-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MRv9TcWq5ZzwZxOambt5sV5/lJQhhA6my2Sz1LJn2FhHpU6vxwTJXV5C0LT4u1ce SQfCltMXhpbzQHpgoknvxw== 0001017062-01-500069.txt : 20010425 0001017062-01-500069.hdr.sgml : 20010425 ACCESSION NUMBER: 0001017062-01-500069 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 11 FILED AS OF DATE: 20010424 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 SEC ACT: SEC FILE NUMBER: 333-59468 FILM NUMBER: 1609893 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 1 ds4.txt FORM S-4 As filed with the Securities and Exchange Commission on April 24, 2001. Registration No. - - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- 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 (Primary Standard Industrial (I.R.S. Employer of 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. [_] CALCULATION OF REGISTRATION FEE - ---------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------
Proposed Proposed Maximum Maximum Aggregate Amount of Title of Each Class Amount to Be Offering Price Offering Registration of Securities to Be Registered Registered Per Share(1) Price(1) Fee - ---------------------------------------------------------------------------------------- 9.875% Senior Notes due April 15, 2011............................ $600,000,000 100% $600,000,000 $150,000 - ----------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------- (1) Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(f) under the Securities Act of 1933, as amended. ---------------- 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. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +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. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION, DATED APRIL 24, 2001 PROSPECTUS Offer to Exchange $600 Million 9.875% Senior Notes due April 15, 2011 for $600 Million 9.875% Senior Notes due April 15, 2011, which Have Been Registered Under the Securities Act of 1933, of [LOGO OF EDISON MISSION ENERGY] 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 95 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 8 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 - --------------------------------------------------------------------------------- $600,000,000 9.875% April 15, 2011
- -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 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
Page ---- Forward-Looking Statements............................................... i Available Information.................................................... i Incorporation of Documents by Reference.................................. ii Notice to New Hampshire Residents........................................ ii Prospectus Summary....................................................... 1 Risk Factors............................................................. 8 Use of Proceeds.......................................................... 17 Capitalization........................................................... 17 Selected Consolidated Financial Data..................................... 18 The Exchange Offer....................................................... 19 Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................... 27 Business................................................................. 55 Management............................................................... 83 Description of the Notes................................................. 85 Exchange Offer; Registration Rights...................................... 94 Material United States Federal Income Tax Considerations................. 95 Plan of Distribution..................................................... 97 Legal Matters............................................................ 98 Experts.................................................................. 98
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; . 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. 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 8. 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 regional offices of the SEC located at Seven World Trade Center, 13th Floor, New York, New York 10048 and 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. i 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; and (ii) Our Current Report on Form 8-K, dated March 22, 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 and the Current Report on Form 8-K, dated March 22, 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 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. ---------------- ii 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 8 of this prospectus. Summary of the Exchange Offer On April 5, 2001, we completed the private offering of $600 million aggregate principal amount of 9.875% Senior Notes due April 15, 2011. 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 $600,000,000 aggregate principal amount of new 9.875% Senior Notes due April 15, 2011, 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 9.875% Senior Notes due April 15, 2011, which have been registered under the Securities Act, for $1,000 principal amount of our outstanding 9.875% Senior Notes due April 15, 2011. 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 $600 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.
1 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 (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 United States Trust Company of New York at the address listed in this prospectus; or
2 . 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. 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...................... United States Trust Company 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 $600 million principal amount of 9.875% Senior Notes due April 15, 2011. Maturity............................ April 15, 2011. Interest............................ Interest accrues on the principal amount of the notes at 9.875% per year. Interest is payable on the notes, and distributions will be made semi-annually in arrears on April 15 and October 15 of each year. The first payment will be made on October 15, 2001. 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 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 Edison Mission Energy 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 Company, one of the largest electric utilities in the United States. We were formed in 1986 with two domestic operating projects. As of December 31, 2000, we owned interests in 33 domestic and 40 international operating power projects with an aggregate generating capacity of 28,036 megawatts (MW), of which our share was 22,759 MW. At that date, one domestic and one international project, totaling 603 MW of generating capacity, of which our anticipated share will be approximately 462 MW, were in construction. At December 31, 2000, we had consolidated assets of $15.0 billion and total shareholder's equity of $2.9 billion. 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." Strategic Overview Our business goal is 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. We have separate strategies for developed and developing countries. In developed countries, 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 a number of our projects in developed countries, known as 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. 5 In developing countries, our strategy focuses on investing with strategic partners, securing limited recourse financing based upon long-term power purchase agreements with state owned utilities and securing government financial support from organizations such as the Export-Import Bank of the United States, the U.S. Overseas Private Investment Corporation and the Japan Bank for International Cooperation. In addition, for some projects, we have obtained political risk insurance from private companies. 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. Recent Developments Offering of Original Notes On April 5, 2001, we issued and sold the original notes. We used a portion of the net proceeds of that offering, which were approximately $571 million, to repay indebtedness. See "Use of Proceeds." ---------------- We are 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. 6 Summary Consolidated Financial Data The following table sets forth a summary of our consolidated financial data for the periods indicated. The summary consolidated financial data were derived from the audited consolidated financial statements of Edison Mission Energy and our consolidated subsidiaries. This summary is qualified in its 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.
Years Ended December 31, -------------------------------------------------- 2000 1999 1998 1997 1996 --------- --------- -------- -------- -------- (in millions) Income Statement Data Operating revenues......... $ 3,241.0 $ 1,635.9 $ 893.8 $ 975.0 $ 843.6 Operating expenses......... 2,410.2 1,209.5 543.3 581.1 476.5 --------- --------- -------- -------- -------- Operating income........... 830.8 426.4 350.5 393.9 367.1 Interest expense........... (721.5) (375.5) (196.1) (223.5) (164.2) Interest and other income.. 74.0 55.8 50.9 53.9 40.7 Minority interest.......... (3.2) (3.0) (2.8) (38.8) (69.5) --------- --------- -------- -------- -------- Income before income taxes..................... 180.1 103.7 202.5 185.5 174.1 Provision (benefit) for income taxes.............. 72.5 (40.4) 70.4 57.4 82.0 --------- --------- -------- -------- -------- Income before accounting change and extraordinary loss...................... 107.6 144.1 132.1 128.1 92.1 Cumulative effect on prior years of change in accounting for major maintenance costs, net of tax....................... 17.7 -- -- -- -- Cumulative effect on prior years of change in accounting for start-up costs, net of tax......... -- (13.8) -- -- -- Extraordinary loss on early extinguishment of debt, net of income tax benefit................... -- -- -- (13.1) -- --------- --------- -------- -------- -------- Net income................. $ 125.3 $ 130.3 $ 132.1 $ 115.0 $ 92.1 ========= ========= ======== ======== ======== As of December 31, -------------------------------------------------- 2000 1999 1998 1997 1996 --------- --------- -------- -------- -------- (in millions) Balance Sheet Data Assets..................... $15,017.1 $15,534.2 $5,158.1 $4,985.1 $5,152.5 Current liabilities........ 3,911.0 1,772.8 358.7 339.8 270.9 Long-term obligations...... 5,334.8 7,439.3 2,396.4 2,532.1 2,419.9 Preferred securities of subsidiaries.............. 326.8 476.9 150.0 150.0 150.0 Shareholder's equity....... 2,948.2 3,068.5 957.6 826.6 1,019.9 Years Ended December 31, -------------------------------------------------- 2000 1999 1998 1997 1996 --------- --------- -------- -------- -------- Other Data Ratio of earnings to fixed charges(/1/).............. 1.23 1.18 1.69 1.64 1.42
- -------- (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 expensed or capitalized), the amortization of debt discount and interest portion of rental expense. 7 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. The current California power crisis has had, and may continue to have, an adverse impact on us. Edison International, our ultimate parent company, is a holding company. Edison International is also the corporate parent of Southern California Edison Company, an electric utility that buys and sells power in California. 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 utilities, Southern California Edison and Pacific Gas and Electric Co., 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 and others. 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. On April 9, 2001, Edison International and Southern California Edison signed a memorandum of understanding with the California Department of Water Resources which 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. Nevertheless, given Southern California Edison's payment defaults, creditors of Southern California Edison could file an involuntary bankruptcy petition against it. For more information on the current regulatory situation in California, see "Business--Regulatory Matters--California Deregulation." For more information on how the current California power crisis affects our investments in energy projects in California, see "--The current California power crisis has had, and may continue to have, an adverse impact on our California partnership investments." Southern California Edison's current financial condition has had, and may continue to have, an adverse impact on Edison International's credit quality and, as previously reported by Edison International, has resulted in cross- defaults under Edison International's credit facilities. Both Standard & Poor's Ratings Services and Moody's Investors Service, Inc. have lowered the credit ratings of Edison International and Southern California Edison to substantially below investment grade levels. The ratings remain under review for potential downgrade by both Standard & Poor's and Moody's. 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 and Southern California Edison. 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 then meet an interest coverage ratio of not less than 2.2 to 1 for the immediately preceding four fiscal quarters. We currently meet this interest coverage ratio; . 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. 8 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. 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. As a result of the downgrades, our cost of capital has increased. Future downgrades could further increase our cost of capital, make efforts to raise capital more difficult and could have an adverse impact on us and our subsidiaries. For more information on the effect of further downgrades, see "--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." On March 15, 2001, the California Public Utilities Commission released a draft of a proposed order instituting an investigation into whether California's investor-owned utilities, including Southern California Edison, have complied with past Commission decisions authorizing the formation of their holding companies and governing affiliate transactions, as well as applicable statutes. The proposed order would reopen the past holding company decisions and initiate an investigation into the following matters: . whether the holding companies, including Edison International, violated requirements to give priority to the capital needs of their respective utility subsidiaries; . whether the ring-fencing actions by Edison International and PG&E Corporation and their respective non-utility affiliates also violated the 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. A prehearing conference was held on April 20, 2001, at which the parties were asked to inform the Commission of their view of the impact of the recently signed memorandum of understanding among Southern California Edison, Edison International and the California Department of Water Resources on specified issues from the order, how to expedite resolution of those issues, and how to conduct the remainder of the investigation to the extent other issues and other parties are not affected. See "Business--Regulatory Matters-- California Deregulation--The Current Power Crisis in California." At this prehearing conference, no definitive rulings were made on any issue in the investigation, including the Commission's resolution of the investigation, as called for in the memorandum of understanding. Several parties, including Edison International, raised objections to the Commission's assertion of jurisdiction over utility holding companies. The Commission is expected to issue a further ruling concerning the scope and scheduling of the investigation and also to schedule a further prehearing conference. We cannot predict whether the Commission will institute this investigation or what effects any investigation or subsequent actions by the Commission may have on Edison International or indirectly on us. The current California power crisis has had, and may continue to have, an adverse impact on our California partnership investments. We have partnership interests in eight partnerships which own power plants in California 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. 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 December 31, 2000 was $345 million. 9 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 which are owned by partnerships in which we have a partnership interest. Southern California Edison did not pay any amount due to the partnerships in January, February and March 2001 and may continue to miss future payments. However, on April 17, 2001, Southern California Edison made its April payment to the partnerships. Pacific Gas and Electric made its January payment in full and has paid for post-petition deliveries during the first half of April, 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. At March 31, 2001, accounts receivable due to these partnerships from Southern California Edison were $472 million and from Pacific Gas and Electric were $59 million. Our share of these receivables was $234 million and $29 million, respectively. 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. Although Pacific Gas and Electric has paid for postpetition deliveries during the first half of April, 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. We cannot assure you that the partnerships with contracts with Pacific Gas and Electric will not be adversely affected by the bankruptcy proceeding. See "Business--Regulatory Matters-- California Deregulation --The Current Power Crisis in California." 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. Some of the partnerships have sought to minimize their exposure to Southern California Edison by reducing deliveries under their power purchase agreements. Three of the partnerships have filed complaints requesting, among other things, a declaration that they are entitled to suspend delivery of capacity and energy to Southern California Edison, and to resell such capacity and energy to other purchasers, so long as Southern California Edison does not pay amounts due under its power purchase agreement and until Southern California Edison establishes that it is creditworthy and able to make future payments when due. It is unclear at this time what additional actions, if any, the partnerships will take in regard to the utilities' suspension of payments due to the qualifying facilities. 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 through March 31, 2001, subsidiaries of ours have made equity contributions totaling approximately $115 million to meet capital calls by the partnerships. Our subsidiaries and the other partners may be required to make additional capital contributions to the partnerships. 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 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. 10 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 either that these partnerships will continue to generate electricity without payment by the purchasing utility, or that the power purchase agreements will not be adversely affected by a bankruptcy or 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 made its April payment in full, and Pacific Gas and Electric made its April payment in part and indicated that it intends to pay the remainder by the end of April. 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 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 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. This decision did not address payment to the qualifying facilities for amounts due prior to April 2001. 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. These activities may result in a restructuring of the California power market. At this time, these activities are in their preliminary stages, and it is not possible to estimate their likely ultimate outcome. For more information on the current regulatory situation in California, see "Business--Regulatory Matters--California Deregulation-- Deregulation Plan." The situation in California changes on an almost daily basis. You should monitor developments in California before investing in the exchange notes, as the discussion in this prospectus may be overtaken by events. We have a substantial amount of indebtedness, including a substantial amount of short-term indebtedness. As of December 31, 2000, we had $2.1 billion of debt which was recourse to Edison Mission Energy and $5.9 billion of debt which was non-recourse to Edison Mission Energy but was recourse to our subsidiaries appearing on our consolidated balance sheet. The indenture governing the notes does not impose limitations on our ability or the ability of our subsidiaries to incur additional indebtedness. Edison Mission Energy has a substantial amount of short-term debt that will need to be extended or refinanced. Edison Mission Energy has two credit facilities, in a total amount of $850 million, that are scheduled to expire in May 2001 and one credit facility, in the amount of $425 million, that is scheduled to expire in October 2001. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Financing Plans." We cannot assure you that we will be able to extend our existing credit facilities or obtain new credit facilities to finance our needs, or that any new credit facility can be obtained under similar terms and rates as our existing credit facilities. If we cannot extend our existing credit facilities or obtain new credit facilities to finance our needs on similar terms and rates as our existing credit facilities, this could have a negative impact on our liquidity and on our ability to make debt service payments on the notes. 11 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 finance the acquisition and development of additional projects, to compete effectively or to operate successfully under adverse economic conditions. See "Capitalization" and "Selected Consolidated Financial Data." 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. 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. We cannot assure you that Standard & Poor's and Moody's will not downgrade us below investment grade, whether as a result of the California power crisis or otherwise. If we are downgraded, 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; . 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 Caliraya-Botocan-Kalayaan (CBK) hydroelectric project in the Philippines; and . repay a portion of the preferred shares issued by our subsidiary in connection with its 1999 acquisition of a 40% interest in Contact Energy Limited, a New Zealand power company, which, based on their value at March 20, 2001, would require a payment of approximately $19 million. Our 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, would 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 and could have an adverse impact on us and our subsidiaries. Furthermore, a downgrade in our credit rating could adversely affect our ability to make debt service payments on the notes. Our ability to meet cash requirements depends upon the performance of our subsidiaries. The notes are exclusively obligations of Edison Mission Energy and are not the obligations of any of our subsidiaries. Because substantially all our operations are conducted by our project subsidiaries, 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 to pay dividends and make distributions to us. As mentioned above, the California power crisis has had, and may continue to have, an adverse impact on our California partnership investments and may adversely affect our ability to receive distributions from these investments. Financing agreements for our subsidiaries and affiliates generally place limitations on the ability of those subsidiaries and affiliates to pay dividends, make distributions or otherwise transfer funds to us. In addition, financing agreements for our subsidiaries and affiliates are generally secured and contain some representations, warranties, covenants and other agreements that, if not met, could lead to a default under those agreements. After a default under a project financing for any reason, project lenders may exercise rights and remedies typically granted to secured parties, including the ability to 12 take control of the project's collateral assets and/or our ownership interest in the project company. In addition, we own a minority interest 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 overseas and, therefore, distributions from foreign operations, if needed, would likely be subject to additional taxes in the United States upon repatriation. 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 the distribution 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 and other requirements under the financing documents related to the acquisition of the Fiddler's Ferry and Ferrybridge power plants. Edison First Power is currently in the process of requesting the necessary waivers and consents to amendments from the financing parties. We cannot assure you that these waivers and consents to amendments will be forthcoming. 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. Due to the timing of its cash flows and debt service payments, Edison First Power utilized (Pounds)37 million from its debt service reserve to meet its debt service requirements in 2000. Our net investment in our subsidiary that holds the Ferrybridge and Fiddlers' Ferry power plants and related debt was $918 million at December 31, 2000. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-- Financing Plans." The indenture governing the notes imposes no limitations on the ability of our subsidiaries to permit contractual restrictions on their ability to make dividends or distributions. 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 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 respective 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. In 2000, 33% of our electric revenues were derived under power purchase agreements with Exelon Generation Company, LLC, 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 are earned from capacity and energy provided by the Illinois Plants under three five-year power purchase agreements. If Exelon Generation were to fail or become 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 generation assets. Any material failure by Exelon Generation to make payments under these power purchase agreements could adversely affect our results of operations and liquidity. The ability to amend or terminate the power purchase agreements is limited. However, the terms of the power purchase agreements do allow amendment or early termination under some limited circumstances. The 13 amendment or early termination of any power purchase agreement could adversely affect the revenues we receive and, therefore, our ability to make debt service payments on the notes. 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 (Persero), formerly known as PT Perusahaan Listrik Negara, the state-owned utility, to meet its obligations under its power sales contract 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--Commitments and 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 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 and our ability to comply with existing regulations or requirements or changes in applicable regulations or requirements may have a negative impact on our business, results of operations or financial conditions. 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, land use and operation of 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. 14 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 error, 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 subsidiary could cause us to lose our interest in the project. Our future acquisitions and development projects may not be successful. Our 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, including those described in this prospectus, 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 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, 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 15 April 5, 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 and Westdeutsche Landesbank Girozentrale (Dusseldorf), the initial purchasers in the 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 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. 16 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 April 5, 2001, we issued and sold the original notes. We used the proceeds of that offering, which were $600 million to: . repay $225 million under our credit facilities as required as a result of the issuance of the original notes; . pay down $346 million under our credit facilities, pending use of this amount for development costs or general corporate purposes; and . pay transaction costs totaling approximately $9 million, related to underwriting fees and legal, accounting and other costs incurred in connection with the offering of the original notes. We retained the remaining $20 million as cash. The interest rates on the credit facilities that we repaid averaged approximately 6.29% per annum as of the dates they were repaid. Two of these credit facilities are scheduled to expire in May 2001, and one credit facility is scheduled to expire in October 2001. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Financing Plans-- Corporate Financing Plans." CAPITALIZATION The following table sets forth our consolidated capitalization as of December 31, 2000 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 December 31, 2000
As Actual Adjusted(1) --------- ----------- (in millions) Short-Term Indebtedness............................. $ 2,651.2 $ 2,155.2 Long-Term Indebtedness.............................. 5,334.8 5,859.8 Preferred Securities................................ 326.8 326.8 --------- --------- Total Indebtedness................................ 8,312.8 8,341.8 Shareholder's Equity................................ 2,948.2 2,948.2 --------- --------- Total Capitalization.............................. $11,261.0 $11,290.0 ========= =========
- -------- (1) Represents the capitalization at December 31, 2000, as adjusted for the net proceeds from the issuance of the original notes. 17 SELECTED CONSOLIDATED FINANCIAL DATA The following table sets forth our selected consolidated financial data for the periods indicated. The selected consolidated financial data 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.
