economic growth both domestically and abroad. In some countries,
including the United States, investment in new power generation facilities has
not been adequate to support the increase in demand, resulting in shortages of
electricity in many regions. As a result, there exists an increased need for
companies like ours that have a large portfolio of power projects to provide
dependable power both to the wholesale energy market and directly to
distribution companies. In addition, this situation provides us with the
opportunity to expand the generation capacity of our existing sites and to
develop new generation projects to meet market demands.
OUR STRATEGY
Our business goal is to continue to be one of the leading owners and
operators of electric generating assets in the world. We play an active role, as
a long-term owner, in all phases of power generation, from planning and
development through construction and commercial operation. We believe that this
involvement allows us to better ensure, with our experienced personnel, that our
projects are well-planned, structured and managed, thus maximizing value
creation.
Our strategy focuses on enhancing the value of existing assets, expanding
plant capacity at existing sites and developing new projects in locations where
we have an established position or otherwise determine that attractive financial
performance can be realized. In addition, because our merchant plants sell power
into markets without the certainty of long-term contracts, we conduct power
marketing, trading, and risk management activities to stabilize and enhance the
financial performance of these projects. We also recognize that our principal
customers are regulated utilities. We therefore strive to understand the
regulatory and economic environment in which the utilities operate so that we
may continue to create mutually beneficial relationships and business dealings.
6
Due to the impact of the California power crisis, our current operational
focus is on enhancing the performance of our existing portfolio of power
projects, expanding our generation capacity at existing sites and maintaining
our credit quality. Our long-term strategy is to continue to grow our business
while maintaining investment grade credit ratings.
OUR COMPETITIVE STRENGTHS
We believe that our competitive strengths advantageously position us to
enhance our financial performance, expand our business and pursue strategic
opportunities in independent power markets both domestically and abroad. Our key
competitive strengths are summarized below.
- GLOBAL PRESENCE. We are among the largest independent power producers in
the world based on MW generated. As of June 30, 2001, we owned interests
in 33 domestic operating projects with total generating capacity of 15,221
MW, of which our share was 13,302 MW. In addition, as of June 30, 2001, we
owned interests in 39 projects outside the United States with total
generation capacity of 12,577 MW, of which our share was 9,621 MW. In
assembling and operating this global portfolio, we have gained substantial
experience and expertise in major U.S. and foreign power markets and, as a
result, enjoy access to a broader range of development and acquisition
opportunities worldwide.
- DIVERSIFIED ASSET PORTFOLIO. In addition to owning interests in power
generation facilities in 10 countries worldwide, our portfolio of power
projects is also diversified by fuel type. As of June 30, 2001, our
portfolio of power projects was comprised of 57% coal, 30% natural gas,
11% hydroelectric and 2% oil and geothermal, as a percentage of our share
of aggregate generation capacity. The fuel type diversification of our
portfolio of power projects reduces our exposure to shortages or other
disruptions in the market for any particular fuel source. The geographic
diversification of our portfolio of power projects spreads our operations
across different regions and market segments, thereby allowing us to
participate in multiple segments of the domestic and international power
markets and reducing the level of risk presented by any particular market.
- BALANCED CONTRACT POSITION. The contract status of our generation
facilities reflects a blend of long-term contracts and sales from our
merchant plants. As of June 30, 2001, the majority of our MW were subject
to long-term power purchase agreements, which provide us with contracted
revenue streams from those generation facilities. Our remaining MW were
generated by our merchant plants which sell power into wholesale power
markets. This blend of contracted and merchant generation provides for a
stream of contract revenue while allowing us the flexibility to sell power
into wholesale markets.
- DISCIPLINED MARKETING AND RISK MANAGEMENT ACTIVITIES. We use a disciplined
approach to energy marketing and risk management that is centered around
our merchant plants and is designed primarily to stabilize and enhance the
operational and financial performance of those facilities. These
activities also reduce our exposure to energy price fluctuations.
- STRONG AND EXPERIENCED PROJECT MANAGEMENT TEAM. We have an experienced
project management team that continues to focus on our core competencies
and to draw upon our significant domestic and international development
and operating experience.
------------------------
THE CALIFORNIA POWER CRISIS AND OUR RELATIONSHIP WITH AFFECTED AFFILIATES
In the past year, various market conditions and other factors have resulted
in higher wholesale power prices to California utilities. At the same time, two
of the three major California utilities, Southern California Edison Company and
Pacific Gas and Electric Co., have operated under a retail
7
rate freeze. As a result, there has been a significant under-recovery of costs
by Southern California Edison and Pacific Gas and Electric, and each of these
companies has failed to make payments due to power suppliers, including us, and
others. Given these and other payment defaults, Southern California Edison could
face bankruptcy at any time. Pacific Gas and Electric filed a voluntary
bankruptcy petition on April 6, 2001. See "Risk Factors--The ongoing California
power crisis has had, and is likely to continue to have, an adverse impact on
us."
Edison International, our ultimate parent company, is also the corporate
parent of Southern California Edison. Both Edison International and Southern
California Edison have faced and continue to face material operating disruptions
as a result of the California power crisis. The chart below, although not a
complete representation of our corporate structure, generally outlines our
relationship with Edison International and Southern California Edison.
[CHART]
Through the enactment of provisions in our articles of incorporation and
bylaws and other measures, (1) we have taken steps to preserve our investment
grade credit ratings and (2) we have attempted to isolate ourselves from
potential bankruptcies of Edison International, Southern California Edison and
their subsidiaries by preserving us as a stand-alone entity, despite the current
credit difficulties of Edison International and Southern California Edison. For
a discussion of the specific provisions, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations--The California Power
Crisis and Our Response." However, we cannot assure you that these measures will
effectively isolate us from the credit downgrades or the potential bankruptcies
of Edison International, Southern California Edison or any of their
subsidiaries.
In addition to the risks described above, the California power crisis has
adversely affected our liquidity. We have undertaken a series of initiatives in
response. These initiatives are summarized below.
- On August 10, 2001, we issued and sold the original notes, the proceeds of
which were used to permanently repay $400 million of outstanding
indebtedness.
- On April 5, 2001, we issued $600 million of 9.875% senior notes due
April 15, 2011, the proceeds of which were used to permanently repay
$225 million of outstanding indebtedness and to provide for additional
working capital.
8
- On June 25, 2001, we completed the sale of a 50% interest in the Sunrise
project to Texaco Power & Gasification Holdings Inc. for $84 million.
- On June 29, 2001, we completed the sale of our 25% interest in the
Hopewell project to our existing partner for $26.5 million.
- On September 20, 2001, we completed the sale of our 50% interest in the
Saguaro project for $67 million.
- We have agreed to sell our interests in the EcoElectrica, Gordonsville,
Commonwealth Atlantic, James River and Nevada Sun-Peak projects. We are
also engaged in a competitive bidding process through an investment bank
for the disposition of our ownership interest in the Brooklyn Navy Yard
project. For more information on which projects are currently offered for
sale, see "Business--Regional Overview of Business Segments."
- In September 2001, we entered into a new $750 million corporate credit
facility. We used this new credit facility, together with other corporate
funds, to replace our existing corporate credit facilities. For more
information on our financing plans, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources--Corporate Financing Plans."
As a result of our focus on short-term initiatives designed to improve our
liquidity, our current focus is on operating our existing project portfolio and
focusing our development activities on expanding our generation capacity at
existing sites rather than pursuing acquisition and development opportunities at
our historical levels. Upon the improvement of our financial position through
the completion of the initiatives discussed above and the resolution of the
California power crisis, we plan to focus to a greater extent on the development
of new projects.
For a more detailed description of the California power crisis, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--The California Power Crisis and Our Response." In addition, for a
further discussion of our transactions and relations with our affiliates, see
"Business--Our Relationship with Affected Affiliates."
MISSION ENERGY HOLDING FINANCING
On June 8, 2001, Edison International created Mission Energy Holding Company
as a wholly-owned indirect subsidiary. Mission Energy Holding's principal asset
is our common stock. On July 2, 2001, Mission Energy Holding engaged in a
$1,185 million debt financing, and pledged our common stock to the lenders as
security for their debt obligations. The majority of the proceeds of this
financing was ultimately used by Edison International to repay a portion of its
indebtedness maturing in 2001. The Mission Energy Holding financing documents
contain restrictions on our ability and the ability of our subsidiaries to enter
into specified transactions or engage in specified business activities and
require in some instances that we obtain the approval of the Mission Energy
Holding board of directors for these transactions. Our articles of incorporation
bind us to the restrictions in the Mission Energy Holding financing documents by
restricting our ability to enter into specified transactions or engage in
specified business activities, as set forth in the Mission Energy Holding
financing documents, without shareholder approval. See "Risk
Factors--Restrictions in our articles of incorporation, our credit facilities
and the Mission Energy Holding financing documents limit or prohibit us from
entering into specified transactions that we otherwise may enter into."
9
RECENT DEVELOPMENTS
OFFERING OF ORIGINAL NOTES
On August 10, 2001, we issued and sold the original notes. We used the
proceeds of that offering, which were $400 million, to repay a portion of our
indebtedness under our three corporate credit facilities. See "Use of Proceeds."
------------------------
Edison Mission Energy is incorporated under the laws of the State of
California. Our headquarters and principal executive offices are located at
18101 Von Karman Avenue, Suite 1700, Irvine, California 92612, and our telephone
number is (949) 752-5588.
We are considering a possible reincorporation in the State of Delaware. The
reincorporation would be accomplished through a merger with Edison Mission
Energy, a Delaware corporation and wholly-owned subsidiary of ours, in which the
Delaware corporation would be the surviving corporation. The Order Authorizing
Disposition of Jurisdictional Facilities issued by the Federal Energy Regulatory
Commission on August 24, 2001 found that our proposed transaction was consistent
with the public interest and granted our request for authority to complete the
reincorporation, subject to certain conditions. We cannot assure you that a
rehearing of the August 24, 2001 order will not be requested, and cannot provide
any assurances as to the outcome of such hearing or as to the consummation of
the reincorporation.
10
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table sets forth our selected consolidated financial data for
the periods indicated. The selected consolidated financial data for the six
month period ended June 30, 2001 were derived from the unaudited consolidated
financial statements of Edison Mission Energy and our consolidated subsidiaries.
The selected consolidated financial data for the years ended December 31, 1996,
1997, 1998, 1999 and 2000 were derived from the audited consolidated financial
statements of Edison Mission Energy and our consolidated subsidiaries. These
selected consolidated financial data are qualified in their entirety by the more
detailed information and financial statements, including the notes to that
information and those financial statements, included in the documents
incorporated by reference in this prospectus.
SIX MONTHS
ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------- -------------------
1996 1997 1998 1999 2000 2000 2001
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS) (DOLLARS IN
MILLIONS)
(UNAUDITED)
INCOME STATEMENT DATA:
Operating revenues................................... $ 843.6 $ 975.0 $ 893.8 $1,635.9 $3,241.0 $1,460.2 $1,585.8
Operating expenses:
Depreciation and amortization...................... 89.9 102.8 87.3 190.2 382.1 202.5 174.3
Other operating expenses........................... 386.6 478.3 456.0 1,019.3 2,028.1 1,004.7 1,105.3
------- ------- ------- -------- -------- -------- --------
Total operating expenses......................... 476.5 581.1 543.3 1,209.5 2,410.2 1,207.2 1,279.6
------- ------- ------- -------- -------- -------- --------
Operating income..................................... 367.1 393.9 350.5 426.4 830.8 253.0 306.2
Interest expense..................................... (164.2) (223.5) (196.1) (375.5) (721.5) (370.5) (328.9)
Interest and other income............................ 40.7 53.9 50.9 55.8 74.0 42.4 34.7
Minority interest.................................... (69.5) (38.8) (2.8) (3.0) (3.2) (1.4) (7.5)
------- ------- ------- -------- -------- -------- --------
Income (loss) before income taxes.................... 174.1 185.5 202.5 103.7 180.1 (76.5) 4.5
Provision (benefit) for income taxes................. 82.0 57.4 70.4 (40.4) 72.5 (27.8) 1.7
------- ------- ------- -------- -------- -------- --------
Income (loss) before accounting changes, and
extraordinary loss................................. 92.1 128.1 132.1 144.1 107.6 (48.7) 2.8
Cumulative effect on prior years of changes, in
accounting, net of tax............................. -- -- -- (13.8) 17.7 17.7 6.0
Extraordinary loss on early extinguishment of debt,
net of income tax benefit.......................... -- (13.1) -- -- -- -- --
------- ------- ------- -------- -------- -------- --------
Net income (loss).................................... $ 92.1 $ 115.0 $ 132.1 $ 130.3 $ 125.3 $ (31.0) $ 8.8
======= ======= ======= ======== ======== ======== ========
OTHER DATA:
Ratio of earnings to fixed charges(1)(2)............. 1.42 1.64 1.69 1.18 1.23 0.81 0.93
------------------------------
(1) For purposes of computing the ratio of earnings to fixed charges, earnings
are divided by fixed charges. "Earnings" represents the aggregate of our
income before income taxes (adjusted for the excess or shortfall of
dividends or other distributions over equity in earnings of less than
50%-owned entities), amortization of previously capitalized interest and
fixed charges (net of capitalized interest). "Fixed Charges" represents
interest (whether expressed or capitalized), the amortization of debt
discount and interest portion of rental expense.
(2) For the six month periods ended June 30, 2001 and 2000, there was a fixed
charge deficiency of $25.4 million and $76.6 million, respectively.
AS OF DECEMBER 31, AS OF
------------------------------------------------------ JUNE 30,
1996 1997 1998 1999 2000 2001
-------- -------- -------- --------- --------- -------------
(IN MILLIONS) (IN MILLIONS)
(UNAUDITED)
BALANCE SHEET DATA:
Assets................................................... $5,152.5 $4,985.1 $5,158.1 $15,534.2 $15,017.1 $15,257.3
Current liabilities...................................... 270.9 339.8 358.7 1,772.8 3,911.0 3,031.2
Long-term obligations, less current portion.............. 2,419.9 2,532.1 2,396.4 7,439.3 5,334.8 6,349.3
Preferred securities of subsidiaries..................... 150.0 150.0 150.0 476.9 326.8 325.7
Shareholder's equity..................................... 1,019.9 826.6 957.6 3,068.5 2,948.2 2,672.6
11
RISK FACTORS
In addition to the information contained elsewhere in this prospectus, the
following risk factors should be carefully considered in evaluating the exchange
offer and an investment in the notes. The following risk factors, other than
"--You may have difficulty selling the notes that you do not exchange,"
generally apply to the original notes as well as the exchange notes.
WE HAVE A SUBSTANTIAL AMOUNT OF INDEBTEDNESS.
As of June 30, 2001, we had $2.5 billion of debt which is recourse to Edison
Mission Energy and $6.1 billion of debt which is non-recourse to Edison Mission
Energy but is recourse to our subsidiaries appearing on our consolidated balance
sheet. The indenture governing the notes will not impose limitations on our
ability or the ability of our subsidiaries to incur additional indebtedness.
A failure to repay, extend or refinance our existing debt as required by
their terms could result in an event of default under the credit facilities. An
event of default under the credit facilities would trigger cross-defaults under
agreements to which our subsidiaries are party. This would have the effect of
not permitting distributions from our subsidiaries, which would have a negative
impact on our liquidity and on our ability to make debt service payments on the
notes.
Our substantial amount of debt and financial obligations presents the risk
that we might not have sufficient cash to service our indebtedness, including
the notes, and that our existing corporate and project debt could limit our
ability to grow our business, to compete effectively or to operate successfully
under adverse economic conditions. See "Prospectus Summary--Our Strategy."
RESTRICTIONS IN OUR ARTICLES OF INCORPORATION, OUR CREDIT FACILITIES AND THE
MISSION ENERGY HOLDING FINANCING DOCUMENTS LIMIT OR PROHIBIT US FROM ENTERING
INTO SPECIFIED TRANSACTIONS THAT WE OTHERWISE MAY ENTER INTO.
The financing documents entered into by Mission Energy Holding contain
financial and investment covenants restricting us and our subsidiaries. Our
articles of incorporation bind us to the provisions in the Mission Energy
Holding financing documents by restricting our ability to enter into specified
transactions and engage in specified business activities, as contemplated by the
Mission Energy Holding financing documents, without shareholder approval. The
instruments governing our indebtedness also contain financial and investment
covenants. Restrictions contained in the documents described in the preceding
sentences could affect, and in some cases significantly limit or prohibit, our
and our subsidiaries' ability to, among other things, incur and prepay debt,
make capital expenditures, pay dividends and make other distributions, make
investments, create liens, sell assets, enter into sale and leaseback
transactions, issue equity interests, enter into transactions with affiliates,
create restrictions on the ability to pay dividends or make other distributions
and engage in mergers and consolidations.
IN A BANKRUPTCY OF MISSION ENERGY HOLDING, CREDITORS OF MISSION ENERGY HOLDING
MAY PETITION TO HAVE OUR ASSETS AND LIABILITIES CONSOLIDATED WITH THOSE OF
MISSION ENERGY HOLDING.
Although we operate independently of Mission Energy Holding, our articles of
incorporation bind us to the restrictions in the Mission Energy Holding
financing documents by restricting our ability to enter into specified
transactions or engage in specified business activities, as set forth in the
Mission Energy Holding financing documents, without shareholder approval. For
more information on the restrictions in the Mission Energy Holding financing
documents, see "--Restrictions in our articles of incorporation, our credit
facilities and the Mission Energy Holding financing documents limit or prohibit
us from entering into specified transactions that we otherwise may enter into."
In the event of a bankruptcy of Mission Energy Holding, creditors of Mission
Energy Holding might seek to have a bankruptcy court substantively consolidate
our assets and liabilities with those of Mission Energy Holding. In the event
that a bankruptcy court were to require substantive consolidation, our assets
and
12
those of Mission Energy Holding would be treated as if they were held by, and
our liabilities and those of Mission Energy Holding would be treated as if they
were incurred by, a single entity, and we may be financially unable to pay
amounts due on the notes.
RATINGS OF THE NOTES AND OUR CREDIT RATINGS ARE SUBJECT TO CHANGE, AND A
DOWNGRADE OF OUR CREDIT RATING BELOW INVESTMENT GRADE COULD HAVE AN ADVERSE
IMPACT ON US.
In January 2001, Standard & Poor's and Moody's downgraded our senior
unsecured credit ratings to "BBB-" from "A-" and to "Baa3" from "Baa1,"
respectively. Our credit ratings remain "investment grade." However, we cannot
assure you that Standard & Poor's and/or Moody's will not downgrade us below
investment grade, whether as a result of the California power crisis or
otherwise. If we are downgraded below investment grade, we could be required to,
among other things:
- provide additional guarantees, collateral, letters of credit or cash for
the benefit of counterparties in our trading activities (see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Other Commitments--Credit Support for Trading and Price Risk
Management Activities"); and
- post a letter of credit or cash collateral to support our $58.5 million
equity contribution obligation in connection with our acquisition in
February 2001 of a 50% interest in the project owned by CBK Power
Co. Ltd. in the Philippines, which equity contribution would otherwise be
payable as currently scheduled in 2003.
A further downgrade could result in a downgrade of Edison Mission Midwest
Holdings Co., our indirect subsidiary. In the event of a downgrade of Edison
Mission Midwest Holdings below its current credit rating, provisions in the
agreements binding on its subsidiary, Midwest Generation, LLC, limit the ability
of Midwest Generation to use excess cash flow to make distributions.
A downgrade in our credit rating below investment grade could increase our
cost of capital, increase our credit support obligations, make efforts to raise
capital more difficult, adversely affect our trading operations, and have an
adverse impact on us and our subsidiaries, particularly in light of the capital
intensive nature of our business. Furthermore, a downgrade in our credit rating
could adversely affect our ability to make debt service payments on the notes.
Standard & Poor's and Moody's have assigned ratings to the notes of "BBB-"
and "Baa3," respectively. A rating is not a recommendation to purchase, hold or
sell notes, because a rating does not address market price or suitability for a
particular investor. We cannot assure you that a rating will remain for any
given period of time or that a rating will not be lowered or withdrawn entirely
by a rating agency if, in its judgment, circumstances in the future so warrant.
THE ONGOING CALIFORNIA POWER CRISIS HAS HAD, AND IS LIKELY TO CONTINUE TO HAVE,
AN ADVERSE IMPACT ON US.
In the past year, various market conditions and other factors have resulted
in higher wholesale power prices to California utilities. At the same time, two
of the three major California utilities, Southern California Edison and Pacific
Gas and Electric, have operated under a retail rate freeze. As a result, there
has been a significant under-recovery of costs by Southern California Edison and
Pacific Gas and Electric, and each of these companies has failed to make
payments due to power suppliers, including us, and others. Given these and other
payment defaults, Southern California Edison could face bankruptcy at any time.
Pacific Gas and Electric filed a voluntary bankruptcy petition on April 6, 2001.
Edison International, our ultimate parent company, is also the corporate parent
of Southern California Edison.
Southern California Edison's current financial condition has had, and may
continue to have, an adverse impact on Edison International's credit quality.
Both Standard & Poor's and Moody's have
13
lowered the credit ratings of Edison International and Southern California
Edison to substantially below investment grade levels.
Through the enactment of ring-fencing provisions in our articles of
incorporation and bylaws and other measures, (1) we have taken steps to preserve
our investment grade credit ratings and (2) we have attempted to isolate
ourselves from potential bankruptcies of Edison International, Southern
California Edison and their subsidiaries by preserving us as a stand-alone
entity, despite the current credit difficulties of Edison International,
Southern California Edison and their subsidiaries. These measures are discussed
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations--The California Power Crisis and Our Response." We cannot assure
you that these measures will effectively isolate us from the credit downgrades
or the potential bankruptcies of Edison International and Southern California
Edison or any of their subsidiaries. A downgrade in our credit ratings could
increase our cost of capital, increase our credit support obligations, make
efforts to raise capital more difficult and have an adverse impact on our
business and operations.
In addition, we have partnership interests in eight partnerships which own
power plants in California and which have power purchase contracts with Pacific
Gas and Electric and/or Southern California Edison. Three of these partnerships
have a contract with Southern California Edison, four of them have a contract
with Pacific Gas and Electric, and one of them has contracts with both. As a
result of Southern California Edison's and Pacific Gas and Electric's current
liquidity crises, each of these utilities has failed to make full payment under
these contracts. As of June 30, 2001, our share of amounts owed to these
partnerships under the power purchase contracts with Southern California Edison
was approximately $301 million. In addition, our share of amounts owed to these
partnerships under the power purchase contracts with Pacific Gas and Electric
was approximately $23 million at the petition date. We have not established any
reserves for these amounts. In 2000, our share of earnings before taxes from
these partnerships was $168 million, which represented 20% of our operating
income. Our investment in these partnerships at June 30, 2001 was $607 million.
As a result of the utilities' failure to make payments due under these power
purchase agreements, the partnerships have called on the partners to provide
additional capital to fund operating costs of the power plants. From January 1,
2001 to June 30, 2001, subsidiaries of ours have made equity contributions
totaling approximately $134 million to meet capital calls by the partnerships.
Although Southern California Edison has been paying the partnerships for power
delivered after March 27, 2001 and Pacific Gas and Electric has paid for power
delivered after April 6, 2001 and four partnerships have entered into settlement
agreements with Southern California Edison with respect to past due payments,
our subsidiaries and the other partners may be required to make additional
capital contributions to the partnerships if the utilities fail to make future
payments. Given the severity of the California power crisis and the uncertainty
surrounding any potential legislative or other solution to the crisis, it is
impossible at this time to determine whether we will receive any or all amounts
owed to us under the power purchase contracts or the settlement agreements,
whether the utilities will continue to operate under the contracts and to what
extent our investment in the affected partnerships will be impaired.
For a more complete discussion, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations--The California Power Crisis and
Our Response." In addition, we cannot assure you that future developments with
respect to the California power crisis will not have a material impact on our
business and operations and our ability to meet our obligations under the notes.
14
WE CANNOT PREDICT THE OUTCOME OF THE ONGOING CALIFORNIA PUBLIC UTILITIES
COMMISSION INVESTIGATION.
On April 3, 2001, the California Public Utilities Commission adopted an
order instituting an investigation. The order reopens past Commission decisions
authorizing the California investor-owned utilities to form holding companies
and initiates an investigation into:
- whether the holding companies violated requirements to give "first
priority" to the capital needs of their respective utility subsidiaries in
the recent energy crisis;
- whether ring-fencing actions by Edison International and PG&E Corporation
and their respective non-utility affiliates (including us) were an
asset-shielding action that also violated requirements to give "first
priority" to the capital needs of their utility subsidiaries;
- whether the payment of dividends by the utilities violated requirements
that the utilities maintain dividend policies as though they were
comparable stand-alone utility companies;
- any additional later-discovered violations of laws or Commission rules and
decisions; and
- whether additional rules, conditions, or other changes to the holding
company decisions are necessary.
On June 6, 2001, in response to motions filed by the three holding companies
(including Edison International) to dismiss the investigation for lack of
subject matter jurisdiction, the Commission issued for comment a draft decision,
which concluded, among other matters, that applicable law permits the
Commission, even if the normal common law prerequisites for piercing the
corporate structures are absent, to disregard the corporate forms within the
holding company system "to reach the assets of or challenge the behaviors of
entities within the holding company system" in order to protect ratepayers.
Commissioner Henry Duque has issued a draft alternate decision that would grant
the three holding companies' motions to dismiss the order as to themselves,
finding lack of subject matter jurisdiction over them, and would direct the
Commission's general counsel to file an action in state court to enforce the
holding company conditions, if necessary. The alternate, as well as the draft
decision that would deny the motions to dismiss, are presently on the
Commission's agenda for its October 11 meeting. Either would require a vote of 3
out of 5 commissioners in order to be adopted. We are not a party to this
investigatory proceeding. We cannot predict whether, when or in what form this
order will be adopted, or what direct or indirect effects any subsequent action
taken by the Commission in such proceeding or in any other action or proceeding,
in reliance on the principles articulated in this order and in other applicable
authority, may have on Edison International or on us.
OUR ABILITY TO MEET CASH REQUIREMENTS DEPENDS UPON THE PERFORMANCE OF OUR
SUBSIDIARIES.
The original notes are, and the exchange notes will be, exclusively our
obligations and will not be the obligations of any of our subsidiaries. Because
substantially all our operations are conducted by our subsidiaries and other
investments, our cash flow and ability to service our indebtedness or otherwise
meet our financial obligations, including our ability to pay the interest on,
and principal of, the notes when due, are dependent upon the ability of our
subsidiaries and other investments to generate earnings and have available cash
sufficient to allow such entities to pay dividends and make distributions to us.
In general, the ability of our subsidiaries and other investments to generate
earnings and have available cash is subject to a number of risks, many of which
are beyond our control, including changes in the regulatory environment,
increased competition, fuel and energy commodity prices, natural disaster,
foreign operating risk, financial environment and a downturn in the economy. In
particular, as discussed above, the California power crisis has had, and is
likely to continue to have, an adverse impact on our California partnership
investments and may adversely affect the ability of these partnerships to make
distributions to us. See "--The ongoing California power crisis has had, and is
likely to continue to have, an adverse impact on us."
15
In addition, financing agreements of our subsidiaries and other investments
generally place limitations on the ability of those subsidiaries and other
investments to pay dividends, make distributions or otherwise transfer funds to
us. Financing agreements for our operating subsidiaries and affiliates are
generally secured and contain representations, warranties, covenants and other
agreements on our or the applicable subsidiary's or other investment's part
that, if not met, could lead to a default under those agreements. If there is a
default under a project financing for any reason, project lenders could exercise
rights and remedies typically granted to secured parties, including the ability
to take control of the project's assets and/or our ownership interest in the
project company. In addition, we own less than all the equity interests in some
of our projects, and so are unable unilaterally to cause dividends or
distributions to be made to us from those projects. Lastly, many of our projects
are located outside the United States. We have a general policy of not
repatriating funds from our foreign projects and instead reinvest those funds in
the foreign projects. Therefore, any distributions from foreign operations could
be subject to additional taxes in the United States upon repatriation. These
taxes could materially affect the amount of cash realized by us from dividends
from our foreign projects. Accordingly, we cannot assure you that we will
receive sufficient distributions from our subsidiaries to pay debt service on
the notes when due.
Any right of ours to receive any assets of any of our subsidiaries upon any
liquidation or reorganization of a subsidiary, and the consequent right of
holders of the notes to participate in distributions of, or to realize proceeds
from, those assets, will be effectively subordinated to the claims of the
subsidiary's creditors, including trade creditors and holders of debt incurred
by the subsidiary.
One of our subsidiaries, Edison First Power, is not in compliance with a
required financial ratio under the financing documents related to the
acquisition of the Fiddler's Ferry and Ferrybridge plants located in the United
Kingdom. In July, Edison First Power received a waiver for its breach of the
required financial ratios under the financing documents. We cannot assure you
that Edison First Power's creditors will continue to waive its non-compliance
with requirements under the financing documents or that Edison First Power will
satisfy the financial ratios in the future. The financing documents stipulate
that a breach of the financial ratio covenant constitutes an immediate event of
default. If the event of default is not waived, the financing parties are
entitled to enforce their security interest over Edison First Power's assets,
including the Fiddler's Ferry and Ferrybridge plants. We are currently offering
for sale through a competitive bidding process the Fiddler's Ferry and
Ferrybridge plants. If we are successful at selling the Ferrybridge and
Fiddler's Ferry plants, it is likely that we will not recover any of our
investment in the subsidiary that owns these assets. At June 30, 2001, that
investment was $974 million. We plan to use the proceeds from the sale, if it
occurs, to repay a portion or all of the indebtedness of the project. If we
retain these plants, it is likely that we will not satisfy the interest coverage
requirement set forth in the financing documents. See "Management Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources--Subsidiary Financing Plans--Status of Edison First Power Loan."
Our subsidiary, Doga Enerji, owns 80% of the Doga project in Turkey. Doga
Enerji has experienced delays in receiving payments from its power purchaser
Turkiye Elektrik, A.S., also referred to as TEAS. Doga Enerji is in the process
of determining whether these delays will materially adversely affect the future
cash flow projections for the project. Until such determination is made, Doga
Enerji will not make a distribution for 2001. While such payment obligations are
guaranteed by the Turkish Treasury, we cannot assure you that TEAS will make its
payments on a timely basis.
SOME OF OUR PROJECTS OPERATE WITHOUT LONG-TERM POWER PURCHASE AGREEMENTS AND ARE
OR WILL BE SUBJECT TO MARKET FORCES THAT AFFECT THE PRICE OF POWER.
Some of our projects do not have long-term power purchase agreements. Also,
projects which we may acquire or develop in the future may not have long-term
power purchase agreements. Because their output is not committed to be sold
under long-term contracts, these projects are subject to market
16
forces which determine the amount and price of power that they sell. We cannot
assure you that these plants will be successful in selling power into their
markets. If they are unsuccessful, they may not be able to generate enough cash
to service their own debt or to make distributions to us.
A SUBSTANTIAL AMOUNT OF OUR REVENUES ARE DERIVED UNDER POWER PURCHASE AGREEMENTS
WITH A SINGLE CUSTOMER, AND WE MAY BE ADVERSELY AFFECTED IF THAT CUSTOMER FAILS
TO FULFILL ITS OBLIGATIONS UNDER THOSE POWER PURCHASE AGREEMENTS.
For the first six months of 2001, 27% of our consolidated operating
revenues, and in 2000, 33% of our consolidated operating revenues, were derived
under three power purchase agreements between our subsidiary, Midwest
Generation, LLC, and Exelon Generation Company, a subsidiary of Exelon
Corporation. These agreements were entered into in connection with our
December 1999 acquisition of fossil fuel power generating plants in Illinois,
which we refer to as the Illinois Plants. Exelon Corporation is the holding
company of Commonwealth Edison and PECO Energy Company, major utilities located
in Illinois and Pennsylvania. Electric revenues attributable to sales to Exelon
Generation are earned from capacity and energy provided by the Illinois Plants
under three five-year power purchase agreements expiring in 2004. Exelon
Generation has the option to terminate two of these agreements in their entirety
or with respect to any generating unit or units in each of 2002, 2003 and 2004.
In June 2001, Exelon Generation provided our subsidiary with notice to continue
the agreement related to the coal units for 2002. If Exelon Generation were to
fail or become unable to fulfill or choose to terminate some of its obligations
under these power purchase agreements, we may not be able to find another
customer on similar terms for the output of our power generation assets. Any
material failure by Exelon Generation Company to make payments under these power
purchase agreements could adversely affect our results of operations and
liquidity.
OUR INTERNATIONAL PROJECTS ARE SUBJECT TO RISKS OF DOING BUSINESS IN FOREIGN
COUNTRIES.
Our international projects are subject to political and business risks,
including uncertainties associated with currency exchange rates, currency
repatriation, expropriation, political instability and other issues that have
the potential to impair the projects from making dividends or other
distributions to us and against which we may not be fully capable of insuring.
In particular, fluctuations in currency exchange rates can affect, on a U.S.
dollar equivalent basis, the amount of our equity contributions to, and
distributions from, our international projects. At times, we have hedged a
portion of our exposure to fluctuations in currency exchange rates. However,
hedge contracts may involve risks, including default by the other party to the
contract, and we cannot assure you that fluctuations in currency exchange rates
will be fully offset by these hedges or that these hedges will be available
throughout the term of the notes.
Generally, the uncertainty of the legal structure in some foreign countries
in which we may develop or acquire projects could make it more difficult to
enforce our rights under agreements relating to the projects. In addition, the
laws and regulations of some countries may limit our ability to hold a majority
interest in some of the projects that we may develop or acquire.
The economic crisis in Indonesia has raised concerns over the ability of PT
PLN, the state owned utility, to meet its obligations under its power purchase
agreement with our Paiton project and has negatively affected and may continue
to negatively affect that project's dividends to us. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Contingencies--Paiton."
COMPETITION COULD ADVERSELY AFFECT OUR BUSINESS.
The global independent power industry is characterized by numerous strong
and capable competitors, some of which may have more extensive operating
experience in the acquisition and
17
development of power projects, larger staffs and greater financial resources
than we do. Further, in recent years some power markets have been characterized
by strong and increasing competition as a result of regulatory changes and other
factors which have contributed to a reduction in market prices for power. These
regulatory and other changes may continue to increase competitive pressures in
the markets where we operate. Increased competition for new project investment
opportunities may adversely affect our ability to develop or acquire projects on
economically favorable terms.
WE ARE SUBJECT TO EXTENSIVE GOVERNMENT REGULATION.
Our operations are subject to extensive regulation by governmental agencies
in each of the countries in which we conduct operations. See
"Business--Regulatory Matters." Our domestic projects are subject to energy,
environmental and other governmental laws and regulations at the federal, state
and local levels in connection with the development, ownership and operation of
the projects. Our projects are also subject to federal, state and local laws and
regulations that govern the geographical location, zoning and land use of or
with respect to a project. Our international projects are subject to the energy,
environmental and other laws and regulations of the foreign jurisdictions in
which these projects are located. The degree of regulation varies according to
each country and may be materially different from the regulatory regimes in the
United States.
We cannot assure you that the introduction of new laws or other future
regulatory developments in countries in which we conduct business will not have
a material adverse effect on our business, results of operations or financial
condition, nor can we assure you that we will be able to obtain and comply with
all necessary licenses, permits and approvals for our proposed energy projects.
If we cannot comply with all applicable regulations, our business, results of
operations and financial condition could be adversely affected.
In addition, if any of our projects were to lose its status as a qualifying
facility, eligible facility or foreign utility company under U.S. federal
regulations, we could become subject to regulation as a "holding company" under
the Public Utility Holding Company Act of 1935. If that were to occur, we would
be required to divest all operations not functionally related to the operation
of a single integrated utility system and would be required to obtain approval
of the Securities and Exchange Commission for various actions. See
"Business--Regulatory Matters--U.S. Federal Energy Regulation."
GENERAL OPERATING RISKS AND CATASTROPHIC EVENTS MAY ADVERSELY AFFECT OUR
PROJECTS.
The operation of power generating plants involves many risks, including
start-up problems, the breakdown or failure of equipment or processes,
performance below expected levels of output, the inability to meet expected
efficiency standards, operator errors, strikes, work stoppages or labor disputes
and catastrophic events such as earthquakes, landslides, fires, floods,
explosions or similar calamities. The occurrence of any of these events could
significantly reduce revenues generated by our projects or increase their
generating expenses, thus diminishing distributions by the projects to us and,
as a result, our ability to make payments under the notes. Equipment and plant
warranties and insurance obtained by us may not be adequate to cover lost
revenues or increased expenses and, as a result, a project may be unable to fund
principal and interest payments under its financing obligations and may operate
at a loss. A default under a financing obligation of a project entity could
cause us to lose our interest in the project.
OUR FUTURE ACQUISITIONS AND DEVELOPMENT PROJECTS MAY NOT BE SUCCESSFUL.
Our long-term strategy includes the development and acquisition of electric
power generation facilities. The development projects and acquisitions in which
we have invested, or in which we may invest in the future, may be large and
complex, and we may not be able to complete the development or acquisition of
any particular project. The development of a power project may require us to
expend
18
significant sums for preliminary engineering, permitting, legal and other
expenses before we can determine whether we will win a competitive bid, or
whether a project is feasible, economically attractive or financeable. Moreover,
our access to capital for future projects is uncertain. Furthermore, due to the
effects of the California power crisis on Edison International and Southern
California Edison, we do not expect to receive capital contributions from Edison
International in the near future. We cannot assure you that we will be
successful in obtaining financing for our projects or that we will obtain
sufficient additional equity capital, project cash flow or additional borrowings
to enable us to fund the equity commitments required for future projects.
YOU MAY HAVE DIFFICULTY SELLING THE NOTES THAT YOU DO NOT EXCHANGE.
If you do not exchange your original notes for exchange notes in the
exchange offer, you will continue to be subject to the restrictions on transfer
of your original notes described in the legend on your original notes. The
restrictions on transfer of your original notes arise because we issued the
original notes under exemptions from, or in transactions not subject to, the
registration requirements of the Securities Act and applicable state securities
laws. In general, you may only offer or sell the original notes if they are
registered under the Securities Act and applicable state securities laws, or
offered and sold under an exemption from these requirements. We do not intend to
register the original notes under the Securities Act. To the extent original
notes are tendered and accepted in the exchange offer, the trading market, if
any, for the original notes would be adversely affected. See "The Exchange
Offer--Consequences of Exchanging or Failing to Exchange Original Notes."
YOU MAY FIND IT DIFFICULT TO SELL YOUR NOTES BECAUSE THERE IS NO EXISTING
TRADING MARKET FOR THE EXCHANGE NOTES.
You may find it difficult to sell your notes because an active trading
market for the notes may not develop. The exchange notes are being offered to
the holders of the original notes. The original notes were issued on August 10,
2001, primarily to a small number of institutional investors. After the exchange
offer, the trading market for the remaining untendered original notes could be
adversely affected.
There is no existing trading market for the exchange notes. We do not intend
to apply for listing or quotation of the exchange notes on any exchange, and so
we do not know the extent to which investor interest will lead to the
development of a trading market or how liquid that market might be. Although
Credit Suisse First Boston Corporation, BMO Nesbitt Burns Corp., Salomon Smith
Barney Inc., SGC Owen Securities Corporation, TD Securities (USA) Inc., and
Westdeutsche Landesbank Girozentrale (Dusseldorf), the initial purchasers in the
private offering of the original notes, have informed us that they intend to
make a market in the exchange notes, they are not obligated to do so, and any
market-making may be discontinued at any time without notice. As a result, the
market price of the exchange notes could be adversely affected.
BROKER-DEALERS OR NOTEHOLDERS MAY BECOME SUBJECT TO THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT.
Any broker-dealer that:
- exchanges its original notes in the exchange offer for the purpose of
participating in a distribution of the exchange notes; or
- resells exchange notes that were received by it for its own account in the
exchange offer,
may be deemed to have received restricted securities and may be required to
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction by that broker-dealer.
Any profit on the resale of the exchange notes and any commission
19
or concessions received by a broker-dealer may be deemed to be underwriting
compensation under the Securities Act.
In addition to broker-dealers, any noteholder that exchanges its original
notes in the exchange offer for the purpose of participating in a distribution
of the exchange notes may be deemed to have received restricted securities and
may be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction by
that noteholder.
USE OF PROCEEDS
We will not receive any proceeds from the exchange offer. In consideration
for issuing the exchange notes, we will receive in exchange original notes of
like principal amount, the terms of which are identical in all material respects
to the exchange notes. The original notes surrendered in exchange for exchange
notes will be retired and canceled and cannot be reissued. Accordingly, issuance
of the exchange notes will not result in any increase in our indebtedness. We
have agreed to bear the expenses of the exchange offer. No underwriter is being
used in connection with the exchange offer.
On August 10, 2001, we issued and sold the original notes in an offering
exempt from registration under the Securities Act. We used the proceeds of that
offering, which were $400 million, to repay indebtedness under our corporate
credit facilities.
The interest rates on the credit facilities that we repaid averaged
approximately 5.84% per annum as of the dates they were repaid. All of these
credit facilities are scheduled to expire in October 2001. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Liquidity and Capital Resources--Corporate Financing Plans."
20
CAPITALIZATION
The following table sets forth our consolidated capitalization as of
June 30, 2001 and as adjusted to reflect the issuance of the original notes and
application of the proceeds from the issuance of the original notes as discussed
in "Use of Proceeds." The information in the table is qualified in its entirety
by the more detailed information included in the documents incorporated by
reference in this prospectus. See "Incorporation of Documents by Reference."
CAPITALIZATION AS OF JUNE 30, 2001
AS
ACTUAL ADJUSTED(1)
--------- -----------
(IN MILLIONS)
Short-Term Indebtedness................................ $ 819.8 $ 419.8
Long-Term Indebtedness(2).............................. 7,763.1 8,163.1
Preferred Securities................................... 325.7 325.7
--------- ---------
Total Indebtedness................................. 8,908.6 8,908.6
Shareholder's Equity................................... 2,672.6 2,672.6
--------- ---------
Total Capitalization............................... $11,581.2 $11,581.2
========= =========
------------------------
(1) Represents the capitalization at June 30, 2001, as adjusted for the net
proceeds from the issuance of the original notes.
(2) Includes current maturities of long-term indebtedness.
21
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth our selected consolidated financial data for
the periods indicated. The selected consolidated financial data for the six
month period ended June 30, 2001 were derived from the unaudited consolidated
financial statements of Edison Mission Energy and our consolidated subsidiaries.
The selected consolidated financial data for the years ended December 31, 1996,
1997, 1998, 1999 and 2000 were derived from the audited consolidated financial
statements of Edison Mission Energy and our consolidated subsidiaries. These
selected consolidated financial data are qualified in their entirety by the more
detailed information and financial statements, including the notes to that
information and those financial statements, included in the documents
incorporated by reference in this prospectus.
SIX MONTHS
ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------- -------------------
1996 1997 1998 1999 2000 2000 2001
-------- -------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS) (DOLLARS IN
MILLIONS)
(UNAUDITED)
INCOME STATEMENT DATA:
Operating revenues................................... $ 843.6 $ 975.0 $ 893.8 $1,635.9 $3,241.0 $1,460.2 $1,585.8
Operating expenses:
Depreciation and amortization...................... 89.9 102.8 87.3 190.2 382.1 202.5 174.3
Other operating expenses........................... 386.6 478.3 456.0 1,019.3 2,028.1 1,004.7 1,105.3
------- ------- ------- -------- -------- -------- --------
Total operating expenses......................... 476.5 581.1 543.3 1,209.5 2,410.2 1,207.2 1,279.6
------- ------- ------- -------- -------- -------- --------
Operating income..................................... 367.1 393.9 350.5 426.4 830.8 253.0 306.2
Interest expense..................................... (164.2) (223.5) (196.1) (375.5) (721.5) (370.5) (328.9)
Interest and other income............................ 40.7 53.9 50.9 55.8 74.0 42.4 34.7
Minority interest.................................... (69.5) (38.8) (2.8) (3.0) (3.2) (1.4) (7.5)
------- ------- ------- -------- -------- -------- --------
Income (loss) before income taxes.................... 174.1 185.5 202.5 103.7 180.1 (76.5) 4.5
Provision (benefit) for income taxes................. 82.0 57.4 70.4 (40.4) 72.5 (27.8) 1.7
------- ------- ------- -------- -------- -------- --------
Income (loss) before accounting changes, and
extraordinary
loss............................................... 92.1 128.1 132.1 144.1 107.6 (48.7) 2.8
Cumulative effect on prior years of changes, in
accounting, net of tax............................. -- -- -- (13.8) 17.7 17.7 6.0
Extraordinary loss on early extinguishment of debt,
net of income tax benefit.......................... -- (13.1) -- -- -- -- --
------- ------- ------- -------- -------- -------- --------
Net income (loss).................................... $ 92.1 $ 115.0 $ 132.1 $ 130.3 $ 125.3 $ (31.0) $ 8.8
======= ======= ======= ======== ======== ======== ========
OTHER DATA:
Ratio of earnings to fixed charges(1)(2)............. 1.42 1.64 1.69 1.18 1.23 0.81 0.93
------------------------------
(1) For purposes of computing the ratio of earnings to fixed charges, earnings
are divided by fixed charges. "Earnings" represents the aggregate of our
income before income taxes (adjusted for the excess or shortfall of
dividends or other distributions over equity in earnings of less than
50%-owned entities), amortization of previously capitalized interest and
fixed charges (net of capitalized interest). "Fixed Charges" represents
interest (whether expressed or capitalized), the amortization of debt
discount and interest portion of rental expense.
(2) For the six month periods ended June 30, 2001 and 2000, there was a fixed
charge deficiency of $25.4 million and $76.6 million, respectively.
AS OF DECEMBER 31, AS OF
------------------------------------------------------ JUNE 30,
1996 1997 1998 1999 2000 2001
-------- -------- -------- --------- --------- -------------
(IN MILLIONS) (IN MILLIONS)
(UNAUDITED)
BALANCE SHEET DATA:
Assets............................................... $5,152.5 $4,985.1 $5,158.1 $15,534.2 $15,017.1 $15,257.3
Current liabilities.................................. 270.9 339.8 358.7 1,772.8 3,911.0 3,031.2
Long-term obligations, less current portion.......... 2,419.9 2,532.1 2,396.4 7,439.3 5,334.8 6,349.3
Preferred securities of subsidiaries................. 150.0 150.0 150.0 476.9 326.8 325.7
Shareholder's equity................................. 1,019.9 826.6 957.6 3,068.5 2,948.2 2,672.6
22
THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER
Upon the terms and conditions described in this prospectus and in the
accompanying letter of transmittal, which together constitute the exchange
offer, we will accept for exchange original notes which are properly tendered on
or before the expiration date and not withdrawn as permitted below. As used in
this prospectus, the term "expiration date" means 5:00 p.m., New York City time,
on , 2001. However, if we, in our sole discretion, have extended the
period of time for which the exchange offer is open, the term "expiration date"
means the latest time and date to which we extend the exchange offer. The
exchange offer, however, will not be in effect any longer than 45 business days
from the date of this prospectus.
As of the date of this prospectus, $400 million aggregate principal amount
of the original notes is outstanding. This prospectus, together with the letter
of transmittal, is first being sent on or about , 2001 to all holders of
original notes known to us. Our obligation to accept original notes for exchange
in the exchange offer is subject to the conditions described below under
"--Conditions to the Exchange Offer."
We reserve the right to extend the period of time during which the exchange
offer is open. We would then delay acceptance for exchange of any original notes
by giving oral or written notice of an extension to the holders of original
notes as described below. During any extension period, all original notes
previously tendered will remain subject to the exchange offer and may be
accepted for exchange by us. Any original notes not accepted for exchange will
be returned to the tendering holder after the expiration or termination of the
exchange offer.
Original notes tendered in the exchange offer must be in denominations of
principal amounts of $1,000 and any integral multiple of $1,000.
We reserve the right to amend or terminate the exchange offer, and not to
accept for exchange any original notes not previously accepted for exchange,
upon the occurrence of any of the conditions of the exchange offer specified
below under "--Conditions to the Exchange Offer." We will give oral or written
notice of any extension, amendment, non-acceptance or termination to the holders
of the original notes as promptly as practicable. If we materially change the
terms of the exchange offer, we will resolicit tenders of the original notes,
file a post-effective amendment to the registration statement of which this
prospectus constitutes a part and provide notice to the noteholders. If the
change is made less than five business days before the expiration of the
exchange offer, we will extend the offer so that the noteholders have at least
five business days to tender or withdraw. We will notify you of any extension by
means of a press release or other public announcement no later than 9:00 a.m.,
New York City time on that date.
Our acceptance of the tender of original notes by a tendering holder will
form a binding agreement upon the terms and subject to the conditions provided
in this prospectus and in the accompanying letter of transmittal.
PROCEDURES FOR TENDERING
Except as described below, a tendering holder must, on or prior to the
expiration date:
- transmit a properly completed and duly executed letter of transmittal,
including all other documents required by the letter of transmittal, to
The Bank of New York at the address listed below under the heading
"--Exchange Agent"; or
- if notes are tendered in accordance with the book-entry procedures listed
below, the tendering holder must transmit an agent's message to the
exchange agent at the address listed below under the heading "--Exchange
Agent."
23
In addition:
- the exchange agent must receive, on or before the expiration date,
certificates for the original notes; or
- a timely confirmation of book-entry transfer of the original notes into
the exchange agent's account at the Depository Trust Company, the
book-entry transfer facility, along with the letter of transmittal or an
agent's message; or
- the holder must comply with the guaranteed delivery procedures described
below.
The Depository Trust Company will be referred to as DTC in this prospectus.
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 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 original notes, letters of transmittal and all
other required documents is at your election and risk. If the delivery is by
mail, we recommend that you use registered mail, properly insured, with return
receipt requested. In all cases, you should allow sufficient time to assure
timely delivery. You should not send letters of transmittal or original notes to
us.
If you are a beneficial owner whose original notes are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee, and
wish to tender, you should promptly instruct the registered holder to tender on
your behalf. Any registered holder that is a participant in DTC's book-entry
transfer facility system may make book-entry delivery of the original notes by
causing DTC to transfer the original notes into the exchange agent's account.
Signatures on a letter of transmittal or a notice of withdrawal must be
guaranteed unless the original notes surrendered for exchange are tendered:
- by a registered holder of the original notes 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."
If signatures on a letter of transmittal or a notice of withdrawal are
required to be guaranteed, the guarantees must be by an "eligible institution."
An "eligible institution" is a financial institution--including most banks,
savings and loan associations and brokerage houses--that is a participant in the
Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Program or the Stock Exchanges Medallion Program.
We will determine in our sole discretion all questions as to the validity,
form and eligibility of original notes tendered for exchange. This discretion
extends to the determination of all questions concerning the timing of receipts
and acceptance of tenders. These determinations will be final and binding.
We reserve the right to reject any particular original note not properly
tendered or any which acceptance might, in our judgment or our counsel's
judgment, be unlawful. We also reserve the right to waive any defects or
irregularities or conditions of the exchange offer as to any particular original
note either before or after the expiration date, including the right to waive
the ineligibility of any tendering holder. Our interpretation of the terms and
conditions of the exchange offer as to any particular original note either
before or after the expiration date, including the letter of transmittal and the
instructions to the letter of transmittal, shall be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of original notes must be cured within a reasonable period of time. Neither we,
the exchange agent nor any other person will be under any duty to give
24
notification of any defect or irregularity in any tender of original notes. Nor
will we, the exchange agent or any other person incur any liability for failing
to give notification of any defect or irregularity.
If the letter of transmittal is signed by a person other than the registered
holder of original notes, the letter of transmittal must be accompanied by a
written instrument of transfer or exchange in satisfactory form duly executed by
the registered holder with the signature guaranteed by an eligible institution.
The original notes must be endorsed or accompanied by appropriate powers of
attorney. In either case, the original notes must be signed exactly as the name
of any registered holder appears on the original notes.
If the letter of transmittal or any original notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, these persons should so indicate when signing. Unless waived by us,
proper evidence satisfactory to us of their authority to so act must be
submitted.
By tendering, each holder will represent to us that, among other things,
- the exchange notes are being acquired in the ordinary course of business
of the person receiving the exchange notes, whether or not that person is
the holder and
- neither the holder nor the other person has any arrangement or
understanding with any person to participate in the distribution of the
exchange notes.
In the case of a holder that is not a broker-dealer, that holder, by
tendering, will also represent to us that the holder is not engaged in and does
not intend to engage in a distribution of the exchange notes.
If any holder or other person is an "affiliate" of ours, as defined under
Rule 405 of the Securities Act, or is engaged in, or intends to engage in, or
has an arrangement or understanding with any person to participate in, a
distribution of the exchange notes, that holder or other person can not rely on
the applicable interpretations of the staff of the SEC and must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction.
Each broker-dealer that receives exchange notes for its own account in
exchange for original notes, where the original notes were acquired by it as a
result of market-making activities or other trading activities, must acknowledge
that it will deliver a prospectus that meets the requirements of the Securities
Act in connection with any resale of the exchange notes. The letter of
transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. See "Plan of Distribution."
ACCEPTANCE OF ORIGINAL NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the exchange offer,
we will accept, promptly after the expiration date, all original notes properly
tendered. We will issue the exchange notes promptly after acceptance of the
original notes. See "--Conditions to the Exchange Offer" below. For purposes of
the exchange offer, we will be deemed to have accepted properly tendered
original notes for exchange when, as and if we have given oral or written notice
to the exchange agent, with prompt written confirmation of any oral notice.
For each original note accepted for exchange, the holder of the original
note will receive an exchange note having a principal amount equal to that of
the surrendered original note. The exchange notes will bear interest from the
most recent date to which interest has been paid on the original notes.
Accordingly, registered holders of exchange notes on the relevant record date
for the first interest payment date following the completion of the exchange
offer will receive interest accruing from the most recent date to which interest
has been paid. Original notes accepted for exchange will cease to accrue
interest from and after the date of completion of the exchange offer. Holders of
original notes
25
whose original notes are accepted for exchange will not receive any payment for
accrued interest on the original notes otherwise payable on any interest payment
date the record date for which occurs on or after completion of the exchange
offer and will be deemed to have waived their rights to receive the accrued
interest on the original notes.
In all cases, issuance of exchange notes for original notes will be made
only after timely receipt by the exchange agent of:
- certificates for the original notes, or a timely book-entry confirmation
of the original notes, into the exchange agent's account at the book-entry
transfer facility;
- a properly completed and duly executed letter of transmittal; and
- all other required documents.
Unaccepted or non-exchanged original notes will be returned without expense
to the tendering holder of the original notes. In the case of original notes
tendered by book-entry transfer in accordance with the book-entry procedures
described below, the non-exchanged original notes will be credited to an account
maintained with the book-entry transfer facility, 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 for the
original notes at DTC for purposes of the exchange offer within two business
days after the date of this prospectus. Any financial institution that is a
participant in DTC's systems must make book-entry delivery of original notes by
causing DTC to transfer those original notes into the exchange agent's account
at DTC in accordance with DTC's procedure for transfer. This participant should
transmit its acceptance to DTC on or prior to the expiration date or comply with
the guaranteed delivery procedures described below. DTC will verify this
acceptance, execute a book-entry transfer of the tendered original notes into
the exchange agent's account at DTC and then send to the exchange agent
confirmation of this book-entry transfer. The confirmation of this book-entry
transfer will include an agent's message confirming that DTC has received an
express acknowledgment from this participant that this participant has received
and agrees to be bound by the letter of transmittal and that we may enforce the
letter of transmittal against this participant. Delivery of exchange notes
issued in the exchange offer may be effected through book-entry transfer at DTC.
However, the letter of transmittal or facsimile of it or an agent's message,
with any required signature guarantees and any other required documents, must:
(1) be transmitted to and received by the exchange agent at the address
listed below under "--Exchange Agent" on or prior to the expiration date;
or
(2) comply with the guaranteed delivery procedures described below.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of original notes desires to tender the original
notes, and the original notes are not immediately available, or time will not
permit the holder's original notes or other required documents to reach the
exchange agent before the expiration date, or the procedure for book-entry
transfer described above cannot be completed on a timely basis, a tender may
nonetheless be made if:
- the tender is made through an eligible institution;
- prior to the expiration date, the exchange agent received from an eligible
institution a properly completed and duly executed letter of transmittal,
or a facsimile of the letter of transmittal, and notice of guaranteed
delivery, substantially in the form provided by us, by facsimile
transmission, mail or hand delivery,
26
(1) stating the name and address of the holder of original notes and the
amount of original notes tendered,
(2) stating that the tender is being made and
(3) guaranteeing that within three New York Stock Exchange trading days
after the expiration date, the certificates for all physically
tendered original notes, 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 original notes, 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 three New York Stock Exchange trading days after
the expiration date.
WITHDRAWAL RIGHTS
Tenders of original notes may be withdrawn at any time before 5:00 p.m., New
York City time, on the expiration date.
For a withdrawal to be effective, the exchange agent must receive a written
notice of withdrawal at the address or, in the case of eligible institutions, at
the facsimile number, indicated below under "--Exchange Agent" before
5:00 p.m., New York City time, on the expiration date. Any notice of withdrawal
must:
- specify the name of the person, referred to as the depositor, having
tendered the original notes to be withdrawn;
- identify the notes to be withdrawn, including the certificate number or
numbers and principal amount of the original notes;
- contain a statement that the holder is withdrawing his election to have
the original notes exchanged;
- be signed by the holder in the same manner as the original signature on
the letter of transmittal by which the original notes were tendered,
including any required signature guarantees, or be accompanied by
documents of transfer to have the trustee with respect to the original
notes register the transfer of the original notes in the name of the
person withdrawing the tender; and
- specify the name in which the original notes are registered, if different
from that of the depositor.
If certificates for original notes have been delivered or otherwise
identified to the exchange agent, then, prior to the release of these
certificates the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and signed notice of withdrawal with
signatures guaranteed by an eligible institution unless this holder is an
eligible institution. If original notes have been tendered in accordance with
the procedure for book-entry transfer described above, any notice of withdrawal
must specify the name and number of the account at the book-entry transfer
facility to be credited with the withdrawn original notes. We will determine all
questions as to the validity, form and eligibility, including time of receipt,
of notices of withdrawal. Any original notes so withdrawn will be deemed not to
have been validly tendered for exchange. No exchange notes will be issued unless
the original notes so withdrawn are validly re-tendered. Any original notes that
have been tendered for exchange, but which are not exchanged for any reason,
will be returned to the tendering holder without cost to the holder. In the case
of original notes tendered by book-entry transfer, the original notes will be
credited to an account maintained with the book-entry transfer facility for the
original notes.
27
Properly withdrawn original notes may be re-tendered by following the procedures
described under "--Procedures for Tendering" above at any time on or before
5:00 p.m., New York City time, on the expiration date.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the exchange offer, we shall not be
required to accept for exchange, or to issue exchange notes in exchange for, any
original notes, and may terminate or amend the exchange offer, if at any time
before the acceptance of the original notes for exchange or the exchange of the
exchange notes for the original notes, any of the following events shall occur:
- there shall be threatened, instituted or pending any action or proceeding
before, or any injunction, order or decree shall have been issued by, any
court or governmental agency or other governmental regulatory or
administrative agency or commission:
(1) seeking to restrain or prohibit the making or completion of the
exchange offer or any other transaction contemplated by the exchange
offer, or assessing or seeking any damages as a result of this
transaction,
(2) resulting in a material delay in our ability to accept for exchange
or exchange some or all of the original notes in the exchange offer;
or any statute, rule, regulation, order or injunction shall be
sought, proposed, introduced, enacted, promulgated or deemed
applicable to the exchange offer or any of the transactions
contemplated by the exchange offer by any governmental authority,
domestic or foreign; or
- any action shall have been taken, proposed or threatened, by any
governmental authority, domestic or foreign, that in our sole judgment
might directly or indirectly result in any of the consequences referred to
in clauses (1) or (2) above or, in our sole judgment, might result in the
holders of exchange notes having obligations with respect to resales and
transfers of exchange notes which are greater than those described in the
interpretation of the SEC referred to above, or would otherwise make it
inadvisable to proceed with the exchange offer; or
- there shall have occurred:
(1) any general suspension of or general limitation on prices for, or
trading in, securities on any national securities exchange or in the
over-the-counter market; or
(2) any limitation by a governmental authority which may adversely affect
our ability to complete the transactions contemplated by the exchange
offer; or
(3) a declaration of a banking moratorium or any suspension of payments
in respect of banks in the United States or any limitation by any
governmental agency or authority which adversely affects the
extension of credit; or
(4) a commencement of a war, armed hostilities or other similar
international calamity directly or indirectly involving the United
States, or, in the case of any of the preceding events existing at
the time of the commencement of the exchange offer, a material
acceleration or worsening of these calamities; or
- any change, or any development involving a prospective change, shall have
occurred or be threatened in our business, financial condition, operations
or prospects and those of our subsidiaries taken as a whole that is or may
be adverse to us, or we shall have become aware of facts that have or may
have an adverse impact on the value of the original notes or the exchange
notes; which in our sole judgment in any case makes it inadvisable to
proceed with the exchange offer and/or with such acceptance for exchange
or with such exchange.
28
These conditions to the exchange offer are to our sole benefit and we may
assert them regardless of the circumstances giving rise to any of these
conditions, or we may waive them in whole or in part in our sole discretion. If
we do so, the exchange offer will remain open for at least 5 business days
following any waiver of the preceding conditions. Our failure at any time to
exercise any of the foregoing rights will not be deemed a waiver of any right.
In addition, we will not accept for exchange any original notes tendered,
and no exchange notes will be issued in exchange for any original notes, if at
this time any stop order is threatened or in effect relating to the registration
statement of which this prospectus constitutes a part or the qualification of
the indenture under the Trust Indenture Act of 1939.
EXCHANGE AGENT
We have appointed The Bank of New York as the exchange agent for the
exchange offer. You should direct all executed letters of transmittal to the
exchange agent at the address indicated below. You should direct 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 to the
exchange agent addressed as follows:
DELIVERY TO: The Bank of New York, EXCHANGE AGENT
BY HAND BEFORE 4:30 P.M.: BY REGISTERED OR CERTIFIED MAIL:
The Bank of New York The Bank of New York
20 Broad Street 20 Broad Street
Lower Level Lower Level
New York, NY 10005 New York, NY 10005
Attention: Frank Driscoll Attention: Frank Driscoll
BY HAND OR OVERNIGHT DELIVERY AFTER
4:30 P.M. ON THE EXPIRATION DATE:
The Bank of New York
20 Broad Street
Lower Level
New York, NY 10005
Attention: Frank Driscoll
FOR INFORMATION CALL:
Carolle Montreuil
(914) 773-5735
BY FACSIMILE TRANSMISSION
(FOR ELIGIBLE INSTITUTIONS ONLY):
(914) 773-5015 or
(914) 773-5040
Attention: Customer Service
CONFIRM BY TELEPHONE:
Carolle Montreuil
(914) 773-5735
If you deliver the letter of transmittal to an address other than any
address indicated above or transmit instructions via facsimile other than any
facsimile number indicated, then your delivery or transmission will not
constitute a valid delivery of the letter of transmittal.
29
FEES AND EXPENSES
We will not make any payment to brokers, dealers, or others soliciting
acceptances of the exchange offer. The estimated cash expenses to be incurred in
connection with the exchange offer will be paid by us. We estimate these
expenses in the aggregate to be approximately $500,000.
ACCOUNTING TREATMENT
We will not recognize any gain or loss for accounting purposes upon the
consummation of the exchange offer. We will amortize the expense of the exchange
offer over the term of the exchange notes under generally accepted accounting
principles.
TRANSFER TAXES
Holders who tender their original notes for exchange will not be obligated
to pay any related transfer taxes, except that holders who instruct us to
register exchange notes in the name of, or request that original notes not
tendered or not accepted in the exchange offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer taxes.
CONSEQUENCES OF EXCHANGING OR FAILING TO EXCHANGE ORIGINAL NOTES
Holders of original notes who do not exchange their original notes for
exchange notes in the exchange offer will continue to be subject to the
provisions in the indenture regarding transfer and exchange of the original
notes and the restrictions on transfer of the original notes as described in the
legend on the notes as a consequence of the issuance of the original notes under
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the original notes may not be offered or sold, unless registered under
the Securities Act, except under an exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. As
discussed in "Exchange Offer; Registration Rights," we do not currently
anticipate that we will register original notes under the Securities Act.
Based on interpretations by the staff of the SEC, as described in no-action
letters issued to third parties, we believe that exchange notes issued in the
exchange offer in exchange for original notes may be offered for resale, resold
or otherwise transferred by holders of the original notes, other than any holder
which is an "affiliate" of ours within the meaning of Rule 405 under the
Securities Act, without compliance with the registration and prospectus delivery
provisions of the Securities Act, if the exchange notes are acquired in the
ordinary course of the holders' business and the holders have no arrangement or
understanding with any person to participate in the distribution of the exchange
notes. However, the SEC has not considered the exchange offer in the context of
a no-action letter. We cannot assure you that the staff of the SEC would make a
similar determination with respect to the exchange offer as in the other
circumstances. Each holder, other than a broker-dealer, must acknowledge that it
is not engaged in, and does not intend to engage in, a distribution of exchange
notes and has no arrangement or understanding to participate in a distribution
of exchange notes. If any holder is an affiliate of ours, is engaged in or
intends to engage in or has any arrangement or understanding with any person to
participate in the distribution of the exchange notes to be acquired in the
exchange offer, that holder:
(1) could not rely on the applicable interpretations of the staff of the
SEC; and
(2) must comply with the registration and prospectus delivery requirements
of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives exchange notes for its own account in
exchange for original notes must acknowledge that the original notes were
acquired by the broker-dealer as a result of
30
market-making activities or other trading activities and that it will comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale of the exchange notes. Furthermore, any
broker-dealer that acquired any of its original notes directly from us:
- may not rely on the applicable interpretation of the staff of the SEC's
position contained in Exxon Capital Holdings Corp., SEC no-action letter
(April 13, 1988), Morgan, Stanley & Co. Inc., SEC no-action letter
(June 5, 1991) and Shearman & Sterling, SEC no-action letter (July 2,
1983) and
- must also be named as a selling noteholder in connection with the
registration and prospectus delivery requirements of the Securities Act
relating to any resale transaction.
See "Plan of Distribution."
In addition, to comply with state securities laws, the exchange notes may
not be offered or sold in any state unless they have been registered or
qualified for sale in such state or an exemption from registration or
qualification, with which there has been compliance, is available. The offer and
sale of the exchange notes to "qualified institutional buyers," as defined under
Rule 144A of the Securities Act, is generally exempt from registration or
qualification under the state securities laws. We currently do not intend to
register or qualify the sale of exchange notes in any state where an exemption
from registration or qualification is required and not available.
31
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS REGARDING
EDISON MISSION ENERGY. THESE STATEMENTS ARE BASED ON OUR CURRENT PLANS AND
EXPECTATIONS AND INVOLVE RISKS AND UNCERTAINTIES WHICH COULD CAUSE ACTUAL FUTURE
ACTIVITIES AND RESULTS OF OPERATIONS TO BE MATERIALLY DIFFERENT FROM THOSE
PRESENTED IN THE FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER INCLUDE RISKS LISTED IN "RISK FACTORS." UNLESS
OTHERWISE INDICATED, THE INFORMATION PRESENTED IN THIS SECTION IS WITH RESPECT
TO EDISON MISSION ENERGY AND OUR CONSOLIDATED SUBSIDIARIES.
GENERAL
We are an independent power producer engaged in the business of developing,
acquiring, owning or leasing and operating electric power generation facilities
worldwide. We also conduct energy trading and price risk management activities
in power markets open to competition. Edison International is our ultimate
parent company. Edison International also owns Southern California Edison, one
of the largest electric utilities in the United States. We were formed in 1986
with two domestic operating projects. As of June 30, 2001, we owned interests in
33 domestic and 39 international operating power projects with an aggregate
generating capacity of 27,798 megawatts (MW), of which our share was 22,923 MW.
At that date, one domestic and five international projects, totaling 1,551 MW of
generating capacity, of which our anticipated share will be approximately 926
MW, were in construction. At June 30, 2001, we had consolidated assets of
$15.3 billion and total shareholder's equity of $2.7 billion.
ACQUISITIONS, DISPOSITIONS AND SALE-LEASEBACK TRANSACTIONS
Set forth below is a description of our acquisitions, dispositions and
sale-leaseback transactions since January 1, 1998.
ACQUISITION OF CBK POWER CO. LTD.
In February 2001, we completed the acquisition of a 50% interest in CBK
Power Co. Ltd. in exchange for $20 million. CBK Power has entered into a 25-year
build-rehabilitate-transfer-and-operate agreement with National Power
Corporation related to the 728 MW Caliraya-Botocan-Kalayaan (CBK) hydroelectric
project located in the Philippines. Financing for this $460 million project
comprises equity commitments of $117 million (our 50% share of which is
$58.5 million) required to be made upon completion of the rehabilitation and
expansion, currently scheduled for 2003, and debt financing which is in place
for the remainder of the cost for this project.
ACQUISITION OF SUNRISE PROJECT
On November 17, 2000, we completed a transaction with Texaco Power &
Gasification Holdings Inc. to purchase a proposed 560 MW gas-fired combined
cycle project to be located in Kern County, California, referred to as the
Sunrise project. The acquisition included all rights, title and interest held by
Texaco in the Sunrise project, except that Texaco had an option to repurchase at
cost a 50% interest in the project prior to its commercial operation which
commenced on June 27, 2001. On June 25, 2001, Texaco exercised its option and
repurchased a 50% interest for $84 million. As part of our acquisition of the
Sunrise project, we also: (i) acquired from Texaco two gas turbines for the
project and (ii) granted Texaco an option to acquire a 50% interest in 1,000 MW
of future power plant projects we designate. The Sunrise project consists of two
phases, with Phase I, a single-cycle gas-fired facility (320 MW), completed on
June 27, 2001, and Phase II, conversion to a combined-cycle gas-fired facility
(560 MW), currently scheduled to be completed in July 2003. We entered into a
long-term power purchase agreement with the California Department of Water
Resources on June 25, 2001.
32
The total purchase price of the Sunrise project from Texaco was
$27.0 million. We funded the purchase with cash. The total estimated
construction cost of this project through 2003 is approximately $455.0 million.
The project intends to obtain project financing for a portion of the capital
costs.
ACQUISITION OF TRADING OPERATIONS OF CITIZENS POWER LLC
On September 1, 2000, we completed a transaction with P&L Coal Holdings
Corporation and Gold Fields Mining Corporation (Peabody) to acquire the trading
operations of Citizens Power LLC and a minority interest in structured
transaction investments relating to long-term power purchase agreements. The
purchase price of $44.9 million was based on the sum of: (a) fair market value
of the trading portfolio and the structured transaction investments at the date
of the acquisition and (b) $25 million. The acquisition was funded with cash. As
a result of this acquisition, we have expanded our trading operations beyond the
traditional marketing of our electric power. By the end of the third quarter of
2000, the Citizens trading operations were merged into our own marketing
operations under Edison Mission Marketing & Trading, Inc.
ACQUISITION OF INTEREST IN ITALIAN WIND
On March 15, 2000, we completed a transaction with UPC International
Partnership CV II to acquire Edison Mission Wind Power Italy B.V., formerly
known as Italian Vento Power Corporation Energy 5 B.V., which owns a 50%
interest in a series of power projects that are in operation or under
development in Italy. All the projects use wind to generate electricity from
turbines which is sold under fixed-price, long-term tariffs. Assuming all the
projects under development are completed, currently scheduled for 2002, the
total capacity of these projects will be 283 MW. The total purchase price is
90 billion Italian Lira (approximately $44 million at December 31, 2000), with
equity contribution obligations of up to 33 billion Italian Lira (approximately
$16 million at December 31, 2000), depending on the number of projects that are
ultimately developed. As of December 31, 2000, our payments in respect of these
projects included $27 million toward the purchase price and $13 million in
equity contributions.
ACQUISITION OF ILLINOIS PLANTS
On December 15, 1999, we completed a transaction with Commonwealth Edison, a
subsidiary of Exelon Corporation, to acquire Commonwealth Edison's fossil-fuel
power generating plants located in Illinois. These plants provide access to the
Mid-America Interconnected Network and the East Central Area Reliability
Council. In connection with this transaction, we entered into power purchase
agreements with Commonwealth Edison with terms of up to five years expiring in
2004, pursuant to which Commonwealth Edison purchases capacity and has the right
to purchase energy generated by the plants. Subsequently, Commonwealth Edison
assigned its rights and obligations under these power purchase agreements to
Exelon Generation Company, LLC. Exelon Generation has the option to terminate
two of the three agreements in their entirety or with respect to any generating
unit or units in each of 2002, 2003 and 2004. In June 2001, Exelon Generation
provided us notice to continue the agreement related to the coal units for 2002.
Concurrently with the acquisition of the Illinois Plants, we assigned our
right to purchase the Collins Station, a 2,698 MW gas and oil-fired generating
station located in Illinois, to third party lessors. After this assignment, we
entered into leases of the Collins Station with terms of 33.75 years. The
aggregate MW either purchased or leased as a result of these transactions with
Commonwealth Edison and the third party lessors is 9,539 MW.
Consideration for the Illinois Plants, excluding $860 million paid by the
third party lessors to acquire the Collins Station, consisted of a cash payment
of approximately $4.1 billion. The acquisition was funded primarily with a
combination of approximately $1.6 billion of non-recourse debt secured by
33
a pledge of the stock of specified subsidiaries, $1.3 billion of our debt and
$1.2 billion in equity contributions to us from Edison International.
ACQUISITION OF FERRYBRIDGE AND FIDDLER'S FERRY PLANTS
On July 19, 1999, we completed a transaction with PowerGen UK plc to acquire
the Ferrybridge and Fiddler's Ferry coal fired electric generating plants
located in the U.K. Ferrybridge, located in West Yorkshire, and Fiddler's Ferry,
located in Warrington, each have a generating capacity of approximately 2,000
MW.
Consideration for the purchase of the Ferrybridge and Fiddler's Ferry plants
by our indirect subsidiary, Edison First Power, consisted of an aggregate of
approximately $2.0 billion (L1.3 billion at the time of the acquisition) for the
two plants. The acquisition was funded primarily with a combination of net
proceeds of L1.15 billion from the Edison First Power Limited Guaranteed Secured
Variable Rate Bonds due 2019, a $500 million equity contribution to us from
Edison International and cash. The Edison First Power Bonds were issued to a
special purpose entity formed by Merrill Lynch International. Merrill Lynch
International sold the variable rate coupons portion of the bonds to a special
purpose entity that borrowed $1.3 billion (L830 million at the time of the
acquisition) under a term loan facility due 2012 to finance the purchase. For a
description of the status of the loan and related matters, see "--Liquidity and
Capital Resources--Subsidiary Financing Plans--Status of Edison First Power
Loan."
ACQUISITION OF INTEREST IN CONTACT ENERGY
On May 14, 1999, we completed a transaction with the New Zealand government
to acquire 40% of the shares of Contact Energy Limited. The remaining 60% of
Contact Energy's shares were sold in a New Zealand and overseas public offering
resulting in widespread ownership among the citizens of New Zealand and offshore
investors. These shares are publicly traded on stock exchanges in New Zealand
and Australia. During 2000, we increased our share of ownership in Contact
Energy to 42.6%. Contact Energy owns and operates hydroelectric, geothermal and
natural gas fired power generating plants primarily in New Zealand with a total
current generating capacity of 2,247 MW. Consideration for our interest in
Contact Energy consisted of a cash payment of approximately $635 million
(NZ $1.2 billion), which was financed by $120 million of preferred securities, a
$214 million (NZ $400 million at the time of the acquisition) credit facility, a
$300 million equity contribution to us from Edison International and cash. The
credit facility was subsequently paid off with proceeds from the issuance of
additional preferred securities.
During the second quarter of 2001, we completed the purchase of additional
shares of Contact Energy for NZ$152 million, thereby increasing our ownership
interest from 42.6% to 51.2%. Accordingly, we began accounting for Contact
Energy on a consolidated basis effective June 1, 2001, upon acquisition of a
controlling interest. Prior to June 1, 2001, we used the equity method of
accounting for Contact Energy. In order to finance this purchase, we obtained a
NZ$135 million, 364-day bridge loan from an investment bank under a credit
facility which is to be syndicated by the bank. In addition to other security
arrangements, a security interest over all Contact Energy shares held has been
provided as collateral. In June and July 2001, we issued through one of our
subsidiaries new preferred securities to repay the bridge loan. On July 2, 2001,
we redeemed NZ$400 million EME Taupo preferred securities from the existing
holders. Funding for the redemption of the existing preferred securities was
provided by a NZ$400 million credit facility scheduled to mature in July 2005.
The financing documents governing the credit facility provide that the credit
facility may be funded under either, or a combination of, a letter of credit
facility or a revolving credit facility. The NZ$400 million was originally
funded as a revolving credit facility.
34
ACQUISITION OF HOMER CITY PLANT
On March 18, 1999, we completed a transaction with GPU, Inc., New York State
Electric & Gas Corporation and their respective affiliates to acquire the 1,884
MW Homer City Electric Generating Station. This facility is a coal-fired plant
in the mid-Atlantic region of the United States and has direct, high voltage
interconnections to both the New York Independent System Operator, which
controls the transmission grid and energy and capacity markets for New York
State and is commonly known as the NYISO, and the Pennsylvania-New
Jersey-Maryland Power Pool, which is commonly known as the PJM.
Consideration for the Homer City plant consisted of a cash payment of
approximately $1.8 billion, which was partially financed by $1.5 billion of new
loans, combined with our revolver borrowings and cash.
ACQUISITION OF INTEREST IN ECOELECTRICA
In December 1998, we acquired 50% of the 540 MW EcoElectrica liquefied
natural gas combined-cycle cogeneration facility under construction in Penuelas,
Puerto Rico for approximately $243 million. The project also includes a
desalination plant and liquefied natural gas storage and vaporization
facilities. Commercial operation commenced in March 2000. For information about
the disposition of the EcoElectrica facility, see "--Dispositions."
ACCOUNTING TREATMENT OF ACQUISITIONS
Each of the acquisitions described above has been accounted for utilizing
the purchase method. The purchase price was allocated to the assets acquired and
liabilities assumed based on their respective fair market values. Amounts in
excess of the fair value of the net assets acquired have been assigned to
goodwill. Our consolidated statement of income reflects the operations of
Citizens beginning September 1, 2000, Italian Wind beginning April 1, 2000,
EcoElectrica beginning March 1, 2000, the Homer City plant beginning March 18,
1999, Contact Energy beginning May 1, 1999, the Ferrybridge and Fiddler's Ferry
plants beginning July 19, 1999, and the Illinois Plants beginning December 15,
1999. We began accounting for Contact Energy on a consolidated basis effective
June 1, 2001, upon acquisition of a controlling interest.
DISPOSITIONS
On June 30, 2000, we completed the sale of our 50% interest in the
Auburndale project to the existing partner. Proceeds from the sale were
$22 million. We recorded a gain on the sale of $17.0 million ($10.5 million
after tax).
On August 16, 2000, we completed the sale of 30% of our interest in the
Kwinana cogeneration plant to SembCorp Energy. We retain the remaining 70%
ownership interest in the plant. Proceeds from the sale were $12 million. We
recorded a gain on the sale of $8.5 million ($7.7 million after tax).
On June 25, 2001, we completed the sale of a 50% interest in the Sunrise
project to Texaco Power & Gasification Holdings Inc. Proceeds from the sale were
$84 million.
On June 29, 2001, we completed the sale of our 25% interest in the Hopewell
project to the existing partner. Proceeds from the sale were $26.5 million. We
recorded a gain on the sale of $5.4 million ($2.8 million after tax).
Subsequent to June 30, 2001, we sold our 50% interest in the Saguaro project
for $67 million. We have also entered into agreements, subject to obtaining
consents from third parties and other conditions precedent to closing, for the
sale of our interests in the EcoElectrica, Gordonsville, Commonwealth Atlantic,
James River and Nevada Sun-Peak projects. In addition, we are currently
35
offering for sale our interest in the Brooklyn Navy Yard project. We expect the
proceeds from the sale of our interests in the above projects, if completed,
will be in excess of their book value with respect to those projects, which was
$482 million at June 30, 2001. We are also offering for sale the Ferrybridge and
Fiddler's Ferry plants in the United Kingdom. See "--Liquidity and Capital
Resources--Subsidiary Financing Plans--Status of Edison First Power Loan."