Years Ended December 31, -------------------------------------------------- 2000 1999 1998 1997 1996 --------- --------- -------- -------- -------- (in millions) INCOME STATEMENT DATA Operating revenues......... $ 3,241.0 $ 1,635.9 $ 893.8 $ 975.0 $ 843.6 Operating expenses......... 2,410.2 1,209.5 543.3 581.1 476.5 --------- --------- -------- -------- -------- Operating income........... 830.8 426.4 350.5 393.9 367.1 Interest expense........... (721.5) (375.5) (196.1) (223.5) (164.2) Interest and other income.. 74.0 55.8 50.9 53.9 40.7 Minority interest.......... (3.2) (3.0) (2.8) (38.8) (69.5) --------- --------- -------- -------- -------- Income before income taxes..................... 180.1 103.7 202.5 185.5 174.1 Provision (benefit) for income taxes.............. 72.5 (40.4) 70.4 57.4 82.0 --------- --------- -------- -------- -------- Income before accounting change and extraordinary loss...................... 107.6 144.1 132.1 128.1 92.1 Cumulative effect on prior years of change in accounting for major maintenance costs, net of tax....................... 17.7 -- -- -- -- Cumulative effect on prior years of change in accounting for start-up costs, net of tax......... -- (13.8) -- -- -- Extraordinary loss on early extinguishment of debt, net of income tax benefit................... -- -- -- (13.1) -- --------- --------- -------- -------- -------- Net income................. $ 125.3 $ 130.3 $ 132.1 $ 115.0 $ 92.1 ========= ========= ======== ======== ======== As of December 31, -------------------------------------------------- 2000 1999 1998 1997 1996 --------- --------- -------- -------- -------- (in millions) BALANCE SHEET DATA Assets..................... $15,017.1 $15,534.2 $5,158.1 $4,985.1 $5,152.5 Current liabilities........ 3,911.0 1,772.8 358.7 339.8 270.9 Long-term obligations...... 5,334.8 7,439.3 2,396.4 2,532.1 2,419.9 Preferred securities of subsidiaries.............. 326.8 476.9 150.0 150.0 150.0 Shareholder's equity....... 2,948.2 3,068.5 957.6 826.6 1,019.9 Years Ended December 31, -------------------------------------------------- 2000 1999 1998 1997 1996 --------- --------- -------- -------- -------- OTHER DATA Ratio of earnings to fixed charges(/1/).............. 1.23 1.18 1.69 1.64 1.42
- -------- (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 expensed or capitalized), the amortization of debt discount and interest portion of rental expense. 18 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, $600 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 amount 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 prospectus 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 United States Trust Company 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." 19 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 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. 20 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 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. 21 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 bonds by causing DTC to transfer those original bonds 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 bonds 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 bonds 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, (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 22 (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. 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. 23 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. 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. 24 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 United States Trust Company 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: United States Trust Company of New York, Exchange Agent By Hand Before 4:30 p.m.: By Registered or Certified Mail: United States Trust Company of New York United States Trust Company of New York 30 Broad Street P.O. Box 112 B-Level Bowling Green Station New York, NY 10004 New York, NY 10274 Attention: Corporate Trust Services
By Hand or Overnight Delivery after 4:30 p.m. on the Expiration Date: United States Trust Company of New York 30 Broad Street, 14th Floor New York, NY 10004 For Information Call: (800) 548-6565 By Facsimile Transmission (for Eligible Institutions only): (212) 422-0183 Attention: Customer Service Confirm by Telephone: (800) 548-6565 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. 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 25 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 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. 26 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 that 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 Company, one of the largest electric utilities in the United States. We were formed in 1986 with two domestic operating projects. As of December 31, 2000, we owned interests in 33 domestic and 40 international operating power projects with an aggregate generating capacity of 28,036 MW, of which our share was 22,759 MW. At that date, one domestic and one international project, totaling 603 MW of generating capacity, of which our anticipated share will be approximately 462 MW, were in construction. At December 31, 2000, we had consolidated assets of $15.0 billion and total shareholder's equity of $2.9 billion. Our operating revenues are derived primarily from electric revenues and equity in income from power projects. Electric revenues accounted for 91%, 83% and 74% of our total operating revenues during 2000, 1999 and 1998, respectively. Our consolidated operating revenues during those years also include equity in income from oil and gas investments, net losses from energy trading and price risk management activities and revenues attributable to operation and maintenance services. The financial data set forth in this section for the three years ended December 31, 2000 were derived from the audited consolidated financial statements of Edison Mission Energy and our consolidated subsidiaries. Acquisitions, Dispositions and Sale-Leaseback Transactions Acquisition of Sunrise Project On November 17, 2000, we completed a transaction with Texaco 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 has an option to repurchase a 50% interest in the project prior to its commercial operation. As part of this transaction, we also: (i) acquired from Texaco an option to purchase two gas turbines which we exercised in late March 2001, (ii) provided Texaco an option to purchase two of the turbines available to us under the Edison Mission Energy Master Turbine Lease and (iii) granted Texaco an option to acquire a 50% interest in 1,000 MW of future power plant projects we designate. For more information on the Edison Mission Energy Master Turbine Lease, see "--Commitments and Contingencies-- Edison Mission Energy Master Turbine Lease." The Sunrise Project consists of two phases, with Phase I, construction of a single-cycle gas fired facility (320 MW), currently scheduled to be completed in August 2001, and Phase II, conversion to a combined-cycle gas fired facility (560 MW), currently scheduled to be completed in June 2003. In December 2000, we received the Energy Commission Certification and a permit to construct the Sunrise plant, which allowed us to commence construction of Phase I. We are negotiating with the California Department of Water Resources the detailed terms and conditions of a long-term cost-based-type rate power purchase agreement. We cannot assure you that we will be successful in reaching a final agreement. The total purchase price of the Sunrise Project was $27 million. We funded the purchase with cash. The total estimated construction cost of this project is approximately $400 million. As of December 31, 2000, we had spent $17.8 million on construction costs for the Sunrise Project. 27 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, which are collectively referred to as the Illinois Plants. These plants provide access to 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. Subsequently, Commonwealth Edison assigned its rights and obligations under these power purchase agreements to Exelon Generation. Under these power purchase agreements, Exelon Generation purchases capacity and has the right to purchase energy generated by the plants. 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 megawatts 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 a pledge of the stock of specified subsidiaries, $1.3 billion of Edison Mission Energy's 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 has 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 ((Pounds)1.3 billion sterling at the time of the acquisition) for the two plants. The acquisition was funded primarily with a combination of net proceeds of 28 (Pounds)1.15 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 (830 million pounds sterling at the time of the acquisition) under a term loan facility due 2012 to finance the purchase. 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 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. During 2000, we increased our share of ownership in Contact Energy to 42%. 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 2,449 MW. Consideration for Contact Energy consisted of a cash payment of approximately $635 million (1.2 billion New Zealand dollars at the time of the acquisition), which was financed by $120 million of preferred securities, a $214 million (400 million New Zealand dollars 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. 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. 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. Dispositions 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). 29 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 million ($10.5 million after tax). Sale-Leaseback Transactions On August 24, 2000, one of our subsidiaries 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, beginning January 2, 2001. Edison Mission Energy guarantees the 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 was $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 guarantee the monthly payments of our subsidiary 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 five years. The gain on the sale of equipment has been deferred and is being amortized over the term of the lease. 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 those entities. Americas
Years Ended December 31, ------------------------ 2000 1999 1998 -------- ------ ------ (in millions) Operating revenues................................... $1,571.0 $378.6 $ 29.9 Net losses from energy trading and price risk management.......................................... (17.3) (6.4) -- Equity in income from investments.................... 257.2 224.8 184.6 -------- ------ ------ Total operating revenues........................... 1,810.9 597.0 214.5 Fuel and plant operations............................ 1,131.6 237.7 22.2 Depreciation and amortization........................ 191.2 52.5 9.8 Administrative and general........................... 21.1 -- -- -------- ------ ------ Operating Income................................... $ 467.0 $306.8 $182.5 ======== ====== ======
30 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. Electric power generated at the Illinois Plants is sold under three five- year power purchase agreements with Exelon Generation, 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. This represented 33% of our consolidated operating revenues in 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 this acquisition 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. 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 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 in which our ownership interest is 50% or less 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 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. 31 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 $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, the acquisition date of Citizens Power LLC, through December 31, 2000. Prior to September 1, 2000, 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 December 31, ----------------------- 2000 1999 1998 ------- ------- ------- (in millions) Operating revenues..................................... $184.2 $213.6 $205.1 Equity in income from investments...................... 14.6 18.1 1.3 ------- ------- ------- Total operating revenues............................. 198.8 231.7 206.4 Fuel and plant operations.............................. 61.5 73.8 69.6 Depreciation and amortization.......................... 35.0 40.5 31.6 ------- ------- ------- Operating Income..................................... $102.3 $117.4 $105.2 ======= ======= =======
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 32 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. 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 December 31, ----------------------- 2000 1999 1998 -------- ------ ------ (in millions) Operating revenues..................................... $1,236.3 $805.8 $469.4 Equity in income (loss) from investments............... (5.0) 1.4 3.5 -------- ------ ------ Total operating revenues............................. 1,231.3 807.2 472.9 Fuel and plant operations.............................. 730.1 456.6 241.3 Depreciation and amortization.......................... 144.8 88.3 40.3 -------- ------ ------ Operating Income..................................... $ 356.4 $262.3 $191.3 ======== ====== ======
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 and warmer-than-average weather. The time weighted average System Marginal Price dropped from (Pounds)22.39/MWh in 1999 to (Pounds)18.75/MWh in 2000. Despite improvement in capacity prices during August, 33 September and early October 2000, and a slight firming of forward prices, the short-term prices for energy continue 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. The First Hydro plants, Ferrybridge and Fiddler's Ferry plants and the Iberian Hy-Power plants are expected to provide for higher electric revenues during the winter months. 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 December 31, ------------------------ 2000 1999 1998 ------ ------- ------- (in millions) Depreciation and amortization........................ $ 11.1 $ 8.9 $ 5.6 Long-term incentive compensation..................... (56.0) 136.3 39.0 Administrative and general........................... 139.8 114.9 83.9 ------ ------- ------- Operating Loss..................................... $(94.9) $(260.1) $(128.5) ====== ======= =======
Long-term incentive compensation expense consists of charges related to our now terminated phantom option plan. 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 34 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 of 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) 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). 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 million ($10.5 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 for Income Taxes 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 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 35 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 such matters will have material adverse effect upon our financial condition or results of operations. Cumulative Effect of Change in Accounting Principle Through December 31, 1999, we accrued for major maintenance costs incurred during the period between turnarounds (referred to as the "accrue in advance" accounting method). The accounting policy has been widely used by independent power producers as well as several other industries. In March 2000, the Securities and Exchange Commission issued a letter to the Accounting Standards Executive Committee, stating its position that the Securities and Exchange Commission staff does not believe it is appropriate to use an "accrue in advance" method for major maintenance costs. The Accounting Standards Executive Committee agreed to add accounting for major maintenance costs as part of an existing project and to issue authoritative guidance by August 2001. Due to the position taken by the Securities and Exchange Commission staff, 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 the recent guidance provided by the Securities and Exchange Commission. In accordance with Accounting Principles Board Opinion No. 20, "Accounting Changes," we have 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 December 31, 2000, we had cash and cash equivalents of $962.9 million and had available a total of $41 million of borrowing capacity under a $500 million revolving credit facility that expires on October 11, 2001 and a $300 million senior credit facility that expires on May 29, 2001. We also had available $127.3 million of borrowing capacity under a $700 million senior credit facility that is now scheduled to expire on May 29, 2001. 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 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. 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. See "--Financing Plans" for further discussion. 36 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 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 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. Payments made on our credit facilities totaling $1.4 billion, a $500 million payment on 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. Edison Mission Energy 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 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 January 2000, one of our foreign subsidiaries borrowed $242.7 million from Edison Capital, an indirect affiliate. On January 17, 2001, the subordinated financing was repaid with interest. 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 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. 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. 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, $27 million was paid toward the purchase price and $13 million in equity contributions for the Italian Wind projects, $44.9 million for the Citizens trading operations and structured transaction investments, and $27 million for the acquisition of the Sunrise project. In addition, $33.5 million, $21.2 million and $20 million was made in equity contributions for the EcoElectrica project (June 2000), 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 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. Credit Ratings On January 17, 2001, we amended our articles of incorporation and our bylaws to include so-called "ring-fencing" provisions to isolate ourselves from the credit downgrades and potential bankruptcies of 37 Edison International and Southern California Edison and to facilitate our ability and the ability of our subsidiaries to maintain their respective investment grade ratings. These ring-fencing provisions are intended to preserve us as a stand-alone investment grade rated entity despite the current credit difficulties of Edison International and Southern California Edison. 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: . we then have an investment grade 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. We currently meet this interest coverage ratio; . 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 and Southern California Edison. In January 2001, 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. We cannot assure you that Standard & Poor's and Moody's will not downgrade us below investment grade, whether as a result of the California power crisis or otherwise. If we are downgraded, 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; . 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 CBK project in the Philippines; and . repay a portion of the preferred shares issued by our subsidiary in connection with its 1999 acquisition of a 40% interest in Contact Energy Limited, a New Zealand power company, which, based on their value at March 20, 2001, would require a payment of approximately $19 million. Our 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, would limit the ability of Midwest Generation to use excess cash flow to make distributions. In March 2001, the California Public Utilities Commission released a draft of a proposed order instituting an investigation into whether California's investor-owned utilities, including Southern California Edison, have complied with past Commission decisions authorizing the formation of their holding companies and governing affiliate transactions, as well as applicable statutes. The proposed order would reopen the past holding company decisions and initiate an investigation into the following matters: . whether the holding companies, including Edison International, violated requirements to give priority to the capital needs of their respective utility subsidiaries; . whether the ring-fencing actions by Edison International and PG&E Corporation and their respective non-utility affiliates also violated the requirements to give priority to the capital needs of their utility subsidiaries; 38 . 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. A prehearing conference was held on April 20, 2001, at which the parties were asked to inform the Commission of their view of the impact of the recently signed memorandum of understanding among Southern California Edison, Edison International and the California Department of Water Resources on specified issues from the order, how to expedite resolution of those issues, and how to conduct the remainder of the investigation to the extent other issues and other parties are not affected. See "Business--California Deregulation--The Current Power Crisis in California." At this prehearing conference, no definitive rulings were made on any issue in the investigation, including the Commission's resolution of the investigation, as called for in the memorandum of understanding. Several parties, including Edison International, raised objections to the Commission's assertion of jurisdiction over utility holding companies. The Commission is expected to issue a further ruling concerning the scope and scheduling of the investigation and also to schedule a further prehearing conference. We cannot predict whether the Commission will institute this investigation or what effects any investigation or subsequent actions by the Commission may have on Edison International or indirectly on us. 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 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. Financing Plans Corporate Financing Plans We have three corporate credit facilities that are scheduled to expire in May 2001 (in a total amount of $850 million) and October 2001 (in an amount of $425 million). As of April 23, 2001, we have borrowed or issued letters of credit aggregating $1.225 billion under these credit facilities and had an unused capacity of approximately $50 million. We plan to refinance these credit facilities through modifications to our existing credit facilities or by entering into new facilities prior to their expiration. Our corporate cash requirements in 2001 are expected to exceed cash distributions from our subsidiaries. Our corporate cash requirements in 2001 include: . debt service under our senior notes and intercompany notes resulting from sale-leaseback transactions which aggregate $180 million; . capital requirements for projects in development and under construction of $251 million; and . development costs, general and administrative expenses. On April 5, 2001, we completed the offering of the original notes. We used the proceeds of this offering to repay indebtedness, including mandatory repayments of $225 million, which also reduced the amount available under the corporate facilities. While we cannot assure you that we will be able to enter into modifications of our existing credit facilities or obtain new facilities on similar terms and rates, we believe our corporate financing plans will be successful in meeting our cash and credit requirements in 2001. In addition, to reduce debt and to provide additional liquidity, we may sell our interest in individual projects in our project 39 portfolio. Under one of our credit facilities, we are required to use 50% of the net proceeds from the sale of assets and 75% of the net proceeds from the issuance of capital markets debt to repay senior bank indebtedness until the aggregate commitment amount under the corporate facilities is reduced to $1 billion. There is no assurance that we will be able to sell assets on favorable terms or that the sale of individual assets will not result in a loss. Subsidiary Financing Plans During 2001, the estimated capital expenditures of our subsidiaries is $262 million, including environmental expenditures disclosed under "--Environmental Matters and Regulations." 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. One of our subsidiaries, Edison First Power, has defaulted on its financing documents related to the acquisition of the Fiddler's Ferry and Ferrybridge power plants. The financial performance of the Fiddler's Ferry and Ferrybridge power plants has not matched 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. See "--Changes in Interest Rates, Changes in Electricity Market Pricing and Other Operating Risks--United Kingdom." As a result, Edison First Power has decided to defer some environmental capital expenditures originally planned to increase plant utilization and therefore is currently in breach of milestone requirements for the implementation of the capital expenditures program set forth in the financing documents relating to the acquisition of these plants. In addition, 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. Edison First Power is currently in discussions with the relevant financing parties to revise the required capital expenditure program, to waive (i) the breach of the financial ratio covenant for 2000, (ii) a technical breach of requirements for the provision of information that was delayed due to uncertainty regarding capital expenditures, and (iii) other related technical defaults. Edison First Power is in the process of requesting the necessary waivers and consents to amendments from the financing parties. We cannot assure you that waivers and consents to amendments will be forthcoming. 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 (Pounds)37 million from its debt service reserve to meet its debt service requirements in 2000. Another of our 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 December 31, 2000, (Pounds)58 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 (Pounds)359 million, and our guarantee remains in force notwithstanding any breaches under Edison First Power's acquisition financing documents. 40 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 considering the sale of 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. However, if a decision to sell the Ferrybridge and Fiddler's Ferry power plants were made, it is likely that the fair value of the assets would be substantially below their book value at December 31, 2000. Our net investment in our subsidiary that holds the Ferrybridge and Fiddler's Ferry power plants and related debt was $918 million at December 31, 2000. Commitments and Contingencies Capital Commitments The following table summarizes our consolidated capital commitments as of December 31, 2000. Details regarding these capital commitments are discussed in the sections referenced.
U.S. Estimated Time Type of Commitment (in millions) Period Discussed Under ------------------ ------------- --------- --------------- New Gas-Fired Generation $250 by 2003 Illinois Plants--Power Purchase Agreements New Gas-Fired Generation 346 2001-2003 Acquisition of Sunrise Project New Gas-Fired Generation 986* 2001-2004 Edison Mission Energy Master Turbine Lease Environmental Improvements at our Project Subsidiaries 557 2001-2005 Environmental Matters and Regulations Project Acquisition for the Italian Wind 17 2001-2002 Firm Commitment for Asset Purchase Equity Contribution for the Italian Wind 3 2001-2002 Firm Commitments to Contribute Project Equity
- -------- * 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." In addition, in February 2001, we purchased a 50% interest in the Caliraya- Botocan-Kalayaan project for $20 million. Financing for this $460 million project will require equity contributions of $117 million, of which our share is $58.5 million. See "--Recent Developments." California Power Crisis We have partnership interests in eight partnerships which own power plants in California 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. 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 December 31, 2000 was $345 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 which are owned by partnerships in which we have a partnership interest. Southern California Edison did not pay any amount due to the partnerships in January, February and March 2001 and may continue to miss future payments. However, on April 17, 2001, Southern California 41 Edison made its April payment to the partnerships. Pacific Gas and Electric made its January payment in full and has paid for post-petition deliveries during the first half of April, 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. At March 31, 2001, accounts receivable due to these partnerships from Southern California Edison were $472 million and from Pacific Gas and Electric were $59 million. Our share of these receivables was $234 million and $29 million, respectively. 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. Although Pacific Gas and Electric has paid for postpetition deliveries during the first half of April, future payments by Pacific Gas and Electric to the qualifying facilities, including those owned by partnerships in which Edison Mission Energy has 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. We cannot assure you that the partnerships with contracts with Pacific Gas and Electric will not be adversely affected by the bankruptcy proceeding. See "Business-- Regulatory Matters--California Deregulation--The Current Power Crisis in California." 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. Some of the partnerships have sought to minimize their exposure to Southern California Edison by reducing deliveries under their power purchase agreements. Three of the partnerships have filed complaints requesting, among other things, a declaration that they are entitled to suspend delivery of capacity and energy to Southern California Edison, and to resell such capacity and energy to other purchasers, so long as Southern California Edison does not pay amounts due under its power purchase agreement and until Southern California Edison establishes that it is creditworthy and able to make future payments when due. It is unclear at this time what additional actions, if any, the partnerships will take in regard to the utilities' suspension of payments due to the qualifying facilities. 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 through March 31, 2001, subsidiaries of ours have made equity contributions totaling approximately $115 million to meet capital calls by the partnerships. Our subsidiaries and the other partners may be required to make additional capital contributions to the partnerships. 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 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 either that these partnerships will continue to generate electricity without payment by the purchasing 42 utility, or that the power purchase agreements will not be adversely affected by a bankruptcy or 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 made its April payment in full, and Pacific Gas and Electric made its April payment in part and indicated that it intends to pay the remainder by the end of April. 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 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. This decision did not address payment to the qualifying facilities for amounts due prior to April 2001. 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. These activities may result in a restructuring of the California power market. At this time, these activities are in their preliminary stages, and it is not possible to estimate their likely ultimate outcome. For more information on the current regulatory situation in California, see "Business--Regulatory Matters--California Deregulation-- Deregulation Plan." 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., which is currently rated investment grade ("BBB-" by Standard and Poor's). As part of obtaining an investment grade rating for this subsidiary, we have entered into a support agreement, which commits us 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 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. 43 Paiton The Paiton project is a 1,230 MW coal fired power plant in operation in East Java, Indonesia. Our wholly-owned subsidiary owns a 40% interest and had a $490 million investment in the project at December 31, 2000. The project's tariff under the power purchase agreement with PT PLN is higher in the early years and steps down over time. The tariff for the Paiton project includes costs relating to infrastructure to be used in common by other units at the Paiton complex. The plant's output is fully contracted with the state-owned electricity company, PT PLN. Payments are in Indonesian Rupiah, with the portion of the payments intended to cover non-Rupiah project costs, including returns to investors, adjusted to account for exchange rate fluctuations between the Indonesian Rupiah and the U.S. dollar. The project received substantial finance and insurance support from the Export-Import Bank of the United States, the Japan Bank for International Cooperation (formerly known as The Export-Import Bank of Japan), the U.S. Overseas Private Investment Corporation and the Ministry of Economy, Trade and Industry of Japan (formerly known as the Ministry of International Trade and Industry). PT PLN's payment obligations are supported by the Government of Indonesia. 43-1 The projected rate of growth of the Indonesian economy and the exchange rate of Indonesian Rupiah into U.S. dollars have deteriorated significantly since the Paiton project was contracted, approved and financed. The Paiton project's senior debt ratings have been reduced from investment grade to speculative grade based on the rating agencies' determination that there is increased risk that PT PLN might not be able to honor the power purchase agreement with P.T. Paiton Energy, the project company. The Government of Indonesia has arranged to reschedule sovereign debt owed to foreign governments and has entered into discussions about rescheduling sovereign debt owed to private lenders. In May 1999, Paiton Energy notified PT PLN that the first 615 MW unit of the Paiton project had achieved commercial operation under the terms of the power purchase agreement and, in July 1999, that the second 615 MW unit of the plant had similarly achieved commercial operation. Because of the economic downturn, PT PLN was then experiencing low electricity demand and PT PLN, through February 2000, dispatched the Paiton plant to zero. In addition, PT PLN filed a lawsuit contesting the validity of its agreement to purchase electricity from the project. The lawsuit was withdrawn by PT PLN on January 20, 2000, and in connection with this withdrawal, the parties entered into an interim agreement for the period through December 31, 2000, under which dispatch levels and fixed and energy payment amounts were agreed. As of December 31, 2000, PT PLN had made all fixed payments due under the interim agreement totaling $115 million and all payments due for energy delivered by the plant to PT PLN. As part of the continuing negotiations on a long-term restructuring of the tariff, Paiton Energy and PT PLN agreed in January 2001 on a Phase I Agreement for the period from January 1, 2001 through June 30, 2001. This 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. Paiton Energy and PT PLN intend to complete the negotiations of the future phases of a new long-term tariff during the six month duration of the Phase I Agreement. To date, PT PLN has made all fixed and energy payments due under the Phase I Agreement. Events, including those discussed above, have occurred which may mature into defaults of the project's debt agreements following the passage of time, notice or lapse of waivers granted by the project's lenders. On October 15, 1999, the project entered into an interim agreement with its lenders pursuant to which the lenders waived defaults during the term of the agreement and effectively agreed to defer payments of principal until July 31, 2000. In July, the lenders agreed to extend the term of the lender interim agreement through December 31, 2000. In December 2000, the lenders agreed to an additional extension of the lender interim agreement through December 31, 2001. Paiton Energy has received lender approval of the Phase I Agreement. Under the terms of the power purchase agreement, PT PLN has been required to pay for capacity and fixed operating costs once each unit and the plant achieved 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. 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 recently agreed 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. 44 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 management and royalty fees. At December 31, 2000, no accrual had been recorded 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. Homer City Edison Mission Energy has 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. Preferred Shares of Edison Mission Energy Taupo Limited In connection with the preferred shares issued by Edison Mission Energy Taupo Limited to partially finance the acquisition of the 40% interest in Contact Energy, Edison Mission Energy provided a guaranty of Edison Mission Energy Taupo Limited's obligation to pay a minimum level of non-cumulative dividends on the preferred shares through June 30, 2002, including NZ$12.9 million during 2001 and NZ$4.6 million during the six months ending June 30, 2002. In addition, Edison Mission Energy has agreed to pay amounts required to ensure that Edison Mission Energy Taupo Limited will satisfy two financial ratio covenants on specified dates. The first financial ratio, called a dividends to outgoings ratio, is to be calculated as of June 30, 2002, and is based on historical and projected dividends received from Contact Energy and the dividends payable to preferred shareholders. The second financial ratio, called a debt to valuation ratio, is to be calculated as of May 14, 2001, and is based on the fair value of our Contact Energy shares and the outstanding preferred shares. If, however, Edison Mission Energy's senior unsecured credit rating by Standard & Poor's were downgraded below BBB-, Edison Mission Energy may be called to perform on its guaranty of Edison Mission Energy Taupo Limited's financial covenants before the specified calculation dates. Based on the fair value of our ownership in Contact Energy at March 20, 2001, had Edison Mission Energy been required to perform on its guarantee of the debt to valuation ratio as of that date, Edison Mission Energy's obligation would have been approximately $19 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 45 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. 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. Illinois Plants--Power Purchase Agreements During 2000, 33% of our electric revenues were derived under power purchase agreements with Exelon Generation, 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 Generation 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. As part of the purchase of the generating assets from Commonwealth Edison, we committed to install one or more gas-fired electric generating units having an additional gross dependable capacity of 500 MWs at an existing or adjacent power plant site in Chicago. The installation must be completed and the unit or units must be fully operational by December 15, 2003. The estimated cost to complete the construction of this 500 MW gas-fired power plant is approximately $250 million. 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--$241 million. Firm Commitment for Asset Purchase
U.S. Projects Local Currency ($ in millions) - -------- ----------------------- --------------- Italian Wind Projects(/1/).............. 36 billion Italian Lira $17
- -------- (1) The Italian Wind Projects are a series of power projects that are in operation or under development in Italy. A wholly-owned subsidiary of Edison Mission Energy owns a 50% interest. Purchase payments will continue through 2002, depending on the number of projects that are ultimately developed. 46 Firm Commitments to Contribute Project Equity
U.S. Projects Local Currency ($ in millions) - -------- ---------------------- --------------- Italian Wind Projects(/1/)............... 6 billion Italian Lira $ 3
- -------- (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 Edison Mission Energy owns a 50% interest. Equity will be contributed depending on the number of projects that are ultimately developed. Firm commitments to contribute project equity could be accelerated due to 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. Contingent Obligations to Contribute Project Equity
U.S. Projects Local Currency ($ in millions) - -------- ----------------------- --------------- Paiton(/1/)............................. -- $39 ISAB(/2/)............................... 90 billion Italian Lira 44
- -------- (1) 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 plant construction, specified partner obligations or events of default. Our obligation to contribute contingent equity will not exceed $141 million, of which $102 million has been contributed as of December 31, 2000. As of March 16, 2001, $5 million of this amount remains to be funded. For more information on the Paiton project, see "--Paiton" above. (2) 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 "Business--Recent Developments--The California Power Crisis" above for further discussion. Subsidiary Indemnification Agreements Some of our subsidiaries have entered into indemnification agreements, under which the subsidiaries 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 December 31, 2000, if payment were required, would be $256 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. 47 Market Risk Exposures Our primary market risk exposures arise from changes in interest rates, changes in oil and gas prices and electricity pool pricing 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. 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 $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 $883.4 million consisting of commercial paper and bank borrowings at December 31, 2000. The fair values of these obligations approximated their carrying values at December 31, 2000, 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 $6,999.8 million at December 31, 2000. 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. Commodity Price Risk Electric power generated at our uncontracted 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 PJM or the 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. 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, 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 48 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 the risk management policies of Edison Mission Energy. 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 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. 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 power purchase agreements with Exelon Generation, 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 capacity payments for the plants under contract and energy payments 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. 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 are the direct result of an October 1997 request by the Minister for Science, Energy and Industry to the U.K. Director General of Electricity Supply to review the operation of the pool pricing system. In July 1998 the Director General proposed that the current structure of contracts for differences and compulsory trading via the pool at half-hourly clearing prices bid a day ahead be abolished. The U.K. Government accepted the proposals in October 1998 subject to reservations. Following this, further proposals were published by the Government and the Director General in July and October 1999. The proposals include, among other things, the establishment of a spot market or voluntary short-term power exchanges operating from 24 to 3 1/2-hours before a trading period; a balancing mechanism to enable the system operator 49 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 are not directly affected by the proposals. Physical bilateral contracts will replace the current contracts for differences, but will function in a similar manner. However, it remains difficult to evaluate the future impact of the proposals. A key feature of the new electricity trading 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 counter parties 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, allows for the implementation of new electricity trading arrangements and the necessary amendments to generators' licenses. Various key documents were designated by the Secretary of State and signed by participants on August 14, 2000; however, due to difficulties encountered during testing, implementation of the new electricity trading arrangements was delayed from November 21, 2000 until March 27, 2001. The Utilities Act sets a principal objective for the Government and the Director General 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 Government to issue guidance to the Director General on social and environmental matters, changes to the procedures for modifying licenses and a new power for the Director General to impose financial penalties on companies for breach of license conditions. We will be monitoring the operation of these new provisions. See "--Financing Plans." 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 January 1, 2001, which expire either on January 1, 2002 or January 1, 2003, 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 50 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 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. 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 7%, 15% and 15%, respectively (determined by the change in the exchange rates from December 31, 1999 to December 31, 2000). The decrease in value of these currencies was the primary reason for the foreign currency translation loss of $157.3 million 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 with varying maturities ranging from January 2001 to July 2002. 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 pound sterling. A 10% fluctuation in exchange rates would change the fair value of the contracts at December 31, 2000 by approximately $6 million. We will continue to monitor our foreign exchange exposure and analyze the effectiveness and efficiency of hedging strategies in the future. 51 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. Environmental Matters and Regulations We are subject to environmental regulation by federal, state and local authorities in the United States and foreign regulatory authorities with jurisdiction over the 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 operation. However, possible future developments, such as the promulgation of more stringent environmental laws and regulations, and future proceedings which 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. We expect that compliance with the Clean Air Act and the regulations and revised State Implementation Plans developed as a consequence of the Act will result in increased capital expenditures and operating expenses. For example, we expect to spend approximately $67 million in 2001 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 $61 million, $67 million, $130 million, $123 million and $57 million for 2001, 2002, 2003, 2004 and 2005, respectively. Provisions related to nonattainment, air toxins, permitting of new and existing units, enforcement and acid rain may affect our domestic plants; however, final details of all these programs have not been issued by the United States Environmental Protection Agency and state agencies. In addition, at the Ferrybridge and Fiddler's Ferry plants we anticipate environmental costs arising from plant modification of approximately $52 million for the 2001-2005 period. We own an indirect 50% interest in EcoElectrica, L.P., a limited partnership which owns and operates a liquified 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 52 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 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 10-15 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. 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. Since the adoption of the United Nations Framework 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, 53 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 was not submitted by the Clinton Administration to the Senate for ratification, and the Bush Administration has announced its opposition to the Kyoto Protocol. Although legislative developments at the federal and state level related to controlling greenhouse gas emissions are beginning, we are not aware of any state legislative developments in the states in which we operate. If the United States ratifies the Kyoto Protocol or we otherwise become subject to limitations on emissions of carbon dioxide from our plants, these requirements could have a significant impact on our operations. 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. We are unaware of any material liabilities under this act; however, we can not assure you that we will not incur CERCLA liability or similar state law liability in the future. New Accounting Standards Effective January 1, 2001, Edison Mission Energy adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities." The Statement establishes accounting and reporting standards requiring that every derivative instrument be recorded in the balance sheet as either an asset or liability measured at its fair value. 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. Upon adoption of SFAS No. 133, we will record all derivatives at fair value unless the derivatives qualify for the normal sales and purchases exception. We expect that the portion of our business activities related to physical sales and purchases of power or fuel and those similar business activities of our affiliates will qualify for this exception. We expect the majority of our risk management activities will qualify for treatment under SFAS No. 133 as cash flow hedges with appropriate adjustments made to other comprehensive income. In the United Kingdom, we expect that the majority of our activities related to the Fiddler's Ferry, Ferrybridge and First Hydro power plants will not qualify for either the normal purchases and sales exception or as cash flow hedges. Accordingly, we expect the majority of these contracts will be recorded at fair value, with subsequent changes in fair value recorded through the 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. The cumulative effect on prior years' net income resulting from the change in accounting for derivatives in accordance with SFAS No. 133 is expected to be less than $10 million, net of tax. Recent Developments 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 726 MW Caliraya-Botocan-Kalayaan 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 for 2003, and debt financing has been arranged for the remainder of the cost for this project. On April 18, 2001, Unit 6 at the Joliet Station (314 MW) was taken off line after a coal-dust explosion occurred in the building housing the unit. We are undertaking a review of the cause of the explosion and the extent of damage and will prepare a plan to return the unit to commercial operations on an expedited basis. The cost to repair the unit and the schedule to complete the repairs cannot be estimated at this time. 54 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. We were formed in 1986 with two domestic operating projects. As of December 31, 2000, we owned interests in 33 domestic and 40 international operating power projects with an aggregate generating capacity of 28,036 MW, of which our share was 22,759 MW. One domestic and one international project totaling 603 MW of generating capacity, of which our anticipated share will be approximately 462 MW, were then in construction stage. At December 31, 2000, we had consolidated assets of $15.0 billion and total shareholder's equity of $2.9 billion. 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. Recent Developments The California Power Crisis Edison International, our ultimate parent company, 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. 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 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 and others. Pacific Gas and Electric filed for bankrutpcy on April 6, 2000. Given its payment defaults, creditors of Southern California Edison could file involuntary bankruptcy petitions against it. For more information on the current regulatory situation in California, see "-- Regulatory Matters--California Deregulation." For more information on how the current California power crisis affects our investments in energy projects in California, see "Risk Factors--The current California power crisis has had, and may continue to have, an adverse impact on our California partnership investments." Southern California Edison's current financial condition has had, and may continue to have, an adverse impact on Edison International's credit quality and, as previously reported by Edison International, has resulted in cross- defaults under Edison International's credit facilities. Both Standard & Poor's Ratings Services and 55 Moody's Investors Service, Inc. have lowered the credit ratings of Edison International and Southern California Edison to substantially below investment grade levels. The ratings remain under review for potential downgrade by both Standard & Poor's and Moody's. We have taken measures to isolate ourselves from the credit downgrades of Edison International and Southern California Edison, and to facilitate our ability and the ability of our subsidiaries to maintain their respective investment grade ratings. For more information on our actions, see "Risk Factors--The current California power crisis has had, and may continue to have, an adverse impact on us." Strategic Overview Our business goal is 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. We have separate strategies for developed and developing countries. In developed countries, 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 a number of our projects in developed countries, known as 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. In developing countries, our strategy focuses on investing with strategic partners, securing limited recourse financing based upon long-term power purchase agreements with state owned utilities and securing government financial support from organizations such as the Export-Import Bank of the United States, the U.S. Overseas Private Investment Corporation and the Japan Bank for International Cooperation. In addition, for some projects, we have obtained political risk insurance from private companies. 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. Below is a brief discussion of the current strategy for each of the three regions and a summary of our projects that are currently in the construction or early operations stage and other significant operating projects in each of the regions. For further information regarding our 33 domestic operating projects, see "--Our Operating Projects--Description of Domestic Operating Projects." For further information regarding our 40 international operating projects, see "-- Our Operating Projects--Description of International Operating Projects." 56 Americas Our Americas region is headquartered in Irvine, California with additional offices located in Chicago, Illinois; Boston, Massachusetts; and Washington, D.C. The strategy for the Americas region is (i) to manage our interest in operating and construction phase projects located throughout the United States, (ii) to expand our generation at existing sites, sometimes referred to as "brownfield" development, (iii) to pursue the development of new power projects throughout the region, sometimes referred to as "greenfield" development and (iv) to a lesser extent than we had in the past, to pursue the acquisition and development of existing generating assets from utilities, industrial companies and other independent power producers throughout the region. We currently have 33 operating projects in this region, all of which are presently located in the United States and its territories. 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. 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 megawatts 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. By the end of the third quarter of 2000, we merged our own marketing operations with the Citizens trading operations under Edison Mission Marketing & Trading, Inc. In November 2000, we completed a transaction with Texaco 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 has an option to repurchase a 50% interest in the project prior to its commercial operation. As part of this transaction, we also: (i) acquired from Texaco an option to purchase two gas turbines which we exercised in late March 2000, (ii) provided Texaco an option to purchase two of the turbines available to us under the Edison Mission Energy Master Turbine Lease and (iii) granted Texaco an option to acquire a 50% interest in 1,000 MW of future power plant projects we designate. For more information on the Edison Mission Energy Master Turbine Lease, see "Management's Discussion and Analysis of Financial Condition and Results of Operations--Commitments and Contingencies--Edison Mission Energy Master Turbine Lease." The Sunrise Project consists of two phases, with Phase I, construction of a single-cycle gas fired facility (320 MW), currently scheduled to be completed in August 2001, and Phase II, conversion to a combined-cycle gas fired facility (560 MW), currently scheduled to be completed in June 2003. In December 2000, we received the Energy 57 Commission Certification and a permit to construct the Sunrise plant, which allowed us to commence construction of Phase I. We are negotiating with the California Department of Water Resources the detailed terms and conditions of a long-term, cost-based-type rate power purchase agreement. We cannot assure you that we will be successful in reaching a final agreement. Asia Pacific Our Asia Pacific region is headquartered in Singapore with additional offices located in Australia, Indonesia and the Philippines. The strategy for this region is (i) to pursue projects in countries where there exist strong political commitment and the structural framework necessary for private power, (ii) to seek opportunities to employ indigenous fuels and (iii) to seek strategic, complimentary alliances with partners who bring value to a project by providing fuel, equipment and construction services. We currently have 14 operating projects in this region that are located in Australia, Indonesia, Thailand and New Zealand. The Paiton project is a 1,230 MW coal fired power plant in operation in East Java, Indonesia. Our wholly-owned subsidiary owns a 40% interest and had a $490 million investment in the Paiton project at December 31, 2000. The project's tariff under the power purchase agreement with PT PLN is higher in the early years and steps down over time. The tariff for the Paiton project includes costs relating to infrastructure to be used in common by other units at the Paiton complex. The plant's output is fully contracted with the state-owned electric company, PT PLN. Payments are in Indonesian Rupiah, with the portion of the payments intended to cover non-Rupiah project costs, including returns to investors, adjusted to account for exchange rate fluctuations between the Indonesian Rupiah and the U.S. dollar. The project received substantial finance and insurance support from the Export-Import Bank of the United States, the Japan Bank for International Cooperation, the U.S. Overseas Private Investment Corporation and the Ministry of Economy, Trade and Industry of Japan. PT PLN's payment obligations are supported by the Government of Indonesia. The projected rate of growth of the Indonesian economy and the exchange rate of Indonesian Rupiah into U.S. dollars have deteriorated significantly since the Paiton project was contracted, approved and financed. The Paiton project's senior debt ratings have been reduced from investment grade to speculative grade based on the rating agencies' determination that there is increased risk that PT PLN might not be able to honor the power purchase agreement with P.T. Paiton Energy, the project company. The Government of Indonesia has arranged to reschedule sovereign debt owed to foreign governments and has entered into discussions about rescheduling sovereign debt owed to private lenders. In May 1999, Paiton Energy notified PT PLN that the first 615 MW unit of the Paiton project had achieved commercial operation under the terms of the power purchase agreement and, in July 1999, that the second 615 MW unit of the plant had similarly achieved commercial operation. Because of the economic downturn, PT PLN was then experiencing low electricity demand and PT PLN, through February 2000, dispatched the Paiton plant to zero. In addition, PT PLN filed a lawsuit contesting the validity of its agreement to purchase electricity from the project. The lawsuit was withdrawn by PT PLN on January 20, 2000, and in connection with this withdrawal, the parties entered into an interim agreement for the period through December 31, 2000, under which dispatch levels and fixed and energy payment amounts were agreed. As of December 31, 2000, PT PLN had made all fixed payments due under the interim agreement totaling $115 million and all payments due for energy delivered by the plant to PT PLN. As part of the continuing negotiations on a long-term restructuring of the tariff, Paiton Energy and PT PLN agreed in January 2001 on a Phase I Agreement for the period from January 1, 2001 through June 30, 2001. This 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. Paiton Energy and PT PLN intend to complete the negotiations of the further phases of a new long-term tariff during the six month duration of the Phase I Agreement. To date, PT PLN has made all fixed and energy payments due under the Phase I Agreement. Events, including those discussed above, have occurred which may mature into defaults of the project's debt agreements following the passage of time, notice or lapse of waivers granted by the project's lenders. On October 15, 1999, the project entered into an interim agreement with its lenders pursuant to which the lenders 58 waived defaults during the term of the agreement and effectively agreed to defer payments of principal until July 31, 2000. In July, the lenders agreed to extend the term of the lender interim agreement through December 31, 2000. In December 2000, the lenders agreed to an additional extension of the lender interim agreement through December 31, 2001. Paiton Energy has received lender approval of the Phase I Agreement. Under the terms of the power purchase agreement, PT PLN has been required to pay for capacity and fixed operating costs once each unit and the plant achieved 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. 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 recently agreed Phase I Agreement, with the payment of these arrears to be dealt with in connection with the overall tariff 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 could require a renegotiation of the Paiton project's debt agreements. The impact of any 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. 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. During 2000, we increased our share of ownership in Contact Energy to 42%. 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 2,449 MW, of which our share is 940 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." 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 726 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. Europe, Central Asia, Middle East and Africa 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. Our strategy for the region is to pursue the development and acquisition of medium to large scale power and cogeneration facilities with diversified fuel sources and generation technology. We currently have 26 operating projects in this region that are located in the U.K., Turkey, Spain and Italy. 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 plants complement the pumped-storage hydroelectric power plants we already own in the U.K. 59 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. Under the new trading arrangements, our 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 volatility of market prices. 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. The U.K. Utilities Act, which was approved on July 28, 2000, allowed for implementation of the new trading arrangements, which commenced on March 27, 2001. 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. The financial performance of the Fiddler's Ferry and Ferrybridge power plants has not matched our expectations, largely due to lower energy prices resulting primarily from increased competition, warmer-than-average weather and uncertainty surrounding the new electricity trading arrangements discussed above. As a result, Edison First Power has decided to defer some environmental capital expenditures originally planned to increase plant utilization and therefore is currently in breach of milestone requirements for the implementation of the capital expenditures program set forth in the financing documents relating to the acquisition of the plants. In addition, 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. Edison First Power is currently in discussions with the relevant financing parties to revise the required capital expenditure program, to waive: (i) the breach of the financial ratio covenant for 2000, (ii) a technical breach of requirements for the provision of information that was delayed due to uncertainty regarding capital expenditures, and (iii) other related technical defaults. Edison First Power is in the process of requesting the necessary waivers and consents to amendments from the financing parties. We cannot assure you that waivers and consents to amendments will be forthcoming. 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 (Pounds)37 million from its debt service reserve to meet its debt service requirements in 2000. Our net investment in our subsidiary that holds the Ferrybridge and Fiddler's Ferry power plants and related debt was $918 million at December 31, 2000. Another of our 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 December 31, 2000, (Pounds)58 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 (Pounds)359 million, and our guarantee remains in force notwithstanding any breaches under Edison First Power's acquisition financing documents. In addition, Edison Mission Energy may provide guarantees in support of bilateral contracts entered into by Edison First Power under the new electricity trading arrangements. Edison Mission Energy has provided guarantees totaling (Pounds)19 million relating to these contracts at March 20, 2001. 60 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. 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. Project Type 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. 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 61 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 under construction and advanced development 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. Long-Term Power and Steam Sales Contracts 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 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. Sale of Power from Merchant Plants During 1999, we acquired a number of merchant plants, 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. The majority of electric power generated at the Illinois Plants is sold under power purchase agreements with Exelon Generation 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 62 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. 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. 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. 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, and which will further mitigate against the price volatility of the electricity pool. Power Marketing and Trading Activities When making sales under negotiated contracts, it is our policy to deal with investment grade counter parties or counter parties 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, 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. 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. 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 63 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 Contracts 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 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. 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 64 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 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. 65 Our Operating Projects Domestic Overview We currently own interests in 32 domestic operating projects in eight states and one project in the Commonwealth of Puerto Rico. These operating projects consist of 12 natural gas fired cogeneration projects, one coal fired cogeneration project, seven coal fired exempt wholesale generator projects, one waste coal project, one liquefied natural gas combined cycle cogeneration project and 11 gas fired exempt wholesale generator projects. All our domestic cogeneration projects, as well as the waste coal project, are qualifying facilities under the Public Utility Regulatory Policies Act. Our domestic operating projects have total generating capacity of 15,257 MW, of which our net ownership share is 13,231 MW. Description of Domestic Operating Projects We have ownership or leasehold interests in the following domestic operating projects:
Electric Ownership/ Capacity Primary Electric Leasehold Project Location (in MW) Purchaser(/2/) Type of Facility(/3/) Interest ------- ------------- -------- ---------------- ---------------- ---------- American Bituminous(/1/) West Virginia 80 MPC Waste Coal 50% Brooklyn Navy Yard New York 286 CE Cogeneration/EWG 50% Coalinga(/1/) California 38 PG&E Cogeneration 50% Commonwealth Atlantic Virginia 340 VEPCO EWG 50% EcoElectrica(/1/) Puerto Rico 540 PREPA Cogeneration 50% Gordonsville(/1/) Virginia 240 VEPCO Cogeneration/EWG 50% Harbor(/1/) California 80 Pool EWG 30% Homer City(/1/) Pennsylvania 1,884 Pool EWG 100% Hopewell Virginia 356 VEPCO Cogeneration 25% Illinois Plants (12 projects)(/1/) Illinois 9,539 EG EWG 100% James River Virginia 110 VEPCO Cogeneration 50% Kern River(/1/) California 300 SCE Cogeneration 50% March Point 1 Washington 80 PSE Cogeneration 50% March Point 2 Washington 60 PSE Cogeneration 50% Mid-Set(/1/) California 38 PG&E Cogeneration 50% Midway-Sunset(/1/) California 225 SCE Cogeneration 50% Nevada Sun-Peak Nevada 210 SPR EWG 50% Saguaro(/1/) Nevada 90 SPR Cogeneration 50% Salinas River(/1/) California 38 PG&E Cogeneration 50% Sargent Canyon(/1/) California 38 PG&E Cogeneration 50% Sycamore(/1/) California 300 SCE Cogeneration 50% Watson California 385 SCE Cogeneration 49%
- -------- (1) Operated by subsidiaries or affiliates of Edison Mission Energy; all other projects are operated by unaffiliated third parties. (2) Electric purchaser abbreviations are as follows: CE Consolidated Edison Company of New York, Inc. EG Exelon Generation MPC Monongahela Power Company Pool Regional electricity trading market PG&E Pacific Gas & Electric Company PREPA Puerto Rico Electric Power Authority PSE Puget Sound Energy, Inc. SCE Southern California Edison Company SPR Sierra Pacific Resources VEPCO Virginia Electric & Power Company
66 (3) 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. International Overview We own interests in 40 operating projects outside the United States. The total generating capacity of these facilities is 12,779 MW, of which our net ownership share is 9,528 MW. Description of International Operating Projects We have ownership interests in the following international operating projects:
Electric Primary Capacity Electric Ownership Project Location (in MW) Purchaser(/2/) Interest - ------- ----------- -------- --------- --------- Contact (10 projects) New Zealand(/6/) 2,449 Pool 42% Derwent(/1/) England 214 SE(/3/) 33% Doga(/1/) Turkey 180 TEAS 80% Ferrybridge England 1,989 Pool 100% Fiddler's Ferry England 1,995 Pool 100% First Hydro (2 projects) Wales 2,088 Pool 100% Iberian Hy-Power I (5 projects) Spain 43 FECSA 100%(/7/) Iberian Hy-Power II (13 projects) Spain 43 FECSA 100% ISAB Italy 512 GRTN 49% Kwinana(/1/) Australia 116 WP 70% Loy Yang B Australia 1,000 Pool(/4/) 100% Paiton(/1/) Indonesia 1,230 PLN 40% Roosecote England 220 NORWEB(/5/) 100% TriEnergy Thailand 700 EGAT 25%
- -------- (1) Operated by subsidiaries or affiliates of Edison Mission Energy; all other projects are operated by unaffiliated third parties. (2) Electric purchaser abbreviations are as follows: GRTN Gestore Rete Transmissione Nazionale EGAT Electricity Generating Authority of Thailand FECSA Fuerzas Electricas de Cataluma, S.A. NORWEB North Western Electricity Board WP Western Power Pool Electricity trading market for England, Wales, Australia and New Zealand PLN PT PLN SE Southern Electric plc. TEAS Turkiye Elektrik Urehm A.S.