SALE-LEASEBACK TRANSACTIONS
On August 24, 2000, we entered into a sale-leaseback transaction for the
Powerton and Joliet power facilities located in Illinois to third party lessors
for an aggregate purchase price of $1.367 billion. Under the terms of the leases
(33.75 years for Powerton and 30 years for Joliet), our subsidiary makes
semi-annual lease payments on each January 2 and July 2, which began January 2,
2001. We guarantee our subsidiary's payments under the leases. If a lessor
intends to sell its interest in the Powerton or Joliet power facility, we have a
right of first refusal to acquire the interest at fair market value. Minimum
lease payments during the next five years are $83.3 million for 2001,
$97.3 million for 2002, $97.3 million for 2003, $97.3 million for 2004, and
$141.1 million for 2005. At December 31, 2000, the total remaining minimum lease
payments are $2.4 billion. Lease costs of these power facilities will be
levelized over the terms of the respective leases. The gain on the sale of the
power facilities has been deferred and is being amortized over the term of the
leases.
On July 10, 2000, one of our subsidiaries entered into a sale-leaseback of
equipment, primarily Illinois peaker power units, to a third party lessor for
$300 million. Under the terms of the 5-year lease, we have a fixed price
purchase option at the end of the lease term of $300 million. We guaranteed the
monthly payments under the lease. In connection with the sale-leaseback, a
subsidiary of ours purchased $255 million of notes issued by the lessor which
accrue interest at LIBOR plus 0.65% to 0.95%, depending on our credit rating.
The notes are due and payable in 2005. The gain on the sale of equipment has
been deferred and is being amortized over the term of the operating lease.
MISSION ENERGY HOLDING COMPANY
On June 8, 2001, Edison International created Mission Energy Holding Company
as a wholly-owned indirect subsidiary. Mission Energy Holding's principal asset
is our common stock. In July 2001, Mission Energy Holding issued $800 million of
13.50% senior secured notes due 2008. Concurrently with the consummation of the
offering of its senior secured notes, Mission Energy Holding borrowed
$385 million under a new term loan. The senior secured notes and the term loan
are secured by a first priority security interest in our common stock. The
respective rights, remedies and priorities of the holders of the senior secured
notes and the lenders with respect to our stock are governed by intercreditor
arrangements. Both the senior secured notes and the term loan also have security
interest in interest reserve accounts, covering the interest payable on those
obligations for the first two years. The net proceeds of the offering and the
term loan not deposited into the respective interest escrow accounts were used
to pay a dividend to Mission Energy Holding's parent, The Mission Group, which
in turn loaned the net proceeds to its parent, Edison International. Edison
International used the funds to repay a portion of its indebtedness that matures
in 2001. The Mission Energy Holding financing documents contain restrictions on
our ability and the ability of our subsidiaries to enter into specified
transactions or engage in specified business activities and require in some
instances that we obtain the approval of the Mission Energy Holding board of
directors. Our articles of incorporation bind us to the restrictions in the
Mission Energy Holding financing documents by restricting our ability to enter
into specified transactions or engage in specified business activities, as set
forth in the Mission Energy Holding financing documents, without shareholder
approval. See "Risk Factors--Restrictions in our articles of incorporation, our
credit facilities and the Mission Energy Holding financing documents limit or
prohibit us from entering into specified transactions that we otherwise may
enter into."
36
RESULTS OF OPERATIONS
We operate predominantly in one line of business, electric power generation,
with reportable segments organized by geographic region: Americas, Asia Pacific,
and Europe, Central Asia, Middle East and Africa.
Operating revenues are derived from our majority-owned domestic and
international entities. Equity in income from investments relates to energy
projects where our ownership interest is 50% or less in the projects. The equity
method of accounting is generally used to account for the operating results of
entities over which we have a significant influence but in which we do not have
a controlling interest. With respect to entities accounted for under the equity
method, we recognize our proportional share of the income or loss of such
entities.
AMERICAS
YEARS ENDED SIX MONTHS THREE MONTHS
DECEMBER 31, ENDED JUNE 30, ENDED, JUNE 30,
------------------------------ ------------------- -------------------
1998 1999 2000 2000 2001 2000 2001
-------- -------- -------- -------- -------- -------- --------
(IN MILLIONS) (IN MILLIONS) (IN MILLIONS)
(UNAUDITED) (UNAUDITED)
Operating revenues................. $ 29.9 $378.6 $1,571.0 $637.1 $687.2 $390.8 $379.7
Net gains (losses) from energy
trading and price risk
management....................... -- (6.4) (17.3) (33.8) 32.5 (32.1) 13.6
Equity in income from
investments...................... 184.6 224.8 257.2 94.3 192.3 61.0 110.0
------ ------ -------- ------ ------ ------ ------
Total operating revenues....... 214.5 597.0 1,810.9 697.6 912.0 419.7 503.3
Fuel and plant operations.......... 22.2 237.7 1,131.6 516.1 593.0 286.6 305.8
Depreciation and amortization...... 9.8 52.5 191.2 100.4 79.5 50.3 40.1
Administrative and general......... -- -- 21.1 -- 10.9 -- 5.1
------ ------ -------- ------ ------ ------ ------
Operating income................... $182.5 $306.8 $ 467.0 $ 81.1 $228.6 $ 82.8 $152.3
====== ====== ======== ====== ====== ====== ======
INTERIM RESULTS
OPERATING REVENUES
Operating revenues decreased $11.1 million for the second quarter ended
June 30, 2001, compared to the corresponding period of 2000. The decrease was
primarily due to lower dispatch from the coal units at the Illinois Plants as a
result of lower market prices during the second quarter of 2001. Operating
revenues increased $50.1 million for the six months ended June 30, 2001,
compared to the same prior year period. The increase resulted from higher
electric revenues from the Homer City plant due to higher energy prices and from
the Illinois Plants due to increased generation from the coal units as a result
of higher market prices, as compared to the same prior year period.
Net gains from energy trading activities were $6.5 million and $2.4 million
for the second quarter and six months ended June 30, 2001, respectively. There
were no comparable gains or losses for the same prior year periods. Total gains
and losses from price risk management activities increased $39.2 million and
$63.9 million for the second quarter and six months ended June 30, 2001,
respectively, compared to the corresponding periods of 2000. The increase in
gains was primarily due to realized and unrealized gains for a gas swap
purchased to hedge a portion of our gas price risk related to our share of gas
production in Four Star, an oil and gas company in which we have a minority
interest and which we account for under the equity method. Although we believe
the gas swap hedges our gas price risk, hedge accounting is not permitted for
our investments accounted for on the equity method. Partially offsetting this
gain in the second quarter and six months ended June 30, 2001 was a
37
loss resulting from the change in market value of future contracts with respect
to fuel purchases at the Illinois Plants that did not qualify for hedge
accounting under SFAS No. 133.
Equity in income from investments increased $49 million and $98 million
during the second quarter and six months ended June 30, 2001, respectively,
compared to the same prior year periods. The increase was primarily the result
of higher revenues from cogeneration projects due to higher energy pricing
during the six-month period ended June 30, 2001, and higher revenues from oil
and gas investments due to higher oil and gas prices in the first quarter of
2001.
Due to warmer weather during the summer months, electric revenues generated
from the Homer City plant and the Illinois Plants are usually higher during the
third quarter of each year. In addition, our third quarter equity in income from
investments in energy projects is materially higher than other quarters of the
year due to higher summer pricing for our West Coast power investments.
OPERATING EXPENSES
Fuel and plant operations increased $19.2 million and $76.9 million for the
second quarter and six months ended June 30, 2001, respectively, compared to the
corresponding periods of the prior year. The increase in plant operations
resulted from lease costs related to the sale-leaseback commitments for the
Powerton-Joliet power facilities and the Collins gas and oil-fired power plant.
There were no comparable lease costs for the Powerton-Joliet power facilities
during the six months ended June 30, 2000. In addition, plant operations
increased due to higher major maintenance costs at the Illinois Plants during
the six-month period ended June 30, 2001. The increase in fuel expense for the
six months ended June 30, 2001, as compared to the same period last year,
resulted from higher fuel costs at the Illinois Plants primarily due to higher
natural gas and fuel oil prices.
Depreciation and amortization expense decreased $10.2 million and
$20.9 million for the second quarter and six months ended June 30, 2001,
respectively, compared to the same periods last year. The decrease resulted from
lower depreciation expense at the Illinois Plants related to the sale-leaseback
transaction for the Powerton-Joliet power facilities to third-party lessors in
August 2000.
Administrative and general expenses for the quarter ended and six months
ended June 30, 2001 consist of administrative and general expenses incurred at
our trading operations in Boston, Massachusetts. Prior to September 1, 2000, the
acquisition date of Citizens Power, administrative and general expenses incurred
by our own marketing operations were reflected in Corporate/Other administrative
and general expenses.
OPERATING INCOME
Operating income increased $69.5 million and $147.5 million during the
second quarter and six months ended June 30, 2001, respectively, compared to the
corresponding periods of the prior year. The increase was primarily due to
operating income from the Homer City plant, equity in income from investments in
energy projects and gains from price risk management activities discussed above.
ANNUAL RESULTS
OPERATING REVENUES
Operating revenues increased $1.2 billion in 2000 compared to 1999, and
increased $348.7 million in 1999 compared to 1998. The 2000 increase resulted
from a full-year of electric revenues from the Illinois Plants acquired in
December 1999 and the Homer City plant acquired in March 1999. The 1999 increase
resulted from electric revenues from the Homer City plant. There were no
comparable electric revenues for the Homer City plant for 1998.
38
Electric power generated at the Illinois Plants is sold under three
five-year power purchase agreements with Exelon Generation Company terminating
in December 2004. Exelon Generation is obligated to make capacity payments for
the plants under contract and an energy payment for electricity produced by
these plants. Our revenues under these power purchase agreements were
$1.1 billion for the year ended December 31, 2000.
On September 1, 2000, we acquired the trading operations of Citizens
Power LLC. As a result of this acquisition, we have expanded our trading
operations beyond the traditional marketing of our electric power. Our energy
trading activities are accounted for using the fair value method under
EITF 98-10, "Accounting for Contracts Involved in Energy Trading and Risk
Management Activities." Net gains from energy trading activities since the date
of the acquisition of trading operations of Citizens Power LLC through
December 31, 2001 were $62.2 million. Our price risk management activities
included economic hedge transactions that required mark to market accounting.
Total losses from price risk management activities were $79.5 million and
$6.4 million in 2000 and 1999, respectively. The increase in losses was
primarily due to realized and unrealized losses for a gas swap entered into as
an economic hedge of a portion of our gas price risk related to our share of gas
production in Four Star (an oil and gas company in which we have a minority
interest and which we account for under the equity method).
Partially offsetting this loss in 2000 was a gain realized for calendar year
2001 financial options entered into beginning August 2000 as a hedge of our
price risk associated with expected natural gas purchases at the Illinois
Plants. During the fourth quarter, we determined that it was no longer probable
that we would purchase natural gas at the Illinois Plants during 2001. This
decision resulted from sustained gas prices far greater than were contemplated
when we originally projected our 2001 gas needs and the fact that we can use
fuel oil interchangeably with natural gas at some of the Illinois Plants. At the
time we made our revised determination, the fair value of our financial option
was $38 million. This gain is being deferred as required by hedge accounting and
will be recognized upon either purchasing natural gas in 2001 or determining
that it is probable we will not purchase natural gas in 2001. Subsequent to our
revised determination, we settled the option for a $56 million gain.
Accordingly, $18 million of gain was recognized in the fourth quarter.
Concurrent with our revised determination of our 2001 natural gas requirements
at the Illinois Plants, we entered into some additional fuel contracts to offset
our financial option and economically hedge the price risk associated with fuel
oil. We recognized a $12 million loss at December 31, 2000 on these additional
fuel contracts.
Equity in income from investments rose 14% in 2000 over 1999, and 22% in
1999 over 1998. The 2000 increase was primarily the result of higher revenues
from cogeneration projects due to higher energy pricing and higher revenues from
oil and gas investments due to higher oil and gas prices. The 1999 increase was
primarily the result of higher revenues from several cogeneration projects due
to a final settlement on energy prices tied to short-run avoided cost with the
applicable public utilities and, second, from one cogeneration project as a
result of a gain on termination of a power sales agreement. In addition, the
1999 increase resulted from higher revenues from oil and gas investments
primarily due to higher oil and gas prices.
Many of the domestic energy projects rely on one power sales contract with a
single electric utility customer for the majority, and in some cases all, of
their power sales revenues over the life of the power sales contract. The
primary power sales contracts for four of our operating projects in 2000 and
1999 and five of our operating projects in 1998 are or were with Southern
California Edison. Our share of equity in earnings from these projects accounted
for 5% in 2000, 8% in 1999 and 13% in 1998 of our consolidated revenues for the
respective years. For more information on these projects and other projects in
California, see "--Contingencies--The California Power Crisis."
39
OPERATING EXPENSES
Fuel and plant operations increased $893.9 million in 2000 compared to 1999,
and increased $215.5 million in 1999 compared to 1998. The 2000 increase
resulted from a full year of expenses at the Illinois Plants and the Homer City
plant. The 1999 increase in fuel and plant operations resulted from having no
comparable expenses for the Homer City plant and the Illinois Plants for 1998.
Depreciation and amortization expense increased $138.7 million in 2000
compared to 1999, and increased $42.7 million in 1999 compared to 1998. The 2000
increase was primarily due to a full year of depreciation and amortization
expense related to the Illinois Plants. The 1999 increase in depreciation and
amortization compared to 1998 resulted primarily from the 1999 acquisition of
the Homer City plant.
Administrative and general expenses for 2000 consist of administrative and
general expenses incurred at our trading operations in Boston, Massachusetts
from September 1, 2000. Prior to September 1, 2000, the acquisition date of
Citizens Power, administrative and general expenses incurred by our own
marketing operations were reflected in Corporate/Other administrative and
general expenses.
OPERATING INCOME
Operating income increased $160.2 million in 2000 compared to 1999, and
increased $124.3 million in 1999 compared to 1998. The 2000 increase was
primarily due to operating income from the Illinois Plants, the Homer City plant
and equity in income from investments in oil and gas. The 1999 increase resulted
from operating income from the Homer City plant and equity in income from
investments in energy projects.
ASIA PACIFIC
YEARS ENDED SIX MONTHS THREE MONTHS
DECEMBER 31, ENDED JUNE 30, ENDED JUNE 30,
------------------------------ ------------------- -------------------
1998 1999 2000 2000 2001 2000 2001
-------- -------- -------- -------- -------- -------- --------
(IN MILLIONS) (IN MILLIONS) (IN MILLIONS)
(UNAUDITED) (UNAUDITED)
Operating revenues..................... $205.1 $213.6 $184.2 $93.1 $138.6 $40.8 $92.4
Net gains from energy trading and price
risk management...................... -- -- -- -- 0.1 -- 0.6
Equity in income from investments...... 1.3 18.1 14.6 4.4 7.0 1.7 3.9
------ ------ ------ ----- ------ ----- -----
Total operating revenues........... 206.4 231.7 198.8 97.5 145.7 42.5 96.9
Fuel and plant operations.............. 69.6 73.8 61.5 32.5 58.2 15.7 43.2
Depreciation and amortization.......... 31.6 40.5 35.0 18.0 16.5 7.4 8.3
------ ------ ------ ----- ------ ----- -----
Operating income....................... $105.2 $117.4 $102.3 $47.0 $ 71.0 $19.4 $45.4
====== ====== ====== ===== ====== ===== =====
INTERIM RESULTS
OPERATING REVENUES
Operating revenues increased $51.6 million and $45.5 million for the second
quarter and six months ended June 30, 2001, respectively, compared to the
corresponding periods of 2000. The increase was primarily due to consolidating
Contact Energy operating revenues due to acquiring a controlling interest in the
project, effective June 1, 2001. The increase was partially offset by lower
electric revenues from the Loy Yang B plant in Australia due to a 14.4% decrease
in the average
40
exchange rate of the Australian dollar compared to the U.S. dollar at the
six-month period ended June 30, 2001, compared to the same prior year period.
Net gains from price risk management activities were $0.6 million and
$0.1 million for the second quarter and six months ended June 30, 2001,
respectively. There were no comparable gains or losses for the same prior year
periods. The gains primarily represent the ineffective portion of a long-term
contract with the State Electricity Commission of Victoria and interest rate
swaps entered into by Loy Yang B plant, which are derivatives that qualified as
cash flow hedges under SFAS No. 133.
Equity in income from investments increased $2.2 million and $2.6 million
during the second quarter and six months ended June 30, 2001, respectively,
compared to the same prior year periods. The increase primarily reflects gains
from Contact Energy through May 31, 2001 due to higher wholesale electricity
prices in the current year.
OPERATING EXPENSES
Fuel and plant operations increased $27.5 million and $25.7 million for the
second quarter and six months ended June 30, 2001, respectively, compared to the
corresponding periods of 2000. The increase was primarily due to consolidating
Contact Energy operating expenses, effective June 1, 2001.
OPERATING INCOME
Operating income increased $26 million and $24 million during the second
quarter and six months ended June 30, 2001, respectively, compared to the
corresponding periods of 2000. The increase was primarily due to consolidating
Contact Energy results of operations, effective June 1, 2001. Prior to June 1,
2001, we used the equity method of accounting for Contact Energy.
ANNUAL RESULTS
OPERATING REVENUES
Operating revenues decreased $29.4 million in 2000 compared to 1999, and
increased $8.5 million in 1999 compared to 1998. The 2000 decrease was
attributable to lower electric revenues from our Loy Yang B plant. During
May 2000, we experienced a major outage due to damage to the generator at one of
our two 500 MW units at the Loy Yang B power plant complex in Australia. The
unit was restored to operation in September 2000. Under our insurance program,
we are obligated for the property damage insurance deductible of $2 million and
for loss of profits during the first 15 days following the insurable event. The
repair costs in excess of the deductible amount together with the loss of
profits after the first 15 days and until the unit was back in operation were
partially recovered from insurance as of December 31, 2000. The 1999 increase
was primarily due to higher electric revenues from the Loy Yang B plant due to
increased generation in 1999; as compared to 1998, when the plant experienced
longer planned outages.
Equity in income from investments decreased $3.5 million in 2000 compared to
1999, and increased $16.8 million in 1999 compared to 1998. The 2000 decrease is
primarily due to lower profitability of our interest in Contact Energy resulting
from lower electricity prices caused by milder winter weather conditions. The
1999 increase reflects the purchase of our 40% ownership interest in Contact
Energy in May 1999.
41
OPERATING EXPENSES
Fuel and plant operations decreased $12.3 million in 2000 compared to 1999,
and increased $4.2 million in 1999 compared to 1998. The 2000 decrease resulted
primarily from lower fuel costs at the Loy Yang B plant due to the major outage
at one of its two 500 MW units. The 1999 increase in fuel expense and plant
operations resulted from higher fuel costs from the Loy Yang B plant due to
increased production in 1999; as compared to 1998, when the plant had lower fuel
expenses and longer planned outages.
Depreciation and amortization expense decreased $5.5 million in 2000
compared to 1999, and increased $8.9 million in 1999 compared to 1998. The 2000
decrease was primarily due to favorable changes in foreign exchange rates. The
1999 increase in depreciation and amortization expense related to the
acquisition of our interest in 1999 in the Contact Energy project.
OPERATING INCOME
Operating income decreased $15.1 million in 2000 compared to 1999, and
increased $12.2 million in 1999 compared to 1998. The 2000 decrease was due to
lower operating income from the Loy Yang B plant resulting from the major outage
at one of its two 500 MW units and a decrease in the value of the Australian
dollar compared to the U.S. dollar. We recorded pre-tax losses of $8.4 million
in 2000 related to this outage. The 1999 increase resulted from the acquisition
of Contact Energy.
EUROPE, CENTRAL ASIA, MIDDLE EAST AND AFRICA
YEARS ENDED SIX MONTHS THREE MONTHS
DECEMBER 31, ENDED JUNE 30, ENDED JUNE 30,
------------------------------ ------------------- -------------------
1998 1999 2000 2000 2001 2000 2001
-------- -------- -------- -------- -------- -------- --------
(IN MILLIONS) (IN MILLIONS) (IN MILLIONS)
(UNAUDITED) (UNAUDITED)
Operating revenues......................... $469.4 $805.8 $1,236.3 $668.7 $540.6 $265.8 $217.9
Net losses from energy trading and price
risk management.......................... -- -- -- -- (14.1) -- (3.9)
Equity in income (loss) from investments... 3.5 1.4 (5.0) (3.7) 0.3 (4.8) 1.1
------ ------ -------- ------ ------ ------ ------
Total operating revenues............... 472.9 807.2 1,231.3 665.0 526.8 261.0 215.1
Fuel and plant operations.................. 241.3 456.6 730.1 382.3 381.0 156.4 181.9
Depreciation and amortization.............. 40.3 88.3 144.8 74.6 72.9 36.9 37.7
------ ------ -------- ------ ------ ------ ------
Operating income (loss).................... $191.3 $262.3 $ 356.4 $208.1 $ 72.9 $ 67.7 $ (4.5)
====== ====== ======== ====== ====== ====== ======
INTERIM RESULTS
OPERATING REVENUES
Operating revenues decreased $47.9 million and $128.1 million for the second
quarter and six months ended June 30, 2001, respectively, compared to the
corresponding periods of the prior year. The decrease resulted primarily from
lower electric revenues from the Ferrybridge and Fiddler's Ferry plants and the
First Hydro plant due to lower energy prices and an 8.2% decrease in the average
exchange rate of the pound sterling compared to the U.S. dollar at the six-month
period ended June 30, 2001, compared to the same prior year period. The time
weighted average System Marginal Price decreased from L21.3/MWh during the
quarter ended March 31, 2000 to L18.6/MWh during the quarter ended March 31,
2001. On March 27, 2001, the United Kingdom pool pricing system was replaced
with a bilateral physical trading system referred to as the new electricity
trading arrangements, therefore eliminating the System Marginal Price. The new
electricity trading arrangements are described in further detail under "--Market
Risk Exposures--United Kingdom." These new electricity
42
trading arrangements have resulted in lower forward contract prices for the
quarter ended June 30, 2001, compared to the quarter ended June 30, 2000. The
First Hydro plant, Ferrybridge and Fiddler's Ferry plants and the Iberian
Hy-Power plants generally provide higher electric revenues during the winter
months.
Net losses from price risk management activities were $3.9 million and
$14.1 million for the second quarter and six months ended June 30, 2001,
respectively. There were no comparable gains or losses for the same prior year
periods. The losses primarily represent the change in market value of
electricity rate swap agreements that were recorded at fair value under SFAS
No. 133 with changes in fair value recorded through the income statement.
Equity in income from investments increased $5.9 million and $4 million
during the second quarter and six months ended June 30, 2001, respectively,
compared to the same prior year periods. The increase reflects lower losses
during the second quarter ended June 30, 2001, compared to the corresponding
period in 2000 from the ISAB project, which commenced operations in April 2000.
We had no comparable results for the ISAB project in the first quarter of 2000.
OPERATING EXPENSES
Fuel and plant operations increased $25.5 million for the quarter ended
June 30, 2001, compared to the corresponding period in 2000. The increase in
fuel expense resulted from higher fuel costs at the Doga plant due to increased
production in the second quarter of 2001, compared to the same prior year
quarter, when the plant experienced more unplanned outages. In addition, fuel
costs increased at the First Hydro plant due to higher overnight prices and
imbalance charges. The increase in plant operations resulted primarily from
higher overhaul costs at the Ferrybridge and Fiddler's Ferry plants during the
quarter ended June 30, 2001, compared to the corresponding period in 2000.
Fuel and plant operations decreased $1.3 million for the six months ended
June 30, 2001, compared to the same prior year period. The decrease in fuel
expense and plant operations resulted primarily from a decrease in the average
exchange rate of the pound sterling compared to the U.S. dollar. In addition,
plant operations decreased from lower production at the Ferrybridge and
Fiddler's Ferry plants during the first six months of 2001. Partially offsetting
these decreases were higher fuel costs and plant operation expenses for the Doga
plant due to increased production in the first six months of 2001, compared to
the same prior year period.
OPERATING INCOME
Operating income decreased $72.2 million and $135.2 million during the
second quarter and six months ended June 30, 2001, respectively, compared to the
same prior year periods. The decrease was due to lower operating income from the
Ferrybridge and Fiddler's Ferry plants, the First Hydro plant and the Doga
plant.
ANNUAL RESULTS
OPERATING REVENUES
Operating revenues increased $430.5 million in 2000 compared to 1999, and
increased $336.4 million in 1999 compared to 1998. The 2000 increase resulted
from a full year of electric revenues from the Ferrybridge and Fiddler's Ferry
plants acquired in July 1999 and the Doga project, which commenced commercial
operation in May 1999. Despite the overall increase in operating revenues in
2000 which resulted from the inclusion of a full year of operations of these
projects, electric revenues from Ferrybridge and Fiddler's Ferry in 2000 were
adversely affected by lower energy prices during the year, primarily due to
increased competition, milder winter weather and uncertainty surrounding planned
changes in electricity trading arrangements described below under "--Market Risk
43
Exposures--United Kingdom." The time weighted average System Marginal Price
dropped from L22.39/MWh in 1999 to L18.75/MWh in 2000. We have entered into
electricity rate price swaps for the majority of our forecasted generation
through the winter 2000/2001, and accordingly, have mitigated the downside risks
to further decreases in energy prices during this period. Despite improvement in
capacity prices during August, September and early October 2000, and a slight
firming of forward prices, the short-term prices for energy continued to be
below the prices in prior years. As a result of the foregoing, we continue to
expect lower revenues from our Ferrybridge and Fiddler's Ferry plants in 2001.
The 1999 increase as compared to 1998 was primarily due to inclusion of electric
revenues from the Ferrybridge and Fiddler's Ferry plants and the Doga project.
There were no comparable electric revenues for the Ferrybridge and Fiddler's
Ferry plants and the Doga project for 1998.
Equity in income from investments decreased $6.4 million in 2000 compared to
1999, and decreased $2.1 million in 1999 compared to 1998. The 2000 decrease
reflects losses from initial commercial operation of the ISAB project in
April 2000. We had no comparable results for the ISAB project in 1999.
OPERATING EXPENSES
Fuel and plant operations increased $273.5 million in 2000 compared to 1999,
and increased $215.3 million in 1999 compared to 1998. The 2000 increase
resulted from a full year of expenses at the Ferrybridge and Fiddler's Ferry
plants and the Doga project, partially offset by lower fuel expense at the First
Hydro plant. Fuel expense at First Hydro decreased primarily due to a drop in
energy prices throughout the year and lower pumping costs. The 1999 increase in
fuel expense and plant operations resulted from having no comparable expenses
for the Ferrybridge and Fiddler's Ferry plants and the Doga project for 1998.
Depreciation and amortization expense increased $56.5 million in 2000
compared to 1999, and increased $48 million in 1999 compared to 1998. The 2000
increase was primarily due to a full year of depreciation and amortization
expense associated with the Ferrybridge and Fiddler's Ferry plants. The 1999
increase in depreciation and amortization resulted primarily from the 1999
acquisition of the Ferrybridge and Fiddler's Ferry plants.
OPERATING INCOME
Operating income increased $94.1 million in 2000 compared to 1999, and
increased $71 million in 1999 compared to 1998. The 2000 increase was primarily
due to operating income from the Ferrybridge and Fiddler's Ferry plants, the
Doga project and higher operating income from the First Hydro plant. The 1999
increase resulted from the inclusion of operating income from the Ferrybridge
and Fiddler's Ferry plants and the Doga project.
CORPORATE/OTHER
YEARS ENDED SIX MONTHS THREE MONTHS
DECEMBER 31, ENDED JUNE 30, ENDED JUNE 30,
------------------------------ ------------------- -------------------
1998 1999 2000 2000 2001 2000 2001
-------- -------- -------- -------- -------- -------- --------
(IN MILLIONS) (IN MILLIONS) (IN MILLIONS)
(UNAUDITED) (UNAUDITED)
Net gains from energy trading and price risk
management................................ $ -- $ -- $ -- $ -- $ 1.3 $ -- $ 0.4
Depreciation and amortization............... 5.6 8.9 11.1 9.4 5.4 4.8 2.6
Long-term incentive compensation............ 39.0 136.3 (56.0) -- (2.9) -- 0.8
Administrative and general.................. 83.9 114.9 139.8 73.8 65.1 39.7 33.4
------- ------- ------ ------ ------ ------ ------
Operating loss.............................. $(128.5) $(260.1) $(94.9) $(83.2) $(66.3) $(44.5) $(36.4)
======= ======= ====== ====== ====== ====== ======
44
INTERIM RESULTS
Net gains from price risk management activities were $0.4 million and
$1.3 million for the second quarter and six months ended June 30, 2001,
respectively. There were no comparable gains or losses for the same prior year
periods. The gains primarily resulted from the change in market value of our
interest rate swaps with respect to our $100 million senior notes that did not
qualify for hedge accounting under SFAS No. 133
Long-term incentive compensation expense consists of charges related to our
terminated phantom option plan. We recorded an adjustment to our long-term
incentive compensation accrual during the six months ended June 30, 2001 for
changes in the market value of stock equivalent units.
Administrative and general expenses decreased $6.3 million and $8.7 million
for the second quarter and six months ended June 30, 2001, respectively,
compared to the corresponding periods of 2000. The decrease was the result of
lower administrative and general operating costs.
ANNUAL RESULTS
Long-term incentive compensation expenses decreased $192.3 million in 2000
compared to 1999, and increased $97.3 million in 1999 compared to 1998. The 2000
decrease was due to the absence of new accruals, as the plan had been
terminated, and to a reduction in the liability for previously accrued incentive
compensation by approximately $60 million. This decrease resulted from the lower
valuation implicit in the August 2000 exchange offer pursuant to which the
phantom option plan was terminated compared to the value previously accrued. The
1999 increase was primarily due to the impact of the 1999 acquisitions of the
Illinois Plants, the Ferrybridge and Fiddler's Ferry plants, the Homer City
plant and a 40% interest in Contact Energy. No further phantom option plan
grants were made in 2000 and, since the plan and all the outstanding phantom
stock options have been terminated, no further phantom stock options will be
granted or exercised.
Administrative and general expenses increased $24.9 million in 2000 compared
to 1999, and increased $31 million in 1999 compared to 1998. The increases in
both periods were primarily due to additional salaries and facilities costs
incurred to support the 1999 acquisitions. We recorded a pretax charge of
approximately $9 million against earnings for severance and other related costs,
which contributed to the 2000 increase. The charge resulted from a series of
actions undertaken by us designed to reduce administrative and general operating
costs, including reductions in management and administrative personnel.
OTHER INCOME (EXPENSE)
INTERIM RESULTS
Interest and other income increased $5.5 million for the six months ended
June 30, 2001, compared to the same prior year period. The increase was
primarily due to higher interest income and foreign exchange gains on
intercompany loans. Higher interest income resulted from the $255 million of
notes purchased in connection with the sale-leaseback of the Illinois peaker
power units in July 2000.
On June 29, 2001, we completed the sale of our 25% interest in the Hopewell
project to the existing partner. Proceeds from the sale were $26.5 million. We
recorded a gain on the sale of $5.4 million ($2.8 million after tax).
On June 30, 2000, we completed the sale of our 50% interest in the
Auburndale project to the existing partner. Proceeds from the sale were
$22 million. We recorded a gain on the sale of $17.0 million ($10.5 million
after tax).
Interest expense decreased $18.5 million and $37.7 million for the second
quarter and six months ended June 30, 2001, respectively, compared to the same
prior year periods. The decrease was
45
primarily the result of payment on our $500 million floating rate notes issued
in December 1999 and subsequently paid in September 2000, lower interest rates
on debt financing associated with the Illinois Plants and favorable changes in
foreign exchange rates.
Minority interest expense increased $6.5 million and $6.1 million for the
second quarter and six months ended June 30, 2001, respectively, compared to the
same prior year periods. The increase was due to accounting for Contact Energy
on a consolidated basis, effective June 1, 2001, due to the purchase of
additional shares of Contact Energy that resulted in our ownership interest
increasing from 42.6% to 51.2%.
ANNUAL RESULTS
On August 16, 2000, we completed the sale of 30% of our interest in the
Kwinana cogeneration plant to SembCorp Energy. We retain the other 70% ownership
interest in the plant. Proceeds from the sale were $12 million. We recorded a
gain on the sale of $8.5 million ($7.7 million after tax).
During the fourth quarter of 1999, we completed the sale of 31.5% of our
50.1% interest in Four Star Oil & Gas for $34.2 million in cash and a 50%
interest in the acquirer, Four Star Holdings. Four Star Holdings financed the
purchase of the interest in Four Star Oil & Gas from $27.5 million in loans from
affiliates, including $13.7 million from us, and $13.7 million from cash. Upon
completion of the sale, we continue to own an 18.6% direct interest in Four Star
Oil & Gas and an indirect interest of 15.75% which is held through Four Star
Holdings. As a result of this transaction, our total interest in Four Star
Oil & Gas has decreased from 50.1% to 34.35%. Cash proceeds from the sale were
$34.2 million ($20.5 million net of the loan to Four Star Holdings). The gain on
the sale of the 31.5% interest in Four Star Oil & Gas was $11.5 million of which
we deferred 50%, or $5.6 million, due to our equity interest in Four Star
Holdings. The after-tax gain on the sale was approximately $30 million.
Interest expense increased $336.2 million in 2000 compared to 1999, and
increased $170.3 million in 1999 compared to 1998. The 2000 increase was
primarily the result of additional debt financing associated with the
acquisitions of the Illinois Plants, Ferrybridge and Fiddler's Ferry plants and
the Homer City plant. The 1999 increase was also the result of debt financing of
the Homer City plant, Ferrybridge and Fiddler's Ferry plants and the Illinois
Plants acquisition.
Dividends on mandatorily redeemable preferred securities increased
$9.7 million in 2000 compared to 1999 and increased $9.2 million in 1999
compared to 1998. The 2000 and 1999 increases reflect the issuance of preferred
securities in connection with the Contact Energy acquisition.
PROVISION (BENEFIT) FOR INCOME TAXES
INTERIM RESULTS
During the six months ended June 30, 2001, we recorded an effective tax
provision rate of 39% based on projected income for the year and benefits under
our tax sharing agreement, compared to the annual effective tax benefit rate for
the first six months of 2000 of 36%.
ANNUAL RESULTS
We had effective tax provision (benefit) rates of 40.3%, (39.0%) and 34.8%
in 2000, 1999 and 1998, respectively. Income taxes increased in 2000 principally
due to a higher foreign income tax expense compared to 1999, nonrecurring 1999
tax benefits discussed below and higher state income taxes due to the Homer City
plant and Illinois Plants. Income taxes decreased in 1999, principally due to
lower pre-tax income and income tax benefits. In 1999, we recorded tax benefits
associated with a capital loss attributable to the sale of a portion of our
interest in Four Star Oil & Gas Company, refunds of advanced corporation tax
payments from the United Kingdom and a reduction in deferred taxes in Australia
as a result of a decrease in statutory rates. In addition, our effective tax
rate has
46
decreased as a result of lower foreign income taxes that result from the
permanent reinvestment of earnings from foreign affiliates located in different
foreign tax jurisdictions. The Australian corporate tax rate decreased from 36%
to 34% effective in July 2000, and is scheduled to decrease from 34% to 30%
effective in July 2001. The 1998 tax provision reflects a benefit from
reductions in the U.K. corporate tax rate from 33% to 31% effective in
April 1997, and from 31% to 30% effective in April 1999. In accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," the reductions in the Australia and U.K. income tax rates resulted in
reductions in income tax expense of approximately $5.9 million and $11 million
in 1999 and 1998, respectively.
We are, and may in the future be, under examination by tax authorities in
varying tax jurisdictions with respect to positions we take in connection with
the filing of our tax returns. Matters raised upon audit may involve substantial
amounts, which, if resolved unfavorably, an event not currently anticipated,
could possibly be material. However, in our opinion, it is unlikely that the
resolution of any those matters will have material adverse effect upon our
financial condition or results of operations.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
Effective January 1, 2001, we adopted Statement of Financial Accounting
Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities." The Statement establishes accounting and reporting standards
requiring that derivative instruments be recorded in the balance sheet as either
assets or liabilities measured at their fair value unless they meet an
exception. The Statement requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. For derivatives that qualify for hedge accounting, depending on the nature
of the hedge, changes in fair value are either offset by changes in the fair
value of the hedged assets, liabilities or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value is
immediately recognized in earnings.
Our primary market risk exposures arise from changes in electricity and fuel
prices, interest rates, and fluctuations in foreign currency exchange rates. We
manage these risks in part by using derivative financial instruments in
accordance with established policies and procedures. Effective January 1, 2001,
we record all derivatives at fair value unless the derivatives qualify for the
normal sales and purchases exception. This exception applies to physical sales
and purchases of power or fuel where it is probable that physical delivery will
occur, the pricing provisions are clearly and closely related to the contracted
prices and the documentation requirements of SFAS No. 133, as amended, are met.
The majority of our physical long-term power and fuel contracts, and the similar
business activities of our affiliates, qualify under this exception.
The majority of our remaining risk management activities, including forward
sales contracts from our Homer City plant, qualify for treatment under SFAS
No. 133 as cash flow hedges with appropriate adjustments made to other
comprehensive income. The hedge agreement we have with the State Electricity
Commission of Victoria for electricity prices from our Loy Yang B project in
Australia qualifies as a cash flow hedge. This contract could not qualify under
the normal sales and purchases exception because financial settlement of the
contract occurs without physical delivery. Some of our derivatives did not
qualify for either the normal sales and purchases exception or as cash flow
hedges. These derivatives are recorded at fair value with subsequent changes in
fair value recorded through the income statement. The majority of our activities
related to the Ferrybridge and Fiddler's Ferry power plants in the United
Kingdom and fuel contracts related to the Collins Station in Illinois do not
qualify for either the normal purchases and sales exception or as cash flow
hedges. In both these situations, we could not conclude, based on information
available at June 30, 2001, that the timing of generation from these power
plants met the probable requirement for a specific forecasted transaction under
SFAS No. 133. Accordingly, the majority of these contracts are recorded at fair
value, with subsequent
47
changes in fair value reflected in net gains (losses) from energy trading and
price risk management in the consolidated income statement.
As a result of the adoption of SFAS No. 133, we expect our quarterly
earnings will be more volatile than earnings reported under our prior accounting
policy. We recorded a $6 million, after tax, increase to net income as the
cumulative change in the accounting for derivatives during the quarter ended
March 31, 2001. In addition, we recorded a $230 million, after tax, unrealized
holding loss upon adoption of a change in accounting principle reflected in
accumulated other comprehensive loss in the consolidated balance sheet. During
the quarter ended June 30, 2001, we recorded a $120 million, after tax,
unrealized holding gain reflected in accumulated other comprehensive loss in the
consolidated balance sheet. We recorded a loss of $0.3 million, after tax, and
$7.4 million, after tax, for the quarter ended and six months ended June 30,
2001, respectively, as the change in the fair value of derivatives required
under SFAS No. 133 that previously qualified for hedge accounting. We also
recorded a net gain of $1.5 million and $1.6 million for the quarter ended and
six months ended June 30, 2001, respectively, representing the amount of cash
flow hedges ineffectiveness, reflected in net gains (losses) from energy trading
and price risk management in the consolidated income statement.
The Derivative Implementation Group of the Financial Accounting Standards
Board has recently provided guidance on the normal sales and purchases exception
that affects classification on commodity contracts. We did not use the normal
sales and purchases exception for forward sales contracts from our Homer City
plant due to our net settlement procedures with counterparties for the period
between January 1, 2001 through June 30, 2001. Effective July 1, 2001, the
Derivative Implementaton Group of the Financial Accounting Standards Board
extended the normal sales and purchases exception to include forward sales
contracts subject to net settlement procedures with counterparties. Accordingly,
we intend to use the normal sales and purchases exception for our Homer City
forward sales contracts commencing July 1, 2001 and plan to record a cumulative
change in the accounting for derivatives during the quarter ended September 30,
2001. We are currently evaluating the impact of the implementation guidance on
our remaining commodity contracts, which would be accounted for on a prospective
basis.
Through December 31, 1999, we accrued for major maintenance costs incurred
during the period between turnarounds (referred to as "accrue in advance"
accounting method). In March 2000, we voluntarily decided to change our
accounting policy to record major maintenance costs as an expense as incurred.
This change in accounting policy is considered preferable based on guidance
provided by the Securities and Exchange Commission. In accordance with
Accounting Principles Board Opinion No. 20, "Accounting Changes," we recorded a
$17.7 million, after tax, increase to net income, as a cumulative change in the
accounting for major maintenance costs during the quarter ended March 31, 2000.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities,"
which became effective in January 1999. The Statement requires that specified
costs related to start-up activities be expensed as incurred and that specified
previously capitalized costs be expensed and reported as a cumulative change in
accounting principle. The reduction to our net income that resulted from
adopting SOP 98-5 was $13.8 million, after tax.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2001, we had cash and cash equivalents of $573.4 million and had
available a total of $16 million of borrowing capacity under one of our three
revolving senior credit facilities. We had no borrowing capacity under our other
two credit facilities. The revolving credit facility provides credit available
in the form of cash advances or letters of credit, and bears interest on
advances under the London Interbank Offered Rate, LIBOR, which was 6.66% at
December 31, 2000, plus the applicable margin as determined by our long-term
credit ratings (0.175% margin at December 31, 2000). In
48
addition to the interest component described above, we pay a facility fee as
determined by our long-term credit ratings (0.09% at December 31, 2000) on the
entire credit facility independent of the level of borrowings. One of our credit
facilities was originally scheduled to mature in March 2001 but was extended
twice: first to May 2001 and then to October 2001. One of our other credit
facilities was originally scheduled to mature in May 2001 but was also extended
to October 2001.
In April 2001, we issued $600 million of 9.875% senior notes, due in 2011.
We used the proceeds of that offering to repay indebtedness, including mandatory
repayments of $225 million, which also permanently reduced the amount available
under our credit facilities. As a result of the mandatory repayments, the credit
facilities were reduced from $1.5 billion to $1.275 billion. In connection with
the sale of our 25% interest in the Hopewell project and a 50% interest in the
Sunrise project, our credit facilities were further reduced to $1.224 billion.
On August 10, 2001, we issued $400 million of 10% senior notes, due in 2008. We
used the proceeds to permanently repay indebtedness under our corporate credit
facilities, reducing the outstanding commitments under these facilities to
$823.3 million.
DISCUSSION OF HISTORICAL CASH FLOW
CASH FLOW FROM OPERATING ACTIVITIES
Cash provided by operating activities is derived primarily from operations
of the Illinois Plants and the Homer City plant, distributions from energy
projects and dividends from investments in oil and gas. Net cash used in
operating activities totaled $372.1 million during the six months ended
June 30, 2001, compared to net cash provided by operating activities of
$68.4 million for the corresponding period of the prior year. The decrease is
primarily due to higher working capital requirements. Net cash provided by
operating activities increased $248.1 million in 2000 compared to 1999 and
$150.6 million in 1999 compared to 1998. The 2000 increase primarily reflects
higher pre-tax earnings from projects acquired in 1999 and higher dividends from
oil and gas investments. The 1999 increase was primarily due to higher
distributions from energy projects and higher dividends from oil and gas
investments.
Net working capital at June 30, 2001 was ($1,160.5) million compared to
($1,703.9) million at December 31, 2000. Net working capital at December 31,
2000 was ($1,703.9) million compared to ($815.5) million at December 31, 1999.
The decrease reflects the reclassification to current maturities of long-term
obligations from long-term obligations at December 31, 2000 of indebtedness
under the financing documents entered into to finance the acquisition of the
Ferrybridge and Fiddler's Ferry plants in 1999.
CASH FLOW FROM FINANCING ACTIVITIES
Net cash provided by financing activities decreased to $381.4 million for
the six months ended June 30, 2001, from $524.6 million for the six months ended
June 30, 2000. Net cash used in financing activities totaled $783 million in
2000, compared to net cash provided by financing activities of $8,363.5 million
and $17.9 million in 1999 and 1998, respectively. In January 2000, one of our
foreign subsidiaries borrowed $242.7 million from Edison Capital, an indirect
affiliate. During the first quarter of 2001, the subordinated financing was
repaid with interest. In April 2001, we issued $600 million of 9.875% senior
notes due 2011, the proceeds of which were used to permanently repay
$225 million on our corporate credit facilities. In June 2001, an additional
$51 million was permanently repaid on our corporate credit facilities. In
addition, dividends totaling $65 million were paid to The Mission Group and
ultimately to Edison International, our ultimate parent company, during the
six-month period ended June 30, 2001, compared to $44 million during the same
prior year period. As of June 30, 2001, we had recourse debt of $2.5 billion,
with an additional $6.1 billion of non-recourse debt (debt which is recourse to
specific assets or subsidiaries, but not to Edison Mission Energy) on our
consolidated balance sheet. Payments made on our credit facilities totaling
$1.4 billion, a $500 million payment on
49
our floating rate notes and the redemption of the Flexible Money Market
Cumulative Preferred Stock for $124.7 million were the primary contributors of
the net cash used in financing activities during 2000. We used the proceeds from
the August 2000 Powerton and Joliet sale-leaseback transaction for a significant
portion of those payments on the credit facilities, commercial paper facilities
and the floating rate notes. We also paid dividends of $88 million to The
Mission Group and ultimately to Edison International. In 2000, we also had
borrowings of $1.2 billion under our credit facilities and commercial paper
facilities. In February 2000, Edison Mission Midwest Holdings Co. issued
$1.7 billion of commercial paper under its credit facility and repaid a similar
amount of its outstanding bank borrowings for the Illinois Plants. Subsequently,
Edison Mission Midwest Holdings Co. repaid $769.3 million of commercial paper
under its credit facility and issued a similar amount of its bank borrowings for
the Illinois Plants in December 2000. In 1999, financings related to the
acquisition of four new projects in 1999 contributed to net cash provided by
financing activities: a term loan facility of $1.3 billion related to the
Ferrybridge and Fiddler's Ferry plants, senior secured bonds totaling
$830 million related to the Homer City plant, $120 million Flexible Money Market
Cumulative Preferred Stock and $125 million Retail Redeemable Preference Shares
and $84 million Class A Redeemable Preferred Shares related to Contact Energy
and credit facilities totaling $1.7 billion related to the Illinois Plants. In
addition, our financings in connection with the aforementioned acquisitions
consisted of floating rate notes of $500 million, borrowings of $215 million
under our revolving credit facility and commercial paper facilities totaling
$1.2 billion. In addition, we also received $2.0 billion in equity contributions
from Edison International, which amount was 100% financed in the capital
markets, to finance our 1999 acquisitions. In June 1999, we issued $600 million
of 7.73% Senior Notes due 2009. As of December 31, 2000, we had recourse debt of
$2.1 billion, with an additional $5.9 billion of non-recourse debt (debt which
is recourse to specific assets or subsidiaries, but not to Edison Mission
Energy) on our consolidated balance sheet.
CASH FLOW FROM INVESTMENT ACTIVITIES
Net cash used in investing activities increased to $347.5 million for the
six months ended June 30, 2001 from $307.6 million for the six months ended
June 30, 2000 and net cash provided by investing activities totaled
$718.1 million in 2000, compared to net cash used in investing activities of
$8,837.8 million and $408.2 million in 1999 and 1998, respectively. The increase
is primarily due to the equity contributions made by us to meet capital calls by
partnerships who own qualifying facilities that have power purchase agreements
with Southern California Edison and Pacific Gas and Electric during the
six-month period ended June 30, 2001. See "--The California Power Crisis and Our
Response" for further discussion. Through June 30, 2001, $3.8 million was paid
towards the purchase price and $1.5 million in equity contributions for the
Italian Wind Projects, $20 million was paid for the purchase of the 50% interest
in the CBK project and $59.5 million was paid for the purchase of additional
shares in Contact Energy. Through June 30, 2000, $27 million was paid towards
the purchase price and $13 million in equity contributions for the Italian Wind
Projects and $33.5 million was made in equity contributions for the EcoElectrica
project. In June 2001, we also competed the sale of a 50% interest in the
Sunrise project to Texaco for $84 million. We invested $113.2 million and
$178.5 million during the six-month periods ended June 30, 2001 and 2000,
respectively, in new plant equipment principally related to the Homer City plant
and Illinois Plants. In 2000, net cash provided by investing activities was
primarily due to proceeds of $1.367 billion and $300 million received from the
sale leaseback transactions with respect to the Powerton and Joliet power
facilities in August 2000 and the Illinois peaker power units in July 2000,
respectively. In connection with the Illinois peaker power units transaction, we
purchased $255 million of notes issued by the lessor. In 2000, we also paid
$44.9 million for the Citizens trading operations and structured transaction
investments, and $27 million for the acquisition of the Sunrise project. In
addition, $21.2 million and $20 million were made in equity contributions for
the Tri Energy project (July 2000) and the ISAB project (September 2000),
respectively. In 1999, cash used in investing activities was primarily due to
the purchase of the Homer
50
City plant, Ferrybridge and Fiddler's Ferry generating facilities, the Illinois
Plants and the 40% interest in Contact Energy. We invested $352.3 million,
$216.4 million and $73.4 million in 2000, 1999 and 1998, respectively, in new
plant and equipment principally related to the Homer City plant and Illinois
Plants in 2000, the Homer City plant and Ferrybridge and Fiddler's Ferry plants
in 1999, and the Doga project in 1998.
CORPORATE FINANCING PLANS
As discussed above, we have three corporate credit facilities scheduled to
expire on October 10, 2001 with an aggregate amount of commitments of
$1.224 billion thereunder as of June 30, 2001, which we had committed to reduce
to $1 billion in the aggregate by August 15, 2001. Our corporate cash
requirements in 2001 are expected to exceed cash distributions from our
subsidiaries. In addition to our commitment to pay down the corporate credit
facilities by $224 million, our expected corporate cash payments for the
remainder of 2001 include:
- debt service under senior notes and intercompany notes resulting from
sale-leaseback transactions which aggregate $123 million;
- equity and capital requirements for projects in development and under
construction of $67 million;
- dividends payable to Mission Energy Holding of $65 million; and
- general and administrative expenses.
We used the proceeds from the offering of the original notes to pay down a
portion of our existing corporate credit facilities. In addition, we have
entered into a new $750 million corporate credit facility. We used this new
credit facility, together with other corporate funds, to replace our existing
corporate credit facilities and repay all outstanding borrowings thereunder. The
new credit facility includes a one-year $538.3 million component that expires on
September 16, 2002 and a three-year $211.7 million component that expires on
September 17, 2004. The interest rate on borrowings under the new credit
facility are at LIBOR plus 2.375%. In addition to the interest payments, we pay
a facility fee of 0.626%.
In addition, we:
- have sold our 50% interest in the Saguaro project for $67 million which
was received in September 2001;
- have agreed to sell our interests in the Commonwealth Atlantic,
EcoElectrica, Gordonsville, James River and Nevada Sun-Peak projects
subject to obtaining consents from third parties and other conditions
precedent to closing;
- have undertaken a competitive bidding process through an investment bank
for the sale of our ownership interest in the Brooklyn Navy Yard project;
and
- are planning on obtaining project financing for the Sunrise project based
on a power purchase agreement, including construction financing for Phase
II of the project (See "--Acquisitions, Dispositions and Sale-Leaseback
Transactions--Acquisition of Sunrise Project").
We may incur additional federal and state income taxes from the proceeds of
the sale of one of our foreign projects if the sale of this project is completed
and we are required to repatriate funds to reduce senior bank indebtedness.
There is no assurance that we will be able to sell projects on favorable terms
or that the sale of individual projects will not result in a loss. We are also
considering sale-leaseback transactions of several projects, the proceeds of
which would be used to repay short-term indebtedness or to meet other capital
requirements.
51
SUBSIDIARY FINANCING PLANS
The estimated capital expenditures of our subsidiaries for the second half
of 2001 are $117 million, including environmental expenditures disclosed under
"Business--Regulatory Matters--Environmental Regulation." These capital
expenditures are planned to be financed by existing subsidiary credit agreements
and cash generated from their operations. Other than as described below under
"--Commitments and Contingencies," we do not plan to make additional capital
contributions to our subsidiaries.
PURCHASE OF ADDITIONAL SHARES IN CONTACT ENERGY
During the second quarter of 2001, we completed the purchase of additional
shares of Contact Energy for NZ$152 million, thereby increasing our ownership
interest from 42.6% to 51.2%. In order to finance this purchase, we obtained a
NZ$135 million, 364-day bridge loan from an investment bank under a credit
facility which is to be syndicated by the bank. In addition to other security
arrangements, a security interest over all Contact Energy shares held has been
provided as collateral. In June and July 2001, we issued through one of our
subsidiaries new preferred securities to repay the bridge loan. On July 2, 2001,
we redeemed NZ$400 million EME Taupo preferred securities from the existing
holders. Funding for the redemption of the existing preferred securities was
provided by a NZ$400 million credit facility scheduled to mature in July 2005.
The financing documents governing the credit facility provide that the credit
facility may be funded under either, or a combination, of a letter of credit
facility or a revolving credit facility. The NZ$400 million was originally
funded as a revolving credit facility.
STATUS OF EDISON FIRST POWER LOAN
The financial performance of the Fiddler's Ferry and Ferrybridge power
plants has not met our expectations, largely due to lower power prices resulting
primarily from increased competition, milder winter weather and uncertainty
surrounding the new electricity trading arrangements. See "--Market Risk
Exposures--United Kingdom."
As a result, Edison First Power has defaulted on its financing documents
related to the acquisition of the power plants. As a result of the reduced
financial performance, Edison First Power deferred some environmental capital
expenditure milestone requirements in the original capital expenditure program
set forth in the financing documents. The original capital expenditure program
has been revised, and this revision has been agreed to by the financing parties.
In addition, in July 2001, the financing parties waived technical defaults under
the financing documents and a default under the financing documents resulting
from the fact that, due to this reduced financial performance, Edison First
Power's debt service coverage ratio during 2000 declined below the threshold set
forth in the financing documents. There is no assurance that Edison First
Power's creditors will continue to waive its non-compliance with the
requirements under the financing documents or that Edison First Power will
satisfy its financial ratios in the future.
The financing documents stipulate that a breach of the financial ratio
covenant constitutes an immediate event of default and, if the event of default
is not waived, the financing parties are entitled to enforce their security over
Edison First Power's assets, including the Fiddler's Ferry and Ferrybridge
plants. Despite the breaches under the financing documents, Edison First Power's
debt service coverage ratio for 2000 exceeded 1:1. Due to the timing of its cash
flows and debt service payments, Edison First Power utilized L37 million from
its debt service reserve to meet its debt service requirements in 2000. In
March 2001, L61 million was paid by Edison First Power to meet its semi-annual
debt service requirements.
Another of our indirect subsidiaries, EME Finance UK Limited, is the
borrower under the facility made available for the purposes of funding coal and
capital expenditures related to the Fiddler's Ferry
52
and Ferrybridge power plants. At June 30, 2001, L58 million was outstanding for
coal purchases and zero was outstanding to fund capital expenditures under this
facility. EME Finance UK Limited on-lends any drawings under this facility to
Edison First Power. The financing parties of this facility have also issued
letters of credit directly to Edison First Power to support their obligations to
lend to EME Finance UK Limited. EME Finance UK Limited's obligations under this
facility are separate and apart from the obligations of Edison First Power under
the financing documents related to the acquisition of these plants. We have
guaranteed the obligations of EME Finance UK Limited under this facility,
including any letters of credit issued to Edison First Power under the facility,
for the amount of L359 million, and Edison Mission Energy's guarantee remains in
force notwithstanding any breaches under Edison First Power's acquisition
financing documents.
In accordance with SFAS No. 121, "ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED," we have evaluated
impairment of the Ferrybridge and Fiddler's Ferry power plants. The undiscounted
projected cash flow from these power plants exceeds the net book value at
December 31, 2000, and, accordingly, no impairment of these power plants is
permitted under SFAS No. 121. As a result of the change in the prices of power
in the U.K., we are offering for sale through a competitive bidding process the
Ferrybridge and Fiddler's Ferry Power plants. Management has not made a decision
whether or not the sale of these power plants will ultimately occur and,
accordingly, these assets are not classified as held for sale. If we are
successful at selling the Ferrybridge and Fiddler's Ferry plants, it is likely
that we will not recover any of our investment in the subsidiary that owns these
assets. At June 30, 2001, that investment was $974 million. We plan to use the
proceeds from the sale, if it occurs, to repay a portion or all of the
indebtedness of the project. We cannot provide assurance that acceptable bids
will be obtained or, if such bids are acceptable, that completion of the sale
will occur. In this regard, there is no assurance that we will be able to
negotiate acceptable terms and conditions with a potential buyer or that if an
agreement was reached, that we will be able to satisfy the conditions needed for
closing, which will include, among other things, a regulatory review in the
United Kingdom.
LIMITATIONS ON DIVIDENDS FROM THE DOGA PROJECT
Our subsidiary, Doga Enerji, owns 80% of the Doga project in Turkey. Doga
Enerji has experienced delays in receiving payments from its power purchaser
Turkiye Elektrik, A.S., also referred to as TEAS. Doga Enerji is in the process
of determining whether these delays will materially adversely affect the future
cash flow projections for the project. Until the determination is made, Doga
Enerji will not make a distribution for 2001. While such payment obligations are
guaranteed by the Turkish Treasury, we cannot assure you that TEAS will make its
payments on a timely basis.
INTERCOMPANY TAX SHARING PAYMENTS
We participate in a tax sharing agreement with The Mission Group, which in
turn participates in a tax sharing agreement with Edison International. We have
historically received tax payments under the tax sharing agreement related to
domestic net operating losses incurred by us. However, we will be required to
pay Edison International $51 million during 2001 as a result of changes in
estimated taxable income for 2000. At June 30, 2001, we have recorded
$142.5 million as an income tax receivable under the tax sharing agreement.
However, we are not eligible to receive tax sharing payments for those losses
until such time as Edison International and its subsidiaries generate sufficient
taxable income in order to be able to monetize our tax losses in the
consolidated income tax returns for Edison International and its subsidiaries.
CREDIT RATINGS
In January 2001, Standard & Poor's and Moody's downgraded our senior
unsecured credit ratings to "BBB-" from "A-" and to "Baa3" from "Baa1",
respectively. Our credit ratings remain "investment
53
grade." Maintaining our investment grade credit ratings is part of our current
operational focus and our long term strategy. However, we cannot assure you that
Standard & Poor's and Moody's will not downgrade our credit rating below
investment grade, whether as a result of the California power crisis or
otherwise. If our credit ratings are downgraded below investment grade, we could
be required to, among other things:
- provide additional guarantees, collateral, letters of credit or cash for
the benefit of counterparties in our trading activities; and
- post a letter of credit or cash collateral to support its $58.5 million
equity contribution obligation in connection with our acquisition in
February 2001 of a 50% interest in the CBK Power Co. Ltd. project in the
Philippines, which equity contribution would otherwise be payable as
currently scheduled in 2003.
A downgrade of our credit ratings could result in a downgrade of the credit
rating of Edison Mission Midwest Holdings Co., our indirect subsidiary. In the
event of a downgrade of Edison Mission Midwest Holdings below its current credit
ratings, provisions in the agreements binding on its subsidiary, Midwest
Generation, LLC, limit the ability of Midwest Generation to use excess cash flow
to make distributions.
A downgrade in our credit ratings below investment grade could increase our
cost of capital, increase our credit support obligations, make efforts to raise
capital more difficult and could have an adverse impact on us and our
subsidiaries.
RESTRICTED ASSETS OF SUBSIDIARIES
Each of our direct or indirect subsidiaries is organized as a legal entity
separate and apart from us and our other subsidiaries. Assets of our
subsidiaries may not be available to satisfy our obligations or the obligations
of any of our other subsidiaries. However, unrestricted cash or other assets
which are available for distribution may, subject to applicable law and the
terms of financing arrangements of the parties, be advanced, loaned, paid as
dividends or otherwise distributed or contributed to us or to an affiliate of
ours.
54
COMMITMENTS AND CONTINGENCIES
CAPITAL COMMITMENTS
The following table summarizes our consolidated capital commitments as of
June 30, 2001. Details regarding these capital commitments are discussed in the
sections referenced.
U.S.
TYPE OF COMMITMENT ESTIMATED TIME PERIOD DISCUSSED UNDER
------------------ ------------- ----------- ----------------------------------
(IN MILLIONS)
New Gas-Fired Generation.......... $250 by 2003 Illinois Plants--Power Purchase
Agreements
New Gas-Fired Generation.......... 986(1) 2001-2004 Edison Mission Energy Master
Turbine Lease
Environmental Improvements at our
Project Subsidiaries.............. 494 2001-2005 Environmental Matters and
Regulations
Project Acquisition for the
Italian Wind Projects............. 8 2001-2002 Firm Commitment for Asset Purchase
Equity Contribution for the
Sunrise Project................... 123 2001-2003 Firm Commitments to Contribute
Project Equity
Equity Contribution for the
Italian Wind Projects............. 1 2001-2002 Firm Commitments to Contribute
Project Equity
Equity Contribution for the CBK
Project........................... 59 2003 Firm Commitments to Contribute
Project Equity
------------------------
(1) Represents the total estimated costs related to four projects using the
Siemens Westinghouse turbines procured under the Edison Mission Energy
Master Turbine Lease. One of these projects may be used to meet the new
gas-fired generation commitments resulting from the acquisition of the
Illinois Plants. See "--Illinois Plants--Power Purchase Agreements."
ILLINOIS PLANTS--POWER PURCHASE AGREEMENTS
During 2000, 33% of our electric revenues were derived under power purchase
agreements with Exelon Generation Company, a subsidiary of Exelon Corporation,
entered into in connection with our December 1999 acquisition of the Illinois
Plants. Exelon Corporation is the holding company of Commonwealth Edison and
PECO Energy Company, major utilities located in Illinois and Pennsylvania.
Electric revenues attributable to sales to Exelon Generating Company are earned
from capacity and energy provided by the Illinois Plants under three five-year
power purchase agreements. If Exelon Generation were to fail to or became unable
to fulfill its obligations under these power purchase agreements, we may not be
able to find another customer on similar terms for the output of our power
generating assets. Any material failure by Exelon Generation to make payments
under these power purchase agreements could adversely affect our results of
operations and liquidity.
Pursuant to the acquisition documents for the purchase of generating assets
from Commonwealth Edison, we committed to install one or more gas-fired power
plants having an additional gross
55
dependable capacity of 500 MWs at an existing or adjacent power plant site in
Chicago. The acquisition documents require that commercial operations of this
project be completed by December 15, 2003. The estimated cost to complete the
construction of this 500 MW gas-fired power plant is approximately
$250 million.
EDISON MISSION ENERGY MASTER TURBINE LEASE
In December 2000, we entered into a master lease and other agreements for
the construction of new projects using nine turbines that are being procured
from Siemens Westinghouse. The aggregate total construction cost of these
projects is estimated to be approximately $986 million. Under the terms of the
master lease, the lessor, as owner of the projects, is responsible for the
development and construction costs of the new projects using these turbines. We
have agreed to supervise the development and construction of the projects as the
agent of the lessor. Upon completion of construction of each project, we have
agreed to lease the projects from the lessor. In connection with the lease, we
have provided a residual value guarantee to the lessor at the end of the lease
term. We are required to deposit treasury notes equal to 103% of the
construction costs as collateral for the lessor which can only be used under
circumstances involving our default of the obligations we have agreed to perform
during the construction of each project. Lease payments are scheduled to begin
in November 2003. Minimum lease payments under this agreement are $3.1 million
in 2003, $27.7 million in 2004, and $50.2 million in 2005. The term of the
master lease ends in 2010. The master lease grants us, as lessee, a purchase
option based on the lease balance which can be exercised at any time during the
term.
FIRM COMMITMENT FOR ASSET PURCHASE
PROJECTS LOCAL CURRENCY U.S.
-------- ----------------------- ---------------
($ IN MILLIONS)
Italian Wind Projects(1).................................. 18 billion Italian Lira $7.9
------------------------
(1) The Italian Wind Projects are a series of power projects that are in
operation or under development in Italy. A wholly-owned subsidiary of ours
owns a 50% interest. Purchase payments will continue through 2002, depending
on the number of projects that are ultimately developed.
FIRM COMMITMENTS TO CONTRIBUTE PROJECT EQUITY
PROJECTS LOCAL CURRENCY U.S.
-------- ---------------------- ---------------
($ IN MILLIONS)
Italian Wind Projects(1)................................... 3 billion Italian Lira $ 1.4
CBK Project(2)............................................. -- 58.5
Sunrise Project(3)......................................... -- 122.9
------------------------
(1) The Italian Wind Projects are a series of power projects that are in
operation or under development in Italy. A wholly-owned subsidiary of ours
owns a 50% interest. Equity will be contributed depending on the number of
projects that are ultimately developed.
(2) Caliraya-Botocan-Kalayaan is a 728 MW hydroelectric power project under
construction in the Philippines. A wholly-owned subsidiary of ours owns a
50% interest. Equity will be contributed upon completion of the
rehabilitation and expansion, which is currently scheduled for 2003. This
equity commitment could be accelerated if our credit rating were to fall
below investment grade.
(3) The Sunrise Project consists of two phases, with Phase I, a single-cycle
gas-fired facility (320MW) that commenced commercial operation in
June 2001, and Phase II, conversion to a combined-cycle gas-fired facility
(560 MW) currently scheduled to be completed in July 2003. A wholly-owned
56
subsidiary of ours owns a 50% interest. Equity will be contributed to fund
the construction of Phase II. The project intends to obtain project
financing for a portion of the capital costs.
Firm commitments to contribute project equity could be accelerated due to
certain events of default as defined in the non-recourse project financing
facilities. Management does not believe that these events of default will occur
to require acceleration of the firm commitments.
OTHER COMMITMENTS
SALE-LEASEBACK COMMITMENTS
At December 31, 2000, we had minimum lease payments related to purchased
power generation assets from Commonwealth Edison that were leased back to us in
three separate transactions. In connection with the 1999 acquisition of the
Illinois Plants, we assigned the right to purchase the Collins gas and oil-fired
power plant to third party lessors. The third party lessors purchased the
Collins Station for $860 million and leased the plant to us. During 2000, we
entered into sale-leaseback transactions for equipment, primarily the Illinois
peaker power units, and for two power facilities, the Powerton and Joliet
coal-fired stations located in Illinois, to third party lessors. Total minimum
lease payments during the next five years are $146.6 million in 2001,
$168.6 million in 2002, $168.6 million in 2003, $168.8 million in 2004, and
$191.4 million in 2005. At December 31, 2000, the total remaining minimum lease
payments were $3.9 billion.
FUEL SUPPLY CONTRACTS
At December 31, 2000, we had contractual commitments to purchase and/or
transport coal and fuel oil. Based on the contract provisions, which consist of
fixed prices, subject to adjustment clauses in some cases, these minimum
commitments are currently estimated to aggregate $2.4 billion in the next five
years summarized as follows: 2001--$838 million; 2002--$653 million;
2003--$386 million; 2004--$308 million; and 2005--$241 million.
HOMER CITY
We have guaranteed to the bondholders, banks and other secured parties which
financed the acquisition of the Homer City plant the performance and payment
when due by Edison Mission Holdings Co. of its obligations in respect of
specified senior debt, up to $42 million. This guarantee will be available until
December 31, 2001, after which time Edison Mission Energy will have no further
obligations under this guarantee.
To satisfy the requirements under the Edison Mission Holdings Co. bank
financing to have a debt service reserve account balance in an amount equal to
six months' debt service, Edison Mission Energy provides a guarantee of Edison
Mission Holdings' obligations in the amount of $9 million to the lenders
involved in the bank financing.
CREDIT SUPPORT FOR TRADING AND PRICE RISK MANAGEMENT ACTIVITIES
Our trading and price risk management activities are conducted through our
subsidiary, Edison Mission Marketing & Trading, Inc. As part of obtaining an
investment grade rating for this subsidiary, Edison Mission Energy has entered
into a support agreement, which commits it to contribute up to $300 million in
equity to Edison Mission Marketing & Trading, if needed to meet cash
requirements. An investment grade rating is an important benchmark used by third
parties when deciding whether or not to enter into master contracts and trades
with us. The majority of Edison Mission Marketing & Trading's contracts have
various standards of creditworthiness, including the maintenance of specified
credit ratings. If Edison Mission Marketing & Trading does not maintain its
investment grade rating or if other events adversely affect its financial
position, a third party could request Edison Mission
57
Marketing & Trading to provide adequate assurance. Adequate assurance could take
the form of supplying additional financial information, additional guarantees,
collateral, letters of credit or cash. Failure to provide adequate assurance
could result in a counterparty liquidating an open position and filing a claim
against Edison Mission Marketing & Trading for any losses.
The California power crisis has adversely affected the liquidity of West
Coast trading markets, and to a lesser extent, other regions in the United
States. Our trading and price risk management activity has been reduced as a
result of these market conditions and uncertainty regarding the effect of the
power crisis on our affiliate, Southern California Edison. It is not certain
that resolution of the California power crisis will occur in 2001 or that, if
resolved, we will be able to conduct trading and price risk management
activities in a manner that will be favorable to us.
SUBSIDIARY INDEMNIFICATION AGREEMENTS
Some of our subsidiaries have entered into indemnification agreements, under
which the subsidiaries have agreed to repay capacity payments to the projects'
power purchasers in the event the projects unilaterally terminate their
performance or reduce their electric power producing capability during the term
of the power contracts. Obligations under these indemnification agreements as of
June 30, 2001, if payment were required, would be $246 million. We have no
reason to believe that the projects will either terminate their performance or
reduce their electric power producing capability during the term of the power
contracts.
OTHER
In support of the businesses of our subsidiaries, we have made, from time to
time, guarantees, and have entered into indemnity agreements with respect to our
subsidiaries' obligations like those for debt service, fuel supply or the
delivery of power, and have entered into reimbursement agreements with respect
to letters of credit issued to third parties to support our subsidiaries'
obligations. We may incur additional guaranty, indemnification, and
reimbursement obligations, as well as obligations to make equity and other
contributions to projects in the future.
CONTINGENCIES
THE CALIFORNIA POWER CRISIS
In the past year, various market conditions and other factors have resulted
in higher wholesale power prices to California utilities. At the same time, two
of the three major California utilities, Southern California Edison and Pacific
Gas and Electric, have operated under a retail rate freeze. As a result, there
has been a significant under recovery of costs by Southern California Edison and
Pacific Gas and Electric, and each of these companies has failed to make
payments due to power suppliers, including us, and others. Given these and other
payment defaults, Southern California Edison could face bankruptcy at any time.
Pacific Gas and Electric filed a voluntary bankruptcy petition on April 6, 2001.
Edison International, our ultimate parent company, is also the corporate parent
of Southern California Edison. For a description of this contingency and the
California power crisis, see "--The California Power Crisis and Our Response."
PAITON
Our wholly-owned subsidiary owns a 40% interest in PT Paiton Energy, which
owns a 1,230 MW coal-fired power plant in operation in East Java, Indonesia,
which is referred to as the Paiton project. Our investment in the Paiton project
was $503 million at June 30, 2001. Under the terms of a long-term power purchase
agreement between Paiton Energy and PT PLN, the state-owned electric utility
company, PT PLN is required to pay for capacity and fixed operating costs once
each unit and the plant achieve commercial operation. As of December 31, 2000,
PT PLN had not paid invoices
58
amounting to $814 million for capacity charges and fixed operating costs under
the power purchase agreement.
Paiton Energy is in continuing negotiations on a long-term restructuring of
the tariff under the power purchase agreement. Paiton Energy and PT PLN agreed
on an interim agreement for the period through December 31, 2000 and on a Phase
I Agreement for the period from January 1, 2001 through June 30, 2001. The
Phase I Agreement provides for fixed monthly payments aggregating $108 million
over its six-month duration and for the payment for energy delivered to PT PLN
from the plant during this period. PT PLN made all fixed and energy payments due
under the interim agreement and has made all fixed payments due under the Phase
I Agreement totaling $108 million as scheduled. Paiton Energy received lender
approval of the Phase I Agreement, and Paiton Energy has also entered into a
lender interim agreement under which lenders have effectively agreed to
interest-only payments and to deferral of principal repayments while Paiton
Energy and PT PLN seek a long-term restructuring of the tariff. The lenders have
agreed to extend that agreement through December 31, 2001. Paiton Energy and PT
PLN intended to complete the negotiations of the future phases of a new
long-term tariff during the six-month duration of the Phase I Agreement.
Although Paiton Energy and PT PLN did not complete negotiations on a long-term
restructuring of the tariff by June 30, 2001, Paiton Energy and PT PLN have
signed an agreement providing for an extension of the Phase I Agreement from
July 1, 2001 to September 30, 2001. Paiton Energy is continuing to generate
electricity to meet the power demand in the region and believes that PT PLN will
continue to agree to make payments for electricity on an interim basis beyond
June 30, 2001 while negotiations regarding long-term restructuring of the tariff
continue. Although completion of negotiations may be delayed, Paiton Energy
continues to believe that negotiations on the long-term restructuring of the
tariff will be successful.
All arrears under the power purchase agreement continue to accrue, minus the
fixed monthly payments actually made under the year 2000 interim agreement and
under the Phase I Agreement, with the payment of these arrears to be dealt with
in connection with the overall long-term restructuring of the tariff. In this
regard, under the Phase I Agreement, Paiton Energy has agreed that, so long as
the Phase I Agreement is complied with, it will seek to recoup no more than
$590 million of the above arrears, the payment of which is to be dealt with in
connection with the overall tariff restructuring.
Any material modifications of the power purchase agreement resulting from
the continuing negotiation of a new long-term tariff could require a
renegotiation of the Paiton project's debt agreements. The impact of any such
renegotiations with PT PLN, the Government of Indonesia or the project's
creditors on our expected return on our investment in Paiton Energy is uncertain
at this time; however, we believe that we will ultimately recover our investment
in the project.
BROOKLYN NAVY YARD
Brooklyn Navy Yard is a 286 MW gas-fired cogeneration power plant in
Brooklyn, New York. Our wholly-owned subsidiary owns 50% of the project. In
February 1997, the construction contractor asserted general monetary claims
under the turnkey agreement against Brooklyn Navy Yard Cogeneration Partners,
L.P. for damages in the amount of $136.8 million. Brooklyn Navy Yard
Cogeneration Partners has asserted general monetary claims against the
contractor. In connection with a $407 million non-recourse project refinancing
in 1997, we agreed to indemnify Brooklyn Navy Yard Cogeneration Partners and its
partner from all claims and costs arising from or in connection with the
contractor litigation, which indemnity has been assigned to Brooklyn Navy Yard
Cogeneration Partners' lenders. At this time, we cannot reasonably estimate the
amount that would be due, if any, related to this litigation. Additional
amounts, if any, which would be due to the contractor with respect to completion
of construction of the power plant would be accounted for as an additional part
of its power plant investment. Furthermore, our partner has executed a
reimbursement agreement with us that provides recovery of up to $10 million over
an initial amount, including legal fees, payable from its
59
management and royalty fees. We believe that the outcome of this litigation will
not have a material adverse effect on our consolidated financial position or
results of operations.
CONTINGENT OBLIGATIONS TO CONTRIBUTE PROJECT EQUITY
PROJECTS LOCAL CURRENCY U.S.
-------- ----------------------- ---------------
($ IN MILLIONS)
Paiton(i)................................................. -- $ 5.3
ISAB(ii).................................................. 84 billion Italian Lira 36.5
------------------------
(i) Contingent obligations to contribute additional project equity will be based
on events principally related to insufficient cash flow to cover interest on
project debt and operating expenses, project cost overruns during the plant
construction, specified partner obligations or events of default. Our
obligation to contribute contingent equity will not exceed $141 million, of
which $136 million has been contributed as of June 30, 2001.
For more information on the Paiton project, see "--Paiton" above.
(ii) ISAB is a 512 MW integrated gasification combined cycle power plant near
Siracusa in Sicily, Italy. A wholly-owned subsidiary of Edison Mission
Energy owns a 49% interest. Commercial operations commenced in April 2000.
Contingent obligations to contribute additional equity to the project relate
specifically to an agreement to provide equity assurances to the project's
lenders depending on the outcome of the contractor claim arbitration.
We are not aware of any other significant contingent obligations or
obligations to contribute project equity other than as noted above and equity
contributions to be made by us to meet capital calls by partnerships who own
qualifying facilities that have power purchase agreements with Southern
California Edison and Pacific Gas and Electric. See "--The California Power
Crisis and Our Response" for further discussion.
THE CALIFORNIA POWER CRISIS AND OUR RESPONSE
THE CALIFORNIA POWER CRISIS
We have partnership interests in eight partnerships that own power plants in
California and have power purchase contracts with Pacific Gas and Electric
and/or Southern California Edison. Three of these partnerships have a contract
with Southern California Edison, four of them have a contract with Pacific Gas
and Electric, and one of them has contracts with both. In 2000, our share of
earnings before taxes from these partnerships was $168 million, which
represented 20% of our operating income. Our investment in these partnerships at
June 30, 2001 was $607 million.
As a result of Southern California Edison's and Pacific Gas and Electric's
current liquidity crisis, each of these utilities has failed to make payments to
qualifying facilities supplying them power. These qualifying facilities include
the eight power plants that are owned by partnerships in which we have a
partnership interest. Southern California Edison did not pay the partnerships
for power delivered between November 1, 2000 and March 26, 2001; however, in
response to the March 27, 2001 California Public Utilities Commission order
discussed below, Southern California Edison has been paying the partnerships for
power delivered after March 27, 2001. Also, following the execution of the
standstill agreements, discussed below, Southern California Edison has paid the
partnerships 10% of the past due amounts (for power delivered between
November 2000 and March 2001) and has also begun making monthly interest
payments on the past due amounts. It is possible that Southern California Edison
may miss future payments. At June 30, 2001, accounts receivable due to these
partnerships from Southern California Edison were $606 million. Our share of
these receivables was $301 million.
60
On April 6, 2001, Pacific Gas and Electric filed for reorganization under
Chapter 11 of the U.S. Bankruptcy Code in San Francisco bankruptcy court.
Pacific Gas and Electric made its January payment in full and has paid for power
delivered after April 6, 2001, but paid only a small portion of the amounts due
to the partnerships in February and March and, as discussed below, may not pay
all or a portion of its future payments. Although Pacific Gas and Electric has
thus far paid for post-petition deliveries, future payments by Pacific Gas and
Electric to the qualifying facilities, including those owned by partnerships in
which we have a partnership interest, may be subject to significant delays
associated with the bankruptcy court process and may not be paid in full.
Furthermore, Pacific Gas and Electric's power purchase agreements with the
qualifying facilities will be subject to review by the bankruptcy court. At the
petition date, accounts receivable to these partnerships from Pacific Gas and
Electric were $47 million. Our share of these receivables was $23 million. We
cannot assure you that the partnerships with long-term contracts with Pacific
Gas and Electric will not be adversely affected by the bankruptcy proceeding.
The California utilities' failure to pay has adversely affected the
operations of our eight California qualifying facilities. Continuing failures to
pay similarly could have an adverse impact on the operations of our California
qualifying facilities. Provisions in the partnership agreements stipulate that
partnership actions concerning contracts with affiliates are to be taken through
the non-affiliated partner in the partnership. Therefore, partnership actions
concerning the enforcement of rights under each qualifying facility's power
purchase agreement with Southern California Edison in response to Southern
California Edison's suspension of payments under that power purchase agreement
are to be taken through the non-Edison Mission Energy affiliated partner in the
partnership. During the period in which Southern California Edison failed to
make payments, some of the partnerships sought to minimize their exposure to
Southern California Edison by reducing deliveries under their power purchase
agreements. Four of the partnerships have filed complaints against Southern
California Edison with respect to the payment defaults.
All of those partnerships have entered into agreements with Southern
California Edison, under which the partnerships and Southern California Edison
will suspend the current litigation for a specified "standstill period" and
provisionally stipulate as to the amount of past due payments, and Southern
California Edison will make partial payments with respect to past due amounts.
The partial payments are to be made on the following schedule: 10% of the past
due amount to be paid within three business days after signing the agreements, a
second 10% to be paid upon the effective date of legislation that restores
Southern California Edison to creditworthiness and enables it to pay its debts
in a timely manner, and the final 80% on the fifth business day after the first
day on which Southern California Edison receives proceeds from the first
financing of the "net undercollected amount" resulting from such legislation.
The agreements also require Southern California Edison to make monthly interest
payments on past due amounts. Southern California Edison has already paid the
first 10% of the past due amounts.
It is unclear at this time what additional actions, if any, the partnerships
will take in regard to any future suspension of payments due to the qualifying
facilities by the utilities or in the event that the settlement agreements cease
to be in effect. As a result of the utilities' failure to make payments due
under these power purchase agreements, the partnerships have called on the
partners to provide additional capital to fund operating costs of the power
plants. From January 1, 2001 to June 30, 2001, subsidiaries of ours have made
equity contributions totaling approximately $134 million to meet capital calls
by the partnerships. Although Southern California Edison has been paying the
partnerships for power delivered after March 27, 2001 and Pacific Gas and
Electric has paid for power delivered after April 6, 2001, our subsidiaries and
the other partners may be required to make additional capital contributions to
the partnerships if the utilities fail to make future payments.
Southern California Edison has stated that it is attempting to avoid
bankruptcy and, subject to the outcome of regulatory and legal proceedings and
negotiations regarding purchased power costs, it
61
intends to pay all its obligations once a permanent solution to the current
energy and liquidity crisis has been reached. However, it is possible that
Southern California Edison will not pay all its obligations in full. In
addition, it is possible that creditors of Southern California Edison could file
an involuntary bankruptcy petition against Southern California Edison. If this
were to occur, payments to the qualifying facilities, including those owned by
partnerships in which we have a partnership interest, could be subject to
significant delays associated with the lengthy bankruptcy court process and may
not be paid in full. Furthermore, Southern California Edison's power purchase
agreements with the qualifying facilities could be subject to review by a
bankruptcy court.
While we believe that the generation of electricity by the qualifying
facilities, including those owned by partnerships in which we have a partnership
interest, is needed to meet California's power needs, we cannot assure you that
these settlement agreements will continue to be effective during the standstill
period, or that the power purchase agreements will not be adversely affected by
a bankruptcy or any further contract renegotiation as a result of the current
power crisis.
On March 27, 2001, the California Public Utilities Commission issued a
decision that ordered the three California investor-owned utilities, including
Southern California Edison and Pacific Gas and Electric, to commence payment for
power generated from qualifying facilities beginning in April 2001. As a result
of this decision, Southern California Edison paid in full for power delivered
after March 27, 2001, and Pacific Gas and Electric paid for power delivered
after April 6, 2001 (the date it filed its bankruptcy petition). This decision
did not address payment to the qualifying facilities for amounts due prior to
March 27, 2001. In addition, the decision modified the pricing formula for
determining short-run avoided costs for qualifying facilities subject to these
provisions. Depending on the utilities' continued reaction to this order, the
impact of this decision may be that the qualifying facilities subject to this
pricing adjustment will be paid at significantly reduced prices for their power.
Furthermore, this decision called for further study of the pricing formula tied
to short-run avoided costs and, accordingly, may be subject to more changes in
the future. Finally, this decision is subject to challenge before the
Commission, the Federal Energy Regulatory Commission and, potentially, state or
federal courts. Although it is premature to assess the full effect of this
decision, it could have a material adverse effect on our investment in the
California partnerships, depending on how it is implemented and future changes
in the relationship between the pricing formula and the actual cost of natural
gas procured by our California partnerships.
On April 9, 2001, Edison International and Southern California Edison signed
a Memorandum of Understanding with the California Department of Water Resources.
The Memorandum calls for legislation, regulatory action and definitive
agreements to resolve important aspects of the energy crisis, and which the
parties expect will help restore Southern California Edison's creditworthiness
and liquidity. Edison International filed a Form 8-K on April 10, 2001, which
describes key elements of the Memorandum. Among other things, the Memorandum
provides that we will execute a contract with the Department of Water Resources
or another state agency for the provision of power from the Sunrise project to
the State at cost-based rates for ten years. We executed this contract on
June 25, 2001, and the first phase became operational on June 27, 2001.
Edison International and Southern California Edison believe that execution
of the Memorandum was an important step toward an acceptable resolution of the
major issues affecting Edison International and Southern California Edison as a
result of the California energy crisis, but this result is not assured. The
parties agreed in the Memorandum that each of its elements is part of an
integrated package, and effectuation of each element will depend upon
effectuation of the others. To implement the Memorandum, numerous actions must
be taken by the parties and by other agencies of the State of California.
Southern California Edison, Edison International and the Department of Water
Resources committed to proceed in good faith to sponsor and support the required
legislation and to negotiate in good faith the necessary definitive agreements.
However, the California Legislature, the California Public Utilities Commission,
the Federal Energy Regulatory Commission, and other
62
governmental entities on whose part action will be necessary to implement the
Memorandum are not parties to the Memorandum. Furthermore, the Memorandum may be
terminated by either Southern California Edison or the California Department of
Water Resources at any time because required regulatory and legislative actions
were not taken before the applicable deadlines; however, neither party has
terminated the Memorandum. The California Legislature completed its regular
session business on September 14, 2001 without passing legislation to implement
the Memorandum or otherwise restore the creditworthiness of Southern California
Edison. However, the Governor of California has stated that he will call a
special session of the Legislature to address such legislation around
October 1, 2001. Whether any legislation will be enacted is unknown. In
addition, a California voter initiative or referendum has been threatened
against any measures that would raise consumer rates or aid California's
investor-owned utilities. Finally, the enactment of legislation would not
eliminate the possibility that some of Southern California Edison's creditors
could take steps to force Southern California Edison into bankruptcy
proceedings.
On April 3, 2001, the California Public Utilities Commission adopted an
order instituting investigation. The order reopens past Commission decisions
authorizing the California investor-owned utilities to form holding companies
and initiates an investigation into: whether the holding companies violated
requirements to give priority to the capital needs of their respective utility
subsidiaries; whether ring-fencing actions by Edison International and PG&E
Corporation and their respective non-utility affiliates (including us) also
violated requirements to give priority to the capital needs of their utility
subsidiaries; whether the payment of dividends by the utilities violated
requirements that the utilities maintain dividend policies as though they were
comparable stand-alone utility companies; any additional suspected violations of
laws or Commission rules and decisions; and whether additional rules,
conditions, or other changes to the holding company decisions are necessary. The
Memorandum calls for the Commission to adopt a decision clarifying that the
first priority condition in Southern California Edison's holding company
decision refers to equity investment, not working capital for operating costs.
On June 6, 2001, in response to motions filed by the three holding companies
(including Edison International) to dismiss the investigation for lack of
subject matter jurisdiction, the Commission issued for comment a draft decision,
which concludes, among other matters, that applicable law permits the
Commission, even if the normal common law prerequisites for piercing the
corporate structures are absent, to disregard the corporate forms within the
holding company system "to reach the assets of or challenge the behaviors of
entities within the holding company system" in order to protect ratepayers.
Commissioner Henry Duque has issued a draft alternate decision that would grant
the three holding companies' motions to dismiss the order as to themselves,
finding lack of subject matter jurisdiction over them, and would direct the
Commission's general counsel to file an action in state court to enforce the
holding company conditions, if necessary. The alternate, as well as the draft
decision that would deny the motions to dismiss, are presently on the
Commission's agenda for its October 11 meeting. Either would require a vote of
three out of five commissioners in order to be adopted. We are not a party to
this investigatory proceeding. We cannot predict whether, when or in what form
this order will be adopted, or what direct or indirect effects any subsequent
action taken by the Commission in such proceeding or in any other action or
proceeding, in reliance on the principles articulated in this order and in other
applicable authority, may have on Edison International or on us and our
subsidiaries.
A number of federal and state, legislative and regulatory initiatives
addressing the issues of the California electric power industry have been
proposed, including wholesale rate caps, retail rate increases, acceleration of
power plant permitting and state entry into the power market. Many of these
activities are ongoing. For example, on March 27, 2001, the California Public
Utilities Commission made permanent the interim surcharge on customers' bills
that it authorized on January 4, 2001 and authorized a rate increase of three
cents per kilowatt-hour; neither this interim surcharge nor the rate increase
affected the retail rate freeze which has been in effect since deregulation
began in 1998. On April 26, 2001, the Federal Energy Regulatory Commission
ordered price mitigation measures, or price
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caps, for power sales in the California spot market during emergency periods
only; on June 19, 2001, the price mitigation measures were expanded to apply
during all periods and to cover the entire eleven-state Western region. After
extensive settlement negotiations failed to produce a global settlement, on
July 25, 2001, the Federal Energy Regulatory Commission ordered that refunds may
be due from sellers who engaged in transactions in these markets from
October 2, 2000 through June 20, 2001, at levels in excess of the requirements
in the April 26 and July 19 orders (with certain modifications), and ordered an
evidentiary hearing to determine the required refunds. A separate proceeding was
also instituted to evaluate the potential for refunds in the Pacific Northwest.
The price mitigation measures end on September 30, 2002. The federal and state,
legislative and regulatory initiatives may result in a restructuring of the
California power market. At this time, it is not possible to estimate the likely
ultimate outcome of these activities.
OUR RESPONSE
To isolate ourselves from the credit downgrades and potential bankruptcies
of Edison International and Southern California Edison, and to facilitate our
ability and the ability of our subsidiaries to maintain our respective
investment grade credit ratings, on January 17, 2001, we amended our articles of
incorporation and our bylaws to include so-called "ring-fencing" provisions.
These ring-fencing provisions are intended to preserve us as a stand-alone
investment grade rated entity in spite of the current credit difficulties of
Edison International, Southern California Edison and their subsidiaries. These
provisions require the unanimous approval of our board of directors, including
at least one independent director, before we can do any of the following:
- declare or pay dividends or distributions unless either of the following
are true: we then have an investment grade credit rating and receive
rating agency confirmation that the dividend or distribution will not
result in a downgrade; or the dividends do not exceed $32.5 million in any
fiscal quarter and we meet an interest coverage ratio of not less than 2.2
to 1 for the immediately preceding four fiscal quarters;
- institute or consent to bankruptcy, insolvency or similar proceedings or
actions; or
- consolidate or merge with any entity or transfer substantially all our
assets to any entity, except to an entity that is subject to similar
restrictions.
We cannot assure you that these measures will effectively isolate us from
the credit downgrades or the potential bankruptcies of Edison International,
Southern California Edison or any of their subsidiaries. In January 2001, after
we implemented the ring-fencing amendments, Standard & Poor's and Moody's
lowered our credit ratings. Our senior unsecured credit ratings were downgraded
to "BBB-" from "A-" by Standard & Poor's and to "Baa3" from "Baa1" by Moody's.
Our credit ratings remain investment grade. Both Standard & Poor's and Moody's
have indicated that the credit ratings outlook for us is stable. However, as a
result of the downgrades, our cost of capital has increased. Future downgrades
could further increase our cost of capital, increase our credit support
obligations, make efforts to raise capital more difficult and could have an
adverse impact on us and our subsidiaries. The measures described above are
intended to insure that we are considered a stand-alone entity. However, in the
event of a bankruptcy of Mission Energy Holding, creditors of Mission Energy
Holding might seek to have a bankruptcy court substantially consolidate the
assets and liabilities of us with those of Mission Energy Holding.
MARKET RISK EXPOSURES
Our primary market risk exposures arise from changes in electricity and fuel
prices, interest rates and fluctuations in foreign currency exchange rates. We
manage these risks in part by using derivative financial instruments in
accordance with established policies and procedures.
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COMMODITY PRICE RISK
Electric power generated at our merchant plants is generally sold under
bilateral arrangements with utilities and power marketers under short-term
contracts with terms of two years or less, or, in the case of the Homer City
plant, to the Pennsylvania-New Jersey-Maryland Power Pool (PJM) or the New York
Independent System Operator (NYISO). We have developed risk management policies
and procedures, which, among other things, address credit risk. When making
sales under negotiated bilateral contracts, it is our policy to deal with
investment grade counterparties or counterparties that provide equivalent credit
support. Our Risk Management Committee grants exceptions to the policy only
after thorough review and scrutiny. Most entities that have received exceptions
are organized power pools and quasi-governmental agencies. We hedge a portion of
the electric output of our merchant plants, whose output is not committed to be
sold under long-term contracts, in order to lock in desirable outcomes. When
appropriate, we manage the spread between electric prices and fuel prices, and
use forward contracts, swaps, futures, or options contracts to achieve those
objectives.
Our electric revenues were increased by $47.5 million, $60.9 million and
$108.4 million in 2000, 1999 and 1998, respectively, as a result of electricity
rate swap agreements and other hedging mechanisms. A 10% increase in pool prices
would result in a $130.8 million decrease in the fair market value of
electricity rate swap agreements. A 10% decrease in pool prices would result in
a $130.5 million increase in the fair market value of electricity rate swap
agreements. An electricity rate swap agreement is an exchange of a fixed price
of electricity for a floating price. As a seller of power, we receive the fixed
price in exchange for a floating price, like the index price associated with
electricity pools. A 10% increase in electricity prices at December 31, 2000
would result in a $1.8 million decrease in the fair market value of forward
contracts entered into by the Loy Yang B plant. A 10% decrease in electricity
prices at December 31, 2000 would result in a $1.8 million increase in the fair
market value of forward contracts entered into by Loy Yang B plant.
A 10% increase in fuel oil, natural gas and electricity forward prices at
December 31, 2000 would result in a $15.7 million decrease in the fair market
value of energy contracts utilized by our domestic trading operations in energy
trading and price risk management activities. A 10% decrease in fuel oil,
natural gas and electricity forward prices at December 31, 2000 would result in
a $15.7 million increase in the fair market value of energy contracts utilized
by our domestic trading operations in energy trading and price risk management
activities.
AMERICAS
On September 1, 2000, we acquired the trading operations of Citizens Power
LLC. As a result of this acquisition, we have expanded our trading operations
beyond the traditional marketing of our electric power. Our energy trading and
price risk management activities give rise to market risk, which represents the
potential loss that can be caused by a change in the market value of a
particular commitment. Market risks are actively monitored to ensure compliance
with our risk management policies. Policies are in place that limit the amount
of total net exposure we may enter into at any point in time. Procedures exist
that allow for monitoring of all commitments and positions with daily reporting
to senior management. We perform a "value at risk" analysis in our daily
business to measure, monitor and control our overall market risk exposure. The
use of value at risk allows management to aggregate overall risk, compare risk
on a consistent basis and identify the reasons for the risk. Value at risk
measures the worst expected loss over a given time interval, under normal market
conditions, at a given confidence level. Given the inherent limitations of value
at risk and relying on a single risk measurement tool, we supplement this
approach with industry "best practice" techniques including the use of stress
testing and worst-case scenario analysis, as well as stop limits and
counterparty credit exposure limits.
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Electric power generated at the Homer City plant is sold under bilateral
arrangements with domestic utilities and power marketers under short-term
contracts with terms of two years or less, or to the PJM or the NYISO. These
pools have short-term markets, which establish an hourly clearing price. The
Homer City plant is situated in the PJM control area and is physically connected
to high-voltage transmission lines serving both the PJM and NYISO markets. The
Homer City plant can also transmit power to the Midwestern United States.
Electric power generated at the Illinois Plants is sold under three power
purchase agreements with Exelon Generation Company, in which Exelon Generation
purchases capacity and has the right to purchase energy generated by the
Illinois Plants. The agreements, which began on December 15, 1999 and have a
term of up to five years, provide for capacity and energy payments. Exelon
Generation is obligated to make a capacity payment for the plants under contract
and an energy payment for the electricity produced by these plants and taken by
Exelon Generation. The capacity payments provide the Illinois Plants revenue for
fixed charges, and the energy payments compensate the Illinois Plants for
variable costs of production. Exelon Generation has the option to terminate two
of the three agreements in their entirety or with respect to any generating unit
or units in each of 2002, 2003 and 2004. In June 2001, Exelon Generation
provided us notice to continue the agreement related to the coal units for 2002.
If Exelon Generation does not fully dispatch the plants under contract, the
Illinois Plants may sell, subject to specified conditions, the excess energy at
market prices to neighboring utilities, municipalities, third-party electric
retailers, large consumers and power marketers on a spot basis. A bilateral
trading infrastructure already exists with access to the Mid-America
Interconnected Network and the East Central Area Reliability Council.
UNITED KINGDOM
Since 1989, our plants in the U.K. have sold their electrical energy and
capacity through a centralized electricity pool, which established a half-hourly
clearing price, also referred to as the pool price, for electrical energy. On
March 27, 2001, this system was replaced with a bilateral physical trading
system referred to as the new electricity trading arrangements.
The new electricity trading arrangements provide for, among other things,
the establishment of a spot market or voluntary short-term power exchanges
operating from a year or more in advance to 3 1/2-hours before a trading period
of 1/2 hour; a balancing mechanism to enable the system operator to balance
generation and demand and resolve any transmission constraints; a mandatory
settlement process for recovering imbalances between contracted and metered
volumes with strong incentives for being in balance; and a Balancing and
Settlement Code Panel to oversee governance of the balancing mechanism.
Contracting over time periods longer than the day-ahead market is not directly
affected by the proposals. Physical bilateral contracts have replaced the prior
financial contracts for differences, but function in a similar manner. However,
it remains difficult to evaluate the future impact of the new electricity
trading arrangement. A key feature of the new arrangements is to require firm
physical delivery, which means that a generator must deliver, and a consumer
must take delivery, against their contracted positions or face assessment of
energy imbalance penalty charges by the system operator. A consequence of this
should be to increase greatly the motivation of parties to contract in advance
and develop forwards and futures markets of greater liquidity than at present.
Recent experience has been that the new electricity trading arrangements have
placed a significant downward pressure on forward contract prices. Furthermore,
another consequence may be that counterparties may require additional credit
support, including parent company guarantees or letters of credit. Legislation
in the form of the Utilities Act, which was approved July 28, 2000, provided for
the implementation of the new electricity trading arrangements and the necessary
amendments to generators' licenses.
The legislation providing for the implementation of the new arrangements,
the Utilities Act 2000, sets a principal objective for the Gas and Electric
Market Authority to "protect the interests of consumers...where appropriate by
promoting competition...." This represents a shift in emphasis toward
66
the consumer interest. But this is qualified by a recognition that license
holders should be able to finance their activities. The Act also contains new
powers for the Secretary of State to issue guidance to the Gas and Electric
Market Authority on social and environmental matters, changes to the procedures
for modifying licenses and a new power for the Gas and Electric Market Authority
to impose financial penalties on companies for breach of license conditions. We
will be monitoring the operation of these new provisions. See
"Business--Regulatory Matters--Recent Foreign Regulatory Matters--United
Kingdom."
ASIA PACIFIC
AUSTRALIA. The Loy Yang B plant sells its electrical energy through a
centralized electricity pool, which provides for a system of generator bidding,
central dispatch and a settlements system based on a clearing market for each
half-hour of every day. The National Electricity Market Management Company,
operator and administrator of the pool, determines a system marginal price each
half-hour. To mitigate exposure to price volatility of the electricity traded
into the pool, the Loy Yang B plant has entered into a number of financial
hedges. From May 8, 1997 to December 31, 2000, approximately 53% to 64% of the
plant output sold was hedged under vesting contracts, with the remainder of the
plant capacity hedged under the State Hedge described below. Vesting contracts
were put into place by the State Government of Victoria, Australia, between each
generator and each distributor, prior to the privatization of electric power
distributors in order to provide more predictable pricing for those electricity
customers that were unable to choose their electricity retailer. Vesting
contracts set base strike prices at which the electricity will be traded. The
parties to the vesting contracts make payments, which are calculated based on
the difference between the price in the contract and the half-hourly pool
clearing price for the element of power under contract. Vesting contracts were
sold in various structures and accounted for as electricity rate swap
agreements. The State Hedge agreement with the State Electricity Commission of
Victoria is a long-term contractual arrangement based upon a fixed price
commencing May 8, 1997 and terminating October 31, 2016. The State Government of
Victoria, Australia guarantees the State Electricity Commission of Victoria's
obligations under the State Hedge. From January 2001 to July 2014, approximately
77% of the plant output sold is hedged under the State Hedge. From August 2014
to October 2016, approximately 56% of the plant output sold is hedged under the
State Hedge. Additionally, the Loy Yang B plant entered into a number of fixed
forward electricity contracts commencing either in 2001 or 2002, which expire on
various dates through December 31, 2002, and which will further mitigate against
the price volatility of the electricity pool.
NEW ZEALAND. The New Zealand Government has been undergoing a steady
process of electric industry deregulation since 1987. Reform in the distribution
and retail supply sector began in 1992 with legislation that deregulated
electricity distribution and provided for competition in the retail electric
supply function. The New Zealand Energy Market, established in 1996, is a
voluntary competitive wholesale market that allows for the trading of physical
electricity on a half-hourly basis. The Electricity Industry Reform Act, which
was passed in July 1998, was designed to increase competition at the wholesale
generation level by splitting up Electricity Company of New Zealand Limited, the
large state-owned generator, into three separate generation companies. The
Electricity Industry Reform Act also prohibits the ownership of both generation
and distribution assets by the same entity.
The New Zealand Government commissioned an inquiry into the electricity
industry in February 2000. This Inquiry Board's report was presented to the
government in mid 2000. The main focus of the report was on the monopoly
segments of the industry, transmission and distribution, with substantial
limitations being recommended in the way in which these segments price their
services in order to limit their monopoly power. Recommendations were also made
with respect to the retail customer in order to reduce barriers to customers
switching. In addition, the Board made recommendations in relation to the
wholesale market's governance arrangements with the purpose of streamlining
them. The recommended changes are now being progressively implemented.
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INTEREST RATE RISK
Interest rate changes affect the cost of capital needed to finance the
construction and operation of our projects. We have mitigated the risk of
interest rate fluctuations by arranging for fixed rate financing or variable
rate financing with interest rate swaps or other hedging mechanisms for a number
of our project financings. Interest expense included $9.3 million and
$9.6 million of additional interest expense for the six months ended June 30,
2001 and 2000, respectively, and $16.1 million, $25.2 million and $22.8 million
for the years 2000, 1999 and 1998, respectively, as a result of interest rate
hedging mechanisms. We have entered into several interest rate swap agreements
under which the maturity date of the swaps occurs prior to the final maturity of
the underlying debt. A 10% increase in market interest rates at December 31,
2000 would result in a $17.2 million increase in the fair value of our interest
rate hedge agreements. A 10% decrease in market interest rates at December 31,
2000 would result in a $17.1 million decline in the fair value of our interest
rate hedge agreements.
We had short-term obligations of $819.8 million consisting of commercial
paper and bank borrowings at June 30, 2001. The fair values of these obligations
approximated their carrying values at June 30, 2001, and would not have been
materially affected by changes in market interest rates. The fair market value
of long-term fixed interest rate obligations are subject to interest rate risk.
The fair market value of our total long-term obligations (including current
portion) was $7.7 billion at June 30, 2001. A 10% increase in market interest
rates at December 31, 2000 would result in a decrease in the fair value of total
long-term obligations by approximately $96 million. A 10% decrease in market
interest rates at December 31, 2000 would result in an increase in the fair
value of total long-term obligations by approximately $104 million.
FOREIGN EXCHANGE RATE RISK
Fluctuations in foreign currency exchange rates can affect, on a United
States dollar equivalent basis, the amount of our equity contributions to, and
distributions from, our international projects. As we continue to expand into
foreign markets, fluctuations in foreign currency exchange rates can be expected
to have a greater impact on our results of operations in the future. At times,
we have hedged a portion of our current exposure to fluctuations in foreign
exchange rates through financial derivatives, offsetting obligations denominated
in foreign currencies, and indexing underlying project agreements to United
States dollars or other indices reasonably expected to correlate with foreign
exchange movements. In addition, we have used statistical forecasting techniques
to help assess foreign exchange risk and the probabilities of various outcomes.
We cannot assure you, however, that fluctuations in exchange rates will be fully
offset by hedges or that currency movements and the relationship between certain
macro economic variables will behave in a manner that is consistent with
historical or forecasted relationships. Foreign exchange considerations for
three major international projects, other than Paiton, which was discussed
earlier, are discussed below.
The First Hydro, Ferrybridge and Fiddler's Ferry plants in the U.K. and the
Loy Yang B plant in Australia have been financed in their local currency, pounds
sterling and Australian dollars, respectively, thus hedging the majority of
their acquisition costs against foreign exchange fluctuations. Furthermore, we
have evaluated the return on the remaining equity portion of these investments
with regard to the likelihood of various foreign exchange scenarios. These
analyses use market-derived volatilities, statistical correlations between
specified variables, and long-term forecasts to predict ranges of expected
returns.
Foreign currencies in the U.K., Australia and New Zealand decreased in value
compared to the U.S. dollar by 6%, 8% and 9%, respectively (determined by the
change in the exchange rates from December 31, 2000 to June 30, 2001). The
decrease in value of these currencies was the primary reason for the foreign
currency translation loss of $101.2 million during the first six months of 2001
and a
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$157.3 million loss during 2000. A 10% increase or decrease in the exchange rate
at December 31, 2000 would result in foreign currency translation gains or
losses of $196.7 million.
In December 2000, we entered into foreign currency forward exchange
contracts in the ordinary course of business to protect ourselves from adverse
currency rate fluctuations on anticipated foreign currency commitments. The
periods of the forward exchange contracts correspond to the periods of the
hedged transactions. At December 31, 2000, the outstanding notional amount of
the contracts totaled $91 million, consisting of contracts to exchange
U.S. dollars to pounds sterling. A 10% fluctuation in exchange rates would
change the fair value of the contracts at December 31, 2000 by approximately
$6 million. At June 30, 2001, the outstanding notional amount of the contracts
totaled $73 million, consisting of contracts to exchange U.S. dollars to pound
sterling with varying maturities ranging from July 2001 to July 2002. During the
first six months of 2001, we recognized a foreign exchange gain of approximately
$36,000 related to the fuel purchases underlying the contracts that matured
during the first six months of 2001.
We will continue to monitor our foreign exchange exposure and analyze the
effectiveness and efficiency of hedging strategies in the future.
OTHER
The electric power generated by some of our investments in domestic
operating projects, excluding the Homer City plant and the Illinois Plants, is
sold to electric utilities under long-term contracts, typically with terms of 15
to 30 years. We structure our long-term contracts so that fluctuations in fuel
costs will produce similar fluctuations in electric and/or steam revenues and
enter into long-term fuel supply and transportation agreements. The degree of
linkage between these revenues and expenses varies from project to project, but
generally permits the projects to operate profitably under a wide array of
potential price fluctuation scenarios.
RECENT DEVELOPMENTS
We are considering a possible reincorporation in the State of Delaware. The
reincorporation would be accomplished through a merger with Edison Mission
Energy, a Delaware corporation and wholly-owned subsidiary of ours, in which the
Delaware corporation would be the surviving corporation. The Order Authorizing
Disposition of Jurisdiction Facilities issued by the Federal Energy Regulatory
Commission on August 24, 2001 found that our proposed transaction was consistent
with the public interest and granted our request for authority to complete the
reincorporation, subject to certain conditions. We cannot assure you that a
rehearing of the August 24, 2001 order will not be requested, and cannot provide
any assurances as to the outcome of such hearing or as to the consummation of
the reincorporation.
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BUSINESS
GENERAL OVERVIEW
We are an independent power producer engaged in the business of developing,
acquiring, owning or leasing and operating electric power generation facilities
worldwide. We also conduct energy trading and price risk management activities
in power markets open to competition. Edison International is our ultimate
parent company. Edison International also owns Southern California Edison, one
of the largest electric utilities in the United States. As of June 30, 2001, we
owned interests in 33 domestic and 39 international operating power projects
with aggregate generation capacity of 27,798 MW, of which our share was 22,923
MW. One domestic and five international projects totaling 1,551 MW of generating
capacity, of which our anticipated share is approximately 926 MW, are in the
construction stage. At June 30, 2001, we had consolidated assets of
$15.3 billion and total shareholder's equity of $2.7 billion.
ELECTRIC POWER INDUSTRY
Until the enactment of the Public Utility Regulatory Policies Act of 1978,
utilities were the only producers of bulk electric power intended for sale to
third parties in the United States. The Public Utility Regulatory Policies Act
encouraged the development of independent power by removing regulatory
constraints relating to the production and sale of electric energy by certain
non-utilities and requiring electric utilities to buy electricity from certain
types of non-utility power producers, qualifying facilities, under certain
conditions. The passage of the Energy Policy Act of 1992 further encouraged the
development of independent power by significantly expanding the options
available to independent power producers with respect to their regulatory status
and by liberalizing transmission access. As a result, a significant market for
electric power produced by independent power producers, such as us, has
developed in the United States since the enactment of the Public Utility
Regulatory Policies Act. In 1998, utility deregulation in several states led
utilities to divest generating assets, which has created new opportunities for
growth of independent power in the United States.
The movement toward privatization of existing power generation capacity in
many foreign countries and the growing need for new capacity in developing
countries have also led to the development of significant new markets for
independent power producers outside the United States. We believe that we are
well-positioned to continue to realize opportunities in these new foreign
markets. See "--Strategic Overview" below.
STRATEGIC OVERVIEW
Our business goal is to continue to be one of the leading owners and
operators of electric generating assets in the world. We play an active role, as
a long-term owner, in all phases of power generation, from planning and
development through construction and commercial operation. We believe that this
involvement allows us to better ensure, with our experienced personnel, that our
projects are well-planned, structured and managed, thus maximizing value
creation.
Our strategy focuses on enhancing the value of existing assets, expanding
plant capacity at existing sites and developing new projects in locations where
we have an established position or otherwise determine that attractive financial
performance can be realized. In addition, because our merchant plants, sell
power into markets without the certainty of long-term contracts, we conduct
power marketing, trading, and risk management activities to stabilize and
enhance the financial performance of these projects. We also recognize that our
principal customers are regulated utilities. We therefore strive to understand
the regulatory and economic environment in which the utilities operate so that
we may continue to create mutually beneficial relationships and business
dealings.
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In making investment decisions, we evaluate potential project returns
against our internally generated rate of return guidelines. We establish these
guidelines by identifying a base rate of return and adjusting the base rate by
potential risk factors, such as risks associated with project location and stage
of project development. We endeavor to mitigate these risks by (i) evaluating
all projects and the markets in which they operate, (ii) selecting strategic
partners with complementary skills and local experience, (iii) structuring
investments through subsidiaries, (iv) managing up-front development costs,
(v) utilizing limited recourse financing and (vi) linking revenue and expense
components where appropriate.
In response to the increasing globalization of the independent power market,
we have organized our operation and development activities into three geographic
regions: (i) Americas, (ii) Asia Pacific and (iii) Europe, Central Asia, Middle
East and Africa. Each region is served by one or more teams consisting of
business development, operations, finance and legal personnel, and each team is
responsible for all our activities within a particular geographic region. Also,
we mobilize personnel from outside a particular region when needed in order to
assist in the development of specified projects.
Due to the impact of the California power crisis, our current operational
focus is on enhancing the performance of our existing portfolio of power
projects, expanding our generation capacity at existing sites and maintaining
our credit quality. Our long-term strategy is to continue to grow our business
while maintaining investment grade credit ratings.
COMPETITIVE STRENGTHS
We believe that our competitive strengths advantageously position us to
enhance our financial performance, expand our business and pursue strategic
opportunities in independent power markets both domestically and abroad. Our key
competitive strengths are summarized below.
- GLOBAL PRESENCE. We are among the largest independent power producers in
the world based on MW generated. As of June 30, 2001, we owned interests
in 33 domestic operating projects with total generating capacity of 15,221
MW, of which our share was 13,302 MW. In addition, as of June 30, 2001, we
owned interests in 39 projects outside the United States with total
generation capacity of 12,577 MW, of which our share was 9,621 MW. In
assembling and operating this global portfolio, we have gained substantial
experience and expertise in major U.S. and foreign power markets and, as a
result, enjoy access to a broader range of development and acquisition
opportunities worldwide.
- DIVERSIFIED ASSET PORTFOLIO. In addition to owning interests in power
generation facilities in 10 countries worldwide, our portfolio is also
diversified by fuel type. As of June 30, 2001, fuel type for our portfolio
of power projects was comprised of 57% coal, 30% natural gas, 11%
hydroelectric and 2% oil and geothermal, as a percentage of our share of
aggregate generation capacity. The fuel type diversification of our
portfolio of power projects reduces our exposure to shortages or other
disruptions in the market for any particular fuel source. The geographic
diversification of our portfolio of power projects spreads our operations
across different regions and market segments, thereby allowing us to
participate in multiple segments of the domestic and international power
markets and reducing the level of risk presented by any particular market.
- BALANCED CONTRACT POSITION. The contract status of our generation
facilities reflects a blend of long-term contracts and sales from our
merchant plants. As of June 30, 2001, the majority of our MW were
generated subject to long-term power purchase contracts, which provide us
with contracted revenue streams on some portion of the output or capacity
from those generation facilities. Our remaining MW were generated by our
merchant plants which sell power into wholesale power markets. This blend
of contracted and merchant generation provides for a stream of contract
revenue while allowing us the flexibility to sell energy into wholesale
markets.
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- DISCIPLINED MARKETING AND RISK MANAGEMENT ACTIVITIES. We use a disciplined
approach to energy marketing and risk management that is centered around
our merchant plants and is designed primarily to stabilize and enhance the
operational and financial performance of those facilities. These
activities also reduce our exposure to energy price fluctuations.
- STRONG AND EXPERIENCED PROJECT MANAGEMENT TEAM. We have an experienced
project management team that continues to focus on our core competencies
and to draw upon our significant domestic and international development
and operating experience.
BUSINESS DESCRIPTION
OPERATION OF GENERATION FACILITIES
We have ownership interests in operating projects that employ gas fired
combustion turbine technology predominantly through an application known as
cogeneration. Cogeneration facilities sequentially produce two or more useful
forms of energy, such as electricity and steam, from a single primary source of
fuel, such as natural gas or coal. Many of our cogeneration projects are located
near large, industrial steam users or in oil fields that inject steam
underground to enhance recovery of heavy oil. The regulatory advantages for
cogeneration facilities under the Public Utility Regulatory Policies Act of
1978, as amended, have become somewhat less significant because of other federal
regulatory exemptions made available to independent power producers under the
Energy Policy Act. Accordingly, we expect that the majority of our future
projects will generate power without selling steam to industrial users.
We also have ownership interests in projects that use renewable resources
like hydroelectric energy and geothermal energy. Our hydroelectric projects,
excluding First Hydro's plants, use run-of-the-river technology to generate
electricity. The First Hydro plant utilizes pumped-storage stations that consume
electricity when it is comparatively less expensive in order to pump water for
storage in an upper reservoir. Water is then allowed to flow back through
turbines in order to generate electricity when its market value is higher. This
type of generation is characterized by its speed of response, its ability to
work efficiently at wide variations of load and the basic reliance of revenue on
the difference between the peak and trough prices of electricity during the day.
Our geothermal projects included as part of our Contact Energy investment use
technologies that convert the heat from geothermal fluids and underground steam
into electricity.
We also have domestic and international ownership interests in operating
projects and projects which are large scale, coal-fired projects using
pulverized coal and coal-fired generation technology. In the United States, we
have developed and acquired coal and waste coal-fired projects that employ
traditional pulverized coal and circulating fluidized bed technology, which
allows for the use of lower quality coal and the direct removal of sulfur from
the coal. We also have acquired ownership interests in gas-fired projects and
have purchased gas-fired turbines for combined cycle gas turbines (commonly
referred to as "F" technology), which are designed to increase efficiency of
power generation due to higher firing temperatures.
CONTRACTED FACILITIES
Many of our operating projects in the United States sell power and steam to
domestic electric utilities and industrial steam users under long-term
contracts. Electric power generated by several of our international projects is
sold under long term contracts to electric utilities located in the country
where the power project is located. These projects' revenues from power purchase
agreements usually consist of two components: energy payments and capacity
payments. Energy payments are made based on actual deliveries of electric
energy, such as kilowatt hours, to the purchaser. Energy payments are usually
indexed to specified variable costs that the purchaser avoids by purchasing this
electric energy from our projects opposed to operating its own power plants to
produce the same amount of electric
72
energy. The variable components typically include fuel costs and selected
operation and maintenance expenses. These costs may be indexed to the utility's
cost of fuel and/or selected inflation indices. Capacity payments are based on a
project's proven capability to reliably make electric capacity available,
whether or not the project is called to deliver electric energy. Capacity
payments compensate a project for specified fixed costs that are incurred
independent of the amount of energy sold by the project. Such fixed costs
include taxes, debt service and distributions to the project's owners. To
receive capacity payments, there are typically minimum performance standards
that must be met, and often there is a performance range that further influences
the amount of capacity payments.
Steam produced from our cogeneration facilities is sold to industrial steam
users, such as petroleum refineries or companies involved in the enhanced
recovery of oil through steam flooding of oil fields, under long term steam
sales contracts. Steam payments are generally based on formulas that reflect the
cost of water, fuel and capital to us. In some cases, we have provided steam
purchasers with discounts from their previous costs for producing this steam
and/or have partially indexed steam payments to other indices including
specified oil prices.
The majority of electric power generated at the Illinois Plants is sold
under power purchase agreements with Exelon Generation Company in which Exelon
Generation purchases capacity and has the right to purchase energy generated by
the Illinois Plants. The agreements, which began on December 15, 1999, and have
a term of up to five years, provide for Exelon Generation to make a capacity
payment for the plants under contract and an energy payment for the electricity
produced by these plants. Exelon Generation has the option to terminate two of
the three agreements in their entirety or with respect to any generating unit or
units in each of 2002, 2003 and 2004. The capacity payments provide the Illinois
Plants revenue for fixed charges, and the energy payments compensate the
Illinois Plants for variable costs of production. If Exelon Generation does not
fully dispatch the plants under contract, the Illinois Plants may sell, subject
to specified conditions, the excess energy at market prices to neighboring
utilities, municipalities, third party electric retailers, large consumers and
power marketers on a spot basis. A bilateral trading infrastructure already
exists with access to the Mid-America Interconnected Network and the East
Central Area Reliability Council.
MERCHANT PLANTS
During 1999, we acquired the Homer City, Fiddler's Ferry and Ferrybridge
plants producing approximately 5,868 MW, which sell capacity, energy and, in
some cases, other services on a competitive basis under bilateral arrangements
or through centralized power pools that provide an institutional framework for
price setting, dispatch and settlement procedures.
Electric power generated at the Homer City plant is sold under bilateral
arrangements with utilities and power marketers under short term contracts with
terms of two years or less, or to the PJM or the NYISO. These pools have short
term markets, which establish an hourly clearing price. The Homer City plant is
situated in the PJM control area and is physically connected to high voltage
transmission lines serving both the PJM and NYISO markets. The Homer City plant
can also transmit power to the Midwestern United States.
Power from the Fiddler's Ferry and Ferrybridge and First Hydro projects is
sold into the United Kingdom electricity market. The electricity trading
mechanism in the U.K. that provided for the sale of energy to a pool has
recently been replaced with trading arrangements using bilateral contracts. See
discussion of the new electricity trading arrangement in "Management's
Discussion and Analysis of Financial Condition and Results of Operations--Market
Risk Exposures--United Kingdom." Under the new trading arrangements, our
indirect U.K. subsidiary, Edison First Power Limited, is required to contract
with specific purchasers for the sales of energy produced by its Ferrybridge and
Fiddler's Ferry stations. Under the new system, a generator must deliver, and a
consumer must take delivery, in accordance with their contracted agreements or
face the assessment of energy imbalance charges by the
73
systems operator. Edison First Power believes that a consequence of this will be
to increase greatly the motivation of parties to contract in advance in order to
lock in an agreed upon price for, and quantity of, energy. As a result of the
introduction of the new electricity trading arrangements, forecasts of future
electricity prices in the markets into which Edison First Power sells its power
vary significantly. Recent experience by Edison First Power has shown that this
arrangement has placed significant downward pressure on prices to be paid by
purchasers of energy in the future, although it is uncertain how the new trading
arrangements will affect prices in the long-term. Edison Mission Energy is
currently considering the sale of the Ferrybridge and Fiddler's Ferry plants.
The Loy Yang B plant sells its electrical energy through a centralized
electricity pool, which provides for a system of generator bidding, central
dispatch and a settlements system based on a clearing market for each half-hour
of every day. The National Electricity Market Management Company, operator and
administrator of the pool, determines a system marginal price each half-hour. To
mitigate our exposure to price volatility of the electricity traded into the
pool, the Loy Yang B plant has entered into a number of financial hedges. From
May 8, 1997 to December 31, 2000, approximately 53% to 64% of the plant output
sold was hedged under vesting contracts, with the remainder of the plant
capacity hedged under the State Hedge. The State Hedge agreement with the State
Electricity Commission of Victoria is a long-term contractual arrangement based
upon a fixed price commencing May 8, 1997 and terminating October 31, 2016. The
State Government of Victoria, Australia guarantees the State Electricity
Commission of Victoria's obligations under the State Hedge. From January 2001 to
July 2014, approximately 77% of the plant output sold is hedged under the State
Hedge. From August 2014 to October 2016, approximately 56% of the plant output
sold is hedged under the State Hedge. Additionally, the Loy Yang B plant has
entered into a number of fixed forward electricity contracts with terms of up to
two years expiring on various dates through December 31, 2002, and which will
further mitigate against the price volatility of the electricity pool.
PROJECT DEVELOPMENT AND FINANCING
PROJECT DEVELOPMENT
The development of power generation projects, whether through new
construction or the acquisition of existing assets, involves numerous elements,
including evaluating and selecting development opportunities, evaluating
regulatory and market risks, designing and engineering the project, acquiring
necessary land rights, permits and fuel resources, obtaining financing, managing
construction and, in some cases, obtaining power and steam sales agreements.
We initially evaluate and select potential development projects based on a
variety of factors, including the reliability of technology, the strength of the
potential partners, the feasibility of the project, the likelihood of obtaining
a long term power purchase agreement or profitably selling power without this
agreement, the probability of obtaining required licenses and permits and the
projected economic return. During the development process, we monitor the
viability of our projects and make business judgments concerning expenditures
for both internal and external development costs. Completion of the financing
arrangements for a project is generally an indication that business development
activities are substantially complete.
The selection of power generation technology for a particular project is
influenced by various factors, including regulatory requirements, availability
of fuel and anticipated economic advantages for a particular application.
In the past we have relied on acquisitions to expand our portfolio of power
projects. As a result of the California power crisis, our current focus is on
operating our existing portfolio and focusing our development activities on
expanding our generation capacity at existing sites rather than pursuing
acquisition and development opportunities at our historical level. Upon
resolution of the California power crisis, we plan to focus to a greater extent
on the development of new projects.
74
PROJECT FINANCING
Each project we develop requires a substantial capital investment. Permanent
project financing is often arranged immediately prior to the construction of the
project. With limited exceptions, this debt financing is for approximately 50%
to 80% of each project's costs and is structured on a basis that is non-recourse
to us and our other projects. In addition, the collateral security for each
project's financing generally has been limited to the physical assets, contracts
and cash flow of that project and our ownership interests in that project.
In general, each of our direct or indirect subsidiaries is organized as a
legal entity separate and apart from us and our other subsidiaries. Any asset of
any of these subsidiaries may not be available to satisfy our obligations or
those of any of our other subsidiaries. However, unrestricted cash or other
assets that are available for distribution by a subsidiary may, subject to
applicable law and the terms of financing arrangements of these subsidiaries, be
advanced, loaned, paid as dividends or otherwise distributed or contributed to
us.
The ability to arrange project financing and the cost of such financing are
dependent upon numerous factors, including general economic and capital market
conditions, the credit attributes of a project, conditions in energy markets,
regulatory developments, credit availability from banks or other lenders,
investor confidence in the industry, us and other project participants, the
continued success of our other projects, and provisions of tax and securities
laws that are conducive to raising capital.
Our financial exposure in any equity investment is generally limited by
contractual arrangement to our equity commitment, which is usually about 20% to
50% of our share of the aggregate project cost. In some cases, we provide
additional credit support to projects in the form of debt service reserves,
contingent equity commitments, revenue shortfall support or other arrangements
designed to provide limited support.
PERMITS AND APPROVALS
Because the process for obtaining initial environmental, siting and other
governmental permits and approvals is complicated and lengthy, often taking a
year or longer, we seek to obtain all permits, licenses and other approvals
required for the construction and operation of a project, including siting,
construction and environmental permits, rights of way and planning approvals,
early in the development process for a project. See "--Regulatory
Matters--General."
Emission allowances were acquired by us as part of the acquisition of the
Illinois Plants and the Homer City plant. Emission allowances are required by
our facilities in order to be certified by the local environmental authorities
and are required to be maintained throughout the period of operation of those
facilities located in Pennsylvania and Illinois. We purchase additional emission
allowances when necessary to meet the environmental regulations. We also use
forward sales and purchases of emission allowances, together with options, to
achieve our objective of stabilizing and enhancing the operations from these
merchant plants.
CONSTRUCTION, OPERATIONS & MAINTENANCE AND MANAGEMENT
In the project implementation stage, we often provide construction
management, start up and testing services. The detailed engineering and
construction of the projects typically are performed by outside contractors
under fixed price, turnkey contracts. Under these contracts, the contractor
generally is required to pay liquidated damages to us in the event of cost
overruns, schedule delays or the project's failure to meet specified capacity,
efficiency and emission standards.
As a project goes into operation, operation and maintenance services are
provided to the project by one of our operation and maintenance subsidiaries or
another operation and maintenance contractor. The projects that we operated in
2000 achieved an average 82% availability. Availability is a
75
measure of the weighted average number of hours each generator is available for
generation as a percentage of the total number of hours in a year.
An executive director generally manages the day-to-day administration of
each project. Management committees comprised of the project's partners
generally meet monthly or quarterly to review and manage the operating
performance of the project.
MARKETING AND RISK MANAGEMENT
When making sales under negotiated contracts, it is our policy to deal with
investment grade counterparties or counterparties that provide equivalent credit
support. Exceptions to the policy are granted only after thorough review and
scrutiny by our Risk Management Committee. Most entities that have received
exceptions are organized power pools and quasi-governmental agencies. We hedge a
portion of the electric output of our merchant plants in order to stabilize and
enhance the operating revenues from merchant plants. When appropriate, we manage
the "spark spread," or margin, which is the spread between electric prices and
fuel prices and use forward contracts, swaps, futures, or options contracts to
achieve those objectives.
Our power marketing and trading organization, Edison Mission Marketing &
Trading, markets and trades electric power and energy related commodity
products, including forwards, futures, options and swaps. It also provides
services and price risk management capabilities to the electric power industry.
Price risk management activities include the restructuring of power sales and
power supply agreements. We generally balance forward sales and purchase
contracts to mitigate market risk and secure cash flow streams.
Edison Mission Marketing & Trading is divided into front-, middle-, and
back-office segments, with specified duties segregated for control purposes. The
personnel of Edison Mission Marketing & Trading have a high level of knowledge
of utility operations, fuel procurement, energy marketing and futures and
options trading. We have systems in place which monitor real time spot and
forward pricing and perform option valuations. We also have a wholesale power
scheduling group that operates on a 24 hour basis.
Energy trading and price risk management activities give rise to commodity
price risk, which represents the potential loss that can be caused by a change
in the market value of a particular commodity. Commodity price risks are
actively monitored to ensure compliance with our risk management policies.
Policies are in place which limit the amount of total net exposure we may enter
into at any point in time. Procedures exist which allow for monitoring of all
commitments and positions with daily reporting to senior management. We perform
a "value at risk" analysis in our daily business to measure, monitor and control
our overall market risk exposure. The use of value at risk allows management to
aggregate overall risk, compare risk on a consistent basis and identify the
drivers of the risk. Value at risk measures the worst expected loss over a given
time interval, under normal market conditions, at a given confidence level.
Given the inherent limitations of value at risk and relying on a single risk
measurement tool, we supplement this approach with industry "best practice"
techniques including the use of stress testing and worst-case scenario analysis,
as well as stop limits and counterparty credit exposure limits.
FUEL SUPPLY MANAGEMENT
We seek to enter into long term contracts to mitigate the risks of
fluctuations in prices for coal, oil, gas and fuel transportation. We believe,
however, that our financial condition will not be substantially adversely
affected by these fluctuations for our non-merchant plants because our long term
contracts to sell power and steam typically are structured so that fluctuations
in fuel costs will produce similar fluctuations in electric energy and/or steam
revenues. The degree of linkage between these
76
revenues and expenses varies from project to project, but generally permits the
projects with long term contracts to operate profitably under a wide array of
potential price scenarios.
REGIONAL OVERVIEW OF BUSINESS SEGMENTS
As of June 30, 2001, we have ownership or leasehold interests in the
following domestic operating projects:
PRIMARY ELECTRIC NET ELECTRIC
ELECTRIC OWNERSHIP CAPACITY CAPACITY
LOCATION PURCHASER(4) TYPE OF FACILITY(5) INTEREST (IN MW) (IN MW)
------------- ------------ ------------------- ---------- -------- ------------
AMERICAS:
American Bituminous(1).......... West Virginia MPC Waste Coal 50% 80 40
Brooklyn Navy Yard(2)........... New York CE Cogeneration/EWG 50% 286 143
Coalinga(1)..................... California PG&E Cogeneration 50% 38 19
Commonwealth Atlantic(3)........ Virginia VEPCO EWG 50% 340 170
EcoElectrica(1)(3).............. Puerto Rico PREPA Cogeneration 50% 540 270
Gordonsville(1)(3).............. Virginia VEPCO Cogeneration/EWG 50% 240 120
Harbor(1)....................... California Pool EWG 30% 80 24
Homer City(1)................... Pennsylvania Pool EWG 100% 1,884 1,884
Illinois Plants Illinois EG EWG 100% 9,539 9,539
(12 projects)(1)..............
James River(3).................. Virginia VEPCO Cogeneration 50% 110 55
Kern River(1)................... California SCE Cogeneration 50% 300 150
March Point I................... Washington PSE Cogeneration 50% 80 40
March Point II.................. Washington PSE Cogeneration 50% 60 30
Mid-Set(1)...................... California PG&E Cogeneration 50% 38 19
Midway-Sunset(1)................ California SCE Cogeneration 50% 225 112
Nevada Sun-Peak(3).............. Nevada SPR EWG 50% 210 105
Saguaro(1)(3)................... Nevada SPR Cogeneration 50% 90 45
Salinas River(1)................ California PG&E Cogeneration 50% 38 19
Sargent Canyon(1)............... California PG&E Cogeneration 50% 38 19
Sunrise(1)...................... California CDWR EWG 50% 320 160
Sycamore(1)..................... California SCE Cogeneration 50% 300 150
Watson.......................... California SCE Cogeneration 49% 385 189
------ ------
Total Americas.............. 15,221 13,302
====== ======
------------------------------
(1) Operated by subsidiaries or affiliates of Edison Mission Energy; all other
projects are operated by unaffiliated third parties.
(2) Currently offered for sale.
(3) Subsequent to June 30, 2001, an agreement to sell our project interest was
executed, with completion subject to satisfaction of closing conditions.
(4) Electric purchaser abbreviations are as follows:
CDWR California Department of Water Resources PREPA Puerto Rico Electric Power Authority
CE Consolidated Edison Company of New PSE Puget Sound Energy, Inc.
York, Inc.
EG Exelon Generation Company SCE Southern California Edison Company
MPC Monongahela Power Company SPR Sierra Pacific Resources
PG&E Pacific Gas & Electric Company VEPCO Virginia Electric & Power Company
Pool Regional electricity trading market
(5) All the cogeneration projects are gas fired facilities except for the James
River project, which uses coal. All the exempt wholesale generator (EWG)
projects are gas fired facilities, except for the Homer City plant and six
of the Illinois Plants, which use coal.
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As of June 30, 2001, we have ownership or leasehold interests in the
following international operating projects:
NET
ELECTRIC ELECTRIC
PRIMARY ELECTRIC OWNERSHIP CAPACITY CAPACITY
LOCATION PURCHASER(3) INTEREST (IN MW) (IN MW)
------------ ---------------- ---------- -------- --------
EUROPE:
Derwent(1)....................................... England SE(4) 33% 214 71
Doga(1).......................................... Turkey TEAS 80% 180 144
Ferrybridge(2)................................... England Various 100% 1,989 1,989
Fiddler's Ferry(2)............................... England Various 100% 1,995 1,995
First Hydro (2 projects)......................... Wales Various 100% 2,088 2,088
Iberian Hy-Power I (5 projects).................. Spain FECSA 100%(7) 43 39
Iberian Hy-Power II (13 projects)................ Spain FECSA 100% 43 43
ISAB............................................. Italy GRTN 49% 512 251
Roosecote........................................ England NORWEB(5) 100% 220 220
------ ------
Total Europe................................... 7,284 6,840
====== ======
ASIA PACIFIC:
Contact (9 projects)............................. New Zealand Pool 51%(8) 2,247 1,033
Kwinana(1)....................................... Australia WP 70% 116 81
Loy Yang B....................................... Australia Pool(6) 100% 1,000 1,000
Paiton(1)........................................ Indonesia PLN 40% 1,230 492
TriEnergy........................................ Thailand EGAT 25% 700 175
------ ------
Total Asia Pacific............................. 5,293 2,781
------ ------
Total International............................ 27,798 22,923
====== ======
------------------------------
(1) Operated by subsidiaries or affiliates of Edison Mission Energy; all other
projects are operated by unaffiliated third parties.
(2) Currently offered for sale.
(3) Electric purchaser abbreviations are as follows:
EGAT Electricity Generating Authority of Thailand Pool Electricity trading market for England,
FECSA Fuerzas Electricas de Cataluma, S.A. Wales, Australia and New Zealand
GRTN Gestore Rete Transmissione Nazionale SE Southern Electric plc.
NORWEB North Western Electricity Board TEAS Turkiye Elektrik Urehm A.S.
PLN PT PLN WP Western Power
(4) Sells to the pool with a long-term contract with SE.
(5) Sells to the pool with a long-term contract with NORWEB.
(6) Sells to the pool with a long-term contract with the State Electricity
Commission of Victoria.
(7) Minority interest in three projects.
(8) Minority interest in one project.
AMERICAS
As of June 30, 2001, we had 33 operating projects in this region, all of
which are presently located in the United States and its territories. Our
Americas region is headquartered in Irvine, California with additional offices
located in Chicago, Illinois; Boston, Massachusetts; and Washington, D.C. The
region-specific strategy for the Americas region is: (i) to pursue the
acquisition and development of existing generating assets from utilities,
industrial companies and other independent power producers throughout the
region, though to a lesser extent than we had in the past and (ii) to market
energy and conduct risk management activities centered around our merchant
plants.
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In March 1999, we acquired 100% of the 1,884 MW Homer City Electric
Generating Station for approximately $1.8 billion. This facility is a coal-fired
plant in the mid-Atlantic region of the United States and has direct, high
voltage interconnections to both the New York Independent System Operator, which
controls the transmission grid and energy and capacity markets for New York
State and is commonly known as the NYISO, and the Pennsylvania-New
Jersey-Maryland Power Pool, which is commonly known as the PJM. We operate the
plant, which we believe is one of the lowest-cost generation facilities in the
region.
In December 1999, we acquired the fossil-fuel generating plants of
Commonwealth Edison, a subsidiary of Exelon Corporation, which are collectively
referred to as the Illinois Plants, totaling 6,841 MW of generating capacity,
for approximately $4.1 billion. We operate these plants, which provide access to
the Mid-America Interconnected Network and the East Central Area Reliability
Council. In connection with this transaction, we entered into power purchase
agreements with Commonwealth Edison with a term of up to five years.
Subsequently, Commonwealth Edison assigned its rights and obligations under
these power purchase agreements to Exelon Generation Company, LLC. Concurrently
with this acquisition, we assigned our right to purchase the Collins Station, a
2,698 MW gas and oil-fired generating station located in Illinois, to third
party lessors. After this assignment, we entered into a lease of the Collins
Station with a term of 33.75 years. The aggregate MW either purchased or leased
as a result of these transactions is 9,539 MW. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Acquisitions,
Dispositions and Sale-Leaseback Transactions--Sale-Leaseback Transactions" for a
description of the Powerton and Joliet sale-leaseback transactions.
In September 2000, we completed a transaction with P&L Coal Holdings
Corporation and Gold Fields Mining Corporation (Peabody) to acquire the trading
operations of Citizens Power LLC and a minority interest in structured
transaction investments relating to long-term power purchase agreements. As a
result of this acquisition, we have expanded our trading operations beyond the
traditional marketing of our electric power.
On November 17, 2000, we completed a transaction with Texaco Power &
Gasification Holdings Inc. to purchase a proposed 560 MW gas-fired combined
cycle project to be located in Kern County, California, referred to as the
Sunrise project. The acquisition includes all rights, title and interest held by
Texaco in the Sunrise project, except that Texaco had an option to repurchase at
cost a 50% interest in the project prior to its commercial operation which
commenced on June 27, 2001. On June 25, 2001, Texaco exercised its option and
repurchased a 50% interest for $84 million. As part of our acquisition of the
Sunrise project, we also: (i) acquired from Texaco two gas turbines for the
project and (ii) granted Texaco an option to acquire a 50% interest in 1,000 MW
of future power plant projects we designate. The Sunrise project consists of two
phases, with Phase I, a single-cycle gas-fired facility (320 MW), completed on
June 27, 2001, and Phase II, conversion to a combined-cycle gas-fired facility
(560 MW), currently scheduled to be completed in June 2003. On June 25, 2001, we
entered into a long-term power purchase agreement with the California Department
of Water Resources.
In November 1999, we completed the sale of a portion of our interest in Four
Star to a company in which we hold a 50% interest. Net proceeds from the sale
were $20.5 million. We recorded an after-tax gain on the sale of our investment
of approximately $30 million. Our net ownership interest in Four Star was
reduced from 50% at December 31, 1998 to 34% as a result of the transaction. In
December 1999 and May and July 2000, we purchased additional shares of stock of
Four Star Oil & Gas Company, increasing our ownership interest to 38%. On
December 31, 2000, shares of convertible preferred shares were converted to
common shares, reducing our net ownership interest to 36%.
In 1988, we formed a wholly-owned subsidiary, Mission Energy Fuel Company,
to develop and invest in fuel interests. Since that time, Mission Energy Fuel
has invested in a number of oil and gas
79
properties and a production company. Oil and gas produced from the properties
are generally sold at a spot or short-term market price.
EUROPE, CENTRAL ASIA, MIDDLE EAST AND AFRICA
As of June 30, 2001, we had 26 operating projects in this region that are
located in the U.K., Turkey, Spain and Italy. Our Europe, Central Asia, Middle
East and Africa region is headquartered in London, England with additional
offices located in Italy, Spain and Turkey. The London office was established in
1989. The region is characterized by a blend of both mature and developing
markets.
In July 1999, we acquired 100% of the Ferrybridge and Fiddler's Ferry
coal-fired power plants located in the U.K. with a total generating capacity of
3,984 MW from PowerGen UK plc for approximately $2.0 billion. Ferrybridge,
located in West Yorkshire, and Fiddler's Ferry, located in Warrington, are in
the middle of the order in which plants are called upon to dispatch electric
power.
The financial performance of the Fiddler's Ferry and Ferrybridge power
plants has not met our expectations, largely due to lower energy power prices
resulting primarily from increased competition, warmer-than-average weather and
uncertainty surrounding the new electricity trading arrangements. As a result,
Edison First Power deferred some environmental capital expenditure milestone
requirements in the original capital expenditure program set forth in the
financing documents. The original capital expenditure program has been revised,
and this revision has been agreed to by the financing parties. In addition, in
July 2001, the financing parties waived technical defaults under the financing
documents and a default under the financing documents resulting from the fact
that due to this reduced financial performance, Edison First Power's debt
service coverage ratio during 2000 declined below the threshold set forth in the
financing documents. We cannot assure you that Edison First Power's creditors
will continue to waive its non-compliance with the requirements under the
financing documents or that Edison First Power will satisfy the financial ratios
in the future. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources--Subsidiary Financing
Plans--Status of Edison First Power Loan."
The financing documents stipulate that a breach of the financial ratio
covenant constitutes an immediate event of default and, if the event of default
is not waived, the financing parties are entitled to enforce their security over
Edison First Power's assets, including the Fiddler's Ferry and Ferrybridge
plants. Despite the breaches under the financing documents, Edison First Power's
debt service coverage ratio for 2000 exceeded 1:1. Due to the timing of its cash
flows and debt service payments, Edison First Power utilized L37 million from
its debt service reserve to meet its debt service requirements in 2000. In
March 2001 L61 million was paid by Edison First Power to meet its semi-annual
debt service requirements.
Another of our indirect subsidiaries, EME Finance UK Limited, is the
borrower under the facility made available for the purposes of funding coal and
capital expenditures related to the Fiddler's Ferry and Ferrybridge power
plants. At June 30, 2001 L58 million was outstanding for coal purchases and zero
was outstanding to fund capital expenditures under this facility. EME Finance UK
Limited on-lends any drawings under this facility to Edison First Power. The
financing parties of this facility have also issued letters of credit directly
to Edison First Power to support their obligations to lend to EME Finance UK
Limited. EME Finance UK Limited's obligations under this facility are separate
and apart from the obligations of Edison First Power under the financing
documents related to the acquisition of these plants. We have guaranteed the
obligations of EME Finance UK Limited under this facility, including any letters
of credit issued to Edison First Power under the facility, for the amount of
L359 million, and our guarantee remains in force notwithstanding any breaches
under Edison First Power's acquisition financing documents.
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During October 1999, we completed the acquisition of the remaining 20% of
the 220 MW natural gas-fired Roosecote project located in England. Consideration
for the remaining 20% consisted of a cash payment of approximately
$16.0 million, or 9.6 million pounds sterling.
In March 2000, we completed a transaction with UPC International Partnership
CV II to acquire Edison Mission Wind Power Italy B.V., formerly known as Italian
Vento Power Corporation Energy 5 B.V., which owns a 50% interest in a series of
power projects that are in operation or under development in Italy. All the
projects use wind to generate electricity from turbines. The electricity is sold
under fixed price, long-term tariffs. Assuming all the projects under
development are completed, currently scheduled for 2002, the total capacity of
these projects will be 283 MW. The total purchase price was 90 billion Italian
Lira (approximately $44 million at December 31, 2000), with equity contribution
obligations of up to 33 billion Italian Lira (approximately $16 million at
December 31, 2000), depending on the number of projects that are ultimately
developed. As of December 31, 2000, our payments in respect of these projects
included $27 million toward the purchase price and $13 million in equity
contributions.
ASIA PACIFIC
As of June 30, 2001, we had 13 operating projects in this region that are
located in Australia, Indonesia, Thailand and New Zealand. Our Asia Pacific
region is headquartered in Singapore with additional offices located in
Australia, Indonesia and the Philippines.
In February 2001, we completed the acquisition of a 50% interest in CBK
Power Co. Ltd. in exchange for $20 million. CBK Power has entered into a 25-year
build-rehabilitate-transfer-and-operate agreement with National Power
Corporation related to the 728 MW Caliraya-Botocan-Kalayaan (CBK) hydroelectric
project located in the Philippines. Financing for this $460 million project has
been completed with equity contributions of $117 million (our 50% share is
$58.5 million) required to be made upon completion of the rehabilitation and
expansion, currently scheduled in 2003, and debt financing has been arranged for
the remainder of the cost for this project.
In May 1999, we completed a transaction with the government of New Zealand
to acquire 40% of the shares of Contact Energy Limited. The remaining 60% of
Contact Energy's shares were sold in an overseas public offering resulting in
widespread ownership among the citizens of New Zealand and offshore investors.
These shares are publicly traded on stock exchanges in New Zealand and
Australia. Since the date of acquisition, we have increased our share of
ownership in Contact Energy to 51.2%. Contact Energy owns and operates
hydroelectric, geothermal and natural gas-fired power generating plants
primarily in New Zealand with a total current generating capacity of 2,247 MW,
of which our share is 1,033 MW. In addition, Contact Energy has expanded into
the retail electricity and gas markets in New Zealand since 1998 through
acquisition of regional electricity supply and retail gas supply businesses. See
"--Regulatory Matters--Recent Foreign Regulatory Matters--New Zealand."
Our wholly-owned subsidiary owns a 40% interest in PT Paiton Energy, which
owns a 1,230 MW coal-fired power plant in operation in East Java, Indonesia,
which is referred to as the Paiton project. Our investment in the Paiton project
was $503 million at June 30, 2001. Under the terms of a long-term power purchase
agreement between Paiton Energy and PT PLN, the state-owned electric utility
company, PT PLN is required to pay for capacity and fixed operating costs once
each unit and the plant achieve commercial operation. As of December 31, 2000,
PT PLN had not paid invoices amounting to $814 million for capacity charges and
fixed operating costs under the power purchase agreement.
Paiton Energy is in continuing negotiations on a long-term restructuring of
the tariff under the power purchase agreement. Paiton Energy and PT PLN agreed
on an interim agreement for the period through December 31, 2000 and on a Phase
I Agreement for the period from January 1, 2001 through June 30, 2001. The Phase
I Agreement provides for fixed monthly payments aggregating $108 million
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over its six-month duration and for the payment for energy delivered to PT PLN
from the plant during this period. PT PLN made all fixed and energy payments due
under the interim agreement and has made all fixed payments due under the Phase
I Agreement totaling $108 million as scheduled. Paiton Energy received lender
approval of the Phase I Agreement, and Paiton Energy has also entered into a
lender interim agreement under which lenders have effectively agreed to
interest-only payments and to deferral of principal repayments while Paiton
Energy and PT PLN seek a long-term restructuring of the tariff. The lenders have
agreed to extend that agreement through December 31, 2001. Paiton Energy and PT
PLN intended to complete the negotiations of the future phases of a new
long-term tariff during the six-month duration of the Phase I Agreement.
Although Paiton Energy and PT PLN did not complete negotiations on a long-term
restructuring of the tariff by June 30, 2001, Paiton Energy and PT PLN have
signed an agreement providing for an extension of the Phase I Agreement from
July 1, 2001 to September 30, 2001. Paiton Energy is continuing to generate
electricity to meet the power demand in the region and believes that PT PLN will
continue to agree to make payments for electricity on an interim basis beyond
June 30, 2001 while negotiations regarding long-term restructuring of the tariff
continue. Although completion of negotiations may be delayed, Paiton Energy
continues to believe that negotiations on the long-term restructuring of the
tariff will be successful.
All arrears under the power purchase agreement continue to accrue, minus the
fixed monthly payments actually made under the year 2000 interim agreement and
under the Phase I Agreement, with the payment of these arrears to be dealt with
in connection with the overall long-term restructuring of the tariff. In this
regard, under the Phase I Agreement, Paiton Energy has agreed that, so long as
the Phase I Agreement is complied with, it will seek to recoup no more than
$590 million of the above arrears, the payment of which is to be dealt with in
connection with the overall tariff restructuring.
Any material modifications of the power purchase agreement resulting from
the continuing negotiation of a new long-term tariff could require a
renegotiation of the Paiton project's debt agreements. The impact of any such
renegotiations with PT PLN, the Government of Indonesia or the project's
creditors on our expected return on our investment in Paiton Energy is uncertain
at this time; however, we believe that we will ultimately recover our investment
in the project.
MARKETING AND RISK MANAGEMENT ACTIVITIES
We use a disciplined approach to energy marketing and risk management that
is centered around our merchant generation assets and is designed primarily to
stabilize and enhance the financial performance of those facilities. We
generally attempt to balance forward sales and purchase contracts to mitigate
market risk and secure cash flow streams. These activities enhance the
operational and financial performance of our facilities and reduce our exposure
to energy price fluctuations.
SEASONALITY
Due to warmer weather during the summer months, electric revenues generated
from the Homer City plant and the Illinois Plants are usually higher during the
third quarter of each year. In addition, our third quarter revenues from energy
projects are materially higher than other quarters of the year due to a
significant number of our domestic energy projects located on the West Coast of
the United States, which generally have power sales contracts that provide for
higher payments during summer months. The First Hydro plants, Ferrybridge and
Fiddler's Ferry plants and the Iberian Hy-Power plants provide for higher
electric revenues during the winter months.
COMPETITION
We compete with many other companies, including multinational development
groups, equipment suppliers and other independent power producers, including
affiliates of utilities, in selling electric power and steam. We also compete
with electric utilities in obtaining the right to install new generating
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capacity. Over the past decade, obtaining a power sales contract with a utility
has generally become a progressively more difficult, expensive and competitive
process. Many power sales contracts are now awarded by competitive bidding,
which both increases the costs of obtaining these contracts and decreases the
chances of obtaining these contracts. We evaluate each potential project in an
effort to determine when the probability of success is high enough to justify
expenditures in developing a proposal or bid for the project.
Amendments to the Public Utility Holding Company Act of 1935 made by the
Energy Policy Act have increased the number of competitors in the domestic
independent power industry by reducing restrictions applicable to projects that
are not qualifying facilities under the Public Utility Regulatory Policies Act.
Retail wheeling of power, which is the offering by utilities of unbundled retail
distribution service, could also lead to increased competition in the
independent power market. See "--Regulatory Matters--Retail Competition."
REGULATORY MATTERS
GENERAL
Our operations are subject to extensive regulation by governmental agencies
in each of the countries in which we conduct operations. Our domestic operating
projects are subject to energy, environmental and other governmental laws and
regulations at the federal, state and local levels in connection with the
development, ownership and operation of, and use of electric energy, capacity
and related products, including ancillary services from, our projects. Federal
laws and regulations govern, among other things, transactions by and with
purchasers of power, including utility companies, the operations of a project
and the ownership of a project. Under limited circumstances where exclusive
federal jurisdiction is not applicable or specific exemptions or waivers from
state or federal laws or regulations are otherwise unavailable, federal and/or
state utility regulatory commissions may have broad jurisdiction over
non-utility owned electric power plants. Energy producing projects are also
subject to federal, state and local laws and regulations that govern the
geographical location, zoning, land use and operation of a project. Federal,
state and local environmental requirements generally require that a wide variety
of permits and other approvals be obtained before the commencement of
construction or operation of an energy producing facility and that the facility
then operate in compliance with these permits and approvals. While we believe
the requisite approvals for our existing projects have been obtained and that
our business is operated in substantial compliance with applicable laws, we
remain subject to a varied and complex body of laws and regulations that both
public officials and private parties may seek to enforce. Regulatory compliance
for the construction of new facilities is a costly and time consuming process.
Intricate and changing environmental and other regulatory requirements may
necessitate substantial expenditures and may create a significant risk of
expensive delays or significant loss of value in a project if the project is
unable to function as planned due to changing requirements or local opposition.
Furthermore, each of our international projects is subject to the energy and
environmental laws and regulations of the foreign country in which this project
is located. The degree of regulation varies according to each country and may be
materially different from the regulatory regime in the United States.
U.S. FEDERAL ENERGY REGULATION
The Federal Energy Regulatory Commission has ratemaking jurisdiction and
other authority with respect to interstate sales and transmission of electric
energy under the Federal Power Act and with respect to certain interstate sales,
transportation and storage of natural gas under the Natural Gas Act of 1938. The
Securities and Exchange Commission has regulatory powers with respect to
upstream owners of electric and natural gas utilities under the Public Utility
Holding Company Act of 1935. The
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enactment of the Public Utility Regulatory Policies Act of 1978 and the adoption
of regulations thereunder by the Federal Energy Regulatory Commission provided
incentives for the development of cogeneration facilities and small power
production facilities using alternative or renewable fuels by establishing
certain exemptions from the Federal Power Act and the Public Utility Holding
Company Act for the owners of qualifying facilities. The passage of the Energy
Policy Act in 1992 further encouraged independent power production by providing
additional exemptions from the Public Utility Holding Company Act for exempt
wholesale generators and foreign utility companies.
A "QUALIFYING FACILITY" under the Public Utility Regulatory Policies Act is
a cogeneration facility or a small power production facility that satisfies
criteria adopted by the Federal Energy Regulatory Commission. In order to be a
qualifying facility, a cogeneration facility must (i) sequentially produce both
useful thermal energy, such as steam, and electric energy, (ii) meet specified
operating standards, and energy efficiency standards when oil or natural gas is
used as a fuel source and (iii) not be controlled, or more than 50% owned by one
or more electric utilities (where "electric utility" is interpreted with
reference to the Public Utility Holding Company Act definition of an "electric
utility company"), electric utility holding companies (defined by reference to
the Public Utility Holding Company Act definitions of "electric utility company"
and "holding company") or affiliates of such entities. A small power production
facility seeking to be a qualifying facility must produce power from renewable
energy sources, such as geothermal energy, waste sources of fuel, such as waste
coal, or any combination thereof and must meet the ownership restrictions
discussed above. Before 1990, a small power production facility seeking to be a
qualifying facility was subject to 30 MW or 80 MW size limits, depending upon
its fuel source. In 1990, these limits were lifted for solar, wind, waste, and
geothermal qualifying facilities, provided that applications for or notices of
qualifying facility status were filed with the Federal Energy Regulatory
Commission for these facilities on or before December 31, 1994, and provided, in
the case of new facilities, the construction of these facilities commenced on or
before December 31, 1999.
An "EXEMPT WHOLESALE GENERATOR" under the Public Utility Holding Company Act
is an entity determined by the Federal Energy Regulatory Commission to be
exclusively engaged, directly or indirectly, in the business of owning and/or
operating specified eligible facilities and selling electric energy at wholesale
or, if located in a foreign country, at wholesale or retail.
A "FOREIGN UTILITY COMPANY" under the Public Utility Holding Company Act is,
in general, an entity located outside the United States that owns or operates
facilities used for the generation, distribution or transmission of electric
energy for sale or the distribution at retail of natural or manufactured gas,
but that derives none of its income, directly or indirectly, from such
activities within the United States.
FEDERAL POWER ACT--The Federal Power Act grants the Federal Energy
Regulatory Commission exclusive ratemaking jurisdiction over wholesale sales of
electricity in interstate commerce, including ongoing, as well as initial, rate
jurisdiction. This jurisdiction allows the Federal Energy Regulatory Commission
to revoke or modify previously approved rates. These rates may be based on a
cost-of-service approach or, in geographic and product markets determined by
Federal Energy Regulatory Commission to be workably competitive, may be
market-based. As noted, most qualifying facilities are exempt from the
ratemaking and several other provisions of the Federal Power Act. Exempt
wholesale generators and other non-qualifying facility independent power
projects are subject to the Federal Power Act and to the ratemaking jurisdiction
of the Federal Energy Regulatory Commission thereunder, but the Federal Energy
Regulatory Commission typically grants exempt wholesale generators the authority
to charge market-based rates as long as the absence of market power is shown. In
addition, the Federal Power Act grants the Federal Energy Regulatory Commission
jurisdiction over the sale or transfer of jurisdictional facilities, including
wholesale power sales contracts, and in some cases, jurisdiction over the
issuance of securities or the assumption of specified liabilities and some
interlocking directorates. In granting authority to make sales at market-based
rates,
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the Federal Energy Regulatory Commission typically also grants blanket approval
for the issuance of securities and partial waiver of the restrictions on
interlocking directorates.
Currently, in addition to the facilities owned or operated by us, a number
of our operating projects, including the Homer City plant, the Illinois Plants,
the Nevada Sun-Peak, Brooklyn Navy Yard, Commonwealth Atlantic and Harbor
facilities, are subject to the Federal Energy Regulatory Commission ratemaking
regulation under the Federal Power Act. Our future domestic non-qualifying
facility independent power projects will also be subject to Federal Energy
Regulatory Commission jurisdiction on rates.
THE PUBLIC UTILITY HOLDING COMPANY ACT--Unless exempt or found not to be a
holding company by the Securities and Exchange Commission, a company that falls
within the definition of a holding company must register with the Securities and
Exchange Commission and become subject to Securities and Exchange Commission
regulation as a registered holding company under the Public Utility Holding
Company Act. "HOLDING COMPANY" is defined in Section 2(a)(7) of the Public
Utility Holding Company Act to include, among other things, any company that
owns 10% or more of the voting securities of an electric utility company.
"ELECTRIC UTILITY COMPANY" is defined in Section 2(a)(3) of the Public Utility
Holding Company Act to include any company that owns facilities used for
generation, transmission or distribution of electric energy for resale. Exempt
wholesale generators and foreign utility companies are not deemed to be electric
utility companies and qualifying facilities are not considered facilities used
for the generation, transmission or distribution of electric energy for resale.
Securities and Exchange Commission precedent also indicates that it does not
consider "paper facilities," such as contracts and tariffs used to make power
sales, to be facilities used for the generation, transmission or distribution of
electric energy for resale, and power marketing activities will not, therefore,
result in an entity being deemed to be an electric utility company.
A registered holding company is required to limit its utility operations to
a single integrated utility system and to divest any other operations not
functionally related to the operation of that utility system. In addition, a
registered holding company will require Securities and Exchange Commission
approval for the issuance of securities, other major financial or business
transactions (such as mergers) and transactions between and among the holding
company and holding company subsidiaries.
Because it owns Southern California Edison, an electric utility company,
Edison International, our ultimate parent company, is a holding company. Edison
International is, however, exempt from registration pursuant to Section 3(a)(1)
of the Public Utility Holding Company Act, because the public utility operations
of the holding company system are predominantly intrastate in character.
Consequently, we are not a subsidiary of a registered holding company, so long
as Edison International continues to be exempt from registration pursuant to
Section 3(a)(1) or another of the exemptions enumerated in Section 3(a). Nor are
we a holding company under the Public Utility Holding Company Act, because our
interests in power generation facilities are exclusively in qualifying
facilities, exempt wholesale generators and foreign utility companies. All
international projects and specified U.S. projects that we are currently
developing or proposing to acquire will be non-qualifying facility independent
power projects. We intend for each project to qualify as an exempt wholesale
generator or as a foreign utility company. Loss of exempt wholesale generator,
qualifying facility or foreign utility company status for one or more projects
could result in our becoming a holding company subject to registration and
regulation under the Public Utility Holding Company Act and could trigger
defaults under the covenants in our project agreements. Becoming a holding
company could, on a retroactive basis, lead to, among other things, fines and
penalties and could cause certain of our project agreements and other contracts
to be voidable.
PUBLIC UTILITY REGULATORY POLICIES ACT OF 1978--The Public Utility
Regulatory Policies Act provides two primary benefits to qualifying facilities.
First, as discussed above, ownership of qualifying facilities will not result in
a company's being deemed an electric utility company for purposes of the Public
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Utility Holding Company Act. In addition, all cogeneration facilities and all
small production facilities that generate power from sources other than
geothermal and whose capacity exceeds 30 MWs that are qualifying facilities are
exempt from most provisions of the Federal Power Act and regulations of the
Federal Energy Regulatory Commission thereunder. Second, the Federal Energy
Regulatory Commission regulations promulgated under the Public Utility
Regulatory Policies Act require that electric utilities purchase electricity
generated by qualifying facilities at a price based on the purchasing utility's
avoided cost, and that the utilities sell back up power to the qualifying
facility on a non discriminatory basis. The Federal Energy Regulatory
Commission's regulations define "avoided cost" as the incremental cost to an
electric utility of electric energy or capacity or both which, but for the
purchase from the qualifying facility or qualifying facilities, the utility
would generate itself or purchase from another source. The Federal Energy
Regulatory Commission's regulations also permit qualifying facilities and
utilities to negotiate agreements for utility purchases of power at prices
different than the utility's avoided costs. While it has been common for
utilities to enter into long-term contracts with qualifying facilities in order,
among other things, to facilitate project financing of independent power
facilities and to reflect the deferral by the utility of capital costs for new
plant additions, increasing competition and the development of new power markets
have resulted in a trend toward shorter term power contracts that would place
greater risk on the project owner.
If one of the projects in which we have an interest were to lose its status
as a qualifying facility, the project would no longer be entitled to the
qualifying facility-related exemptions from regulation under the Public Utility
Holding Company Act and the Federal Power Act. As a result, the project could
become subject to rate regulation by the Federal Energy Regulatory Commission
under the Federal Power Act, and we could inadvertently become a holding company
under the Public Utility Holding Company Act. Under Section 26(b) of the Public
Utility Holding Company Act, any project contracts that are entered into in
violation of the Public Utility Holding Company Act, including contracts entered
into during any period of non-compliance with the registration requirement,
could be determined by the courts or the Securities and Exchange Commission to
be void. If a project were to lose its qualifying facility status, we could
attempt to avoid holding company status on a prospective basis by qualifying the
project owner as an exempt wholesale generator. However, assuming this changed
status would be permissible under the terms of the applicable power sales
agreement, rate approval from the Federal Energy Regulatory Commission would be
required. In addition, the project would be required to cease selling
electricity to any retail customers, in order to qualify for exempt wholesale
generator status, and could become subject to additional state regulation. Loss
of qualifying facility status by one project could also potentially cause other
projects with the same partners to lose their qualifying facility status to the
extent those partners became electric utilities, electric utility holding
companies or affiliates of such companies for purposes of the ownership criteria
applicable to qualifying facilities. Loss of qualifying facility status could
also trigger defaults under covenants to maintain qualifying facility status in
the project's power sales agreements, steam sales agreements and financing
agreements and result in termination, penalties or acceleration of indebtedness
under such agreements. If a power purchaser were to cease taking and paying for
electricity or were to seek to obtain refunds of past amounts paid because of
the loss of qualifying facility status, we cannot assure you that the costs
incurred in connection with the project could be recovered through sales to
other purchasers. Moreover, our business and financial condition could be
adversely affected if regulations or legislation were modified or enacted that
changed the standards for maintaining qualifying facility status or that
eliminated or reduced the benefits, such as the mandatory purchase provisions of
the Public Utility Regulatory Policies Act and exemptions currently enjoyed by
qualifying facilities. Loss of qualifying facility status on a retroactive basis
could lead to, among other things, fines and penalties being levied against us,
or claims by a utility customer for the refund of payments previously made.