(3) Sells to the pool with a long-term contract with SE. (4) Sells to the pool with a long-term contract with the State Electricity Commission of Victoria. (5) Sells to the pool with a long-term contract with NORWEB. (6) Minority interest in one project in Australia. (7) Minority interests are owned by third parties in three of the projects. Oil and Gas Investments 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 properties and a production company. Oil and gas produced from the properties are generally sold at spot or short term market prices. 67 Four Star As of December 31, 2000, we owned 36% of the stock of Four Star Oil & Gas Company, a subsidiary of Texaco Inc. The underlying value of Four Star is attributable to the production of oil and gas from nine producing properties. Our proportionate interest in net quantities of proved reserves at December 31, 2000 totaled 180.6 billion cubic feet of natural gas and 10.4 million barrels of oil. 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, 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%. 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 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." Tax Sharing Agreements We are 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. 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. Employees and Offices At December 31, 2000, we employed 3,391 people, all of whom were full time employees and approximately 639, 146 and 1,294 of whom were covered by collective bargaining agreements in the 68 United Kingdom, Australia and the United States, respectively. We have never experienced a work stoppage or strike. We believe we have good relations with our employees. However, the term of the collective bargaining agreement covering our employees at the Illinois Plants is currently in dispute, with the union maintaining that the agreement expired as early as March 31, 2001, while we maintain that the agreement remains in effect until June 2002. The dispute will be heard by an administrative law judge with the National Labor Relations Board. While no strike has been authorized or strike vote taken, the union has indicated that is one possibility. Midwest Generation has operational plans in place and intends to operate the Illinois Plants in the event of the strike if the current dispute is not resolved. Although we cannot predict the outcome of this dispute, we believe the impact on our operations will not be material. We lease our corporate headquarters in Irvine, California and our principal regional offices in London, Melbourne and Singapore. We also lease other smaller offices in the United States and certain foreign countries. Regulatory Matters General 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. Our operations are subject to extensive regulation by governmental agencies in each of the countries in which we conduct operations. 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, and use of electric energy, capacity and related products, including ancillary services from, our projects. 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 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 69 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, 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. 70 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 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 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 71 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 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. 72 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 to provide electric service 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. A state's public utility commission also has the authority to determine avoided costs for qualifying facilities and 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. 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 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 73 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 Independent 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 Current Power Crisis in California--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. 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 January 4, 2001, the California Public Utilities Commission authorized an interim surcharge on customers' bills, subject to refund, to be applied only to ongoing power procurement costs which 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 74 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. Further 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 March 15, 2001, the California Public Utilities Commission released a draft of a proposed order instituting an investigation into whether California's investor-owned utilities, including Southern California Edison, have complied with past Commission decisions authorizing the formation of their holding companies and governing affiliate transactions, as well as applicable statutes. The proposed order would reopen the past holding company decisions and initiate an investigation into the following matters: . whether the holding companies, including Edison International, violated requirements to give priority to the capital needs of their respective utility subsidiaries; . whether the ring-fencing actions by Edison International and PG&E Corporation and their respective non-utility affiliates also violated the 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. A prehearing conference was held on April 20, 2001, at which the parties were asked to inform the Commission of their view of the impact of the recently signed memorandum of understanding among Southern California Edison, Edison International and the California Department of Water Resources on specified issues from the order, how to expedite resolution of those issues, and how to conduct the remainder of the investigation to the extent other issues and other parties are not affected. At this prehearing conference, no definitive rulings were made on any issue in the investigation, including the Commission's resolution of the investigation, as called for in the memorandum of understanding. Several parties, including Edison International, raised objections to the Commission's assertion of jurisdiction over utility holding companies. The Commission is expected to issue a further ruling concerning the scope and scheduling of the investigation and also to schedule a further prehearing conference. We cannot predict whether the Commission will institute this investigation or what effects any investigation or subsequent actions by the Commission may have on Edison International or indirectly on us. 75 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 made its April payment in full, and Pacific Gas and Electric made its April payment in part and indicated that it intends to pay the remainder later this month. 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 qualifying facilities subject to this pricing adjustment will be paid 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 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. This decision did not address payment to the qualifying facilities for amounts due prior to April 2001. As previously disclosed by Edison International, 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, our power project currently under development, to the State at cost-based rates for ten years. Edison International agreed that we will use all commercially reasonable efforts to place the first phase of the project into service before the end of Summer 2001. Edison International and Southern California Edison believe that the Memorandum is 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 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 if required legislation is not adopted and definitive agreements executed by August 15, 2001, or if the California Public Utilities Commission does not adopt the required implementing decisions within 60 days after the Memorandum was signed, or if specified other adverse changes occur. We cannot provide assurance that all the required legislation will be enacted, regulatory actions taken, and definitive agreements executed before the applicable deadlines. In addition, a California voter initiative or referendum previously has been threatened against any measures that would raise consumer rates or aid California's investor-owned utilities. Finally, execution of the Memorandum does 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 20, 2001, a prehearing conference was held, at which the parties involved were asked to inform the California Public Utilities Commission of their view of the impact of the Memorandum on specified issues from a draft of a proposed order released by the Commission on March 15, 2001. This proposed order 76 instituted an investigation into whether California's investor-owned utilities have complied with past Commission decisions authorizing the formation of their holding companies and governing affiliate transactions, as well as applicable statutes. See "Risk Factors--The current California power crisis has had, and may continue to have, an adverse impact on us." At this prehearing conference, no definitive rulings were made on any issue in the investigation, including the Commission's resolution of the investigation, as called for in the Memorandum, nor were any views expressed on Southern California Edison's characterization of the impact on the investigation of the Memorandum. The Commission is expected to issue a further ruling concerning the scope and scheduling of the investigation and also to schedule a further prehearing conference. We cannot predict what the effects of any investigation or subsequent actions by the Commission may have on Edison International or indirectly on us. On April 6, 2001, Pacific Gas and Electric announced that it had filed for reorganization under Chapter 11 of the United States Bankruptcy Code. Pacific Gas and Electric said that neither its parent holding company nor any of the parent's other subsidiaries are affected by Pacific Gas and Electric's filing. Pacific Gas and Electric cited as reasons for its bankruptcy filing the failure by the State of California to assume full procurement responsibility for Pacific Gas and Electric's net short position, the California Public Utilities Commission's actions on March 27 and April 3, 2001 that created new payment obligations for Pacific Gas and Electric, lack of progress in negotiations with the State to provide recovery of power purchase costs, the California Public Utilities Commission's adoption of an illegal and retroactive accounting change, and the slow progress of discussions with the Governor's representatives. The situation in California changes on an almost daily basis. You should monitor developments in California for the most up to date information. Recent Foreign Regulatory Matters United Kingdom--The U.K.'s new electricity trading arrangements are the direct result of an October 1997 request by the Minister for Science, Energy and Industry who asked the U.K. Director General of Electricity Supply to review the operation of the pool pricing system. In July 1998 the Director General proposed that the current structure of contracts for differences and compulsory trading via the pool at half-hourly clearing prices bid a day ahead be abolished. The U.K. Government accepted the proposals in October 1998 subject to reservations. Following this, further proposals were published by the Government and the Director General in July and October 1999. The proposals include, among other things, the establishment of a spot market or voluntary short-term power exchanges operating from 24 to 3 1/2-hours before a trading period; 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 are not directly affected by the proposals. Physical bilateral contracts will replace the current contracts for differences, but will function in a similar manner. However, it remains difficult to evaluate the future impact of the proposals. A key feature of the new electricity trading 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 counter parties 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, allows for the implementation of new electricity trading arrangements and the necessary amendments to generators' licenses. Various key documents were designated by the Secretary of State and signed by participants on August 14, 2000; however, due to difficulties encountered during testing, implementation of the new electricity trading arrangements was delayed from November 21, 2000 until March 27, 2001. A warmer-than-average winter (January to March 2000), the entry of new operations into the generation market, the impending introduction of the new electricity trading arrangements coupled with uncertainties surrounding the new Utilities Act and action by the Director General to control abuse of market power, discussed below, contributed to a drop in the energy component of pool prices throughout the year (time weighted average System Marginal Price dropped from (Pounds)22.39/MWh in 1999 to (Pounds)18.75/MWh in 2000) and depressed forward prices for winter 2000/2001. We have entered into contracts for differences 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. 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 continue to be below prior years. As a result of the foregoing, we continue to expect lower revenues from our Ferrybridge and Fiddler's Ferry plants. The Utilities Act sets a principal objective for the Government and the Director General 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 77 to finance their activities. The Act also contains new powers for the Government to issue guidance to the Director General on social and environmental matters, changes to the procedures for modifying licenses and a new power for the Director General 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 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. 78 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 which 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 Act will result in increased capital expenditures and operating expenses. For example, we expect to spend approximately $67 million in 2001 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 79 emissions to result in expenditures of approximately $61 million, $67 million, $130 million, $123 million and $57 million for 2001, 2002, 2003, 2004 and 2005, respectively. Provisions related to nonattainment, air toxins, permitting of new and existing units, enforcement and acid rain may affect our domestic plants; however, final details of all these programs have not been issued by the United States Environmental Protection Agency and state agencies. In addition, at the Ferrybridge and Fiddler's Ferry plants we anticipate environmental costs arising from plant modification of approximately $52 million for the 2001-2005 period. We own an indirect 50% interest in EcoElectrica, L.P., a limited partnership which owns and operates a liquified 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 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 10-15 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. 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 80 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. Since the adoption of the United Nations Framework 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. However, because of opposition to the treaty in the United States Senate, the Kyoto Protocol was not submitted by the Clinton Administration to the Senate for ratification, and the Bush Administration has announced its opposition to the Kyoto Protocol. Although legislative developments at the federal and state level related to controlling greenhouse gas emissions are beginning, we are not aware of any state legislative developments in the states in which we operate. If, as a result of the treaty or otherwise, we become subject to limitations on emissions of carbon dioxide from our plants, these requirements could have a significant impact on our operations. 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. We are not aware of any material liabilities under this act; however, we cannot assure you that we will not incur CERCLA liability or similar state law liability in the future. 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 a Brooklyn Navy Yard bank account in the amount of $0.5 million. Brooklyn Navy Yard is appealing the attachment order. On the same day, the court stayed all proceedings in the California action pending the New York action. PMNC's motion to dismiss the New York 81 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. We agreed to indemnify Brooklyn Navy Yard and our partner in the venture from all claims and costs arising from or 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 liquified 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 December 31, 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. 82 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 April 24, 2001.
Name Age Position ---- --- -------- John E. Bryson.......................... 57 Director, Chairman of the Board Dean A. Christiansen.................... 41 Director Theodore F. Craver, Jr.................. 49 Director Bryant C. Danner........................ 63 Director Director, President and Chief Alan J. Fohrer.......................... 50 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 Senior Vice President Worldwide Ronald L. Litzinger..................... 41 Operations Senior Vice President and President of Midwest Generation Georgia R. Nelson....................... 51 EME, LLC Senior Vice President and Chief Kevin M. Smith.......................... 43 Financial Officer Senior Vice President and Raymond W. Vickers...................... 58 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 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 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 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 Executive Vice President and General Counsel of Edison International since June 1995. Mr. Danner was Executive Vice 83 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. 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 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. 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. 84 DESCRIPTION OF THE 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. For purposes of this description, references to "Edison Mission Energy," "we," "our," "ours" and "us" do not include 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 April 5, 2001, between us and United States Trust Company of New York, as trustee. References to the notes include the exchange notes unless the context otherwise requires. The notes are our unsecured senior obligations and rank equally in right of payment with all our other unsubordinated indebtedness. Because we conduct substantially all 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, or 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 aggregate principal amount of $600,000,000. 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 hereby. The notes will mature on April 15, 2011 and will bear interest at the rate of 9.875% per annum. We will pay interest on the notes on each April 15 and October 15, beginning on October 15, to the holders of record on the immediately preceding April 1 and October 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 April 5, 2001. Interest will be computed on the basis of a 360-day year consisting of twelve 30-day months. The interest rate on the notes may be increased under the circumstances described in "Exchange Offer; Registration Rights." The original notes are, and the exchange notes will be, in denominations of $100,000 and any integral multiple of $1,000 in excess of $100,000. 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 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. 85 "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 obtained by 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 the trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the trustee by 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. 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 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; 86 (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 of 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. 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 of 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 of 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 87 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 of 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 (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 (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 88 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 compliance by Edison Mission Energy 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 (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 89 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. 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; 90 (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 "--Covenants" (other than those with respect to the maintenance of our existence and those described under the first paragraph of the caption "--Covenants--Merger, Consolidation, Sale, Lease or Conveyance" other than those described in clauses (2)-(5) under "--Covenants--Additional Covenants"); (y) clause (c) in "--Events of Default" with respect to such covenants; and (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. 91 . 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 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 92 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. 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. 93 EXCHANGE OFFER; REGISTRATION RIGHTS As part of the sale of the original notes, under a registration rights agreement, dated as of April 2, 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 best efforts to consummate an exchange 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 April 5, 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, April 5, 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 this exchange offer is not completed 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 exchange offer is consummated or the date on which all the notes otherwise become transferable by note holders (other than our affiliates or former affiliates) without further registration under the Securities Act. 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 (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 . 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. 94 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. 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 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 95 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 at a rate of 31% will generally apply to these payments if (i) in the case of a United States Holder, the holder fails to provide an 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. 96 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 180 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 180 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 have agreed 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. In addition, all reports and other documents we subsequently file under Sections 13(a) and 15(d) of the Securities Exchange Act will be deemed to be incorporated by reference into this prospectus and to be part of this prospectus from the date we subsequently file the reports and documents. Any statements contained in a document incorporated or deemed to be incorporated by reference into this prospectus are deemed to be modified or superseded for purposes of this prospectus to the extent modified or 97 superseded by another statement contained in any subsequently filed document also incorporated by reference in this prospectus. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute part of this prospectus. 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 LEGAL MATTERS The legality of the exchange notes will be passed upon for Edison Mission Energy by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York. EXPERTS The consolidated financial statements of Edison Mission Energy and subsidiaries included in Edison Mission Energy's Annual Report on Form 10-K for the fiscal year ended December 31, 2000, which is incorporated by reference in this prospectus 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. 98 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. Until , 2001, all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. [LOGO OF EDISON MISSION ENERGY APPEARS HERE] 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, (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. II-1 ITEM 21. Exhibits and Financial Statement Schedules.
Exhibit No. Description ------- ----------- 1.1 Purchase Agreement, dated as of April 2, 2001, among Edison Mission Energy and Credit Suisse First Boston Corporation and Westdeutsche Landesbank Girozentrale (Dsseldorf) as representatives of the Initial Purchasers.* 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. 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.
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Exhibit No. Description ------- ----------- 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. 3.2 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 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. 4.1.1 Form of 9.875% Senior Note due 2011 (included in Exhibit 4.1).* 4.2 Registration Rights Agreement, dated as of April 2, 2001, among Edison Mission Energy and Credit Suisse First Boston Corporation and Westdeutsche Landesbank Girozentrale (Dsseldorf) as representatives of the Initial Purchasers.* 4.3 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. 4.3.1 Schedule identifying substantially identical agreement to Guarantee constituting Exhibit 4.3 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. 4.4 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. 4.4.1 Schedule identifying substantially identical agreement to Guarantee constituting Exhibit 4.4 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. 4.5 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.
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Exhibit No. Description ------- ----------- 4.6 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. 4.6.1 Schedule identifying substantially identical agreement to Participation Agreement constituting Exhibit 4.6 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. 4.7 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. 4.7.1 Schedule identifying substantially identical agreement to Participation Agreement constituting Exhibit 4.7 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. 4.8 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. 4.9 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. 4.9.1 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. 4.10 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. 4.10.1 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. 4.11 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. 4.12 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.
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Exhibit No. Description ------- ----------- 4.12.1 Schedule identifying substantially identical agreements to Promissory Note constituting Exhibit 4.12 hereto, incorporated by reference to Exhibit 4.5.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 4.13 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. 10.2 Power Purchase Contract between Southern California Edison Company and Champlin Petroleum Company, dated March 8, 1985, incorporated by reference to Exhibit 10.2 to Edison Mission Energy's Form 10. 10.2.1 Amendment to Power Purchase Contract between Southern California Edison Company and Champlin Petroleum Company, dated July 29, 1985, incorporated by reference to Exhibit 10.2.1 to Edison Mission Energy's Form 10. 10.2.2 Amendment No. 2 to Power Purchase Contract between Southern California Edison Company and Champlin Petroleum Company, dated October 29, 1985, incorporated by reference to Exhibit 10.2.2 to Edison Mission Energy's Form 10. 10.4 Power Purchase Contract between Southern California Edison Company and Imperial Energy Company, dated February 22, 1984, incorporated by reference to Exhibit 10.4 Edison Mission Energy's Form 10. 10.4.1 Amendment to Power Purchase Contract between Southern California Edison Company and Imperial Energy Company, dated November 13, 1984, incorporated by reference to Exhibit 10.4.1 to Edison Mission Energy's Form 10. 10.6 Power Purchase Contract between Southern California Edison Company and Imperial Energy Company Niland No. 2, dated April 16, 1985, incorporated by reference to Exhibit 10.6 to Edison Mission Energy's Form 10. 10.7 Power Purchase Contract between Southern California Edison Company and Chevron U.S.A. Inc., dated November 9, 1984, incorporated by reference to Exhibit 10.7 to Edison Mission Energy's Form 10. 10.7.1 Amendment No. 1 to Power Purchase Contract between Southern California Edison Company and Chevron U.S.A. Inc., dated March 29, 1985, incorporated by reference to Exhibit 10.7.1 to Edison Mission Energy's Form 10. 10.7.2 Amendment No. 2 to Power Purchase Contract between Southern California Edison Company and Chevron U.S.A. Inc., dated November 21, 1985, incorporated by reference to Exhibit 10.7.2 to Edison Mission Energy's Form 10. 10.7.3 Amendment No. 3 to Power Purchase Contract between Southern California Edison Company and Chevron U.S.A. Inc., dated November 21, 1985, incorporated by reference to Exhibit 10.7.3 to Edison Mission Energy's Form 10. 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.
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Exhibit No. Description ------- ----------- 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. 10.16 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).
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Exhibit No. Description ------- ----------- 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 (Fi1e 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.
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Exhibit No. Description ------- ----------- 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. 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. 10.53 Transition Power Purchase Agreement, dated August 1, 1998, between Pennsylvania Electric Company and Mission Energy Westside, Inc., incorporated by reference to Exhibit 10.53 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.
II-8
Exhibit No. Description ------- ----------- 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. 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.
II-9
Exhibit No. Description ------- ----------- 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, dated as of March 18, 2001, 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 and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001. 10.60.3 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. 10.60.4 Debt Service Reserve Letter of Credit and Reimbursement Agreement, dated as of March 30, 2001, among Edison Mission Holdings Co., Westdeutsche Landesbank Girozentrale, New York Branch and the Banks named therein, incorporated by reference to Exhibit 10.60.4 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. 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. 10.62 Edison Power Limited (Pounds)1,150,000,000 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 Ju1y 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. 10.65 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.
II-10
Exhibit No. Description ------- ----------- 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. 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. 10.85 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-11
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. 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, incorporated by reference to Exhibit 21 to Edison Mission Energy's Annual Report on Form 10-K for the year ended December 31, 2000. 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 United States Trust Company of New York for the 9.875% 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. II-12 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 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. II-13 (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-14 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 24th day of April, 2001. Edison Mission Energy (Registrant) /s/ Kevin M. Smith By: _________________________________ Kevin M. Smith Senior Vice President and Chief Financial Officer
Signature Title Date --------- ----- ---- /s/ Alan J. Fohrer Director, Chief Executive Officer, and April 24, 2001 _________________________________ President (Principal Executive Officer) Alan J. Fohrer /s/ Kevin M. Smith Senior Vice President and Chief April 24, 2001 _________________________________ Financial Officer (Principal Financial Kevin M. Smith and Accounting Officer) /s/ John E. Bryson Director and Chairman of the Board April 24, 2001 _________________________________ John E. Bryson /s/ Bryant C. Danner Director April 24, 2001 _________________________________ Bryant C. Danner /s/ Theodore F. Craver, Jr. Director April 24, 2001 _________________________________ Theodore F. Craver, Jr. Director April 24, 2001 _________________________________ Dean A. Christiansen
II-15 INDEX TO EXHIBITS
Exhibit No. Description ------- ----------- 1.1 Purchase Agreement, dated as of April 2, 2001, among Edison Mission Energy and Credit Suisse First Boston Corporation and Westdeutsche Landesbank Girozentrale (Dsseldorf) as representatives of the Initial Purchasers.* 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. 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.
1
Exhibit No. Description ------- ----------- 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. 3.2 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 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. 4.1.1 Form of 9.875% Senior Note due 2011 (included in Exhibit 4.1).* 4.2 Registration Rights Agreement, dated as of April 2, 2001, among Edison Mission Energy and Credit Suisse First Boston Corporation and Westdeutsche Landesbank Girozentrale (Dsseldorf) as representatives of the Initial Purchasers.* 4.3 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. 4.3.1 Schedule identifying substantially identical agreement to Guarantee constituting Exhibit 4.3 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. 4.4 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. 4.4.1 Schedule identifying substantially identical agreement to Guarantee constituting Exhibit 4.4 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. 4.5 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.
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Exhibit No. Description ------- ----------- 4.6 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. 4.6.1 Schedule identifying substantially identical agreement to Participation Agreement constituting Exhibit 4.6 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. 4.7 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. 4.7.1 Schedule identifying substantially identical agreement to Participation Agreement constituting Exhibit 4.7 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. 4.8 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. 4.9 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. 4.9.1 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. 4.10 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. 4.10.1 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. 4.11 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. 4.12 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.
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Exhibit No. Description ------- ----------- 4.12.1 Schedule identifying substantially identical agreements to Promissory Note constituting Exhibit 4.12 hereto, incorporated by reference to Exhibit 4.5.1 to Edison Mission Energy's Form 10-K for the year ended December 31, 2000. 4.13 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. 10.2 Power Purchase Contract between Southern California Edison Company and Champlin Petroleum Company, dated March 8, 1985, incorporated by reference to Exhibit 10.2 to Edison Mission Energy's Form 10. 10.2.1 Amendment to Power Purchase Contract between Southern California Edison Company and Champlin Petroleum Company, dated July 29, 1985, incorporated by reference to Exhibit 10.2.1 to Edison Mission Energy's Form 10. 10.2.2 Amendment No. 2 to Power Purchase Contract between Southern California Edison Company and Champlin Petroleum Company, dated October 29, 1985, incorporated by reference to Exhibit 10.2.2 to Edison Mission Energy's Form 10. 10.4 Power Purchase Contract between Southern California Edison Company and Imperial Energy Company, dated February 22, 1984, incorporated by reference to Exhibit 10.4 Edison Mission Energy's Form 10. 10.4.1 Amendment to Power Purchase Contract between Southern California Edison Company and Imperial Energy Company, dated November 13, 1984, incorporated by reference to Exhibit 10.4.1 to Edison Mission Energy's Form 10. 10.6 Power Purchase Contract between Southern California Edison Company and Imperial Energy Company Niland No. 2, dated April 16, 1985, incorporated by reference to Exhibit 10.6 to Edison Mission Energy's Form 10. 10.7 Power Purchase Contract between Southern California Edison Company and Chevron U.S.A. Inc., dated November 9, 1984, incorporated by reference to Exhibit 10.7 to Edison Mission Energy's Form 10. 10.7.1 Amendment No. 1 to Power Purchase Contract between Southern California Edison Company and Chevron U.S.A. Inc., dated March 29, 1985, incorporated by reference to Exhibit 10.7.1 to Edison Mission Energy's Form 10. 10.7.2 Amendment No. 2 to Power Purchase Contract between Southern California Edison Company and Chevron U.S.A. Inc., dated November 21, 1985, incorporated by reference to Exhibit 10.7.2 to Edison Mission Energy's Form 10. 10.7.3 Amendment No. 3 to Power Purchase Contract between Southern California Edison Company and Chevron U.S.A. Inc., dated November 21, 1985, incorporated by reference to Exhibit 10.7.3 to Edison Mission Energy's Form 10. 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.
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Exhibit No. Description ------- ----------- 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. 10.16 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).
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Exhibit No. Description ------- ----------- 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 (Fi1e 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.
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Exhibit No. Description ------- ----------- 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. 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. 10.53 Transition Power Purchase Agreement, dated August 1, 1998, between Pennsylvania Electric Company and Mission Energy Westside, Inc., incorporated by reference to Exhibit 10.53 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.
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Exhibit No. Description ------- ----------- 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. 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.
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Exhibit No. Description ------- ----------- 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, dated as of March 18, 2001, 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 and Midwest Generation LLC's Registration Statement on Form S-4 to the Securities and Exchange Commission on April 20, 2001. 10.60.3 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. 10.60.4 Debt Service Reserve Letter of Credit and Reimbursement Agreement, dated as of March 30, 2001, among Edison Mission Holdings Co., Westdeutsche Landesbank Girozentrale, New York Branch and the Banks named therein, incorporated by reference to Exhibit 10.60.4 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. 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. 10.62 Edison Power Limited (Pounds)1,150,000,000 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 Ju1y 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. 10.65 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.
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Exhibit No. Description ------- ----------- 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. 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. 10.85 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.