We endeavor to develop our qualifying facility projects, monitor regulatory
compliance by these projects and choose our customers in a manner that minimizes
the risks of losing these projects' qualifying facility status. However, some
factors necessary to maintain qualifying facility status are
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subject to risks of events outside of our control. For example, loss of a
thermal energy customer or failure of a thermal energy customer to take required
amounts of thermal energy from a cogeneration facility that is a qualifying
facility could cause a facility to fail to meet the requirements regarding the
minimum level of useful thermal energy output. Upon the occurrence of this type
of event, we would seek to replace the thermal energy customer or find another
use for the thermal energy that meets the requirements of the Public Utility
Regulatory Policies Act.
NATURAL GAS ACT--Twenty-four of the domestic operating facilities that we
own, operate or have investments in use natural gas as their primary fuel. Under
the Natural Gas Act, the Federal Energy Regulatory Commission has jurisdiction
over certain sales of natural gas and over transportation and storage of natural
gas in interstate commerce. The Federal Energy Regulatory Commission has granted
blanket authority to all persons to make sales of natural gas without
restriction but continues to exercise significant oversight with respect to
transportation and storage of natural gas services in interstate commerce.
STATE ENERGY REGULATION
State public utility commissions have broad jurisdiction over non qualifying
facility independent power projects, including exempt wholesale generators,
which are considered public utilities in many states. This jurisdiction often
includes the issuance of certificates of public convenience and necessity and/or
other certifications to construct, own and operate a facility, as well as the
regulation of organizational, accounting, financial and other corporate matters
on an ongoing basis. Qualifying facilities may also be required to obtain these
certificates of public convenience and necessity in some states. Some states
that have restructured their electric industries require generators to register
or be licensed to sell electricity to customers. Many states are currently
undergoing significant changes in their electric statutory and regulatory
frameworks that result from restructuring the electric industries that may
affect generators in those states. Although the Federal Energy Regulatory
Commission generally has exclusive jurisdiction over the rates charged by a
non-qualifying facility independent power project to its wholesale customers, a
state's public utility commission has the ability, in practice, to influence the
establishment of these rates by asserting jurisdiction over the purchasing
utility's ability to pass through the resulting cost of purchased power to its
retail customers. Various states that have adopted electric restructuring plans
have enacted caps on the rates that may be charged to retail customers. The
duration of those caps vary from state to state. A state's public utility
commission also has the authority to determine avoided costs for qualifying
facilities and may have the authority to regulate the retail rates charged by
qualifying facilities. In addition, states may assert jurisdiction over the
siting and construction of independent power projects and, among other things,
the issuance of securities, related party transactions and the sale or other
transfer of assets by these facilities. Independent power projects under certain
circumstances also may be consumers of electric power and energy under tariff
rates subject to state commission jurisdiction. The actual scope of jurisdiction
over independent power projects by state public utility commissions varies from
state to state.
In addition, state public utility commissions may seek to modify, suspend or
terminate a qualifying facility's power sales contract under specified
circumstances. This could occur if the state public utility commission were to
determine that the pricing mechanism of the power sales contract is unfairly
high in light of the current prevailing market cost of power for the utility
purchasing the power. In this instance, the state public utility commission
could attempt to alter the terms of the power sales contract to reflect more
accurately market conditions for the prevailing cost of power. While we believe
that these attempts are not common, and that the state public utility commission
may not have any jurisdiction to modify the terms of the wholesale power sales,
we cannot assure you that the power sales contracts of our projects will not be
subject to adverse regulatory actions.
The California Public Utilities Commission has authorized the electric
utilities in California to "monitor" compliance by qualifying facilities with
the Public Utility Regulatory Policies Act rules and
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regulations. However, the United States Court of Appeals for the Ninth Circuit
found in 1994 that a California Public Utilities Commission program was
preempted by the Public Utility Regulatory Policies Act, to the extent it
authorized utilities to determine that a qualifying facility was not in
compliance with the Public Utility Regulatory Policies Act rules and
regulations, to then pay a reduced avoided cost rate and to take other action
contrary to a facility's status as a qualifying facility. The court did,
however, uphold reasonable monitoring of qualifying facility operating data.
Other states, like New York and Virginia, have also instituted qualifying
facility monitoring programs.
We buy and transport the natural gas used at our domestic facilities through
local distribution companies. State public utility commissions have jurisdiction
over the transportation of natural gas by local distribution companies. Each
state's regulatory laws are somewhat different. However, all generally require
the local distribution companies to obtain approval from the relevant public
utility commission for the construction of facilities and transportation
services if the local distribution company's generally applicable tariffs do not
cover the proposed transaction. Local distribution companies' rates are usually
subject to continuing public utility commission oversight.
CALIFORNIA DEREGULATION
DEREGULATION PLAN--Efforts to restructure the California electric industry
began in 1994 in response to high electricity prices. A final restructuring
order was issued by the California Public Utility Commission in December 1995,
which led to the unanimous enactment of Assembly Bill 1890, the Restructuring
Legislation, in September 1996 and its signature by the Governor of California
at the time. The main points of this legislation included the following:
- the creation of the California System Operator and California Power
Exchange by January 1998 and simultaneous initiation of direct access
between electricity suppliers and end use customers;
- the creation of the California Electricity Oversight Board; and
- the adoption of a Competitive Transition Charge for the recovery of
stranded costs.
The state's utilities were authorized to divest much of their generation
assets and apply the proceeds to their stranded costs resulting from
deregulation of the retail markets. The restructuring also required that
California investor-owned utilities sell into and purchase most of their power
requirements from the California Power Exchange but did not permit them to hedge
their risk through long-term forward contracts. Through this mechanism, a spot
market was created that set the purchase price for power by establishing the
highest bid as the market clearing price for all bidders.
Additionally, the legislation provided for a limited transition period
ending March 31, 2002, or an earlier date at which it is determined that a
utility has recovered its stranded costs. During the transition period, there is
a rate reduction of no less than 10% for residential and small commercial
ratepayers. The rate reduction was financed through the issuance of rate
reduction bonds. The rate reduction scheme capped retail electric rates at 1996
levels. The retail rate cap and bond offering were intended to assist utilities
in the recovery of stranded costs incurred by their investments made prior to
deregulation. At the conclusion of the transition period, the legislation
anticipated that residential and small business purchasers of electricity would
pay 20% less for electricity due to effective implementation of Assembly Bill
1890.
THE CALIFORNIA POWER CRISIS--Wholesale power prices rose significantly in
California during 2000 and early 2001, we believe primarily as a result of
supply shortages, high natural gas and petroleum prices and a variety of other
factors. Unregulated wholesale rates rose above the fixed retail rates the
California utilities were permitted to charge their customers. The inability of
utilities to recover the full amount of wholesale prices has led to billions of
dollars in unrecovered costs by the California utilities and to their current
liquidity crisis.
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Ongoing legislative and regulatory efforts seek to address both market
structure and supply problems. In September 2000, legislation was enacted in
California seeking to accelerate the power plant siting approval process. Other
initiatives may seek to stimulate entry into the market of new power generation
capacity. In December 2000, the Federal Energy Regulatory Commission issued an
order permitting California utilities to negotiate long-term supply contracts,
and establishing a "soft-cap" limiting the wholesale price that could be charged
without additional cost justification, as opposed to allowing the highest bid
price to set the market clearing price for all generators. At that time the
Federal Energy Regulatory Commission refused to set a regional price cap for
wholesale power prices as sought by state officials. On April 26, 2001, the
Federal Energy Regulatory Commission ordered price mitigation measures, or price
caps, for power sales in the California spot market during emergency periods
only; on June 19, 2001, the price mitigation measures were expanded to apply
during all periods and to cover the entire eleven-state Western region. The
price mitigation measures end on September 30, 2002. On January 4, 2001, the
California Public Utilities Commission authorized an interim surcharge on
customers' bills, subject to refund, which was to be applied only to ongoing
power procurement costs and was to result in rate increases of 7-15% during a
90-day period. On March 27, 2001, the California Public Utilities Commission
made the interim surcharge permanent and authorized a rate increase of three
cents per kilowatt-hour. Neither the interim surcharge nor the rate increase
affected the retail rate freeze which has been in effect since deregulation
began in 1998.
On February 1, 2001, legislation was enacted in California that, among other
things: authorized the California Department of Water Resources to enter into
long-term power purchase contracts; authorized the Department of Water Resources
to sell revenue bonds to finance electricity purchases; provided for rate
recovery of the Department of Water Resources' costs through rate increases,
subject to specified limits; authorized the Department of Water Resources to
sell power at its costs to retail customers and, with specified exceptions, to
local publicly owned electric utilities; appropriated a total of $500 million
toward additional spot market power purchases; and provided for suspension of
the ability of customers to choose alternative energy providers while the
Department of Water Resources is procuring power. Executive Orders promoting
energy conservation measures were also signed by the Governor of California,
including a mandatory requirement that retail businesses reduce outdoor retail
lighting during non-business hours or face fines. In addition, on February 21,
2001, the California Senate approved formation of a California state power
authority, which (if formed) will have the power to own and operate generation
and transmission facilities in the state. The formation of the state power
authority has not yet been approved by the California Assembly. The Governor of
California has also proposed that the state acquire the transmission assets of
the investor-owned utilities, including Southern California Edison, and that the
proceeds from such sales be applied against the utilities' existing debts.
As part of an investigation that the Federal Energy Regulatory Commission
has been conducting on wholesale power prices in the California market, the
Federal Energy Regulatory Commission ordered a number of power generators, not
including Edison Mission Energy, to justify charges to California utilities
during the months of January and February 2001 or refund such charges. The
Federal Energy Regulatory Commission has further required a power generator and
a marketer to justify their decision to bring plants off-line or refund to the
California utilities the increased costs resulting from such shutdowns. Also,
the Governor of California and other western states have petitioned the Federal
Energy Regulatory Commission and the United States Congress for "cost-based"
price caps for wholesale power rates on the spot market, permitting power
generators to recover all their costs with a small level of profit. After
extensive settlement negotiations failed to produce a global settlement, on
July 25, 2001 the Federal Energy Regulatory Commission ordered that refunds may
be due from sellers who engaged in transactions in these markets from
October 2, 2000 through June 20, 2001, at levels in excess of the requirements
in the April 26 and July 19 orders (with certain modifications), and ordered an
evidentiary hearing to determine the required refunds. A separate proceeding was
also instituted to evaluate the potential for refunds in the Pacific Northwest.
Further
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actions are anticipated as both the Federal and California state governments
have intervened to address the short- and long-term issues associated with the
power crisis. A recent Federal Energy Regulatory Commission report estimates
that it could take up to 24 months to address these issues.
On April 3, 2001, the California Public Utilities Commission adopted an
order instituting an investigation. The order reopens past Commission decisions
authorizing California investor-owned utilities to form holding companies and
initiates an investigation into:
- whether the holding companies violated requirements to give priority to
the capital needs of their respective utility subsidiaries;
- whether ring-fencing actions by Edison International and PG&E Corporation
and their respective non-utility affiliates (including us) also violated
requirements to give priority to the capital needs of their utility
subsidiaries;
- whether the payment of dividends by the utilities violated requirements
that the utilities maintain dividend policies as though they were
comparable stand-alone utility companies;
- any additional suspected violations of laws or Commission rules and
decisions; and
- whether additional rules, conditions, or other changes to the holding
company decisions are necessary.
The Memorandum signed by Edison International and Southern California Edison
with the California Department of Water Resources calls for the Commission to
adopt a decision clarifying that the first priority condition in Southern
California Edison's holding company decision refers to equity investment, not
working capital for operating costs. On June 6, 2001, in response to motions
filed by the three holding companies (including Edison International) to dismiss
the investigation for lack of subject matter jurisdiction, the Commission issued
for comment a draft decision, which concludes, among other matters, that
applicable law permits the Commission, even if the normal common law
prerequisites for piercing the corporate structures are absent, to disregard the
corporate forms within the holding company system "to reach the assets of or
challenge the behaviors of entities within the holding company system" in order
to protect ratepayers. Commissioner Henry Duque has issued a draft alternate
decision that would grant the three holding companies' motions to dismiss the
order as to themselves, finding lack of subject matter jurisdiction over them,
and would direct the Commission's general counsel to file an action in state
court to enforce the holding company conditions, if necessary. The alternate, as
well as the draft decision that would deny the motions to dismiss, are presently
on the Commission's agenda for its October 11 meeting. Either would require a
vote of 3 out of 5 commissioners in order to be adopted. We are not a party to
this investigatory proceeding. We cannot predict whether, when or in what form
this order will be adopted, or what direct or indirect effects any subsequent
action taken by the Commission in such proceeding or in any other action or
proceeding, in reliance on the principles articulated in this order and in other
applicable authority, may have on Edison International or us and our
subsidiaries.
On March 27, 2001, the California Public Utilities Commission issued a
decision that ordered the three California investor owned utilities, including
Southern California Edison and Pacific Gas and Electric, to commence payment for
power generated from qualifying facilities beginning in April 2001. As a result
of this decision, Southern California Edison paid in full for power delivered
after March 27, 2001, and Pacific Gas and Electric paid for power delivered
after April 6, 2001, the date of its bankruptcy petition. This decision did not
address payment to the qualifying facilities for amounts due prior to March 27,
2001. In addition, the decision modified the pricing formula for determining
short run avoided costs for qualifying facilities subject to these provisions.
Depending on the utilities' continued reaction to this order, the impact of this
decision may be that the qualifying facilities subject to this pricing
adjustment will be paid at significantly reduced prices for their power.
Furthermore, this decision called for further study of the pricing formula tied
to short-run avoided costs and, accordingly,
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may be subject to more changes in the future. Finally, this decision is subject
to challenge before the Commission, the Federal Energy Regulatory Commission
and, potentially, state or federal courts. Although it is premature to assess
the full effect of this recent decision, it could have a material adverse effect
on our investment in the California partnerships, depending on how it is
implemented and future changes in the relationship between the pricing formula
and the actual cost of natural gas procured by our California partnerships.
RECENT FOREIGN REGULATORY MATTERS
UNITED KINGDOM--The new electricity trading arrangements provide for, among
other things, the establishment of a spot market or voluntary short-term power
exchanges operating from a year or more in advance to 3 1/2-hours before a
trading period of 1/2 hour; a balancing mechanism to enable the system operator
to balance generation and demand and resolve any transmission constraints; a
mandatory settlement process for recovering imbalances between contracted and
metered volumes with strong incentives for being in balance; and a Balancing and
Settlement Code Panel to oversee governance of the balancing mechanism.
Contracting over time periods longer than the day-ahead market is not directly
affected by the proposals. Physical bilateral contracts have replaced the prior
financial contracts for differences, but function in a similar manner. However,
it remains difficult to evaluate the future impact of the new electricity
trading arrangement. A key feature of the arrangements is to require firm
physical delivery, which means that a generator must deliver, and a consumer
must take delivery, against their contracted positions or face assessment of
energy imbalance penalty charges by the system operator. A consequence of this
should be to increase greatly the motivation of parties to contract in advance
and develop forwards and futures markets of greater liquidity than at present.
Recent experience has been that the new electricity trading arrangements have
placed a significant downward pressure on forward contract prices. Furthermore,
another consequence may be that counterparties may require additional credit
support, including parent company guarantees or letters of credit. Legislation
in the form of the Utilities Act, which was approved July 28, 2000, provided for
the implementation of the new electricity trading arrangements and the necessary
amendments to generators' licenses.
The legislation providing for implementation of the new arrangements, the
Utilities Act 2000, sets a principal objective for the Gas and Electric Market
Authority to "protect the interests of consumers...where appropriate by
promoting competition...." This represents a shift in emphasis toward the
consumer interest. But this is qualified by a recognition that license holders
should be able to finance their activities. The Act also contains new powers for
the Secretary of State to issue guidance to the Gas and Electric Market
Authority on social and environmental matters, changes to the procedures for
modifying licenses and a new power for the Gas and Electric Market Authority to
impose financial penalties on companies for breach of license conditions. We
will be monitoring the operation of these new provisions.
NEW ZEALAND--The New Zealand Government has been undergoing a steady process
of electric industry deregulation since 1987. Reform in the distribution and
retail supply sector began in 1992 with legislation that deregulated electricity
distribution and provided for competition in the retail electric supply
function. The New Zealand Energy Market, established in 1996, is a voluntary
competitive wholesale market which allows for the trading of physical energy on
a half-hourly basis. The Electricity Industry Reform Act, which was passed in
July 1998, was designed to increase competition at the wholesale generation
level by splitting up Electricity Company of New Zealand Limited, the large
state-owned generator, into three separate generation companies. The Electricity
Industry Reform Act also prohibits the ownership of both generation and
distribution assets by the same entity.
The New Zealand Government commissioned an inquiry into the electricity
industry in February 2000. This Inquiry Board's report was presented to the
government in mid-2000. The main focus of the report was on the monopoly
segments of the industry, transmission and distribution, with substantial
limitations being recommended in the way in which these segments price their
services in
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order to limit their monopoly power. Recommendations were also made with respect
to the retail customer in order to reduce barriers to customers switching. In
addition, the Board made recommendations in relation to the wholesale market's
governance arrangements with the purpose of streamlining them. The recommended
changes are now being progressively implemented.
TRANSMISSION OF WHOLESALE POWER
Generally, projects that sell power to wholesale purchasers other than the
local utility to which the project is interconnected require the transmission of
electricity over power lines owned by others, also known as wheeling. The prices
and other terms and conditions of transmission contracts are regulated by the
Federal Energy Regulatory Commission, when the entity providing the wheeling
service is a jurisdictional public utility under the Federal Power Act. Until
1992, the Federal Energy Regulatory Commission's ability to compel wheeling was
very limited, and the availability of voluntary wheeling service could be a
significant factor in determining whether a site was viable for project
development.
The Federal Energy Regulatory Commission's authority under the Federal Power
Act to require electric utilities to provide transmission service on a case by
case basis to qualifying facilities, exempt wholesale generators, and other
power generators was expanded substantially by the Energy Policy Act.
Furthermore, in 1996 the Federal Energy Regulatory Commission issued a
rulemaking order, Order 888, in which the Federal Energy Regulatory Commission
asserted the power, under its authority to eliminate undue discrimination in
transmission, to compel all jurisdictional public utilities under the Federal
Power Act to file open access transmission tariffs consistent with a pro forma
tariff drafted by the Federal Energy Regulatory Commission. The Federal Energy
Regulatory Commission subsequently issued Orders 888-A, 888-B and 888-C to
clarify the terms that jurisdictional transmitting utilities are required to
include in their open access transmission tariffs. The Federal Energy Regulatory
Commission also issued Order 889, which required those transmitting utilities to
abide by specified standards of conduct when using their own transmission
systems to make wholesale sales of power, and to post specified transmission
information, including information about transmission requests and availability,
on a publicly available computer bulletin board. Although the pro forma tariff
does not cover the pricing of transmission service, Order 888 and the
subsequently issued regional transmission organization rulemaking are expected
to improve transmission access for independent power producers like us.
A 1999 decision by the United States Court of Appeals for the Eighth Circuit
has cast doubt on the extent of the Federal Energy Regulatory Commission's
authority to require specified curtailment policies in the pro forma tariff. The
United States Court of Appeals for the D.C. Circuit issued an opinion on
June 30, 2000 that affirmed the Federal Energy Regulatory Commission's Order 888
et seq. in all material respects.
When the entity providing transmission service is not a jurisdictional
public utility under the Federal Power Act, it will be required by the Federal
Energy Regulatory Commission's pro forma tariff adopted in Order No. 888 et seq.
to submit an open access transmission tariff to the Federal Energy Regulatory
Commission as a condition to taking service under a public utility's open access
transmission tariff. Nevertheless, the Federal Energy Regulatory Commission's
authority over such non-jurisdictional transmission providers, including those
from whom we purchase transmission service, and its ability to enforce the open
access requirements is limited. Accordingly, we and other transmission customers
of such non-jurisdictional entities do not have the same assurances of open
access as we would with regard to jurisdictional entities. In this regard, we
note that both Southern California Edison and another California investor-owned
utility, San Diego Gas & Electric Company, have agreed to sell their respective
electric transmission facilities to an agency of the State of California, and
that such an agency would not be subject to the Federal Energy Regulatory
Commission's jurisdiction.
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RETAIL COMPETITION
In response to pressure from retail electric customers, particularly large
industrial users, the state commissions or state legislatures of most states are
considering, or have considered, whether to open the retail electric power
market to competition. Retail competition is possible when a customer's local
utility agrees, or is required, to "unbundle" its distribution service (for
example, the delivery of electric power through its local distribution lines)
from its transmission and generation service (for example, the provision of
electric power from the utility's generating facilities or wholesale power
purchases). Several state commissions and legislatures have issued orders or
passed legislation requiring utilities to offer unbundled retail distribution
service, which is called retail wheeling, and phasing in retail wheeling over
the next several years.
The competitive pricing environment that will result from retail competition
may cause utilities to experience revenue shortfalls and deteriorating
creditworthiness. However, we expect that most, if not all, state plans will
insure that utilities receive sufficient revenues, through a distribution
surcharge if necessary, to pay their obligations under existing long-term power
purchase contracts with qualifying facilities and exempt wholesale generators.
On the other hand, qualifying facilities and exempt wholesale generators may be
subject to pressure to lower their contract prices in an effort to reduce the
stranded investment costs of their utility customers.
We believe that, as a predominantly low cost producer of electricity, we
will ultimately benefit from any increased competition that may arise from the
opening of the retail market. Although our exempt wholesale generators are
forbidden under the Public Utility Holding Company Act from selling electric
power in the retail market, our exempt wholesale generators can sell at
wholesale to a power marketer which could resell at retail. Furthermore,
qualifying facilities are permitted to market power directly to large industrial
users that could not previously be served, because of local franchise laws or
the inability to obtain retail wheeling. We also believe we will compete
effectively as a wholesale supplier to power marketers serving the newly-open
retail markets.
ENVIRONMENTAL REGULATION
We are subject to environmental regulation by federal, state and local
authorities in the United States and foreign regulatory authorities with
jurisdiction over projects located outside the United States. We believe that we
are in substantial compliance with environmental regulatory requirements and
that maintaining compliance with current requirements will not materially affect
our financial position or results of operations. However, possible future
developments, such as the promulgation of more stringent environmental laws and
regulations, and future proceedings that may be taken by environmental
authorities, could affect the costs and the manner in which we conduct our
business and could cause us to make substantial additional capital expenditures.
We cannot assure you that we would be able to recover these increased costs from
our customers or that our financial position and results of operations would not
be materially adversely affected.
Typically, environmental laws require a lengthy and complex process for
obtaining licenses, permits and approvals prior to construction and operation of
a project. Meeting all the necessary requirements can delay or sometimes prevent
the completion of a proposed project as well as require extensive modifications
to existing projects, which may involve significant capital expenditures.
The Clean Air Act provides the statutory framework to implement a program
for achieving national ambient air quality standards in areas exceeding such
standards and provides for maintenance of air quality in areas already meeting
such standards. Among other requirements, it also restricts the emission of
toxic air contaminants and provides for the reduction of sulfur dioxide
emissions to address acid deposition. In 1990, Congress passed amendments to the
Clean Air Act that greatly expanded the scope of federal regulations in several
significant respects. We expect that compliance with the Clean Air Act and the
regulations and revised State Implementation Plans developed as a consequence of
the
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Act will result in increased capital expenditures and operating expenses. We
expect to spend approximately $34 million for the final two quarters of 2001 and
$12 million in 2002 to install upgrades to the environmental controls at the
Homer City plant to control sulfur dioxide and nitrogen oxide emissions.
Similarly, we anticipate upgrades to the environmental controls at the Illinois
Plants to control nitrogen oxide emissions to result in expenditures of
approximately $22 million for the final two quarters of 2001 and $386 million
for the 2002--2005 period. In addition, at the Ferrybridge and Fiddler's Ferry
plants we anticipate environmental costs arising from plant modification of
approximately $18 million for the final two quarters of 2001 and $21 million for
the 2002--2005 period.
We own an indirect 50% interest in EcoElectrica, L.P., a limited partnership
which owns and operates a liquefied natural gas import terminal and cogeneration
project at Penuelas, Puerto Rico. In 2000, the U.S. Environmental Protection
Agency issued to EcoElectrica a notice of violation and a compliance order
alleging violations of the Federal Clean Air Act primarily related to start-up
activities. Representatives of EcoElectrica have met with the Environmental
Protection Agency to discuss the notice of violations and compliance order. To
date, EcoElectrica has not been informed of the commencement of any formal
enforcement proceedings. It is premature to assess what, if any, action will be
taken by the Environmental Protection Agency.
On November 3, 1999, the United States Department of Justice filed suit
against a number of electric utilities for alleged violations of the Clean Air
Act's "new source review" requirements related to modifications of air emissions
sources at electric generating stations located in the southern and midwestern
regions of the United States. Several states have joined these lawsuits. In
addition, the United States Environmental Protection Agency has also issued
administrative notices of violation alleging similar violations at additional
power plants owned by some of the same utilities named as defendants in the
Department of Justice lawsuit, as well as other utilities, and also issued an
administrative order to the Tennessee Valley Authority for similar violations at
certain of its power plants. The Environmental Protection Agency has also issued
requests for information pursuant to the Clean Air Act to numerous other
electric utilities, including the prior owners of the Homer City plant, seeking
to determine whether these utilities also engaged in activities that may have
been in violation of the Clean Air Act's new source review requirements.
To date, one utility, the Tampa Electric Company, has reached a formal
agreement with the United States to resolve alleged new source review
violations. Two other utilities, the Virginia Electric & Power Company and
Cinergy Corp., have reached agreements in principle with the Environmental
Protection Agency. In each case, the settling party has agreed to incur over
$1 billion in expenditures over several years for the installation of additional
pollution control, the retirement or repowering of coal-fired generating units,
supplemental environmental projects and civil penalties. These agreements
provide for a phased approach to achieving required emission reductions over the
next 10 to 15 years. The settling utilities have also agreed to pay civil
penalties ranging from $3.5 million to $8.5 million.
Prior to our purchase of the Homer City plant, the Environmental Protection
Agency requested information from the prior owners of the plant concerning
physical changes at the plant. Other than with respect to the Homer City plant,
no proceedings have been initiated or requests for information issued with
respect to any of our United States facilities. However, we have been in
informal voluntary discussions with the Environmental Protection Agency relating
to these facilities, which may result in the payment of civil fines. We cannot
assure you that we will reach a satisfactory agreement or that these facilities
will not be subject to proceedings in the future. Depending on the outcome of
the proceedings, we could be required to invest in additional pollution control
requirements, over and above the upgrades we are planning to install, and could
be subject to fines and penalties. In May 2001, President Bush issued a
directive for a 90-day review of new source review "interpretation and
implementation" by the Administrator of the Environmental Protection Agency and
the Secretary of the U.S. Department of Energy. President Bush also directed the
Attorney General to review ongoing new source review legal actions to "ensure"
they are "consistent with the Clean Air Act and its
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regulations." Both actions were recommendations detailed within the Bush
Administration's "National Energy Policy Task Force Report."
A new ambient air quality standard was adopted by the Environmental
Protection Agency in July 1997 to address emissions of fine particulate matter.
It is widely understood that attainment of the fine particulate matter standard
may require reductions in nitrogen oxides and sulfur dioxides, although, under
the time schedule announced by the Environmental Protection Agency when the new
standard was adopted, non-attainment areas were not to have been designated
until 2002 and control measures to meet the standard were not to have been
identified until 2005. In May 1999, the United States Court of Appeals for the
District of Columbia Circuit held that Section 109(b)(1) of the Clean Air Act,
the section of the Clean Air Act requiring the promulgation of national ambient
air quality standards, as interpreted by the Environmental Protection Agency,
was an unconstitutional delegation of legislative power. The Court of Appeals
remanded both the fine particulate matter standard and the revised ozone
standard to allow the EPA to determine whether it could articulate a
constitutional application of Section 109(b)(1). On February 27, 2001, the
Supreme Court, in WHITMAN V. AMERICAN TRUCKING ASSOCIATIONS, INC., reversed the
Circuit Court's judgment on this issue and remanded the case back to the Court
of Appeals to dispose of any other preserved challenges to the particulate
matter and ozone standards. Accordingly, as the final application of the revised
particulate matter ambient air quality standard is potentially subject to
further judicial proceedings, the impact of this standard on our facilities is
uncertain at this time.
On December 20, 2000, the Environmental Protection Agency issued a
regulatory finding that it is "necessary and appropriate" to regulate emissions
of mercury and other hazardous air pollutants from coal-fired power plants. The
agency has added coal-fired power plants to the list of source categories under
Section 112(c) of the Clean Air Act for which "maximum available control
technology" standards will be developed. Eventually, unless overturned or
reconsidered, the Environmental Protection Agency will issue technology-based
standards that will apply to every coal-fired unit owned by us or our affiliates
in the United States. This section of the Clean Air Act provides only for
technology-based standards, and does not permit market trading options. Until
the standards are actually promulgated, the potential cost of these control
technologies cannot be estimated, and we cannot evaluate the potential impact on
the operations of our facilities.
In June 2001, Illinois passed legislation mandating the Illinois
Environmental Protection Agency to evaluate and issue a report to the Illinois
legislature addressing the need for further emissions controls on fossil
fuel-fired electric generating stations, including the potential need for
additional controls on nitrogen oxides, sulfur dioxide and mercury. The study,
which is to be submitted between September 30, 2003 and September 30, 2004, also
requires an evaluation of incentives to promote renewable energy and the
establishment of a banking system for certifying credits from voluntary
reductions of greenhouse gases. The law allows the Illinois Environmental
Protection Agency to propose regulations based on its findings no sooner than
ninety days after the issuance of its findings, and requires the Illinois
Pollution Control Board to act within one year on such proposed regulations.
Until the Illinois Environmental Protection Agency issues its findings and
proposes regulations in accordance with the findings, if such regulations are
proposed, we cannot evaluate the potential impact of this legislation on the
operations of our facilities.
Since the adoption of the United Nations Framework Convention on Climate
Change in 1992, there has been worldwide attention with respect to greenhouse
gas emissions. In December 1997, the Clinton Administration participated in the
Kyoto, Japan negotiations, where the basis of a Climate Change treaty was
formulated. Under the treaty, known as the Kyoto Protocol, the United States
would be required, by 2008--2012, to reduce its greenhouse gas emissions by 7%
from 1990 levels.
The Kyoto Protocol has yet to be submitted to the U.S. Senate for
ratification. In March 2001, the Bush Administration announced that the United
States would not ratify the Kyoto Protocol, but would
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instead offer an alternative. Various bills have been, and are expected to be,
introduced in Congress to address some of these implementing guidelines and
other aspects of climate change. Apart from the Kyoto Protocol, we may be
impacted by future federal or state legislation relating to controlling
greenhouse gas emissions.
Notwithstanding the Bush Administration position, in July 2001, environment
ministers from around the world met in Bonn, Germany and reached a compromise
agreement on the mechanics and rules of the Kyoto Protocol. The compromise
agreement is believed to clear the way for countries to begin the treaty
ratification process. The United States was the sole country not to embrace the
agreement.
We either have an equity interest in or own and operate generating plants in
the following countries:
- Australia - Spain
- Indonesia - Thailand
- Italy - Turkey
- New Zealand - The United Kingdom
- Philippines - The United States
With the exception of Turkey, all of the countries identified have ratified
the UN Framework Convention on Climate Change, as well as signed the Kyoto
Protocol. None of the countries have ratified the Kyoto Protocol, but, with the
exception of the United States, all are expected to do so by the end of 2002.
For the treaty to come into effect, it must be ratified by approximately 55
countries, representing at least 55% of the greenhouse gas emissions of the
developed world.
All of the countries, with the exception of Indonesia, the Philippines and
Thailand, are classified as Annex 1 or "developed" countries and are subject to
national greenhouse gas emission reduction targets during the period of
2008--2012 (e.g., Phase 1). Each nation is actively developing policies and
measures meant to assist it with meeting the individual national emission
targets as set out within the Kyoto Protocol.
If we do become subject to limitations on emissions of carbon dioxide from
our fossil fuel-fired electric generating plants, these requirements could have
a significant economic impact on their operations.
The Environmental Protection Agency proposed rules establishing standards
for the location, design, construction and capacity of cooling water intake
structures at new facilities, including steam electric power plants. Under the
terms of a consent decree entered into by the U.S. District Court for the
Southern District of New York in RIVERKEEPER, INC. V. WHITMAN, these regulations
must be adopted by November 9, 2001. The consent decree also requires the agency
to propose similar regulations for existing facilities by February 28, 2002, and
finalize those regulations by August 28, 2003. Until the final standards are
promulgated, we cannot determine their impact on our facilities or estimate the
potential cost of compliance.
The Comprehensive Environmental Response, Compensation, and Liability Act,
which is also known as CERCLA, and similar state statutes, require the cleanup
of sites from which there has been a release or threatened release of hazardous
substances. As of the date of this prospectus, we are unaware of any material
liabilities under CERCLA or similar state statutes; however, we cannot assure
you that we will not incur CERCLA liability or similar state law liability in
the future.
EMPLOYEES
At June 30, 2001, Edison Mission Energy employed 3,493 people, all of whom
were full time employees and approximately 537, 147 and 1,347 of whom were
covered by collective bargaining
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agreements in the United Kingdom, Australia and the United States, respectively.
We believe we have good relations with our employees. However, our subsidiary,
Midwest Generation and the union which represents the employees at the Illinois
Plants are currently in negotiations to replace the now expired collective
bargaining agreement, covering wages and working conditions. Although we cannot
predict the outcome of these negotiations, the union authorized a strike, which
began on June 28, 2001. Midwest Generation has contingency plans in place and is
operating the Illinois Plants during the strike. We believe that the impact of
the strike on the operations of the Illinois Plants will not be material.
Furthermore, Paiton Energy was sued in the Central Jakarta District Court by
the PLN Labor Union in April 2001. PT PLN, the Indonesian Minister of Mines and
Energy and the former President Director of PT PLN are also named as defendants
in the suit. The union seeks to set aside the power purchase agreement between
Paiton Energy and PT PLN and the interim agreement between Paiton Energy and its
lenders, as well as damages and other relief. The initial preliminary hearing
was held on April 30, 2001 in Jakarta. Paiton Energy and the other defendants
filed challenges to jurisdiction and moved for a dismissal of the suit, but such
actions were denied by an order dated July 23, 2001. Paiton Energy has filed a
notice of appeal. Paiton Energy believes, based upon discussions with its
Indonesian counsel, that the suit is without merit.
LEGAL PROCEEDINGS
PMNC LITIGATION
In February 1997, a civil action was commenced in the Superior Court of the
State of California, Orange County, entitled THE PARSONS CORPORATION AND PMNC V.
BROOKLYN NAVY YARD COGENERATION PARTNERS, L.P., MISSION ENERGY NEW YORK, INC.
AND B-41 ASSOCIATES, L.P., Case No. 774980, in which the plaintiffs asserted
general monetary claims under the Construction Turnkey Agreement in the amount
of $136.8 million. Brooklyn Navy Yard has also filed an action entitled BROOKLYN
NAVY YARD COGENERATION PARTNERS, L.P. V. PMNC, PARSONS MAIN OF NEW YORK, INC.,
NAB CONSTRUCTION CORPORATION, L.K. COMSTOCK & CO., INC. AND THE PARSONS
CORPORATION, in the Supreme Court of the State of New York, Kings County, Index
No. 5966/97 asserting general monetary claims in excess of $13 million under the
Construction Turnkey Agreement. On March 26, 1998, the Superior Court in the
California action granted PMNC's motion for attachment in the amount of
$43 million against Brooklyn Navy Yard and attached three Brooklyn Navy Yard
bank accounts totaling approximately $0.5 million. On the same day, the court
stayed all proceedings in the California action pending the New York action.
Brooklyn Navy Yard appealed the attachment order, and on August 24, 2001, the
California Court of Appeal heard arguments in the appeal by Brooklyn Navy Yard
and Mission Energy New York from the attachment order. In August 2001 PMNC filed
a motion to lift the stay of the California action in order to amend the
California action to add Edison Mission Energy as a defendant and as a party to
the attachment previously granted against Brooklyn Navy Yard. The motion is
scheduled to be heard in October 2001. The court took the matter under
submission and a ruling is expected within the next few months. PMNC's motion to
dismiss the New York action was denied by the New York Supreme Court and further
denied on appeal in September 1998. On March 9, 1999, Brooklyn Navy Yard filed a
motion for partial summary judgment in the New York action. The motion was
denied and Brooklyn Navy Yard has appealed. The appeal and the commencement of
discovery were suspended until June 2000 to allow for voluntary mediation
between the parties. The mediation ended unsuccessfully on March 23, 2000. On
November 13, 2000, a New York appellate court issued a ruling granting summary
judgment in favor of Brooklyn Navy Yard, striking PMNC's cause of action for
quantum meruit, and limiting PMNC to its claims under the construction contract.
Discovery is continuing. The court has recommended and the parties have agreed
to pursue mediation in the fall of 2001. We agreed to indemnify Brooklyn Navy
Yard and our partner in the venture from all claims and costs arising from or
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in connection with this litigation. We believe that the outcome of this
litigation will not have a material adverse effect on our consolidated financial
position or results of operations.
ECOELECTRICA POTENTIAL ENVIRONMENTAL PROCEEDING
We own an indirect 50% interest in EcoElectrica, L.P., a limited partnership
which owns and operates a liquefied natural gas import terminal and cogeneration
project at Penuelas, Puerto Rico. In 2000, the U.S. Environmental Protection
Agency issued to EcoElectrica a notice of violation and a compliance order
alleging violations of the federal Clean Air Act primarily related to start-up
activities. Representatives of EcoElectrica have met with the Environmental
Protection Agency to discuss the notice of violations and compliance order. To
date, EcoElectrica has not been informed of the commencement of any formal
enforcement proceedings. It is premature to assess what, if any, action will be
taken by the Environmental Protection Agency. At June 30, 2001, no loss accrual
had been recorded by EcoElectrica. We do not believe the outcome of this matter
will have a material adverse effect on our consolidated financial position or
results of operations. For information regarding the disposition of
EcoElectrica, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Acquisitions, Dispositions and Sale-Leaseback
Transactions--Dispositions."
OUR RELATIONSHIP WITH AFFECTED AFFILIATES
Edison Mission Energy is an indirect subsidiary of Edison International.
Edison International is a holding company. Edison International is also the
corporate parent of Southern California Edison, an electric utility that buys
and sells power in California. Both Edison International and Southern California
Edison have faced and continue to face material operating disruptions as a
result of the California power crisis. For a description of the California power
crisis, see "Management's Discussion and Analysis of Financial Condition and
Results of Operations--The California Power Crisis and Our Response."
We are also included in the consolidated federal income tax and combined
state franchise tax returns of Edison International. We calculate our income tax
provision on a separate company basis under a tax sharing arrangement with The
Mission Group, which in turn has an agreement with Edison International. Tax
benefits generated by us and used in the Edison International consolidated tax
return are recognized by us without regard to separate company limitations.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Our directors are elected by, and serve until their successors are elected
by, our sole stockholder. Our officers are elected from time to time by the
board of directors and hold office at the discretion of the board of directors.
Set forth below are our current directors and executive officers and their ages
and positions with us as of August 27, 2001.
NAME AGE POSITION
---- -------- --------------------------------------------------------
John E. Bryson....................... 58 Director, Chairman of the Board
Dean A. Christiansen................. 42 Director
Theodore F. Craver, Jr............... 49 Director
Bryant C. Danner..................... 63 Director
Alan J. Fohrer....................... 50 Director, President and Chief Executive Officer
Robert M. Edgell..................... 54 Executive Vice President and Division President of
Edison Mission Energy, Asia Pacific
William J. Heller.................... 44 Senior Vice President and Division President of Edison
Mission Energy, Europe, Central Asia, Middle East and
Africa
Ronald L. Litzinger.................. 42 Senior Vice President Worldwide Operations
Georgia R. Nelson.................... 51 Senior Vice President and President of Midwest
Generation EME, LLC
Kevin M. Smith....................... 43 Senior Vice President and Chief Financial Officer
Raymond W. Vickers................... 58 Senior Vice President and General Counsel
Described below are the principal occupations and business activities of our
directors and executive officers for the past five years, in addition to their
positions indicated above.
MR. BRYSON has been Director and Chairman of the Board of Edison Mission
Energy since January 2000. Mr. Bryson was Director of Edison Mission Energy from
January 1986 to January 1998. Mr. Bryson has been Director and Chairman of the
Board of Mission Energy Holding since its formation on June 8, 2001. Mr. Bryson
has been President of Edison International since January 2000 and Chairman of
the Board and Chief Executive Officer of Edison International since 1990.
Mr. Bryson served as Chairman of the Board, Chief Executive Officer and a
Director of Southern California Edison from 1990 to January 2000. Mr. Bryson is
a director of The Boeing Company, The Times Mirror Company, and Pacific American
Income Shares, Inc. and LM Institutional Fund Advisors I, Inc.
MR. CHRISTIANSEN has been Director of Edison Mission Energy since
January 15, 2001 and serves as Edison Mission Energy's independent director.
Mr. Christiansen has been President of Lord Securities since October 2000 and
has been President of Acacia Capital since May 1990. Mr. Christiansen has been a
Director of Capital Markets Engineering & Trading, New York since August 1999
and has been Director of Structural Concepts Corporation of Muskegon, MI since
May 1995.
MR. CRAVER has been Director of Edison Mission Energy since January 15,
2001. Mr. Craver has been Director and Chief Executive Officer of Mission Energy
Holding since its formation on June 8, 2001. Mr. Craver has been Senior Vice
President, Chief Financial Officer and Treasurer of Edison International since
January 2000. Mr. Craver has been Chairman of the Board and Chief Executive
Officer of Edison Enterprise since September 1999. Mr. Craver served as Senior
Vice President and Treasurer of Edison International from February 1998 to
January 2000. Mr. Craver served as Senior Vice President and Treasurer of
Southern California Edison from February 1998 to September 1999. Mr. Craver
served as Vice President and Treasurer of Edison International and Southern
California
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Edison from September 1996 to February 1998. Mr. Craver was Executive Vice
President and Corporate Treasurer of First Interstate Bancorp from
September 1990 to April 1996.
MR. DANNER has been Director of Edison Mission Energy since May 1993.
Mr. Danner has been Director of Mission Energy Holding since its formation on
June 8, 2001. Mr. Danner has been Executive Vice President and General Counsel
of Edison International since June 1995. Mr. Danner was Executive Vice President
and General Counsel of Southern California Edison from June 1995 until
January 2000. Mr. Danner was Senior Vice President and General Counsel of Edison
International and Southern California Edison from July 1992 until May 1995.
MR. EDGELL has been Executive Vice President of Edison Mission Energy since
April 1988. Mr. Edgell served as Director of Edison Mission Energy from
May 1993 to January 2001. Mr. Edgell was named Division President of Edison
Mission Energy's Asia Pacific region in January 1995.
MR. FOHRER has been Director, President and Chief Executive Officer of
Edison Mission Energy since January 2000. Mr. Fohrer has been Director of
Mission Energy Holding since its formation on June 8, 2001. From 1998 to 2000,
Mr. Fohrer served as Chairman of the Board of Edison Mission Energy. From 1993
to 1998, Mr. Fohrer served as Vice Chairman of the Board of Edison Mission
Energy. Mr. Fohrer was Executive Vice President and Chief Financial Officer of
Edison International and was Executive Vice President and Chief Financial
Officer of Southern California Edison from June 1995 until January 2000.
Effective February 1996 and June 1995, Mr. Fohrer also served as Treasurer of
Southern California Edison and Edison International, respectively, until
August 1996. Mr. Fohrer was Senior Vice President, Treasurer and Chief Financial
Officer of Edison International, and Senior Vice President and Chief Financial
Officer of Southern California Edison from January 1993 until May 1995.
Mr. Fohrer was Edison Mission Energy's interim Chief Executive Officer between
May 1993 and August 1993. From 1991 until 1993, Mr. Fohrer was Vice President,
Treasurer and Chief Financial Officer of Edison International and Southern
California Edison.
MR. HELLER has been Senior Vice President and Division President of Edison
Mission Energy, Europe, Central Asia, Middle East and Africa since
February 2000. Mr. Heller was elected Director of Edison Mission Energy's Board,
effective December 9, 1999, and subsequently resigned effective February 7,
2000. Mr. Heller was Senior Vice President of Strategic Planning and New
Business Development for Edison International from January 1996 until
February 2000. Prior to joining Edison International, Mr. Heller was with
McKinsey and Company, Inc. from 1982 to 1995, serving as principal and head of
McKinsey's Los Angeles Energy Practice from 1991 to 1995.
MR. LITZINGER has been Senior Vice President, Worldwide Operations, of
Edison Mission Energy since June 1999. Mr. Litzinger served as Vice
President-O&M Business Development from December 1998 to May 1999.
Mr. Litzinger has been with Edison Mission Energy since November 1995 serving as
both Regional Vice President, O&M Business Development and Manager, O&M Business
Development until December 1998. Prior to joining Edison Mission Energy,
Mr. Litzinger was a Reliability Supervisor with Texaco Refining and
Marketing, Inc. from March 1995 to October 1995 and prior to that held numerous
management positions with Southern California Edison since June 1986.
MS. NELSON has been Senior Vice President of Edison Mission Energy since
January 1996 and has been President of Midwest Generation EME, LLC since
May 1999. From January 1996 until June 1999, Ms. Nelson was Senior Vice
President, Worldwide Operations. Ms. Nelson was Division President of Edison
Mission Energy's Americas region from January 1996 to January 1998. Prior to
joining Edison Mission Energy, Ms. Nelson served as Senior Vice President of
Southern California Edison from June 1995 until December 1995 and Vice President
of Southern California Edison from June 1993 until May 1995.
MR. SMITH has been Senior Vice President and Chief Financial Officer of
Edison Mission Energy since May 1999. Mr. Smith has also been Senior Vice
President and Chief Financial Officer of Mission
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Energy Holding since its formation on June 8, 2001. Mr. Smith served as
Treasurer of Edison Mission Energy from 1992 to 2000 and was elected a Vice
President in 1994. During March 1998 until September 1999, Mr. Smith also held
the position of Regional Vice President, Americas region.
MR. VICKERS has been Senior Vice President and General Counsel of Edison
Mission Energy since March 1999. Mr. Vickers has been Senior Vice President and
General Counsel of Mission Energy Holding since its formation on June 8, 2001.
Prior to joining Edison Mission Energy, Mr. Vickers was a partner with the law
firm of Skadden, Arps, Slate, Meagher & Flom LLP concentrating on international
business transactions, particularly cross-border capital markets and investment
transactions, project implementation and finance. Mr. Vickers originally joined
Skadden, Arps, Slate, Meagher & Flom LLP in 1989 as resident partner in the Hong
Kong office.
COMPENSATION OF DIRECTORS
Our directors do not receive any compensation for serving on our board of
directors or attending meetings thereof, except that our independent director
receives customary compensation.
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CERTAIN TRANSACTIONS AND RELATIONS WITH AFFILIATES
Specified administrative services such as payroll and employee benefit
programs, all performed by Edison International or Southern California Edison
employees, are shared among all affiliates of Edison International, and the
costs of these corporate support services are allocated to all affiliates,
including us. Costs are allocated based on one of the following formulas:
percentage of time worked, equity in investment and advances, number of
employees, or multi-factor (operating revenues, operating expenses, total assets
and number of employees). In addition, services of Edison International or
Southern California Edison employees are sometimes directly requested by us and
these services are performed for our benefit. Labor and expenses of these
directly requested services are specifically identified and billed at cost.
We have entered into a tax sharing agreement with The Mission Group, which
in turn has entered into a tax sharing agreement with Edison International. For
a further discussion of this agreement, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Intercompany Tax
Sharing Payments."
We hold interests in eight partnerships that own power plants in California.
Four of these partnerships are parties to power purchase agreements with
Southern California Edison.
Edison Mission Operation & Maintenance, Inc., our indirect, wholly-owned
subsidiary, has entered into operation and maintenance agreements with
partnerships in which we have a 50% or less ownership interest. Pursuant to the
negotiated agreements, Edison Mission Operation & Maintenance performs all
operation and maintenance activities necessary for the production of power by
these partnerships' facilities. The agreements will continue until terminated by
either party. Edison Mission Operation & Maintenance pays for all costs incurred
with operating and maintaining the facilities and may also earn an incentive
compensation as set forth in the agreements.
In July 1999, we made an interest-free loan to Georgia R. Nelson, Senior
Vice President of Edison Mission Energy and President of Midwest Generation EME,
LLC, in the amount of $179,800 in exchange for a note executed by Ms. Nelson and
payable to Edison Mission Energy 365 days following the conclusion of her
assignment in Chicago, Illinois.
In October 2000, we made a loan to Gregory C. Hoppe who at that time was
Vice President and Director, Australia, in the amount of $350,000 in exchange
for a secured promissory note executed by Mr. Hoppe and payable to Edison
Mission Energy at simple interest of 6.37%. The entire note, together with
accrued interest, is due January 2002. Mr. Hoppe is no longer an employee of
Edison Mission Energy.
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DESCRIPTION OF THE NOTES
IN THIS "DESCRIPTION OF THE NOTES," REFERENCES TO "WE," "OUR," "OURS" AND
"US" REFER ONLY TO EDISON MISSION ENERGY, AND NOT TO ANY OF OUR DIRECT OR
INDIRECT SUBSIDIARIES OR AFFILIATES. THE FOLLOWING DESCRIPTION IS A SUMMARY OF
PROVISIONS OF THE INDENTURE AND THE NOTES. IT IS NOT A COMPLETE DESCRIPTION OF
THE NOTES AND IS SUBJECT TO, AND QUALIFIED IN ITS ENTIRETY BY, REFERENCE TO THE
NOTES AND THE INDENTURE. WE URGE YOU TO READ THE INDENTURE AND THE NOTES BECAUSE
THEY, AND NOT THIS DESCRIPTION, DEFINE YOUR RIGHTS AS A HOLDER OF THESE NOTES.
YOU MAY OBTAIN A COPY OF THE INDENTURE AND THE NOTES FROM US BY WRITING TO US AT
18101 VON KARMAN AVENUE, SUITE 1700, IRVINE, CALIFORNIA 92612.
GENERAL
We issued the original notes and will issue the exchange notes under the
indenture, dated as of August 10, 2001, between us and The Bank of New York, as
trustee. Reference to the notes includes the exchange notes unless the context
otherwise requires. The notes are our unsecured senior obligations and rank
equally in right of payment with all of our other unsubordinated indebtedness.
Because we conduct substantially all of our business through numerous
subsidiaries, all existing and future liabilities of our direct and indirect
subsidiaries are and will be effectively senior to the notes with respect to the
assets and cash flows of those subsidiaries. The notes are not guaranteed by,
and are not otherwise obligations of, our project subsidiaries and project
affiliates, or our other direct and indirect subsidiaries and affiliates.
We issued the original notes in an offering exempt from registration, in
aggregate principal amount of $400,000,000. We may, without the consent of the
holders, increase such principal amount in the future on the same terms and
conditions and with the same CUSIP number as the notes being offered in this
exchange offer. The notes will mature on August 15, 2008 and will bear interest
at the rate of 10% per annum. We will pay interest on the notes on each
February 15 and August 15, beginning on February 15, 2002, to the holders of
record on the immediately preceding February 1 and August 1. Interest on the
notes will accrue from the most recent date to which interest has been paid or,
if no interest has been paid, from August 10, 2001. Interest will be computed on
the basis of a 360-day year consisting of twelve 30-day months.
The original notes are in denominations of $100,000 and any integral
multiple of $1,000 in excess thereof.
REDEMPTION
We may redeem the notes at any time, in whole or in part, at a redemption
price equal to:
- the greater of:
(1) 100% of the principal amount of the notes being redeemed;
or
(2) the sum of the present values of the Remaining Scheduled Payments on
the notes being redeemed discounted to the date of redemption on a
semiannual basis (assuming a 360-day year consisting of twelve 30-day
months) at a rate equal to the Treasury Rate plus 75 basis points,
- plus, in either case, accrued and unpaid interest, if any, on the
principal amount of notes being redeemed to the redemption date.
"Remaining Scheduled Payments" means, with respect to each note that we are
redeeming, the remaining scheduled payments of the principal and interest on
that note that would be due after the related redemption date if we were not
redeeming that note. However, if the redemption date is not a
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scheduled interest payment date with respect to that note, the amount of the
next succeeding scheduled interest payment on that note will be reduced by the
amount of interest accrued on that note to the redemption date.
"Treasury Rate" means, with respect to any redemption date, an annual rate
equal to the semiannual equivalent yield to maturity of the Comparable Treasury
Issue, assuming 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. The semiannual equivalent yield to maturity will be
computed as of the third business day immediately preceding the redemption date.
"Comparable Treasury Issue" means the United States Treasury security
selected by Credit Suisse First Boston Corporation or an affiliate as having a
maturity comparable to the remaining term of the notes that would be utilized,
at the time of selection and in accordance with customary financial practice, in
pricing new issues of corporate debt securities of comparable maturity to the
remaining term of the notes.
"Comparable Treasury Price" means the average of three Reference Treasury
Dealer Quotations provided to the trustee in respect of the notes to be redeemed
on the applicable redemption date.
"Reference Treasury Dealer Quotation" means, with respect to each Reference
Treasury Dealer and any redemption date, the average, as determined by us, 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 us by a
Reference Treasury Dealer at 3:30 p.m., New York City time, on the third
business day preceding the redemption date.
"Reference Treasury Dealers" means Credit Suisse First Boston Corporation
(so long as it continues to be a primary U.S. Government securities dealer) and
any two other primary U.S. Government securities dealers chosen by us. If Credit
Suisse First Boston Corporation ceases to be a primary U.S. Government
securities dealer, we will appoint in its place another nationally recognized
investment banking firm that is a primary U.S. Government securities dealer.
We will give notice to The Depository Trust Company ("DTC") and holders of
definitive notes at least 30 days (but not more than 60 days) before we redeem
the notes. If we redeem only some of the notes, DTC's practice is to choose by
lot the amount to be redeemed from the notes held by each of its participating
institutions. DTC will give notice to these participants, and these participants
will give notice to any "Street Name" holders of any indirect interests in the
notes according to arrangements among them. These notices may be subject to
statutory or regulatory requirements. We will not be responsible for giving
notice of a redemption of the notes to anyone other than DTC and holders of
definitive notes.
CERTAIN COVENANTS
RESTRICTIONS ON LIENS
We will agree not to:
(X) pledge, mortgage, hypothecate or permit to exist any mortgage, pledge or
other lien upon any property at any time directly owned by us to secure any
indebtedness for money borrowed which is incurred, issued, assumed or guaranteed
by us ("Indebtedness"), or
(Y) cause or permit any of our subsidiaries to pledge, mortgage, hypothecate
or permit to exist any mortgage, pledge or other lien upon any property at any
time directly owned by them to secure any Indebtedness of ours,
without, in each such case, providing for the notes to be equally and
ratably secured with any and all such Indebtedness and with any other
Indebtedness similarly entitled to be equally and ratably
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secured; PROVIDED, HOWEVER, that the restrictions set forth in clauses (X) and
(Y) above will not apply to, or prevent the creation or existence of:
(1) liens existing at the original date of issuance of the notes;
(2) purchase money liens which do not exceed the cost or value of the
purchased property;
(3) other liens not to exceed 10% of our Consolidated Net Tangible
Assets, PROVIDED that:
(A) neither we nor our subsidiaries will be permitted to create or to
permit to exist any liens to secure our Indebtedness in reliance upon
this item (3) until the earlier to occur of:
(x) the first date on or after the second anniversary of the
consummation of the offering of the notes on which the notes are
rated at least BBB- by Standard & Poor's and Baa3 by Moody's, and
(y) the date on which Standard & Poor's rates the notes BBB or
higher and Moody's rates the notes Baa2 or higher; and
(B) notwithstanding the restriction in clause (A) above, we and our
subsidiaries will be permitted to create and permit to exist liens in
reliance upon this item (3) to secure Indebtedness not to exceed
$100 million in the aggregate;
(4) liens granted in connection with extending, renewing, replacing or
refinancing in whole or in part the Indebtedness (including, without
limitation, increasing the principal amount of such Indebtedness, other than
the Indebtedness referred to in item (3)(B)) secured by liens described in
clauses (1) through (3) above; and
(5) liens granted by any of our subsidiaries on the capital stock or
assets of any project subsidiary in order to secure any Indebtedness that we
incur (other than Indebtedness the proceeds of which are used to finance the
equity contributed by us, or loans made by us, to a project) in order to
finance or refinance any acquisition, development, construction, expansion,
operation or maintenance of such project subsidiary.
"Consolidated Net Tangible Assets" means, as of any date of determination,
the total amount of all our assets, determined on a consolidated basis in
accordance with generally accepted accounting principles as of such date, less
the sum of:
(a) our consolidated current liabilities, determined in accordance with
generally accepted accounting principles, and
(b) our assets that are properly classified as intangible assets in
accordance with generally accepted accounting principles, except for any
intangible assets which are distribution or related contracts with an
assignable value.
If we propose to pledge, mortgage or hypothecate any property at any time
directly owned by us to secure any Indebtedness, other than as permitted by
clauses (1) through (5) of the second previous paragraph, we will agree to give
prior written notice thereof to the trustee, who will give notice to the holders
of notes, and we will further agree, prior to or simultaneously with such
pledge, mortgage or hypothecation, effectively to secure all the notes equally
and ratably with such Indebtedness.
Except as set forth above, this covenant will not restrict the ability of
our subsidiaries and affiliates to pledge, mortgage, hypothecate or permit to
exist any mortgage, pledge or lien upon their assets, in connection with project
financings, sale-leasebacks or otherwise.
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MERGER, CONSOLIDATION, SALE, LEASE OR CONVEYANCE
We will agree not to merge or consolidate with or into any other person and
we will agree not to sell, lease or convey all or substantially all our assets
to any person, unless (1) we are the continuing corporation, or the successor
corporation or the person that acquires all or substantially all our assets is a
corporation organized and existing under the laws of the United States or a
State thereof or the District of Columbia and expressly assumes all our
obligations under the notes and the indenture, (2) immediately after such
merger, consolidation, sale, lease or conveyance, there is no default or Event
of Default (as defined below) under the indenture, (3) if, as a result of the
merger, consolidation, sale, lease or conveyance, any or all of our property
would become the subject of a lien that would not be permitted by the indenture,
we secure the notes equally and ratably with the obligations secured by that
lien and (4) we deliver or cause to be delivered to the trustee an officers'
certificate and opinion of counsel each stating that the merger, consolidation,
sale, lease or conveyance comply with the indenture.
The meaning of the term "all or substantially all the assets" has not been
definitely established and is likely to be interpreted by reference to
applicable state law if and at the time the issue arises and will be dependent
on the facts and circumstances existing at the time.
Except for a sale of all or substantially all our assets as provided above,
and other than assets we are required to sell to conform with governmental
regulations, we may not sell or otherwise dispose of any assets (other than
short-term, readily marketable investments purchased for cash management
purposes with funds not representing the proceeds of other asset sales) if, on a
pro forma basis, the aggregate net book value of all such sales during the most
recent 12-month period would exceed 10% of our Consolidated Net Tangible Assets
(as defined above) computed as of the end of the most recent quarter preceding
such sale; provided, however, that any such sales shall be disregarded for
purposes of this 10% limitation if the proceeds are invested in assets in
similar or related lines of our business; and, provided further, that we may
sell or otherwise dispose of assets in excess of this 10% limitation if we
retain the proceeds from such sales or dispositions, which are not reinvested as
provided above, as cash or cash equivalents or if we use the proceeds from such
sales to purchase and retire notes or to reduce or retire Indebtedness ranking
equal in right of payment to the notes or indebtedness of our subsidiaries.
REPORTING OBLIGATIONS
We will agree to furnish or cause to be furnished to holders of notes copies
of our annual reports and of the information, documents and other reports that
we are required to file with the Securities and Exchange Commission pursuant to
Section 13 or 15(d) of the Exchange Act within 15 days after we file them with
the Securities and Exchange Commission.
ADDITIONAL COVENANTS
Subject to certain exceptions and qualifications, we will agree in the
indenture to do, among other things, the following:
(1) deliver to the trustee copies of all reports that we file with the
Securities and Exchange Commission;
(2) deliver to the trustee annual officers' certificates with respect to
our compliance with our obligations under the indenture;
(3) maintain our corporate existence, subject to the provisions
described above relating to mergers and consolidations;
(4) pay our taxes when due, except when we are contesting such taxes in
good faith; and
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(5) following the effectiveness of any registration statement filed by
us pursuant to the registration rights agreement, we will maintain our
status as a reporting company under the Exchange Act whether or not the
Securities and Exchange Commission rules and regulations require us to
maintain that status and file copies of all such information and reports
with the Securities and Exchange Commission within the time periods
specified in the rules and regulations (unless the Securities and Exchange
Commission will not accept the filing of the applicable reports) or pay an
additional interest rate on the notes in the amount of one half of one
percent (50 basis points) per annum.
MODIFICATION OF THE INDENTURE
The indenture will contain provisions permitting us and the trustee, with
the consent of the holders of at least a majority in aggregate principal amount
of notes then outstanding, to modify or amend the indenture or the rights of the
holders of notes. However, no such modification or amendment may, without the
consent of the holder of each outstanding note affected thereby:
(a) change the stated maturity of the principal of, or extend the time
of payment of interest on, any note;
(b) reduce the principal amount of, or interest on, any note;
(c) change the place or currency of payment of principal of, or interest
on, any note;
(d) reduce any amount payable upon the redemption of any note; or
(e) impair the right to institute suit for the enforcement of any
payment on or with respect to any note.
In addition, without the consent of the holders of all notes then
outstanding, no such modification or amendment may:
(x) reduce the percentage in principal amount of outstanding notes the
consent of whose holders is required for modification or amendment of the
indenture;
(y) reduce the percentage in principal amount of outstanding notes
necessary for waiver of compliance with certain provisions of the indenture
or for waiver of certain defaults; or
(z) modify such provisions with respect to modification and waiver.
The holders of at least a majority in principal amount of the outstanding
notes may waive our compliance with certain restrictive provisions of the
indenture. The holders of a majority in principal amount of the outstanding
notes may waive any past default under the indenture, except a default in the
payment of principal or interest and certain covenants and provisions of the
indenture which cannot be amended without the consent of the holder of each
outstanding note affected.
We and the trustee may, without the consent of any holder of notes, amend
the indenture and the notes for the purpose of curing any ambiguity, or of
curing, correcting or supplementing any defective provision thereof, or in any
manner that we and the trustee may determine is not inconsistent with the
indenture and the notes and will not adversely affect the interest of any holder
of notes.
EVENTS OF DEFAULT
Each of the following will be an "Event of Default" under the indenture:
(a) our failure to pay any interest on any note when due, which failure
continues for 30 days; or
(b) our failure to pay principal or premium when due; or
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(c) our failure to perform any other covenant in the notes or the
indenture for a period of 90 days after the trustee or the holders of at
least 25% in aggregate principal amount of the notes gives us written notice
of our failure to perform; or
(d) an event of default occurring under any of our instruments under
which there may be issued, or by which there may be secured or evidenced,
any Indebtedness for money borrowed that has resulted in the acceleration of
such Indebtedness, or any default occurring in payment of any such
Indebtedness at final maturity (and after the expiration of any applicable
grace periods), other than:
(i) Indebtedness which is payable solely out of the property or
assets of a partnership, joint venture or similar entity of which we or
any of our subsidiaries or affiliates is a participant, or which is
secured by a lien on the property or assets owned or held by such entity,
without further recourse to or liability of us; or
(ii) Indebtedness, excluding (i) above, not exceeding $20,000,000; or
(e) one or more nonappealable final judgments, decrees or orders of any
court, tribunal, arbitrator, administrative or other governmental body or
similar entity for the payment of money aggregating more than $20,000,000
shall be rendered against us (excluding the amount thereof covered by
insurance) and shall remain undischarged, unvacated and unstayed for more
than 90 days, except while being contested in good faith by appropriate
proceedings; or
(f) certain events of bankruptcy, insolvency or reorganization in
respect of us.
If any Event of Default (other than an Event of Default due to certain
events of bankruptcy, insolvency or reorganization) has occurred and is
continuing, either the trustee or the holders of not less than 25% in principal
amount of the notes outstanding under the indenture may declare the principal of
all notes under the indenture and interest accrued thereon to be due and payable
immediately.
The trustee will be entitled, subject to the duty of the trustee during a
default to act with the required standard of care, to be indemnified by the
holders of notes before proceeding to exercise any right or power under the
indenture at the request of such holders. Subject to such provisions in the
indenture for the indemnification of the trustee and certain other limitations,
the holders of a majority in principal amount of the notes then outstanding may
direct the time, method and place of conducting any proceeding for any remedy
available to the trustee or exercising any trust or power conferred on the
trustee.
No holder of notes may institute any action against us under the indenture
(except actions for payment of overdue principal or interest) unless:
(1) such holder previously has given the trustee written notice of the
default and continuance thereof;
(2) the holders of not less than 25% in principal amount of the notes
then outstanding have requested the trustee to institute such action and
offered the trustee reasonable indemnity;
(3) the trustee has not instituted such action within 60 days of the
request; and
(4) the trustee has not received direction inconsistent with such
written request from the holders of a majority in principal amount of the
notes then outstanding.
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DEFEASANCE AND COVENANT DEFEASANCE
DEFEASANCE
We will be deemed to have paid and will be discharged from any and all
obligations in respect of the notes on the 123rd day after we have made the
deposit referred to below, and the provisions of the indenture will cease to be
applicable with respect to the notes (except for, among other matters, certain
obligations to register the transfer of or exchange of the notes, to replace
stolen, lost or mutilated notes, to maintain paying agencies and to hold funds
for payment in trust) if:
(A) we have deposited with the trustee, in trust, money and/or certain
U.S. government obligations that, through the payment of interest and
principal in respect thereof in accordance with their terms, will provide
money in an amount sufficient to pay the principal of, premium, if any, and
accrued interest on the notes at the time such payments are due in
accordance with the terms of the indenture;
(B) we have delivered to the trustee:
(i) an opinion of counsel to the effect that note holders will not
recognize income, gain or loss for federal income tax purposes as a
result of the defeasance and will be subject to federal income tax on the
same amount and in the same manner and at the same times as would have
been the case if such deposit, defeasance and discharge had not occurred,
which opinion of counsel must be based upon a ruling of the Internal
Revenue Service to the same effect or a change in applicable federal
income tax law or related treasury regulations after the date of the
indenture; and
(ii) an opinion of counsel to the effect that the defeasance trust
does not constitute an "investment company" within the meaning of the
Investment Company Act of 1940 and after the passage of 123 days
following the deposit, the trust fund will not be subject to the effect
of Section 547 of the U.S. Bankruptcy Code or Section 15 of the New York
Debtor and Creditor Law;
(C) immediately after giving effect to such deposit, no Event of
Default, or event that after the giving of notice or lapse of time or both
would become an Event of Default, will have occurred and be continuing on
the date of such deposit or during the period ending on the 123rd day after
the date of such deposit, and such deposit shall not result in a breach or
violation of, or constitute a default under, any other agreement or
instrument to which we are a party or by which we are bound; and
(D) if at such time the notes are listed on a national securities
exchange, we have delivered to the trustee an opinion of counsel to the
effect that the notes will not be delisted as a result of such deposit and
discharge.
DEFEASANCE OF CERTAIN COVENANTS AND CERTAIN EVENTS OF DEFAULT
The provisions of the indenture will cease to be applicable with respect to:
(x) the covenants described in "--Certain Covenants" (other than those
with respect to the maintenance of our existence and those described under
the first paragraph of the caption "--Certain Covenants--Merger,
Consolidation, Sale, Lease or Conveyance" and other than those described in
clauses (2)-(5) under "--Certain Covenants--Additional Covenants");
(y) clause (c) in "--Events of Default" with respect to such covenants;
and
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(z) clauses (d) and (e) in "--Events of Default" upon
(1) the deposit with the trustee, in trust, of money and/or certain
U.S. government obligations that through the payment of interest and
principal in respect thereof in accordance with their terms will provide
money in an amount sufficient to pay the principal of, premium, if any,
and accrued interest on the notes,
(2) the satisfaction of the conditions described in clauses (B)(ii),
(C) and (D) of the preceding paragraph, and
(3) our delivery to the trustee of an opinion of counsel to the
effect that, among other things, the holders of the notes will not
recognize income, gain or loss for federal income tax purposes as a
result of such deposit and defeasance and will be subject to federal
income tax on the same amount and in the same manner and at the same
times as would have been the case if such deposit and defeasance had not
occurred.
DEFEASANCE AND CERTAIN OTHER EVENTS OF DEFAULT
If we exercise our option to omit compliance with certain covenants and
provisions of the indenture as described in the immediately preceding paragraph
and the notes are declared due and payable because of the occurrence of an Event
of Default that remains applicable, the amount of money and/or U.S. government
obligations on deposit with the trustee may not be sufficient to pay amounts due
on the notes at the time of acceleration resulting from such Event of Default.
In such event, we will remain liable for such payments.
BOOK-ENTRY; DELIVERY AND FORM
The certificates representing the exchange notes will be issued in fully
registered form. Except as described below, the exchange notes initially will be
represented by one or more global notes, in definitive, fully registered form
without interest coupons. The global notes will be deposited with the trustee as
custodian for DTC and registered in the name of Cede & Co. or another nominee as
DTC may designate.
DTC has advised us as follows:
- DTC is a limited purpose trust company organized under the laws of the
State of New York, a "banking organization" within the meaning of the New
York Banking Law, 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 provision of Section 17A of
the Exchange Act.
- DTC was created to hold securities for its participants and to facilitate
the clearance and settlement of securities transactions between
participants through electronic book-entry changes in accounts of its
participants, thus eliminating the need for physical movement of
certificates. Participants include securities brokers and dealers, banks,
trust companies and clearing corporations and other organizations.
Indirect access to the DTC system is available to others, including banks,
brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
- Upon the issuance of the global notes, DTC or its custodian will credit,
on its internal system, the respective principal amounts of the exchange
notes represented by the global notes to the accounts of persons who have
accounts with DTC. Ownership of beneficial interests in the global notes
will be limited to persons who have accounts with DTC or persons who hold
interests through the persons who have accounts with DTC. Persons who have
accounts with DTC are referred to as "participants." Ownership of
beneficial interests in the global notes will be shown
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on, and the transfer of that ownership 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.
So long as DTC or its nominee is the registered owner or holder of the
global notes, DTC or the nominee, as the case may be, will be considered the
sole record owner or holder of the exchange notes represented by the global
notes for all purposes under the indenture and the exchange notes. No beneficial
owners of an interest in the global notes will be able to transfer that interest
except according to DTC's applicable procedures, in addition to those provided
for under the indenture. Owners of beneficial interests in the global notes will
not:
- be entitled to have the exchange notes represented by the global notes
registered in their names,
- receive or be entitled to receive physical delivery of certificated notes
in definitive form, and
- be considered to be the owners or holders of any exchange notes under the
global notes.
Accordingly, each person owning a beneficial interest in the global notes
must rely on the procedures of DTC and, if a person is not a participant, on the
procedures of the participant through which that person owns its interests, to
exercise any right of a holder of exchange notes under the global notes. We
understand that under existing industry practice, in the event an owner of a
beneficial interest in the global notes desires to take any action that DTC, as
the holder of the global notes, is entitled to take, DTC would authorize the
participants to take that action, and that the participants would authorize
beneficial owners owning through the participants to take that action or would
otherwise act upon the instructions of beneficial owners owning through them.
Payments of the principal of, premium, if any, and interest on the exchange
notes represented by the global notes will be made to DTC or its nominee, as the
case may be, as the registered owner of the global notes. Neither we, the
trustee, nor any paying agent 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 notes or for maintaining, supervising or
reviewing any records relating to the beneficial ownership interests.
We expect that DTC or its nominee, upon receipt of any payment of principal
of, premium, if any, or interest on the global notes will credit participants'
accounts with payments in amounts proportionate to their respective beneficial
ownership interests in the principal amount of the global notes, 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 notes held through these
participants will be governed by standing instructions and customary practices,
as is now the case with securities held for the accounts of customers registered
in the names of nominees for these customers. These payments will be the
responsibility of these participants.
Transfer between participants in DTC will be effected in the ordinary way in
accordance with DTC rules. If a holder requires physical delivery of notes in
certificated form for any reason, including to sell notes to persons in states
which require the delivery of the notes or to pledge the notes, a holder must
transfer its interest in the global notes in accordance with the normal
procedures of DTC and the procedures described in the indenture.
Unless and until they are exchanged in whole or in part for certificated
exchange notes in definitive form, the global notes may not be transferred
except as a whole by DTC to a nominee of DTC or by a nominee of DTC to DTC or
another nominee of DTC.
Beneficial owners of exchange notes registered in the name of DTC or its
nominee will be entitled to be issued, upon request, exchange notes in
definitive certificated form.
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DTC has advised us that DTC will take any action permitted to be taken by a
holder of notes, including the presentation of notes for exchange as described
below, only at the direction of one or more participants to whose account the
DTC interests in the global notes are credited. Further, DTC will take any
action permitted to be taken by a holder of notes only in respect of that
portion of the aggregate principal amount of notes as to which the participant
or participants has or have given that direction.
Although DTC has agreed to these procedures in order to facilitate transfers
of interests in the global notes among participants of DTC, it is under no
obligation to perform these procedures, and may discontinue them at any time.
Neither we 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.
Subject to specified conditions, any person having a beneficial interest in
the global notes may, upon request to the trustee, exchange the beneficial
interest for exchange notes in the form of certificated notes. Upon any issuance
of certificated notes, the trustee is required to register the certificated
notes in the name of, and cause the same to be delivered to, the person or
persons, or the nominee of these persons. In addition, if DTC is at any time
unwilling or unable to continue as a depositary for the global notes, and a
successor depositary is not appointed by us within 90 days, we will issue
certificated notes in exchange for the global notes.
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EXCHANGE OFFER; REGISTRATION RIGHTS
As part of the sale of the original notes, under a registration rights
agreement, dated as of August 10, 2001, we agreed with the initial purchasers in
the offering of the original notes, for the benefit of the holders of the notes,
to file with the SEC an exchange offer registration statement or, if applicable,
within a specified time period, a shelf registration statement unless we were to
determine in good faith that applicable SEC policy or applicable law did not
permit us to effect this exchange offer. Under the registration rights
agreement, we agreed to use our reasonable best efforts to cause to become
effective a registration statement with respect to a registered offer to
exchange the original notes for a like amount of the exchange notes that are
identical in all material respects to the restricted original notes. We agreed
to bear all expenses incurred in connection with our obligations under the
registration rights agreement. Once this registration statement is declared
effective, we will offer the exchange notes in return for surrender of the
original notes. This offer will remain open for no less than the shorter of
30 days after the date notice of the exchange offer is mailed to the original
note holders and the period ending when the last remaining original note is
tendered into the exchange offer. For each original note surrendered to us under
the exchange offer, the original note holder will receive exchange notes in an
equal principal amount. Interest on each exchange note will accrue from the last
date on which interest was paid on the original note so surrendered or, if no
interest has been paid, since August 10, 2001.
In the event that we reasonably determine in good faith that (1) the
exchange notes would not be tradeable, upon receipt in the exchange offer,
without restriction, (2) the SEC is unlikely to permit the exchange offer
registration statement to become effective prior to the 270th day after the date
of original issue of the notes or (3) the exchange offer may not be made in
compliance with applicable laws, we will use our reasonable best efforts,
subject to customary representations and agreements of the note holders, to have
a shelf registration statement covering the resale of the original notes
declared effective and kept effective until August 10, 2003, subject to
specified exceptions. We will, in the event of a shelf registration, provide to
each note holder copies of the prospectus, notify each note holder when a
registration statement for the notes has become effective and take other actions
as are appropriate to permit resale of the notes.
In the event that the exchange offer registration statement does not become
effective on or prior to the 270th day after the date of original issue of the
notes, the annual interest rates on the notes will be increased by 0.50% per
annum from and after that date to, but excluding, the date the registration
statement becomes effective and the exchange offer is commenced or a shelf
registration statement becomes effective. In the event that a registration
statement is required to be filed with the SEC and becomes effective and later
ceases to be effective at any time during the period specified by the
registration rights agreement, the annual interest rate on the notes will be
increased by 0.50% per annum from and after the date such registration statement
ceases to be effective to, but excluding, such date when the registration
statement again becomes effective and an exchange offer has commenced or a shelf
registration statement has become effective (or, if earlier, the end of such
period specified by the registration rights agreement). Such additional interest
will be paid to note holders on a regular distribution date. The interest rate
on the notes will be increased by 0.50% per annum if we cease to maintain our
status as a reporting company under the Exchange Act whether or not the SEC
rules and regulations require us to maintain that status (unless the SEC will
not accept the filing of the applicable reports). In the event that more than
one of the aforementioned events occurs at the same time, the maximum increase
in the interest rate applicable to the notes shall be 0.50% per annum.
Each note holder, other than specified holders, who wishes to exchange its
original notes for exchange notes in the exchange offer will be required to
represent that:
- it is not our affiliate;
- any exchange notes to be acquired by it will be acquired in the ordinary
course of business; and
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- that at the time of the completion of the exchange offer it will have no
arrangement with any person to participate in the distribution, within the
meaning of the Securities Act, of the exchange notes.
A note holder that sells its notes under a shelf registration generally:
- would be required to be named as a selling holder in the related
prospectus and to deliver a prospectus to purchasers;
- will be subject to certain of the civil liability provisions under the
Securities Act in connection with this sale; and
- will be required to agree in writing to be bound by the provisions of the
registration rights agreement which are applicable to the selling note
holder, including specified indemnification obligations.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary describes certain material United States federal
income tax considerations of the acquisition, ownership and disposition of the
exchange notes. The summary is based on the Internal Revenue Code of 1986, as
amended (the "Code"), and regulations, rulings and judicial decisions as of the
date hereof, all of which may be repealed, revoked or modified with possible
retroactive effect. This discussion does not deal with holders that may be
subject to special tax rules (including, but not limited to, insurance
companies, tax-exempt organizations, financial institutions, dealers in
securities or currencies, holders whose functional currency is not the United
States dollar or holders who will hold the exchange notes as a hedge against
currency risks or as part of a straddle, synthetic security, conversion
transaction or other integrated investment comprised of the notes and one or
more other investments). The summary is applicable only to purchasers that
acquired the original notes pursuant to the offering at the initial offering
price and who will hold the exchange notes as capital assets within the meaning
of Section 1221 of the Code. This summary is for general information only and
does not address all aspects of United States federal income taxation that may
be relevant to holders of the exchange notes in light of their particular
circumstances, and it does not address any tax consequences arising under the
laws of any state, local or foreign taxing jurisdiction. Prospective holders
should consult their own tax advisors as to the particular tax consequences to
them of acquiring, holding or disposing of the exchange notes.
As used herein, the term "United States Holder" means a beneficial owner of
a note that is (i) a citizen or resident of the United States for United States
federal income tax purposes, (ii) a corporation or partnership (or any entity
treated as a corporation or partnership for United States federal income tax
purposes) created or organized under the laws of the United States, any state
thereof or the District of Columbia, (iii) an estate the income of which is
subject to United States federal income tax without regard to its source or
(iv) a trust if (x) a court within the United States is able to exercise primary
supervision over the administration of the trust and one or more United States
persons have the authority to control all substantial decisions of the trust or
(y) the trust has a valid election in effect under applicable United States
Treasury regulations to be treated as a United States Holder. If a partnership
(including any entity treated as a partnership for United States federal income
tax purposes) is a holder of the notes, the United States federal income tax
treatment of a partner in such a partnership will generally depend on the status
of the partner and the activities of the partnership. Partners in such a
partnership should consult their own tax advisors as to the particular federal
income tax consequences applicable to them.
A "Non-United States Holder" is any beneficial holder of a note that is not
a United States Holder.
For United States federal income tax purposes, a beneficial owner of an
original note will not recognize any taxable gain or loss on the exchange of the
original notes for exchange notes under the exchange offer, and a beneficial
owner's tax basis and holding period in the exchange notes will be the same as
in the original notes.
UNITED STATES HOLDERS
Stated interest on an exchange note generally will be taxable to a United
States Holder as ordinary income at the time it accrues or is received in
accordance with the United States Holder's method of accounting for United
States federal income tax purposes.
Upon the sale, exchange, redemption, retirement or other disposition of an
exchange note, a United States Holder generally will recognize gain or loss
equal to the difference between the amount realized upon the sale, exchange,
redemption, retirement or other disposition (not including amounts attributable
to accrued but unpaid interest, which will be taxable as ordinary income) and
such United States Holder's adjusted tax basis in the exchange note. A United
States Holder's adjusted tax basis in
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an exchange note will, in general, be the United States Holder's adjusted tax
basis in the original note exchanged for the exchange note, less any principal
payments received by such holder. Such gain or loss will generally be capital
gain or loss. Capital gain recognized by an individual investor upon a
disposition of an exchange note that has been held for more than 12 months will
generally be subject to a maximum tax rate of 20% or, in the case of an exchange
note that has been held for 12 months or less, will be subject to tax at
ordinary income tax rates. A United States Holder's holding period for an
exchange note will include the holding period of the original note exchanged for
the exchange note.
NON-UNITED STATES HOLDERS
Under present United States federal income tax law, subject to the
discussion of backup withholding and information reporting below:
(a) payments of interest on the exchange notes to any Non-United States
Holder will not be subject to United States federal income, branch profits
or withholding tax provided that (i) the Non-United States Holder does not
actually or constructively own 10% or more of the total combined voting
power of all classes of our stock entitled to vote, (ii) the Non-United
States Holder is not a bank receiving interest on an extension of credit
pursuant to a loan agreement entered into in the ordinary course of its
trade or business, (iii) the Non-United States Holder is not a controlled
foreign corporation that is related to us (directly or indirectly) through
stock ownership, (iv) such interest payments are not effectively connected
with a United States trade or business, (v) the Non-United States Holder is
not a foreign tax exempt organization or foreign private foundation for
United States federal income tax purposes and (vi) certain certification
requirements are met. Such certification will be satisfied if the beneficial
owner of the exchange note certifies on IRS Form W-8 BEN or a substantially
similar substitute form, under penalties of perjury, that it is not a United
States person and provides its name and address, and (x) such beneficial
owner files such form with the withholding agent or (y) in the case of an
exchange note held through a foreign partnership or intermediary, the
beneficial owner and the foreign partnership or intermediary satisfy
certification requirements of applicable United States Treasury regulations;
and
(b) a Non-United States Holder will not be subject to United States
federal income or branch profits tax on gain realized on the sale, exchange,
redemption, retirement or other disposition of an exchange note, unless
(i) the gain is effectively connected with a trade or business carried on by
such holder within the United States or, if a treaty applies (and the holder
complies with applicable certification and other requirements to claim
treaty benefits), is generally attributable to a United States permanent
establishment maintained by the holder, or (ii) the holder is an individual
who is present in the United States for 183 days or more in the taxable year
of disposition and certain other requirements are met.
An exchange note held by an individual who at the time of death is not a
citizen or resident of the United States will not be subject to United States
federal estate tax with respect to an exchange note as a result of such
individual's death, provided that (i) the individual does not actually or
constructively own 10% or more of the total combined voting power of all classes
of our stock entitled to vote and, (ii) the interest accrued on the exchange
note was not effectively connected with the conduct of a United States trade or
business.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, payments of interest and the proceeds of the sale, exchange,
redemption, retirement or other disposition of the exchange notes payable by a
United States paying agent or other United States intermediary will be subject
to information reporting. In addition, backup withholding will generally apply
to these payments if (i) in the case of a United States Holder, the holder fails
to provide an
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accurate taxpayer identification number, or fails to certify that such holder is
not subject to backup withholding or fails to report all interest and dividends
required to be shown on its United States federal income tax returns, or
(ii) in the case of a Non-United States Holder, the holder fails to provide the
certification on IRS Form W-8BEN described above or otherwise does not provide
evidence of exempt status. Certain United Status Holders (including, among
others, corporations) and Non-United States Holders that comply with certain
certification requirements are not subject to backup withholding. Any amount
paid as backup withholding will be creditable against the holder's United States
federal income tax liability provided that the required information is timely
furnished to the IRS. Holders of exchange notes should consult their tax
advisors as to their qualification for exemption from backup withholding and the
procedure for obtaining such an exemption.
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PLAN OF DISTRIBUTION
Each broker-dealer that receives exchange notes for its own account in the
exchange offer must acknowledge that it will deliver a prospectus in connection
with any resale of the exchange notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of exchange notes received in exchange for original notes where the
original notes were acquired as a result of market-making activities or other
trading activities. We have agreed that, for a period of at least 120 days after
the expiration date of the exchange offer, we will make this prospectus
available to any broker-dealer for use in connection with any resale. In
addition, until , 2001, all dealers effecting transactions in the
exchange notes may be required to deliver a prospectus.
We will not receive any proceeds from any sale of exchange notes by
broker-dealers. Exchange notes received by broker-dealers for their own account
in 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 exchange notes or a combination of these methods of resale.
These resales may be made at market prices prevailing at the time of resale, at
prices related to these prevailing market prices or 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
broker-dealer or the purchasers of any of the exchange notes. Any broker-dealer
that resells exchange notes that were received by it for its own account in the
exchange offer and any broker or dealer that participates in a distribution of
the exchange notes may be deemed to be an underwriter within the meaning of the
Securities Act, and any profit on the resale of exchange notes and any
commission or concessions received by those persons may be deemed to be
underwriting compensation under the Securities Act. Any broker-dealer that
resells notes that were received by it for its own account in the exchange offer
and any broker-dealer that participates in a distribution of those notes may be
deemed to be an underwriter within the meaning of the Securities Act and must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction, including the delivery
of a prospectus that contains information with respect to any selling holder
required by the Securities Act in connection with any resale of the exchange
notes. The letter of transmittal states that, by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an underwriter within the meaning of the Securities Act.
Furthermore, any broker-dealer that acquired any of its original notes
directly from us:
- may not rely on the applicable interpretation of the staff of the SEC's
position contained in Exxon Capital Holdings Corp., SEC no-action letter
(April 13, 1988), Morgan, Stanley & Co. Inc., SEC no-action letter
(June 5, 1991) and Shearman & Sterling, SEC no-action letter (July 2,
1983); and
- must also be named as a selling noteholder in connection with the
registration and prospectus delivery requirements of the Securities Act
relating to any resale transaction.
For a period of at least 120 days after the expiration date of the exchange
offer, we will promptly send additional copies of this prospectus and any
amendment or supplement to this prospectus to any broker-dealer that requests
these documents in the letter of transmittal. We agree to pay all expenses
incident to the exchange offer, including the expenses of one counsel for the
holders of the notes, other than commissions or concessions of any brokers or
dealers. We will indemnify the holders of the notes, including any
broker-dealers, against various liabilities, including liabilities under the
Securities Act.
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LEGAL MATTERS
The legality of the exchange notes will be passed upon for Edison Mission
Energy by Skadden, Arps, Slate, Meagher & Flom LLP.
EXPERTS
The consolidated financial statements and schedules of Edison Mission Energy
and subsidiaries included in Edison Mission Energy's Annual Report on Form 10-K
for the year ended December 31, 2000, which is incorporated by reference in this
prospectus and elsewhere in the registration statement, have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report with respect thereto, and are included herein in reliance upon the
authority of said firm as experts in giving said report.
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We have not authorized any dealer, salesperson or other person to give any
information or represent anything not contained in this prospectus. You must not
rely on unauthorized information. This prospectus does not offer to sell or buy
any notes in any jurisdiction where it is unlawful. The information in this
prospectus is current as of , 2001. However, you should realize that
our affairs may have changed since the date of this prospectus.
[EDISON MISSION ENERGY LOGO]
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
We are a California corporation. Article VI of our Bylaws provide, in
effect, that, to the extent and under the circumstances permitted by
Section 317 of the California Corporations Code, we shall indemnify any person
who was or is a party or is threatened to be made a party to any action, suit or
proceeding of the type described in that section by reason of the fact that he
or she is or was our director or officer.
Section 317 of the California Corporations Code empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, other than in certain actions
by or in the right of the corporation as described below, by reason of the fact
that he or she is or was a director, officer, employee or other agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or was a director, officer, employee or
agent of a corporation that was a predecessor corporation of the corporation or
of another enterprise at the request of the predecessor corporation, against
expenses, including attorneys' fees, judgments, fines, settlements and other
amounts actually or reasonably incurred by this person in connection with this
action, suit or proceeding if this person acted in good faith and in a manner he
or she reasonably believed to be in the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe that his or her conduct was unlawful. In the case of an action by or in
the right of the corporation, no indemnification shall be made in respect to any
claim, issue or matter as to which this person shall have been adjudged to be
liable to the corporation in the performance of his or her duty to the
corporation and its shareholders unless and only to the extent that the court in
which this action or suit is or was pending shall determine that, in view of all
of the circumstances of the case, this person is fairly and reasonably entitled
to indemnify for these expenses which this court shall deem proper. Section 317
further provides that to the extent that this director, officer, employee or
agent of a corporation has been successful on the merits in defense of any
action, suit or proceeding referred to above or in the defense of any claim,
issue or matter, this person shall be indemnified against expenses, including
attorneys' fees, actually and reasonably incurred by him or her in connection.
Article IV of our Certificate of Incorporation relieves our directors from
monetary damages to us or our shareholders for any breach of this director's
fiduciary duty as a director to the extent permitted by the California
Corporations Code. Under Section 204(a)(10) of the California Corporations Code,
a corporation may relieve its directors from personal liability to such
corporation or its shareholders for monetary damages for any breach of their
fiduciary duty as directors except:
(1) for acts or omissions that show a reckless disregard for the director's
duty to the corporation or its shareholders in circumstances in which the
director was unaware, or should have been aware, in the ordinary course
of performing his or her duties, of a risk of serious injury to the
corporation or its shareholders,
(2) for any act or omission not in good faith or that a director believes to
be contrary to the best interests of the corporation or its shareholders,
(3) for any intentional misconduct or knowing and culpable violation of law,
(4) for any willful or negligent violation of certain provisions of the
California Corporations Code imposing certain requirements with respect
to the making of loans or guarantees and the payment of dividends,
II-1
(5) for any transaction from which the director derived an improper personal
benefit or
(6) for acts or omissions that constitute an unexcused pattern of
inattention that amounts to an abdication of the director's duty to the
corporation or its shareholders.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
EXHIBIT NO. DESCRIPTION
--------------------- -----------
1.1 Purchase Agreement, dated as of August 7, 2001, among Edison
Mission Energy and Credit Suisse First Boston Corporation,
BMO Nesbitt Burns Corp., Salomon Smith Barney Inc., SG Cowen
Securities Corporation, TD Securities (USA) Inc. and
Westdeutsche Landesbank Girozentrale (Dusseldorf).*
2.1 Agreement for the Sale and Purchase of Shares in First Hydro
Limited, dated December 21, 1995, between PSB Holding
Limited and First Hydro Finance Plc, incorporated by
reference to Exhibit 2.1 to Edison Mission Energy's
Form 8-K dated December 21, 1995.
2.2 Transaction Implementation Agreement, dated March 29, 1997,
between The State Electricity Commission of Victoria, Edison
Mission Energy Australia Limited, Loy Yang B Power Station
Pty Ltd, Loy Yang Power Limited, The Honorable Alan Robert
Stockdale, Leanne Power Pty Ltd and Edison Mission Energy,
incorporated by reference to Exhibit 2.2 to Edison Mission
Energy's Form 8-K dated May 22, 1997.
2.3 Stock Purchase and Assignment Agreement, dated December 23,
1998, between KES Puerto Rico, L.P., KENETECH Energy
Systems, Inc., KES Bermuda, Inc. and Edison Mission Energy
del Caribe for the (i) sale and purchase of KES Puerto Rico,
L.P.'s shares in EcoElectrica Holdings Ltd.;
(ii) assignment of KENETECH Energy Systems' rights and
interests in that certain Project Note from the Partnership;
and (iii) assignment of KES Bermuda, Inc.'s rights and
interests in that certain Administrative Services Agreement
dated October 31 1997, incorporated by reference to
Exhibit 2.3 to Edison Mission Energy's 10-K for the year
ended December 31, 1998.
2.4 Asset Purchase Agreement, dated August 1, 1998, between
Pennsylvania Electric Company, NGE Generation, Inc., New
York State Electric & Gas Corporation and Mission Energy
Westside, Inc., incorporated by reference to Exhibit 2.4 to
Edison Mission Energy's 10-K for the year ended
December 31, 1998.
2.5 Asset Sale Agreement, dated March 22, 1999, between
Commonwealth Edison Company and Edison Mission Energy as to
the Fossil Generating Assets, incorporated by reference to
Exhibit 2.5 to Edison Mission Energy's Form 10-K for the
year ended December 31, 1998.
2.6 Agreement for the Sale and Purchase of Shares in Contact
Energy Limited, dated March 10, 1999, between Her Majesty
the Queen in Right of New Zealand, Edison Mission Energy
Taupo Limited and Edison Mission Energy, incorporated herein
by reference to Exhibit 2.6 to the Edison Mission Energy's
Form 10-Q for the quarter ended March 31, 1999.
2.7 Sale, Purchase and Leasing Agreement between PowerGen UK plc
and Edison First Power Limited for the purchase of the
Ferrybridge C Power Station, incorporated by reference to
Exhibit 2.7 to Edison Mission Energy's Form 8-K/A dated
July 19, 1999.
2.8 Sale, Purchase and Leasing Agreement between PowerGen UK plc
and Edison First Power Limited for the purchase of the
Fiddler's Ferry Power Station, incorporated by reference to
Exhibit 2.8 to Edison Mission Energy's Form 8-K/A, dated
July 19, 1999.
II-2
EXHIBIT NO. DESCRIPTION
--------------------- -----------
2.9 Purchase and Sale Agreement, dated May 10, 2000, between
Edison Mission Energy, P & L Coal Holdings Corporation and
Gold Fields Mining Corporation, incorporated by reference to
Exhibit 2.9 to Edison Mission Energy's 10-Q for the quarter
ended September 30, 2000.
2.10 Asset Purchase Agreement, dated 3 March 2000, between MEC
International B.V. and UPC International Partnership CV II,
incorporated by reference to Exhibit 10.80 to Edison Mission
Energy's Form 10-Q for the quarter ended March 31, 2000.
2.11 Stock Purchase Agreement, dated November 17, 2000, between
Mission Del Sol, LLC and Texaco Inc., incorporated by
reference to Exhibit 2.11 to Edison Mission Energy's
Form 10-K for the year ended December 31, 2000.
3.1 First Amended and Restated Articles of Incorporation of
Edison Mission Energy. Originally filed with Edison Mission
Energy's Registration Statement on Form 10 to the Securities
and Exchange Commission on September 30, 1994 and amended by
Amendment No. 1 thereto dated November 19, 1994 and
Amendment No. 2 thereto dated November 21, 1994 (as so
amended, the "Form 10"), incorporated by reference to
Exhibit 3.1 to Edison Mission Energy's Form 10-K for the
year ended December 31, 2000.
3.1.1 Certificate of Amendment of Articles of Incorporation of
Edison Mission Energy dated October 18, 1988, originally
filed with Edison Mission Energy's Form 10, incorporated by
reference to Exhibit 3.1.1 to Edison Mission Energy's
Form 10-K for the year ended December 31, 2000.
3.1.2 Certificate of Amendment of Articles of Incorporation of
Edison Mission Energy dated January 17, 2001, incorporated
by reference to Exhibit 3.1.2 to Edison Mission Energy's
Form 10-K for the year ended December 31, 2000.
3.1.3 Certificate of Amendment of Articles of Incorporation of
Edison Mission Energy dated July 2, 2001, incorporated by
reference to Exhibit 3.1.3 to Edison Mission Energy's 10-Q
for the quarter ended June 30, 2001.
3.2 By-Laws of Edison Mission Energy as amended to and including
January 1, 2000, incorporated by reference to Exhibit 3.2 to
Edison Mission Energy's Form 10-K for the year ended
December 31, 2000.
3.2.1 Amendment to By-Laws of Edison Mission Energy dated
January 15, 2001, incorporated by reference to
Exhibit 3.2.1 to Edison Mission Energy's Form 10-K for the
year ended December 31, 2000.
4.1 Indenture, dated as of August 10, 2001, among Edison Mission
Energy and The Bank of New York as Trustee. *
4.1.1 Form of 10% Senior Note due 2008 (included in Exhibit 4.1).
*
4.2 Registration Rights Agreement, dated as of August 7, 2001,
among Edison Mission Energy, Credit Suisse First Boston
Corporation, BMO Nesbitt Burns Corp., Salomon Smith Barney
Inc., SG Cowen Securities Corporation, TD Securities (USA)
Inc. and Westdeutsche Landesbank Girozentrale (Dusseldorf).
*
4.3 Indenture, dated as of April 5, 2001, among Edison Mission
Energy and United States Trust Company of New York as
Trustee, incorporated by reference to Exhibit 4.20 to Edison
Mission Energy's and Midwest Generation LLC's Registration
Statement on Form S-4 to the Securities and Exchange
Commission on April 20, 2001.
4.3.1 Form of 9.875% Senior Note due 2011 (included in
Exhibit 4.1 to Edison Mission Energy's Registration
Statement on Form S-4 to the Securities and Exchange
Commission on April 24, 2001.)
II-3
EXHIBIT NO. DESCRIPTION
--------------------- -----------
4.4 Registration Rights Agreement, dated as of April 2, 2001,
among Edison Mission Energy and Credit Suisse First Boston
Corporation and Westdeutsche Landesbank Girozentrale
(Dusseldorf) as representatives of the Initial Purchasers,
incorporated by reference to Exhibit 4.2 to Edison Mission
Energy's Registration Statement on Form S-4 to the
Securities and Exchange Commission on April 24, 2001.
4.5 Guarantee, dated as of August 17, 2000, made by Edison
Mission Energy, as Guarantor in favor of Powerton Trust I,
as Owner Lessor, incorporated by reference to Exhibit 4.9 to
Edison Mission Energy's and Midwest Generation LLC's
Registration Statement on Form S-4 to the Securities and
Exchange Commission on April 20, 2001.
4.5.1 Schedule identifying substantially identical agreement to
Guarantee constituting Exhibit 4.5 hereto, incorporated by
reference to Exhibit 4.9.1 to Edison Mission Energy's and
Midwest Generation LLC's Registration Statement on Form S-4
to the Securities and Exchange Commission on April 20, 2001.
4.6 Guarantee, dated as of August 17, 2000, made by Edison
Mission Energy, as Guarantor in favor of Joliet Trust I, as
Owner Lessor, incorporated by reference to Exhibit 4.10 to
Edison Mission Energy's and Midwest Generation LLC's
Registration Statement on Form S-4 to the Securities and
Exchange Commission on April 20, 2001.
4.6.1 Schedule identifying substantially identical agreement to
Guarantee constituting Exhibit 4.6 hereto, incorporated by
reference to Exhibit 4.10.1 to Edison Mission Energy's and
Midwest Generation LLC's Registration Statement on Form S-4
to the Securities and Exchange Commission on April 20, 2001.
4.7 Registration Rights Agreement, dated as of August 17, 2000,
among Edison Mission Energy, Midwest Generation, LLC and
Credit Suisse First Boston Corporation and Lehman Brothers
Inc., as representatives of the Initial Purchasers,
incorporated by reference to Exhibit 4.11 to Edison Mission
Energy's and Midwest Generation LLC's Registration Statement
on Form S-4 to the Securities and Exchange Commission on
April 20, 2001.
4.8 Participation Agreement (T1), dated as of August 17, 2000,
by and among, Midwest Generation, LLC, Powerton Trust I, as
the Owner Lessor, Wilmington Trust Company, as the Owner
Trustee, Powerton Generation I, LLC, as the Owner
Participant, Edison Mission Energy, United States Trust
Company of New York, as the Lease Indenture Trustee, and
United States Trust Company of New York, as the Pass Through
Trustees, incorporated by reference to Edison Mission
Energy's and Midwest Generation LLC's Registration Statement
on Form S-4 to the Securities and Exchange Commission on
April 20, 2001.
4.8.1 Schedule identifying substantially identical agreement to
Participation Agreement constituting Exhibit 4.8 hereto,
incorporated by reference to Exhibit 4.12.1 to Edison
Mission Energy's and Midwest Generation LLC's Registration
Statement on Form S-4 to the Securities and Exchange
Commission on April 20, 2001.
4.9 Participation Agreement (T1), dated as of August 17, 2000,
by and among, Midwest Generation, LLC, Joliet Trust I, as
the Owner Lessor, Wilmington Trust Company, as the Owner
Trustee, Joliet Generation I, LLC, as the Owner Participant,
Edison Mission Energy, United States Trust Company of New
York, as the Lease Indenture Trustee and United States Trust
Company of New York, as the Pass Through Trustees,
incorporated by reference to Exhibit 4.13 to Edison Mission
Energy's and Midwest Generation LLC's Registration Statement
on Form S-4 to the Securities and Exchange Commission on
April 20, 2001.
II-4
EXHIBIT NO. DESCRIPTION
--------------------- -----------
4.9.1 Schedule identifying substantially identical agreement to
Participation Agreement constituting Exhibit 4.9 hereto,
incorporated by reference to Exhibit 4.13.1 to Edison
Mission Energy's and Midwest Generation LLC's Registration
Statement on Form S-4 to the Securities and Exchange
Commission on April 20, 2001.
4.10 Copy of the Global Debenture representing Edison Mission
Energy's 9 7/8% Junior Subordinated Deferrable Interest
Debentures, Series A, Due 2024, incorporated by reference to
Exhibit 4.1 to Edison Mission Energy's Form 10-K for the
year ended December 31, 1994.
4.11 Conformed copy of the Indenture, dated as of November 30,
1994, between Edison Mission Energy and The First National
Bank of Chicago, as Trustee, incorporated by reference to
Exhibit 4.2 to Edison Mission Energy's Form 10-K for the
year ended December 31, 1994.
4.11.1 First Supplemental Indenture, dated as of November 30, 1994,
to Indenture dated as of November 30, 1994 between Edison
Mission Energy and The First National Bank of Chicago, as
Trustee, incorporated by reference to Exhibit 4.2.1 to
Edison Mission Energy's Form 10-K for the year ended
December 31, 1994.
4.11.2 Second Supplemental Indenture, dated as of August 8, 1995,
to Indenture dated as of November 30, 1994 between Edison
Mission Energy and The First National Bank of Chicago, as
Trustee.*
4.12 Indenture, dated as of June 28, 1999, between Edison Mission
Energy and The Bank of New York, as Trustee, incorporated by
reference to Exhibit 4.1 to Edison Mission Energy's
Registration Statement on Form S-4 to the Securities and
Exchange Commission on February 18, 2000.
4.12.1 First Supplemental Indenture, dated as of June 28, 1999, to
Indenture dated as of June 28, 1999, between Edison Mission
Energy and The Bank of New York, as Trustee, incorporated by
reference to Exhibit 4.2 to Edison Mission Energy's
Registration Statement on Form S-4 to the Securities and
Exchange Commission on February 18, 2000.
4.13 Copy of the Security representing Edison Mission Energy's
8 1/8% Senior Notes Due 2002, incorporated by reference to
Exhibit 4.4 to Edison Mission Energy's Form 10-K for the
year ended December 31, 2000.
4.14 Promissory Note ($499,450,800), dated as of August 24, 2000,
by Edison Mission Energy in favor of Midwest Generation,
LLC, incorporated by reference to Exhibit 4.5 to Edison
Mission Energy's Form 10-K for the year ended December 31,
2000.
4.14.1 Schedule identifying substantially identical agreements to
Promissory Note constituting Exhibit 4.14 hereto,
incorporated by reference to Exhibit 4.5.1 to Edison Mission
Energy's Form 10-K for the year ended December 31, 2000.
4.15 Promissory Note, dated as of June 23, 2000, by Edison
Mission Energy in favor of Midwest Generation, LLC,
incorporated by reference to Exhibit 4.6 to Edison Mission
Energy's Form 10-K for the year ended December 31, 2000.
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special
counsel to Edison Mission Energy, as to the legality of the
Notes being registered hereby.*
10.1 Registration Rights Agreement, dated as of June 23, 1999,
between Edison Mission Energy and the Initial Purchasers
specified therein, incorporated by reference to
Exhibit 10.1 to Edison Mission Energy's Registration
Statement on Form S-4 to the Securities and Exchange
Commission on February 18, 2000.
II-5
EXHIBIT NO. DESCRIPTION
--------------------- -----------
10.8 Power Purchase Contract between Southern California Edison
Company and Arco Petroleum Products Company (Watson
Refinery), incorporated by reference to Exhibit 10.8 to
Edison Mission Energy's Form 10.
10.9 Power Supply Agreement between State Electricity Commission
of Victoria, Loy Yang B Power Station Pty. Ltd. and the
Company Australia Pty. Ltd., as managing partner of the
Latrobe Power Partnership, dated December 31, 1992,
incorporated by reference to Exhibit 10.9 to Edison Mission
Energy's Form 10.
10.10 Power Purchase Agreement between P.T. Paiton Energy Company
as Seller and Perusahaan Umum Listrik Negara as Buyer, dated
February 12, 1994, incorporated by reference to
Exhibit 10.10 to Edison Mission Energy's Form 10.
10.11 Amended and Restated Power Purchase Contract between
Southern California Energy Company and Midway-Sunset
Cogeneration Company, dated May 5, 1988, incorporated by
reference to Exhibit 10.11 to Edison Mission Energy's
Form 10.
10.12 Parallel Generation Agreement between Kern River
Cogeneration Company and Southern California Energy Company,
dated January 6, 1984, incorporated by reference to
Exhibit 10.12 to Edison Mission Energy's Form 10.
10.13 Parallel Generation Agreement between Kern River
Cogeneration (Sycamore Project) Company and Southern
California Energy Company, dated December 18, 1984,
incorporated by reference to Exhibit 10.13 to Edison Mission
Energy's Form 10.
10.15 Conformed copy of the Second Amended and Restated U.S. $500
million Bank of America National Trust and Savings
Association Credit Agreement, dated as of October 11, 1996,
incorporated by reference to Exhibit 10.15.3 to Edison
Mission Energy's Form 10-K for the year ended December 31,
1996.
10.15.1 Amendment One to Second Amended and Restated U.S. $500
million Bank of America National Trust and Savings
Association Credit Agreement, dated as of August 17, 2000,
incorporated by reference to Exhibit 10.15.1 to Edison
Mission Energy's Form 10-K for the year ended December 31,
2000.
10.15.2 Amendment Two to Second Amended and Restated U.S. $425
million Bank of America, N.A. Credit Agreement, dated as of
May 30, 2001, incorporated by reference to Exhibit 10.15.2
to Edison Mission Energy's Form 10-Q for the quarter ended
June 30, 2001.
10.16 Amended and Restated Ground Lease Agreement between Texaco
Refining and Marketing Inc. and March Point Cogeneration
Company, dated August 21, 1992, incorporated by reference to
Exhibit 10.16 to Edison Mission Energy's Form 10.
10.16.1 Amendment No. 1 to Amended and Restated Ground Lease
Agreement between Texaco Refining and Marketing Inc. and
March Point Cogeneration Company, dated August 21, 1992,
incorporated by reference to Exhibit 10.16 to Edison Mission
Energy's Form 10.
10.17 Memorandum of Agreement between Atlantic Richfield Company
and Products Cogeneration Company, dated September 17, 1987,
incorporated by reference to Exhibit 10.17 to Edison Mission
Energy's Form 10.
10.18 Memorandum of Ground Lease between Texaco Producing Inc. and
Sycamore Cogeneration Company, dated January 19, 1987,
incorporated by reference to Exhibit 10.18 to Edison
Mission Energy's Form 10.
10.19 Amended and Restated Memorandum of Ground Lease between
Getty Oil Company and Kern River Cogeneration Company, dated
November 14, 1984, incorporated by reference to
Exhibit 10.19 to Edison Mission Energy's Form 10.
II-6
EXHIBIT NO. DESCRIPTION
--------------------- -----------
10.20 Memorandum of Lease between Sun Operating Limited
Partnership and Midway-Sunset Cogeneration Company,
incorporated by reference to Exhibit 10.20 to Edison Mission
Energy's Form 10.
10.21 Executive Supplemental Benefit Program, incorporated by
reference to Exhibits to Forms 10-K filed by SCEcorp (File
No. 1-2313).
10.22 1981 Deferred Compensation Agreement, incorporated by
reference to Exhibits to Forms 10-K filed by SCEcorp (File
No. 1-2313).
10.23 1985 Deferred Compensation Agreement for Executives,
incorporated by reference to Exhibits to Forms 10-K filed by
SCEcorp (File No. 1-2313).
10.24 1987 Deferred Compensation Plan for Executives, incorporated
by reference to Exhibits to Forms 10-K filed by SCEcorp
(File No. 1-2313).
10.25 1988 Deferred Compensation Plan for Executives, incorporated
by reference to Exhibits to Forms 10-K filed by SCEcorp
(File No. 1-2313).
10.26 1989 Deferred Compensation Plan for Executives, incorporated
by reference to Exhibits to Forms 10-K filed by SCEcorp
(File No. 1-9936).
10.27 1990 Deferred Compensation Plan for Executives, incorporated
by reference to Exhibits to Forms 10-K filed by SCEcorp
(File No. 1-9936).
10.28 Annual Deferred Compensation Plan for Executives,
incorporated by reference to Exhibits to Forms 10-K filed by
SCEcorp (File No. 1-9936).
10.29 Executive Retirement Plan for Executives, incorporated by
reference to Exhibits to Forms 10-K filed by SCEcorp (File
No. 1-2313).
10.31 Estate and Financial Planning Program for Executive
Officers, incorporated by reference to Exhibits to Forms
10-K filed by SCEcorp (File No 1-9936).
10.32 Letter Agreement with Edward R. Muller, incorporated by
reference to Exhibit 10.32 to Edison Mission Energy's
Form 10.
10.33 Agreement with James S. Pignatelli, incorporated by
reference to Exhibit 10.33 to Edison Mission Energy's
Form 10.
10.34 Conformed copy of the Guarantee Agreement dated as of
November 30, 1994, incorporated by reference to
Exhibit 10.34 to Edison Mission Energy's Form 10.
10.35 Indenture of Lease between Brooklyn Navy Yard Development
Corporation and Cogeneration Technologies, Inc., dated as of
December 18, 1989, incorporated by reference to
Exhibit 10.35 to Edison Mission Energy's Form 10-K for the
year ended December 31, 1994.
10.35.1 First Amendment to Indenture of Lease between Brooklyn Navy
Yard Development Corporation and Cogeneration
Technologies, Inc., dated November 1, 1991, incorporated by
reference to Exhibit 10.35.1 to Edison Mission Energy's
Form 10-K for the year ended December 31, 1994.
10.35.2 Second Amendment to Indenture of Lease between Brooklyn Navy
Yard Development Corporation and Cogeneration
Technologies, Inc., dated June 3, 1994, incorporated by
reference to Exhibit 10.35.2 to Edison Mission Energy's
Form 10-K for the year ended December 31, 1994.
II-7
EXHIBIT NO. DESCRIPTION
--------------------- -----------
10.35.3 Third Amendment to Indenture of Lease between Brooklyn Navy
Yard Development Corporation and Cogeneration
Technologies, Inc., dated December 12, 1994, incorporated by
reference to Exhibit 10.35.3 to Edison Mission Energy's
Form 10-K for the year ended December 31, 1994.
10.37 Amended and Restated Limited Partnership Agreement of
Mission Capital, L.P., dated as of November 30, 1994,
incorporated by reference to Exhibit 10.37 to Edison Mission
Energy's Form 10-K for the year ended December 31, 1994.
10.38 Action of General Partner of Mission Capital, L.P. creating
the 9 7/8% Cumulative Monthly Income Preferred Securities,
Series A, dated as of November 30, 1994, incorporated by
reference to Exhibit 10.38 to Edison Mission Energy's
Form 10-K for the year ended December 31, 1994.
10.39 Action of General Partner of Mission Capital, L.P., creating
the 8 1/2% Cumulative Monthly Income Preferred Securities,
Series B, dated as of August 8, 1995, incorporated by
reference to Exhibit 10.39 to Edison Mission Energy's
Form 10-Q for the quarter ended June 30, 1995.
10.40 Power Purchase Contract between ISAB Energy, S.r.l. as
Seller and Enel, S.p.A. as Buyer, dated June 9, 1995,
incorporated by reference to Exhibit 10.40 to Edison Mission
Energy's Form 10-Q for the quarter ended June 30, 1995.
10.41 400 million sterling pounds Barclays Bank Plc Credit
Agreement, dated December 18, 1995, incorporated by
reference to Exhibit 10.41 to Edison Mission Energy's
Form 8-K, dated December 21, 1995.
10.44 Guarantee by Edison Mission Energy, dated December 20, 1996,
in favor of The Fuji Bank, Limited, Los Angeles Agency, to
secure Camino Energy Company's payments pursuant to Camino
Energy Company's Credit Agreement and Defeasance Agreement,
incorporated by reference to Exhibit 10.44 to Edison Mission
Energy's Form 10-K for the year ended December 31, 1996.
10.45 Power Purchase Agreement between National Power Corporation
and San Pascual Cogeneration Company International B.V.,
dated September 10, 1997, incorporated by reference to
Exhibit 10.45 to Edison Mission Energy's Form 10-K for the
year ended December 31, 1997.
10.46 Power Purchase Agreement between Gulf Power Generation Co.,
LTD., and Electricity Generating Authority of Thailand,
dated December 22, 1997, incorporated by reference to
Exhibit 10.46 to Edison Mission Energy's Form 10-K for the
year ended December 31, 1997.
10.49 Equity Support Guarantee by Edison Mission Energy, dated
December 23, 1998, in favor of ABN AMRO Bank N.V., and the
Chase Manhattan Bank to guarantee certain equity funding
obligations of EcoElectrica Ltd. and EcoElectrica Holdings
Ltd. pursuant to EcoElectrica Ltd.'s Credit Agreement dated
as of October 31, 1997, incorporated by reference to
Exhibit 10.49 to Edison Mission Energy's Form 10-K for the
year ended December 31, 1998.
10.50 Master Guarantee and Support Instrument by Edison Mission
Energy, dated December 23, 1998, in favor of ABN AMRO Bank
N.V., and the Chase Manhattan Bank to guarantee the
availability of funds to purchase fuel for the EcoElectrica
project pursuant to EcoElectrica Ltd.'s Credit Agreement
dated as of October 31, 1997 and Intercreditor Agreement
dated as of October 31, 1997, incorporated by reference to
Exhibit 10.50 to Edison Mission Energy's Form 10-K for the
year ended December 31, 1998.
II-8
EXHIBIT NO. DESCRIPTION
--------------------- -----------
10.51 Guarantee Assumption Agreement from Edison Mission Energy,
dated December 23, 1998, under which Edison Mission Energy
assumed all of the obligations of KENETECH Energy
Systems, Inc. to Union Carbide Caribe Inc., under the
certain Guaranty dated November 25, 1997, incorporated by
reference to Exhibit 10.51 to Edison Mission Energy's
Form 10-K for the year ended December 31, 1998.
10.52 Transition Power Purchase Agreement, dated August 1, 1998,
between New York State Electric & Gas Corporation and
Mission Energy Westside, Inc, incorporated by reference to
Exhibit 10.52 to Edison Mission Energy's Form 10-K for the
year ended December 31, 1998.
10.54 Guarantee, dated August 1, 1998, between Edison Mission
Energy, Pennsylvania Electric Company, NGE Generation, Inc.
and New York State Electric & Gas Corporation, incorporated
by reference to Exhibit 10.54 to Edison Mission Energy's
Form 10-K for the year ended December 31, 1998.
10.55 Credit Agreement, dated March 18, 1999, among Edison Mission
Holdings Co. and Certain Commercial Lending Institutions,
and Citicorp USA, Inc., incorporated by reference to
Exhibit 10.55 to Edison Mission Energy's Form 8-K dated
March 18, 1999.
10.56 Guarantee and Collateral Agreement made by Edison Mission
Holdings Co., Edison Mission Finance Co., Homer City
Property Holdings, Inc., Chestnut Ridge Energy Co., Mission
Energy Westside, Inc., EME City Generation L.P. and Edison
Mission Energy in favor of United States Trust Company of
New York, dated as of March 18, 1999, incorporated by
reference to Exhibit 10.56 to Edison Mission Energy's
Form 8-K dated March 18, 1999.
10.56.1 Amendment No. 1 to the Guarantee and Collateral Agreement,
dated May 27, 1999, between Edison Mission Holdings, Edison
Mission Finance Co., Homer City Property Holdings, Inc.,
Chestnut Ridge Energy Company, Mission Energy
Westside, Inc., EME Homer City Generation L.P. and Edison
Mission Energy in favor of United States Trust Company of
New York, incorporated by reference to Exhibit 10.56.1 to
Amendment No. 1 of Edison Mission Holdings Co.'s
Registration Statement on Form S-4 to the Securities and
Exchange Commission on February 8, 2000.
10.56.2 Open-End Mortgage, Security Agreement and Assignment of
Leases and Rents, dated March 18, 1999 from EME Homer City
Generation L.P. to United States Trust Company of New York,
incorporated by reference to Exhibit 10.56.2 to Amendment
No. 1 of Edison Mission Holdings Co.'s Registration
Statement on Form S-4 to the Securities and Exchange
Commission on February 8, 2000.
10.56.3 Amendment No. 1 to the Open-End Mortgage, Security Agreement
and Assignment of Leases and Rents, dated May 27, 1999, from
EME Homer City Generation L.P. to United States Trust
Company of New York, incorporated by reference to
Exhibit 10.56.3 to Amendment No. 1 of Edison Mission
Holdings Co.'s Registration Statement on Form S-4 to the
Securities and Exchange Commission on February 8, 2000.
10.57 Collateral Agency and Intercreditor Agreement among Edison
Mission Holdings Co., Edison Mission Finance Co., Homer City
Property Holdings, Inc., Chestnut Ridge Energy Co., Mission
Energy Westside, Inc., EME Homer City Generation L.P., The
Secured Parties' Representatives, Citicorp USA, Inc. as
Administrative Agent and United States Trust Company of New
York as Collateral Agent, dated as of March 18, 1999,
incorporated by reference to Exhibit 10.57 to Edison Mission
Energy's Form 8-K dated March 18, 1999.
II-9
EXHIBIT NO. DESCRIPTION
--------------------- -----------
10.58 Security Deposit Agreement among Edison Mission Holdings
Co., Edison Mission Finance Co., Homer City Property
Holdings, Inc., Chestnut Ridge Energy Co., Mission Energy
Westside, Inc., EME Homer City Generation L.P. and United
States Trust Company of New York, as Collateral Agent, dated
as of March 18, 1999, incorporated by reference to
Exhibit 10.58 to Edison Mission Energy's Form 8-K dated
March 18, 1999.
10.58.1 Amendment No. 1 to the Security Deposit Agreement, dated May
27, 1999, between Edison Mission Holdings, Edison Mission
Finance Co., Homer City Property Holdings, Inc., Chestnut
Ridge Energy Company, Mission Energy Westside, Inc., EME
Homer City Generation L.P. and United States Trust Company
of New York, as Collateral Agent, incorporated by reference
to Exhibit 10.58.1 to Amendment No. 1 of Edison Mission
Holdings Co.'s Registration Statement on Form S-4 to the
Securities and Exchange Commission on February 8, 2000.
10.59 Credit Support Guarantee, dated as of March 18, 1999, made
by Edison Mission Energy in favor of United States Trust
Company of New York, incorporated by reference to
Exhibit 10.59 to Edison Mission Energy's Form 8-K dated
March 18, 1999.
10.59.1 Amendment No. 1 to the Credit Support Guarantee, dated May
27, 1999, made by Edison Mission Energy in favor of United
States Trust Company of New York, incorporated by reference
to Exhibit 10.59.1 to Amendment No. 1 of Edison Mission
Holdings Co.'s Registration Statement on Form S-4 to the
Securities and Exchange Commission on February 8, 2000.
10.60 Debt Service Reserve Guarantee, dated as of March 18, 1999,
made by Edison Mission Energy in favor of United States
Trust Company of New York on behalf of the various financial
institutions (Lenders) as are or may become parties to the
Credit Agreement, dated as of March 18, 1999, among Edison
Mission Holdings Co., the Lenders and Citicorp USA, Inc.,
incorporated by reference to Exhibit 10.60 to Edison Mission
Energy's Form 8-K dated March 18, 1999.
10.60.1 Amendment No. 1 to the Debt Service Reserve Guarantee, dated
May 27, 1999, made by Edison Mission Energy in favor of
United States Trust Company of New York, incorporated by
reference to Exhibit 10.60.1 to Amendment No. 1 of Edison
Mission Holdings Co.'s Registration Statement on Form S-4 to
the Securities and Exchange Commission on February 8, 2000.
10.60.2 Amendment No. 2 to the Debt Service Reserve Guarantee, dated
as of March 18, 2001, made by Edison Mission Energy in favor
of United States Trust Company of New York, incorporated by
reference to Exhibit 10.60.2 to Edison Mission Energy's
Form 10-Q for the quarter ended June 30, 2001.
10.60.3 Bond Debt Service Reserve Guarantee, dated May 27, 1999,
made by Edison Mission Energy in favor of United States
Trust Company of New York, incorporated by reference to
Exhibit 10.60.2 to Amendment No. 1 of Edison Mission Holding
Co.'s Registration Statement on Form S-4 to the Securities
and Exchange Commission on February 8, 2000.
10.60.4 Intercompany Loan Subordination Agreement, dated March 18,
1999, among Edison Mission Holdings Co., Edison Mission
Finance Co., Homer City Property Holdings, Inc., Chestnut
Ridge Energy Co., Mission Energy Westside, Inc., EME Homer
City Generation L.P. and United States Trust Company of New
York, incorporated by reference to Exhibit 10.60.3 to
Amendment No. 2 of Edison Mission Holdings Co.'s
Registration Statement on Form S-4 to the Securities and
Exchange Commission on February 29, 2000.
II-10
EXHIBIT NO. DESCRIPTION
--------------------- -----------
10.61 Credit Agreement, dated March 18, 1999, among Edison Mission
Energy and Certain Commercial Lending Institutions, and
Citicorp USA, Inc., incorporated by reference to
Exhibit 10.61 to Edison Mission Energy's Form 8-K dated
March 18, 1999.
10.61.1 Amendment One to Credit Agreement, dated as of August 17,
2000, by and among Edison Mission Energy, Certain Commercial
Lending Institutions, and Citicorp USA, Inc., as
Administrative Agent, incorporated by reference to
Exhibit 10.61.1 to Edison Mission Energy's Form 10-K for the
year ended December 31, 2000.
10.61.2 Amendment Two to Credit Agreement, dated as of March 15,
2001, by and among Edison Mission Energy, certain commercial
lending institutions, and Citicorp USA, Inc., as
Administrative Agent, incorporated by reference to
Exhibit 10.61.2 to Edison Mission Energy's Form 10-Q for the
quarter ended June 30, 2001.
10.61.3 Amendment Three to the U.S. $595 million Credit Agreement,
dated as of May 30, 2001, by and among Edison Mission
Energy, certain commercial lending institutions, and
Citicorp USA, Inc., as Administrative Agent, incorporated by
reference to Exhibit 10.61.3 to Edison Mission Energy's
Form 10-Q for the quarter ended June 30, 2001.
10.62 Edison Power Limited L1,150,000,000 Guaranteed Secured
Variable Rate Bonds due 2019 Guaranteed by Maplekey UK
Limited, incorporated by reference to Exhibit 10.62 to
Edison Mission Energy's Form 8-K, dated July 19, 1999.
10.64 Coal and Capex Facility Agreement, dated July 16, 1999
between EME Finance UK Limited, Barclay's Capital and Credit
Suisse First Boston, The Financial Institutions named as
Banks, and Barclays Bank PLC as Facility Agent, incorporated
by reference to Exhibit 10.64 to Edison Mission Energy's
Form 10-Q for the quarter ended September 30, 1999.
10.64.1 Amendment One to Coal and Capex Facility Agreement, dated as
of May 29, 2001, by and among Edison Mission Energy Finance
UK Limited and Barclays Bank PLC, as Facility Agent,
incorporated by reference to Exhibit 10.64.1 to Edison
Mission Energy's Form 10-Q for the quarter ended June 30,
2001.
10.65 Guarantee by Edison Mission Energy dated July 16, 1999
supporting the Coal and Capex Facility Agreement (Facility
Agreement) issued by Barclays Bank PLC to secure EME Finance
UK Limited obligations pursuant to the Facility Agreement,
incorporated by reference to Exhibit 10.65 to Edison Mission
Energy's Form 10-Q for the quarter ended September 30, 1999.
10.65.1 Amendment One to Guarantee by Edison Mission Energy
supporting the Facility Agreement, dated as of August 17,
2000, incorporated by reference to Exhibit 10.65.1 to Edison
Mission Energy's Form 10-K for the year ended December 31,
2000.
10.65.2 Amendment Two to Guarantee by Edison Mission Energy
Supporting the Facility Agreement, dated as of May 29, 2001,
incorporated by reference to Exhibit 10.65.2 to Edison
Mission Energy's Form 10-Q for the quarter ended June 30,
2001.
10.66 Debt Service Reserve Guarantee, dated as of July 16, 1999,
made by Edison Mission Energy in favor of Bank of America
National Trust and Savings Association, incorporated by
reference to Exhibit 10.66 to Edison Mission Energy's Annual
Report on Form 10-K for the year ended December 31, 1999.
10.71 Indenture, dated as of May 27, 1999, between Edison Mission
Holdings Co. and United States Trust Company of New York, as
Trustee, incorporated by reference to Exhibit 4.1 to Edison
Mission Holdings Co.'s Registration Statement on Form S-4 to
the Securities and Exchange Commission on December 3, 1999.
II-11
EXHIBIT NO. DESCRIPTION
--------------------- -----------
10.75 Exchange and Registration Rights Agreement, dated as of May
27, 1999, by and among the Initial Purchasers named therein,
the Guarantors named therein and Edison Mission Holdings
Co., incorporated by reference to Exhibit 10.1 to Edison
Mission Holdings Co.'s Registration Statement on Form S-4 to
the Securities and Exchange Commission on December 3, 1999.
10.76 Agreement among Edward R. Muller, Edison International and
Edison Mission Energy concerning the terms of Mr. Muller's
employment separation, incorporated by reference to
Exhibit 10.76 to Edison Mission Energy's Form 10-Q for the
quarter ended March 31, 2000.
10.77 Agreement By and Between S. Linn Williams and Edison Mission
Energy dated February 5, 2000, incorporated by reference to
Exhibit 10.77 to Edison Mission Energy's Form 10-Q for the
quarter ended March 31, 2000.
10.78 Form of Agreement for 2000 Employee Awards under the Equity
Compensation Plan, incorporated by reference to
Exhibit 10.78 to Edison Mission Energy's Form 10-Q for the
quarter ended March 31, 2000.
10.79 Resolution regarding the computation of disability and
survivor benefits prior to age 55 for Alan J. Fohrer,
incorporated by reference to Exhibit 10.79 to Edison Mission
Energy's Form 10-Q for the quarter ended March 31, 2000.
10.81 Edison International 2000 Equity Plan, incorporated by
reference to Exhibit 10.1 to Edison International's
Form 10-Q for the quarter ended June 30, 2000. (File
No. 1-9936).
10.82 Form of Agreement for 2000 Employee Awards under the 2000
Equity Plan, incorporated by reference to Exhibit 10.2 to
Edison International's Form 10-Q for the quarter ended
June 30, 2000. (File No. 1-9936).
10.83 Amendment No. 1 to the Edison International Equity
Compensation Plan (as restated January 1, 1998),
incorporated by reference to Exhibit 10.4 to Edison
International's Form 10-Q for the quarter ended June 30,
2000. (File No. 1-9936).
10.84 Credit Agreement, dated May 30, 2000, among Edison Mission
Energy, Certain Commercial Lending Institutions and Bank of
America, N.A., incorporated by reference to Exhibit 10.84 to
Edison Mission Energy's Form 10-Q for the quarter ended
June 30, 2000.
10.84.1 Amendment One to Credit Agreement, dated as of August 17,
2000, by and among Edison Mission Energy, Certain Commercial
Lending Institutions and Bank of America, N.A. as
Administrative Agent, incorporated by reference to
Exhibit 10.84.1 to Edison Mission Energy's Form 10-K for the
year ended December 31, 2000.
10.84.2 Amendment Two to the U.S. $255 million Credit Agreement,
dated as of May 30, 2001, by and among Edison Mission
Energy, Certain Commercial Lending Institutions and Bank of
America, N.A. as Administrative Agent, incorporated by
reference to Exhibit 10.84.2 to Edison Mission Energy's
Form 10-Q for the quarter ended June 30, 2001.
10.85 Guarantee, dated as of June 23, 2000, in favor of EME/CDL
Trust and Midwest Generation, LLC made by Edison Mission
Energy, incorporated by reference to Exhibit 10.85 to Edison
Mission Energy's Form 10-K for the year ended December 31,
2000.
10.86 Power Purchase Agreement (Crawford, Fisk, Waukegan, Will
County, Joliet and Powerton Generating Stations), dated as
of December 15, 1999, between Commonwealth Edison Company
and Midwest Generation, LLC, incorporated by reference to
Exhibit 10.86 to Edison Mission Energy's Form 10-K for the
year ended December 31, 2000.
II-12
EXHIBIT NO. DESCRIPTION
--------------------- -----------
10.87 Power Purchase Agreement (Collins Generating Station), dated
as of December 15, 1999, between Commonwealth Edison Company
and Midwest Generation, LLC, incorporated by reference to
Exhibit 10.87 to Edison Mission Energy's Form 10-K for the
year ended December 31, 2000.
10.87.1 Amendment No. 1 to the Power Purchase Agreement, dated
July 12, 2000, between Commonwealth Edison Company and
Midwest Generation, LLC, incorporated by reference to
Exhibit 10.87.1 to Edison Mission Energy's Form 10-K for the
year ended December 31, 2000.
10.87.2 Amended and Restated Power Purchase Agreement (Collins
Generating Station), dated as of September 13, 2000, between
Commonwealth Edison Company and Midwest Generation, LLC,
incorporated by reference to Exhibit 10.87.2 to Edison
Mission Energy's Form 10-K for the year ended December 31,
2000.
10.88 Power Purchase Agreement (Crawford, Fisk, Waukegan, Calumet,
Joliet, Bloom, Electric Junction, Sabrooke and Lombard
Peaking Units), dated as of December 15, 1999, between
Commonwealth Edison Company and Midwest Generation, LLC,
incorporated by reference to Exhibit 10.88 to Edison Mission
Energy's Form 10-K for the year ended December 31, 2000.
10.89 Participation Agreement, dated as of June 23, 2000, among
Midwest Generation, LLC, Edison Mission Energy, EME/CDL
Trust, the Investor party to the Trust Agreement, Wilmington
Trust Company, the Persons listed as Noteholders on Schedule
I thereto, Citicorp North America, Inc. and Citicorp North
America, Inc., incorporated by reference to Exhibit 10.89 to
Edison Mission Energy's Form 10-K for the year ended
December 31, 2000.
10.89.1 Amendment One, dated as of August 17, 2000, by and among
Midwest Generation, LLC, Edison Mission Energy, EME/CDL
Trust, Citicorp Del-Lease, Inc., Wilmington Trust Company,
Certain Noteholders Party Thereto, Citicorp North
America, Inc. and Citicorp North America, Inc., incorporated
by reference to Exhibit 10.89.1 to Edison Mission Energy's
Form 10-K for the year ended December 31, 2000.
10.90 Reimbursement Agreement, dated as of August 17, 2000,
between Edison Mission Energy and Midwest Generation, LLC,
incorporated by reference to Exhibit 10.90 to Edison Mission
Energy's Form 10-K for the year ended December 31, 2000.
10.91 Supplemental Agreement, dated as of May 30, 2001, to
Amendment Two to the Second Amended and Restated U.S. $425
million Bank of America, N.A. Credit Agreement dated as of
May 30, 2001, Amendment Three to the U.S. $595 million
Credit Agreement dated as of May 30, 2001 and Amendment Two
to the U.S. $255 million Credit Agreement dated as of May
30, 2001, incorporated by reference to Exhibit 10.91 to
Edison Mission Energy's Form 10-Q for the quarter ended
June 30, 2001.
10.92 Credit Agreement, dated as of September 13, 2001, among
Edison Mission Energy, Certain Commercial Lending
Institutions, Citicorp USA, Inc., as Administrative Agent,
and Citibank, N.A. as Issuing Lender.+
12.1 Statement regarding the computation of ratio of earnings to
fixed charges for Edison Mission Energy.*
21.1 List of Subsidiaries of Edison Mission Energy.*
23.1 Consent of Arthur Andersen LLP.+
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1).*
II-13
EXHIBIT NO. DESCRIPTION
--------------------- -----------
25.1 Statement of Eligibility and Qualification on Form T-1 of
The Bank of New York for the 10% Senior Notes.*
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Letter to Clients.*
99.4 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.*
------------------------
+ Filed herewith.
* Previously filed.
II-14
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933.
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering
range may be reflected in the form of prospectus filed with the SEC
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement
II-15
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) For purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of 1934 (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the registration statement shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(b) The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d) The undersigned Registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
II-16
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Irvine, State of
California, on the 27th day of September, 2001.
EDISON MISSION ENERGY
(Registrant)
By: /s/ KEVIN M. SMITH
-----------------------------------------
Kevin M. Smith
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
SIGNATURE TITLE DATE
--------- ----- ----
/s/ ALAN J. FOHRER Director, Chief Executive Officer, September 27, 2001
------------------------------------ and President (Principal
Alan J. Fohrer Executive Officer)
/s/ KEVIN M. SMITH Senior Vice President and Chief September 27, 2001
------------------------------------ Financial Officer (Principal
Kevin M. Smith Financial and Accounting
Officer)
/s/ JOHN E. BRYSON Director and Chairman of the Board September 27, 2001
------------------------------------
John E. Bryson
/s/ BRYANT C. DANNER Director September 27, 2001
------------------------------------
Bryant C. Danner
II-17
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
--------------------- -----------
1.1 Purchase Agreement, dated as of August 7, 2001, among Edison
Mission Energy and Credit Suisse First Boston Corporation,
BMO Nesbitt Burns Corp., Salomon Smith Barney Inc., SG Cowen
Securities Corporation, TD Securities (USA) Inc. and
Westdeutsche Landesbank Girozentrale (Dusseldorf).*
2.1 Agreement for the Sale and Purchase of Shares in First Hydro
Limited, dated December 21, 1995, between PSB Holding
Limited and First Hydro Finance Plc, incorporated by
reference to Exhibit 2.1 to Edison Mission Energy's
Form 8-K dated December 21, 1995.
2.2 Transaction Implementation Agreement, dated March 29, 1997,
between The State Electricity Commission of Victoria, Edison
Mission Energy Australia Limited, Loy Yang B Power Station
Pty Ltd, Loy Yang Power Limited, The Honorable Alan Robert
Stockdale, Leanne Power Pty Ltd and Edison Mission Energy,
incorporated by reference to Exhibit 2.2 to Edison Mission
Energy's Form 8-K dated May 22, 1997.
2.3 Stock Purchase and Assignment Agreement, dated December 23,
1998, between KES Puerto Rico, L.P., KENETECH Energy
Systems, Inc., KES Bermuda, Inc. and Edison Mission Energy
del Caribe for the (i) sale and purchase of KES Puerto Rico,
L.P.'s shares in EcoElectrica Holdings Ltd.;
(ii) assignment of KENETECH Energy Systems' rights and
interests in that certain Project Note from the Partnership;
and (iii) assignment of KES Bermuda, Inc.'s rights and
interests in that certain Administrative Services Agreement
dated October 31 1997, incorporated by reference to
Exhibit 2.3 to Edison Mission Energy's 10-K for the year
ended December 31, 1998.
2.4 Asset Purchase Agreement, dated August 1, 1998, between
Pennsylvania Electric Company, NGE Generation, Inc., New
York State Electric & Gas Corporation and Mission Energy
Westside, Inc., incorporated by reference to Exhibit 2.4 to
Edison Mission Energy's 10-K for the year ended
December 31, 1998.
2.5 Asset Sale Agreement, dated March 22, 1999, between
Commonwealth Edison Company and Edison Mission Energy as to
the Fossil Generating Assets, incorporated by reference to
Exhibit 2.5 to Edison Mission Energy's Form 10-K for the
year ended December 31, 1998.
2.6 Agreement for the Sale and Purchase of Shares in Contact
Energy Limited, dated March 10, 1999, between Her Majesty
the Queen in Right of New Zealand, Edison Mission Energy
Taupo Limited and Edison Mission Energy, incorporated herein
by reference to Exhibit 2.6 to the Edison Mission Energy's
Form 10-Q for the quarter ended March 31, 1999.
2.7 Sale, Purchase and Leasing Agreement between PowerGen UK plc
and Edison First Power Limited for the purchase of the
Ferrybridge C Power Station, incorporated by reference to
Exhibit 2.7 to Edison Mission Energy's Form 8-K/A dated
July 19, 1999.
2.8 Sale, Purchase and Leasing Agreement between PowerGen UK plc
and Edison First Power Limited for the purchase of the
Fiddler's Ferry Power Station, incorporated by reference to
Exhibit 2.8 to Edison Mission Energy's Form 8-K/A, dated
July 19, 1999.
2.9 Purchase and Sale Agreement, dated May 10, 2000, between
Edison Mission Energy, P & L Coal Holdings Corporation and
Gold Fields Mining Corporation, incorporated by reference to
Exhibit 2.9 to Edison Mission Energy's 10-Q for the quarter
ended September 30, 2000.
2.10 Asset Purchase Agreement, dated 3 March 2000, between MEC
International B.V. and UPC International Partnership CV II,
incorporated by reference to Exhibit 10.80 to Edison Mission
Energy's Form 10-Q for the quarter ended March 31, 2000.
EXHIBIT NO. DESCRIPTION
--------------------- -----------
2.11 Stock Purchase Agreement, dated November 17, 2000, between
Mission Del Sol, LLC and Texaco Inc., incorporated by
reference to Exhibit 2.11 to Edison Mission Energy's
Form 10-K for the year ended December 31, 2000.
3.1 First Amended and Restated Articles of Incorporation of
Edison Mission Energy. Originally filed with Edison Mission
Energy's Registration Statement on Form 10 to the Securities
and Exchange Commission on September 30, 1994 and amended by
Amendment No. 1 thereto dated November 19, 1994 and
Amendment No. 2 thereto dated November 21, 1994 (as so
amended, the "Form 10"), incorporated by reference to
Exhibit 3.1 to Edison Mission Energy's Form 10-K for the
year ended December 31, 2000.
3.1.1 Certificate of Amendment of Articles of Incorporation of
Edison Mission Energy dated October 18, 1988, originally
filed with Edison Mission Energy's Form 10, incorporated by
reference to Exhibit 3.1.1 to Edison Mission Energy's
Form 10-K for the year ended December 31, 2000.
3.1.2 Certificate of Amendment of Articles of Incorporation of
Edison Mission Energy dated January 17, 2001, incorporated
by reference to Exhibit 3.1.2 to Edison Mission Energy's
Form 10-K for the year ended December 31, 2000.
3.1.3 Certificate of Amendment of Articles of Incorporation of
Edison Mission Energy dated July 2, 2001, incorporated by
reference to Exhibit 3.1.3 to Edison Mission Energy's 10-Q
for the quarter ended June 30, 2001.
3.2 By-Laws of Edison Mission Energy as amended to and including
January 1, 2000, incorporated by reference to Exhibit 3.2 to
Edison Mission Energy's Form 10-K for the year ended
December 31, 2000.
3.2.1 Amendment to By-Laws of Edison Mission Energy dated
January 15, 2001, incorporated by reference to
Exhibit 3.2.1 to Edison Mission Energy's Form 10-K for the
year ended December 31, 2000.
4.1 Indenture, dated as of August 10, 2001, among Edison Mission
Energy and The Bank of New York as Trustee. *
4.1.1 Form of 10% Senior Note due 2008 (included in Exhibit 4.1).
*
4.2 Registration Rights Agreement, dated as of August 7, 2001,
among Edison Mission Energy, Credit Suisse First Boston
Corporation, BMO Nesbitt Burns Corp., Salomon Smith Barney
Inc., SG Cowen Securities Corporation, TD Securities (USA)
Inc. and Westdeutsche Landesbank Girozentrale (Dusseldorf).
*
4.3 Indenture, dated as of April 5, 2001, among Edison Mission
Energy and United States Trust Company of New York as
Trustee, incorporated by reference to Exhibit 4.20 to Edison
Mission Energy's and Midwest Generation LLC's Registration
Statement on Form S-4 to the Securities and Exchange
Commission on April 20, 2001.
4.3.1 Form of 9.875% Senior Note due 2011 (included in
Exhibit 4.1 to Edison Mission Energy's Registration
Statement on Form S-4 to the Securities and Exchange
Commission on April 24, 2001.)
4.4 Registration Rights Agreement, dated as of April 2, 2001,
among Edison Mission Energy and Credit Suisse First Boston
Corporation and Westdeutsche Landesbank Girozentrale
(Dusseldorf) as representatives of the Initial Purchasers,
incorporated by reference to Exhibit 4.2 to Edison Mission
Energy's Registration Statement on Form S-4 to the
Securities and Exchange Commission on April 24, 2001.
4.5 Guarantee, dated as of August 17, 2000, made by Edison
Mission Energy, as Guarantor in favor of Powerton Trust I,
as Owner Lessor, incorporated by reference to Exhibit 4.9 to
Edison Mission Energy's and Midwest Generation LLC's
Registration Statement on Form S-4 to the Securities and
Exchange Commission on April 20, 2001.
EXHIBIT NO. DESCRIPTION
--------------------- -----------
4.5.1 Schedule identifying substantially identical agreement to
Guarantee constituting Exhibit 4.5 hereto, incorporated by
reference to Exhibit 4.9.1 to Edison Mission Energy's and
Midwest Generation LLC's Registration Statement on Form S-4
to the Securities and Exchange Commission on April 20, 2001.
4.6 Guarantee, dated as of August 17, 2000, made by Edison
Mission Energy, as Guarantor in favor of Joliet Trust I, as
Owner Lessor, incorporated by reference to Exhibit 4.10 to
Edison Mission Energy's and Midwest Generation LLC's
Registration Statement on Form S-4 to the Securities and
Exchange Commission on April 20, 2001.
4.6.1 Schedule identifying substantially identical agreement to
Guarantee constituting Exhibit 4.6 hereto, incorporated by
reference to Exhibit 4.10.1 to Edison Mission Energy's and
Midwest Generation LLC's Registration Statement on Form S-4
to the Securities and Exchange Commission on April 20, 2001.
4.7 Registration Rights Agreement, dated as of August 17, 2000,
among Edison Mission Energy, Midwest Generation, LLC and
Credit Suisse First Boston Corporation and Lehman Brothers
Inc., as representatives of the Initial Purchasers,
incorporated by reference to Exhibit 4.11 to Edison Mission
Energy's and Midwest Generation LLC's Registration Statement
on Form S-4 to the Securities and Exchange Commission on
April 20, 2001.
4.8 Participation Agreement (T1), dated as of August 17, 2000,
by and among, Midwest Generation, LLC, Powerton Trust I, as
the Owner Lessor, Wilmington Trust Company, as the Owner
Trustee, Powerton Generation I, LLC, as the Owner
Participant, Edison Mission Energy, United States Trust
Company of New York, as the Lease Indenture Trustee, and
United States Trust Company of New York, as the Pass Through
Trustees, incorporated by reference to Edison Mission
Energy's and Midwest Generation LLC's Registration Statement
on Form S-4 to the Securities and Exchange Commission on
April 20, 2001.
4.8.1 Schedule identifying substantially identical agreement to
Participation Agreement constituting Exhibit 4.8 hereto,
incorporated by reference to Exhibit 4.12.1 to Edison
Mission Energy's and Midwest Generation LLC's Registration
Statement on Form S-4 to the Securities and Exchange
Commission on April 20, 2001.
4.9 Participation Agreement (T1), dated as of August 17, 2000,
by and among, Midwest Generation, LLC, Joliet Trust I, as
the Owner Lessor, Wilmington Trust Company, as the Owner
Trustee, Joliet Generation I, LLC, as the Owner Participant,
Edison Mission Energy, United States Trust Company of New
York, as the Lease Indenture Trustee and United States Trust
Company of New York, as the Pass Through Trustees,
incorporated by reference to Exhibit 4.13 to Edison Mission
Energy's and Midwest Generation LLC's Registration Statement
on Form S-4 to the Securities and Exchange Commission on
April 20, 2001.
4.9.1 Schedule identifying substantially identical agreement to
Participation Agreement constituting Exhibit 4.9 hereto,
incorporated by reference to Exhibit 4.13.1 to Edison
Mission Energy's and Midwest Generation LLC's Registration
Statement on Form S-4 to the Securities and Exchange
Commission on April 20, 2001.
4.10 Copy of the Global Debenture representing Edison Mission
Energy's 9 7/8% Junior Subordinated Deferrable Interest
Debentures, Series A, Due 2024, incorporated by reference to
Exhibit 4.1 to Edison Mission Energy's Form 10-K for the
year ended December 31, 1994.
4.11 Conformed copy of the Indenture, dated as of November 30,
1994, between Edison Mission Energy and The First National
Bank of Chicago, as Trustee, incorporated by reference to
Exhibit 4.2 to Edison Mission Energy's Form 10-K for the
year ended December 31, 1994.
EXHIBIT NO. DESCRIPTION
--------------------- -----------
4.11.1 First Supplemental Indenture, dated as of November 30, 1994,
to Indenture dated as of November 30, 1994 between Edison
Mission Energy and The First National Bank of Chicago, as
Trustee, incorporated by reference to Exhibit 4.2.1 to
Edison Mission Energy's Form 10-K for the year ended
December 31, 1994.
4.11.2 Second Supplemental Indenture, dated as of August 8, 1995,
to Indenture dated as of November 30, 1994 between Edison
Mission Energy and The First National Bank of Chicago, as
Trustee.*
4.12 Indenture, dated as of June 28, 1999, between Edison Mission
Energy and The Bank of New York, as Trustee, incorporated by
reference to Exhibit 4.1 to Edison Mission Energy's
Registration Statement on Form S-4 to the Securities and
Exchange Commission on February 18, 2000.
4.12.1 First Supplemental Indenture, dated as of June 28, 1999, to
Indenture dated as of June 28, 1999, between Edison Mission
Energy and The Bank of New York, as Trustee, incorporated by
reference to Exhibit 4.2 to Edison Mission Energy's
Registration Statement on Form S-4 to the Securities and
Exchange Commission on February 18, 2000.
4.13 Copy of the Security representing Edison Mission Energy's
8 1/8% Senior Notes Due 2002, incorporated by reference to
Exhibit 4.4 to Edison Mission Energy's Form 10-K for the
year ended December 31, 2000.
4.14 Promissory Note ($499,450,800), dated as of August 24, 2000,
by Edison Mission Energy in favor of Midwest Generation,
LLC, incorporated by reference to Exhibit 4.5 to Edison
Mission Energy's Form 10-K for the year ended December 31,
2000.
4.14.1 Schedule identifying substantially identical agreements to
Promissory Note constituting Exhibit 4.14 hereto,
incorporated by reference to Exhibit 4.5.1 to Edison Mission
Energy's Form 10-K for the year ended December 31, 2000.
4.15 Promissory Note, dated as of June 23, 2000, by Edison
Mission Energy in favor of Midwest Generation, LLC,
incorporated by reference to Exhibit 4.6 to Edison Mission
Energy's Form 10-K for the year ended December 31, 2000.
5.1 Opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special
counsel to Edison Mission Energy, as to the legality of the
Notes being registered hereby.*
10.1 Registration Rights Agreement, dated as of June 23, 1999,
between Edison Mission Energy and the Initial Purchasers
specified therein, incorporated by reference to
Exhibit 10.1 to Edison Mission Energy's Registration
Statement on Form S-4 to the Securities and Exchange
Commission on February 18, 2000.
10.8 Power Purchase Contract between Southern California Edison
Company and Arco Petroleum Products Company (Watson
Refinery), incorporated by reference to Exhibit 10.8 to
Edison Mission Energy's Form 10.
10.9 Power Supply Agreement between State Electricity Commission
of Victoria, Loy Yang B Power Station Pty. Ltd. and the
Company Australia Pty. Ltd., as managing partner of the
Latrobe Power Partnership, dated December 31, 1992,
incorporated by reference to Exhibit 10.9 to Edison Mission
Energy's Form 10.
10.10 Power Purchase Agreement between P.T. Paiton Energy Company
as Seller and Perusahaan Umum Listrik Negara as Buyer, dated
February 12, 1994, incorporated by reference to
Exhibit 10.10 to Edison Mission Energy's Form 10.
10.11 Amended and Restated Power Purchase Contract between
Southern California Energy Company and Midway-Sunset
Cogeneration Company, dated May 5, 1988, incorporated by
reference to Exhibit 10.11 to Edison Mission Energy's
Form 10.
EXHIBIT NO. DESCRIPTION
--------------------- -----------
10.12 Parallel Generation Agreement between Kern River
Cogeneration Company and Southern California Energy Company,
dated January 6, 1984, incorporated by reference to
Exhibit 10.12 to Edison Mission Energy's Form 10.
10.13 Parallel Generation Agreement between Kern River
Cogeneration (Sycamore Project) Company and Southern
California Energy Company, dated December 18, 1984,
incorporated by reference to Exhibit 10.13 to Edison Mission
Energy's Form 10.
10.15 Conformed copy of the Second Amended and Restated U.S. $500
million Bank of America National Trust and Savings
Association Credit Agreement, dated as of October 11, 1996,
incorporated by reference to Exhibit 10.15.3 to Edison
Mission Energy's Form 10-K for the year ended December 31,
1996.
10.15.1 Amendment One to Second Amended and Restated U.S. $500
million Bank of America National Trust and Savings
Association Credit Agreement, dated as of August 17, 2000,
incorporated by reference to Exhibit 10.15.1 to Edison
Mission Energy's Form 10-K for the year ended December 31,
2000.
10.15.2 Amendment Two to Second Amended and Restated U.S. $425
million Bank of America, N.A. Credit Agreement, dated as of
May 30, 2001, incorporated by reference to Exhibit 10.15.2
to Edison Mission Energy's Form 10-Q for the quarter ended
June 30, 2001.
10.16 Amended and Restated Ground Lease Agreement between Texaco
Refining and Marketing Inc. and March Point Cogeneration
Company, dated August 21, 1992, incorporated by reference to
Exhibit 10.16 to Edison Mission Energy's Form 10.
10.16.1 Amendment No. 1 to Amended and Restated Ground Lease
Agreement between Texaco Refining and Marketing Inc. and
March Point Cogeneration Company, dated August 21, 1992,
incorporated by reference to Exhibit 10.16 to Edison Mission
Energy's Form 10.
10.17 Memorandum of Agreement between Atlantic Richfield Company
and Products Cogeneration Company, dated September 17, 1987,
incorporated by reference to Exhibit 10.17 to Edison Mission
Energy's Form 10.
10.18 Memorandum of Ground Lease between Texaco Producing Inc. and
Sycamore Cogeneration Company, dated January 19, 1987,
incorporated by reference to Exhibit 10.18 to Edison
Mission Energy's Form 10.
10.19 Amended and Restated Memorandum of Ground Lease between
Getty Oil Company and Kern River Cogeneration Company, dated
November 14, 1984, incorporated by reference to
Exhibit 10.19 to Edison Mission Energy's Form 10.
10.20 Memorandum of Lease between Sun Operating Limited
Partnership and Midway-Sunset Cogeneration Company,
incorporated by reference to Exhibit 10.20 to Edison Mission
Energy's Form 10.
10.21 Executive Supplemental Benefit Program, incorporated by
reference to Exhibits to Forms 10-K filed by SCEcorp (File
No. 1-2313).
10.22 1981 Deferred Compensation Agreement, incorporated by
reference to Exhibits to Forms 10-K filed by SCEcorp (File
No. 1-2313).
10.23 1985 Deferred Compensation Agreement for Executives,
incorporated by reference to Exhibits to Forms 10-K filed by
SCEcorp (File No. 1-2313).
10.24 1987 Deferred Compensation Plan for Executives, incorporated
by reference to Exhibits to Forms 10-K filed by SCEcorp
(File No. 1-2313).
10.25 1988 Deferred Compensation Plan for Executives, incorporated
by reference to Exhibits to Forms 10-K filed by SCEcorp
(File No. 1-2313).
10.26 1989 Deferred Compensation Plan for Executives, incorporated
by reference to Exhibits to Forms 10-K filed by SCEcorp
(File No. 1-9936).
EXHIBIT NO. DESCRIPTION
--------------------- -----------
10.27 1990 Deferred Compensation Plan for Executives, incorporated
by reference to Exhibits to Forms 10-K filed by SCEcorp
(File No. 1-9936).
10.28 Annual Deferred Compensation Plan for Executives,
incorporated by reference to Exhibits to Forms 10-K filed by
SCEcorp (File No. 1-9936).
10.29 Executive Retirement Plan for Executives, incorporated by
reference to Exhibits to Forms 10-K filed by SCEcorp (File
No. 1-2313).
10.31 Estate and Financial Planning Program for Executive
Officers, incorporated by reference to Exhibits to Forms
10-K filed by SCEcorp (File No 1-9936).
10.32 Letter Agreement with Edward R. Muller, incorporated by
reference to Exhibit 10.32 to Edison Mission Energy's
Form 10.
10.33 Agreement with James S. Pignatelli, incorporated by
reference to Exhibit 10.33 to Edison Mission Energy's
Form 10.
10.34 Conformed copy of the Guarantee Agreement dated as of
November 30, 1994, incorporated by reference to
Exhibit 10.34 to Edison Mission Energy's Form 10.
10.35 Indenture of Lease between Brooklyn Navy Yard Development
Corporation and Cogeneration Technologies, Inc., dated as of
December 18, 1989, incorporated by reference to
Exhibit 10.35 to Edison Mission Energy's Form 10-K for the
year ended December 31, 1994.
10.35.1 First Amendment to Indenture of Lease between Brooklyn Navy
Yard Development Corporation and Cogeneration
Technologies, Inc., dated November 1, 1991, incorporated by
reference to Exhibit 10.35.1 to Edison Mission Energy's
Form 10-K for the year ended December 31, 1994.
10.35.2 Second Amendment to Indenture of Lease between Brooklyn Navy
Yard Development Corporation and Cogeneration
Technologies, Inc., dated June 3, 1994, incorporated by
reference to Exhibit 10.35.2 to Edison Mission Energy's
Form 10-K for the year ended December 31, 1994.
10.35.3 Third Amendment to Indenture of Lease between Brooklyn Navy
Yard Development Corporation and Cogeneration
Technologies, Inc., dated December 12, 1994, incorporated by
reference to Exhibit 10.35.3 to Edison Mission Energy's
Form 10-K for the year ended December 31, 1994.
10.37 Amended and Restated Limited Partnership Agreement of
Mission Capital, L.P., dated as of November 30, 1994,
incorporated by reference to Exhibit 10.37 to Edison Mission
Energy's Form 10-K for the year ended December 31, 1994.
10.38 Action of General Partner of Mission Capital, L.P. creating
the 9 7/8% Cumulative Monthly Income Preferred Securities,
Series A, dated as of November 30, 1994, incorporated by
reference to Exhibit 10.38 to Edison Mission Energy's
Form 10-K for the year ended December 31, 1994.
10.39 Action of General Partner of Mission Capital, L.P., creating
the 8 1/2% Cumulative Monthly Income Preferred Securities,
Series B, dated as of August 8, 1995, incorporated by
reference to Exhibit 10.39 to Edison Mission Energy's
Form 10-Q for the quarter ended June 30, 1995.
10.40 Power Purchase Contract between ISAB Energy, S.r.l. as
Seller and Enel, S.p.A. as Buyer, dated June 9, 1995,
incorporated by reference to Exhibit 10.40 to Edison Mission
Energy's Form 10-Q for the quarter ended June 30, 1995.
10.41 400 million sterling pounds Barclays Bank Plc Credit
Agreement, dated December 18, 1995, incorporated by
reference to Exhibit 10.41 to Edison Mission Energy's
Form 8-K, dated December 21, 1995.
EXHIBIT NO. DESCRIPTION
--------------------- -----------
10.44 Guarantee by Edison Mission Energy, dated December 20, 1996,
in favor of The Fuji Bank, Limited, Los Angeles Agency, to
secure Camino Energy Company's payments pursuant to Camino
Energy Company's Credit Agreement and Defeasance Agreement,
incorporated by reference to Exhibit 10.44 to Edison Mission
Energy's Form 10-K for the year ended December 31, 1996.
10.45 Power Purchase Agreement between National Power Corporation
and San Pascual Cogeneration Company International B.V.,
dated September 10, 1997, incorporated by reference to
Exhibit 10.45 to Edison Mission Energy's Form 10-K for the
year ended December 31, 1997.
10.46 Power Purchase Agreement between Gulf Power Generation Co.,
LTD., and Electricity Generating Authority of Thailand,
dated December 22, 1997, incorporated by reference to
Exhibit 10.46 to Edison Mission Energy's Form 10-K for the
year ended December 31, 1997.
10.49 Equity Support Guarantee by Edison Mission Energy, dated
December 23, 1998, in favor of ABN AMRO Bank N.V., and the
Chase Manhattan Bank to guarantee certain equity funding
obligations of EcoElectrica Ltd. and EcoElectrica Holdings
Ltd. pursuant to EcoElectrica Ltd.'s Credit Agreement dated
as of October 31, 1997, incorporated by reference to
Exhibit 10.49 to Edison Mission Energy's Form 10-K for the
year ended December 31, 1998.
10.50 Master Guarantee and Support Instrument by Edison Mission
Energy, dated December 23, 1998, in favor of ABN AMRO Bank
N.V., and the Chase Manhattan Bank to guarantee the
availability of funds to purchase fuel for the EcoElectrica
project pursuant to EcoElectrica Ltd.'s Credit Agreement
dated as of October 31, 1997 and Intercreditor Agreement
dated as of October 31, 1997, incorporated by reference to
Exhibit 10.50 to Edison Mission Energy's Form 10-K for the
year ended December 31, 1998.
10.51 Guarantee Assumption Agreement from Edison Mission Energy,
dated December 23, 1998, under which Edison Mission Energy
assumed all of the obligations of KENETECH Energy
Systems, Inc. to Union Carbide Caribe Inc., under the
certain Guaranty dated November 25, 1997, incorporated by
reference to Exhibit 10.51 to Edison Mission Energy's
Form 10-K for the year ended December 31, 1998.
10.52 Transition Power Purchase Agreement, dated August 1, 1998,
between New York State Electric & Gas Corporation and
Mission Energy Westside, Inc, incorporated by reference to
Exhibit 10.52 to Edison Mission Energy's Form 10-K for the
year ended December 31, 1998.
10.54 Guarantee, dated August 1, 1998, between Edison Mission
Energy, Pennsylvania Electric Company, NGE Generation, Inc.
and New York State Electric & Gas Corporation, incorporated
by reference to Exhibit 10.54 to Edison Mission Energy's
Form 10-K for the year ended December 31, 1998.
10.55 Credit Agreement, dated March 18, 1999, among Edison Mission
Holdings Co. and Certain Commercial Lending Institutions,
and Citicorp USA, Inc., incorporated by reference to
Exhibit 10.55 to Edison Mission Energy's Form 8-K dated
March 18, 1999.
10.56 Guarantee and Collateral Agreement made by Edison Mission
Holdings Co., Edison Mission Finance Co., Homer City
Property Holdings, Inc., Chestnut Ridge Energy Co., Mission
Energy Westside, Inc., EME City Generation L.P. and Edison
Mission Energy in favor of United States Trust Company of
New York, dated as of March 18, 1999, incorporated by
reference to Exhibit 10.56 to Edison Mission Energy's
Form 8-K dated March 18, 1999.