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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. 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, incorporated by reference to Exhibit 21 to Edison Mission Energy's Annual Report on Form 10-K for the year ended December 31, 2000. 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 United States Trust Company of New York for the 9.875% 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. 11 EX-1.1 2 dex11.txt PURCHASE AGREEMENT DATED 4-2-01 Exhibit 1.1 $600,000,000 EDISON MISSION ENERGY $600,000,000 9.875% Senior Notes Due April 15, 2011 PURCHASE AGREEMENT ------------------ April 2, 2001 Credit Suisse First Boston Corporation, Westdeutsche Landesbank Girozentrale (Dusseldorf), c/o Credit Suisse First Boston Eleven Madison Avenue New York, New York 10010-3629 Ladies and Gentlemen: Edison Mission Energy, a California corporation (the "Company"), ------- proposes, subject to the terms and conditions stated herein, to issue and sell to Credit Suisse First Boston Corporation ("CSFBC") and Westdeutsche Landesbank ----- Girozentrale (Dusseldorf), the initial purchasers (the several "Purchasers") ---------- $600,000,000 principal amount of its 9.875% Senior Notes Due April 15, 2011 (the "Notes") to be issued under an Indenture to be dated as of April 5, 2001 (the - ------ "Indenture"), by and between the Company and United States Trust Company of New - ---------- York, as trustee (the "Trustee"). ------- The Company hereby agrees with the several Purchasers as follows: 1. Representations and Warranties of the Company. The Company represents and warrants to, and agrees with, the several Purchasers that: (a) The Company has prepared a preliminary offering circular dated March 22, 2001 (as it may be amended or supplemented, the "Preliminary ----------- Offering Circular") and a final offering circular dated April 2, 2001 -------- -------- (as it may be amended or supplemented, the "Offering Circular") relating ----------------- to the Notes. For purposes of this Agreement, the Preliminary Offering Circular and the Offering Circular shall include any documents or portions thereof incorporated by reference therein as set forth under the caption "Incorporation of Documents by Reference" therein. Copies of the Preliminary Offering Circular and the Offering Circular have been delivered by the Company to the Purchasers. The Preliminary Offering Circular was on the date thereof accurate in all material respects and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and the Offering Circular is as of its date (and any amendment or supplement thereto will be as of its date) accurate in all material respects and does not (and, as of the Closing Date (as defined below), will not) contain any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation or warranty as to information contained in or omitted from the Preliminary Offering Circular or the Offering Circular in reliance upon and in conformity with written information furnished to the Company by any Purchaser through CSFBC specifically for inclusion therein, it being understood and agreed that the only such information is that described as such in Section 6(b) hereof. Except as disclosed in the ------------ Offering Circular, on the date of this Agreement, the Company's Annual Report on Form 10-K most recently filed with the Securities and Exchange Commission (the "Commission"), and all subsequent reports (collectively, ---------- the "Exchange Act Reports") which have been filed by the Company with the -------------------- Commission or sent to its shareholders pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), do not include any untrue ------------ statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Such documents, when they were filed with the Commission, conformed in all material respects to the requirements of the Exchange Act and the rules and regulations of the Commission thereunder. (b) The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of California, is duly qualified to do business as a foreign corporation, and is a corporation in good standing in each jurisdiction in which its ownership or lease of property or the conduct of its business requires such qualification (except where the failure to so qualify would not have a material adverse effect on the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries, taken as a whole, or on the ability of the Company to perform its obligations under the Financing Documents, as hereinafter defined, (a "Material Adverse Effect"). Each subsidiary of the Company has been duly ------------------------ organized and is validly existing as a corporation, general partnership, limited partnership, limited liability company or other entity, as the case may be, in good standing under the laws of the jurisdiction of its organization, is duly qualified to do business as a foreign corporation, general partnership, limited partnership, limited liability company or other entity, as the case may be, and is a corporation, general partnership, limited partnership, limited liability company or other entity, as the case may be, in good standing in each jurisdiction in which its ownership or lease of property or the conduct of its business requires such qualification, except 2 where the failure to so qualify would not have a Material Adverse Effect. The Company and each subsidiary of the Company have all necessary power and authority (corporate and other) to own or lease their respective properties and to conduct the respective businesses in which they are engaged as described in the Offering Circular. One hundred percent of the outstanding shares of capital stock of the Company are owned by The Mission Group, a California corporation. All of the outstanding shares of capital stock of the Company have been duly authorized and validly issued and are fully paid and nonassessable. All of the issued and outstanding capital stock of each subsidiary of the Company has been duly authorized and validly issued and is fully paid and nonassessable; and the capital stock of each subsidiary owned by the Company, directly or through subsidiaries, is owned free and clear from liens, encumbrances and defects except as pledged to lenders in connection with financings involving the Company's subsidiaries as permitted under the terms of the Notes as described in the Offering Circular. (c) The Company has all power and authority necessary to execute and deliver this Agreement, the Notes, the Indenture, the Exchange Notes referred to in the Offering Circular (the "Exchange Notes") and the -------------- Registration Rights Agreement referred to in the Offering Circular (the "Registration Rights Agreement" and, together with this Agreement, ----------------------------- the Notes, the Exchange Notes and the Indenture, the "Financing --------- Documents") and to perform its --------- obligations hereunder and thereunder. The execution, delivery and performance by the Company of the Financing Documents and its compliance with the provisions hereof and thereof will not breach or (except as contemplated by the Financing Documents) result in the creation or imposition of any lien, charge or encumbrance upon any material asset of the Company or any subsidiary thereof (a "Material Asset") pursuant to the -------------- terms of, or constitute a breach of, or default under, the corporate charter or by-laws of the Company or similar organizational documents of any subsidiary thereof or any agreement, indenture or other instrument to which the Company or any subsidiary thereof is a party or by which the Company or any subsidiary thereof is bound (in each case which is material to the Company or any subsidiary thereof) or to which any Material Asset is subject, or any law, order, rule, regulation, judgment or decree of any court or governmental agency having jurisdiction over the Company or any subsidiary thereof or any Material Asset of the Company or any subsidiary thereof; and, except as completed on or prior to the Closing Date or as required by applicable state securities laws, no consent, authorization or order of, or filing or registration by the Company with, any court, governmental agency or body or third party is required in connection with the issuance and sale of the Notes by the Company or the execution, delivery and performance by the Company of the Financing Documents, except for the order of the Commission declaring the Exchange Offer Registration Statement or the Shelf Registration Statement (each as defined in the Registration Rights Agreement) effective. (d) Neither the Company nor any subsidiary thereof is in violation of its corporate charter, by-laws or other organizational documents. Except as 3 described in or contemplated by the Offering Circular, none of the Company or any of its subsidiaries (i) is in default, and no event has occurred which, with notice or lapse of time or both, would constitute such a default, in the due performance and observance of any material term, representation, covenant or condition contained in any material lease, license, indenture, mortgage, deed of trust, note, bank loan or other evidence of indebtedness or any other agreement, understanding or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or any Material Asset may be bound or affected, which default would have a Material Adverse Effect, or (ii) is in violation of any law, ordinance, governmental rule or regulation or court decree to which it may be subject, which violation would have a Material Adverse Effect. (e) Except as described in or contemplated by the Offering Circular, each of the Company and its subsidiaries (i) has properly obtained each consent, license, approval, registration, permit, certification, determination or other authorization (each a "Governmental ------------ Approval") necessary to the ownership of its property or to the conduct -------- of its business as described in the Offering Circular, and (ii) is in compliance with all terms and conditions of each such Governmental Approval and has not received any notice of any proceedings relating to the revocation or modification thereof except (x) in either case where the failure to do so would not have a Material Adverse Effect and (y) such as may be required for operating activities which are ordinarily deemed to be ministerial in nature and which are anticipated to be obtained in the ordinary course. (f) Except as described in or contemplated by the Offering Circular, each of the Company and its subsidiaries holds, as applicable, good, legal and valid title to, or valid and enforceable leasehold or contractual interests in, all items of real and personal property and all other properties and assets owned by them which are material to the business of the Company and its subsidiaries taken as a whole, free and clear of all liens, encumbrances and claims which would materially interfere with the conduct of the business of the Company and its subsidiaries, taken as a whole, as described in the Offering Circular. The Company and its subsidiaries are presently conducting their respective businesses as described in the Offering Circular and in compliance with all applicable rules, regulations and laws, except where such failure would not result in a Material Adverse Effect. Each of the Company and its subsidiaries carries insurance in such amounts and covering such risks as is adequate for the conduct of its business and the value of its properties and which is consistent with what is customarily carried by similar companies engaged in similar businesses. Each of such insurance policies is valid and in full force and effect. (g) Arthur Andersen LLP, whose report is incorporated by reference into the Offering Circular, is and was, during the period covered by its report, independent with respect to the Company and its subsidiaries within the meaning of the Exchange Act. 4 (h) The Indenture and the Registration Rights Agreement have been validly authorized by the Company and, when executed by the proper officers of the Company (assuming the due authorization, execution and delivery thereof by the other parties thereto) and delivered by the Company, will constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, (x) except as the enforceability thereof may be limited by (i) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and (ii) by general equitable principles, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether in a proceeding in equity or at law and (y) subject to the unenforceability in certain circumstances under law or court decisions of provisions for indemnification or contribution to a party with respect to a liability where such indemnification or contribution is contrary to public policy; the Notes and the Exchange Notes (as defined in the Registration Rights Agreement) have been validly authorized by the Company, and, in the case of the Notes, upon payment therefor on the Closing Date as provided herein, or, in the case of the Exchange Notes, upon their issuance pursuant to the Exchange Offer (as defined in the Registration Rights Agreement), will be validly issued and outstanding, and will constitute obligations of the Company entitled to the benefits of the Indenture and enforceable in accordance with their terms, except as the enforceability thereof may be limited by (i) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and (ii) by general equitable principles, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether in a proceeding in equity or at law; the summary descriptions contained in the Offering Circular of the Notes, the Exchange Notes, the Indenture and the Registration Rights Agreement conform in all material respects to these documents. (i) This Agreement has been duly authorized, executed and delivered by the Company and, assuming due authorization, execution and delivery by the Purchasers, constitutes the legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, (x) except as the enforceability thereof may be limited by (i) bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally and (ii) by general equitable principles, including, without limitation, concepts of materiality, reasonableness, good faith and fair dealing, regardless of whether in a proceeding in equity or at law and (y) subject to the unenforceability in certain circumstances under law or court decisions of provisions for indemnification or contribution to a party with respect to a liability where such indemnification or contribution is contrary to public policy. (j) Except as described in the Offering Circular, there is no litigation, proceeding or investigation pending before or by any court or governmental agency or any arbitrator or otherwise or, to the knowledge of the Company, threatened, against the Company or any of its subsidiaries or to which any of their 5 Material Assets is subject, including, without limitation, any audit by the Internal Revenue Service, which, if an adverse decision were reached, would be reasonably likely to have a Material Adverse Effect. (k) The consolidated financial statements (including the related notes) of the Company included in the Offering Circular comply as to form in all material respects with the requirements applicable to registration statements on Form S-3 under the Securities Act of 1933, as amended (the "Securities Act") and present fairly in all material respects the financial --------------- condition, results of operations and changes in financial position of the Company, at the dates and for the periods indicated, and, except as otherwise described in the Offering Circular, have been prepared in conformity with generally accepted accounting principles in the United States applied on a consistent basis throughout the periods involved; the capitalization of the Company, as set forth in the column labeled "Actual" under the caption "Capitalization" in the Offering Circular, is accurately described as of the date presented therein. (l) Except as disclosed in the Offering Circular, since the date of the latest audited financial statements included in the Offering Circular or incorporated by reference therein, there has been no Material Adverse Effect, nor, to the Company's knowledge, any development or event involving a prospective Material Adverse Effect. Except as disclosed in or contemplated by the Offering Circular and except for the dividend in the amount of $32.5 million paid on EME's common stock on February 28, 2001, since the date of such financial statements there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its equity capital. (m) Neither the Company nor any of its affiliates (as defined in Rule 501(b) of Regulation D under the Securities Act) nor (assuming the accuracy of the representations of the Purchasers set forth herein) any person acting on the Company's behalf has made offers or sales of securities under circumstances that would require the registration of the Notes under the Securities Act. (n) The Company is not an open-end investment company, unit investment trust or face-amount certificate company that is or is required to be registered under Section 8 of the United States Investment Company Act of 1940, as amended (the "Investment Company Act"), nor is it a closed- ---------------------- end investment company required to be registered, but not registered, thereunder; and the Company is not and, after giving effect to the offering and sale of the Notes and the application of the proceeds thereof as described in the Offering Circular under the caption "Use of Proceeds," the Company will not be an "investment company" as defined in the Investment Company Act. (o) No securities of the same class (within the meaning of Rule 14 4A(d)(3) under the Securities Act) as the Notes are listed on any national securities exchange registered under Section 6 of the Exchange Act or quoted in a U.S. automated inter-dealer quotation system. 6 (p) Assuming (i) the accuracy of the representations and warranties of the Purchasers set forth herein, (ii) the compliance by the Purchasers with their agreements herein and (iii) the Notes are offered and sold in the manner contemplated by the Offering Circular, the offer and sale of the Notes in the manner contemplated by this Agreement will be exempt from the registration requirements of the Securities Act by reason of Section 4(2) thereof and Regulation S thereunder; and it is not necessary to qualify an indenture in respect of the Notes under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"). ------------------- (q) Neither the Company nor any of its affiliates, nor (assuming the accuracy of the representations and warranties of the Purchasers set forth herein) any person acting on its or their behalf (i) has, within the six-month period prior to the date hereof, offered or sold in the United States or to any U.S. person (as such terms are defined in Regulation S under the Securities Act ("Regulation S")) the Notes or any security of the ------------ same class or series as the Notes or (ii) has offered or will offer or sell the Notes (A) in the United States by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) of Regulation D under the Securities Act or (B) with respect to any such securities sold in reliance on Rule 903 of Regulation S by means of any directed selling efforts within the meaning of Rule 902(b) of Regulation S. The Company, its affiliates and (assuming the accuracy of the representations and warranties of the Purchasers set forth herein) any person acting on its or their behalf have complied and will comply with the offering restriction requirements of Regulation S in connection with the offering of Notes outside the United States. The Company has not entered and will not enter into any contractual relationship with respect to the distribution of the Notes except for this Agreement. (r) The proceeds to the Company from the offering of the Notes will not be used in a manner which would violate Regulations T, U or X of the Federal Reserve Board. (s) Neither the Company nor any of its subsidiaries is or will, solely as a result of their participation in the transactions contemplated by the Operative Documents or their ownership, use or operation of the projects described in the Offering Circular under the heading "Our Operating Projects," be subject to (i) regulation under the Public Utility Holding Company Act of 1935, as amended ("PUHCA") as a "public utility company," a "holding company," or a "subsidiary" or an "affiliate" of a holding company, except that each of the Company and its subsidiaries is a "subsidiary" and an "affiliate" under PUHCA of Edison International, a California corporation, 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, or (ii) regulation under the Federal Power Act ("FPA"), except (A) for such rules or regulations applicable to "exempt wholesale generators" ("EWGs") under Section 32 of PUHCA and "qualifying facilities" ("QFs") under the Public Utility Regulatory Policies Act of 1978 ("PURPA") and 7 (B) each of the EWG and power marketer subsidiaries of the Company is a "public utility," as such term is defined under the FPA, but each such subsidiary has been granted authority under Section 205 of the FPA to sell electric energy, capacity and ancillary services; or (iii) state laws and regulations in respect of the rates or the financial or organizational regulation of utilities except that certain subsidiaries of the Company are subject to state laws applicable to entities that make retail sales of electric energy and other energy-related services ("Retail Service Providers"), EWGs, "foreign utility companies" under Section 33 of PUHCA, or QFs, and to the extent that any subsidiary of the Company is a Retail Service Provider, that subsidiary has been granted all requisite authority under applicable state laws and regulations to make sales of electric energy and other energy-related services as a Retail Service Provider. In addition, none of the Purchasers will, solely as a result of purchasing and/or reselling the Notes pursuant to this Agreement, be a "public utility company," an "electric utility company," a "gas utility company," a "holding company," a "subsidiary" or an "affiliate" under PUHCA, or otherwise subject to regulation under PUHCA, the FPA, PURPA, or rate, financial or organizational regulation under any state law or regulation. (t) (i) All tax returns, declarations of estimated tax and tax reports (collectively, the "Tax Returns") required to be filed on or before ----------- (after consideration of any allowable extensions of time to file) the Closing Date with respect to all federal, state or local income, gross receipts, severance, property, productions, sales, use, license, excise, franchise, employment, withholding or similar taxes, together with any interest, additions or penalties with respect thereto and any interest in respect of such additions or penalties (collectively, the "Taxes") by the ----- Company have been duly filed, (ii) all Taxes due on the Tax Returns referred to in clause (i) that are required to be paid or withheld by the Company (the "Company Taxes") have been paid or withheld in full, (iii) all ------------- deficiencies asserted or assessments made against the Company with respect to Tax Returns as a result of an examination of such Tax Returns referred to in clause (i) have been paid in full, (iv) no issues that have been raised with respect to Company Taxes by the relevant taxing authority in connection with an examination of Tax Returns are currently pending and (v) no waivers of statutes of limitations have been given or requested by or with respect to any Company Taxes, except in each case for any Company Taxes which are being diligently contested in good faith by appropriate proceedings and for which adequate reserves in accordance with U.S. generally accepted accounting principles have been set aside on the Company's books. (u) Except as disclosed in the Offering Circular, neither the Company nor any of its subsidiaries is in violation of any statute, rule, regulation, decision or order of any governmental agency or body or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, "Environmental Laws"), owns or operates any real property ------------------ contaminated with any substance that is subject to any 8 Environmental Laws, is liable for any off-site disposal or contamination pursuant to any Environmental Laws, or is subject to any claim relating to any Environmental Laws, which violation, contamination, liability or claim could individually or in the aggregate reasonably be expected to have a Material Adverse Effect; and the Company has no knowledge of any pending investigation which might lead to such a claim. (v) The Company and its subsidiaries own, possess or can acquire on reasonable terms adequate trademarks, trade names and other rights to inventions, know-how, patents, copyrights, confidential information and other intellectual property (collectively, "Intellectual Property Rights") ---------------------------- necessary to conduct the business now operated by them, or presently employed by them, and have not received any notice of infringement of or conflict with asserted rights of others with respect to any Intellectual Property Rights that, if determined adversely to the Company or any of its subsidiaries, would individually or in the aggregate have a Material Adverse Effect. (w) The Company is subject to Section 13 or 15(d) of the Exchange Act. (x) During the consecutive twelve-month period prior to each date as of which the following representations are made or deemed made, (i) no steps have been taken to terminate any "pension plan", as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, together with any successor statute of similar import and together with the regulations thereunder ("ERISA"), to which the Company, any ----- subsidiary thereof or any member of a controlled group of corporations treated as a single employer together with the Company or any subsidiary thereof under Section 414(b) or 414(c) of the Internal Revenue Code of 1986, as amended (the "Code") or Section 4001 of ERISA (the "Controlled ---- ---------- Group") sponsors, contributed to or under which any such entity may incur ----- any liability (each a "Pension Plan"), (ii) no contribution failure has ------------ occurred with respect to any Pension Plan sufficient to give rise to a lien under Section 302(f) of ERISA or Section 412 of the Code and (iii) 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 Company, any subsidiary thereof 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 and none of the following events or conditions, either individually or in the aggregate, has resulted or is reasonably likely to result in a material liability to the Company, any subsidiary thereof or any member of the Controlled Group: (w) any of the events set forth in Section 4043(b) of ERISA, other than those events as to which the thirty day notice period is waived under subsections .13, .14, .16, .18, .19 or .20 of Pension Benefit Guaranty Corporation Reg. Section 2615; (x) a complete or partial withdrawal from any "multiemployer plan," as defined in Section 4001(a)(3) of ERISA (the "Multiemployer Plan"), by the Company, any subsidiary thereof ------------------ 9 or any member of the Controlled Group; (y) any liability of the Company, any subsidiary thereof or any member of the Controlled Group under ERISA if the Company, any subsidiary thereof or any member of the Controlled Group under ERISA were to withdraw completely from all Multiemployer Plans as of the annual valuation date most closely preceding the date on which this representation is made or deemed made; or (z) the "reorganization" (within the meaning of Section 4241 of ERISA) or "insolvency" (within the meaning of Section 4245 of ERISA) or any Multiemployer Plan. None of the Company, any subsidiary thereof or any member of the Controlled Group has any contingent liability with respect to any post-retirement benefit under a "welfare plan" (as defined in Section 3(1) of ERISA) 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. (y) The proceeds from the sale of Notes will be utilized by the Company as described under the section of the Offering Circular entitled "Use of Proceeds." 2. Purchase, Sale and Delivery of Notes. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Company agrees to sell to the Purchasers, and the Purchasers agree, severally and not jointly, to purchase from the Company, at an aggregate purchase price of 9 % of the principal amount thereof plus accrued interest from April 5, 2001 to the Closing Date (as hereinafter defined) (the "Purchase Price"), the respective principal amounts of -------------- the Notes set forth opposite the names of the several Purchasers on Schedule 1 ---------- hereto. The Company shall not be obligated to deliver any Notes to be delivered, except upon payment of all of the Notes to be purchased on the Closing Date as provided herein. The Company will deliver against payment of the Purchase Price the Notes in the form of one or more permanent global Notes in definitive form (the "Global Notes") deposited with the Trustee as custodian for The Depository Trust ------------ Company ("DTC") and registered in the name of Cede & Co., as nominee for DTC. --- Interests in any permanent Global Notes will be held only in book-entry form through DTC, except in the limited circumstances described in the Offering Circular. Payment of the Purchase Price for the Notes shall be made by the Purchasers in Federal (same day) funds by official check or checks or wire transfer to an account at a bank acceptable to CSFBC drawn to the order of the Company, at the office of Latham & Watkins, 885 Third Avenue, New York, New York 10022 at 9:30 A.M., (New York time), on April 5, 2001 or at such other place or time not later than seven full business days thereafter as CSFBC and the Company determine, such time being herein referred to as the "Closing Date", against ------------ delivery to the Trustee, as custodian for DTC, of the Global Notes representing all of the Notes. The Global Notes will be made available for inspection at the above office of Latham & Watkins at least 24 hours prior to the Closing Date. Notwithstanding the foregoing, any Notes sold to Institutional Accredited Investors (as hereinafter defined) pursuant to Section 3(c) shall be ------------ issued in definitive, fully registered form and shall bear the legend relating thereto set forth under the caption 10 "Transfer Restrictions" in the Offering Circular, but shall be paid for in the same manner as any Notes to be purchased by the Purchasers hereunder and to be offered and sold by it in reliance on Rule 144A under the Securities Act. 3. Representations by Purchasers; Resale by Purchasers. (a) Each Purchaser severally represents and warrants to the Company that it is an "accredited investor" within the meaning of Regulation D under the Securities Act. (b) Each Purchaser severally acknowledges that the Notes have not been registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except pursuant to an exemption from the registration requirements of the Securities Act. Each Purchaser severally represents and agrees that it has offered and sold the Notes, and will offer and sell the Notes, as part of its distribution at any time only in accordance with Rule 903 or Rule 144A under the Securities Act ("Rule 144A") or to a limited number of Institutional Accredited Investors (as defined below) in accordance with subsection (c). Accordingly, neither such Purchaser nor its affiliates, nor any persons acting on its or their behalf, have engaged or will engage in any directed selling efforts with respect to the Notes, and such Purchaser, its affiliates and all persons acting on its or their behalf have complied and will comply with the offering restrictions requirement of Regulation S and Rule 144A. Terms used in this subsection (b) have the meanings given to them by Regulation S. (c) Each Purchaser severally agrees that it may offer and sell Notes in definitive, fully registered form to a limited number of institutions, each of which is reasonably believed by such Purchaser to be an "accredited investor" within the meaning of Rule 501(a)(1), (2) or (3) under the Securities Act or an entity in which all of the equity owners are accredited investors within the meaning of Rule 501(a)(1), (2) or (3) of Regulation D under the Securities Act (each, an "Institutional Accredited ------------------------ Investor"); provided that each such Institutional Accredited Investor -------- executes and delivers to such Purchaser or its representative and the Company, prior to the consummation of any sale of Notes to such Institutional Accredited Investor, a Purchaser's Letter in substantially the form included in the Offering Circular (a "Purchaser's Letter"). ------------------ (d) Each Purchaser severally agrees that it and each of its affiliates has not entered and will not enter into any contractual arrangement with respect to the distribution of the Notes except for any such arrangements with the other Purchaser or affiliate thereof or with the prior written consent of the Company. (e) Each Purchaser severally agrees that it and each of its affiliates has not offered and sold the Notes and will not offer or sell the Notes in the United 11 States by means of any form of general solicitation or general advertising within the meaning of Rule 502(c) of Regulation D under the Securities Act, including, but not limited to (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar media or broadcast over television or radio, or (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising. Each Purchaser severally agrees, with respect to resales made in reliance on Rule 144A of any of the Notes, to deliver either with the confirmation of such resale or otherwise prior