EXHIBIT NO. DESCRIPTION
--------------------- -----------
10.56.1 Amendment No. 1 to the Guarantee and Collateral Agreement,
dated May 27, 1999, between Edison Mission Holdings, Edison
Mission Finance Co., Homer City Property Holdings, Inc.,
Chestnut Ridge Energy Company, Mission Energy
Westside, Inc., EME Homer City Generation L.P. and Edison
Mission Energy in favor of United States Trust Company of
New York, incorporated by reference to Exhibit 10.56.1 to
Amendment No. 1 of Edison Mission Holdings Co.'s
Registration Statement on Form S-4 to the Securities and
Exchange Commission on February 8, 2000.
10.56.2 Open-End Mortgage, Security Agreement and Assignment of
Leases and Rents, dated March 18, 1999 from EME Homer City
Generation L.P. to United States Trust Company of New York,
incorporated by reference to Exhibit 10.56.2 to Amendment
No. 1 of Edison Mission Holdings Co.'s Registration
Statement on Form S-4 to the Securities and Exchange
Commission on February 8, 2000.
10.56.3 Amendment No. 1 to the Open-End Mortgage, Security Agreement
and Assignment of Leases and Rents, dated May 27, 1999, from
EME Homer City Generation L.P. to United States Trust
Company of New York, incorporated by reference to
Exhibit 10.56.3 to Amendment No. 1 of Edison Mission
Holdings Co.'s Registration Statement on Form S-4 to the
Securities and Exchange Commission on February 8, 2000.
10.57 Collateral Agency and Intercreditor Agreement among Edison
Mission Holdings Co., Edison Mission Finance Co., Homer City
Property Holdings, Inc., Chestnut Ridge Energy Co., Mission
Energy Westside, Inc., EME Homer City Generation L.P., The
Secured Parties' Representatives, Citicorp USA, Inc. as
Administrative Agent and United States Trust Company of New
York as Collateral Agent, dated as of March 18, 1999,
incorporated by reference to Exhibit 10.57 to Edison Mission
Energy's Form 8-K dated March 18, 1999.
10.58 Security Deposit Agreement among Edison Mission Holdings
Co., Edison Mission Finance Co., Homer City Property
Holdings, Inc., Chestnut Ridge Energy Co., Mission Energy
Westside, Inc., EME Homer City Generation L.P. and United
States Trust Company of New York, as Collateral Agent, dated
as of March 18, 1999, incorporated by reference to
Exhibit 10.58 to Edison Mission Energy's Form 8-K dated
March 18, 1999.
10.58.1 Amendment No. 1 to the Security Deposit Agreement, dated May
27, 1999, between Edison Mission Holdings, Edison Mission
Finance Co., Homer City Property Holdings, Inc., Chestnut
Ridge Energy Company, Mission Energy Westside, Inc., EME
Homer City Generation L.P. and United States Trust Company
of New York, as Collateral Agent, incorporated by reference
to Exhibit 10.58.1 to Amendment No. 1 of Edison Mission
Holdings Co.'s Registration Statement on Form S-4 to the
Securities and Exchange Commission on February 8, 2000.
10.59 Credit Support Guarantee, dated as of March 18, 1999, made
by Edison Mission Energy in favor of United States Trust
Company of New York, incorporated by reference to
Exhibit 10.59 to Edison Mission Energy's Form 8-K dated
March 18, 1999.
10.59.1 Amendment No. 1 to the Credit Support Guarantee, dated May
27, 1999, made by Edison Mission Energy in favor of United
States Trust Company of New York, incorporated by reference
to Exhibit 10.59.1 to Amendment No. 1 of Edison Mission
Holdings Co.'s Registration Statement on Form S-4 to the
Securities and Exchange Commission on February 8, 2000.
10.60 Debt Service Reserve Guarantee, dated as of March 18, 1999,
made by Edison Mission Energy in favor of United States
Trust Company of New York on behalf of the various financial
institutions (Lenders) as are or may become parties to the
Credit Agreement, dated as of March 18, 1999, among Edison
Mission Holdings Co., the Lenders and Citicorp USA, Inc.,
incorporated by reference to Exhibit 10.60 to Edison Mission
Energy's Form 8-K dated March 18, 1999.
EXHIBIT NO. DESCRIPTION
--------------------- -----------
10.60.1 Amendment No. 1 to the Debt Service Reserve Guarantee, dated
May 27, 1999, made by Edison Mission Energy in favor of
United States Trust Company of New York, incorporated by
reference to Exhibit 10.60.1 to Amendment No. 1 of Edison
Mission Holdings Co.'s Registration Statement on Form S-4 to
the Securities and Exchange Commission on February 8, 2000.
10.60.2 Amendment No. 2 to the Debt Service Reserve Guarantee, dated
as of March 18, 1999, made by Edison Mission Energy in favor
of United States Trust Company of New York, incorporated by
reference to Exhibit 10.60.2 to Edison Mission Energy's
Form 10-Q for the quarter ended June 30, 2001.
10.60.3 Bond Debt Service Reserve Guarantee, dated May 27, 1999,
made by Edison Mission Energy in favor of United States
Trust Company of New York, incorporated by reference to
Exhibit 10.60.2 to Amendment No. 1 of Edison Mission Holding
Co.'s Registration Statement on Form S-4 to the Securities
and Exchange Commission on February 8, 2000.
10.60.4 Intercompany Loan Subordination Agreement, dated March 18,
1999, among Edison Mission Holdings Co., Edison Mission
Finance Co., Homer City Property Holdings, Inc., Chestnut
Ridge Energy Co., Mission Energy Westside, Inc., EME Homer
City Generation L.P. and United States Trust Company of New
York, incorporated by reference to Exhibit 10.60.3 to
Amendment No. 2 of Edison Mission Holdings Co.'s
Registration Statement on Form S-4 to the Securities and
Exchange Commission on February 29, 2000.
10.61 Credit Agreement, dated March 18, 1999, among Edison Mission
Energy and Certain Commercial Lending Institutions, and
Citicorp USA, Inc., incorporated by reference to
Exhibit 10.61 to Edison Mission Energy's Form 8-K dated
March 18, 1999.
10.61.1 Amendment One to Credit Agreement, dated as of August 17,
2000, by and among Edison Mission Energy, Certain Commercial
Lending Institutions, and Citicorp USA, Inc., as
Administrative Agent, incorporated by reference to
Exhibit 10.61.1 to Edison Mission Energy's Form 10-K for the
year ended December 31, 2000.
10.61.2 Amendment Two to Credit Agreement, dated as of March 15,
2001, by and among Edison Mission Energy, certain commercial
lending institutions, and Citicorp USA, Inc., as
Administrative Agent, incorporated by reference to
Exhibit 10.61.2 to Edison Mission Energy's Form 10-Q for the
quarter ended June 30, 2001.
10.61.3 Amendment Three to the U.S. $595 million Credit Agreement,
dated as of May 30, 2001, by and among Edison Mission
Energy, certain commercial lending institutions, and
Citicorp USA, Inc., as Administrative Agent, incorporated by
reference to Exhibit 10.61.3 to Edison Mission Energy's
Form 10-Q for the quarter ended June 30, 2001.
10.62 Edison Power Limited L1,150,000,000 Guaranteed Secured
Variable Rate Bonds due 2019 Guaranteed by Maplekey UK
Limited, incorporated by reference to Exhibit 10.62 to
Edison Mission Energy's Form 8-K, dated July 19, 1999.
10.64 Coal and Capex Facility Agreement, dated July 16, 1999
between EME Finance UK Limited, Barclay's Capital and Credit
Suisse First Boston, The Financial Institutions named as
Banks, and Barclays Bank PLC as Facility Agent, incorporated
by reference to Exhibit 10.64 to Edison Mission Energy's
Form 10-Q for the quarter ended September 30, 1999.
10.64.1 Amendment One to Coal and Capex Facility Agreement, dated as
of May 29, 2001, by and among Edison Mission Energy Finance
UK Limited and Barclays Bank PLC, as Facility Agent,
incorporated by reference to Exhibit 10.64.1 to Edison
Mission Energy's Form 10-Q for the quarter ended June 30,
2001.
EXHIBIT NO. DESCRIPTION
--------------------- -----------
10.65 Guarantee by Edison Mission Energy dated July 16, 1999
supporting the Coal and Capex Facility Agreement (Facility
Agreement) issued by Barclays Bank PLC to secure EME Finance
UK Limited obligations pursuant to the Facility Agreement,
incorporated by reference to Exhibit 10.65 to Edison Mission
Energy's Form 10-Q for the quarter ended September 30, 1999.
10.65.1 Amendment One to Guarantee by Edison Mission Energy
supporting the Facility Agreement, dated as of August 17,
2000, incorporated by reference to Exhibit 10.65.1 to Edison
Mission Energy's Form 10-K for the year ended December 31,
2000.
10.65.2 Amendment Two to Guarantee by Edison Mission Energy
Supporting the Facility Agreement, dated as of May 29, 2001,
incorporated by reference to Exhibit 10.65.2 to Edison
Mission Energy's Form 10-Q for the quarter ended June 30,
2001.
10.66 Debt Service Reserve Guarantee, dated as of July 16, 1999,
made by Edison Mission Energy in favor of Bank of America
National Trust and Savings Association, incorporated by
reference to Exhibit 10.66 to Edison Mission Energy's Annual
Report on Form 10-K for the year ended December 31, 1999.
10.71 Indenture, dated as of May 27, 1999, between Edison Mission
Holdings Co. and United States Trust Company of New York, as
Trustee, incorporated by reference to Exhibit 4.1 to Edison
Mission Holdings Co.'s Registration Statement on Form S-4 to
the Securities and Exchange Commission on December 3, 1999.
10.75 Exchange and Registration Rights Agreement, dated as of May
27, 1999, by and among the Initial Purchasers named therein,
the Guarantors named therein and Edison Mission Holdings
Co., incorporated by reference to Exhibit 10.1 to Edison
Mission Holdings Co.'s Registration Statement on Form S-4 to
the Securities and Exchange Commission on December 3, 1999.
10.76 Agreement among Edward R. Muller, Edison International and
Edison Mission Energy concerning the terms of Mr. Muller's
employment separation, incorporated by reference to
Exhibit 10.76 to Edison Mission Energy's Form 10-Q for the
quarter ended March 31, 2000.
10.77 Agreement By and Between S. Linn Williams and Edison Mission
Energy dated February 5, 2000, incorporated by reference to
Exhibit 10.77 to Edison Mission Energy's Form 10-Q for the
quarter ended March 31, 2000.
10.78 Form of Agreement for 2000 Employee Awards under the Equity
Compensation Plan, incorporated by reference to
Exhibit 10.78 to Edison Mission Energy's Form 10-Q for the
quarter ended March 31, 2000.
10.79 Resolution regarding the computation of disability and
survivor benefits prior to age 55 for Alan J. Fohrer,
incorporated by reference to Exhibit 10.79 to Edison Mission
Energy's Form 10-Q for the quarter ended March 31, 2000.
10.81 Edison International 2000 Equity Plan, incorporated by
reference to Exhibit 10.1 to Edison International's
Form 10-Q for the quarter ended June 30, 2000. (File
No. 1-9936).
10.82 Form of Agreement for 2000 Employee Awards under the 2000
Equity Plan, incorporated by reference to Exhibit 10.2 to
Edison International's Form 10-Q for the quarter ended
June 30, 2000. (File No. 1-9936).
10.83 Amendment No. 1 to the Edison International Equity
Compensation Plan (as restated January 1, 1998),
incorporated by reference to Exhibit 10.4 to Edison
International's Form 10-Q for the quarter ended June 30,
2000. (File No. 1-9936).
10.84 Credit Agreement, dated May 30, 2000, among Edison Mission
Energy, Certain Commercial Lending Institutions and Bank of
America, N.A., incorporated by reference to Exhibit 10.84 to
Edison Mission Energy's Form 10-Q for the quarter ended
June 30, 2000.
EXHIBIT NO. DESCRIPTION
--------------------- -----------
10.84.1 Amendment One to Credit Agreement, dated as of August 17,
2000, by and among Edison Mission Energy, Certain Commercial
Lending Institutions and Bank of America, N.A. as
Administrative Agent, incorporated by reference to
Exhibit 10.84.1 to Edison Mission Energy's Form 10-K for the
year ended December 31, 2000.
10.84.2 Amendment Two to the U.S. $255 million Credit Agreement,
dated as of May 30, 2001, by and among Edison Mission
Energy, Certain Commercial Lending Institutions and Bank of
America, N.A. as Administrative Agent, incorporated by
reference to Exhibit 10.84.2 to Edison Mission Energy's
Form 10-Q for the quarter ended June 30, 2001.
10.85 Guarantee, dated as of June 23, 2000, in favor of EME/CDL
Trust and Midwest Generation, LLC made by Edison Mission
Energy, incorporated by reference to Exhibit 10.85 to Edison
Mission Energy's Form 10-K for the year ended December 31,
2000.
10.86 Power Purchase Agreement (Crawford, Fisk, Waukegan, Will
County, Joliet and Powerton Generating Stations), dated as
of December 15, 1999, between Commonwealth Edison Company
and Midwest Generation, LLC, incorporated by reference to
Exhibit 10.86 to Edison Mission Energy's Form 10-K for the
year ended December 31, 2000.
10.87 Power Purchase Agreement (Collins Generating Station), dated
as of December 15, 1999, between Commonwealth Edison Company
and Midwest Generation, LLC, incorporated by reference to
Exhibit 10.87 to Edison Mission Energy's Form 10-K for the
year ended December 31, 2000.
10.87.1 Amendment No. 1 to the Power Purchase Agreement, dated
July 12, 2000, between Commonwealth Edison Company and
Midwest Generation, LLC, incorporated by reference to
Exhibit 10.87.1 to Edison Mission Energy's Form 10-K for the
year ended December 31, 2000.
10.87.2 Amended and Restated Power Purchase Agreement (Collins
Generating Station), dated as of September 13, 2000, between
Commonwealth Edison Company and Midwest Generation, LLC,
incorporated by reference to Exhibit 10.87.2 to Edison
Mission Energy's Form 10-K for the year ended December 31,
2000.
10.88 Power Purchase Agreement (Crawford, Fisk, Waukegan, Calumet,
Joliet, Bloom, Electric Junction, Sabrooke and Lombard
Peaking Units), dated as of December 15, 1999, between
Commonwealth Edison Company and Midwest Generation, LLC,
incorporated by reference to Exhibit 10.88 to Edison Mission
Energy's Form 10-K for the year ended December 31, 2000.
10.89 Participation Agreement, dated as of June 23, 2000, among
Midwest Generation, LLC, Edison Mission Energy, EME/CDL
Trust, the Investor party to the Trust Agreement, Wilmington
Trust Company, the Persons listed as Noteholders on Schedule
I thereto, Citicorp North America, Inc. and Citicorp North
America, Inc., incorporated by reference to Exhibit 10.89 to
Edison Mission Energy's Form 10-K for the year ended
December 31, 2000.
10.89.1 Amendment One, dated as of August 17, 2000, by and among
Midwest Generation, LLC, Edison Mission Energy, EME/CDL
Trust, Citicorp Del-Lease, Inc., Wilmington Trust Company,
Certain Noteholders Party Thereto, Citicorp North
America, Inc. and Citicorp North America, Inc., incorporated
by reference to Exhibit 10.89.1 to Edison Mission Energy's
Form 10-K for the year ended December 31, 2000.
10.90 Reimbursement Agreement, dated as of August 17, 2000,
between Edison Mission Energy and Midwest Generation, LLC,
incorporated by reference to Exhibit 10.90 to Edison Mission
Energy's Form 10-K for the year ended December 31, 2000.
EXHIBIT NO. DESCRIPTION
--------------------- -----------
10.91 Supplemental Agreement, dated as of May 30, 2001, to
Amendment Two to the Second Amended and Restated U.S. $425
million Bank of America, N.A. Credit Agreement dated as of
May 30, 2001, Amendment Three to the U.S. $595 million
Credit Agreement dated as of May 30, 2001 and Amendment Two
to the U.S. $255 million Credit Agreement dated as of May
30, 2001, incorporated by reference to Exhibit 10.91 to
Edison Mission Energy's Form 10-Q for the quarter ended
June 30, 2001.
10.92 Credit Agreement, dated as of September 13, 2001, among
Edison Mission Energy, Certain Commercial Lending
Institutions, Citicorp USA, Inc., as Administrative Agent,
and Citibank, N.A. as Issuing Agent.+
12.1 Statement regarding the computation of ratio of earnings to
fixed charges for Edison Mission Energy.*
21.1 List of Subsidiaries of Edison Mission Energy.*
23.1 Consent of Arthur Andersen LLP.+
23.2 Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 5.1).*
25.1 Statement of Eligibility and Qualification on Form T-1 of
The Bank of New York for the 10% Senior Notes.*
99.1 Form of Letter of Transmittal.*
99.2 Form of Notice of Guaranteed Delivery.*
99.3 Form of Letter to Clients.*
99.4 Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.*
------------------------
+ Filed herewith.
* Previously filed.
EX-10.92
3
a2059726zex-10_92.txt
EXHIBIT 10.92
Exhibit 10.92
EXECUTION COPY
--------------------------------------------------------------------------------
CREDIT AGREEMENT
DATED AS OF SEPTEMBER 13, 2001
AMONG
EDISON MISSION ENERGY
AND
CERTAIN COMMERCIAL LENDING INSTITUTIONS
AND
CITICORP USA, INC.,
AS ADMINISTRATIVE AGENT FOR THE LENDERS
AND
CITIBANK, N.A.,
AS ISSUING LENDER
ARRANGED BY:
BMO NESBITT BURNS,
CREDIT SUISSE FIRST BOSTON,
SOCIETE GENERALE,
SALOMON SMITH BARNEY INC.,
TD SECURITIES (USA) INC AND
WESTDEUTSCHE LANDESBANK GIROZENTRALE, NEW YORK BRANCH
AS LEAD ARRANGERS
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND ACCOUNTING TERMS.......................................................................1
SECTION 1.1 DEFINED TERMS...............................................................................1
SECTION 1.2 USE OF DEFINED TERMS.......................................................................19
SECTION 1.3 CROSS-REFERENCES...........................................................................19
SECTION 1.4 ACCOUNTING AND FINANCIAL DETERMINATIONS....................................................19
ARTICLE II COMMITMENTS AND BORROWING PROCEDURES.................................................................19
SECTION 2.1 COMMITMENTS................................................................................19
SECTION 2.1.1 COMMITMENTS..............................................................................20
SECTION 2.1.2 LENDERS NOT REQUIRED TO MAKE LOANS.......................................................20
SECTION 2.2 REDUCTION OF THE TOTAL COMMITMENT AMOUNT...................................................20
SECTION 2.3 BORROWING PROCEDURE........................................................................21
SECTION 2.4 CONTINUATION AND CONVERSION ELECTIONS......................................................21
SECTION 2.5 FUNDING....................................................................................21
ARTICLE III REPAYMENTS, PREPAYMENTS, INTEREST AND FEES..........................................................22
SECTION 3.1 REPAYMENTS AND PREPAYMENTS.................................................................22
SECTION 3.1.1 OPTIONAL PREPAYMENTS.....................................................................22
SECTION 3.2 INTEREST PROVISIONS........................................................................23
SECTION 3.2.1 RATES....................................................................................23
SECTION 3.2.2 POST-MATURITY RATES; DEFAULT RATES.......................................................24
SECTION 3.2.3 PAYMENT DATES............................................................................24
SECTION 3.2.4 INTEREST RATE DETERMINATION..............................................................25
SECTION 3.3 FEES.......................................................................................25
SECTION 3.3.1 FACILITY FEE.............................................................................25
SECTION 3.3.2 ADMINISTRATIVE AGENT'S FEE AND MISCELLANEOUS FEES........................................25
ARTICLE IV CERTAIN LIBO RATE AND OTHER PROVISIONS...............................................................25
SECTION 4.1 LIBO RATE LENDING UNLAWFUL.................................................................25
SECTION 4.2 INABILITY TO DETERMINE RATES...............................................................26
SECTION 4.3 INCREASED LIBO RATE LOAN COSTS.............................................................26
SECTION 4.4 OBLIGATION TO MITIGATE.....................................................................26
SECTION 4.5 FUNDING LOSSES.............................................................................27
SECTION 4.6 INCREASED CAPITAL COSTS....................................................................27
SECTION 4.7 TAXES......................................................................................28
SECTION 4.8 PAYMENTS, COMPUTATIONS.....................................................................29
SECTION 4.9 SHARING OF PAYMENTS........................................................................30
SECTION 4.10 SETOFF....................................................................................30
SECTION 4.11 REPLACEMENT OF LENDER.....................................................................30
-i-
ARTICLE V THE LETTERS OF CREDIT.................................................................................31
SECTION 5.1 THE LETTER OF CREDIT COMMITMENT............................................................31
SECTION 5.1.1 ISSUANCE, AMENDMENT AND RENEWAL OF LETTERS OF CREDIT.....................................33
SECTION 5.1.2 RISK PARTICIPATIONS, DRAWINGS AND REIMBURSEMENTS.........................................35
SECTION 5.1.3 REPAYMENT OF PARTICIPATIONS..............................................................37
SECTION 5.1.4 ROLE OF THE ISSUING LENDER...............................................................37
SECTION 5.1.5 OBLIGATIONS ABSOLUTE.....................................................................38
SECTION 5.2 CASH COLLATERALIZATION.....................................................................39
SECTION 5.3 LETTER OF CREDIT FEES......................................................................39
SECTION 5.4 ISSUANCE OF LETTERS OF CREDIT IN OFFSHORE CURRENCIES.......................................40
SECTION 5.5 UNIFORM CUSTOMS AND PRACTICE...............................................................41
SECTION 5.6 ADDITIONAL AND SUCCESSOR ISSUING LENDERS...................................................41
SECTION 5.7 CURRENCY EXCHANGE FLUCTUATIONS.............................................................41
ARTICLE VI CONDITIONS TO LOANS..................................................................................42
SECTION 6.1 CONDITIONS TO EFFECTIVENESS................................................................42
SECTION 6.1.1 DELIVERY OF LOAN DOCUMENTS...............................................................42
SECTION 6.1.2 OFFICER'S CERTIFICATE....................................................................42
SECTION 6.1.3 RESOLUTIONS..............................................................................42
SECTION 6.1.4 OPINIONS OF COUNSEL......................................................................42
SECTION 6.1.5 CLOSING FEES, EXPENSES...................................................................42
SECTION 6.1.6 FINANCIAL STATEMENTS.....................................................................42
SECTION 6.1.7 DEBT RATINGS.............................................................................43
SECTION 6.1.8 REPAYMENT OF EXISTING CREDIT AGREEMENTS..................................................43
SECTION 6.2 ALL CREDIT EXTENSIONS......................................................................43
SECTION 6.2.1 REPRESENTATIONS AND WARRANTIES; NO DEFAULT...............................................43
SECTION 6.2.2 BORROWING REQUEST........................................................................43
SECTION 6.2.3 SATISFACTORY LEGAL FORM..................................................................43
ARTICLE VII REPRESENTATIONS AND WARRANTIES......................................................................44
SECTION 7.1 ORGANIZATION; POWER; COMPLIANCE WITH LAW AND CONTRACTUAL OBLIGATIONS.......................44
SECTION 7.2 DUE AUTHORIZATION; NON-CONTRAVENTION.......................................................44
SECTION 7.3 GOVERNMENTAL APPROVAL; REGULATION..........................................................44
SECTION 7.4 VALIDITY...................................................................................45
SECTION 7.5 FINANCIAL INFORMATION......................................................................45
SECTION 7.6 NO MATERIAL ADVERSE CHANGE.................................................................45
SECTION 7.7 LITIGATION.................................................................................45
SECTION 7.8 OWNERSHIP OF PROPERTIES....................................................................45
SECTION 7.9 TAXES......................................................................................45
SECTION 7.10 PENSION AND WELFARE PLANS.................................................................45
SECTION 7.11 ENVIRONMENTAL WARRANTIES..................................................................46
SECTION 7.12 REGULATIONS T, U AND X....................................................................46
SECTION 7.13 ACCURACY OF INFORMATION...................................................................47
SECTION 7.14 THE OBLIGATIONS...........................................................................47
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ARTICLE VIII COVENANTS..........................................................................................47
SECTION 8.1 AFFIRMATIVE COVENANTS......................................................................47
SECTION 8.1.1 FINANCIAL INFORMATION, REPORTS, NOTICES..................................................47
SECTION 8.1.2 COMPLIANCE WITH LAWS.....................................................................49
SECTION 8.1.3 MAINTENANCE OF PROPERTIES................................................................49
SECTION 8.1.4 INSURANCE................................................................................49
SECTION 8.1.5 BOOKS AND RECORDS........................................................................49
SECTION 8.1.6 ENVIRONMENTAL COVENANT...................................................................49
SECTION 8.1.7 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE.........................................50
SECTION 8.1.8 USE OF PROCEEDS..........................................................................50
SECTION 8.1.9 INDEPENDENT DIRECTOR.....................................................................50
SECTION 8.1.10 ARTICLES OF INCORPORATION...............................................................50
SECTION 8.2 NEGATIVE COVENANTS.........................................................................50
SECTION 8.2.1 RESTRICTIONS ON SECURED INDEBTEDNESS.....................................................50
SECTION 8.2.2 LIENS....................................................................................51
SECTION 8.2.3 INVESTMENTS..............................................................................52
SECTION 8.2.4 CONSOLIDATION, MERGER....................................................................52
SECTION 8.2.5 ASSET DISPOSITIONS.......................................................................53
SECTION 8.2.6 TRANSACTIONS WITH AFFILIATES.............................................................53
SECTION 8.2.7 RESTRICTIVE AGREEMENTS...................................................................53
SECTION 8.2.8 INTEREST COVERAGE........................................................................54
SECTION 8.2.9 RECOURSE DEBT TO RECOURSE CAPITAL RATIO..................................................54
SECTION 8.3 ERISA......................................................................................54
ARTICLE IX EVENTS OF DEFAULT....................................................................................54
SECTION 9.1 LISTING OF EVENTS OF DEFAULT...............................................................54
SECTION 9.1.1 NON-PAYMENT OF OBLIGATIONS...............................................................54
SECTION 9.1.2 BREACH OF WARRANTY.......................................................................55
SECTION 9.1.3 NON-PERFORMANCE OF CERTAIN COVENANTS AND OBLIGATIONS.....................................55
SECTION 9.1.4 NON-PERFORMANCE OF OTHER COVENANTS AND OBLIGATIONS.......................................55
SECTION 9.1.5 DEFAULT ON OTHER INDEBTEDNESS............................................................55
SECTION 9.1.6 JUDGMENTS................................................................................55
SECTION 9.1.7 PENSION PLANS............................................................................55
SECTION 9.1.8 BANKRUPTCY, INSOLVENCY...................................................................56
SECTION 9.2 ACTION IF BANKRUPTCY.......................................................................57
SECTION 9.3 ACTION IF OTHER EVENT OF DEFAULT...........................................................57
SECTION 9.4 RESCISSION OF DECLARATION..................................................................57
ARTICLE X THE ADMINISTRATIVE AGENT..............................................................................57
SECTION 10.1 ACTIONS...................................................................................57
SECTION 10.2 FUNDING RELIANCE..........................................................................58
SECTION 10.3 EXCULPATION...............................................................................59
SECTION 10.4 SUCCESSOR.................................................................................59
SECTION 10.5 LOANS BY CUSA.............................................................................59
SECTION 10.6 RELIANCE BY ADMINISTRATIVE AGENT..........................................................60
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SECTION 10.7 NOTICE OF DEFAULT.........................................................................60
SECTION 10.8 CREDIT DECISIONS..........................................................................60
SECTION 10.9 COPIES....................................................................................61
ARTICLE XI MISCELLANEOUS PROVISIONS.............................................................................61
SECTION 11.1 WAIVERS, AMENDMENTS.......................................................................61
SECTION 11.2 NOTICES...................................................................................62
SECTION 11.3 PAYMENT OF COSTS AND EXPENSES.............................................................62
SECTION 11.4 INDEMNIFICATION...........................................................................63
SECTION 11.5 SURVIVAL..................................................................................64
SECTION 11.6 SEVERABILITY..............................................................................64
SECTION 11.7 HEADINGS..................................................................................64
SECTION 11.8 EXECUTION IN COUNTERPARTS.................................................................64
SECTION 11.9 GOVERNING LAW; ENTIRE AGREEMENT...........................................................64
SECTION 11.10 SUCCESSORS AND ASSIGNS...................................................................65
SECTION 11.11 SALE AND TRANSFER OF LOANS AND NOTES; PARTICIPATIONS IN LOANS AND NOTES..................65
SECTION 11.11.1 ASSIGNMENTS............................................................................65
SECTION 11.11.2 PARTICIPATIONS.........................................................................67
SECTION 11.12 OTHER TRANSACTIONS.......................................................................68
SECTION 11.13 SUBMISSION TO JURISDICTION; WAIVERS......................................................68
SECTION 11.14 WAIVERS OF JURY TRIAL....................................................................69
SECTION 11.15 NON-RECOURSE PERSONS.....................................................................69
SECTION 11.16 ACKNOWLEDGMENTS..........................................................................69
SECTION 11.17 CONFIDENTIALITY..........................................................................69
Annex I - Tranche A Pricing Grid
Annex II - Tranche B Pricing Grid
SCHEDULES
1.1(a) - Commitments
1.1(b) - Addresses for Notices and Lending Offices
5.1 - Existing Letters of Credit
5.4 - Agreed Alternative Currency
EXHIBITS
A - Form of Note
A-1 - Form of Tranche A Note
A-2 - Form of Tranche B Note
B - Form of Borrowing Request
C - Form of Continuation/Conversion Notice
D - Form of Lender Assignment Agreement
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CREDIT AGREEMENT dated as of September 13, 2001 among EDISON MISSION
ENERGY, the various financial institutions as are or may become parties hereto
(collectively, the "LENDERS"), WESTDEUTSCHE LANDESBANK GIROZENTALE, NEW YORK
BRANCH, as documentation agent (in such capacity, the "Documentation Agent"),
CITICORP USA, INC. ("CUSA"), as administrative agent for the Lenders (in such
capacity, the "ADMINISTRATIVE AGENT") and CITIBANK, N.A., as issuing lender (in
such capacity, the "ISSUING LENDER").
RECITALS
A. The Borrower has requested that the Lenders establish a credit
facility for general corporate purposes (including without limitation, to
refinance certain existing Indebtedness of the Borrower, to finance equity
investments in certain projects of the Borrower, to provide working capital, for
the issuance of the letters of credit and to finance capital expenditures); and
B. The Lenders are willing to make such credit facility available upon
and subject to the terms and conditions hereinafter set forth;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1 DEFINED TERMS. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"ADMINISTRATIVE AGENT" means CUSA in its capacity as administrative
agent for the Lenders hereunder, and includes each other Person as may have
subsequently been appointed as the successor Administrative Agent pursuant to
SECTION 10.4.
"AFFILIATE" of any Person means any other Person which, directly or
indirectly, controls, is controlled by or is under common control with such
Person (excluding any trustee under, or any committee with responsibility for
administering, any Pension Plan or Welfare Plan). A Person shall be deemed to be
"controlled by" any other Person if such other Person possesses, directly or
indirectly, power to direct or cause the direction of the management and
policies of such Person whether by contract or otherwise.
"AFFILIATE BANKRUPTCY EVENT" means, with respect to Edison
International or any of its Subsidiaries (other than the Borrower), such Person
shall:
(a) apply for, consent to, or acquiesce in, or suffer to
exist, the appointment of a trustee, receiver, sequestrator or other
custodian for such Person or a substantial portion of its property, or
make a general assignment for the benefit of creditors; or
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(b) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution,
winding up or liquidation proceeding, in respect of such Person.
"AGENT-RELATED PERSONS" means CUSA and any successor agent arising
under SECTION 10.4, together with their respective Affiliates, and the officers,
directors, employees, agents and attorneys-in-fact of such Persons and
Affiliates.
"AGREED ALTERNATIVE CURRENCY" shall mean the eurocurrencies listed on
SCHEDULE 5.4, pursuant to the procedures specified in SECTION 5.4(B).
"AGREEMENT" means, on any date, this Credit Agreement as originally in
effect on the Effective Date and as thereafter from time to time amended,
supplemented, amended and restated, or otherwise modified and in effect on such
date.
"ALTERNATE BASE RATE" means, on any date and with respect to all Base
Rate Loans, a fluctuating rate of interest per annum equal to the higher of:
(a) the rate of interest in effect for such day as publicly
announced from time to time by the Administrative Agent at its
principal office in New York, New York, as its "base rate" (or such
other term used by any successor Administrative Agent). The "base rate"
is a rate set by the Administrative Agent based upon various factors
including the Administrative Agent's cost and desired return, general
economic conditions and other factors, and is used as a reference point
for pricing some loans, which may be priced at, above, or below such
announced rate; or
(b) the Federal Funds Rate most recently determined by the
Administrative Agent plus 1/2 of 1%.
The Alternate Base Rate is not necessarily intended to be the lowest rate of
interest determined by the Administrative Agent in connection with extensions of
credit. Changes in the rate of interest on that portion of any Loans maintained
as Base Rate Loans will take effect simultaneously with each change in the
Alternate Base Rate. The Administrative Agent will give notice promptly to the
Borrower and the Lenders of changes in the Alternate Base Rate.
"APPLICABLE CURRENCY" means, as to any particular payment or Loan or
L/C Obligation, Dollars or the Offshore Currency in which it is denominated or
is payable, and, if no Applicable Currency is specified, shall mean Dollars.
"APPLICABLE MARGIN" means, for any day with respect to any LIBO Rate
Loans or Base Rate Loans, the rate per annum in effect for such day based on the
Borrower's Debt Rating for such day determined as provided in: (a) the Tranche A
Pricing Grid for Tranche A Loans; and (b) the Tranche B Pricing Grid for Tranche
B Loans.
"AUTHORIZED REPRESENTATIVE" means, relative to the Borrower, those of
its officers and employees whose signatures and incumbency shall have been
certified to the Administrative Agent and the Lenders pursuant to SECTION 6.1.3.
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"BASE RATE LOAN" means a Loan bearing interest at a fluctuating rate
determined by reference to the Alternate Base Rate plus the Applicable Margin
from time to time in effect.
"BORROWER" means Edison Mission Energy, a California corporation, which
shall, after giving effect to a proposed merger in compliance with SECTION
8.2.4, be succeeded by a Delaware corporation with the same name and other
permitted successors in accordance with SECTION 8.2.4.
"BORROWING" means Loans of the same type and, in the case of LIBO Rate
Loans having the same Interest Period, made by all Lenders on the same Business
Day and pursuant to the same Borrowing Request in accordance with SECTION 2.1.
"BORROWING DATE" means any Business Day specified in a notice pursuant
to SECTION 2.3 as a date which the Borrower requests the Lenders to make Loans.
"BORROWING REQUEST" means a loan request and certificate duly executed
by an Authorized Representative of the Borrower, substantially in the form of
EXHIBIT B hereto, with respect to Loans, and means an L/C Application duly
executed by an Authorized Representative of the Borrower, with respect to
Letters of Credit.
"BUSINESS DAY" means:
(a) any day which is neither a Saturday or Sunday nor a legal
holiday on which the Lenders are authorized or required to be closed in
New York, New York; and
(b) relative to the making, continuing, prepaying or repaying
of any LIBO Rate Loans, any day on which dealings in Dollars are
carried on in the London interbank market.
"CAPITALIZED LEASE LIABILITIES" of any Person means all monetary
obligations of such Person under any leasing or similar arrangement which, in
accordance with GAAP, would be classified as capitalized leases, and, for
purposes of each Loan Document, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP.
"CASH COLLATERALIZE" means to pledge and deposit with or deliver to the
Administrative Agent in accordance with SECTION 5.2, for the ratable benefit of
the Administrative Agent, the Issuing Lender and the Lenders, as collateral for
the L/C Obligations, cash or deposit account balances pursuant to documentation
in form and substance satisfactory to the Administrative Agent and the Issuing
Lender.
"CASH EQUIVALENT INVESTMENT" means, at any time:
(a) any evidence of Indebtedness, maturing not more than one
year after such time, issued or guaranteed by the United States
Government or an agency thereof; or
(b) other investments in securities or bank instruments rated
at least "A" by S&P and "A2" by Moody's or "A-1" by S&P and "P-1" by
Moody's and with maturities of less than 180 days.
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"CERCLIS" means the Comprehensive Environmental Response Compensation
Liability Information System List.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMITMENT" means, collectively, the Tranche A Commitment and the
Tranche B Commitment.
"COMMITMENT TERMINATION EVENT" means:
(a) the occurrence of any Default described in CLAUSES (A)
through (E) of SECTION 9.1.8 with respect to the Borrower; or
(b) the occurrence and continuance of any other Event of
Default and the declaration of the Loans to be due and payable pursuant
to SECTION 9.3.
"COMPUTATION DATE" has the meaning specified in SECTION 5.4(C).
"CONSOLIDATED NET WORTH" means, at any date, the consolidated
stockholders' equity of the Borrower and its Consolidated Subsidiaries
determined as of such date without giving effect to any accumulated other
comprehensive gain or loss after December 31, 1999 plus, to the extent not
otherwise included therein, (a) the liquidation preference at such date of
non-redeemable preferred stock of the Borrower and (b) to the extent not
included therein, Equity Preferred Securities.
"CONSOLIDATED OPERATING PROJECTS" means any electric generation
facilities, oil and gas properties, trading activities, and operation and
maintenance services in which the Borrower or its Subsidiaries have a direct or
indirect ownership greater than 50%.
"CONSOLIDATED SUBSIDIARY" means, at any date with respect to any
Person, any Subsidiary of such Person or other entity the accounts of which
would be consolidated with those of such Person in its consolidated financial
statements if such statements were prepared as of such date.
"CONTINGENT LIABILITY" means any agreement, undertaking or arrangement
by which any Person guarantees, endorses or otherwise becomes or is contingently
liable upon (by direct or indirect agreement, contingent or otherwise, to
provide funds for payment, to supply funds to, or otherwise to invest in, a
debtor, or otherwise to assure a creditor against loss) the indebtedness,
obligation or any other liability of any other Person (other than by
endorsements of instruments in the course of collection), or guarantees the
payment of dividends or other distributions upon the shares of any other Person.
The amount of any Person's obligation under any Contingent Liability shall
(subject to any limitation set forth therein) be deemed to be the outstanding
principal amount of the debt, obligation or other liability guaranteed thereby;
PROVIDED, HOWEVER, that if the maximum amount of the debt, obligation or other
liability guaranteed thereby has not been established, the amount of such
Contingent Liability shall be the maximum reasonably anticipated amount of the
debt, obligation or other liability; PROVIDED, FURTHER, HOWEVER, that any
agreement to limit the maximum amount of such Person's obligation
-4-
under such Contingent Liability shall not, of and by itself, be deemed to
establish the maximum reasonably anticipated amount of such debt, obligation or
other liability.
"CONTINUATION/CONVERSION NOTICE" means a notice of continuation or
conversion and certificate duly executed by an Authorized Representative of the
Borrower, substantially in the form of EXHIBIT C.
"CONTRACTUAL OBLIGATION" means, as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or other
undertaking to which such Person is a party or by which it or any of its
property is bound.
"CONTROLLED GROUP" means all members of a controlled group of
corporations and all members of a controlled group of trades or businesses
(whether or not incorporated) under common control which, together with the
Borrower, are treated as a single employer under Section 414(b) or 414(c) of the
Code or Section 4001 of ERISA.
"CREDIT EXTENSION" means and includes (a) any Borrowing and (b) any
Issuance of, or participation in, any Letters of Credit.
"CUSA" has the meaning set forth in the PREAMBLE.
"DEBT RATING" means a rating of the Borrower's long-term debt which is
not secured or supported by a guarantee, letter of credit or other form of
credit enhancement. If Moody's or S&P shall have changed its system of
classifications after the date hereof, the Borrower's Debt Rating shall be
considered to be at or above a specified level if it is at or above the new
rating which most closely corresponds to the specified level under the old
rating system.
"DEFAULT" means any Event of Default or any condition, occurrence or
event which, after notice or lapse of time or both, would constitute an Event of
Default.
"DERIVATIVES OBLIGATIONS" of any Person means all obligations of such
Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions.
For purposes of determining the Recourse Debt to Recourse Capital Ratio on any
date, the Derivatives Obligations of the Borrower shall be determined on a "mark
to market" basis on such date.
"DISTRIBUTIONS" means any interest or principal payments on loans,
distributions, management fees and dividends to the Borrower or any of its
Subsidiaries made by a Non-Consolidated Operating Project.
"DOLLAR" and the sign "$" mean lawful money of the United States.
"DOLLAR EQUIVALENT" means, at any time, (a) as to any amount
denominated in Dollars, the amount thereof at such time and (b) as to any amount
denominated in any other
-5-
Offshore Currency, the equivalent amount in Dollars as determined by the
Administrative Agent at such time on the basis of the Spot Rate for the purchase
of Dollars with such Offshore Currency on the most recent Computation Date, as
defined in and provided for in SECTION 5.4(C).
"DOMESTIC OFFICE" means, relative to any Lender, the office of such
Lender designated on SCHEDULE 1.1(B) or designated in the Lender Assignment
Agreement or such other office of a Lender (or any successor or assign of such
Lender) within the United States as may be designated from time to time by
notice from such Lender, as the case may be, to each other Person party hereto.
A Lender may have separate Domestic Offices for purposes of making, maintaining
or continuing, as the case may be, Base Rate Loans.
"EDISON INTERNATIONAL" means Edison International, a California
corporation.
"EFFECTIVE DATE" means the date this Agreement becomes effective
pursuant to SECTION 6.1.
"ELIGIBLE ASSIGNEE" means (a) a commercial bank or other financial
institution organized or licensed under the laws of the United States, or any
state thereof, and having a combined capital and surplus of at least
$250,000,000; (b) a Person that is primarily engaged in the business of
commercial banking and that is (i) a Subsidiary of a Lender, (ii) a Subsidiary
of a Person of which a Lender is a Subsidiary or (iii) a Person of which a
Lender is a Subsidiary; and (c) an SPC under the circumstances described, and in
accordance with, SECTION 11.11.1(F).
"ENVIRONMENTAL LAWS" means all applicable federal, state or local
statutes, laws, ordinances, codes, rules, regulations and guidelines (including
consent decrees and administrative orders) relating to Hazardous Materials
and/or to public health and protection of the environment, including the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, and the Resource Conservation and Recovery Act, as amended.
"EQUITY PREFERRED SECURITIES" means securities issued by the Borrower
(a) that are not subject to mandatory redemption or the underlying securities,
if any, of which are not subject to mandatory redemption, (b) that are perpetual
or mature no less than 30 years from the date of issuance, (c) the indebtedness
issued in connection with which, including any guaranty, is subordinate in right
of payment to the unsecured and unsubordinated indebtedness of the issuer of
such indebtedness or guaranty, and (d) the terms of which permit the deferral of
payment of interest or distributions thereon to the date occurring after the
Tranche B Commitment Termination Date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and any successor statute of similar import, together with the
regulations thereunder, in each case as in effect from time to time. References
to sections of ERISA also refer to any successor sections.
"EVENT OF DEFAULT" has the meaning set forth in SECTION 9.1.
"EXCLUDED OPERATING CASH FLOW" means, for any period, the excess (if
any) of (a) Operating Cash Flow for such period of each Consolidated Operating
Project unable to make
-6-
Subsidiary Payments at the end of such period solely by reason of Restrictive
Financing Documents OVER (b) Subsidiary Payments made by each such Consolidated
Operating Project during such period.
"FACILITY FEE" has the meaning set forth in SECTION 3.3.1.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to:
(a) the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged
by federal funds brokers, as published for such day (or, if such day is
not a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York; or
(b) if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from not less than
three of the Lead Arrangers (or if quotations are unavailable from any
of them, up to three federal funds brokers of recognized standing
selected by the Administrative Agent).
"FINANCIAL LETTER OF CREDIT" means a standby or direct pay Letter of
Credit supporting indebtedness owing to third parties, which may include
workers' compensation requirements.
"FISCAL QUARTER" means any quarter of a Fiscal Year.
"FISCAL YEAR" means any period of twelve consecutive calendar months
ending on December 31; references to a Fiscal Year with a number corresponding
to any calendar year (E.G., the "2000 Fiscal Year") referred to the Fiscal Year
ending on December 31 occurring during such calendar year.
"F.R.S. BOARD" means the Board of Governors of the Federal Reserve
System or any successor thereto.
"FUNDS FLOW FROM OPERATIONS" means, for any period, the sum of the
following (computed without duplication) (a) Distributions during such period
plus (b) Operating Cash Flow for such period less (c) Excluded Operating Cash
Flow for such period plus (d) interest income during such period less (e)
Operating Expenses during such period.
"FX DEALING DESK" means the Foreign Exchange Dealing Desk in New York,
NY of Citibank N.A., or such other of Citibank, N.A.'s offices as Citbank, N.A.
may designate from time to time.
"GAAP" has the meaning set forth in SECTION 1.4.
"GRANTING LENDER" has the meaning specified in SECTION 11.11.1(F).
"GOVERNMENTAL APPROVAL" has the meaning set forth in SECTION 7.3.
-7-
"HAZARDOUS MATERIAL" means:
(a) any "hazardous substance", as defined by any Environmental
Law;
(b) any "hazardous waste", as defined by any Environmental
Law;
(c) any petroleum product; or
(d) any pollutant or contaminant or hazardous, dangerous or
toxic chemical, material or substance within the meaning of any
Environmental Law.
"HEREIN", "HEREOF", "HERETO", "HEREUNDER" and similar terms contained
in any Loan Document refer to such Loan Document as a whole and not to any
particular Section, paragraph or provision of such Loan Document.
"HONOR DATE" has the meaning set forth in SECTION 5.1.2(B).
"INCLUDING" means including without limiting the generality of any
description preceding such term, and, for purposes of each Loan Document, the
parties thereto agree that the rule of EJUSDEM GENERIS shall not be applicable
to limit a general statement, which is followed by or referable to an
enumeration of specific matters, to matters similar to the matters specifically
mentioned.
"INDEBTEDNESS" of any Person means, without duplication:
(a) all indebtedness for borrowed money;
(b) all obligations issued, undertaken or assumed as the
deferred purchase price of property or services which purchase price is
due more than six months from the date of incurrence of the obligation
in respect thereof or is evidenced by a note or other instrument,
except trade accounts arising in the ordinary course of business;
(c) all reimbursement obligations with respect to surety
bonds, letters of credit (to the extent not collateralized with cash or
Cash Equivalent Investments), bankers' acceptances and similar
instruments (in each case, whether or not matured);
(d) all obligations evidenced by notes, bonds, debentures or
similar instruments, including obligations so evidenced incurred in
connection with the acquisition of property, assets or businesses;
(e) all indebtedness created or arising under any conditional
sale or other title retention agreement, or incurred as financing, in
either case with respect to property acquired by the Person (even
though the rights and remedies of the seller or bank under such
agreement in the event of default are limited to repossession or sale
of such property);
(f) all Capitalized Lease Liabilities;
-8-
(g) all net obligations with respect to sales of foreign
exchange options;
(h) all indebtedness referred to in CLAUSES (A) through (G)
above secured by (or for which the holder of such Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien
upon or in property (including accounts and contracts rights) owned by
such Person, even though such Person has not assumed or become liable
for the payment of such Indebtedness; and
(i) all Contingent Liabilities.
For all purposes of this Agreement, the Indebtedness of any Person shall include
the Indebtedness of any partnership or joint venture in which such Person is a
general partner or a joint venturer.
"INTEREST COVERAGE RATIO" means, for any period, the ratio of (a) Funds
Flow from Operations during such period to (b) Interest Expense for such period.
"INTEREST EXPENSE" means the accrued interest expense of all the
Borrower's senior recourse indebtedness, but shall exclude any intercompany
obligation on which interest or the equivalent is received by the Borrower.
"INTEREST PERIOD" means, relative to any LIBO Rate Loan, the period
beginning on (and including) the date on which such LIBO Rate Loan is made or
continued as, or converted into, a LIBO Rate Loan pursuant to SECTION 2.3 or 2.4
and shall end on (but exclude) the day which numerically corresponds to such
date one, two, three or six months thereafter (or shorter or longer period as
agreed to with the Lenders, if such month has no numerically corresponding day,
on the last Business Day of such month), in either case as the Borrower may
select in its relevant notice pursuant to SECTION 2.3 or 2.4; PROVIDED, HOWEVER,
that:
(a) the Borrower shall not be permitted to select Interest
Periods to be in effect at any one time which have expiration dates
occurring on more than ten different dates or such other larger number
of dates and on such terms as may be agreed to by the Borrower and the
Administrative Agent;
(b) Interest Periods commencing on the same date for Loans
comprising part of the same Borrowing shall be of the same duration;
(c) if such Interest Period would otherwise end on a day which
is not a Business Day, such Interest Period shall end on the next
following Business Day (unless, if such Interest Period applies to LIBO
Rate Loans, such next following Business Day is the first Business Day
of a calendar month, in which case such Interest Period shall end on
the Business Day next preceding such numerically corresponding day);
and
(d) no Interest Period may end later than the date set forth
in CLAUSE (A) of the definition of "Tranche A Commitment Termination
Date" or "Tranche B Commitment Termination Date", as applicable.
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"INVESTMENT" means, relative to any Person:
(a) any loan or advance made by such Person to any other
Person (excluding commission, travel and similar advances to officers
and employees made in the ordinary course of business);
(b) any Contingent Liability of such Person; and
(c) any ownership or similar interest held by such Person in
any other Person.
The amount of any Investment shall be the original principal or capital amount
thereof less all returns of principal or equity thereon (and without adjustment
by reason of the financial condition of such other Person) and shall, if made by
the transfer or exchange of property other than cash, be deemed to have been
made in an original principal or capital amount equal to the fair market value
of such property.
"ISSUE" means, with respect to any Letter of Credit, to issue or to
extend the expiry of, or to renew or increase the amount of, such Letter of
Credit; and the terms "ISSUED," "ISSUING" and "ISSUANCE" have corresponding
meanings.
"ISSUING LENDER" means Citibank, N.A. in its capacity as issuer of one
or more Letters of Credit hereunder, together with any additional or successor
letter of credit issuer appointed pursuant to SECTION 5.6 hereof.
"L/C ADVANCE" means each Lender's participation in any L/C Borrowing in
accordance with its Percentage.
"L/C APPLICATION" means an application form reasonably satisfactory to
the Issuing Lender for issuances of Financial Letters of Credit or Performance
Letters of Credit or for amendment thereof as shall at any time be in use at the
Issuing Lender, as the Issuing Lender shall request.
"L/C BORROWING" means an extension of credit resulting from a drawing
under any Letter of Credit which shall not have been reimbursed on the date when
made nor converted into a Borrowing of Tranche A Loans or Tranche B Loans under
SECTION 5.1.2(C).
"L/C OBLIGATIONS" means, the Tranche A L/C Obligations and the Tranche
B L/C Obligations.
"L/C RELATED DOCUMENTS" means the Letters of Credit, the L/C
Applications and any other document relating to any Letter of Credit, including
any of the Issuing Lender's standard form documents for letter of credit
issuances.
"LEAD ARRANGERS" means Credit Suisse First Boston, Salomon Smith Barney
Inc., Societe Generale, BMO Nesbitt Burns, TD Securities (USA) Inc. and
Westdeutsche Landesbank Girozentrale, New York Branch.
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"LENDER ASSIGNMENT AGREEMENT" means a Lender Assignment Agreement,
substantially in the form of EXHIBIT D.
"LENDERS" has the meaning set forth in the PREAMBLE.
"LETTERS OF CREDIT" means any Tranche A Letters of Credit and/or
Tranche B Letters of Credit.
"LEVERAGED LEASE BASIC DOCUMENTS" means the Basic Documents as defined
in the Leveraged Lease Participation Agreement.
"LEVERAGED LEASE PARTICIPATION AGREEMENT" means, collectively (a) the
Participation Agreement dated as of August 17, 2000 by and among Midwest, Edison
Mission Energy, Powerton Trust I, Powerton Generation I, LLC, Wilmington Trust
Company, United States Trust Company of New York, as Lease Indenture Trustee and
United States Trust Company of New York, as Pass Through Trustee; (b) the
Participation Agreement dated as of August 17, 2000 by and among Midwest, Edison
Mission Energy, Powerton Trust II, Powerton Generation II, LLC, Wilmington Trust
Company, United States Trust Company of New York, as Lease Indenture Trustee and
United States Trust Company of New York, as Pass Through Trustee; (c) the
Participation Agreement dated as of August 17, 2000 by and among Midwest, Edison
Mission Energy, Joliet Trust I, Joliet Generation I, LLC, Wilmington Trust
Company, United States Trust Company of New York, as Lease Indenture Trustee and
United States Trust Company of New York, as Pass Through Trustee; and (d) the
Participation Agreement dated as of August 17, 2000 by and among Midwest, Edison
Mission Energy, Joliet Trust II, Joliet Generation II, LLC, Wilmington Trust
Company, United States Trust Company of New York, as Lease Indenture Trustee and
United States Trust Company of New York, as Pass Through Trustee.
"LEVERAGED LEASE TRANSACTION" means the transaction consummated
pursuant to the Leveraged Lease Participation Agreement and the Leveraged Lease
Basic Documents."
"LIBO RATE" has the meaning set forth in SECTION 3.2.1.
"LIBO RATE LOAN" means a Loan bearing interest, at all times during an
Interest Period applicable to such Loan at a fixed rate of interest determined
by reference to the LIBO Rate.
"LIBO RATE (RESERVE ADJUSTED)" means, relative to any Loan to be made,
continued or maintained as, or converted into, a LIBO Rate Loan for any Interest
Period, a rate per annum (rounded upwards, if necessary, to the nearest whole
multiple of l/100 of 1%) determined pursuant to the following formula:
LIBO Rate (Reserve Adjusted) = LIBO RATE
-----------------------------------
1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate Loans
will be determined by the Administrative Agent on the basis of the LIBOR Reserve
Percentage in effect
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on, and the applicable rates furnished to and received by the Administrative
Agent, two Business Days before the first day of such Interest Period.
"LIBOR OFFICE" means, relative to any Lender, the office of such Lender
designated as such on SCHEDULE 1.1(B) or designated in the Lender Assignment
Agreement or such other office of a Lender as designated from time to time by
notice from such Lender to the Borrower and the Administrative Agent pursuant to
SECTION 4.4, whether or not outside the United States, which shall be making or
maintaining LIBO Rate Loans of such Lender hereunder.
"LIBOR RESERVE PERCENTAGE" means, relative to any Interest Period for
LIBO Rate Loans, the reserve percentage (expressed as a decimal) equal to the
aggregate reserve requirements (including all basic, emergency, supplemental,
marginal and other reserves and taking into account any transitional adjustments
or other scheduled changes in reserve requirements) specified under regulations
issued from time to time by the F.R.S. Board and then applicable to assets or
liabilities consisting of and including "Eurocurrency Liabilities", as currently
defined in Regulation D of the F.R.S. Board, having a term approximately equal
or comparable to such Interest Period.
"LIEN" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property, in each case of any kind, to secure
payment of a debt or performance of an obligation.
"LOAN" means collectively, Tranche A Loans and Tranche B Loans.
"LOAN DOCUMENTS" means this Agreement, the Notes, the L/C Related
Documents and the other agreements, documents and instruments delivered in
connection with this Agreement and the Notes, including the fee letter referred
to in SECTION 3.3.3, each Borrowing Request and each Continuation/ Conversion
Notice.
"MAJOR PROJECTS" means the plants owned by First Hydro, the Loy Yang B
plant, the Homer City Generating Station, the plants located in Illinois owned
by Midwest Generation, LLC, the Kern River cogeneration facility, the Midway
Sunset cogeneration facility, the Watson cogeneration facility and the Sycamore
cogeneration facility.
"MATERIAL ADVERSE EFFECT" means any event, development or circumstance
that has had or could reasonably be expected to have a material adverse effect
on (a) the business, assets, property, condition (financial or otherwise) or
operations of the Borrower and its subsidiaries, taken as a whole since the
Effective Date, or (b) the ability of the Borrower to perform its obligations
under any of the Loan Documents, or (c) the validity or enforceability of any of
the Loan Documents or the rights or remedies of the Administrative Agent or the
Lenders hereunder or thereunder.
"MIDWEST" means Midwest Generation, LLC.
"MOODY'S" means Moody's Investors Service, a division of Dun &
Bradstreet Corporation, and its successors and assigns.
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"NET TANGIBLE ASSETS" means, as of the date of any determination
thereof, the total amount of all assets of the Borrower and its Subsidiaries
(determined on a consolidated basis in accordance with GAAP), less the sum of
(a) the consolidated current liabilities of the Borrower and its Subsidiaries
(determined on a consolidated basis in accordance with GAAP) and (b) assets
properly classified as "intangible assets" in accordance with GAAP.
"NON-CONSOLIDATED OPERATING PROJECTS" means any electric generation
facilities, oil and gas properties, trading activities, and operation and
maintenance services in which the Borrower or its Subsidiaries have a direct or
indirect ownership equal to or less than 50%.
"NON-RECOURSE DEBT" means Indebtedness which the Borrower is not
directly or indirectly obligated to repay.
"NON-RECOURSE PERSONS" means the Affiliates of the Borrower, including
The Mission Group, Edison International, Mission Energy Holdings and Southern
California Edison Company, and the officers, directors, employees, shareholders,
agents, Authorized Representatives and other controlling persons of the Borrower
or any of its Affiliates, PROVIDED that in no event shall the Borrower be deemed
to be a Non-Recourse Person.
"OBLIGATIONS" means all obligations (monetary or otherwise) of the
Borrower arising under or in connection with the Loan Documents.
"OFFSHORE CURRENCY" means at any time Australian dollars, Canadian
dollars, English pounds sterling, French francs, Italian lira, Deutsche marks,
Japanese yen, Swiss francs, Spanish pesetas, Belgian Francs, Dutch Guilders,
Thai Baht, Euros and any Agreed Alternative Currency.
"OPERATING CASH FLOW" means, for any period, the excess of accrued
Project Revenues during such period less accrued Project Operating Expenses less
accrued Project Debt Service during such period from the Consolidated Operating
Projects.
"OPERATING EXPENSES" means, for any period, all amounts accrued by the
Borrower in the conduct of its business during such period, including utilities,
general and administrative expenses, employee salaries, wages and other
employment-related costs, fees for letters of credit, surety bonds and
performance bonds. Operating Expenses do not include federal and state taxes,
depreciation or amortization, and other non-cash charges.
"ORGANIC DOCUMENT" means, relative to the Borrower, its certificate of
incorporation, its by-laws and all shareholder agreements, voting trusts and
similar arrangements applicable to any of its authorized shares of capital
stock.
"PARTICIPANT" is defined in SECTION 11.11.2.
"PARTNERSHIP" means a general partnership, limited partnership, joint
venture or similar entity in which the Borrower or a Subsidiary is a partner,
joint venturer or equity participant.
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"PBGC" means the Pension Benefit Guaranty Corporation and any entity
succeeding to any or all of its functions under ERISA.
"PENSION PLAN" means a "pension plan", as such term is defined in
Section 3(2) of ERISA, which is subject to Title IV of ERISA (other than a
multiemployer plan as defined in Section 4001(a)(3) of ERISA), and to which the
Borrower or any corporation, trade or business that is, along with the Borrower,
a member of a Controlled Group, has any liability, including any liability by
reason of having been a substantial employer within the meaning of Section 4063
of ERISA at any time during the preceding five years, or by reason of being
deemed to be a contributing sponsor under Section 4069 of ERISA.
"PERCENTAGE" means, with respect to the Tranche A Commitment or the
Tranche B Commitment of any Lender, the percentage set forth on SCHEDULE 1.1(A)
for such Commitment opposite its name or set forth in the Lender Assignment
Agreement pursuant to which such Lender became a Lender hereunder, as such
percentage may be adjusted from time to time pursuant to any Lender Assignment
Agreement executed by such Lender and delivered pursuant to SECTION 11.11.1.
"PERFORMANCE LETTER OF CREDIT" means a standby Letter of Credit used
directly or indirectly to cover bid, performance, advance and retention
obligations, including, without limitation, Letters of Credit issued in favor of
sureties who in connection therewith cover bid, performance and retention
obligations.
"PERSON" means any natural person, corporation, partnership, limited
liability company, firm, association, trust, government, governmental agency or
any other entity, whether acting in an individual, fiduciary or other capacity.
"POWERTON/JOLIET GUARANTEES" means, collectively, (a) the Guaranty
Agreement dated as of August 17, 2000 made by the Borrower in favor of Powerton
Trust I that, among other things, guarantees the payment by Midwest of certain
liabilities payable to Powerton Trust I, (b) the Guaranty Agreement dated as of
August 17, 2000 made by the Borrower in favor of Powerton Trust II that, among
other things, guarantees the payment by Midwest of certain liabilities payable
to Powerton Trust II, (c) the Guaranty Agreement dated as of August 17, 2000
made by the Borrower in favor of Joliet Trust I that, among other things,
guarantees the payment by Midwest of certain liabilities payable to Joliet Trust
I and (d) the Guaranty Agreement dated as of August 17, 2000 made by the
Borrower in favor of Joliet Trust II that, among other things, guarantees the
payment by Midwest of certain liabilities payable to Joliet Trust II.
"POWERTON/JOLIET INTERCOMPANY NOTES" means the promissory notes of the
Borrower dated as of August 24, 2000 having an aggregate principal amount equal
to $1,367,000,000, evidencing in each case a loan from Midwest to the Borrower.
"PROJECT DEBT SERVICE" means, for any period, all accrued interest and
principal payments during such period for the Consolidated Operating Projects.
Any principal payments made due to refinancing shall be excluded.
"PROJECT OPERATING EXPENSES" means all accrued expenses by the
Consolidated Operating Projects which are necessary for the continued operation
and maintenance of the
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Consolidated Operating Projects which shall include operating lease payments and
foreign taxes paid but exclude depreciation and amortization or any capital
expenditure undertaken primarily to increase the efficiency of, expand or
re-power the Consolidated Operating Projects or capital expenditures for
environmental purposes which are not required by applicable law.
"PROJECT REVENUES" means, for any period, all accrued revenues by the
Consolidated Operating Projects during such period, including revenues from the
sale of energy and capacity, steam and fuel plus accruals for business
interruption insurance and all interest and other income.
"QUARTERLY PAYMENT DATE" means the last day of each March, June,
September, and December or, if any such day is not a Business Day, the next
succeeding Business Day.
"RECOURSE DEBT" means, on any date, the sum (without duplication) of
the following indebtedness of the Borrower: (a) all indebtedness for borrowed
money other than Subordinated Debt; (b) all guarantees for (i) indebtedness of
the Subsidiaries and (ii) rental expenses of the Subsidiaries; (c) all
reimbursement obligations with respect to surety bonds, letters of credit (to
the extent not collateralized with cash or Cash Equivalent Investments),
bankers' acceptances and similar instruments (in each case, whether or not
matured); (d) all obligations evidenced by notes, bonds, debentures or similar
instruments, including obligations so evidenced incurred in connection with the
acquisition of property, assets or businesses; and (e) Derivative Obligations.
For purposes of the foregoing, (i) indebtedness of the Borrower shall exclude,
to the extent included, (A) indebtedness of the Borrower evidenced by the
Powerton/Joliet Intercompany Notes for so long as amounts payable thereunder are
subject to setoff against amounts paid under the Powerton/Joliet Guarantees in
accordance with the terms of the Powerton/Joliet Intercompany Notes; (B)
indebtedness of the Borrower evidenced by the Synthetic Lease Intercompany Note
for so long as amounts payable thereunder are subject to setoff against payments
under the Synthetic Lease Guarantee in accordance with the terms of the
Synthetic Lease Intercompany Note; and (C) indebtedness of the Borrower under
guarantees of rental expenses to the extent attributable to lease indebtedness
provided by Subsidiaries under leasing transactions, including, without
limitation, indebtedness of the Borrower under the Synthetic Lease Guarantee to
the extent attributable to lease indebtedness provided by Subsidiaries as
Synthetic Lease Tranche A Loans; and (ii) the amount of indebtedness of the
Borrower under guarantees of rental expenses of the Subsidiaries on any date of
determination shall be the termination value under the related lease on such
date of determination (adjusted so as to give effect to adjustments contemplated
by clause (i)(C) above, if applicable) plus reasonably anticipated indemnity or
other similar payments as of such date of determination; PROVIDED that the
amount of indebtedness of the Borrower under each Powerton/Joliet Guarantee on
any date of determination shall be the Termination Value (or, if applicable,
Special Termination Value) as defined in such Powerton/Joliet Guarantee on such
date of determination plus reasonably anticipated indemnity or other similar
payments as of such date of determination.
"RECOURSE DEBT TO RECOURSE CAPITAL RATIO" means, on any date, the ratio
of: (a) Recourse Debt on such date to (b) the sum on such date of (i)
Consolidated Net Worth on such date PLUS (ii) Recourse Debt.
"REGISTER" has the meaning set forth in SECTION 11.11.1.
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"REQUIRED LENDERS" means, at any time, Lenders having at least 66?% of
the Total Commitment Amount, or, if no Commitments are then outstanding, Lenders
holding at least 66?% of the then aggregate outstanding principal amount of the
Loans.
"RESTRICTIVE FINANCING DOCUMENTS" means has the meaning specified in
SECTION 8.2.7.
"S&P" means Standard & Poor's Ratings Services and its successors and
assigns.
"SAME DAY FUNDS" means (i) with respect to disbursements and payments
in Dollars, immediately available funds, and (ii) with respect to disbursements
and payments in any other Offshore Currency, same day or other funds as may be
determined by the Administrative Agent to be customary in the place of
disbursement or payment for the settlement of international banking transactions
in the relevant Offshore Currency.
"SPC" has the meaning specified in SECTION 11.11.1(F).
"SPOT RATE" for a currency means the rate quoted by Citibank, N.A. as
the spot rate for the purchase by Citibank, N.A. of such currency with another
currency through its FX Dealing Desk at approximately 11:00 a.m. (New York time)
on the date as of which the foreign exchange computation is made.
"SUBORDINATED DEBT" means all unsecured Indebtedness of the Borrower
for money borrowed which is subordinated, upon terms (including the terms
applicable to the payment, prepayment, redemption, purchase or defeasance
thereof) satisfactory to the Required Lenders, in right of payment to the
payment in full in cash of all Obligations.
"SUBSIDIARY" means, with respect to any Person, any corporation of
which more than 50% of the outstanding capital stock having ordinary voting
power to elect a majority of the board of directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation shall or might have voting power upon the occurrence of any
contingency) is at the time directly or indirectly owned by such Person, by such
Person and one or more other Subsidiaries of such Person, or by one or more
other Subsidiaries of such Person.
"SUBSIDIARY PAYMENTS" has the meaning specified in SECTION 8.2.7.
"SYNTHETIC LEASE CREDIT AGREEMENT" means the Credit Agreement dated as
of June 23, 2000 among EME/CDL Trust, Midwest Peaker Holdings, Inc., Citicorp
Del-Lease, Inc. and Citicorp North America, Inc.
"SYNTHETIC LEASE GUARANTEE" means the Guaranty Agreement dated as of
June 23, 2000 made by the Borrower in favor of the EME/CDL Trust.
"SYNTHETIC LEASE INTERCOMPANY NOTE" means the intercompany note of the
Borrower dated as of July 10, 2000 having a principal amount of $300,000,000,
evidencing a loan from Midwest to the Borrower.
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"SYNTHETIC LEASE TRANCHE A LOANS" means the Tranche A Loans (as defined
in the Synthetic Lease Credit Agreement)."
"TANGIBLE NET WORTH" means the net worth of the Borrower and its
Subsidiaries (determined on a consolidated basis in accordance with GAAP) after
subtracting therefrom the aggregate amount of any intangible assets of the
Borrower and its Subsidiaries (determined on a consolidated basis in accordance
with GAAP), including goodwill, franchises, licenses, patents, trademarks, trade
names, copyrights, service marks and brand names.
"TAXES" has the meaning set forth in SECTION 4.7.
"TOTAL COMMITMENT AMOUNT" means, collectively, the Tranche A Commitment
Amount and the Tranche B Commitment Amount.
"TRANCHE A COMMITMENT" means, relative to any Lender, the obligation of
such Lender to make a Tranche A Loan to the Borrower hereunder in a principal
amount not to exceed the amount set forth under "Tranche A Commitment" opposite
such Lender's name on SCHEDULE 1.1(A) and as such amount may be adjusted from
time to time pursuant to any Lender Assignment Agreement executed by such Lender
and delivered pursuant to SECTION 11.11.1.
"TRANCHE A COMMITMENT AMOUNT" means $538,333,333.36, as such amount may
be reduced from time to time pursuant to SECTION 2.2.
"TRANCHE A COMMITMENT TERMINATION DATE" means the earliest of:
(a) the date 364 days after the Effective Date;
(b) the date on which the Total Commitment Amount is
terminated in full or reduced to zero pursuant to SECTION 2.2; or
(c) the date on which any Commitment Termination Event occurs.
"TRANCHE A ISSUANCE DATE" has the meaning specified in SECTION 5.1(A).
"TRANCHE A L/C OBLIGATIONS" means at any time the sum of (a) the Dollar
Equivalent of the aggregate undrawn amount of all Tranche A Letters of Credit
then outstanding plus (b) the amount of all unreimbursed drawings under all
Tranche A Letters of Credit, including all outstanding L/C Borrowings pursuant
to Tranche A Letters of Credit.
"TRANCHE A LETTERS OF CREDIT" means any Financial Letters of Credit or
Performance Letters of Credit Issued by the Issuing Lender pursuant to SECTION
5.1(A).
"TRANCHE A LOAN" has the meaning set forth in SECTION 2.1.1(A).
"TRANCHE A NOTE" means a promissory note of the Borrower payable to any
Lender, in the form of EXHIBIT A-1 hereto (as such promissory note may be
amended, endorsed or otherwise modified from time to time), evidencing the
aggregate Indebtedness of the
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Borrower to such Lender resulting from outstanding Tranche A Loans, and also
means all other promissory notes accepted from time to time in substitution
therefor or renewal thereof.
"TRANCHE A PERCENTAGE" means such Lender's Percentage with respect to
Tranche A Commitments.
"TRANCHE A PRICING GRID" means the pricing grid attached as ANNEX I.
"TRANCHE B LOAN" has the meaning set forth in SECTION 2.1.1(B).
"TRANCHE B COMMITMENT" means, relative to any Lender, the obligation of
such Lender to make Tranche B Loans to the Borrower hereunder in an aggregate
principal amount not to exceed the amount set forth under "Tranche B Commitment"
opposite such Lender's name on SCHEDULE 1.1(A) and as such amount may be
adjusted from time to time pursuant to any Lender Assignment Agreement executed
by such Lender and delivered pursuant to SECTION 11.11.1.
"TRANCHE B COMMITMENT AMOUNT" means, on any date, $211,666,666.64, as
such amount may be reduced from time to time pursuant to SECTION 2.2.
"TRANCHE B COMMITMENT TERMINATION DATE" means the earliest of:
(a) the third anniversary of the Effective Date;
(b) the date on which the Total Commitment Amount is
terminated in full or reduced to zero pursuant to SECTION 2.2; or
(c) the date on which any Commitment Termination Event occurs.
"TRANCHE B ISSUANCE DATE" has the meaning specified in SECTION 5.1(B).
"TRANCHE B L/C OBLIGATIONS" means at any time the sum of (a) the Dollar
Equivalent of the aggregate undrawn amount of all Tranche B Letters of Credit
then outstanding plus (b) the amount of all unreimbursed drawings under all
Tranche B Letters of Credit, including all outstanding L/C Borrowings pursuant
to Tranche B Letters of Credit.
"TRANCHE B LETTERS OF CREDIT" means any Financial Letters of Credit or
Performance Letters of Credit Issued by the Issuing Lender pursuant to SECTION
5.1(B).
"TRANCHE B NOTE" means a promissory note of the Borrower payable to any
Lender, in the form of EXHIBIT A-2 hereto (as such promissory note may be
amended, endorsed or otherwise modified from time to time), evidencing the
aggregate Indebtedness of the Borrower to such Lender resulting from outstanding
Tranche B Loans, and also means all other promissory notes accepted from time to
time in substitution therefor or renewal thereof.
"TRANCHE B PERCENTAGE" means such Lender's Percentage with respect to
Tranche B Commitments.
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"TRANCHE B PRICING GRID" means the pricing grid attached as ANNEX II.
"TYPE" means, relative to any Loan, the portion thereof, if any, being
maintained as a Base Rate Loan or a LIBO Rate Loan.
"UCP" has the meaning specified in SECTION 5.5.
"UNITED STATES" or "U.S." means the United States of America, its fifty
States and the District of Columbia.
"UTILIZATION FEE" has the meaning set forth in SECTION 3.3.2.
"WELFARE PLAN" means a "welfare plan", as such term is defined in
Section 3(1) of ERISA.
SECTION 1.2 USE OF DEFINED TERMS. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in each Note, Borrowing Request,
Continuation/Conversion Notice, Loan Document, notice and other communication
delivered from time to time in connection with any Loan Document.
SECTION 1.3 CROSS-REFERENCES. Unless otherwise specified, references in
this Agreement to any Article, Section, Annex, Exhibit or Schedule are
references to such Article, Section, Annex, Exhibit or Schedule of or to this
Agreement, and, unless otherwise specified, references in any Article, Section
or definition to any clause are references to such clause of such Article,
Section or definition.
SECTION 1.4 ACCOUNTING AND FINANCIAL DETERMINATIONS. Unless otherwise
specified, all accounting terms used in any Loan Document shall be interpreted,
all accounting determinations and computations hereunder or thereunder shall be
made, and all financial statements required to be delivered hereunder or
thereunder shall be prepared in accordance with, those generally accepted
accounting principles in effect in the United States ("GAAP") applied in the
preparation of the financial statements referred to in SECTION 7.5, except that
quarterly financial statements are not required to contain footnotes.
ARTICLE II
COMMITMENTS AND BORROWING PROCEDURES
SECTION 2.1 COMMITMENTS. On the terms and subject to the conditions of
this Agreement, each Lender severally agrees to make (a) Tranche A Loans in an
aggregate principal amount up to such Lender's Tranche A Commitment and (b)
Tranche B Loans in an aggregate principal amount up to such Lender's Tranche B
Commitment, in each case as provided in this SECTION 2.1.
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SECTION 2.1.1 COMMITMENTS.
(a) From time to time on any Business Day occurring prior to the
Tranche A Commitment Termination Date, each Lender severally agrees to make
revolving loans (each, a "TRANCHE A LOAN") to the Borrower equal to such
Lender's Percentage of the Borrowing of Tranche A Loans requested by the
Borrower to be made on such day. Tranche A Loans may from time to time be LIBO
Rate Loans or Base Rate Loans, as determined by the Borrower and notified to the
Administrative Agent in accordance with SECTIONS 2.3 and 2.4. The Borrower may
from time to time borrow, repay, in whole or in part, and reborrow Tranche A
Loans. Tranche A Commitments shall terminate automatically on the Tranche A
Commitment Termination Date.
(b) From time to time on any Business Day occurring prior to the
Tranche B Commitment Termination Date, each Lender severally agrees to make
revolving loans (each, a "TRANCHE B LOAN") to the Borrower equal to such
Lender's Percentage of the Borrowing of Tranche B Loans requested by the
Borrower to be made on such day. Tranche B Loans may from time to time be LIBO
Rate Loans or Base Rate Loans, as determined by the Borrower and notified to the
Administrative Agent in accordance with SECTIONS 2.3 and 2.4. The Borrower may
from time to time borrow, repay, in whole or in part, and reborrow Tranche B
Loans. Tranche B Commitments shall terminate automatically on the Tranche B
Commitment Termination Date.
SECTION 2.1.2 LENDERS NOT REQUIRED TO MAKE LOANS. No Lender shall be
required to make:
(a) any Tranche A Loan if, after giving effect thereto, the aggregate
outstanding principal amount of all Tranche A Loans and the Dollar Equivalent of
the Tranche A L/C Obligations (if any) would exceed the Tranche A Commitment
Amount; or
(b) any Tranche B Loan if, after giving effect thereto, the aggregate
outstanding principal amount of all Tranche B Loans and the Dollar Equivalent of
the Tranche B L/C Obligations (if any) would exceed the Tranche B Commitment
Amount.
SECTION 2.2 REDUCTION OF THE TOTAL COMMITMENT AMOUNT. The Borrower may,
from time to time on any Business Day occurring after the Effective Date,
voluntarily reduce the Tranche A Commitment Amount or the Tranche B Commitment
Amount without premium or penalty (subject, however, to SECTION 4.5); PROVIDED,
HOWEVER, that all such reductions shall require at least three Business Days'
prior notice to the Administrative Agent and be permanent, and any partial
reduction of the Tranche A Commitment Amount or the Tranche B Commitment Amount
shall be in a minimum amount of $10,000,000 and in an integral multiple of
$1,000,000 in excess thereof; and, PROVIDED, further, that (i) the Tranche A
Commitment Amount may not be reduced to an amount less than the aggregate amount
of outstanding Tranche A Loans and the Dollar Equivalent of the Tranche A L/C
Obligations and (ii) the Tranche B Commitment Amount may not be reduced to an
amount less than the aggregate amount of outstanding Tranche B Loans and the
Dollar Equivalent of the Tranche B L/C Obligations.
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SECTION 2.3 BORROWING PROCEDURE. By delivering a Borrowing Request to
the Administrative Agent on or before 12:00 Noon, New York City time, on a
Business Day, the Borrower may from time to time irrevocably request, (i) on not
less than three Business Days' notice, in the case of LIBO Rate Loans, and (ii)
on the same Business Day, in the case of Base Rate Loans, that a Borrowing of
Tranche A Loans or Tranche B Loans be made in minimum amounts of $10,000,000, or
in a lesser amount equal to the unused Tranche A Commitments or Tranche B
Commitment as permitted by SECTION 2.1.2. On the terms and subject to the
conditions of this Agreement, each Borrowing for each tranche shall be comprised
of the same type of Loans, and shall be made on the Business Day specified in
such Borrowing Request. On or before 2:00 p.m., New York City time, on the
Business Day such Tranche A Loans or Tranche B Loans are to be made, each Lender
shall deposit with the Administrative Agent Same Day Funds in an amount equal to
such Lender's Percentage of the requested Borrowing. Such deposit will be made
to an account which the Administrative Agent shall specify from time to time by
notice to the Lenders. To the extent funds are received from the Lenders, the
Administrative Agent shall make such funds available to the Borrower by wire
transfer to the accounts the Borrower shall have specified in its Borrowing
Request. No Lender's obligation to make any Loan shall be affected by any other
Lender's failure to make any Loan.
SECTION 2.4 CONTINUATION AND CONVERSION ELECTIONS. By delivering a
Continuation/Conversion Notice to the Administrative Agent on or before 12:00
Noon, New York City time on a Business Day, the Borrower may from time to time
irrevocably elect that all, or any portion in an aggregate minimum amount of
$10,000,000 and an integral multiple of $1,000,000 in excess thereof, of any
Loans be (i) on not less than three Business Days' notice, converted into, or
continued as, LIBO Rate Loans, or (ii) on the same Business Day, be converted
into, or continued as Base Rate Loans. In the absence of delivery of a
Continuation/Conversion Notice with respect to any LIBO Rate Loan, such LIBO
Rate Loan shall automatically be continued as a LIBO Rate Loan with an Interest
Period of the same duration as the then expiring Interest Period; PROVIDED,
HOWEVER, that (x) each such conversion or continuation shall be pro rated among
the applicable outstanding Loans of all Lenders, (y) a LIBO Rate Loan may not be
converted at any time other than the last day of the Interest Period applicable
thereto and (z) no portion of the outstanding principal amount of any Loans may
be continued as, or be converted into, LIBO Rate Loans when any Default or Event
of Default under SECTION 9.1.1 has occurred and is continuing. Each delivery of
a Continuation/Conversion Notice shall constitute a certification and warranty
by the Borrower that on the date of delivery of such notice no Default has
occurred and is continuing. If prior to the time of such continuation or
conversion any matter certified to by the Borrower by reason of the immediately
preceding sentence will not be true and correct at such time if then made, the
Borrower will immediately so notify the Administrative Agent. Except to the
extent, if any, that prior to the time of such continuation or conversion the
Administrative Agent shall have received written notice to the contrary from the
Borrower, such certification and warranty shall be deemed to be made at the date
of such continuation or conversion as if then made. Upon the occurrence and
during the continuance of any Event of Default under SECTION 9.1.1, each LIBO
Rate Loan shall convert automatically to a Base Rate Loan at the end of the
Interest Period then in effect for such LIBO Rate Loan.
SECTION 2.5 FUNDING. Each Lender may, if it so elects, fulfill its
obligation to make, continue or convert LIBO Rate Loans hereunder by causing one
of its
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foreign branches or Affiliates (or an international banking facility created by
such Lender) to make or maintain such LIBO Rate Loan; PROVIDED, HOWEVER, that
such LIBO Rate Loan shall nonetheless be deemed to have been made and to be held
by such Lender, and the obligation of the Borrower to repay such LIBO Rate Loan
shall nevertheless be to such Lender for the account of such foreign branch,
Affiliate or international banking facility. In addition, the Borrower hereby
consents and agrees that, for purposes of any determination to be made for
purposes of SECTION 4.1, 4.2, 4.3, 4.4, or 4.5, it shall be conclusively assumed
that each Lender elected to fund all LIBO Rate Loans by purchasing deposits in
its LIBOR Office's interbank eurodollar markets.
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1 REPAYMENTS AND PREPAYMENTS.
(a) The Tranche A Loans of each Lender shall mature, and the Borrower
unconditionally promises to pay in full the unpaid principal amount of such
Tranche A Loan to the Administrative Agent, for the account of such Lender, on
the Tranche A Commitment Termination Date.
(b) The Tranche B Loans of each Lender shall mature, and the Borrower
unconditionally promises to pay in full the unpaid principal amount of such
Tranche B Loan to the Administrative Agent, for the account of such Lender, on
the Tranche B Commitment Termination Date.
SECTION 3.1.1 OPTIONAL PREPAYMENTS.
(a) At any time, and from time to time, the Borrower may, on any
Business Day, make a voluntary prepayment, in whole or in part, of the
outstanding principal amount of the Loans; PROVIDED, HOWEVER, that:
(i) unless an Event of Default shall have occurred and be
continuing, any such prepayment shall be applied as between Loans, as
the Borrower may direct; PROVIDED that in the event that an Event of
Default shall have occurred and be continuing any such prepayment shall
be applied to the Tranche A Loans and the Tranche B Loans on a PRO RATA
basis until such Loans of the same class are paid in full;
(ii) any such prepayment shall be applied PRO RATA among the
Lenders in accordance with the respective unpaid principal amounts of
the Loans of the same class held by them;
(iii) any such prepayment made shall be applied PRO RATA among
Loans of the same type and, if applicable, having the same Interest
Period;
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(iv) any such prepayment of any LIBO Rate Loan made on any day
other than the last day of the Interest Period for such Loan shall be
subject to the provisions of SECTION 4.5;
(v) any such prepayment of LIBO Rate Loans shall require at
least two Business Days' prior written notice to the Administrative
Agent and any such prepayment of Base Rate Loans may be made on same
day's written notice to the Administrative Agent; and
(vi) any such partial prepayment of Loans shall be in an
aggregate minimum amount of $10,000,000 and an integral multiple of
$1,000,000 in excess thereof.
(b) The Borrower shall, on each date when a prepayment is required
pursuant to SECTION 5.7, make a mandatory prepayment of Loans, and/or Cash
Collateralize the Letters of Credit, in an amount equal to the excess of the
aggregate outstanding principal amount of (i) all Tranche A Loans and the Dollar
Equivalent of all Tranche A L/C Obligations over the Tranche A Commitment Amount
and (ii) all Tranche B Loans and the Dollar Equivalent of all Tranche B L/C
Obligations over the Tranche B Commitment Amount.
(c) The Borrower shall (i) immediately upon any acceleration of any
Loans pursuant to SECTION 9.2 or SECTION 9.3, repay all Loans, unless, pursuant
to SECTION 9.3, only a portion of all Loans is so accelerated.
(d) Each prepayment of Loans made pursuant to this SECTION 3.1.1 shall
be accompanied by accrued interest to the date of such prepayment on the amount
prepaid, but shall be without premium or penalty, except as may be required by
SECTION 4.5. No prepayment of principal of any Loan pursuant to SECTION 3.1.1(A)
shall cause a reduction in the Total Commitment Amount.
SECTION 3.2 INTEREST PROVISIONS. Interest on the outstanding principal
amount of Loans shall accrue and be payable in accordance with this SECTION 3.2.
SECTION 3.2.1 RATES.
(a) Pursuant to an appropriately delivered Borrowing Request or
Continuation/Conversion Notice, the Borrower may elect that Loans comprising a
Borrowing accrue interest at a rate per annum:
(i) on that portion maintained from time to time as a Base
Rate Loan, equal to the sum of the Alternate Base Rate from time to
time in effect plus the Applicable Margin from time to time in effect;
and
(ii) on that portion maintained as a LIBO Rate Loan, during
each Interest Period applicable thereto, equal to the sum of the LIBO
Rate for such Interest Period plus the Applicable Margin from time to
time in effect.
"LIBO RATE" means, for each day during each Interest Period for each
LIBO Rate Loan, the rate per annum determined on the basis of the rate for
deposits in Dollars for a period equal to such Interest Period commencing on the
first day of such Interest Period appearing on
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Telerate Service Page 3750 as of 11:00 a.m., London time, two Business Days
prior to the beginning of such Interest Period. In the event that such rate does
not appear on Telerate Service Page 3750, the "LIBO RATE" shall be determined by
reference to such other comparable publicly available service for displaying
eurodollar rates as may be selected by the Administrative Agent or, in the
absence of such availability, by reference to the rate at which the
Administrative Agent is offered Dollar deposits at or about 11:00 a.m., New York
City time, two Business Days prior to the beginning of such Interest Period in
the interbank eurodollar market where its eurodollar and foreign currency and
exchange operations are then being conducted for delivery on the first day of
such Interest Period for the number of days comprised therein. Notwithstanding
any other provision hereof, at such time as there shall exist for any Lender a
LIBOR Reserve Percentage which is greater than zero, the LIBO Rate used in the
determination of LIBO Rate Loans made by such Lender shall be the LIBO Rate
(Reserve Adjusted).
(b) All LIBO Rate Loans shall bear interest from and including the
first day of the applicable Interest Period to (but not including) the last day
of such Interest Period at the interest rate determined as applicable to such
LIBO Rate Loan.
SECTION 3.2.2 POST-MATURITY RATES; DEFAULT RATES.
(a) After the date any principal amount of any Loan is due and payable
(whether on the related Commitment Termination Date, upon acceleration or
otherwise), or after any monetary Obligation of the Borrower shall become due
and payable, the Borrower shall pay, but only to the extent permitted by law,
interest (after as well as before judgment) on such overdue amount at a rate per
annum equal to the Alternate Base Rate plus the Applicable Margin plus 2% until
such amount is paid in full.
(b) Upon the occurrence and during the continuance of any Event of
Default (other than an Event of Default under SECTION 9.1.1, for which provision
is made in SECTION 3.2.2(A) above), the Borrower shall pay, but only to the
extent permitted by law, in addition to the interest then payable on the Loans,
interest (after as well as before judgment) on the Loans at 2% per annum until
such Event of Default is cured.
SECTION 3.2.3 PAYMENT DATES. Interest accrued on each Loan shall be
payable, without duplication:
(a) on the Commitment Termination Date therefor;
(b) on the date of any payment or prepayment, in whole or in
part, of principal outstanding on such Loan;
(c) with respect to Base Rate Loans, on each Quarterly Payment
Date occurring after the date of the initial Borrowing hereunder;
(d) with respect to LIBO Rate Loans, the last day of each
applicable Interest Period (and, if such Interest Period shall exceed
three months, on the day three months after such Loan is made or
continued); and
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(e) on that portion of any Loans which is accelerated pursuant
to SECTION 9.2 or SECTION 9.3, immediately upon such acceleration.
Interest accrued on Loans or other monetary Obligations arising under or any
Loan Document after the date such amount is due and payable (whether on the
related Commitment Termination Date, upon acceleration or otherwise) shall be
payable upon demand.
SECTION 3.2.4 INTEREST RATE DETERMINATION. The Administrative Agent
shall determine the interest rate applicable to Loans and shall give prompt
notice to the Borrower and the Lenders of such determination, and its
determination thereof shall be conclusive in the absence of manifest error.
SECTION 3.3 FEES. The Borrower agrees to pay the fees set forth in this
SECTION 3.3.
SECTION 3.3.1 FACILITY FEE. The Borrower agrees to pay to the
Administrative Agent, for the ratable account of each Lender, a facility fee
(the "FACILITY FEE") in respect of each of the Tranche A Commitment Amount and
the Tranche B Commitment Amount (irrespective of usage) for each day from and
after the Effective Date at the rate per annum in effect for such day based on
the Borrower's Debt Rating for such day determined as provided in the Tranche A
Pricing Grid and the Tranche B Pricing Grid, respectively. Such fee shall be
payable in arrears on each Quarterly Payment Date, commencing with the first
such date following the Effective Date, and on the related Commitment
Termination Date.
SECTION 3.3.2 ADMINISTRATIVE AGENT'S FEE AND MISCELLANEOUS FEES. The
Borrower agrees to pay to the Administrative Agent, for (i) its own account,
(ii) the account of the Lenders and (iii) the account of the Lead Arrangers, the
respective fees as agreed to in the letter dated July 18, 2001, between the Lead
Arrangers and the Borrower and the letter dated July 18, 2001, between the
Borrower and the Administrative Agent.
ARTICLE IV
CERTAIN LIBO RATE AND OTHER PROVISIONS
SECTION 4.1 LIBO RATE LENDING UNLAWFUL. If any Lender shall reasonably
determine (which determination shall, upon notice thereof to the Borrower and
the Administrative Agent, be conclusive and binding on the Borrower absent
manifest error) that the introduction of or any change in or in the
interpretation of any law, rule or regulation makes it unlawful, or any central
bank or other governmental authority or comparable agency asserts that it is
unlawful, for such Lender to make, continue or maintain any Loan as, or to
convert any Loan into, a LIBO Rate Loan, the obligations of such Lender to make,
continue, maintain or convert any such Loans shall, upon such determination,
forthwith be suspended until such Lender shall notify the Administrative Agent
that the circumstances causing such suspension no longer exist, and all LIBO
Rate Loans of such Lender shall automatically convert into Base Rate Loans at
the end of the then current Interest Periods with respect thereto or sooner, if
required by such law or assertion.
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SECTION 4.2 INABILITY TO DETERMINE RATES. If the Administrative Agent
shall have determined that by reason of circumstances affecting the
Administrative Agent's relevant market, adequate means do not exist for
ascertaining the interest rate applicable hereunder to LIBO Rate Loans, then,
upon notice from the Administrative Agent to the Borrower and the Lenders, the
obligations of all Lenders under SECTION 2.3 and SECTION 2.4 to make or continue
any Loans as, or to convert any Loans into, LIBO Rate Loans shall forthwith be
suspended until the Administrative Agent shall notify the Borrower and the
Lenders that the circumstances causing such suspension no longer exist.
SECTION 4.3 INCREASED LIBO RATE LOAN COSTS. If after the date hereof,
the adoption of any applicable law, rule or regulation, or any change therein,
or any change in the interpretation or administration thereof by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender (or its
LIBOR Office) with any request or directive (whether or not having the force of
law) of any such authority, central bank or comparable agency shall increase the
cost to such Lender of, or result in any reduction in the amount of any sum
receivable by such Lender in respect of, making, continuing or maintaining (or
of its obligation to make, continue or maintain) any Loans as, or of converting
(or of its obligation to convert) any Loans into, LIBO Rate Loans, then the
Borrower agrees to pay to the Administrative Agent for the account of each
Lender the amount of any such increase or reduction. Such Lender shall promptly
notify the Administrative Agent and the Borrower in writing of the occurrence of
any such event, such notice to state, in reasonable detail, the reasons therefor
and the additional amount required fully to compensate such Lender for such
increased cost or reduced amount. Such additional amounts shall be payable by
the Borrower directly to such Lender within ten Business Day's of its receipt of
such notice, and such notice shall be binding on the Borrower absent clear and
convincing evidence to the contrary.
SECTION 4.4 OBLIGATION TO MITIGATE. Each Lender agrees that as promptly
as practicable after it becomes aware of the occurrence of an event that would
entitle it to give notice pursuant to SECTION 4.L, 4.3 or 4.6, and in any event
if so requested by the Borrower, each Lender shall use reasonable efforts to
make, fund or maintain its affected Loans through another lending office if as a
result thereof the increased costs would be avoided or materially reduced or the
illegality would thereby cease to exist and if, in the reasonable opinion of
such Lender, the making, funding or maintaining of such Loans through such other
lending office would not in any material respect be disadvantageous to such
Lender, contrary to such Lender's normal banking practices or violate any
applicable law or regulation. No change by a Lender in its Domestic Office or
LIBOR Office made for such Lender's convenience shall result in any increased
cost to the Borrower. The Borrower shall not be obligated to compensate any
Lender for the amount of any additional amount pursuant to SECTION 4.1, 4.3 or
4.6 accruing prior to the date which is 90 days before the date on which such
Lender first notifies the Borrower that it intends to claim such compensation;
it being understood that the calculation of the actual amounts may not be
possible within such period and that such Lender may provide such calculation as
soon as reasonably practicable thereafter without affecting or limiting the
Borrower's payment obligation thereunder. If any Lender demands compensation
pursuant to SECTION 4.1, 4.3 or 4.6 with respect to any LIBO Rate Loan, the
Borrower may, at any time upon at least one Business Days prior notice to such
Lender through the Administrative Agent, elect to convert such Loan into a Base
Rate Loan. Thereafter, unless and until such Lender notifies the
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Borrower that the circumstances giving rise to such notice no longer apply, all
such LIBO Rate Loans by such Lender shall bear interest as Base Rate Loans,
notwithstanding any prior election by the Borrower to the contrary. If such
Lender notifies the Borrower that the circumstances giving rise to such notice
no longer apply, the Borrower may elect that the principal amount of each such
Loan again bear interest as LIBO Rate Loans in accordance with this Agreement,
on the first day of the next succeeding Interest Period applicable to the
related LIBO Rate Loans of other Lenders. Additionally, the Borrower may, at its
option, upon at least five Business Days' prior notice to such Lender, elect to
prepay in full, without premium or penalty, such Lender's affected LIBO Rate
Loans. If the Borrower elects to prepay any Loans pursuant to this SECTION 4.4,
the Borrower shall pay within ten Business Days after written demand any
additional increased costs of such Lender accruing for the period prior to such
date of prepayment. If such conversion or prepayment is made on a day other than
the last day of the current Interest Period for such affected LIBO Rate Loans,
such Lender shall be entitled to make a request for, and the Borrower shall pay,
compensation under SECTION 4.5.
SECTION 4.5 FUNDING LOSSES. In the event any Lender shall incur any
loss or expense (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender
to make, continue or maintain any portion of the principal amount of any Loan
as, or to convert any portion of the principal amount of any Loan into, a LIBO
Rate Loan) as a result of:
(a) any conversion or repayment or prepayment of the principal
amount of any LIBO Rate Loans on a date other than the scheduled last
day of the Interest Period applicable thereto, whether pursuant to
SECTION 3.1 or otherwise;
(b) Borrower's failure to borrow any LIBO Rate Loans in
accordance with the Borrowing Request therefor; or
(c) any Loans not being continued as, or converted into, LIBO
Rate Loans in accordance with the Continuation/Conversion Notice
therefor;
then, upon the written notice of such Lender to the Borrower (with a copy to the
Administrative Agent), the Borrower shall, within ten Business Days of its
receipt thereof, pay directly to such Lender such amount as will (in the
reasonable determination of such Lender) reimburse such Lender for such loss or
expense. Such written notice (which shall include calculations in reasonable
detail) shall be binding on the Borrower absent manifest error.
SECTION 4.6 INCREASED CAPITAL COSTS. If after the date hereof any
change in, or the introduction, adoption, effectiveness, interpretation,
reinterpretation or phase-in of, any applicable law or regulation, directive,
guideline, decision or request (whether or not having the force of law) of any
court, central bank, regulator or other governmental authority affects the
amount of capital required to be maintained by any Lender, and such Lender
reasonably determines that the rate of return on its capital as a consequence of
its Commitment or the Loans made by such Lender is reduced in a material amount
to a level below that which such Lender could have achieved but for the
occurrence of any such circumstance, then, in any such case upon notice from
time to time by such Lender to the Borrower, the Borrower shall pay within ten
Business Days after such demand directly to such Lender additional amounts
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sufficient to compensate such Lender for such reduction in rate of return. A
statement of such Lender as to any such additional amount or amounts (including
calculations thereof in reasonable detail) shall be binding on the Borrower
absent manifest error.
SECTION 4.7 TAXES.
(a) All payments by the Borrower of principal of, and interest on, the
Loans and all other amounts payable hereunder shall be made free and clear of
and without deduction for any present or future income, excise, stamp or
franchise taxes and other taxes, fees, duties, withholdings or other charges of
any nature whatsoever imposed by any taxing authority, but excluding franchise
taxes or taxes imposed on or measured by any Lender's net income, in each case,
imposed as a result of a connection between the Lender and the jurisdiction
imposing the tax (other than a connection arising solely from the Lender having
executed, delivered or performed its obligations or received a payment under, or
enforced, this Agreement), and the Lenders will use reasonable efforts to
minimize, to the extent possible, any such applicable taxes; PROVIDED, HOWEVER,
that such taxes does not include franchise taxes receipts, net worth or
shareholders' capital (such non-excluded items being called "TAXES"). In the
event that any withholding or deduction from any payment to be made by the
Borrower hereunder is required in respect of any Taxes pursuant to any
applicable law, rule or regulation, then the Borrower will:
(i) pay directly to the relevant authority the full amount
required to be so withheld or deducted;
(ii) within 30 days after such payment forward to the
Administrative Agent an official receipt or other documentation
satisfactory to the Administrative Agent evidencing such payment to
such authority; and
(iii) pay to the Administrative Agent for the account of the
Lenders such additional amount or amounts as is necessary to ensure
that the net amount actually received by each Lender will equal the
full amount such Lender would have received had no such withholding or
deduction been required.
Moreover, if any Taxes are directly asserted against the Administrative Agent or
any Lender with respect to any payment received by the Administrative Agent or
such Lender hereunder, the Administrative Agent or such Lender may pay such
Taxes and, upon receipt of notice from the Administrative Agent or such Lender
within 30 days after such payment, the Borrower will promptly pay such
additional amounts (including any penalties, interest or expenses) as is
necessary in order that the net amount received by such person after the payment
of such Taxes (including any Taxes on such additional amount) shall equal the
amount such person would have received had no such Taxes been asserted.
(b) If the Borrower fails to pay any Taxes when due to the
appropriate taxing authority or fails to remit to the Administrative Agent, for
the account of the respective Lenders, the required receipts or other required
documentary evidence, the Borrower shall indemnify the Lenders for any
incremental Taxes, interest or penalties that may become payable by any Lender
as a result of any such failure. For purposes of this SECTION 4.7, a
distribution hereunder by the
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Administrative Agent or any Lender to or for the account of any Lender shall be
deemed a payment by the Borrower.
(c) Each Lender that is not a United States person as defined in
Section 7701(a)(3) of the Code (a "NON-U.S. LENDER") shall deliver to the
Borrower and the Administrative Agent two copies of either U.S. Internal Revenue
Service Form 1001 or Form W8BEN, or any subsequent versions thereof or
successors thereto properly completed and duly executed by such Non-U.S. Lender
claiming complete exemption from, or a reduced rate of, U.S. federal withholding
tax on all payments by the Borrower under the Loan Documents. Such forms shall
be delivered by each Non-U.S. Lender on or before the date it becomes a party to
this Agreement. In addition, each Non-U.S. Lender shall deliver such forms
promptly upon the obsolescence or invalidity of any form previously delivered by
such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify the Borrower at
any time it determines that it is no longer in a position to provide any
previously delivered certificate to the Borrower (or any other form of
certification adopted by the U.S. taxing authorities for such purpose). The
Borrower shall not be required to increase any such amounts payable to any
Non-U.S. Lender with respect to any Non-Excluded Taxes (i) that are attributable
to such Non-U.S. Lender's failure to comply with the requirements of this
SECTION 4.7(c) or (ii) that are United States withholding taxes imposed on
amounts payable to such Lender at the time the Lender becomes a party to this
Agreement, except to the extent that such Lender's assignor (if any) was
entitled, at the time of assignment, to receive additional amounts from the
Borrower with respect to such Non-Excluded Taxes pursuant to SECTION 4.7(A).
Notwithstanding any other provision of this SECTION 4.7(C), a Non-U.S. Lender
shall not be required to deliver any form pursuant to this SECTION 4.7(C) that
such Non-U.S. Lender is not legally able to deliver.
SECTION 4.8 PAYMENTS, COMPUTATIONS. Unless otherwise expressly
provided, all payments by the Borrower pursuant to any Loan Document shall be
made by the Borrower to the Administrative Agent for the PRO RATA account of the
Lenders entitled to receive such payment. All such payments required to be made
to the Administrative Agent shall be made, without setoff, deduction or
counterclaim, not later than 12:00 Noon, New York City time, on the date due, in
Same Day Funds, to such account as the Administrative Agent shall specify from
time to time by notice to the Borrower; PROVIDED that such payment shall be
deemed made timely if made by wire transfer and by such time as an Authorized
Representative has advised the Administrative Agent of the applicable Federal
Reserve System wire transfer confirmation number. Funds received after that time
shall be deemed to have been received by the Administrative Agent on the next
succeeding Business Day. The Administrative Agent shall promptly remit in Same
Day Funds to each Lender its share, if any, of such payments received by the
Administrative Agent for the account of such Lender. All interest and fees shall
be computed on the basis of the actual number of days (including the first day
but excluding the last day) occurring during the period for which such interest
or fee is payable over a year comprised of 360 days (or, in the case of interest
on a Base Rate Loan, 365 days or, if appropriate, 366 days). Whenever any
payment to be made shall otherwise be due on a day which is not a Business Day,
such payment shall (except as otherwise required by CLAUSE (C) of the definition
of the term "INTEREST Period" with respect to LIBO Rate Loans) be made on the
next succeeding Business Day and such extension of time shall be included in
computing interest and fees, if any, in connection with such payment.
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SECTION 4.9 SHARING OF PAYMENTS. If any Lender shall obtain any payment
or other recovery (whether voluntary, involuntary, by application of setoff or
otherwise) on account of any Loan (other than pursuant to the terms of SECTIONS
4.3, 4.4, 4.5, 4.6, and 4.7) in excess of its pro rata share of payments then or
therewith obtained by all Lenders holding Loans of such type, such Lender shall
purchase from the other Lenders such participations in Loans made by them as
shall be necessary to cause such purchasing Lender to share the excess payment
or other recovery ratably with each of them; PROVIDED, HOWEVER, that if all or
any portion of the excess payment or other recovery is thereafter recovered from
such purchasing Lender, the purchase shall be rescinded and each Lender which
has sold a participation to the purchasing Lender shall repay to the purchasing
Lender the purchase price to the ratable extent of such recovery together with
an amount equal to such selling Lender's ratable share (according to the
proportion of (a) the amount of such selling Lender's required repayment to the
purchasing Lender to (b) the total amount so recovered from the purchasing
Lender) of any interest or other amount paid or payable by the purchasing Lender
in respect of the total amount so recovered. The Borrower agrees that any Lender
so purchasing a participation from another Lender pursuant to this SECTION 4.9
may, to the fullest extent permitted by law, exercise all its rights of payment
(including pursuant to SECTION 4.10) with respect to such participation as fully
as if such Lender were the direct creditor of the Borrower in the amount of such
participation.
If under any applicable bankruptcy, insolvency or other similar law,
any Lender receives a secured claim in lieu of a setoff to which this SECTION
4.9 applies, such Lender shall, to the extent practicable, exercise its rights
in respect of such secured claim in a manner consistent with the rights of the
Lenders entitled under this SECTION 4.9 to share in the benefits of any recovery
on such secured claim.
SECTION 4.10 SETOFF. Each Lender shall, upon the occurrence of any
Event of Default described in CLAUSE (A) or (B) of SECTION 9.1.8 and, upon the
occurrence of any Default described in CLAUSES (C) through (D) of SECTION 9.1.8
with respect to the Borrower or, with the consent of the Required Lenders, upon
the occurrence and continuance beyond the expiration of the applicable grace
period, if any, of any other Event of Default, have the right to appropriate and
apply to the payment of the Obligations owing to it (whether or not then due),
and (as security for such Obligations) the Borrower hereby grants to each Lender
a continuing security interest in, any and all balances, credits, deposits,
accounts or moneys of the Borrower then or thereafter maintained with such
Lender or any bank controlling such Lender; PROVIDED, HOWEVER, that any such
appropriation and application shall be subject to the provisions of SECTION 4.9.
Each Lender agrees promptly to notify the Borrower and the
Administrative Agent after any such setoff and application made by such Lender;
PROVIDED, HOWEVER, that the failure to give such notice shall not affect the
validity of such setoff and application.
The rights of each Lender under this SECTION 4.10 are in addition to
other rights and remedies (including other rights of setoff under applicable law
or otherwise) which such Lender may have.
SECTION 4.11 REPLACEMENT OF LENDER. The Borrower shall be permitted to
replace (with one or more replacement Lenders) any Lender which requests
reimbursement for
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amounts owing pursuant to SECTION 4.1, 4.3, 4.6 or 4.7; PROVIDED that (i) such
replacement does not conflict with any law, treaty, rule or regulation or
determination of an arbitrator or a court or other governmental authority, in
each case applicable to the Borrower or such Lender or to which the Borrower or
such Lender or any of their respective property is subject, (ii) no Default or
Event of Default shall have occurred and be continuing at the time of such
replacement, (iii) the Borrower shall repay (or the replacement bank or
institution shall purchase, at par) all Loans and other amounts owing to such
replaced Lender prior to the date of replacement, (iv) the Borrower shall be
liable to such replaced Lender under SECTION 4.5 if any LIBO Rate Loan owing to
such replaced Lender shall be prepaid (or purchased) other than on the last day
of the Interest Period relating thereto, (v) the replacement bank or
institution, if not already a Lender, shall be reasonably satisfactory to the
Administrative Agent, (vi) the replaced Lender shall be obligated to make such
replacement in accordance with the provisions of SECTION 11.11.1 (PROVIDED that
the Borrower or replacement Lender shall be obligated to pay the registration
and processing fee), (vii) until such time as such replacement shall be
consummated, the Borrower shall pay all additional amounts (if any) required
pursuant to SECTION 4.1, 4.3, 4.6 or 4.7, as the case may be, (viii) any such
replacement shall not be deemed to be a waiver of any rights which the Borrower,
the Administrative Agent or any other Lender shall have against the replaced
Lender, and (ix) if such replacement bank or institution is not already a
Lender, the Borrower shall pay to the Administrative Agent an administrative fee
of $3,500.
ARTICLE V
THE LETTERS OF CREDIT
SECTION 5.1 THE LETTER OF CREDIT COMMITMENT.
(a) On the terms and conditions set forth herein (i) the Issuing Lender
agrees, (A) from time to time on any Business Day during the period from the
Effective Date to the date ten Business Days prior to the Tranche A Commitment
Termination Date to Issue Tranche A Letters of Credit for the account of the
Borrower, and to amend or renew Tranche A Letters of Credit previously issued by
it, in accordance with SECTION 5.1.1, and (B) to honor drafts under the Tranche
A Letters of Credit; and (ii) the Lenders holding Tranche A Commitments
severally agree to participate in Tranche A Letters of Credit Issued for the
account of the Borrower; PROVIDED, that the Issuing Lender shall not be
obligated to Issue, and no Lender shall be obligated to participate in, any
Tranche A Letter of Credit if as of the date of Issuance of such Tranche A
Letter of Credit (the "TRANCHE A ISSUANCE DATE"), after giving effect to the
issuance of such Tranche A Letter of Credit (1) the Dollar Equivalent of all
Tranche A L/C Obligations plus all Tranche A Loans exceeds the Tranche A
Commitment Amount, or (2) the Dollar Equivalent of all Tranche A L/C Obligations
exceeds $[150,000,000], or (3) the participation of any Lender in the Dollar
Equivalent of all Tranche A L/C Obligations plus the Tranche A Loans of such
Lender exceeds such Lender's Tranche A Commitment. Within the foregoing limits,
and subject to the other terms and conditions hereof, the Borrower's ability to
obtain Tranche A Letters of Credit shall be fully revolving, and, accordingly,
the Borrower may, during the foregoing period, obtain Tranche A Letters of
Credit to replace Tranche A Letters of Credit which have expired or which have
been drawn upon and reimbursed.
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(b) On the terms and conditions set forth herein (i) the Issuing Lender
agrees, (A) from time to time on any Business Day during the period from the
Effective Date to the date ten Business Days prior to the Tranche B Commitment
Termination Date to Issue Tranche B Letters of Credit for the account of the
Borrower, and to amend or renew Tranche B Letters of Credit previously issued by
it, in accordance with SECTION 5.1.1, and (B) to honor drafts under the Tranche
B Letters of Credit; and (ii) the Lenders holding Tranche B Commitments
severally agree to participate in Tranche B Letters of Credit Issued for the
account of the Borrower; PROVIDED, that the Issuing Lender shall not be
obligated to Issue, and no Lender shall be obligated to participate in, any
Tranche B Letter of Credit if as of the date of Issuance of such Tranche B
Letter of Credit (the "TRANCHE B ISSUANCE DATE"), after giving effect to the
issuance of such Tranche B Letter of Credit (1) the Dollar Equivalent of all
Tranche B L/C Obligations plus all Tranche B Loans exceeds the Tranche B
Commitment Amount, or (2) the participation of any Lender in the Dollar
Equivalent of all Tranche B L/C Obligations plus the Tranche B Loans of such
Lender exceeds such Lender's Tranche B Commitment. Within the foregoing limits,
and subject to the other terms and conditions hereof, the Borrower's ability to
obtain Tranche B Letters of Credit shall be fully revolving, and, accordingly,
the Borrower may, during the foregoing period, obtain Tranche B Letters of
Credit to replace Tranche B Letters of Credit which have expired or which have
been drawn upon and reimbursed.
(c) The Issuing Lender is under no obligation to Issue any Letter of
Credit if:
(i) any order, judgment or decree of any governmental
authority or arbitrator shall by its terms purport to enjoin or
restrain the Issuing Lender from Issuing such Letter of Credit, or any
requirement of law applicable to the Issuing Lender or any request or
directive (whether or not having the force of law) from any court or
governmental authority or regulatory body with jurisdiction over the
Issuing Lender shall prohibit, or request that the Issuing Lender
refrain from, the Issuance of letters of credit generally or such
Letter of Credit in particular or shall impose upon the Issuing Lender
with respect to such Letter of Credit any restriction, reserve or
capital requirement (for which the Issuing Lender is not otherwise
compensated hereunder) not in effect on the Effective Date, or shall
impose upon the Issuing Lender any unreimbursed loss, cost or expense
which was not applicable on the Effective Date and which the Issuing
Lender in good faith deems material to it;
(ii) the Issuing Lender has received written notice from any
Lender, the Administrative Agent or the Borrower, on or prior to the
Business Day prior to the requested date of Issuance of such Letter of
Credit, that one or more of the applicable conditions contained in
SECTION 6.2 is not then satisfied;
(iii) the expiry date of any requested Tranche A Letter of
Credit is after five Business Days prior to the Tranche A Commitment
Termination Date;
(iv) the expiry date of any requested Tranche B Letter of
Credit is after five Business Days prior to the Tranche B Commitment
Termination Date;
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(v) any requested Letter of Credit is not in form and
substance acceptable to the Issuing Lender, or the Issuance of a Letter
of Credit shall violate any applicable policies of the Issuing Lender
in its sole discretion;
(vi) any standby Letter of Credit is for the purpose of
supporting the issuance of any letter of credit by any other Person
(except for Bank of America, N.A as the issuing bank of existing
letters of credit listed on SCHEDULE 5.1); or
(vii) such Letter of Credit is in a face amount less than the
Dollar Equivalent of $300,000 or denominated in a currency other than
Dollars or an Offshore Currency.
SECTION 5.1.1 ISSUANCE, AMENDMENT AND RENEWAL OF LETTERS OF CREDIT.
(a) Each Letter of Credit shall be Issued upon the irrevocable written
request of the Borrower received by the Issuing Lender (with a copy sent by the
Borrower to the Administrative Agent) at least five Business Days (or such
shorter time as the Issuing Lender may agree in a particular instance in its
sole discretion) prior to the proposed date of Issuance. Each such request for
Issuance of a Letter of Credit shall be by facsimile, promptly confirmed in
writing, in the form of an L/C Application, and shall specify in form and detail
satisfactory to the Issuing Lender: (i) whether the Letter of Credit is a
Tranche A Letter of Credit or a Tranche B Letter of Credit; (ii) the proposed
date of Issuance of the Letter of Credit (which shall be a Business Day); (iii)
the face amount and currency of the Letter of Credit; (iv) the expiry date of
the Letter of Credit; (v) the name and address of the beneficiary thereof; (vi)
any documents to be presented by the beneficiary of the Letter of Credit in case
of any drawing thereunder; (vii) the full text of any certificate to be
presented by the beneficiary in case of any drawing thereunder; and (viii) such
other matters as the Issuing Lender may require. The Administrative Agent shall
promptly notify the Lenders of the receipt by it of any L/C Application.
(b) At least two Business Days prior to the Issuance of any Letter of
Credit, the Issuing Lender will confirm with the Administrative Agent (by
telephone or in writing) that the Administrative Agent has received a copy of
the L/C Application from the Borrower and, if not, the Issuing Lender will
provide the Administrative Agent with a copy thereof. On or before the Business
Day immediately preceding the date the Issuing Lender is to issue a requested
Letter of Credit, the Administrative Agent will confirm to the Issuing Lender
that (A) such issuance is then permitted under SECTION 5.1; and (B) all
conditions specified in SECTION 6.2 are then satisfied. If the Administrative
Agent shall have directed the Issuing Lender to issue such Letter of Credit,
then, subject to the terms and conditions hereof, the Issuing Lender shall, on
the requested date, issue a Letter of Credit for the account of the Borrower in
accordance with the Issuing Lender's usual and customary business practices.
(c) From time to time while a Letter of Credit is outstanding and ten
Business Days prior to (i) the Tranche A Commitment Termination Date for Tranche
A Letters of Credit or (ii) the Tranche B Commitment Termination Date for
Tranche B Letters of Credit, the Issuing Lender will, upon the written request
of the Borrower received by the Issuing Lender (with a copy sent by the Borrower
to the Administrative Agent) at least four Business Days (or such shorter time
as the Issuing Lender may agree in a particular instance in its sole discretion)
prior to the proposed date of amendment, amend any Letter of Credit issued by
it. Each such request
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for amendment of a Letter of Credit shall be made by facsimile, promptly
confirmed in writing, made in the form of an L/C Application and shall specify
in form and detail satisfactory to the Issuing Lender: (i) the Letter of Credit
to be amended; (ii) the proposed date of amendment of the Letter of Credit
(which shall be a Business Day); (iii) the nature of the proposed amendment; and
(iv) such other matters as the Issuing Lender may require. The Issuing Lender
shall be under no obligation to amend any Letter of Credit if: (A) the Issuing
Lender would have no obligation at such time to issue such Letter of Credit in
its amended form under the terms of this Agreement; or (B) the beneficiary of
any such Letter of Credit does not accept the proposed amendment to the Letter
of Credit; or (C) the conditions of SECTION 5.1(C) shall not have been met. On
or before the Business Day immediately preceding the date the Issuing Lender is
to amend a Letter of Credit, the Administrative Agent will confirm to the
Issuing Lender that (A) such amendment is then permitted under SECTION 5.1; and
(B) all conditions specified in SECTION 6.2 are then satisfied. The
Administrative Agent shall promptly notify the Lenders of the receipt by it of
any L/C Application.
(d) The Issuing Lender and the Lenders agree that, while a Letter of
Credit is outstanding and ten Business Days prior to (i) the Tranche A
Commitment Termination Date for Tranche A Letters of Credit or (ii) the Tranche
B Commitment Termination Date for Tranche B Letters of Credit, at the option of
the Borrower and upon the written request of the Borrower received by the
Issuing Lender (with a copy sent by the Borrower to the Administrative Agent) at
least four Business Days (or such shorter time as the Issuing Lender may agree
in a particular instance in its sole discretion) prior to the proposed date of
notification of renewal, the Issuing Lender shall be entitled to authorize the
automatic renewal of any Letter of Credit issued by it. Each such request for
renewal of a Letter of Credit shall be made by facsimile, promptly confirmed in
writing, in the form of an L/C Application, and shall specify in form and detail
satisfactory to the Issuing Lender: (i) the Letter of Credit to be renewed; (ii)
the proposed date of notification of renewal of the Letter of Credit (which
shall be a Business Day); (iii) the revised expiry date of the Letter of Credit;
and (iv) such other matters as the Issuing Lender may require. The
Administrative Agent shall promptly notify the Lenders of the receipt by it of
any L/C Application. The Issuing Lender shall be under no obligation so to renew
any Letter of Credit if: (A) the Issuing Lender would have no obligation at such
time to issue or amend such Letter of Credit in its renewed form under the terms
of this Agreement; or (B) the beneficiary of any such Letter of Credit does not
accept the proposed renewal of the Letter of Credit; or (C) the conditions of
SECTION 5.1(C) shall not have been met. On or before the Business Day
immediately preceding the date the Issuing Lender is to renew a Letter of
Credit, the Administrative Administrative Agent will confirm to the Issuing
Lender that (A) such renewal is then permitted under SECTION 5.1; and (B) all
conditions specified in SECTION 6.2 are then satisfied. If any outstanding
Letter of Credit shall provide that it shall be automatically renewed unless the
beneficiary thereof receives notice from the Issuing Lender that such Letter of
Credit shall not be renewed, and if at the time of renewal the Issuing Lender
would be entitled to authorize the automatic renewal of such Letter of Credit in
accordance with this SECTION 5.1.1(D) upon the request of the Borrower but the
Issuing Lender shall not have received any L/C Application from the Borrower
with respect to such renewal or other written direction by the Borrower with
respect thereto, the Issuing Lender shall nonetheless be permitted to allow such
Letter of Credit to renew, and the Borrower and the Lenders hereby authorize
such renewal, and, accordingly, the Issuing Lender shall be deemed to have
received an L/C Application from the Borrower requesting such renewal.
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(e) The Issuing Lender may, at its election (or as required by the
Administrative Agent at the direction of the Required Lenders), deliver any
notices of termination or other communications to any Letter of Credit
beneficiary or transferee, with a copy to the Borrower, and take any other
action as necessary or appropriate, at any time and from time to time, in order
to cause the expiry date of such Letter of Credit to be a date not later than
(i) five Business Days prior to the Tranche A Commitment Termination Date for
Tranche A Letters of Credit or (ii) five Business Days prior to the Tranche B
Commitment Termination Date for Tranche B Letters of Credit.
(f) This Agreement shall control in the event of any conflict with any
L/C Related Document (other than any Letter of Credit).
(g) The Issuing Lender will also deliver to the Administrative Agent,
concurrently or promptly following its delivery of a Letter of Credit, or
amendment to or renewal of a Letter of Credit, to an advising bank or a
beneficiary, a true and complete copy of each such Letter of Credit or amendment
to or renewal of a Letter of Credit.
SECTION 5.1.2 RISK PARTICIPATIONS, DRAWINGS AND REIMBURSEMENTS.
(a) (i) Immediately upon the Issuance of each Tranche A Letter of
Credit, each Lender shall be deemed to, and hereby irrevocably and
unconditionally agrees to, purchase from the Issuing Lender a participation in
such Letter of Credit and each drawing thereunder in an amount equal to the
product of (i) the Tranche A Percentage of such Lender, times (ii) the maximum
Dollar Equivalent amount available to be drawn under such Letter of Credit and
the Dollar Equivalent amount of such drawing, respectively. For purposes of
SECTION 5.1, each Issuance of a Tranche A Letter of Credit shall be deemed to
utilize the Tranche A Commitment of each Lender by an amount equal to the Dollar
Equivalent amount of such participation and (ii) immediately upon the Issuance
of each Tranche B Letter of Credit, each Lender shall be deemed to, and hereby
irrevocably and unconditionally agrees to, purchase from the Issuing Lender a
participation in such Letter of Credit and each drawing thereunder in an amount
equal to the product of (i) the Tranche B Percentage of such Lender, times (ii)
the maximum Dollar Equivalent amount available to be drawn under such Letter of
Credit and the Dollar Equivalent amount of such drawing, respectively. Each
Issuance of a Tranche B Letter of Credit shall be deemed to utilize the Tranche
B Commitment of each Lender by an amount equal to the Dollar Equivalent amount
of such participation.
(b) In the event of any request for a drawing under a Letter of Credit
by the beneficiary or transferee thereof, the Issuing Lender will promptly
notify the Borrower. The Borrower shall reimburse the Issuing Lender prior to
11:00 a.m. (New York time), on each date that any amount is paid by the Issuing
Lender under any Letter of Credit (each such date, an "HONOR DATE"), in the
Applicable Currency and in an amount equal to the amount so paid by the Issuing
Lender. In the event the Borrower fails to reimburse the Issuing Lender for the
full amount of any drawing under any Letter of Credit by 11:00 a.m. (New York
time) on the Honor Date, the Issuing Lender will promptly notify the
Administrative Agent and the Administrative Agent will promptly notify each
Lender thereof, and the Borrower shall be deemed to have requested that Base
Rate Loans be made by the Lenders to be disbursed on the Honor Date under such
Letter of Credit. Any notice given by the Issuing Lender or the Administrative
Agent
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pursuant to this SECTION 5.1.2(B) may be oral if immediately confirmed in
writing (including by facsimile); PROVIDED that the lack of such an immediate
confirmation shall not affect the conclusiveness or binding effect of such
notice.
(c) Each Lender shall upon any notice pursuant to SECTION 5.1.2(B) make
available to the Administrative Agent for the account of the relevant Issuing
Lender an amount in Dollars and in Same Day Funds equal to its Tranche A
Percentage or Tranche B Percentage of the Dollar Equivalent amount of the
drawing, whereupon the participating Lenders shall (subject to SECTION 5.1.2(E))
each be deemed to have made a (i) Tranche A Loan for a drawing under a Tranche A
Letter of Credit or (ii) Tranche B Loan for a drawing under a Tranche B Letter
of Credit consisting of a Base Rate Loan denominated in Dollars to the Borrower
in that amount. If any Lender so notified fails to make available to the
Administrative Agent for the account of the Issuing Lender the amount of such
Lender's Tranche A Percentage or Tranche B Percentage (as applicable) of the
amount of the drawing by no later than 12:00 Noon (New York time) on the Honor
Date, then interest shall accrue on such Lender's obligation to make such
payment, from the Honor Date to the date such Lender makes such payment, at a
rate per annum equal to the Federal Funds Rate in effect from time to time
during such period. The Administrative Agent will promptly give notice of the
occurrence of the Honor Date, but failure of the Administrative Agent to give
any such notice on the Honor Date or in sufficient time to enable any Lender to
effect such payment on such date shall not relieve such Lender from its
obligations under this SECTION 5.1.2.
(d) With respect to any unreimbursed drawing that is not converted into
Tranche A Loans or Tranche B Loans in whole or in part, for any reason
whatsoever, the Borrower shall be deemed to have incurred from the Issuing
Lender an L/C Borrowing in the Dollar Equivalent amount of such drawing, which
L/C Borrowing shall be due and payable on demand (together with interest) and
shall bear interest at a rate per annum equal to the Alternate Base Rate plus
the Applicable Margin for (i) Tranche A Loans in the case of Tranche A Letters
of Credit or (ii) Tranche B Loans for Tranche B Letters of Credit, and each
Lender's payment to the Issuing Lender pursuant to SECTION 5.1.2 shall be deemed
payment in respect of its participation in such L/C Borrowing and shall
constitute an L/C Advance from such Lender in satisfaction of its participation
obligation under this SECTION 5.1.2.
(e) Each Lender's obligation in accordance with this Agreement to make
the Tranche A Loans, Tranche B Loans or L/C Advances, as contemplated by this
SECTION 5.1.2, as a result of a drawing under a Letter of Credit, shall be
absolute and unconditional and without recourse to the Issuing Lender and shall
not be affected by any circumstance, including (i) any set-off, counterclaim,
recoupment, defense or other right which such Lender may have against the
Issuing Lender, the Borrower or any other Person for any reason whatsoever; (ii)
the occurrence or continuance of a Default, an Event of Default or a Material
Adverse Effect; or (iii) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing; PROVIDED, HOWEVER, that each
Lender's obligation to make Tranche A Loans and Tranche B Loans under this
SECTION 5.1.2 is subject to the conditions set forth in SECTION 5.1(A) or
SECTION 5.1(B).
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SECTION 5.1.3 REPAYMENT OF PARTICIPATIONS.
(a) Upon (and only upon) receipt by the Administrative Agent for the
account of the Issuing Lender of immediately available funds from the Borrower
(i) in reimbursement of any payment made by the Issuing Lender under the Letter
of Credit with respect to which any Lender has paid the Administrative Agent for
the account of the Issuing Lender for such Lender's participation in the Letter
of Credit pursuant to SECTION 5.1.2(a) or (ii) in payment of interest thereon,
the Administrative Agent will pay to each Lender, in the same funds as those
received by the Administrative Agent for the account of the Issuing Lender, the
amount of such Lender's (x) Tranche A Percentage with respect to Tranche A
Letters of Credit and (y) Tranche B Percentage with respect to Tranche B Letters
of Credit, of such funds, and the Issuing Lender shall receive the amount of the
Percentage of such funds of any Lender that did not so pay the Administrative
Agent for the account of the Issuing Lender.
(b) If the Administrative Agent or the Issuing Lender is required at
any time to return to the Borrower, or to a trustee, receiver, liquidator,
custodian, or any official in any insolvency proceeding, any portion of the
payments made by the Borrower to the Administrative Agent for the account of the
Issuing Lender pursuant to SECTION 5.1.2(A) in reimbursement of a payment made
under the Letter of Credit or interest or fee thereon, each Lender shall, on
demand of the Administrative Agent, forthwith return to the Administrative Agent
or the Issuing Lender the amount of its (x) Tranche A Percentage with respect to
Tranche A Letters of Credit and (y) Tranche B Percentage with respect to Tranche
B Letters of Credit, of any amounts so returned by the Administrative Agent or
the Issuing Lender plus interest thereon from the date such demand is made to
the date such amounts are returned by such Lender to the Administrative Agent or
the Issuing Lender, at a rate per annum equal to the Federal Funds Rate in
effect from time to time.
SECTION 5.1.4 ROLE OF THE ISSUING LENDER.
(a) Each Lender and the Borrower agree that, in paying any drawing
under a Letter of Credit, the Issuing Lender shall not have any responsibility
to obtain any document (other than any sight draft and certificates if expressly
required by the Letter of Credit) or to ascertain or inquire as to the validity
or accuracy of any such document or the authority of the Person executing or
delivering any such document.
(b) No Agent-Related Person nor any of the respective correspondents,
participants or assignees of the Issuing Lender shall be liable to any Lender
for: (i) any action taken or omitted in connection herewith at the request or
with the approval of the Lenders (including the Required Lenders, as
applicable); (ii) any action taken or omitted in the absence of gross negligence
or willful misconduct; or (iii) the due execution, effectiveness, validity or
enforceability of any L/C Related Document.
(c) The Borrower hereby assumes all risks of the acts or omissions of
any beneficiary or transferee with respect to its use of any Letter of Credit;
PROVIDED, HOWEVER, that this assumption is not intended to, and shall not,
preclude the Borrower pursuing such rights and remedies as it may have against
the beneficiary or transferee at law or under any other agreement. No
Agent-Related Person, nor any of the respective correspondents, participants or
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assignees of the Issuing Lender, shall be liable or responsible for any of the
matters described in clauses (i) through (vii) of SECTION 5.1.5; PROVIDED,
HOWEVER, anything in such clauses to the contrary notwithstanding, the Borrower
may have a claim against the Issuing Lender, and the Issuing Lender may be
liable to the Borrower, for such damages suffered by the Borrower which the
Borrower proves were caused by the Issuing Lender's willful misconduct or gross
negligence or the Issuing Lender's willful failure to pay under any Letter of
Credit after the presentation to it by the beneficiary of a sight draft and
certificate(s) strictly complying with the terms and conditions of a Letter of
Credit. In furtherance and not in limitation of the foregoing: (i) the Issuing
Lender may accept documents that appear on their face to be in order, without
responsibility for further investigation, regardless of any notice or
information to the contrary; and (ii) the Issuing Lender shall not be
responsible for the validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign a Letter of Credit or the rights
or benefits thereunder or proceeds thereof, in whole or in part, which may prove
to be invalid or ineffective for any reason.
SECTION 5.1.5 OBLIGATIONS ABSOLUTE. The obligations of the Borrower
under this Agreement and any L/C Related Document to reimburse the Issuing
Lender for a drawing under a Letter of Credit, and to repay any L/C Borrowing
and any drawing under a Letter of Credit converted into Tranche A Loans or
Tranche B Loans, shall be unconditional and irrevocable, and shall be paid
strictly in accordance with the terms of this Agreement and each such other L/C
Related Document under all circumstances, including the following:
(i) any lack of validity or enforceability of this Agreement
or any L/C Related Document;
(ii) any change in the time, manner or place of payment of, or
in any other term of, all or any of the obligations of the Borrower in
respect of any Letter of Credit or any other amendment or waiver of or
any consent to departure from all or any of the L/C Related Documents;
(iii) the existence of any claim, set-off, defense or other
right that the Borrower may have at any time against any beneficiary or
any transferee of any Letter of Credit (or any Person for whom any such
beneficiary or any such transferee may be acting), the Issuing Lender
or any other Person, whether in connection with this Agreement, the
transactions contemplated hereby or by the L/C Related Documents or any
unrelated transaction;
(iv) any draft, demand, certificate or other document
presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect; or any loss or delay in the
transmission or otherwise of any document required in order to make a
drawing under any Letter of Credit;
(v) any payment by the Issuing Lender under any Letter of
Credit against presentation of a draft or certificate that does not
strictly comply with the terms of any Letter of Credit; or any payment
made by the Issuing Lender under any Letter of Credit to any Person
purporting to be a trustee in bankruptcy, debtor-in-possession,
assignee for
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the benefit of creditors, liquidator, receiver or other representative
of or successor to any beneficiary or any transferee of any Letter of
Credit, including any arising in connection with any insolvency
proceeding;
(vi) any exchange, release or non-perfection of any
collateral, or any release or amendment or waiver of or consent to
departure from any other guarantee, for all or any of the obligations
of the Borrower in respect of any Letter of Credit; or
(vii) any other circumstance or happening whatsoever, whether
or not similar to any of the foregoing, including any other
circumstance that might otherwise constitute a defense available to, or
a discharge of, the Borrower or a guarantor.
SECTION 5.2 CASH COLLATERALIZATION. If either (i) an Event of Default
shall occur and be continuing and the Borrower receives notice from the
Administrative Agent or the Required Lenders (or, if the maturity of the Loans
has been accelerated, Lenders with L/C Obligations representing at least 66?% of
the total L/C Obligations) demanding the deposit of cash collateral pursuant to
this paragraph, or (ii) the Borrower shall be required to provide cover for
currency fluctuations pursuant to SECTION 5.7, the Borrower shall immediately
deposit into an account established and maintained on the books and records of
the Administrative Agent, which account may be a "securities account" (within
the meaning of Section 8-501 of the Uniform Commercial Code as in effect in the
State of New York), in the name of the Administrative Agent and for the benefit
of the Lenders, an amount in cash equal to, in the case of an Event of Default,
the L/C Obligations as of such date PLUS any accrued and unpaid interest thereon
and, in the case of cover pursuant to SECTION 5.7, the amount required under
SECTION 5.7; PROVIDED that the obligation to deposit such cash collateral shall
become effective immediately, and such deposit shall become immediately due and
payable, without demand or other notice of any kind, upon the occurrence of any
Event of Default with respect to the Borrower described in SECTION 8.1.8. Such
deposit shall be held by the Administrative Agent as collateral for the L/C
Obligations under this Agreement, and for this purpose the Borrower hereby
grants a security interest to the Administrative Agent for the benefit of the
Lenders in such collateral account and in any financial assets (as defined in
the Uniform Commercial Code) or other property held therein.
SECTION 5.3 LETTER OF CREDIT FEES. The Borrower shall pay to the
Administrative Agent for the ratable account of each of the Lenders a letter of
credit fee with respect to the Letters of Credit at the rate per annum based on
the Borrower's Debt Rating determined as provided (i) on the Tranche A Pricing
Grid for Tranche A Letters of Credit and (ii) on the Tranche B Pricing Grid for
Tranche B Letters of Credit, for Financial Letters of Credit or Performance
Letters of Credit, as applicable, of the average daily maximum Dollar Equivalent
amount available to be drawn of the outstanding Letters of Credit, computed on a
quarterly basis in arrears on Quarterly Payment Date based upon Letters of
Credit outstanding for that quarter as calculated by the Administrative Agent.
Such letter of credit fees shall be due and payable in Dollars quarterly in
arrears on Quarterly Payment Date during which Letters of Credit are
outstanding, commencing on the first such Quarterly Payment Date to occur after
the Effective Date, through the (i) Tranche A Commitment Termination Date for
Tranche A Letters of Credit or (ii) Tranche B Commitment Termination Date for
Tranche B Letters of Credit (or such later date upon which the outstanding
Letters of Credit shall expire), with the final payment to be
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made on the (i) Tranche A Commitment Termination Date for Tranche A Letters of
Credit or (ii) Tranche B Commitment Termination Date for Tranche B Letters of
Credit (or such later expiration date).
Section 5.3.1 FRONTING FEE/PROCESSING FEES.
(a) The Borrower shall pay to the Issuing Lender a fronting fee which
shall accrue at 0.125% per annum on the average daily Dollar Equivalent amount
of the Letters of Credit outstanding during the period when any Letters of
Credit have been Issued and are outstanding. Such fronting fee shall be due and
payable in Dollars quarterly in arrears on each Quarterly Payment Date during
which Letters of Credit are outstanding, commencing on the first such Quarterly
Payment Date to occur after the Effective Date, through the (i) Tranche A
Commitment Termination Date for Tranche A Letters of Credit or (ii) Tranche B
Commitment Termination Date for Tranche B Letters of Credit (or such later date
upon which the outstanding Letters of Credit shall expire), with the final
payment to be made on the (i) Tranche A Commitment Termination Date for Tranche
A Letters of Credit or (ii) Tranche B Commitment Termination Date for Tranche B
Letters of Credit (or such later expiration date).
(b) The Borrower further agrees to pay or cause to be paid the Issuing
Lender's standard fees with respect to the processing of the drawings under the
Letters of Credit, which such fees shall be payable on each Quarterly Payment
Date.
SECTION 5.4 ISSUANCE OF LETTERS OF CREDIT IN OFFSHORE CURRENCIES.
(a) The Issuing Lender shall be under no obligation to Issue any Letter
of Credit denominated in an Offshore Currency if the Administrative Agent has
received notice from any of the Lenders by 2:00 p.m. (New York time) four
Business Days prior to the day of such Issuance that the Issuing Lender cannot
Issue, or any Lender cannot purchase a participation in, such Letter of Credit
in the requested Offshore Currency, in which event the Administrative Agent will
give notice to the Borrower no later than 9:00 a.m. (New York time) on the third
Business Day prior to the requested date of such Issuance that the Issuance in
the requested Offshore Currency is not then available, and notice thereof also
will be given promptly by the Administrative Agent to the Issuing Lender and the
Lenders. If the Administrative Agent shall have so notified the Borrower, the
request for such Letter of Credit shall be deemed withdrawn.
(b) The Borrower shall be entitled to request that Letters of Credit
hereunder also be permitted to be Issued in any other lawful currency
constituting a eurocurrency, in addition to the eurocurrencies specified in the
definition of "Offshore Currency" herein, that, in the opinion of all Lenders,
is at such time, freely traded in the offshore interbank foreign exchange
markets and is freely transferable and freely convertible into Dollars (an
"AGREED ALTERNATIVE CURRENCY"). The Borrower shall deliver to the Administrative
Agent any request for designation of an Agreed Alternative Currency by not later
than 11:00 a.m. (New York time) at least seven Business Days in advance of the
date of any Letter of Credit proposed to be Issued in such Agreed Alternate
Currency. Upon receipt of any such request the Administrative Agent will
promptly notify the Lenders thereof, and each Lender will use its best efforts
to respond to such request within two Business Days of receipt thereof. Each
Lender may reject or accept such request in its sole discretion. The
Administrative Agent will promptly notify the Borrower of the acceptance or
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rejection of any such request, and, if accepted by all of the Lenders, will
circulate to each party to this Credit Agreement a revised Schedule 5.4, setting
forth the Agreed Alternative Currency.
(c) The Administrative Agent will determine the Dollar Equivalent
amount with respect to any (i) Issuances of Letters of Credit in Offshore
Currencies as of the requested Tranche A Issuance Date or Tranche B Issuance
Date, (ii) unreimbursed drawing on the date that it is converted to a Tranche A
Loan or Tranche B Loan pursuant to SECTION 5.1.2(B), (iii) outstanding L/C
Obligations as of the last Business Day of each month, which such information
shall be provided to the Borrower on a quarterly basis and monthly upon request
by the Borrower, (iv) the date of Borrowing of any Loan, (v) the date on which
any Commitments are reduced pursuant to Section 2.2, (vi) the date of any
prepayments pursuant to SECTION 3.1.1 and (vii) any other date that the Dollar
Equivalent amount has to be determined pursuant to the Loan Documents (each such
date a "COMPUTATION DATE").
SECTION 5.5 UNIFORM CUSTOMS AND PRACTICE. The Uniform Customs and
Practice for Documentary Credits as published by the International Chamber of
Commerce ("UCP") most recently at the time of issuance of any Letter of Credit
shall (unless otherwise expressly provided in the Letters of Credit) apply to
the Letters of Credit.
SECTION 5.6 ADDITIONAL AND SUCCESSOR ISSUING LENDERS. If (i) the credit
rating on the unsecured long term indebtedness of the Issuing Lender has been
materially lowered, suspended or withdrawn by the applicable rating agencies or
(ii) the Issuing Lender shall reasonably request, the Borrower may, with the
written consent of the Administrative Agent and the Required Lenders, appoint an
additional Lender or Lenders to act as Issuing Lender. Each additional or
successor Issuing Lender shall execute an instrument of assumption in form and
substance satisfactory to the Borrower, the Administrative Agent and the
Lenders, whereupon such Lender shall be deemed an Issuing Lender for all
purposes whatsoever pursuant to this Agreement, and with all the rights, powers,
obligations, privileges and duties inuring thereto.
SECTION 5.7 CURRENCY EXCHANGE FLUCTUATIONS. Subject to SECTION 4.5, if
on any Computation Date the Administrative Agent shall have determined that the
(i) aggregate Dollar Equivalent principal amount of all Tranche A Loans and all
Tranche A L/C Obligations then outstanding exceeds the Tranche A Commitment
Amount or (ii) aggregate Dollar Equivalent principal amount of all Tranche B
Loans and all Tranche B L/C Obligations then outstanding exceeds the Tranche B
Commitment Amount, due to a change in applicable rates of exchange between
Dollars and Offshore Currencies, THEN the Administrative Agent shall give notice
to the Borrower that a prepayment is required under this SECTION 5.7, and the
Borrower agrees thereupon promptly to make prepayments of Loans pursuant to
SECTION 3.1.1(B) and/or Cash Collateralize L/C Obligations pursuant to SECTION
5.2 such that, after giving effect to such prepayment or Cash Collateralization,
the aggregate Dollar Equivalent amount of all (i) Tranche A Loans and Tranche A
L/C Obligations does not exceed the Tranche A Commitment Amount and (ii) Tranche
B Loans and Tranche B L/C Obligations does not exceed the Tranche B Commitment
Amount.
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ARTICLE VI
CONDITIONS TO LOANS
SECTION 6.1 CONDITIONS TO EFFECTIVENESS. This Agreement shall become
effective upon the satisfaction of each of the conditions precedent set forth in
this SECTION 6.1.
SECTION 6.1.1 DELIVERY OF LOAN DOCUMENTS. The Administrative Agent
shall have received from the Borrower this Agreement, executed and delivered by
an Authorized Representative of the Borrower, with a counterpart for each Lender
and, for the account of each Lender who so requests, its Note duly executed and
delivered by the Borrower.
SECTION 6.1.2 OFFICER'S CERTIFICATE. The Administrative Agent shall
have received, with a copy for each Lender, a certificate of an Authorized
Representative of the Borrower, substantially in the form of EXHIBIT E.
SECTION 6.1.3 RESOLUTIONS. The Administrative Agent shall have received
from the Borrower a certificate, substantially in the form of EXHIBIT F hereto,
dated the Effective Date, of its Secretary or Assistant Secretary as to:
(a) resolutions of its Board of Directors then in full force
and effect authorizing the execution, delivery and performance of each
Loan Document to be executed by it;
(b) the incumbency and signatures of those of its officers and
representatives authorized to act with respect to each Loan Document
executed by it; and
(c) the Borrower's Organic Documents.
The Administrative Agent and each Lender may conclusively rely upon
such certificate until it shall have received a further certificate of the
Secretary, Assistant Secretary or other Authorized Representative of the
Borrower canceling or amending such prior certificate.
SECTION 6.1.4 OPINIONS OF COUNSEL. The Administrative Agent shall have
received opinions, dated the Effective Date and addressed to the Administrative
Agent and the Lenders, from Skadden Arps Meagher & Flom LLP and the Regional
Vice President of the Borrower, substantially in the form of EXHIBIT G hereto
and given upon the express instruction of the Borrower.
SECTION 6.1.5 CLOSING FEES, EXPENSES. The Administrative Agent shall
have received for its own account, or for the account of each Lender or Lead
Arranger, as the case may be, all fees due and payable pursuant to SECTIONS 3.3
and 11.3, and all costs and expenses for which invoices have been presented.
SECTION 6.1.6 FINANCIAL STATEMENTS. The Administrative Agent shall have
received, with a copy for each Lender, the audited consolidated financial
statements of the Borrower for the year ended December 31, 2000 and the most
recent unaudited consolidated quarterly financial statements of the Borrower.
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SECTION 6.1.7 DEBT RATINGS. The Borrower shall have Debt Ratings of at
least BBB- and Baa3 from S&P and Moody's, respectively (with stable outlook from
both rating agencies).
SECTION 6.1.8 REPAYMENT OF EXISTING CREDIT AGREEMENTS The Borrower
shall contemporaneously prepay in full and terminate all commitments under: (i)
the Credit Agreement dated March 18, 1999 among the Borrower, certain commercial
lending institutions party thereto and Citicorp USA, Inc. as administrative
agent; (ii) the Credit Agreement dated May 30, 2000 among the Borrower, certain
commercial lending institutions party thereto and Bank of America, N.A. as the
administrative agent; and (iii) the Second Amended and Restated Credit Agreement
dated as of October 11, 1996 among the Borrower, certain commercial lending
institutions party thereto and Bank of America, N.A (formerly, Bank of America
National Trust and Savings Association) as the agent.
SECTION 6.2 ALL CREDIT EXTENSIONS. The obligation of each Lender to
make any Credit Extension (including the initial Credit Extension) shall be
subject to the satisfaction of each of the conditions precedent set forth in
this SECTION 6.2.
SECTION 6.2.1 REPRESENTATIONS AND WARRANTIES; NO DEFAULT. Both before
and after giving effect to any Credit Extension (but, if any Default of the
nature referred to in SECTION 9.1.5 shall have occurred with respect to any
other Indebtedness, without giving effect to the application, directly or
indirectly, of the proceeds of such Credit Extension), the following statements
shall be true and correct:
(a) the representations and warranties set forth in ARTICLE
VII shall be true and correct in all material respects with the same
effect as if then made (unless stated to relate solely to an earlier
date, in which case such representations and warranties shall be true
and correct as of such earlier date); and
(b) no Default or Event of Default has occurred and is
continuing or would result from such Credit Extension.
SECTION 6.2.2 BORROWING REQUEST. The Administrative Agent shall have
received a Borrowing Request for such Credit Extension. Each of the delivery of
a Borrowing Request and the acceptance by the Borrower of the proceeds of such
Credit Extension shall constitute a representation and warranty by the Borrower
that on the date of such Credit Extension (both immediately before and after
giving effect to such Credit Extension and the application of the proceeds
thereof) the statements made in SECTION 6.2.1 are true and correct.
SECTION 6.2.3 SATISFACTORY LEGAL FORM. All documents executed or
submitted pursuant hereto by or on behalf of the Borrower shall be satisfactory
in form and substance to the Administrative Agent and its counsel.
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ARTICLE VII
REPRESENTATIONS AND WARRANTIES
In order to induce the Administrative Agent and each Lender to enter
into this Agreement and to make Loans hereunder, the Borrower represents and
warrants unto the Administrative Agent and each Lender as set forth in this
ARTICLE VII.
SECTION 7.1 ORGANIZATION; POWER; COMPLIANCE WITH LAW AND CONTRACTUAL
OBLIGATIONS. The Borrower (a) is a corporation validly organized and existing
and in good standing under the laws of the state of its incorporation, (b) is
duly qualified to do business and is in good standing as a foreign corporation
in each jurisdiction where the nature of its business requires such
qualification, (c) has all requisite corporate power and authority and holds all
material requisite governmental licenses, permits and other approvals to enter
into and perform its Obligations under each Loan Document and to conduct its
business substantially as currently conducted by it and (d) is in compliance
with all laws, governmental regulations (including ERISA and Federal Reserve
regulations), court decrees, orders and Contractual Obligations applicable to
it, except, with respect to CLAUSES (B), (C) and (D) to the extent that the
failure to comply therewith could not reasonably be expected to have a Material
Adverse Effect.
SECTION 7.2 DUE AUTHORIZATION; NON-CONTRAVENTION. The execution,
delivery and performance by the Borrower of each Loan Document are within the
Borrower's corporate powers, have been duly authorized by all necessary
corporate action, and do not:
(a) contravene the Borrower's Organic Documents;
(b) contravene any law, governmental regulation, court decree
or order or material Contractual Obligation binding on or affecting the
Borrower; or
(c) result in, or require the creation or imposition of, any
Lien on any of the Borrower's properties.
SECTION 7.3 GOVERNMENTAL APPROVAL; REGULATION.
(a) No authorization, consent, approval, license, exemption of or
filing or registration with any court or governmental authority or regulatory
body ("GOVERNMENTAL APPROVAL") is required for the Borrower to execute and
perform its obligations under the Loan Documents, except for those which have
been duly obtained or effected. No material Governmental Approval is required
for the Borrower to carry on its business, except for those which have been duly
obtained or effected.
(b) The Borrower is not subject to any regulation as an "investment
company" subject to the Investment Company Act of 1940, as amended, or as a
"holding company" or a "subsidiary company" or an "affiliate" of a "holding
company" subject to the Public Utility Holding Company Act of 1935, as amended
("PUHCA"), except that the Borrower is a "subsidiary company" of Edison
International which is a "holding company" that is exempt from all regulation
under PUHCA (except Section 9(a)(2) thereof) pursuant to Section 3(a) thereof.
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The Borrower is not otherwise subject to any regulation as a "public utility"
under any other applicable law, rule or regulation, which would have a Material
Adverse Effect.
SECTION 7.4 VALIDITY. Each Loan Document constitutes the legal, valid
and binding obligations of the Borrower enforceable in accordance with their
respective terms (except as may be limited by bankruptcy, insolvency or other
similar laws affecting the enforcement of creditors' rights generally and
general principles of equity).
SECTION 7.5 FINANCIAL INFORMATION. The consolidated balance sheets of
the Borrower as at December 31, 2000 and June 30, 2001, and the related
consolidated statements of income and cash flows of the Borrower, copies of
which have been furnished to the Administrative Agent, have been prepared in
accordance with GAAP consistently applied, and present fairly the consolidated
financial condition of the Borrower and its Subsidiaries as at the dates thereof
and the results of their operations for the periods then ended.
SECTION 7.6 NO MATERIAL ADVERSE CHANGE. There has not occurred any
event or condition having a Material Adverse Effect since December 31, 2000.
SECTION 7.7 LITIGATION. There is no pending or, to the knowledge of the
Borrower, threatened litigation, action, proceeding, or labor controversy
affecting the Borrower, or any of its properties, businesses, assets or
revenues, which, if adversely determined (taking into account any insurance
proceeds payable under a policy where the insurer has accepted coverage without
any reservations), would have a Material Adverse Effect or which purports to
adversely affect the legality, validity or enforceability of this or any Loan
Document.
SECTION 7.8 OWNERSHIP OF PROPERTIES. The Borrower owns good and
marketable title to, or a valid leasehold interest in or other enforceable
interest in all properties and assets, real and personal, tangible and
intangible, of any nature whatsoever (including patents, trademarks, trade
names, service marks and copyrights) purported to be owned, leased or held by
it, free and clear of all Liens, charges or claims (including infringement
claims with respect to patents, trademarks, copyrights and the like) except as
permitted pursuant to SECTION 8.2.2.
SECTION 7.9 TAXES. The Borrower has filed all tax returns and reports
required by law to have been filed by it and has paid all taxes and governmental
charges thereby shown to be owing, except any such taxes or charges which are
being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set aside on its
books.
SECTION 7.10 PENSION AND WELFARE PLANS. During the consecutive
twelve-month period prior to the date of the execution and delivery of this
Agreement and prior to the date of any Borrowing hereunder, no steps have been
taken to terminate any Pension Plan, and no contribution failure has occurred
with respect to any Pension Plan sufficient to give rise to a Lien under Section
302(f) of ERISA. No condition exists or event or transaction has occurred with
respect to any Pension Plan which could reasonably be expected to result in the
incurrence by the Borrower or any member of the Controlled Group of any material
liability (other than liabilities incurred in the ordinary course of maintaining
the Pension Plan), fine or
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penalty. Neither the Borrower nor any member of the Controlled Group has any
contingent liability with respect to any post-retirement benefit under a Welfare
Plan which could reasonably be expected to have a Material Adverse Effect, other
than liability for continuation coverage described in Part 6 of Title I of
ERISA.
SECTION 7.11 ENVIRONMENTAL WARRANTIES.
(a) All facilities and property owned or leased by the Borrower or any
of its Subsidiaries or Partnerships have been, and continue to be, owned or
leased by the Borrower and its Subsidiaries in compliance with all Environmental
Laws, except where the failure so to comply would not have, or be reasonably
expected to have, a Material Adverse Effect.
(b) There are no pending or, to the knowledge of the Borrower,
threatened:
(i) claims, complaints, notices or requests for information
received by the Borrower from governmental authorities with respect to
any alleged violation by the Borrower of any Environmental Law that,
singly or in the aggregate, have, or may reasonably be expected to
have, a Material Adverse Effect; or
(ii) complaints, notices or inquiries to the Borrower from
governmental authorities regarding potential liability under any
Environmental Law that, singly or in the aggregate, have, or may
reasonably be expected to have, a Material Adverse Effect.
(c) There have been no Releases (as defined under any Environmental
Law) of Hazardous Materials at, on or under any property now or previously owned
or leased by the Borrower that, singly or in the aggregate, have, or may
reasonably be expected to have, a Material Adverse Effect.
(d) The Borrower has obtained and is in compliance with all permits,
certificates, approvals, licenses and other authorizations relating to
environmental matters and necessary for the Borrower's business, except where
the failure to obtain, maintain or comply with such permits, certificates,
approvals, licenses or other authorizations would not have, or be reasonably
expected to have, a Material Adverse Effect.
(e) To the reasonable knowledge of the Borrower, no property now or
previously owned or leased by the Borrower is listed or proposed for listing
(with respect to owned property only) on the National Priorities List pursuant
to any Environmental Law, on the CERCLIS or on any similar state list of sites
requiring investigation or clean-up.
(f) No conditions exist at, on or under any property now or previously
owned or leased by the Borrower which, with the passage of time, or the giving
of notice or both, would give rise to liability under any Environmental Law
which liability would have, or may reasonably be expected to have, a Material
Adverse Effect.
SECTION 7.12 REGULATIONS T, U AND X. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock, and no proceeds of any Loans will be used for a purpose which violates,
or would be inconsistent with, F.R.S. Board Regulation T, U or X. Terms for
which meanings are provided in F.R.S. Board
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Regulation T, U or X or any regulations substituted therefor, as from time to
time in effect, are used in this SECTION 7.12 with such meanings.
SECTION 7.13 ACCURACY OF INFORMATION. All factual information
heretofore or contemporaneously furnished by the Borrower in writing to the
Administrative Agent or any Lender for purposes of or in connection with this
Agreement or any transaction contemplated hereby (other than projections and
other "forward-looking" information which have been prepared on a reasonable
basis and in good faith by the Borrower) is, and all other such written factual
information hereafter furnished by the Borrower in writing to the Administrative
Agent or any Lender will be, true and materially accurate in every material
respect on the date as of which such information is dated or certified and as of
the date of execution and delivery of this Agreement by the Administrative Agent
and such Lender, and such information is not, or shall not be, as the case may
be, incomplete by omitting to state any material fact necessary to make such
information not materially misleading.
SECTION 7.14 THE OBLIGATIONS. The Obligations are senior, unsecured
Indebtedness of the Borrower ranking at least PARI PASSU with all other senior,
unsecured Indebtedness of the Borrower.
ARTICLE VIII
COVENANTS
SECTION 8.1 AFFIRMATIVE COVENANTS. The Borrower agrees with the Administrative
Agent and each Lender that, until the Commitments have terminated and all
Obligations have been paid and performed in full, the Borrower will perform the
obligations set forth in this SECTION 8.1.
SECTION 8.1.1 FINANCIAL INFORMATION, REPORTS, NOTICES. The Borrower will
furnish, or will cause to be furnished, to the Administrative Agent copies of
the following financial statements, reports, notices and information:
(a) as soon as available and in any event within 60 days after
the end of each of the first three Fiscal Quarters of each Fiscal Year
of the Borrower, consolidated balance sheets of the Borrower and its
Subsidiaries as of the end of such Fiscal Quarter and consolidated
statements of income and cash flows of the Borrower and its
Subsidiaries for such Fiscal Quarter and for the period commencing at
the end of the previous Fiscal Year and ending with the end of such
Fiscal Quarter, certified by an Authorized Representative with
responsibility for financial matters;
(b) as soon as available and in any event within 120 days
after the end of each Fiscal Year of the Borrower, a copy of the annual
audit report for such Fiscal Year for the Borrower and its
Subsidiaries, including therein consolidated balance sheets of the
Borrower and its Subsidiaries as of the end of such Fiscal Year and
consolidated statements of income and cash flows of the Borrower and
its Subsidiaries for such Fiscal Year, and accompanied by the
unqualified opinion of Arthur Andersen & Co. or other internationally
recognized independent auditors selected by the Borrower which report
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shall state that such consolidated financial statements present fairly
in all material respects the financial position for the periods
indicated in conformity with GAAP applied on a basis consistent with
prior periods;
(c) concurrently with the delivery of financial statements
referred to in SECTIONS 8.1.1.(A) and 8.1.1(B), a certificate, executed
by the controller, treasurer or chief financial officer of the
Borrower, showing (in reasonable detail and with appropriate
calculations and computations (separately specifying, INTER ALIA,
Excluded Operating Cash Flow (if any) of each Consolidated Operating
Project) in all respects satisfactory to the Administrative Agent)
compliance with the financial covenants set forth in SECTION 8.2.8 and
SECTION 8.2.9;
(d) as soon as possible and in any event within five Business
Days after any Authorized Representative obtains knowledge of the
occurrence of each Default, a statement of such Authorized
Representative setting forth details of such Default or default and the
action which the Borrower has taken and proposes to take with respect
thereto;
(e) as soon as possible and in any event within five Business
Days after (x) the occurrence of any material adverse development with
respect to any litigation, action, proceeding, or labor controversy of
the type described in SECTION 7.7 or (y) the commencement of any labor
controversy, litigation, action, proceeding of the type described in
SECTION 7.7, notice thereof and, upon request of the Administrative
Agent, copies of all non-privileged documentation relating thereto;
(f) promptly after the sending or filing thereof, copies of
all reports and registration statements which the Borrower files with
the Securities and Exchange Commission or any national securities
exchange;
(g) immediately upon becoming aware of the institution of any
steps by the Borrower or any other Person to terminate any Pension Plan
(other than a standard termination under ERISA Section 4041(b)), or the
failure to make a required contribution to any Pension Plan if such
failure is sufficient to give rise to a Lien under Section 302(f) of
ERISA, or the taking of any action with respect to a Pension Plan which
could result in the requirement that the Borrower furnish a bond or
other security to the PBGC or such Pension Plan, or the occurrence of
any event with respect to any Pension Plan which could result in the
incurrence by the Borrower or any member of the Controlled Group of any
material liability (other than liabilities incurred in the ordinary
course of maintaining the Pension Plan), fine or penalty, or any
increase in the contingent liability of the Borrower with respect to
any post-retirement Welfare Plan benefit which has a Material Adverse
Effect, notice thereof and copies of all documentation relating
thereto;
(h) as soon as known, any changes in Borrower's Debt Rating by
Moody's or S&P or any other rating agency which maintains a Debt Rating
on the Borrower which is used in the Pricing Grid;
(i) as soon as known, the occurrence of any Affiliate
Bankruptcy Event; and
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(j) other information reasonably requested by the
Administrative Agent.
SECTION 8.1.2 COMPLIANCE WITH LAWS. The Borrower will comply in all
material respects with all applicable laws, rules, regulations and orders, such
compliance to include the payment, before the same become delinquent, of all
taxes, assessments and governmental charges imposed upon it or upon its property
(except to the extent non-compliance would not reasonably be expected to have a
Material Adverse Effect and to the extent that such assignments and charges are
being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with GAAP shall have been set aside on its
books).
SECTION 8.1.3 MAINTENANCE OF PROPERTIES. The Borrower will, and will
use reasonable efforts to cause each of its Subsidiaries and Partnerships to,
maintain, preserve, protect and keep its property and equipment in good repair,
working order and condition (ordinary wear and tear excepted), and make
necessary and proper repairs, renewals and replacements so that its business
carried on in connection therewith may be properly conducted at all times unless
the Borrower determines in good faith that the continued maintenance of any of
its properties or equipment is no longer economically desirable and except where
the failure so to do would not have a Material Adverse Effect.
SECTION 8.1.4 INSURANCE. The Borrower will maintain or cause to be
maintained with responsible insurance companies insurance with respect to its
properties and business against such casualties and contingencies and of such
types and in such amounts as is customary in the case of similar businesses.
SECTION 8.1.5 BOOKS AND RECORDS. The Borrower will, and will cause each
of its active Subsidiaries to, keep books and records which accurately reflect
all of its business affairs and transactions and permit the Administrative Agent
and each Lender or any of their respective representatives (at the
Administrative Agent's or such Lender's expense), at reasonable times and
intervals upon reasonable prior notice, to visit all of its offices, to discuss
its financial matters with its officers and independent public accountant. The
Borrower will at any reasonable time and from time to time upon reasonable prior
notice, permit the Administrative Agent and the Lenders or any of their
respective agents or representatives to examine and make copies of and abstracts
from the records and books of account of the Borrower; PROVIDED that by virtue
of this SECTION 8.1.5 the Borrower shall not be deemed to have waived any right
to confidential treatment of the informational obtained, subject to the
provisions of applicable law or court order.
SECTION 8.1.6 ENVIRONMENTAL COVENANT. The Borrower will, and will use
reasonable efforts to cause each of its Subsidiaries and Partnerships to:
(a) use and operate all of its facilities and properties in
compliance with all Environmental Laws, keep all necessary permits,
approvals, certificates, licenses and other authorizations relating to
environmental matters in effect and remain in material compliance
therewith, and handle all Hazardous Materials in material compliance
with all applicable Environmental Laws, in each case where the failure
to do so may reasonably be expected to have a Material Adverse Effect;
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(b) promptly cure and have dismissed with prejudice to the
reasonable satisfaction of the Administrative Agent any actions and
proceedings relating to compliance with Environmental Laws where such
action or proceeding may reasonably be expected to have a Material
Adverse Effect; PROVIDED that the Borrower or such Subsidiary or
Partnership may postpone such cure and dismissal during any period in
which it is diligently pursuing any available administrative review
proceedings, remedial actions or appeals with respect to such action or
proceeding so long as such postponement would not be reasonably likely
to have a Material Adverse Effect; and
(c) provide such non-privileged information as the
Administrative Agent may reasonably request from time to time to
evidence compliance with this SECTION 8.1.6.
SECTION 8.1.7 CONDUCT OF BUSINESS AND MAINTENANCE OF EXISTENCE. The
Borrower will continue to engage in business of the same type as now conducted
by it and preserve, renew and keep in full force and effect its corporate
existence and take all reasonable action to maintain all material rights,
privileges and franchises necessary or desirable in the normal conduct of its
business, except, in each case, as otherwise permitted by SECTION 8.2.4.