to settlement of such resale a notice to the effect that the resale of such Notes has been made in reliance upon the exemption from the registration requirements of the Securities Act provided by Rule 144A. (f) Each Purchaser severally represents and agrees that: (i) it has not offered or sold and prior to the date six months after the date of issue of the Notes will not offer or sell any Notes to persons in the United Kingdom except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and will not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995; (ii) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the Notes in, from or otherwise involving the United Kingdom; and (iii) it has only issued or passed on and will only issue or pass on in the United Kingdom any document received by it in connection with the issue of the Notes to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person to whom such document may otherwise lawfully be issued or passed on. 4. Certain Agreements of the Company. The Company agrees with the Purchasers that: (a) The Company will advise the Purchasers promptly of any proposal to amend or supplement the Offering Circular and will not effect such amendment or supplementation without the Purchasers' consent. If, at any time prior to the completion of the resale of the Notes by the Purchasers, any event occurs as a result of which, in the reasonable judgment of the Company, the Purchasers or counsel to the Purchasers, the Offering Circular as then amended or supplemented would include an untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary at any such time to amend or supplement the Offering Circular to comply with any applicable law, the Company promptly will notify the Purchasers of such event and promptly will prepare, at the Company's own expense, an amendment or supplement which will correct such statement or omission or effect such compliance. Neither the Purchasers' consent to, nor their delivery to offerees or 12 investors of, any such amendment or supplement shall constitute a waiver of any of the conditions set forth in Section 5. --------- (b) The Company will furnish to the Purchasers copies of the Preliminary Offering Circular, the Offering Circular and all amendments and supplements to such documents, in each case as soon as available and in such quantities as the Purchasers reasonably request, and the Company will furnish to the Purchasers on the date hereof two copies of the Offering Circular certified as being true, complete and correct by a duly authorized officer of the Company, together with certified copies of the independent accountants' consents with respect to the incorporation by reference of their reports therein. At any time when the Company is not subject to Section 13 or 15(d) of the Exchange Act, and for so long as the sale of the Notes is reliant upon the exception afforded by Rule 144A, the Company will promptly furnish or cause to be furnished to the Purchasers and, upon the request of holders and prospective purchasers of the Notes, to such holders and purchasers, copies of the information required to be delivered to holders and prospective purchasers of the Notes pursuant to Rule 144A(d)(4) under the Securities Act (or any successor provision thereto) in order to permit compliance with Rule 144A in connection with resales by such holders of the Notes. The Company will pay the expenses of printing and distributing to the Purchasers and such holders and purchasers all such documents. (c) The Company will arrange for the qualification of the Notes for sale and the determination of their eligibility for investment under the laws of such jurisdictions in the United States and Canada as the Purchasers designate and will continue such qualifications in effect so long as required for the resale of the Notes by the Purchasers, provided that the Company will not be required to qualify as a foreign corporation in any jurisdiction in which it is not now qualified or to file a general consent to service of process in any such jurisdiction. (d) During the period of three years hereafter, the Company will furnish to the Purchasers as soon as available after the end of each fiscal year, a copy of such notices and reports as it is required to deliver to the Trustee or any holder of the Notes under Section 3.4 of the Indenture, ----------- and the Company will furnish to each Purchaser (i) as soon as available, a copy of each report and any definitive proxy statement of the Company filed with the Commission under the Exchange Act or mailed to shareholders and (ii) from time to time, such other information concerning the Company as the Purchasers may reasonably request. (e) During the period of two years after the Closing Date, the Company will, upon request, furnish to each Purchaser and any holder of Notes a copy of the restrictions on transfer applicable to the Notes. (f) During the period of two years after the Closing Date (or such other period as the Commission may specify for the unrestricted resale of Notes which constitute "restricted securities" under Rule 144 under the Securities Act ("Rule 144")), the Company will not, and will not permit any of its affiliates (as 13 defined in Rule 144) to, resell any of the Notes that have been reacquired by any of them which constitute "restricted securities" under Rule 144. (g) During the period of two years after the Closing Date, the Company will not be or become an open-end investment company, unit investment trust or face-amount certificate company that is or is required to be registered under Section 8 of the Investment Company Act, and the Company is and will not become a closed-end investment company required to be registered, but not registered, under the Investment Company Act. (h) The Company will pay all expenses incidental to the performance of its obligations under this Agreement, the Indenture and the other Financing Documents, including (i) the fees and expenses of the Trustee and its counsel, and (ii) all expenses in connection with the execution, issue, authentication, packaging, initial delivery, preparation and printing of the Notes, the Indenture, the other Financing Documents, the Preliminary Offering Circular, the Offering Circular and amendments and supplements thereto and any other document relating to the issuance, offer, sale and delivery of the Notes and the Exchange Notes. The Company agrees to pay for any reasonable expenses (including fees and disbursements of counsel) incurred in connection with qualification of the Notes for sale under the laws of such jurisdictions in the United States and Canada as CSFBC designates and the printing of memoranda relating thereto, and for any fees charged by investment rating agencies for the rating of the Notes and the Exchange Notes. The Company agrees to reimburse the Purchasers for all reasonable travel expenses of the Purchasers and the Company's officers and employees and any other reasonable expenses of the Purchasers and the Company incurred in connection with attending or hosting meetings with prospective purchasers of the Notes from the Purchasers. The Company agrees to pay for expenses incurred in distributing Preliminary Offering Circulars and Offering Circulars (including any amendments and supplements thereto) to the Purchasers and for the reasonable fees and expenses of counsel to the Purchasers. (i) In connection with the offering of the Notes, until the earlier of (x) 180 days following the Closing Date and (y) the date the Purchasers shall have notified the Company of the completion of the resale of the Notes, neither the Company nor any of its affiliates has or will, either alone or with one or more other persons, bid for or purchase for any account in which it or any of its affiliates has a beneficial interest in any Notes or attempt to induce any person to purchase any Notes; and neither the Company nor any of its affiliates will make bids or purchases for the purpose of creating actual, or apparent, active trading in, or of raising the price of, the Notes. (j) The Company will not, until 30 days following the Closing Date, without the prior written consent of the Purchasers, pursuant to Rule 144A, Regulation S or an offering registered under the Securities Act, offer, sell or contract to sell, or otherwise dispose of, directly or indirectly, or announce the offering of, any debt securities issued or guaranteed by the Company (other than 14 the Notes). The Company will not, at any time, offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any securities under circumstances where such offer, sale, pledge, contract or disposition would cause the exemption afforded by Section 4(2) of the Securities Act or the safe harbor of Regulation S thereunder to cease to be applicable to the offer and sale of the Notes. 5. Conditions of the Obligations of the Purchasers. The respective obligations of the Purchasers to purchase and pay for the Notes will be subject to the accuracy as of the date hereof and as of the Closing Date of the representations and warranties made by the Company herein (except for those representations and warranties expressly stated to relate to an earlier specified date, which must be accurate as of such earlier specified date), to the accuracy of the statements of officers of the Company made pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions precedent: (a) The Purchasers shall have received a letter, dated no more than three business days prior to the date of this Agreement, of Arthur Andersen LLP confirming that they are independent certified public accountants with respect to the Company under Rule 101 of the Code of Professional Conduct of the American Institute of Certified Public Accountants ("AICPA"), and ----- its interpretations and rulings, and to the effect that: (i) in their opinion the financial statements examined by them and incorporated by reference into the Offering Circular comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the related published rules and regulations thereunder (ii) they have performed the procedures specified by the AICPA for a review of interim financial information as described in Statement of Auditing Standards No. 71, Interim Financial Information, on the unaudited financial statements incorporated by reference into the Offering Circular; (iii) on the basis of the review referred to in clause (i) above, a reading of the latest available interim financial statements of the Company, inquiries of officials of the Company who have responsibility for financial and accounting matters and other specified procedures, nothing came to their attention that caused them to believe that: (A) any material modifications should be made to the unaudited financial statements incorporated by reference into the Offering Circular for them to be in conformity with generally accepted accounting principles; (B) at the date of the latest available balance sheet read by such accountants, or at a subsequent specified date not more 15 than three days prior to the date of this Agreement, there was any change in the capital stock or any increase in long-term debt of the Company and its consolidated subsidiaries or, at the date of the latest available balance sheet read by such accountants, there was any decrease in consolidated net current assets or stockholder's equity, as compared with amounts shown on the latest balance sheet incorporated by reference into the Offering Circular; or (C) for the period from the closing date of the latest income statement incorporated by reference into the Offering Circular to the closing date of the latest available income statement read by such accountants there were any decreases, as compared with the corresponding period of the previous year, in total operating revenues or in net income; except in the case of clauses (B) and (C) above, for changes, increases or decreases which the Offering Circular or documents incorporated by reference therein disclose have occurred or may occur or which are described in such letter; (iv) they have compared specified dollar amounts (or percentages derived from such dollar amounts) and other financial information contained in the Offering Circular and the documents incorporated by reference therein (in each case to the extent that such dollar amounts, percentages and other financial information are derived from the general accounting records of the Company and its subsidiaries subject to the internal controls of the Company's accounting system or are derived directly from such records by analysis or computation) with the results obtained from inquiries, a reading of such general accounting records and other procedures specified in such letter and have found such dollar amounts, percentages and other financial information to be in agreement with such results, except as otherwise specified in such letter; (v) they have read the unaudited pro forma statement of capitalization included in the Offering Circular and have inquired of certain officials of the Company about the basis for their determination of the pro forma adjustments and have proved the arithmetic accuracy of the application of the pro forma adjustments to the historical amounts in the unaudited pro forma statement of capitalization; and (vi) on the basis of the review referred to in clause (v) above, nothing came to their attention that caused them to believe that the pro forma adjustments have not been properly applied to the historical amounts in the compilation of the pro forma statement of capitalization. (b) Subsequent to the execution and delivery of this Agreement, there shall not have occurred: (i) a change in U.S. or international financial, political or 16 economic conditions or currency exchange rates or exchange controls as, in the judgment of CSFBC, is material and adverse and makes it inadvisable to proceed with completion of the offering or sale of and payment for the Notes as contemplated in the Offering Circular; (ii) any change, or any development or event involving a prospective change, in or affecting the condition (financial or other), business, properties or results of operations of the Company and its subsidiaries, taken as a whole, which, in the judgment of a majority in interest of the Purchasers including CSFBC, materially impairs the investment quality of the Notes or is material and adverse and makes it inadvisable to proceed with completion of the offering or sale of and payment for the Notes as contemplated in the Offering Circular; (iii) any downgrading in the rating of any debt securities of the Company by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Securities Act) or any public announcement that any such organization has under surveillance or review its rating of any debt securities of the Company (other than an announcement with positive implications of a possible upgrading, and no implication of a possible downgrading, of such rating); (iv) any material suspension or material limitation of trading in securities generally on the New York Stock Exchange, or any setting of minimum prices for trading on such exchange or any suspension of trading of any securities of the Company or Edison International, Inc. ("EIX") on any exchange or in the over the --- counter market; (v) the occurrence of any voluntary or involuntary bankruptcy or similar proceeding, filing or similar process by or against Southern California Edison Company or EIX, (vi) any banking moratorium declared by U.S. Federal or New York State authorities; or (vii) any outbreak or escalation of major hostilities in which the United States is involved, any declaration of war by Congress of the United States or any other change in financial markets or substantial national or international calamity or emergency if, in the judgment of a majority in interest of the Purchasers including CSFBC, the effect of any such outbreak, escalation, declaration, change, calamity or emergency makes it inadvisable to proceed with completion of the offering or sale of and payment for the Notes as contemplated in the Offering Circular. (c) The Company shall have furnished to the Purchasers a certificate, dated as of the Closing Date, of its Chief Executive Officer or Chief Financial Officer and a Vice President stating that (i) the representations and warranties of the Company contained in this Agreement are true and correct as of the Closing Date and after giving effect to the consummation of the transactions contemplated by this Agreement (except representations and warranties expressly stated to relate to a specific earlier date, in which case such representations and warranties are true and correct in all material respects as of such earlier date), (ii) the Company has complied with all its agreements and has satisfied all conditions on its part to be performed or satisfied at or prior to the Closing Date contained herein and (iii) subsequent to the respective dates of the most recent financial statements incorporated by reference in the Offering Circular, there has been no Material Adverse Effect, nor any development or event involving a prospective Material Adverse Effect, except as described in or contemplated by the Offering Circular. 17 (d) The Purchasers shall have received a letter, dated the Closing Date, of Arthur Andersen LLP that meets the requirements of subsection (a) of this Section, except that the specified date referred to in such subsection will be a date not more than three days prior to the Closing Date for the purposes of this subsection. (e) The Purchasers shall have received (i) an opinion, dated the Closing Date, of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel for the Company, in form and substance reasonably satisfactory to the Purchasers, regarding the likelihood that the assets and liabilities of the Company would be consolidated with those of EIX if EIX were to be subject to bankruptcy proceedings and (ii) an opinion, dated the Closing Date, of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel for the Company, in form and substance reasonably satisfactory to the Purchasers, to the following effect: (i) The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the State of California and has the corporate power and authority to execute, deliver and perform its obligations under each of the Operative Documents, as defined in the opinion, and to carry on its business and to own, lease and operate its properties as described in the Offering Circular. (ii) The Purchase Agreement has been duly authorized, executed and delivered by the Company. (iii) The issuance and sale of the Notes and the Exchange Notes have been duly authorized by the Company, and when the Notes are duly authenticated in accordance with the terms of the Indenture and delivered to and paid for by the Purchasers as contemplated by the Purchase Agreement, the Notes will be valid and binding obligations of the Company, entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms, except to the extent that enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally and (ii) general principles of equity (regardless of whether enforcement is considered in a proceeding at law or in equity). (iv) The Indenture has been duly authorized, executed and delivered by the Company and constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except to the extent that enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer, fraudulent conveyance, or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally and (ii) general principles of equity (regardless of whether enforcement is considered in a proceeding at law or in equity). 18 (v) The Registration Rights Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except to the extent that (a) enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer, fraudulent conveyance, or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally and (ii) general principles of equity (regardless of whether enforcement is considered in a proceeding at law or in equity) and (b) the enforceability of indemnification and contribution provisions may be limited by federal and state securities laws or the public policies underlying such laws. (vi) The issuance and sale of the Notes by the Company, the execution and delivery of each of the Purchase Agreement, the Indenture and the Registration Rights Agreement by the Company, the compliance by the Company with the terms thereof and the consummation by the Company of the transactions contemplated thereby will not (i) require any consent, approval, authorization, or other order of, or qualification with, any Governmental Authorities, (ii) conflict with the corporate charter or the by-laws, (iii) constitute a violation of or default under the terms of any Applicable Contract, as defined in the opinion, (except that such counsel will not express any opinion as to any covenant, restriction or provision of any such agreement or instrument with respect to financial covenants, ratios or tests or any aspect of the financial condition or results of operations of the Company) or (iv) violate or conflict with, or result in any contravention of, any Applicable Law, as defined in the opinion, or any Applicable Order, as defined in the opinion. Such counsel will note that, for the purposes of clause (i) of this paragraph (vi), such counsel will not express any opinion with respect to the United States federal securities laws, which are addressed in paragraph (vii) below, or as to any state or foreign securities or Blue Sky laws or any opinion as to any registrations, qualifications, filings and others required in connection with the registration obligations of the Company under the Registration Rights Agreement. (vii) Assuming (i) the accuracy of the representations and warranties of the Company set forth in Section 1 of the Purchase Agreement and of the Purchasers' representations and warranties set forth in Section 3 of the Purchase Agreement, (ii) the due performance by the Company of the agreements set forth in Section 4 of the Purchase Agreement, (iii) the Purchasers' compliance with the offering and transfer procedures and restrictions described in the Offering Circular, (iv) the accuracy of the representations and agreements made in accordance with the Purchase Agreement and the Offering Circular by purchasers to whom the Purchasers initially resell the Notes and (v) that purchasers to whom the Purchasers initially resell the Notes receive a copy of the Offering 19 Circular prior to such sale, the offer, sale and delivery of the Notes to the Purchasers, and purchase of the Notes by the Purchasers, in the manner contemplated by the Purchase Agreement and the Offering Circular, and the initial resale of the Notes by the Purchasers in the manner contemplated in the Offering Circular and the Purchase Agreement, do not require registration under the Securities Act, and the Indenture does not require qualification under the Trust Indenture Act of 1939, as amended, it being understood that such counsel will not express any opinion as to any subsequent resale of any Note. (viii) The Company is not and, after giving effect to the offering and sale of the Notes and the application of the net proceeds thereof as described in the Offering Circular will not be, subject to registration or regulation as an "investment company," as such term is defined in the Investment Company Act of 1940, as amended. (ix) The Notes and the Indenture conform, in all material respects, to the descriptions thereof contained in the Offering Circular. (x) Neither the Company nor any of its subsidiaries is or will, solely as a result of their participation in the transactions contemplated by the Operative Documents or their ownership, use or operation of the projects described in the Offering Circular under the heading "Our Operating Projects," be subject to (i) regulation under PUHCA as a "public utility company," a "holding company," or a "subsidiary" or an "affiliate" of a holding company, except that each of the Company and its subsidiaries is a "subsidiary" and an "affiliate" under PUHCA of Edison International, a California corporation, 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, or (ii) regulation under the FPA, except (A) for such rules or regulations applicable to EWGs under Section 32 of PUHCA and QFs under PURPA and (B) each of the EWG and power marketer subsidiaries of the Company is a "public utility," as such term is defined under the FPA, but each such subsidiary has been granted authority under Section 205 of the FPA to sell electric energy, capacity and ancillary services; or (iii) state laws and regulations in respect of the rates or the financial or organizational regulation of utilities except that certain subsidiaries of the Company are subject to state laws applicable to Retail Service Providers, EWGs, "foreign utility companies" under Section 33 of PUHCA, or QFs, and to the extent that any subsidiary of the Company is a Retail Service Provider, that subsidiary has been granted all requisite authority under applicable state laws and regulations to make sales of electric energy and other energy-related services as a Retail Service Provider. In addition, none of the Purchasers will, solely as a result of purchasing and/or reselling the Notes pursuant to this Agreement, be a "public utility company," an "electric utility company," a "gas utility company," a "holding company," a "subsidiary" or an "affiliate" under 20 PUHCA, or otherwise subject to regulation under PUHCA, the FPA, PURPA, or rate, financial or organizational regulation under any state law or regulation. (xi) In addition, such counsel has participated in conferences with officers and other representatives of the Company, representatives of the independent public accountants of the Company, the Purchasers and representatives of the Purchasers' counsel, at which the contents of the Offering Circular (which, for purposes of the opinion, will include certain information specifically incorporated by reference therein) and related matters were discussed and, although such counsel is not passing upon, and does not assume any responsibility for, the accuracy, completeness or fairness of the statements contained in the Offering Circular and has made no independent check or verification thereof, on the basis of the foregoing, no facts have come to such counsel's attention which have led such counsel to believe that the Offering Circular, as of its date and as of the date hereof, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that such counsel does not express any opinion or belief with respect to the financial statements, schedules and other financial or statistical data included therein or excluded therefrom. (f) The Purchasers shall have received an opinion, dated the Closing Date, of Steven D. Eisenberg, Vice President and Associate General Counsel of the Company, in form and substance reasonably satisfactory to the Purchasers, to the following effect: (i) The Company is duly qualified to do business as a foreign corporation in good standing in all jurisdictions in which its ownership or lease of property or the conduct of its business requires such qualification. (ii) To the best of such counsel's knowledge, there are no legal or governmental proceedings pending or threatened against the Company or any of its subsidiaries or to which any of their respective Material Assets is subject, that are not disclosed in the Offering Circular and which are reasonably likely to have a Material Adverse Effect or to materially affect the issuance of the Notes or the consummation of the other transactions contemplated by the Operative Documents. (iii) The Purchase Agreement has been duly authorized, executed and delivered by the Company. (iv) The issuance and sale of the Notes and the Exchange Notes have been duly authorized by the Company, and the Notes, when duly executed and authenticated in accordance with the terms of the Indenture and delivered to and paid for by the Purchasers as contemplated by the 21 Purchase Agreement, will be valid and binding obligations of the Company entitled to the benefits of the Indenture and enforceable against the Company in accordance with their terms, except to the extent that enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer, fraudulent conveyance or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally and (ii) general principles of equity (regardless of whether enforcement is considered in a proceeding at law or in equity). (v) The Indenture has been duly authorized, executed and delivered by the Company and constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except to the extent that enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer, fraudulent conveyance, or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally and (ii) general principles of equity (regardless of whether enforcement is considered in a proceeding at law or in equity). (vi) The Registration Rights Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except to the extent that (a) enforcement thereof may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer, fraudulent conveyance, or other similar laws now or hereafter in effect relating to or affecting creditors' rights generally and (ii) general principles of equity (regardless of whether enforcement is considered in a proceeding at law or in equity) and (b) the enforceability of indemnification and contribution provisions may be limited by federal and state securities laws or the public policies underlying such laws. (vii) The issuance and sale of the Notes by the Company, the execution and delivery of each of the Purchase Agreement the Indenture and the Registration Rights Agreement by the Company, the compliance by the Company with the terms thereof and the consummation by the Company of the transactions contemplated thereby will not (i) except as completed on or prior to the Closing Date require any consent, approval, authorization, or other order of, or qualification with, any court, regulatory body, administrative agency, or governmental body of any state or the United States of America having jurisdiction over the Company (other than any registrations, qualifications, filings and orders required in connection with the registration obligations of the Company under the Registration Rights Agreement), (ii) conflict with the Articles of Incorporation, by- laws or other organizational documents of the Company or any of its subsidiaries, (iii) to the best of such counsel's knowledge, constitute a violation of or default under the terms or provisions of any 22 indenture, mortgage, deed of trust, loan agreement or other agreement or instrument, in each case which is material to the Company and its subsidiaries, taken as a whole, to which the Company or its subsidiaries is bound or to which any of the property or assets of the Company or any of its subsidiaries is subject (except that such counsel does not express any opinion as to any covenant, restriction or provision of any such agreement or instrument with respect to financial covenants, ratios or tests or any aspect of the financial condition or results of operations of the Company or any of its subsidiaries) or (iv) violate or conflict with, or result in any contravention of, any statute or any order, rule or regulation of any court or governmental agency or body having jurisdiction over the Company or any of its subsidiaries or any of their Material Assets. Such counsel will note that, for the purposes of clause (i) of this paragraph (vii), such counsel does not express any opinion with respect to the United States federal securities laws or any state or foreign securities or Blue Sky laws. (viii) Except as disclosed in the Offering Circular, the Company and its subsidiaries (a) have obtained each Governmental Approval which is material to the ownership of their respective properties or to the conduct of their businesses as described in the Offering Circular and (b) are in compliance with all terms and conditions of such Governmental Approvals, except (x) in either case, where the failure to do so is not reasonably likely to have, individually or in the aggregate, a Material Adverse Effect, (y) for Governmental Approvals that may be required for future activities which are ordinarily deemed to be ministerial in nature and which are anticipated to be obtained in the ordinary course, and (z) for Governmental Approvals for activities that are not yet required which have not yet been obtained but which have been or will be applied for in the ordinary course and which are anticipated to be obtained in the ordinary course. (g) The Purchasers shall have received an opinion, dated the Closing Date, from Stadtmauer Bailkin, LLP, counsel to the Trustee, in respect of the enforceability of the Financing Documents to which the Trustee is a party and the authentication of the Notes by the Trustee, which opinion shall be satisfactory in all respects to the Purchasers and their counsel. (h) The Purchasers shall have received from Latham & Watkins, special counsel for the Purchasers, such opinion or opinions as the Purchasers reasonably request, dated the Closing Date, with respect to the Offering Circular and certain other matters, and the Company shall have furnished to such counsel such documents as it requests for the purpose of enabling it to pass upon such matters. (i) The Company and CSFBC shall have entered into the Registration Rights Agreement and the Purchasers shall have received counterparts, conformed 23 as executed, thereof and each other document entered into by the Company in connection with the transactions contemplated by this Agreement. (j) There shall exist at and as of the Closing Date no conditions that would constitute an Event of Default (or an event that with notice or the lapse of time, or both, would constitute an Event of Default) under the Indenture. (k) (i)(A) Moody's Investors Services, Inc. ("Moody's") shall have ------- delivered to the Company and the Purchasers a final rating letter, setting forth a rating of Baa3 or better with respect to the Notes, and (B) Standard & Poor's Ratings Services ("S&P") shall have delivered to the Company and the Purchasers --- a final rating letter, setting forth a rating of BBB- or better with respect to the Notes, (ii) each of Moody's and S&P shall have delivered to the Company a letter confirming the ratings with respect to the other debt securities of the Company after giving effect to the transactions contemplated in this Agreement and (iii) neither of Moody's nor S&P shall have announced that it has under surveillance or review, with possible negative implications, its rating of the Notes or any other debt securities of the Company. (l) The Notes shall have been accepted for settlement through the facilities of DTC, the Euroclear System or Clearstream Banking S.A., as applicable, for "book-entry" transfer of the Notes. (m) The Company shall have furnished to the Purchasers (i) a copy of the resolutions of its Board of Directors or committees thereof, certified by the Secretary or Assistant Secretary of the Company as of the Closing Date, duly authorizing the execution, delivery and performance of this Agreement and any other documents executed by or on behalf of it in connection with this Agreement, (ii) certified copies of its organizational documents and, (iii) if applicable, incumbency certificates or certified copies of powers-of-attorney, if any, pursuant to which officers of such entity shall execute this Agreement and any other documents executed by or on behalf of it in connection with this Agreement. (n) The Purchasers shall have received, in form and substance satisfactory to the Purchasers, copies of such opinions, certificates, letters and documents as the Purchasers reasonably request. 