SECTION 8.1.8 USE OF PROCEEDS. The Borrower will apply the proceeds of
the Loans for general corporate purposes (including without limitation, to
refinance certain existing Indebtedness of the Borrower, to finance equity
investments in certain projects of the Borrower, to provide working capital, for
the issuance of the letters of credit and to finance capital expenditures).
SECTION 8.1.9 INDEPENDENT DIRECTOR. The Borrower shall maintain at
least one independent director on the Board of Directors of the Borrower, other
than during one or more periods not in any one case to exceed 30 consecutive
days; PROVIDED that, during the vacancy, the Board of Directors of the Borrower
will not take any action which requires the approval of the independent director
(including bankruptcy actions).
SECTION 8.1.10 ARTICLES OF INCORPORATION. The Borrower will observe all
of (i) the restricted payments provisions and (ii) the separateness provisions
of its Articles of Incorporation as such provisions are in effect on the
Effective Date.
SECTION 8.2 NEGATIVE COVENANTS. The Borrower agrees with the
Administrative Agent and each Lender that, until all Commitments have terminated
and all Obligations have been paid and performed in full, the Borrower will, and
will cause each of its Subsidiaries and Partnerships, as applicable, to perform
the obligations set forth in this SECTION 8.2.
SECTION 8.2.1 RESTRICTIONS ON SECURED INDEBTEDNESS. The Borrower will
not create, incur, assume or suffer to exist any secured Indebtedness other
than:
(a) (i) Capitalized Lease Liabilities, (ii) other secured
Indebtedness of any kind whatsoever existing on the Effective Date and
(iii) other secured Indebtedness not to exceed 10% of the Borrower's
Net Tangible Assets, PROVIDED that: (A) neither the Company nor its
subsidiaries shall be permitted to create, incur, assume or suffer to
exist secured Indebtedness in reliance upon this SECTION 8.2.1(a)(iii)
until the earlier to occur
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of: (x) April 5, 2003, if the Borrower's Debt Rating is at least BBB-
by S&P and Baa3 by Moody's (with stable outlook from each rating
agency), and (y) the date on which S&P rates the Borrower's Debt rating
at least BBB or higher and Moody's rates the Borrower's Debt Rating at
least Baa2 or higher (with stable outlook from each rating agency); and
(B) NOTWITHSTANDING any restriction in this SECTION 8.2.1(A)(III), the
Company and its subsidiaries shall be permitted to create, incur,
assume or suffer to exist secured Indebtedness in reliance upon this
SECTION 8.2.1(A)(III) to secure Indebtedness not to exceed $100 million
in the aggregate; PROVIDED that any secured Indebtedness exceeding such
amount may be secured pursuant to CLAUSE (F) of SECTION 8.2.2; and
(b) Non-Recourse Debt with respect to which the Borrower has
pledged the stock of a Subsidiary in order to secure initial project
financing obtained or being obtained after the Effective Date hereof by
such Subsidiary (or the Partnership in which such Subsidiary is a
partner).
SECTION 8.2.2 LIENS. The Borrower will not create, incur, assume or
suffer to exist any Lien upon any of its property, revenues or assets, whether
now owned or hereafter acquired, except:
(a) Liens granted to secure payment of Indebtedness of the
type permitted and described in CLAUSE (B) of SECTION 8.2.1;
(b) Liens for taxes, assessments or other governmental charges
or levies not at the time delinquent or thereafter payable without
penalty or which are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on its books;
(c) Liens of carriers, warehousemen, mechanics, materialmen
and landlords incurred in the ordinary course of business for sums not
overdue or which are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance
with GAAP shall have been set aside on its books;
(d) Liens incurred in the ordinary course of business in
connection with workmen's compensation, unemployment insurance or other
forms of governmental insurance or benefits, or to secure performance
of tenders, statutory obligations, leases and contracts (other than for
borrowed money) entered into in the ordinary course of business or to
secure obligations on surety or appeal bonds;
(e) judgment Liens in existence less than 30 days after the
entry thereof or with respect to which execution has been stayed or the
payment of which is covered in full (subject to a customary deductible)
by insurance maintained with responsible insurance companies;
(f) Liens upon any property (other than direct or indirect
ownership interests of the Borrower in Major Projects, except for those
Liens on such ownership interests existing on the Effective Date) at
any time directly owned by the Borrower to secure any Indebtedness of
the nature described in CLAUSE (A) of SECTION 8.2.1; and
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(g) any Lien existing on the property of the Borrower on the
Effective Date.
In the event that the Borrower shall propose to create, incur, assume
or suffer to exist any Lien upon any property at any time directly owned by it
to secure any Indebtedness as contemplated by CLAUSE (F) above, the Borrower
will give prior written notice thereof to the Administrative Agent, who shall
give notice to the Lenders, and the Borrower will, prior to or simultaneously
with the creation of such Lien, effectively secure the Obligations equally and
ratably with such Indebtedness.
SECTION 8.2.3 INVESTMENTS. The Borrower will not, and will not permit
any of its Subsidiaries to, make, incur, assume or suffer to exist any
Investment in any other Person, except:
(a) Investments existing on the Effective Date;
(b) Cash Equivalent Investments, PROVIDED, HOWEVER, that any
Investment which when made complies with the requirements of the
definition of the term "CASH EQUIVALENT INVESTMENT" may continue to be
held notwithstanding that such Investment if made thereafter would not
comply with such requirements.
(c) without duplication, Investments permitted as Indebtedness
pursuant to SECTION 8.2.1;
(d) otherwise in the ordinary course of business;
(e) Investments permitted pursuant to SECTION 8.2.4(B); and
(f) Investments in Persons primarily engaged in the power
generation, power sales or power transmission business.
SECTION 8.2.4 CONSOLIDATION, MERGER. The Borrower will not, and will
not permit any of its Subsidiaries to, liquidate or dissolve, consolidate with,
or merge into or with, any other corporation, or purchase or otherwise acquire
all or substantially all of the assets of any Person (or of any division
thereof) except:
(a) any such Subsidiary may liquidate or dissolve voluntarily
into, and may merge with and into, the Borrower or any other
Subsidiary, and the assets or stock of any Subsidiary may be purchased
or otherwise acquired by the Borrower or any other Subsidiary;
(b) so long as no Default has occurred and is continuing or
would occur after giving effect thereto, the Borrower or any of its
Subsidiaries may purchase all or substantially all of the assets of any
Person, or (in the case of any such Subsidiary) acquire such person by
merger; and
(c) provided that no Default has occurred and is continuing or
would occur after giving effect thereto, the Borrower may consolidate
with or merge into any other Person, or convey, transfer or lease its
properties and assets substantially as an entirety to any
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person, or permit any Person to merge into or consolidate with the
Borrower if (i) the Borrower is the surviving corporation or the
surviving corporation or purchaser or lessee is a corporation
incorporated under the laws of the United States of America or Canada
and assumes the Obligations and (ii) the surviving corporation has Debt
Ratings of at least BBB- from S&P and Baa3 from Moody's (with a stable
outlook from both rating agencies).
SECTION 8.2.5 ASSET DISPOSITIONS. The Borrower will not, and will not
permit any of its Subsidiaries to, sell, transfer, lease, contribute or
otherwise convey, or grant options, warrants or other rights with respect to,
all or any substantial part of its assets (including accounts receivable and
capital stock of Subsidiaries) to any Person, unless:
(a) such sale, transfer, lease, contribution or conveyance is
the ordinary course of its business; or
(b) the net book value of such assets, together with the net
book value of all other assets sold, transferred, leased, contributed
or conveyed otherwise than in the ordinary course of business by the
Borrower or any of its Subsidiaries pursuant to this SECTION 8.2.5(B)
during the most recent 12-month period since the Effective Date, does
not exceed 10% of Net Tangible Assets computed as of the end of the
most recent quarter preceding such sale; PROVIDED, HOWEVER, that any
such sales shall be disregarded for purposes of the limitation of this
SECTION 8.2.5(B) if the proceeds are invested in assets in similar or
related lines of business of the Borrower, and PROVIDED FURTHER, that
the Borrower may sell or otherwise dispose of assets in excess of such
10% if the proceeds from such sales or dispositions, which are not so
reinvested, are retained by the Borrower as cash or Cash Equivalent
Investments or are used to purchase or repay Indebtedness ranking equal
in right of payment to the Indebtedness of the Borrower hereunder or to
purchase or repay Indebtedness of its Subsidiaries.
SECTION 8.2.6 TRANSACTIONS WITH AFFILIATES. The Borrower will not enter
into, or cause, suffer or permit to exist any arrangement or contract with any
of its Affiliates unless such arrangement or contract is fair and equitable to
the Borrower and is an arrangement or contract of the kind which would be
entered into by a prudent Person in the position of the Borrower with a Person
which is not one of its Affiliates. Notwithstanding the foregoing, the Leveraged
Lease Transaction and the Leveraged Lease Basic Documents shall be deemed not to
be contracts or arrangements with an Affiliate for the purposes of this SECTION
8.2.6.
SECTION 8.2.7 RESTRICTIVE AGREEMENTS. The Borrower will not, and will
not permit any of its Subsidiaries to, enter into any agreement (excluding (i)
any Loan Document and any agreement governing any Indebtedness permitted by
CLAUSE (B) of SECTION 8.2.1 as to the assets financed with the proceeds of such
Indebtedness and, (ii) any Leveraged Lease Basic Document and any agreement with
respect to any Indebtedness entered into by the Borrower or any of its
Subsidiaries in connection with the Leveraged Lease Transaction) prohibiting:
(a) the ability of the Borrower to amend or otherwise modify
any Loan Document; or
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(b) the ability of any Subsidiary to make any payments,
directly or indirectly, to the Borrower by way of dividend, advances,
repayments of loans or advances, reimbursements of management and other
intercompany charges, expenses and accruals or other returns on
investments ("SUBSIDIARY Payments") , or any other agreement or
arrangement which restricts the ability of any such Subsidiary to make
any payment, directly or indirectly, to the Borrower where such
prohibition or restriction has a Material Adverse Effect.
The restriction set forth in clause (b) above shall not apply to prohibitions or
restrictions on Subsidiary Payments directly or indirectly to the Borrower set
forth in any agreement entered into in connection with a refinancing of any
Indebtedness of the Borrower or any of its Subsidiaries (each such agreement
entered into after the Effective Date, a "RESTRICTIVE FINANCING DOCUMENT") if,
prior to entering into such Restrictive Financing Document, the Borrower shall
have delivered to the Administrative Agent: (A) a certificate of an Authorized
Representative stating that the projected financial or coverage ratios of the
affected Subsidiary as calculated on the basis of the pro forma financials
prepared in good faith on the basis of reasonable assumptions in connection
with, and after giving effect to, the transactions contemplated by such
Restrictive Financing Document will, during the remaining life to maturity of
the Obligations, equal or exceed the financial or coverage ratios, if any,
required for the affected Subsidiary to make any Subsidiary Payments directly or
indirectly to the Borrower in accordance with such Restrictive Financing
Document; and (B) letters from Moody's and S&P confirming the then current Debt
Rating.
SECTION 8.2.8 INTEREST COVERAGE. The Borrower will at the end of each
of its fiscal quarters maintain an Interest Coverage Ratio for the immediately
preceding four consecutive fiscal quarters of the Borrower of not less than 1.50
to 1.00.
SECTION 8.2.9 RECOURSE DEBT TO RECOURSE CAPITAL RATIO. The Borrower
will at the end of each of its fiscal quarters maintain a Recourse Debt to
Recourse Capital Ratio of not more than 0.675 to 1.00.
SECTION 8.3 ERISA. The Borrower will not engage in any prohibited
transactions under Section 406 of ERISA or under Section 4975 of the Internal
Revenue Code, which would subject the Borrower to any tax, penalty or other
liabilities having a Material Adverse Effect.
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.1 LISTING OF EVENTS OF DEFAULT. Each of the following events
or occurrences described in this SECTION 9.1 shall constitute an "EVENT OF
DEFAULT".
SECTION 9.1.1 NON-PAYMENT OF OBLIGATIONS. (i) The Borrower shall
default in the payment when due of principal of any Loan or L/C Obligation or
the Borrower shall fail to Cash Collateralize its L/C Obligation when due or
(ii) the Borrower shall default (and such default shall continue unremedied for
a period of five Business Days) in the payment when due
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of interest on any Loan or L/C Obligation, any Facility Fee, Letter of Credit
Fee or of any other Obligation.
SECTION 9.1.2 BREACH OF WARRANTY. Any representation or warranty of the
Borrower made or deemed to be restated or remade in any Loan Document or any
other writing or certificate furnished by or on behalf of the Borrower to the
Administrative Agent or any Lender for the purposes of or in connection with any
Loan Document (including any certificates delivered pursuant to ARTICLE VI) is
or shall be incorrect when made or deemed made in any material respect.
SECTION 9.1.3 NON-PERFORMANCE OF CERTAIN COVENANTS AND OBLIGATIONS. The
Borrower shall default in the due performance and observance of any of its
obligations under SECTION 8.2 (other than SECTIONS 8.2.3 and 8.2.6).
SECTION 9.1.4 NON-PERFORMANCE OF OTHER COVENANTS AND OBLIGATIONS. The
Borrower shall default in the due performance and observance of any other
covenant or agreement contained in any Loan Document, and such default shall
continue unremedied for a period of 30 days after written notice thereof shall
have been given to the Borrower by the Administrative Agent.
SECTION 9.1.5 DEFAULT ON OTHER INDEBTEDNESS. A default shall occur in
the payment when due (subject to any applicable grace period), whether by
acceleration or otherwise, of any Indebtedness of the Borrower or a default
shall occur in the performance or observance of any obligation or condition with
respect to such Indebtedness if the effect of such default is to accelerate the
maturity of any such Indebtedness or such default shall continue unremedied for
any applicable period of time sufficient to permit the holder or holders of such
Indebtedness, or any trustee or agent for such holders, to cause such
Indebtedness to become due and payable prior to its expressed maturity, in
either case, such Indebtedness having a principal amount, individually or in the
aggregate, in excess of $20,000,000 (other than Indebtedness described in
SECTION 9.1.1).
SECTION 9.1.6 JUDGMENTS. Any judgment or order for the payment of money
in excess of $20,000,000 (taking into account any Insurance proceeds payable
under a policy where the insurer has accepted coverage without reservation)
shall be rendered against the Borrower and either:
(a) enforcement proceedings shall have been commenced by any
creditor upon such judgment or order; or
(b) there shall be any period of ninety (90) consecutive days
during which a stay of enforcement of such judgment or order, by reason
of a pending appeal or otherwise, shall not be in effect.
SECTION 9.1.7 PENSION PLANS. Any of the following events shall occur
with respect to any Pension Plan:
(a) the institution of any steps by the Borrower, any member
of its Controlled Group or any other Person to terminate a Pension Plan
if, as a result of such termination,
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the Borrower or any such member could be required to make a
contribution to such Pension Plan, or could reasonably expect to incur
a liability or obligation to such Pension Plan, in excess of
$20,000,000; or
(b) a contribution failure occurs with respect to any Pension
Plan sufficient to give rise to a Lien under Section 302(f) of ERISA.
SECTION 9.1.8 BANKRUPTCY, INSOLVENCY. The Borrower shall:
(a) become insolvent or generally fail to pay, or admit in
writing its inability or unwillingness to pay, debts as they become
due;
(b) apply for, consent to, or acquiesce in, the appointment of
a trustee, receiver, sequestrator or other custodian for the Borrower
or a substantial portion of its property, or make a general assignment
for the benefit of creditors;
(c) in the absence of such application, consent or
acquiescence, permit or suffer to exist the appointment of a trustee,
receiver, sequestration or other custodian for the Borrower or for a
substantial part of its property, and such trustee, receiver,
sequestration or other custodian shall not be discharged within 60
days, PROVIDED that nothing in the Loan Documents shall prohibit or
restrict any right the Administrative Agent or any Lender may have
under applicable law to appear in any court conducting any relevant
proceeding during such 60-day period to preserve, protect and defend
its rights under the Loan Documents (and the Borrower shall not object
to any such appearance);
(d) permit or suffer to exist the commencement of any
bankruptcy, reorganization, debt arrangement or other case or
proceeding under any bankruptcy or insolvency law, or any dissolution,
winding up or liquidation proceeding, in respect of the Borrower, and,
if any such case or proceeding is not commenced by the Borrower, such
case or proceeding shall be consented to or acquiesced in by the
Borrower or shall result in the entry of an order for relief or shall
remain for 60 days undismissed, PROVIDED that nothing in the Loan
Documents shall prohibit or restrict any right the Administrative Agent
or any Lender may have under applicable law to appear in any court
conducting any such case or proceeding during such 60-day period to
preserve, protect and defend its rights under the Loan Documents (and
the Borrower shall not object to any such appearance); or
(e) take any corporate action authorizing, or in furtherance
of, any of the foregoing.
SECTION 9.1.9 SUBSTANTIVE CONSOLIDATION. In connection with an
Affiliate Bankruptcy Event, any Person shall seek (whether by adversarial
proceeding, motion or otherwise) the substantive consolidation of any part of
the assets, properties, estate or liabilities of the Borrower with the estate or
liabilities of any Person subject of such Affiliate Bankruptcy Event and such
application shall be consented to or acquiesced in by the Borrower or shall
result in an order for such substantive consolidation or shall remain for 60
days undismissed, PROVIDED that nothing in the Loan Documents shall prohibit or
restrict any right the Administrative Agent or any Lender may have under
applicable law to appear in any court conducting any such case or
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proceeding during such 60-day period to preserve, protect and defend its rights
under the Loan Documents (and the Borrower shall not object to any such
appearance).
SECTION 9.2 ACTION IF BANKRUPTCY. If any Event of Default described in
CLAUSES (A) through (E) of SECTION 9.1.8 shall occur with respect to the
Borrower, the Commitments (if not theretofore terminated) shall automatically
terminate and the outstanding principal amount of all outstanding Loans and all
other Obligations shall automatically be and become immediately due and payable,
without notice or demand.
SECTION 9.3 ACTION IF OTHER EVENT OF DEFAULT. If any Event of Default
(other than any Event of Default described in CLAUSES (A) through (E) of SECTION
9.1.8) shall occur for any reason, whether voluntary or involuntary, and be
continuing, the Administrative Agent, upon the direction of the Required
Lenders, shall by written notice to the Borrower declare all or any portion of
the outstanding principal amount of the Loans and other Obligations to be due
and payable and/or the Commitments (if not theretofore terminated) to be
terminated, whereupon the full unpaid amount of such Loans and other Obligations
which shall be so declared due and payable shall be and become immediately due
and payable, without further notice, demand or presentment and/or, as the case
may be, the Commitments shall terminate. The rights provided for in the Loan
Documents are cumulative and are not exclusive of any other rights, powers,
privileges or remedies provided by law or in equity, or under any other
instrument, document or agreement now existing or hereafter arising.
SECTION 9.4 RESCISSION OF DECLARATION. Any declaration made pursuant to
SECTION 9.3 may, should the Required Lenders in their sole and absolute
discretion so elect, be rescinded by written notice to the Borrower at any time
after the principal of the Loans and the Notes shall have become due and
payable, but before any judgment or decree for the payment of the monies so due,
or any part thereof, shall have been entered; PROVIDED that the Borrower shall
have paid all arrears of interest upon the Loans and all other amounts then owed
to the Administrative Agent and the Lenders including all costs, expenses and
liabilities incurred by the Administrative Agent and the Lenders in respect of
such declaration and all consequences thereof (except that principal of the
Loans which by such declaration shall have become payable) and every other Event
of Default shall have been made good, waived or cured; PROVIDED that no such
rescission or annulment shall extend to or affect any subsequent Event of
Default or impair any right consequent thereon.
ARTICLE X
THE ADMINISTRATIVE AGENT
SECTION 10.1 ACTIONS.
(a) Each Lender hereby appoints CUSA as its Administrative Agent under
and for purposes of each Loan Document. Each Lender authorizes the
Administrative Agent to act on behalf of such Lender under each Loan Document
and, in the absence of other written instructions from the Required Lenders
received from time to time by the Administrative Agent (with respect to which
the Administrative Agent agrees that it will comply, except as otherwise
provided in this Section or as otherwise advised by counsel), to exercise such
powers hereunder
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and thereunder as are specifically delegated to or required of the
Administrative Agent by the terms hereof and thereof, together with such powers
as may be reasonably incidental thereto. Notwithstanding any provision to the
contrary contained elsewhere in any Loan Document, the Administrative Agent
shall not have any duties or responsibilities, except those expressly set forth
herein, nor shall the Administrative Agent have or be deemed to have any
fiduciary relationship with any Lender, and no implied covenants, functions,
responsibilities, duties, obligations or liabilities shall be read into any Loan
Document or otherwise exist against the Administrative Agent. Without limiting
the generality of the foregoing sentence, the use of the term "agent" in this
Agreement with reference to the Administrative Agent is not intended to connote
any fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law. Instead, such term is used merely as a matter of
market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties.
(b) Each Lender hereby agrees to indemnify (which indemnity shall
survive any termination of this Agreement) the Agent-Related Persons PRO RATA
according to such Lender's Percentage, from and against any and all liabilities,
obligations, losses, damages, claims, costs or expenses of any kind or nature
whatsoever which may at any time be imposed on, incurred by, or asserted
against, the Agent-Related Persons in any way relating to or arising out of any
Loan Document, including reasonable attorneys' fees, and as to which the
Administrative Agent is not reimbursed by the Borrower; PROVIDED, HOWEVER, that
no Lender shall be liable for the payment of any portion of such liabilities,
obligations, losses, damages, claims, costs or expenses which are determined by
a court of competent jurisdiction in a final proceeding to have resulted from
the Agent-Related Person's gross negligence or willful misconduct. No
Agent-Related Persons shall be required to take any action under any Loan
Document, or to prosecute or defend any suit in respect of or any Loan Document,
unless it is indemnified hereunder to its satisfaction. If any indemnity in
favor of the Administrative Agent shall be or become, in its determination,
inadequate, the Agent-Related Person may call for additional indemnification
from the Lenders and cease to do the acts indemnified against hereunder until
such additional indemnity is given.
(c) The Issuing Lender shall act on behalf of the Lenders with respect
to any Letters of Credit Issued by it and the documents associated therewith
until such time and except for so long as the Administrative Agent may agree at
the request of the Required Lenders to act for such Issuing Lender with respect
thereto; PROVIDED, HOWEVER, that the Issuing Lender shall have all of the
benefits and immunities (i) provided to the Administrative Agent in this ARTICLE
X with respect to any acts taken or omissions suffered by the Issuing Lender in
connection with Letters of Credit Issued by it or proposed to be Issued by it
and the L/C Related Documents as fully as if the term "Administrative Agent", as
used in this ARTICLE X, included the Issuing Lender with respect to such acts or
omissions, and (ii) as additionally provided in this Agreement with respect to
the Issuing Lender.
SECTION 10.2 FUNDING RELIANCE. Unless the Administrative Agent shall
have been notified by telephone, confirmed in writing, by any Lender by 12:00
Noon, New York City time, on the Business Day prior to a Borrowing that such
Lender will not make available the amount which would constitute its Percentage
of such Borrowing on the date specified therefor, the Administrative Agent may
assume that such Lender has made such amount available to the Administrative
Agent and, in reliance upon such assumption, may, but shall not be required to,
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make available to the Borrower a corresponding amount. If and to the extent that
such Lender shall not have made such amount available to the Administrative
Agent, such Lender and the Borrower severally agree to repay the Administrative
Agent forthwith on demand such corresponding amount together with interest
thereon, for each day from the date the Administrative Agent made such amount
available to the Borrower to the date such amount is repaid to the
Administrative Agent, at the interest rate applicable at the time to Loans
comprising such Borrowing; PROVIDED that if such Lender makes available the
amount which is its Percentage of such Borrowing on or before the next Business
Day following the day when due, the interest rate payable on such amount shall
be the Federal Funds Rate.
SECTION 10.3 EXCULPATION. No Agent-Related Person shall be liable to
any Lender for any action taken or omitted to be taken by it under or any Loan
Document, or in connection therewith, except for its own willful misconduct or
gross negligence, nor responsible for any recitals or warranties herein or
therein, nor for the effectiveness, enforceability, validity or due execution of
any Loan Document, nor to make any inquiry respecting the performance by the
Borrower of its obligations under any Loan Document. Any such inquiry which may
be made by the Administrative Agent shall not obligate it to make any further
inquiry or to take any action. Each Agent-Related Person shall be entitled to
rely upon advice of counsel concerning legal matters and upon any notice,
consent, certificate, statement or writing which the Administrative Agent
believes to be genuine and to have been presented by a proper Person.
SECTION 10.4 SUCCESSOR. The Administrative Agent may resign as such at
any time upon at least 30 days' prior notice to the Borrower and all Lenders. If
the Administrative Agent at any time shall resign, the Required Lenders may,
within ten (10) days after such notice and with the consent of the Borrower (not
to be unreasonably withheld), appoint another Lender as a successor
Administrative Agent which shall thereupon become the Administrative Agent
hereunder. If no successor Administrative Agent shall have been so appointed by
the Required Lenders, and shall have accepted such appointment, within 30 days
after the retiring Administrative Agent's giving notice of resignation, then the
retiring Administrative Agent may, on behalf of the Lenders, after notice to and
consultation with the Borrower, appoint a successor Administrative Agent, which
shall be one of the Lenders or an Eligible Assignee, and shall have a combined
capital and surplus of at least $250,000,000. Upon the acceptance of any
appointment as Administrative Agent hereunder by a successor Administrative
Agent, such successor Administrative Agent shall be entitled to receive from the
retiring Administrative Agent such documents of transfer and assignment as such
successor Administrative Agent may reasonably request, and shall thereupon
succeed to and become vested with all rights, powers, privileges and duties of
the retiring Administrative Agent, and the retiring Administrative Agent shall
be discharged from its duties and obligations under this Agreement. After the
effective date of any retiring Administrative Agents resignation hereunder as
the Administrative Agent, the provisions of (a) this ARTICLE X shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
the Administrative Agent under this Agreement; and (b) SECTION 11.3 and SECTION
11.4 shall continue to inure to its benefit.
SECTION 10.5 LOANS BY CUSA. CUSA shall have the same rights and powers
with respect to the Loans made by it or any of its Affiliates as any other
Lender and may exercise the same as if it were not the Administrative Agent.
CUSA and its Affiliates may accept deposits from, lend money to, and generally
engage in any kind of business with the
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Borrower or any Subsidiary or Affiliate of the Borrower as if CUSA were not the
Administrative Agent hereunder.
SECTION 10.6 RELIANCE BY ADMINISTRATIVE AGENT.
(a) The Administrative Agent shall be entitled to rely, and shall be
fully protected in relying, upon any writing, resolution, notice, consent,
certificate, affidavit, letter, telegram, facsimile, telex or telephone message,
statement or other document or conversation believed by it to be genuine and
correct and to have been signed, sent or made by the proper Person or Persons,
and upon advice and statements of legal counsel (including counsel to the
Company), independent accountants and other experts selected by the
Administrative Agent. The Administrative Agent shall be fully justified in
failing or refusing to take any action under any Loan Document unless it shall
first receive such advice or concurrence of the Required Lenders as it deems
appropriate and, if it so requests, it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action. The
Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, under any Loan Document in accordance with a request or
consent of the Required Lenders and such request and any action taken or failure
to act pursuant thereto shall be binding upon all of the Lenders.
(b) For purposes of determining compliance with the conditions
specified in SECTION 6.1, each Lender that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Administrative Agent to such Lender
for consent, approval, acceptance or satisfaction, or required thereunder to be
consented to or approved by or acceptable or satisfactory to the Lender.
SECTION 10.7 NOTICE OF DEFAULT. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default, except with respect to defaults in the payment of principal, interest
and fees required to be paid to the Administrative Agent for the account of the
Lenders, unless the Administrative Agent shall have received written notice from
a Lender or the Borrower referring to this Agreement, describing such Default or
Event of Default and stating that such notice is a "notice of default". The
Administrative Agent will notify the Lenders of its receipt of any such notice.
The Administrative Agent shall take such action with respect to such Default or
Event of Default as may be requested by the Required Lenders in accordance with
Article IX; PROVIDED, HOWEVER, that unless and until the Administrative Agent
has received any such request, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to such Default or Event of Default as it shall deem advisable or in the best
interest of the Lenders.
SECTION 10.8 CREDIT DECISIONS. Each Lender acknowledges that it has,
independently of the Agent-Related Person and each other Lender, and based on
such Lender's review of the financial information of the Borrower, the Loan
Documents (the terms and provisions of which being satisfactory to such Lender)
and such other documents, information and investigations as such Lender has
deemed appropriate, made its own credit decision to extend its Commitments. Each
Lender also acknowledges that it will, independently of the Administrative Agent
and each other Lender, and based on such other documents, information
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and investigations as it shall deem appropriate at any time, continue to make
its own credit decisions as to exercising or not exercising from time to time
any rights and privileges available to it under any Loan Document.
SECTION 10.9 COPIES. The Administrative Agent shall give prompt notice
to each Lender of each notice or request required or permitted to be given to
the Administrative Agent by the Borrower pursuant to the terms of this Agreement
(unless concurrently delivered to the Lenders by the Borrower). The
Administrative Agent will distribute to each Lender each document or instrument
(including without limitation, each document or instrument delivered by the
Borrower to the Administrative Agent pursuant to Article VI and VIII) received
for its account and copies of all other communications received by the
Administrative Agent from the Borrower for distribution to the Lenders by the
Administrative Agent in accordance with the terms of this Agreement.
ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1 WAIVERS, AMENDMENTS.
(a) The provisions of each Loan Document may from time to time be
amended, modified or waived, if such amendment, modification or waiver is in
writing and consented to by the Borrower and the Required Lenders; PROVIDED,
HOWEVER, that no such amendment, modification or waiver shall (i) forgive the
principal amount or extend the final scheduled date of maturity of any Loan,
reduce the stated rate of any interest or fee payable hereunder or extend the
scheduled date of any payment thereof, or increase the amount or extend the
expiration date of any Lender's Commitment without the consent of each Lender
directly affected thereby; (ii) amend, modify or waive any provision of this
SECTION 11.1, SCHEDULE 2.9 or any percentage specified in the definition of
Required Lenders, or consent to the assignment or transfer by the Borrower of
any of its rights and obligations under the Loan Documents, in each case without
the written consent of all Lenders; (iii) amend, modify or waive any PRO RATA
provision of SECTION 4.9, or any provision in the Loan Documents which provides
for amounts paid in respect of the Obligations to be shared among the Lenders
ratably, without the consent of all Lenders; or affect the interests, rights or
obligations of the Agent QUA the Agent or the Issuing Lender QUA the Issuing
Lender shall be made without consent of the Agent or the Issuing Lender,
respectively. Any such waiver and any such amendment, supplement or modification
shall apply equally to each of the Lenders and shall be binding upon the
Borrower, the Lenders, the Administrative Agent and all future holders of the
Loans. In the case of any waiver, the Borrower and its Subsidiaries, the Lenders
and the Administrative Agent shall be restored to their former position and
rights and under the Loan Documents, and any Default or Event of Default waived
shall be deemed to be cured and not continuing; but no such waiver shall extend
to any subsequent or other Default or Event of Default, or impair any right
consequent thereon.
(b) No failure or delay on the part of the Administrative Agent,
Issuing Lender or any Lender in exercising any power or right under any Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power or right preclude any other or further exercise
thereof or the exercise of any other power or right. No notice to or demand on
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the Borrower in any case shall entitle it to any notice or demand in similar or
other circumstances. No waiver or approval by the Administrative Agent, the
Issuing Lender or any Lender under any Loan Document shall, except as may be
otherwise stated in such waiver or approval, be applicable to subsequent
transactions. No waiver or approval hereunder shall require any similar or
dissimilar waiver or approval thereafter to be granted hereunder.
SECTION 11.2 NOTICES. All notices and other communications provided to
any party hereto under any Loan Document shall be in writing or by facsimile and
addressed, delivered or transmitted to such party at its address or facsimile
number set forth on SCHEDULE 1.1(B) or set forth in the Lender Assignment
Agreement or at such other address or facsimile number as may be designated by
such party in a written notice to the other parties. Any notice, if mailed and
properly addressed with postage prepaid shall be effective five Business Days
after being sent or if properly addressed and sent by pre-paid courier service,
shall be deemed given when received; any notice, if transmitted by facsimile,
shall be deemed given when transmitted (if confirmed).
SECTION 11.3 PAYMENT OF COSTS AND EXPENSES.
(a) The Borrower agrees to pay promptly on demand all reasonable costs
and expenses of the Lead Arrangers, the Issuing Lender and the Administrative
Agent (including the reasonable fees and out-of-pocket costs and expenses of
counsel to the Administrative Agent) in connection with:
(i) the negotiation, preparation, execution and delivery of
each Loan Document, including schedules and exhibits, and any
amendments, waivers, consents, supplements or other modifications to
any Loan Document as may from time to time hereafter be required; and
(ii) the preparation and review of the form of any document or
instrument relevant to any Loan Document; PROVIDED, HOWEVER, that the
Borrower shall have no obligation to pay for the cost of the
documentation of assignments or participations as provided in SECTION
11.11 (unless such assignment is made pursuant to SECTION 4.11);
in each case, upon presentation of statement of account, whether or not the
transactions contemplated hereby are consummated.
(b) The Borrower further agrees to pay upon demand, and to
save the Administrative Agent, the Issuing Lender and the Lenders harmless from
all liability for, any stamp or other taxes which may be payable in connection
with the execution, delivery or enforcement of any Loan Document or with the
Borrowings hereunder. The Borrower also agrees to reimburse the Administrative
Agent, the Issuing Lender and each Lender, as applicable, promptly upon demand
for (x) all reasonable out-of-pocket costs and expenses (including fees and
out-of-pocket expenses of counsel) incurred by the Administrative Agent, the
Issuing Lender and each Lender in connection with the negotiation of any
restructuring or work-out, whether or not consummated, of any Obligations and
(y) all out-of-pocket costs and expenses (including fees and out-of-pocket costs
and expenses of counsel) by the Administrative Agent, the Issuing Lender and
each Lender in connection with the enforcement of any Obligations after an Event
of
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Default or in connection with any insolvency proceedings; PROVIDED that, in
either case, the Borrower shall not be obligated to reimburse such costs and
expenses that are found in a final judgment by a court of competent jurisdiction
to have been incurred in an attempt to enforce such rights and remedies that
were pursued by such Administrative Agent, the Issuing Lender or Lender in bad
faith and without any reasonable basis in fact or law.
SECTION 11.4 INDEMNIFICATION.
(a) In consideration of the execution and delivery of this Agreement by
each Lender and the extension of the Commitments, the Borrower hereby
indemnifies, exonerates and holds the Administrative Agent, the Lead Arrangers,
the Issuing Lender and each Lender and each of their respective affiliates,
officers, directors and employees (collectively, the "INDEMNIFIED PARTIES") free
and harmless from and against any and all losses, costs, actions, causes of
action, suits, liabilities and damages, and expenses incurred in connection
therewith (irrespective of whether any such Indemnified Party is a party to the
action for which indemnification hereunder is sought), including any amounts
paid to any Agent-Related Person pursuant to SECTION 10.1(B) and reasonable
attorneys' fees and disbursements but excluding claims for lost profits
(collectively, the "INDEMNIFIED LIABILITIES"), joint or several, that may be
incurred by or asserted or awarded against any Indemnified Party, in each case
arising out of or in connection with or relating to:
(i) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Loan;
(ii) the entering into and performance of any Loan Document by
any of the Indemnified Parties (including any action brought by or on
behalf of the Borrower as the result of any determination by the
Required Lenders pursuant to ARTICLE VII not to fund any Borrowing);
(iii) any investigation, litigation, proceeding, or obligation
related to any Environmental Law or other matter in any case arising
out of the relationship of the parties under this Agreement; or
(iv) the presence on or under, or the escape, seepage,
leakage, spillage, discharge, emission or release from, any real
property owned, leased or operated by any Loan Party thereof of any
Hazardous Material (including any losses, liabilities, damages,
injuries, costs, expenses or claims asserted or arising under any
Environmental Law), or at any other locations regardless of whether
caused by, or within the control of, such Loan Party, where such claim
or liability arises out of the relationship of the parties under this
Agreement;
whether or not such investigation, litigation or proceeding is brought by the
Borrower or its Affiliates, any of their respective shareholders or creditors,
an Indemnified Party or any other person, or an Indemnified Party is otherwise a
party thereto and whether or not the transactions contemplated hereby are
consummated, except for any such Indemnified Liabilities arising for the account
of a particular Indemnified Party by reason of the relevant Indemnified Party's
(i) gross negligence or willful misconduct or (ii) breach of such Indemnified
Party's obligations
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under this Agreement. If and to the extent that the foregoing undertaking may be
unenforceable for any reason, the Borrower hereby agrees to make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.
(b) To the extent permitted by applicable law, no Indemnified Party
shall have any liability to the Borrower or its Affiliates or any of their
respective shareholders or creditors under any theory of liability, for special,
indirect, consequential or punitive damages (as opposed to direct or actual
damages) arising out of, in connection with, or as a result of, this Agreement
or any agreement or instrument contemplated hereby, any Loan or the use of the
proceeds thereof.
SECTION 11.5 SURVIVAL. The obligations of the Borrower under SECTIONS
4.3, 4.5, 4.6, 4.7, 11.3 and 11.4, and the obligations of the Lenders under
SECTION 10.1, shall in each case survive any termination of this Agreement, the
payment in full of all Obligations and the termination of all Commitments. The
representations and warranties made by the Borrower in each Loan Document shall
survive the execution and delivery of such Loan Document.
SECTION 11.6 SEVERABILITY. Any provision of any Loan Document which is
prohibited or unenforceable in any jurisdiction shall, as to such provision and
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of such Loan
Document or affecting the validity or enforceability of such provision in any
other jurisdiction.
SECTION 11.7 HEADINGS. The various headings of each Loan Document are
inserted for convenience only and shall not affect the meaning or interpretation
of such other Loan Document or any provisions hereof or thereof.
SECTION 11.8 EXECUTION IN COUNTERPARTS. This Agreement may be executed
by the parties hereto in several counterparts, each of which shall be executed
by the Borrower and the Administrative Agent and be deemed to be an original and
all of which shall constitute together but one and the same agreement.
SECTION 11.9 GOVERNING LAW; ENTIRE AGREEMENT. This Agreement, the Notes
and the rights and obligations of the parties under this Agreement shall be
governed by, and construed and interpreted in accordance with, the law of the
state of New York. The Loan Documents, together with the fee letter referred to
in SECTION 3.3.3 and the commitment letter of even date therewith, represent the
agreement of the Borrower, the Administrative Agent and the Lenders and
supersede any and all prior agreements and understandings, oral or written,
relative or with respect to the subject matter hereof, and there are no
promises, undertakings, representations or warranties by the Administrative
Agent or any Lender relative to subject matter hereof not expressly set forth or
referred to in the Loan Documents.
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SECTION 11.10 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; PROVIDED, HOWEVER, that:
(a) the Borrower may not assign or transfer its rights or
obligations hereunder without the prior written consent of the
Administrative Agent, the Issuing Lender and all Lenders; and
(b) the rights of sale, assignment and transfer of the Lenders
are subject to SECTION 11.11.
SECTION 11.11 SALE AND TRANSFER OF LOANS AND NOTES; PARTICIPATIONS IN
LOANS AND NOTES. Each Lender may assign, or sell participations in, its Loans
and Commitments to one or more other Persons in accordance with this SECTION
11.11.
SECTION 11.11.1 ASSIGNMENTS.
(a) Any Lender (an "ASSIGNOR") may, in accordance with applicable law,
at any time and from time to time assign to any Eligible Assignee, with the
consent of the Administrative Agent, the Issuing Lender and, except at any time
a Default or Event of Default shall have occurred and be continuing, the
Borrower (which, in each case, shall not be unreasonably withheld or delayed),
all or any part of its rights and obligations under this Agreement pursuant to a
Lender Assignment Agreement, executed by such Eligible Assignee, such Assignor
and any other Person whose consent is required pursuant to this paragraph, and
delivered to the Administrative Agent for its acceptance and recording in the
Register; PROVIDED that no such assignment to an Eligible Assignee (other than
any Lender or any affiliate thereof) shall be in an aggregate principal amount
of less than $10,000,000 (other than in the case of an assignment of all of a
Lender's interests under this Agreement), unless otherwise agreed by the
Borrower and the Administrative Agent and; PROVIDED, FURTHER, that after giving
effect to any such assignment the assigning Lender shall have a Commitment
remaining of at least $10,000,000 in the aggregate amount (other than in the
case of an assignment of all of a Lender's interests under this Agreement). Upon
such execution, delivery, acceptance and recording, from and after the effective
date determined pursuant to such Lender Assignment Agreement, (x) the Eligible
Assignee thereunder shall be a party hereto and, to the extent provided in such
Lender Assignment Agreement, have the rights and obligations of a Lender
hereunder with a Commitment and/or Loans as set forth therein, and (y) the
Assignor thereunder shall, to the extent provided in such Lender Assignment
Agreement, be released from its obligations under this Agreement (and, in the
case of a Lender Assignment Agreement covering all of an Assignor's rights and
obligations under this Agreement, such Assignor shall cease to be a party
hereto). Notwithstanding any provision of this SECTION 11.11, the consent of the
Borrower shall not be required for any assignment that occurs when a Default or
an Event of Default pursuant to SECTION 9.1 shall have occurred and be
continuing with respect to the Borrower.
(b) The Administrative Agent shall, on behalf of the Borrower, maintain
at its address referred to on SCHEDULE 1.1(B) a copy of each Lender Assignment
Agreement delivered to it and a register (the "REGISTER") for the recordation of
the names and addresses of the Lenders and the Commitment of, and the principal
amount of the Loans owing to, each Lender from time
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to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrower, the Administrative Agent and the Lenders shall
treat each Person whose name is recorded in the Register as the owner of the
Loans and any Notes evidencing the Loans recorded therein for all purposes of
this Agreement. Any assignment of any Loan, whether or not evidenced by a Note,
shall be effective only upon appropriate entries with respect thereto being made
in the Register (and each Note shall expressly so provide). Any assignment or
transfer of all or part of a Loan evidenced by a Note shall be registered on the
Register only upon surrender for registration of assignment or transfer of the
Note evidencing such Loan, accompanied by a duly executed Lender Assignment
Agreement, and thereupon one or more new Notes shall be issued to the designated
Eligible Assignee.
(c) Upon its receipt of a Lender Assignment Agreement executed by an
Assignor, an Eligible Assignee and any other Person whose consent is required by
SECTION 11.11.1(A), together with payment to the Administrative Agent of a
registration and processing fee of $3,000, the Administrative Agent shall (i)
promptly accept such Lender Assignment Agreement and (ii) record the information
contained therein in the Register on the effective date determined pursuant
thereto.
(d) For avoidance of doubt, the parties to this Agreement acknowledge
that the provisions of this SECTION 11.11.1 concerning assignments of Loans
relate only to absolute assignments and that such provisions do not prohibit
assignments creating security interests, including any pledge or assignment by a
Lender of any Loan or Note to any Federal Reserve Bank in accordance with
applicable law.
(e) The Borrower, upon receipt of written notice from the relevant
Lender, agrees to issue Notes to any Lender requiring Notes to facilitate
transactions of the type described in PARAGRAPH (D) of this SECTION 11.11.1.
(f) Notwithstanding anything to the contrary contained herein, any
Lender (a "GRANTING Lender") may grant to a special purpose funding vehicle (a
"SPC"), identified as such in writing from time to time by the Granting Lender
to the Administrative Agent and the Borrower, the option to provide to the
Borrower all or any part of any Loan that such Granting Lender would otherwise
be obligated to make to the Borrower pursuant to this Agreement; PROVIDED THAT
(i) nothing herein shall constitute a commitment by any SPC to make any Loan and
(ii) if an SPC elects not to exercise such option or otherwise fails to provide
all or any part of such Loan, the Granting Lender shall be obligated to make
such Loan pursuant to the terms hereof. The making of a Loan by an SPC hereunder
shall utilize the related Commitment of the Granting Lender to the same extent,
and as if, such Loan were made by such Granting Lender. Each party hereto hereby
agrees that no SPC shall be liable for any indemnity or similar payment
obligation under this Agreement (all liability for which shall remain with the
Granting Lender). In furtherance of the foregoing, each party hereto hereby
agrees (which agreement shall survive the termination of this Agreement) that,
prior to the date that is one year and one day after the payment in full of all
outstanding commercial paper or other senior indebtedness of any SPC, it will
not institute against, or join any other person in instituting against, such SPC
any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings under the laws of the United States or any State thereof. In
addition, notwithstanding anything to the contrary contained in this SECTION
11.11.1, any SPC may (A) with notice to, but without the prior written
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consent of, the Borrower and the Administrative Agent and without paying any
processing fee therefor, assign all or a portion of its interests in any Loans
to the Granting Lender or to any financial institutions (consented to by the
Borrower and Administrative Agent) providing liquidity and/or credit support to
or for the account of such SPC to support the funding or maintenance of Loans
and (B) disclose on a confidential basis any non-public information relating to
its Loans to any rating agency, commercial paper dealer or provider of any
surety, guarantee or credit or liquidity enhancement to such SPC. This SECTION
11.11.1(F) may not be amended without the written consent of each SPC.
SECTION 11.11.2 PARTICIPATIONS. Any Lender may at any time sell to one
or more commercial banks or other Persons (each of such commercial banks and
other Persons being herein called a "PARTICIPANT") participating interests in
any of the Loans, Commitments, or other interests of such Lender hereunder;
PROVIDED, HOWEVER, that:
(a) no participation contemplated in this SECTION 11.11.2
shall relieve such Lender from its Commitments or its other obligations
under any Loan Document;
(b) such Lender shall remain solely responsible for the
performance of its Commitments and such other obligations;
(c) the Borrower and the Administrative Agent shall continue
to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under each of the Loan Documents;
(d) no Participant, unless such Participant is an Affiliate of
such Lender, or is itself a Lender, shall be entitled to require such
Lender to take or refrain from taking any action under any Loan
Document, except as provided in CLAUSE (F) of this SECTION 11.11.2;
(e) the Borrower shall not be required to pay any amount under
SECTIONS 4.3, 4.4, 4.5, 4.6, 4.7, 4.8, 4.9, 11.3 and 11.4, that is
greater than the amount which it would have been required to pay had no
participating interest been sold;
(f) in no event shall any Participant under any such
participation have any right to approve any amendment or waiver of any
provision of any Loan Document, or any consent to any departure by the
Borrower therefrom, except to the extent that such amendment, waiver or
consent would reduce the principal of, or interest on, the Loans or any
fees payable hereunder, extend the due date of such principal, interest
or fee payments or increase the amount or extend the Commitment
Termination Date of such Loans, in each case to the extent subject to
such participation;
(g) the Borrower agrees that if amounts outstanding under this
Agreement and the Loans are due or unpaid, or shall have been declared
or shall have become due and payable upon the occurrence of an Event of
Default, each Participant shall, to the maximum extent permitted by
applicable law, be deemed to have the right of setoff in respect of its
participating interest in amounts owing under this Agreement to the
same extent as if the amount of its participating interest were owing
directly to it as a Lender under this Agreement, PROVIDED that, in
purchasing such participating interest, such
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Participant shall be deemed to have agreed to share with the Lenders
the proceeds thereof as provided in SECTION 4.10 as fully as if it were
a Lender hereunder; and
(h) the Borrower also agrees that each Participant shall be
entitled to the benefits of SECTIONS 4.3, 4.6 and 4.7 with respect to
its participation in the Commitments, and the Loans outstanding from
time to time as if it was a Lender; PROVIDED that, in the case of
SECTION 4.7, such Participant shall have complied with the requirements
of said Section and PROVIDED, FURTHER, that no Participant shall be
entitled to receive any greater amount pursuant to any such Section
than the transferor Lender would have been entitled to receive in
respect of the amount of the participation transferred by such
transferor Lender to such Participant had no such transfer occurred.
SECTION 11.12 OTHER TRANSACTIONS. Nothing contained herein shall
preclude the Administrative Agent or any other Lender from engaging in any
transaction, in addition to those contemplated by any Loan Document, with the
Borrower or any of its Affiliates in which the Borrower or such Affiliate is not
restricted hereby from engaging with any other Person.
SECTION 11.13 SUBMISSION TO JURISDICTION; WAIVERS. Each of the
Borrower, the Administrative Agent, the Issuing Lender and the Lenders hereby
irrevocably and unconditionally:
(a) submits for itself and its property in any legal action or
proceeding relating to the Loan Documents to which it is a party, or
for recognition and enforcement of any judgment in respect thereof, to
the non-exclusive general jurisdiction of the courts of the State of
New York, the courts of the United States for the Southern District of
New York, and appellate courts from any thereof;
(b) consents that any such action or proceeding may be brought
in such courts and waives any objection that it may now or hereafter
have to the venue of any such action or proceeding in any such court or
that such action or proceeding was brought in an inconvenient court and
agrees not to plead or claim the same;
(c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially similar form of mail), postage
prepaid, to such Person at its address set forth on SCHEDULE 1.1(B) or
at such other address of which the Administrative Agent shall have been
notified pursuant to SECTION 11.2;
(d) agrees that nothing herein shall affect the right to
effect service of process in any other manner permitted by law or shall
limit the right to sue in any other jurisdiction; and
(e) waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any legal action or proceeding
referred to in this Section any special, exemplary, punitive or
consequential damages.
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SECTION 11.14 WAIVERS OF JURY TRIAL. THE BORROWER, THE ADMINISTRATIVE
AGENT, THE ISSUING LENDER AND THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVE TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO ANY LOAN
DOCUMENT AND FOR ANY COUNTERCLAIM THEREIN.
SECTION 11.15 NON-RECOURSE PERSONS. The Lenders acknowledge that no
Non-Recourse Person shall have any responsibility or liability for the
Obligations.
SECTION 11.16 ACKNOWLEDGMENTS. The Borrower hereby acknowledges that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of the Loan Documents;
(b) neither the Administrative Agent nor any Lender has any
fiduciary relationship with or duty to the Borrower arising out of or
in connection with any of the Loan Documents, and the relationship
between Administrative Agent and Lenders, on one hand, and the
Borrower, on the other hand, in connection herewith or therewith is
solely that of debtor and creditor; and
(c) no joint venture is created by any of the Loan Documents
or otherwise exists by virtue of the transactions contemplated hereby
among the Lenders or among the Borrower and the Lenders.
SECTION 11.17 CONFIDENTIALITY. Each of the Administrative Agent, the
Issuing Lender and each Lender agrees to keep confidential all non-public
information provided to it by the Borrower pursuant to this Agreement; PROVIDED
that nothing herein shall prevent the Administrative Agent, the Issuing Lender
or any Lender from disclosing any such information (a) to the Administrative
Agent, the Issuing Lender, any other Lender or any affiliate of any Lender, (b)
to any transferee or prospective transferee that agrees to comply with the
provisions of this SECTION 11.17, (c) to its employees, directors, agents,
attorneys, accountants and other professional advisors or those of any of its
affiliates, (d) upon the request or demand of any governmental authority, (e) in
response to any order of any court or other governmental authority or as may
otherwise be required pursuant to any Requirement of Law, (f) if requested or
required to do so in connection with any litigation or similar proceeding, (g)
that has been publicly disclosed, (h) to the National Association of Insurance
Commissioners or any similar organization or any nationally recognized rating
agency that requires access to information about a Lender's investment portfolio
in connection with ratings issued with respect to such Lender, or (i) in
connection with the exercise of any remedy under any Loan Document.
-69-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers as of the day and year first above
written.
EDISON MISSION ENERGY
By: /s/ Steven D. Eisenberg
--------------------------------------
Name: Steven D. Eisenberg
Title: Vice President and
Associate General Counsel
CITICORP USA, INC.,
as Administrative Agent, and Lender
By: /s/ Anita J. Brickell
--------------------------------------
Name: Anita J. Brickell
Title: Vice President
CITIBANK, N.A.,
as Issuing Lender
By: /s/ Anita J. Brickell
--------------------------------------
Name: Anita J. Brickell
Title: Vice President
CREDIT SUISSE FIRST BOSTON,
as Lender
By: /s/ Paul L. Colden
--------------------------------------
Name: Paul L. Colden
Title: Vice President
By: /s/ Vitaly G. Butenko
--------------------------------------
Name: Vitaly G. Butenko
Title: Assistant Vice President
SOCIETE GENERALE,
as Lender
By: /s/ Francis Sacr
--------------------------------------
Name: Francis Sacr
Title: Director, Project Finance
S-1
BANK OF MONTREAL
as Lender
By: /s/ Cahal B. Carmody
--------------------------------------
Name: Cahal B. Carmody
Title: Director
TORONTO DOMINION (TEXAS), INC.
as Lender
By: /s/ Carol Brandt
--------------------------------------
Name: Carol Brandt
Title: Vice President
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH
as Documentation Agent and as Lender
By: /s/ Jasjeet S. Saad
--------------------------------------
Name: Jasjeet S. Saad
Title: Managing Director and
Head of Energy Group
By: /s/ Susana Vivares
--------------------------------------
Name: Susana Vivares
Title: Associate Director
ABN AMRO BANK N.V.,
as Lender
By: /s/ Jeffrey Dodd
--------------------------------------
Name: Jeffrey Dodd
Title: Group Vice President
By: /s/ Frank T.J. Van Deur
--------------------------------------
Name: Frank T.J. Van Deur
Title: Assistant Vice President
S-2
BARCLAYS BANK PLC,
as Lender
By: /s/ Nicolas A. Bell
------------------------------------
Name: Nicolas A. Bell
Title: Director
BANK OF AMERICA, N.A.
as Lender
By: /s/ Timothy V. Hintz
------------------------------------
Name: Timothy V. Hintz
Title: Managing Director
AUSTRALIA AND NEW ZEALAND
BANKING GROUP LIMITED,
as Lender
By: /s/ R. Scott McInnis
------------------------------------
Name: R. Scott McInnis
Title: Head of Structured
Finance and Relationship
Management -- Americas
BANK OF NOVA SCOTIA,
as Lender
By: /s/ John A. Quick
------------------------------------
Name: John A. Quick
Title: Managing Director
S-3
BAYERISCHE LANDESBANK
GIROZENTRALE,
as Lender
By: /s/ Dietmar Rieg
------------------------------------
Name: Dietmar Rieg
Title: First Vice President
By: /s/ Cornelia Wintergerst
------------------------------------
Name: Cornelia Wintergerst
Title: Vice President
THE CHASE MANHATTAN BANK,
as Lender
By: /s/ Peter Ling
------------------------------------
Name: Peter Ling
Title: Vice President
THE INDUSTRIAL BANK OF JAPAN,
LIMITED,
as Lender
By: /s/ Carl-Eric Banzinger
------------------------------------
Name: Carl-Eric Banzinger
Title: Senior Vice President and
Senior Deputy General Manager
By:
------------------------------------
Name:
Title:
S-4
ING (U.S.) CAPITAL LLC,
as Lender
By: /s/ Erwin Thomet
------------------------------------
Name: Erwin Thomet
Title: Managing Director
By: /s/ Charles M. O'Neil
------------------------------------
Name: Charles M. O'Neil
Title: Managing Director
KBC BANK, N.V.,
as Lender
By: /s/ Robert Snauffer
------------------------------------
Name: Robert Snauffer
Title: First Vice President
By: /s/ Eric Raskin
------------------------------------
Name: Eric Raskin
Title: Vice President
UNION BANK OF CALIFORNIA, N.A.,
as Lender
By: /s/ Dennis G. Blank
------------------------------------
Name: Dennis G. Blank
Title: Vice President
UBS AG, STAMFORD BRANCH,
as Lender
By: /s/ Patricia O'Kicki
------------------------------------
Name: Patricia O'Kicki
Title: Director
By: /s/ Wendy P. Field
------------------------------------
Name: Wendy P. Field
Title: Executive Director
Leveraged Finance
S-5
ANNEX I
EDISON MISSION ENERGY
TRANCHE A PRICING GRID
=============================================================================================================================
LEVEL 1 LEVEL 2 LEVEL 3
BASIS FOR PRICING LT Senior Unsecured Debt Rated LT Senior Unsecured Debt Rated LT Senior Unsecured Debt Rated
At Least BBB By S&P AND BAA2 By Less Than Level 1 But At Least Less Than Level 2 But At Least
Moody's. BBB- By S&P AND BAA3 By Moody's. BB+ By S&P AND BA1 By Moody's.
=============================================================================================================================
BASE RATE APPLICABLE
MARGIN 75.00 bps 137.50 200.00 bps
=============================================================================================================================
FACILITY FEE (1) 50.00 bps 62.50 bps 75.00 bps
-----------------------------------------------------------------------------------------------------------------------------
LIBO APPLICABLE
MARGIN 175.00 bps 237.50 bps 300.00 bps
-----------------------------------------------------------------------------------------------------------------------------
DRAWN COST (2) LIBOR + 225.00 bps LIBOR + 300.00 bps LIBOR + 375.00 bps
Base Rate + 125.00 bps Base Rate + 200.00 bps Base Rate + 275.00 bps
-----------------------------------------------------------------------------------------------------------------------------
FINANCIAL LETTER OF CREDIT 225 bps 300 bps 375 bps
FEE
-----------------------------------------------------------------------------------------------------------------------------
PERFORMANCE LETTER OF 112.50 bps 150 bps 187.50 bps
CREDIT FEE
-----------------------------------------------------------------------------------------------------------------------------
==============================================================
LEVEL 4
BASIS FOR PRICING LT Senior Unsecured Debt Rated
Lower Than Level 3.
==============================================================
BASE RATE APPLICABLE
MARGIN 262.50 bps
==============================================================
FACILITY FEE (1) 87.50 bps
--------------------------------------------------------------
LIBO APPLICABLE
MARGIN 362.50 bps
--------------------------------------------------------------
DRAWN COST (2) LIBOR + 450.00 bps
Base Rate + 350.00 bps
--------------------------------------------------------------
FINANCIAL LETTER OF CREDIT 450 bps
FEE
--------------------------------------------------------------
PERFORMANCE LETTER OF 225.00
CREDIT FEE
--------------------------------------------------------------
(1) Paid quarterly in arrears on each bank's commitment
irrespective of usage.
(2) Facility Fee plus Applicable Margin.
bps = basis points per annum
ANNEX II
EDISON MISSION ENERGY
TRANCHE B PRICING GRID
==============================================================================================================================
LEVEL 1 LEVEL 2 LEVEL 3
BASIS FOR PRICING LT Senior Unsecured Debt Rated LT Senior Unsecured Debt Rated LT Senior Unsecured Debt Rated
At Least BBB By S&P AND BAA2 By Less Than Level 1 But At Least Less Than Level 2 But At Least
---
Moody's. BBB- By S&P AND BAA3 By Moody's. BB+ By S&P AND BA1 By Moody's.
--- ---
==============================================================================================================================
BASE RATE APPLICABLE
MARGIN 62.50 bps 125.00 bps 187.50 bps
==============================================================================================================================
FACILITY FEE (1) 62.50 bps 75.00 bps 87.50 bps
------------------------------------------------------------------------------------------------------------------------------
LIBO APPLICABLE
MARGIN 162.50 bps 225.00 bps 287.50 bps
------------------------------------------------------------------------------------------------------------------------------
DRAWN COST (2) LIBOR + 225.00 bps LIBOR + 300.00 bps LIBOR + 375.00 bps
Base Rate + 125.00 bps Base Rate + 200.00 bps Base Rate + 275.00 bps
------------------------------------------------------------------------------------------------------------------------------
FINANCIAL LETTER OF CREDIT 225 bps 300 bps 375 bps
FEE
------------------------------------------------------------------------------------------------------------------------------
PERFORMANCE LETTER OF 112.50 bps 150 bps 187.50 bps
CREDIT FEE
------------------------------------------------------------------------------------------------------------------------------
=============================================================
LEVEL 4
BASIS FOR PRICING LT Senior Unsecured Debt Rated
Lower Than Level 3.
=============================================================
BASE RATE APPLICABLE
MARGIN 250.00 bps
=============================================================
FACILITY FEE (1) 100.00 bps
-------------------------------------------------------------
LIBO APPLICABLE
MARGIN 350.00 bps
-------------------------------------------------------------
DRAWN COST (2) LIBOR + 450.00 bps
Base Rate + 350.00 bps
-------------------------------------------------------------
FINANCIAL LETTER OF CREDIT 450 bps
FEE
-------------------------------------------------------------
PERFORMANCE LETTER OF 225.00
CREDIT FEE
-------------------------------------------------------------
(1) Paid quarterly in arrears on each bank's commitment
irrespective of usage.
(2) Facility Fee plus Applicable Margin.
bps = basis points per annum
SCHEDULE 1.1(a)
to Credit Agreement
COMMITMENTS
NAME OF LENDER TRANCHE A COMMITMENT TRANCHE B COMMITMENT
--------------- -------------------- --------------------
Citicorp, U.S.A., Inc. $46,666,666.67 $23,333,333.33
Credit Suisse First Boston $46,666,666.67 $23,333,333.33
Societe Generale $46,666,666.67 $23,333,333.33
Bank of Montreal $46,666,666.67 $23,333,333.33
Toronto Dominion (Texas), Inc. $46,666,666.67 $23,333,333.33
Westdeutsche Landesbank Girozentrale, $46,666,666.67 $23,333,333.33
New York Branch
ABN AMRO Bank N.V. $30,000,000.00 $15,000,000.00
Barclays Bank PLC $36,000,000.00 $9,000,000.00
Bank of America, N.A. $25,000,000.00 $0.00
The Bank of Nova Scotia $17,000,000.00 $8,000,000.00
Bayerische Landesbank Girozentrale $16,666,666.67 $8,333,333.33
ING (US) Capital LLC $25,000,000.00 $0.00
KBC Bank N.V. $20,000,000.00 $5,000,000.00
Union Bank of California, N.A. $16,666,666,67 $8,333,333,33
The Industrial Bank of Japan, Limited $12,000,000.00 $3,000,000.00
Australia and New Zealand Banking $15,000,000.00 $0.00
Group Limited
The Chase Manhattan Bank $15,000,000.00 $0.00
UBS AG, Stamford Branch $30,000,000.00 $15,000,000.00
SCHEDULE 1.1(b)
to Credit Agreement
LENDING OFFICES
NAME OF LENDER DOMESTIC OFFICE EURODOLLAR OFFICE
Citicorp, U.S.A., Inc. 2 Penn's Way, Suite 200 2 Penn's Way, Suite 200
New Castle, DE 19720 New Castle, DE 19720
Credit Suisse First Boston 11 Madison Avenue, 13th Floor 11 Madison Avenue, 13th Floor
New York, NY 10010 New York, NY 10010
Societe Generale 1221 Avenue of the Americas, 11th 1221 Avenue of the Americas, 11th
Floor Floor
New York, NY 10020 New York, NY 10020
Bank of Montreal 115 S. LaSalle Street, 11 W. 115 S. LaSalle Street, 11 W.
Chicago, IL 60603 Chicago, IL 60603
Toronto Dominion (Texas), Inc. 909 Fannin Street, Suite 1700 909 Fannin Street, Suite 1700
Houston, TX 77010 Houston, TX 77010
Westdeutsche Landesbank Girozentrale, 1211 Avenue of the Americas 1211 Avenue of the Americas
New York Branch New York, NY 10036-8701 New York, NY 10036-8701
ABN AMRO Bank N.V. 208 South LaSalle Street, Suite 1500 208 South LaSalle Street, Suite 1500
Chicago, IL 60604-1003 Chicago, IL 60604-1003
Barclays Bank PLC 222 Broadway 222 Broadway
New York, NY 10038 New York, NY 10038
Bank of America, N.A. 555 California Street 555 California Street
San Francisco, CA 94104 San Francisco, CA 94104
The Bank of Nova Scotia 600 Peachtree Street, Suite 2700 600 Peachtree Street, Suite 2700
Atlanta, GA 30308 Atlanta, GA 30308
Bayerische Landesbank Girozentrale New York Branch Cayman Islands Branch
560 Lexington Avenue 560 Lexington Avenue
New York, NY 10094 New York, NY 10094
ING (US) Capital LLC 55 East 52nd Street 55 East 52nd Street
New York, NY 10055 New York, NY 10055
KBC Bank N.V. 125 W. 55th St., 10th Fl. 125 W. 55th St., 10th Fl.
New York, NY 10019 New York, NY 10019
Union Bank of California, N.A. 445 S. Figueroa Street, 15th Fl. 445 S. Figueroa Street, 15th Fl.
Los Angeles, CA 90071 Los Angeles, CA 90071
The Industrial Bank of Japan, Limited 1251 Avenue of the Americas 1251 Avenue of the Americas
New York, NY 10020-1104 New York, NY 10020-1104
Australia and New Zealand Banking 1177 Avenue of the Americas 1177 Avenue of the Americas
Group Limited New York, NY 10036-2798 New York, NY 10036-2798
The Chase Manhattan Bank 270 Park Avenue 270 Park Avenue
New York, NY 10017 New York, NY 10017
UBS AG, Stamford Branch 677 Washington Boulevard 677 Washington Boulevard
Stamford, CT 06901 Stamford, CT 06901
SCHEDULE 5.1
EXISTING LETTERS OF CREDIT
---------------------------------------- -------------------------------------- --------------------------------------
Outstanding Letter of Credit Number Amount of Outstanding Letter of Expiration Date of Outstanding
Credit Letter of Credit
---------------------------------------- -------------------------------------- --------------------------------------
3004533 A$ 50,000,000.00 October 1, 2001
---------------------------------------- -------------------------------------- --------------------------------------
3017195 GBP 17,000,000.00 October 9, 2001
---------------------------------------- -------------------------------------- --------------------------------------
3029989 GBP 10,500,000.00 October 1, 2001
---------------------------------------- -------------------------------------- --------------------------------------
3016758 US$ 300,000.00 October 1, 2001
---------------------------------------- -------------------------------------- --------------------------------------
3029676 Euro 34,376,310.14 October 9, 2001
---------------------------------------- -------------------------------------- --------------------------------------
3029898 US$ 5,000,000.00 October 9, 2001
---------------------------------------- -------------------------------------- --------------------------------------
3035722 US$ 1,000,000.00 October 1, 2002
---------------------------------------- -------------------------------------- --------------------------------------
3036396 US$ 9,000,000.00 October 1, 2001
---------------------------------------- -------------------------------------- --------------------------------------
3037213 US$ 5,000,000.00 October 1, 2001
---------------------------------------- -------------------------------------- --------------------------------------
3037376 US$ 10,000,000.00 October 1, 2001
---------------------------------------- -------------------------------------- --------------------------------------
3037416 US$ 10,000,000.00 October 1, 2001
---------------------------------------- -------------------------------------- --------------------------------------
3037582 US$ 10,000,000.00 October 1, 2001
---------------------------------------- -------------------------------------- --------------------------------------
3037581 US$ 10,000,000.00 October 1, 2001
---------------------------------------- -------------------------------------- --------------------------------------
3014914 US$ 2,500,000.00 February 17, 2002
---------------------------------------- -------------------------------------- --------------------------------------
3014915 US$ 2,500,000.00 February 17, 2002
---------------------------------------- -------------------------------------- --------------------------------------
SCHEDULE 5.4
AGREED ALTERNATIVE CURRENCY
[To be added pursuant to Section 5.4 of the Credit Agreement]
EXHIBIT A-1
to Credit Agreement
[FORM OF]
TRANCHE A NOTE
$__________ [DATE]
FOR VALUE RECEIVED, the undersigned, EDISON MISSION ENERGY (the
"Borrower"), promises to pay to the order of __________ (the "Lender") on the
Tranche A Commitment Termination Date the principal sum of ________ DOLLARS
($_______) or, if less, the aggregate unpaid principal amount of all Tranche A
Loans shown on the schedule attached hereto (and any continuation thereof) made
by the Lender pursuant to that certain Credit Agreement, dated as of September
13, 2001 (together with all amendments, supplements and other modifications, if
any, from time to time thereafter made thereto, the "Credit Agreement"), among
the Borrower, the various financial institutions as are, or shall from time to
time become, parties thereto, Citibank, N.A., as Issuing Lender and Citicorp
USA, Inc., as Administrative Agent (the "Administrative Agent") for such
financial institutions.
The Borrower also promises to pay interest on the unpaid principal
amount hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, at the
rates per annum and on the dates specified in the Credit Agreement.
Payments of both principal and interest are to be made in Dollars in
same day or immediately available funds to the account designated by the
Administrative Agent pursuant to the Credit Agreement.
This Note evidences Indebtedness incurred under the Credit Agreement,
to which reference is made for a statement of the terms and conditions on which
the Borrower is permitted and required to make prepayments and repayments of
principal of the Indebtedness evidenced by this Note and on which such
Indebtedness may be declared to be immediately due and payable. Unless otherwise
defined, terms used herein have the meanings provided in the Credit Agreement.
All parties hereto, whether as makers, endorsers, or otherwise,
severally waive presentment for payment, demand, protest and notice of dishonor.
If any payment on this Note becomes due and payable on a date which is
not a Business Day, such payment shall be made on the next succeeding Business
Day; provided that, in the case of LIBO Rate Loans, if such extension would
result in extending such payment into another calendar month, then such payment
shall be made on the immediately preceding Business Day.
THIS NOTE HAS BEEN DELIVERED IN NEW YORK, NEW YORK AND SHALL BE DEEMED
TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
NEW YORK.
EDISON MISSION ENERGY
By:
------------------------------------
Title:
-2-
LOANS AND PRINCIPAL PAYMENTS
Amount of Prin. Or Outstanding
Date Type of Amount of End of Int. Paid Principal Balance Notation
Loan Made Loan Made Interest Period This Date This Date Made By
-----------------------------------------------------------------------------------------------------------------------------------
EXHIBIT A-2
to Credit Agreement
[FORM OF]
TRANCHE B NOTE
$__________ [DATE]
FOR VALUE RECEIVED, the undersigned, EDISON MISSION ENERGY (the
"Borrower"), promises to pay to the order of __________ (the "Lender") on the
Tranche B Commitment Termination Date the principal sum of ________ DOLLARS
($_______) or, if less, the aggregate unpaid principal amount of all Tranche B
Loans shown on the schedule attached hereto (and any continuation thereof) made
by the Lender pursuant to that certain Credit Agreement, dated as of September
13, 2001 (together with all amendments, supplements and other modifications, if
any, from time to time thereafter made thereto, the "Credit Agreement"), among
the Borrower, the various financial institutions as are, or shall from time to
time become, parties thereto, Citibank, N.A., as Issuing Lender and Citicorp
USA, Inc., as Administrative Agent (the "Administrative Agent") for such
financial institutions.
The Borrower also promises to pay interest on the unpaid principal
amount hereof from time to time outstanding from the date hereof until maturity
(whether by acceleration or otherwise) and, after maturity, until paid, at the
rates per annum and on the dates specified in the Credit Agreement.
Payments of both principal and interest are to be made in Dollars in
same day or immediately available funds to the account designated by the
Administrative Agent pursuant to the Credit Agreement.
This Note evidences Indebtedness incurred under the Credit Agreement,
to which reference is made for a statement of the terms and conditions on which
the Borrower is permitted and required to make prepayments and repayments of
principal of the Indebtedness evidenced by this Note and on which such
Indebtedness may be declared to be immediately due and payable. Unless otherwise
defined, terms used herein have the meanings provided in the Credit Agreement.
All parties hereto, whether as makers, endorsers, or otherwise,
severally waive presentment for payment, demand, protest and notice of dishonor.
If any payment on this Note becomes due and payable on a date which is
not a Business Day, such payment shall be made on the next succeeding Business
Day; provided that, in the case of LIBO Rate Loans, if such extension would
result in extending such payment into another calendar month, then such payment
shall be made on the immediately preceding Business Day.
THIS NOTE HAS BEEN DELIVERED IN NEW YORK, NEW YORK AND SHALL BE DEEMED
TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
NEW YORK.
EDISON MISSION ENERGY
By:
-------------------------------------
Title:
-2-
LOANS AND PRINCIPAL PAYMENTS
Amount of Prin. Or Outstanding
Type of Amount of End of Int. Paid Principal Balance Notation
Date Loan Made Loan Made Interest Period This Date This Date Made By
------------------------------------------------------------------------------------------------------------------------------------
EXHIBIT B
to Credit Agreement
[FORM OF]
BORROWING REQUEST
Citicorp USA, Inc., as Administrative Agent
Attention: [_________]
EDISON MISSION ENERGY
Ladies and Gentlemen:
This Borrowing Request is delivered to you pursuant to Sections 2.3 and
6.2.2 of the Credit Agreement, dated as of September 13, 2001 (together with all
amendments, supplements and other modifications, if any, from time to time
thereafter made thereto, the "Credit Agreement"), among Edison Mission Energy
(the "Borrower"), the various financial institutions as are, or shall from time
to time become, parties thereto, Citibank, N.A., as Issuing Lender and Citicorp
USA, Inc., as Administrative Agent (the "Administrative Agent"). Unless
otherwise defined herein or the context otherwise requires, terms used herein
have the meanings provided in the Credit Agreement.
The Borrower hereby requests that [Tranche A] [Tranche B] Loans be made
in the aggregate principal amount of [________] on __________, ____ as a [LIBO
Rate Loan having an Interest Period of ___ months] [Base Rate Loan]. The
Borrower hereby confirms that the proceeds of the Borrowing will be used for the
purposes permitted in the Credit Agreement.
Please wire transfer the proceeds of the Borrowing to the accounts of
the following persons at the financial institutions indicated respectively:
Person to be Paid
Amount to be
Transferred Name Account Co. Name, Address of Transferee Lender
--------------- -------------------- -------------- ----------------------------------
$
----------------------------------------
-------------------------------
Attention:_______________________
--------------- -------------------- -------------- ----------------------------------
$
--------------- -------------------- -------------- ----------------------------------
$
Attention:_______________________
PERSON TO BE PAID
Amount to be
Transferred Name Account Co. Name, Address of Transferee Lender
--------------- -------------------- -------------- ----------------------------------
Balance of such proceeds The Borrower
--------------------------------------
Attention:_______________________
The Borrower has caused this Borrowing Request to be executed and
delivered by its duly Authorized Representative this ___ day of _______, ____.
EDISON MISSION ENERGY
By:
-----------------------------------
Title:
-2-
CREDIT AGREEMENT
EXHIBIT C
to Credit Agreement
[FORM OF]
CONTINUATION/CONVERSION NOTICE
Citicorp USA, Inc., as Administrative Agent
Attention: [_________]
EDISON MISSION ENERGY
Ladies and Gentlemen:
This Continuation/Conversion Notice is delivered to you pursuant to
Sections 2.4 and 3.2.1 of the Credit Agreement, dated as of September 13, 2001
(together with all amendments, supplements and other modifications, if any, from
time to time thereafter made thereto, the "Credit Agreement"), among Edison
Mission Energy (the "Borrower"), the various financial institutions as are, or
shall from time to time become, parties thereto, Citibank, N.A., as Issuing
Lender and Citicorp USA, Inc., as Administrative Agent (the "Administrative
Agent"). Unless otherwise defined herein or the context otherwise requires,
terms used herein have the meanings provided in the Credit Agreement.
The Borrower hereby requests that on __________, ____,
(1) $_________ of the presently outstanding principal amount
of the [Tranche A] [Tranche B] Loans originally made on ________, ____,
(2) and all presently being maintained as [Base Rate Loans]
[LIBO Rate Loans],
(3) be [continued as] [converted into],
(4) [LIBO Rate Loans having an Interest Period of months]
[Base Rate Loans].
The Borrower has caused this Continuation/Conversion Notice to be
executed and delivered by its Authorized Representative this ___ day of
_________, ____.
EDISON MISSION ENERGY
By:
-----------------------------------
Title:
EXHIBIT D
to Credit Agreement
[FORM OF]
LENDER ASSIGNMENT AGREEMENT
To: EDISON MISSION ENERGY
To: Citicorp USA, Inc., as Administrative Agent
EDISON MISSION ENERGY
Ladies and Gentlemen:
We refer to clause (a) of Section 11.11.1 of the Credit Agreement,
dated as of September 13, 2001 (together with all amendments, supplements and
other modifications, if any, from time to time thereafter made thereto, the
"Credit Agreement"), among Edison Mission Energy (the "Borrower"), the various
financial institutions (the "Lenders") as are, or shall from time to time
become, parties thereto, Citibank, N.A., as Issuing Lender and Citicorp USA,
Inc., as Administrative Agent (the "Administrative Agent") for the Lenders.
Unless otherwise defined herein or the context otherwise requires, terms used
herein have the meanings provided in the Credit Agreement.
This Agreement is delivered to you pursuant to clause (a) of Section
11.11.1 of the Credit Agreement and also constitutes notice to each of you of
the assignment and delegation to ________ (the "Assignee") of ___% of the
[Tranche A] [Tranche B] Loans and [Tranche A] [Tranche B] Commitments of
_________ (the "Assignor") outstanding under the Credit Agreement on the date
hereof.
Upon acceptance and recording of this notice by the Administrative
Agent, from and after the date hereof, the Administrative Agent shall make all
payments in respect of the [Tranche A] [Tranche B] Commitment and [Tranche A]
[Tranche B] Loans assigned hereby (including payments of principal, interest,
fees and other amounts) to the Assignor for amounts which have accrued to the
date hereof and to the Assignee for amounts which have accrued subsequent to the
date hereof. The Assignor and the Assignee shall make all appropriate
adjustments in payments by the Administrative Agent for periods prior to the
date hereof or with respect to the making of this assignment directly between
themselves.
The Assignee hereby acknowledges and confirms that it has received a
copy of the Credit Agreement and the exhibits related thereto, together with
copies of the documents which were required to be delivered under the Credit
Agreement as a condition to the making of the Loans thereunder. The Assignee
further confirms and agrees that in becoming a Lender and in making its
Commitments and Loans under the Credit Agreement, such actions have and will be
made without recourse to, or representation or warranty by the Administrative
Agent.
Except as otherwise provided in the Credit Agreement, effective as of
the date of acceptance hereof by the Administrative Agent:
(1) the Assignee:
(a) shall be deemed automatically to have become a
party to the Credit Agreement, have all the rights and
obligations of a "Lender" under the Credit Agreement and the
other Loan Documents as if it were an original signatory
thereto to the extent specified in the second paragraph
hereof; and
(b) agrees to be bound by the terms and conditions
set forth in the Credit Agreement and the other Loan Documents
as if it were an original signatory thereto; and
(2) the Assignor shall be released from its obligations under
the Credit Agreement and the other Loan Documents to the extent
specified in the second paragraph hereof.
The Assignor and the Assignee hereby agree that the [Assignor]
[Assignee] will pay to the Administrative Agent the processing fee referred to
in Section 11.11.1 of the Credit Agreement upon the delivery hereof.
The Assignee hereby advises each of you of the following administrative
details with respect to the assigned Loans and Commitments and requests the
Administrative Agent to acknowledge receipt of this document:
1. ADDRESS FOR NOTICES:
-------------------
Institution Name:
Attention:
Domestic Office:
Telephone:
Facsimile:
Telex (Answerback):
LIBOR Office:
Telephone:
Facsimile:
2. PAYMENT INSTRUCTIONS:
--------------------
The Assignee agrees to furnish the tax form required by paragraph (c)
of Section 4.7 (if so required) of the Credit Agreement no later than the date
of acceptance hereof by the Administrative Agent.
This Agreement may be executed by the Assignor and Assignee in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute one and the same
agreement.
Adjusted Percentage [ASSIGNOR]
[Tranche A] [Tranche B] Loan
Commitment: ____% By:
------------------------------------
Title:
Percentage [ASSIGNEE]
[Tranche A] [Tranche B] Loan
Commitment: ____% By:
------------------------------------
Title:
Accepted and Acknowledged
this ___ day of _______, ___
CITICORP USA, INC.,
as Administrative Agent
By:
------------------------------------------------
Title:
EDISON MISSION ENERGY*
By:
------------------------------------------------
Title:
-----------------------------------
* If required under Section 10.11.1 of the Credit Agreement.
EX-23.1
4
a2057631zex-23_1.txt
EXHIBIT 23.1
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated March 28, 2001 on the consolidated financial statements of Edison Mission
Energy included in Edison Mission Energy's Annual Report on Form 10-K for the
year ended December 31, 2000, incorporated by reference in this registration
statement and to all references to our Firm included in this registration
statement, Registration Statement File No. 333-68630.
ARTHUR ANDERSEN LLP
Orange County, California
September 27, 2001