6. Indemnification and Contribution. (a) The Company will indemnify and hold harmless each Purchaser, its directors and officers and each person, if any, who controls such Purchaser within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities, joint or several, to which such Purchaser may become subject, under the Securities Act or the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any breach of any of the representations and warranties of the Company contained herein or any untrue statement or alleged untrue 24 statement of any material fact contained in the Offering Circular, or any amendment or supplement thereto or any of the information incorporated by reference therein, or any related Preliminary Offering Circular or any of the information incorporated by reference therein, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, including any losses, claims, damages or liabilities arising out of or based upon the Company's failure to perform its obligations under Section 4(a) of this Agreement, and will reimburse each ------------ Purchaser for any legal or other expenses reasonably incurred by such Purchaser in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement in or omission or alleged omission from any of such documents in reliance upon and in conformity with written information furnished to the Company by any Purchaser through CSFBC specifically for use therein, it being understood and agreed that the only such information consists of the information described as such in subsection (b) below; and provided further that, with respect to any untrue statement or omission in the Preliminary Offering Circular, this indemnity agreement shall not inure to the benefit of a Purchaser on account of any loss, claim, damage, liability or action arising from the sale of any Notes to any person by such Purchaser to the extent such sale was an initial resale by such Purchaser, if such Purchaser failed to send or give a copy of the Offering Circular, as the same may be amended or supplemented, to that person and the untrue statement or alleged untrue statement of a material fact or omission or alleged omission to state a material fact in the Preliminary Offering Circular was corrected in the Offering Circular and the Offering Circular was made available to such Purchaser prior to the sale of the Notes. (b) Each Purchaser will, severally and not jointly, indemnify and hold harmless the Company, its directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the Securities Act, against any losses, claims, damages or liabilities to which the Company may become subject, under the Securities Act or the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Offering Circular, or any amendment or supplement thereto, or any related Preliminary Offering Circular, or arise out of or are based upon the omission or the alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information furnished to the Company by such Purchaser through CSFBC specifically for use therein, and will reimburse any legal or other expenses reasonably incurred by the Company in connection with investigating or 25 defending any such loss, claim, damage, liability or action as such expenses are incurred, it being understood and agreed that the only such information furnished by any Purchaser consists of the following information in the Offering Circular: the third paragraph, the second sentence of the fourth paragraph, the sixth paragraph, the second sentence of the eighth paragraph, the ninth paragraph, the tenth paragraph and the last paragraph under the caption "Plan of Distribution"; provided, however, that the Purchasers shall not be liable for any losses, claims, damages or liabilities arising out of or based upon the Company's failure to perform its obligations under Section 4(a) of this ------------ Agreement. (c) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under subsection (a) or (b) above, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party otherwise than under subsection (a) or (b) above. In case any such action is brought against any indemnified party and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that the indemnified party shall have the right to employ counsel to represent the indemnified party and their respective controlling persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the indemnified party against the indemnifying party under this Section 6 (i) ------------- if the employment of such counsel shall have been authorized in writing by the indemnifying party in connection with the defense of such action, (ii) if, in the written opinion of counsel to either the indemnifying party or the indemnified party, representation of both parties by the same counsel would be inappropriate due to actual or likely conflicts of interest between them, and in that event the fees and expenses of one firm of separate counsel (in addition to the fees and expenses of local counsel) shall be paid by the indemnifying party, or (iii) if the indemnifying party shall have failed to appoint acceptable counsel within a reasonable period of time. No indemnifying party shall, without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld), effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter 26 of such action and does not include a statement as to or an admission of fault, culpability or failure to act by or on behalf of any indemnified party. (d) If the indemnification provided for in this Section is unavailable or insufficient to hold harmless an indemnified party under subsection (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Purchasers on the other from the offering of the Notes or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Purchasers on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Purchasers on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (before deducting expenses) received by the Company bear to the total discounts and commissions received by the Purchasers from the Company under this Agreement. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or the Purchasers on the other hand and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages, or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding the provisions of this subsection (d), no Purchaser shall be required to contribute any amount in excess of the amount by which the total price at which the Notes purchased by it were resold exceeds the amount of any damages which such Purchaser has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. The Purchasers' obligations in this subsection (d) to contribute are several in proportion to their respective purchase obligations and are not joint. (e) The obligations of the Company under this Section shall be in addition to any liability which the Company may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls any Purchaser within the meaning of the Securities Act or the Exchange Act; and the obligations of the Purchasers under this Section shall be in addition to any liability which the Purchasers may otherwise have and shall extend, upon the same terms and conditions, to each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act. 27 7. Default of Purchasers. If any Purchaser or Purchasers default in its or their obligations to purchase Notes hereunder and the aggregate principal amount of Notes that such defaulting Purchaser or Purchasers agreed but failed to purchase does not exceed 10% of the total principal amount of Notes, CSFBC may make arrangements satisfactory to the Company for the purchase of such Notes by other persons, including any of the Purchasers, but if no such arrangements are made by the Closing Date, the non-defaulting Purchasers shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the Notes that such defaulting Purchasers agreed but failed to purchase. If any Purchaser or Purchasers so default and the aggregate principal amount of Notes with respect to which such default or defaults occur exceeds 10% of the total principal amount of Notes and arrangements satisfactory to CSFBC and the Company for the purchase of such Notes by other persons are not made within 36 hours after such default, this Agreement will terminate without liability on the part of any non-defaulting Purchaser or the Company, except as provided in Section 8. --------- As used in this Agreement, the term "Purchaser" includes any person substituted for a Purchaser under this Section. Nothing herein will relieve a defaulting Purchaser from liability for its default. 8. Survival of Certain Representations and Obligations. The respective indemnities, agreements, representations, warranties and other statements of the Company and its officers and of the several Purchasers set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation, or statement as to the results thereof, made by or on behalf of any Purchaser, the Company or any of their respective representatives, officers or directors or any controlling person, and will survive delivery of and payment for the Notes. If this Agreement is terminated pursuant to Section 7 --------- or if for any reason (including the failure by the Company to satisfy any condition pursuant to Section 5 hereof), the purchase of the Notes by the --------- Purchasers is not consummated, the Company shall remain responsible for the expenses to be paid or reimbursed by it pursuant to Section 4 and the respective --------- obligations of the Company and the Purchasers pursuant to Section 6 shall remain --------- in effect. If the purchase of the Notes by the Purchasers is not consummated for any reason, other than solely as a result of the termination of this Agreement pursuant to Section 7 or the occurrence of any event specified in clause (iv), (vi) or (vii) of Section 5(b), the Company will reimburse the Purchasers for all out-of-pocket expenses (including reasonable fees and disbursements of one separate counsel) reasonably incurred by them in connection with the offering of the Notes. 9. Notices. All communications hereunder will be in writing and, if sent to the Purchasers will be mailed, delivered or telegraphed and confirmed to the Purchasers, c/o Credit Suisse First Boston Corporation, Eleven Madison Avenue, New York, N.Y. 10010-3629, Attention: Transactions Advisory Group with a copy to Westdeutsche Landesbank Girozentrale (Dusseldorf) c/o Westdeutsche Landesbank Girozentrale, New York Branch, 1211 Avenue of the Americas, New York, N.Y. 10036, Attention: Global Structured Finance/Energy Group or, if sent to the Company, will be mailed, delivered or telegraphed and confirmed to it at 18101 Von Karman Avenue, Suite 1700, Irvine, California 92612 (Fax: (949) 752-5624), Attention: Chief Financial Officer. 10. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the controlling persons referred to in Section 6, and no other person will have any --------- right or obligation hereunder, except that holders of Notes shall be entitled to enforce the agreements for their benefit contained in the second and third sentences of Section 4(b) hereof against the Company as if such holders were ------------ parties thereto. 11. Representation of Purchasers. CSFBC will act for the several Purchasers in connection with this purchase, and any action under this Agreement taken by CSFBC will be binding upon all the Purchasers. 12. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement. 13. APPLICABLE LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York without regard to principles of conflicts of laws. THE COMPANY HEREBY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE FEDERAL AND STATE COURTS IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN ANY SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. If the foregoing is in accordance with the Purchasers' understanding of our agreement, kindly sign and return to us one of the counterparts hereof, whereupon it will become a binding agreement between the Company and the several Purchasers in accordance with its terms. Very truly yours, EDISON MISSION ENERGY By: /s/ G. Gary Garcia ------------------ Name: G. Gary Garcia Title: Treasurer The foregoing Purchase Agreement is hereby confirmed and accepted as of the date first above written. CREDIT SUISSE FIRST BOSTON CORPORATION, acting on behalf of itself and as the representative of the several Purchasers By: /s/ Jennifer L. Powers ---------------------- Name: Jennifer L. Powers Title: Managing Director Schedule 1 ---------- Purchaser Principal Amount of Notes - --------- ------------------------- Credit Suisse First Boston Corporation $540,000,000 Westdeutsche Landesbank Girozentrale 60,000,000 (Dusseldorf) Total $600,000,000 EX-4.2 3 dex42.txt REGISTRATION RIGHTS AGREEMENT DATED 4-2-01 Exhibit 4.2 EXECUTION COPY $600,000,000 EDISON MISSION ENERGY 9.875% Senior Notes due April 15, 2011 REGISTRATION RIGHTS AGREEMENT ----------------------------- April 2, 2001 CREDIT SUISSE FIRST BOSTON CORPORATION WESTDEUTSCHE LANDESBANK GIROZENTRALE (DUSSELDORF) c/o Credit Suisse First Boston Corporation Eleven Madison Avenue New York, New York 10010-3629 Ladies and Gentlemen: In connection with the issue and sale of $600 million in aggregate principal amount of 9.875% Senior Notes due April 15, 2011 (the "Initial Notes") ------------- issued by Edison Mission Energy, a California corporation (the "Company"), ------- pursuant to the terms of the Indenture (as defined below) and as an inducement to Credit Suisse First Boston Corporation and Westdeutsche Landesbank Girozentrale (Dusseldorf) (the "Initial Purchasers") to enter into the Purchase ------------------ Agreement, dated April 2, 2001 (the "Purchase Agreement"), among the Company and ------------------ the Initial Purchasers, the Company hereby agrees to provide the registration rights set forth in this Registration Rights Agreement (this "Agreement") for --------- the benefit of the holders of the Initial Notes. The execution of this Agreement is a condition to the purchase of the Initial Notes under the Purchase Agreement. SECTION 1. Definitions. Capitalized terms used herein without ----------- definition shall have the respective meanings ascribed thereto, whether expressly or by reference to another agreement or document, in the Indenture. The definitions set forth in this Agreement shall equally apply to both the singular and plural forms of the terms defined. As used in this Agreement, the following terms shall have the following meanings: "Advice" shall have the meaning set forth in the last paragraph of ------ Section 5 of this Agreement. "Affiliate", with respect to any Person, shall mean any other Person --------- that directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with such first Person. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities or by contract or otherwise. For purposes of Section 2, an "Affiliate" of the Company shall mean and include, in addition, any Person deemed an affiliate thereof under the Securities Act or the Exchange Act in connection with the Exchange Offer. "Closing Date" shall mean the date of the initial issuance and sale of ------------ the Initial Notes. "Commission" shall mean the United States Securities and Exchange ---------- Commission. "Company" shall have the meaning set forth in the first paragraph of ------- this Agreement. "Cure Date" shall have the meaning set forth in Section 4(a) of this --------- Agreement. "Effective Date" shall mean the date which is 270 days after the -------------- Closing Date. "Effective Period" shall have the meaning set forth in Section 3(a) of ---------------- this Agreement. "Exchange Act" shall mean the Securities Exchange Act of 1934, as ------------ amended, and the rules and regulations of the Commission promulgated thereunder. "Exchange Offer" shall have the meaning set forth in Section 2(a) of -------------- this Agreement. "Exchange Offer Registration Statement" shall have the meaning set ------------------------------------- forth in Section 2(a) of this Agreement. "Exchange Period" shall have the meaning set forth in Section 2(a) of --------------- this Agreement. "Exchange Notes" shall have the meaning set forth in Section 2(a) of -------------- this Agreement. A "holder" of Registrable Notes shall mean the registered holder of ------ such securities or any beneficial owner thereof. "Holder Indemnified Party" shall have the meaning set forth in Section ------------------------ 8(a) of this Agreement. "Holder Information" shall have the meaning set forth in Section 8(a) ------------------ of this Agreement. "Illiquidity Event" with respect to the Initial Notes shall mean any ----------------- of the following events: (a) as of the Effective Date, both (i) an Exchange Offer Registration Statement (which, if applicable pursuant to Section 2(a), covers resales of such Exchange Notes) 2 has not become effective and (ii) the Registrable Notes are not the subject of an Initial Shelf Registration Statement which has become effective; or (b) the Exchange Notes offered in exchange for the Registrable Notes are the subject of an Exchange Offer Registration Statement which was effective (and which, if applicable pursuant to Section 2(a), covered resales of such Exchange Notes) but which ceased to be effective for any reason prior to the end of the Exchange Period; or (c) the Registrable Notes are the subject of an Initial Shelf Registration Statement or Subsequent Shelf Registration Statement which was effective but which has ceased to be effective for any reason prior to the end of the Effective Period. An Illiquidity Event shall be deemed to cease to exist on the date subsequent to the occurrence of such Illiquidity Event on which: (i) in the case of an Illiquidity Event described in clause (a) above, either (i) an Exchange Offer Registration Statement (which, if applicable pursuant to Section 2(a), covers resales of the Exchange Notes exchanged for such Registrable Notes) shall become effective and an Exchange Offer for such Registrable Notes shall have commenced or (ii) an Initial Shelf Registration Statement covering such Registrable Notes shall become effective; or (ii) in the case of an Illiquidity Event described in clause (b) above, either (i) an Exchange Offer Registration Statement (which, if applicable pursuant to Section 2(a), covers resales of the Exchange Notes offered in exchange for such Initial Notes) shall become effective and an Exchange Offer for such Registrable Notes shall have commenced pursuant to an Exchange Offer Registration Statement or (ii) an Initial Shelf Registration Statement covering such Registrable Notes shall become effective; or (iii) in the case of an Illiquidity Event described in clause (c) above, a Subsequent Shelf Registration Statement covering such Registrable Notes shall become effective. "Indenture" shall mean the Indenture, dated as of April 5, 2001, and --------- as further amended or supplemented from time to time in accordance with the terms thereof, between the Company and the Trustee, and pursuant to which the Initial Notes and any Exchange Notes are to be issued. "Initial Purchasers" shall have the meaning set forth in the first ------------------ paragraph of this Agreement. "Initial Notes" shall have the meaning set forth in the first ------------- paragraph of this Agreement. "Initial Shelf Registration Statement" shall have the meaning set ------------------------------------ forth in Section 3(a) of this Agreement. "Inspectors" shall have the meaning set forth in Section 5(m) of this ---------- Agreement. 3 "Managing Underwriters" shall mean the investment banker or investment --------------------- bankers and manager or managers that shall administer an Underwritten Offering. "NASD" shall mean the National Association of Securities Dealers, Inc. ---- "Prospectus" shall mean the prospectus included in any Registration ---------- Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, and all other amendments and supplements to the prospectus included in any Registration Statement, including post-effective amendments and all material incorporated by reference into such prospectus. "Purchase Agreement" shall have the meaning set forth in the first ------------------ paragraph of this Agreement. "Records" shall have the meaning set forth in Section 5(m) of this ------- Agreement. "Registrable Notes" shall mean the Initial Notes upon original ----------------- issuance thereof and at all times subsequent thereto until, in the case of any such Initial Note, (i) a Registration Statement covering such Initial Note, or the Exchange Note to be exchanged for such Initial Note (and, in the case of any Resale Note, any resale thereof), has been declared effective and such Initial Note has been disposed of or exchanged (or, in any case where such Registration Statement covers the resale of Resale Notes, such Initial Note has been exchanged and the Resale Note received therefor has been resold), as the case may be, in accordance with such effective Registration Statement, (ii) such Initial Note is sold in compliance with Rule 144 or would be permitted to be sold pursuant to Rule 144(k), (iii) such Initial Note shall have been otherwise transferred and a new certificate therefor not bearing a legend restricting further transfer shall have been delivered by or on behalf of the Company and such Initial Note shall be tradeable by each holder thereof without restriction under the Securities Act or the Exchange Act and without material restriction under the applicable blue sky or state securities laws or (iv) such Initial Note ceases to be outstanding. "Registration Statement" shall mean any registration statement ---------------------- (including any Shelf Registration Statement) of the Company that covers any of the Registrable Notes or the Exchange Notes, as the case may be, pursuant to the provisions of this Agreement, including the Prospectus which is part of such Registration Statement, amendments (including post-effective amendments) and supplements to such Registration Statement and all exhibits and appendices to any of the foregoing. For purposes of the foregoing, unless the context requires otherwise, a Registration Statement for an Exchange Offer shall not be deemed to cover Registrable Notes held by a Restricted Person unless such Registration Statement covers the resale of Resale Notes to be received by such Restricted Person pursuant to such Exchange Offer and any such Initial Notes shall continue to be Registrable Notes. "Resale Initial Purchaser" shall have the meaning set forth in Section ------------------------ 8(a) of this Agreement. 4 "Resale Notes" shall mean any Exchange Note received by a Restricted ------------ Person pursuant to an Exchange Offer, and at all times subsequent thereto, until, subject to the time periods set forth herein, such Exchange Note has been resold by such Restricted Person. "Restricted Person" shall mean (a) any Affiliate of the Company, (b) ----------------- any Initial Purchaser or (c) any Affiliate of any Initial Purchaser (other than Affiliates of such Initial Purchaser that (i) are acquiring Exchange Notes in the ordinary course of business and do not have an arrangement with any Person to distribute Exchange Notes and (ii) may trade such Exchange Notes without restriction under the Securities Act). "Rule 144" shall mean Rule 144 under the Securities Act, as such Rule -------- may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission. "Rule 144A" shall mean Rule 144A under the Securities Act, as such --------- Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission. "Rule 415" shall mean Rule 415 under the Securities Act, as such Rule -------- may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission. "Securities Act" shall mean the Securities Act of 1933, as amended, -------------- and the rules and regulations of the Commission promulgated thereunder. "Shelf Notice" shall have the meaning set forth in Section 2(b) of ------------ this Agreement. "Shelf Registration Statement" shall have the meaning set forth in ---------------------------- Section 3(b) of this Agreement. "Special Counsel" shall mean Latham & Watkins, special counsel to the --------------- Initial Purchasers, or any other firm acceptable to the Company, acting as special counsel to the holders of Registrable Notes or Exchange Notes. "Subsequent Shelf Registration Statement" shall have the meaning set --------------------------------------- forth in Section 3(b) of this Agreement. "TIA" shall mean the Trust Indenture Act of 1939, as amended, and the --- rules and regulations of the Commission promulgated thereunder. "Trustee" shall mean United States Trust Company of New York, its ------- successors and any successor trustee under the Indenture. "Underwritten Registration" or "Underwritten Offering" shall mean a ------------------------- --------------------- registration in which securities are sold to an underwriter or group of underwriters for reoffering to the public. 5 SECTION 2. Exchange Offer. -------------- (a) Unless the Company determines in good faith that the Exchange Offer shall not be permissible under applicable law or Commission policy, the Company shall prepare and cause to be filed with the Commission as soon as reasonably practicable after the Closing Date, subject to Sections 2(b) and 2(c) of this Agreement, a Registration Statement (an "Exchange Offer Registration --------------------------- Statement") for an offer to exchange (an "Exchange Offer") the Registrable Notes - --------- -------------- (subject to Section 2(c)) for a like aggregate principal amount of debt securities of the Company in all material respects substantially identical to the Initial Notes (the "Exchange Notes") (and which are entitled to the benefits -------------- of the Indenture, which shall be qualified under the TIA in connection with such registration, or a trust indenture which is substantially identical in all material respects to the Indenture), other than (i) such changes to the Indenture or any such substantially identical indenture as the Trustee and the Company may deem necessary in connection with the Trustee's rights and duties or to comply with any requirements of the Commission to effect or maintain the qualification thereof under the TIA and (ii) such changes relating to restrictions on transfer set forth in the Indenture. The Exchange Offer shall be registered under the Securities Act on the appropriate form of Registration Statement and shall comply with all applicable tender offer rules and regulations under the Exchange Act and with all other applicable laws. Subject to the terms and limitations of Section 2(c), such Exchange Offer Registration Statement may also cover any resales of Exchange Notes by any Restricted Person, in the manner or manners designated by them which, in any event, is reasonably acceptable to the Company. The Company shall use its reasonable best efforts to (i) cause the Exchange Offer Registration Statement to become effective under the Securities Act on or prior to the Effective Date, (ii) keep the Exchange Offer open for a period of not less than the shorter of (A) the period ending when the last remaining Initial Note is tendered into the Exchange Offer and (B) 30 days from the date notice is mailed to the holders of Initial Notes (provided that in no -------- event shall such period be less than the period required under applicable Federal and state securities laws), and (iii) maintain such Exchange Offer Registration Statement continuously effective for a period (the "Exchange -------- Period") of not less than the longer of (A) the period until the consummation of - ------ the Exchange Offer and (B) 120 days after effectiveness of the Exchange Offer Registration Statement, provided however, that in the event that all resales of -------- ------- Exchange Notes (including, subject to the time periods set forth herein, any Resale Notes and including, subject to the time periods set forth herein, any resales by broker-dealers that receive Exchange Notes for their own account pursuant to the Exchange Offer) covered by such Exchange Offer Registration Statement have been made, the Exchange Offer Registration Statement need not remain continuously effective for the period set forth in clause (B) above. Upon consummation of the Exchange Offer, the Company shall deliver to the Trustee under the Indenture for cancellation all Initial Notes tendered by the holders thereof pursuant to the Exchange Offer and not withdrawn prior to the date of consummation of the Exchange Offer. Each Restricted Person shall notify the Company promptly after reselling all Resale Notes held by such Restricted Person which are covered by any such Registration Statement. Each holder of Registrable Notes to be exchanged in the Exchange Offer (other than any Restricted Person) shall be required as a condition to participating in the Exchange Offer to represent that (i) it is not an Affiliate of the Company, (ii) any Exchange Notes to be 6 received by it shall be acquired in the ordinary course of its business and (iii) that at the time of the consummation of the Exchange Offer it shall have no arrangement with any person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Notes. Upon consummation of an Exchange Offer in accordance with this Section 2 and compliance with the other provisions of this Section 2, the Company shall, subject to Sections 2(b) and 2(c), have no further obligation to register Registrable Notes pursuant to Section 3(a) of this Agreement; provided that the other provisions of this -------- Agreement shall continue to apply as set forth in such provisions. (b) In the event that the Company reasonably determines in good faith that (i) the Exchange Notes would not, upon receipt in the Exchange Offer by any holder of Registrable Notes (other than any Restricted Person and other than any holder who is not acquiring such Exchange Notes in the ordinary course of business or who has an arrangement with any person to participate in the distribution of such Exchange Notes), be tradeable by each holder thereof without restriction under the Securities Act and the Exchange Act and without restriction under applicable blue sky or state securities laws, (ii) after conferring with counsel, the Commission is unlikely to permit the Exchange Offer Registration Statement to become effective prior to the Effective Date (except in the circumstances set forth in Section 2(c)) or (iii) the Exchange Offer may not be made in compliance with applicable laws, then the Company shall promptly deliver notice thereof (the "Shelf Notice") to the holders of the Registrable ------------ Notes and the Trustee and shall thereafter file an Initial Shelf Registration Statement pursuant to, and otherwise comply with, the provisions of Section 3(a). Following the delivery of a Shelf Notice in accordance with this Section 2(b) and compliance with Section 3(a), the Company shall not have any further obligation under this Section 2. (c) In the event that the Company reasonably determines in good faith that (i) the Exchange Notes would not, upon consummation of any resale thereof by a Restricted Person to any Person other than another Restricted Person, be tradeable by each holder thereof without restriction under the Securities Act (other than applicable prospectus requirements) and the Exchange Act and without restriction under applicable blue sky or state securities laws or (ii) the Commission is unlikely to permit the Exchange Offer Registration Statement to become effective prior to the Effective Date solely because such Registration Statement covers resales of the Exchange Notes by Restricted Persons, then the Company shall promptly deliver a Shelf Notice to the Restricted Persons who are holders of Registrable Notes and to the Trustee, and the Company shall thereafter file an Initial Shelf Registration Statement with respect to any such Registrable Notes pursuant to, and otherwise comply with, the provisions of Section 3(a); provided that such Initial Shelf Registration Statement shall only -------- cover resales of Registrable Notes by Restricted Persons if a Shelf Notice is not then otherwise required to be delivered pursuant to Section 2(b); and, provided, further that such Initial Shelf Registration Statement covering - -------- ------- Registrable Notes held by Restricted Persons shall be kept effective for at least a period of 120 days and is not required to remain effective with respect to Registrable Notes held by Restricted Persons thereafter. Following the delivery of a Shelf Notice in accordance with this Section 2(c) and compliance with Section 3(a), the Company shall not have any further obligation under this Section 2 with respect to the filing of an offer to exchange the Registrable Notes held by the Restricted Persons (including, without limitation, any obligation to provide that an Exchange Offer Registration Statement filed pursuant to Section 2(a) cover resales of Exchange Notes by Restricted Persons); provided that the provisions of this Section 2 shall - -------- 7 otherwise remain in full force and effect with respect to Registrable Notes held by any person other than a Restricted Person. SECTION 3. Shelf Registration; Registrable Notes. With respect to ------------------------------------- the Registrable Notes, if a Shelf Notice is delivered in accordance with Section 2(b) or 2(c) of this Agreement, then the Company shall comply with the following provisions of this Section 3: (a) Initial Shelf Registration. The Company shall prepare and cause -------------------------- to be filed with the Commission a Registration Statement for an offering to be made on a continuous basis other than pursuant to an Underwritten Offer pursuant to Rule 415 covering all of the Registrable Notes (or, if a Shelf Notice is delivered solely pursuant to Section 2(c), all of the Registrable Notes held by any Restricted Persons) (the "Initial Shelf Registration Statement"); provided, ------------------------------------ -------- however, that no holder shall be entitled to have its Registrable Notes covered - ------- by such Initial Shelf Registration Statement unless such holder agrees in writing, within 10 Business Days after actual receipt of a request therefrom, to be bound by all the provisions of this Agreement applicable to such holder. No holder shall be entitled to the benefits of Section 4 of this Agreement unless and until such holder shall have provided all information reasonably requested by the Company (after conferring with counsel), and such holder shall not be entitled to such benefits with respect to any period during which such information was not provided. Each holder to which any Shelf Registration Statement is being effected agrees to furnish promptly to the Company all information required to be disclosed in order to make the information previously furnished to the Company by such holder not materially misleading. The Initial Shelf Registration Statement shall be an appropriate form permitting registration of such Registrable Notes for resale by the holders thereof in the manner or manners reasonably designated by them (but excluding any Underwritten Offerings). The Company shall use its reasonable best efforts to (A) cause the Initial Shelf Registration Statement to be declared effective under the Securities Act on or prior to the Effective Date and (B) keep the Initial Shelf Registration Statement continuously effective under the Securities Act for a period of two years after the Closing Date (subject to extension pursuant to the last paragraph of Section 5 and subject, with respect to Registrable Notes held by Restricted Persons, to the limitations set forth in Section 2(c)) (such two- year period, as it may be extended, being the "Effective Period"), or such ---------------- shorter period ending when (1) all Registrable Notes covered by the Initial Shelf Registration Statement have been sold or (2) a Subsequent Shelf Registration Statement covering all of such Registrable Notes remaining unsold has been declared effective under the Securities Act or (3) all Registrable Notes may be sold pursuant to subsection (k) of Rule 144. Notwithstanding any other provision hereof, the Company may postpone or suspend the filing or the effectiveness of a Registration Statement (or any amendments or supplements thereto), if (1) such action is required by applicable law, or (2) such action is taken by the Company in good faith and for valid business reasons (not including avoidance of such party's obligations hereunder), including the acquisition or divestiture of assets, other pending corporate developments, public filings with the Commission or other similar events, so long as the Company promptly thereafter complies with the requirements of Section 5(b) hereof, if applicable. Notwithstanding the occurrence of any event referred to in the immediately preceding sentence (a "Suspension"), such event shall not suspend, postpone or in any other manner - ----------- affect the running of the time period after which an Illiquidity Event shall be deemed to occur and, if the filing or effectiveness of a Registration Statement is postponed or suspended as 8 a result of a Suspension, an Illiquidity Event shall nonetheless exist if all other requirements set forth for the occurrence of an Illiquidity Event shall be satisfied, and the provisions of Section 4 requiring the accrual payment of additional interest, as set forth in such Section, on the Registrable Notes, shall be applicable. (b) Subsequent Shelf Registrations. If the Initial Shelf Registration ------------------------------ Statement or any Subsequent Shelf Registration Statement ceases to be effective for any reason at any time during the Effective Period after the Effective Date, the Company may attempt to obtain the withdrawal of any order suspending the effectiveness thereof, and may amend such Initial Shelf Registration Statement or Subsequent Shelf Registration Statement in a manner reasonably expected to obtain the withdrawal of the order suspending the effectiveness thereof, or file an additional "shelf" Registration Statement applicable to the Initial Notes pursuant to Rule 415 covering all of such Registrable Notes remaining unsold (a "Subsequent Shelf Registration Statement"). If a Subsequent Shelf Registration --------------------------------------- Statement is declared effective, the Company shall use its reasonable best efforts to keep such Shelf Registration Statement continuously effective for a period after the date of such effectiveness equal in length to the length of the Effective Period plus the aggregate number of days from the date of the order suspending the effectiveness of the Initial Shelf Registration Statement or any Subsequent Shelf Registration Statement to the date of the effectiveness of the Subsequent Shelf Registration Statement. As used herein, the term "Shelf ----- Registration Statement" means the Initial Shelf Registration Statement and any - ---------------------- Subsequent Shelf Registration Statement. SECTION 4. Additional Interest for Illiquidity. ----------------------------------- (a) The Company acknowledges and agrees that the Initial Purchasers (and any subsequent holders of the Initial Notes) have acquired the Initial Notes in reliance on the covenant of the Company to use its reasonable best efforts to (i) cause to become effective on or prior to the Effective Date (A) the Exchange Offer Registration Statement or (B) an Initial Shelf Registration Statement, and (ii) maintain the respective effectiveness of such Registration Statements as described herein. The Company further acknowledges and agrees that the failure of the Company to fulfill such covenants will have an adverse effect on the holders of the Initial Notes. Therefore, the Company agrees that from and after the date on which any Illiquidity Event occurs, additional interest (in addition to the interest otherwise payable with respect to the Registrable Notes) shall accrue with respect to the Initial Notes until but not including the date on which such Illiquidity Event shall cease to exist (and provided no other Illiquidity Event with respect to any Initial Notes shall then be continuing), at the rate of one half of one percent (0.50%) per annum, which additional interest shall be payable by the Company to the holders of all Initial Notes at the times, in the manner and subject to the same terms and conditions set forth in the Indenture, as nearly as may be, as though the interest rates provided in such Initial Notes had been increased by one half of one percent (0.50%) per annum. Subject to the provisions of this Section 4, the Company agrees that it shall be liable to the holders of all Initial Notes for the payment of any and all additional interest on the Initial Notes that shall accrue pursuant to this Section 4. Any such additional interest accrued on any such Initial Notes but unpaid on the date on which such interest ceases to accrue (the "Cure Date") --------- shall be due and payable on the first interest payment date following the next record date following such Cure Date (or the record 9 date occurring on such Cure Date, if such Cure Date is a record date) to the holders of record of such Initial Notes on such record date. (b) The Company shall promptly notify the holders of the Initial Notes and the Trustee of the occurrence of any Illiquidity Event of which it has knowledge. Notwithstanding the foregoing, the Company shall not be required to pay the additional interest described in clause (a) of this Section 4 to a holder with respect to the Registrable Notes held by such holder if the applicable Illiquidity Event arises by reason of the failure of such holder to provide such information as (i) the Company may reasonably request, with reasonable prior written notice, for use in the Shelf Registration Statement or any Prospectus included therein to the extent the Company reasonably determines that such information is required to be included therein by applicable law, (ii) the NASD or the Commission may request in connection with such Shelf Registration Statement, or (iii) is required to comply with the agreements of such holder contained in clause (a) of Section 3 to the extent compliance thereof is necessary for the Shelf Registration Statement to be declared effective. SECTION 5. Registration Procedures. In connection with the ----------------------- registration of any Registrable Notes or Exchange Notes pursuant to Sections 2 and 3 hereof, the Company shall use its reasonable best efforts to effect such registration to permit the sale of such Registrable Notes or Exchange Notes in accordance with any permitted intended method or methods of disposition thereof, and pursuant thereto the Company shall: (a) prepare and cause to be filed with the Commission a Registration Statement or Registration Statements as prescribed by Sections 2 and 3 of this Agreement, and use its reasonable best efforts to cause each such Registration Statement to become effective and remain effective for the applicable period as provided herein; provided, however, that (i) during the period in which the -------- ------- Initial Registration Statement is open for the Restricted Persons, the Company shall afford any Restricted Person which is a holder of Registrable Notes or Exchange Notes and the Special Counsel, upon such holder's written request to the Company, an opportunity to review copies of all such documents proposed to be filed, and (ii) if such filing is pursuant to Section 3, before filing any Registration Statement or Prospectus or any amendments or supplements thereto (including documents that would be incorporated therein by reference after the initial filing of the Registration Statement), the Company shall afford the Special Counsel for all holders of the Registrable Notes covered by such Registration Statement an opportunity to review copies of all such documents proposed to be filed; (b) prepare and cause to be filed with the Commission such amendments and post-effective amendments to each Shelf Registration Statement as may be necessary to keep such Registration Statement continuously effective for the applicable period as provided herein; cause the related Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) under the Securities Act; and comply with the provisions of the Securities Act, the Exchange Act and the rules and regulations of the Commission promulgated thereunder with respect to the disposition of all securities covered by such Registration Statement as so amended or in such 10 Prospectus as so supplemented in accordance with the intended methods of disposition by the sellers of Registrable Notes covered thereby set forth therein; (c) if a Shelf Registration Statement is filed pursuant to Section 3 hereof, notify the selling holders of Registrable Notes promptly after the Company becomes aware thereof, and confirm such notice in writing, (i) when a Prospectus or any Prospectus supplement or post-effective amendment has been filed, and, with respect to a Registration Statement or any post-effective amendment, when the same has become effective, (ii) of any request by the Commission for amendments or supplements to the Registration Statement or the Prospectus or for additional information, (iii) of the issuance by the Commission of any stop order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of any preliminary prospectus or Prospectus or the initiation of any proceedings for that purpose, (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of a Registration Statement or any of the Registrable Notes for offer or sale in any jurisdiction, or the initiation of any proceeding for such purpose, (v) of the existence of any fact known to the Company which results in such Registration Statement or related Prospectus or any document incorporated therein by reference containing any untrue statement of a material fact or omitting to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (which notice may be accompanied by an instruction that such notice constitutes material non-public information and to suspend the use of the prospectus until the requisite changes have been made, and which instruction shall require that such holders shall not communicate such material non-public information to any third party and shall not sell or purchase, or offer to sell or purchase, any securities of the Company after receipt of such notice) and (vi) if the Company reasonably determines that the filing of a post-effective amendment to such Registration Statement would be appropriate; (d) if a Shelf Registration Statement is filed pursuant to Section 3, use its reasonable efforts to prevent the issuance of any order suspending the effectiveness of a Registration Statement or of any order preventing or suspending the use of a Prospectus or suspending the qualification (or exemption from qualification) of any of the Registrable Notes for sale in any jurisdiction and, if any such order is issued, to obtain the withdrawal of any such order at the earliest possible moment; (e) if a Shelf Registration Statement is filed pursuant to Section 3, furnish to each selling holder of Registrable Notes who so requests (at such holder's address set forth in the Securities Register) without charge, one conformed copy of the Registration Statement or Registration Statements and each post-effective amendment thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits (including those incorporated by reference); (f) if a Shelf Registration Statement is filed pursuant to Section 3, deliver to each selling holder of Registrable Notes without charge, as many copies of the Prospectus (including each preliminary prospectus) and each amendment or supplement thereto as such persons may reasonably request; and, subject to the last paragraph of this Section 5, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling holders of Registrable Notes and the underwriters, if any, in 11 connection with the offering and sale of the Registrable Notes covered by such Prospectus and any amendment or supplement thereto; (g) prior to any public offering of Registrable Notes, register or qualify, or cooperate with the selling holders of Registrable Notes, the underwriters, if any, and their respective counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Registrable Notes for offer and sale under the securities or blue sky laws of such jurisdictions within the United States as the selling holders reasonably request in writing (provided that, if Registrable Notes are offered other than through an Underwritten Offering, the Company agrees to cause its counsel to perform blue sky investigations and file registrations and qualifications required to be filed pursuant to this Section 5(g)); keep each such registration or qualification (or exemption therefrom) effective during the period such Registration Statement is required to be kept effective; and do any and all other acts or things necessary or advisable to enable the disposition in such jurisdictions of the Registrable Notes covered by the applicable Registration Statement; provided, however, that the Company will not be required to qualify as a foreign corporation, or to do business, to file a general consent or take any action which would subject it to service of process in any jurisdiction or take any action which would subject itself to taxation in any such jurisdiction; (h) if a Shelf Registration Statement is filed pursuant to Section 3, cooperate with the Trustee and the selling holders of Registrable Notes to facilitate the timely preparation and delivery of certificates representing Registrable Notes to be sold, which certificates shall not bear any restrictive legends and shall be in a form eligible for deposit with The Depository Trust Company, and enable such Registrable Notes to be in such authorized denominations and registered in such names as the holders may reasonably request at least three Business Days prior to any such sale; (i) if a Shelf Registration Statement is filed pursuant to Section 3, upon the occurrence of any event contemplated by Section 5(c), prepare a supplement or post-effective amendment to the Registration Statement or a supplement to the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Notes, such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company so notifies the holders to suspend the use of the Prospectus after the occurrence of such an event, the holders shall suspend use of the Prospectus, and not communicate such material non- public information to any third party, and not sell or purchase, or offer to sell or purchase, any securities of the Company, until the Company has amended or supplemented the Prospectus to correct such misstatement or omission; (j) use its reasonable best efforts to cause the Registrable Notes covered by the Registration Statement to continue to be rated by the rating agencies that initially rated the Initial Notes during the period that the Registration Statement is required hereunder to remain effective (it being acknowledged, however, that the foregoing shall not be deemed to require the Company to maintain the rating of such Registrable Notes at the rating given to the Initial Notes); 12 (k) prior to the effective date of the first Registration Statement relating to the Registrable Notes or the Exchange Notes, as the case may be, (i) provide the Trustee with printed certificates for such securities in definitive form or in a global form eligible for deposit with The Depository Trust Company and (ii) provide a CUSIP number for such Registrable Notes or Exchange Notes represented by such certificates; (l) if a Shelf Registration Statement is filed pursuant to Section 3, enter into such reasonably required agreements and take all other appropriate actions in order to expedite or facilitate the registration or the disposition of such Registrable Notes; (m) in the event of any Underwritten Offering (which shall only be undertaken at the option of the Company), if a Shelf Registration Statement is filed pursuant to Section 3, make available prior to the filing thereof for inspection by a representative of the holders of a majority in aggregate principal amount of the Registrable Notes being sold, and the Special Counsel, on the one hand, or underwriter on the other hand (collectively, the "Inspectors"), during reasonable business hours, all financial and other ---------- records, pertinent corporate documents and properties of the Company (collectively, the "Records"), and cause the officers, directors and employees ------- of the Company to supply all relevant information as shall be reasonably necessary to enable them to exercise any applicable due diligence responsibilities; provided, however, that, as a condition to supplying such -------- ------- information, the Company shall receive an agreement in writing from the Special Counsel agreeing that any information that is designated in writing by the Company, in good faith, as confidential at the time of delivery of such information shall be kept confidential by such Inspector (other than as to holders of Registrable Notes) and by any holders of Registrable Notes receiving such information, unless (i) disclosure of such information is required pursuant to applicable law or by court or administrative order, (ii) disclosure of such information is, in the reasonable opinion of counsel to the Company, necessary to avoid or correct a misstatement or omission of a material fact in the Registration Statement, Prospectus or any supplement or post-effective amendment thereto or disclosure is otherwise required by law, (iii) such information becomes generally available to the public other than as a result of a disclosure by any Inspector or any such holder of Registrable Notes in violation of this Section 5(m) or (iv) such information is approved for release by the Company, in writing; (n) use its best efforts to cause the Indenture or the trust indenture provided for in Section 2, as the case may be, to be qualified under the TIA not later than the effective date of such Registration Statement; and, in connection therewith, cooperate with the Trustee under the Indenture and the holders of the Registrable Notes to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the TIA and execute, and use its best efforts to cause such Trustee to execute, all documents as may be required to effect such changes, and all other forms and documents required to be filed with the Commission to enable the Indenture or the trust indenture provided for in Section 2 to be so qualified in a timely manner; (o) otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the Commission. For purposes of the covenants set forth in this Section 5, references to a Shelf Registration Statement, including a Shelf Registration Statement filed pursuant to Section 3, 13 shall be deemed to include any Registration Statement, filed pursuant to Section 2, which covers, for the period set forth therein, resales of Exchange Notes held by Restricted Persons as provided in Section 2, and, in connection with such resales such Restricted Persons shall be entitled to exercise all rights, receive all notices and copies of documents, and otherwise receive all benefits afforded to sellers or holders of Registrable Notes under this Section 5 in connection with a Shelf Registration Statement. Without limiting the generality of the foregoing, the Company agrees to fulfill its obligations set forth in Sections 5(a), (b), (c), (d), (e), (f), (h), (i), (l) and (m) with respect to any such Registration Statement filed pursuant to Section 2 insofar as it covers such resales. The Company may require each seller of Registrable Notes as to which any registration is being effected, as a condition thereto, to furnish to the Company such information regarding the holder and the distribution of such Registrable Notes as the Company may, from time to time, request in writing, including without limitation stating (i) that it is not an Affiliate of the Company, (ii) the amount of Registrable Notes held by such holder prior to the Exchange Offer, (iii) the amount of Registrable Notes owned by such holder to be exchanged in the Exchange Offer, and representing that such holder is not engaged in, and does not intend to engage in, and has no arrangement or understanding with any Person to participate in, a distribution of the Exchange Notes to be issued, and (iv) that it is acquiring the Exchange Notes in its ordinary course of business, and to covenant and agree to promptly notify the Company if any such information so provided by such seller ceases to be true and correct and will promptly thereafter furnish the Company with corrected information. The Company may exclude from such registration the Registrable Notes of any Person who fails to furnish such information within a reasonable time after receiving such request. Each holder of Registrable Notes agrees by acquisition of such Registrable Notes that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 5(c)(ii), 5(c)(iii), 5(c)(v) or 5(c)(vi) hereof, such holder shall forthwith discontinue disposition of such Registrable Notes covered by such Registration Statement or Prospectus until such holder is advised in writing (the "Advice") by the Company that the ------ use of the applicable Prospectus may be resumed, and has received copies of any amendments or supplements thereto and, if so directed by the Company, such holder will deliver to the Company (at such holder's expense) all copies in its possession, other than permanent file copies then in such holder's possession, of the prospectus covering such Registrable Notes current at the time of receipt of such notice, or certify in writing as to the destruction thereof. In the event the Company shall give any such notice, the length of the Effective Period shall be extended by the number of days during such period from and including the date of the giving of such notice to and including the date when each seller of Registrable Notes covered by such Registration Statement shall have received (x) the copies of the supplemented or amended Prospectus contemplated by Section 5(i) or (y) the Advice. 14 SECTION 6. Delivery of Prospectus; Notification Upon Resale. The ------------------------------------------------ Initial Purchasers acknowledge that it is the position of the staff of the Commission that any broker-dealer that receives Exchange Notes for its own account in exchange for Registrable Notes pursuant to the Exchange Offer must deliver a prospectus in connection with any resale of such Resale Notes. By so acknowledging, such Initial Purchasers shall not be deemed to admit that, by delivering a prospectus, it is an underwriter within the meaning of the Securities Act. Each Initial Purchaser shall notify the Company promptly upon the completion of the resale of the Resale Notes received by such Initial Purchaser pursuant to the Exchange Offer. SECTION 7. Registration Expenses. The Company shall bear all --------------------- expenses incurred in connection with the performance of its obligations under Sections 2, 3 and 4; provided, however, that the Company shall bear or reimburse -------- ------- the holders for the reasonable fees and disbursements of only one counsel, the Special Counsel, in accordance with the terms of the Purchase Agreement; provided, further, however, that if the Company opts for an Underwritten - -------- ------- ------- Offering, the Company shall not be responsible for any fees and expenses of any underwriter, including any underwriting discounts and commissions or any legal fees and expenses of counsel to the underwriters (except for the reasonable fees and disbursements of counsel in connection with state securities or blue sky qualification of any of the Registrable Notes or the Exchange Notes). SECTION 8. Indemnification and Contribution. -------------------------------- (a) The Company agrees to (A) indemnify and hold harmless each holder of Registrable Notes (including any Initial Purchaser which holds Registrable Notes, including Resale Notes, for its own account (each, a "Resale Initial -------------- Purchaser") and each Person, if any, who controls any such Person within the - --------- meaning of either the Securities Act or the Exchange Act and each director, officer, employee or agent of each such Person) (each a "Holder Indemnified ------------------ Party") against any and all losses, claims, damages or liabilities, joint or - ----- several, to which they or any of them are subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in any Registration Statement covering Registrable Notes held by such person or any Prospectus relating to any such Registration Statement, or any amendment thereof or supplement thereto and all documents incorporated by reference therein, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading, and (B) reimburse each such Holder Indemnified Party for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; provided, -------- however, that the Company will not be liable in any such case to the extent that - ------- any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made in such Registration Statement or Prospectus, or in any amendment thereof or supplement thereto, in reliance upon and in conformity with written information relating to such holder provided by such holder to the Company specifically for use therein (collectively, the "Holder Information"); provided, ------------------ -------- further, however, that the indemnity obligations arising out of this Section 8 - ------- ------- with respect to any untrue statement or alleged untrue statement or omission or 15 alleged omission made in any preliminary Prospectus shall not inure to the benefit of any holder or any controlling Person of such holder, to the extent that a prospectus relating to such Registrable Notes or the Exchange Notes, as the case may be, was required to be delivered by such holder under the Securities Act in connection with such sale and any such loss, claim, damage or liability of such holder results from the fact that such holder failed to send or deliver to the Person asserting any such losses a copy of the final Prospectus with or prior to the delivery of the written confirmation of the sale of the Registrable Notes or the Exchange Notes, as the case may be, and such final Prospectus would have cured the untrue statement or omission giving rise to such losses if the Company had previously furnished copies thereof to such holder. This indemnity agreement will be in addition to any liability which the Company may otherwise have. (b) As a condition to the inclusion of a holder's Registrable Notes in a Registration Statement, such holder shall agree to (i) indemnify and hold harmless the Company and each person who controls the Company within the meaning of either the Securities Act or the Exchange Act, and each director, officer, employee or agent of each such person, against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them are subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in a Registration Statement covering Registrable Notes held by such holder or any Prospectus relating to any such Registration Statement or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in light of the circumstances in which they were made, not misleading, and (ii) reimburse each such indemnified party for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action as such expenses are incurred; in each and every case under clause (i) and (ii) above to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in such Registration Statement or Prospectus or in any amendment thereof or supplement thereto, in reliance upon and in conformity with the Holder Information. This indemnity agreement will be in addition to any liability which any such holder may otherwise have. In no event shall the liability of any selling holder of Registrable Notes hereunder be greater in amount than the dollar amount of the proceeds (net of payment of all expenses) received by such holder upon the sale (or, in the case of Resale Notes, the resale) of the Registrable Notes giving rise to such indemnification obligation. (c) Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof (enclosing a copy of all papers served); but the omission to so notify the indemnifying party (i) shall not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such omission results in the forfeiture by the indemnifying party or material impairment of substantial rights and defenses and (ii) shall not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligations provided in paragraph (a) or (b) above. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the 16 indemnifying party shall be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party. After notice from the indemnifying party to such indemnified party of its election to so assume the defense of such claim or action, the indemnifying party will not be liable to such indemnified party under this Section 8 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than costs of investigation; provided that if (i) the defendants in any such action include both the indemnified party and the indemnifying party, and the indemnified party shall have received an opinion of counsel reasonably acceptable to the indemnifying party that representation of both parties by the same counsel would be inappropriate due to actual or likely conflicts of interest between them, or (ii) the indemnifying party shall not have employed counsel for the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action, then the indemnified party or parties shall have the right to select one firm of separate counsel (in addition to the fees and expenses of local counsel) to assert any separate legal defenses and to otherwise defend such action on behalf of such indemnified party or parties. No indemnifying party shall be liable for any settlement of any action or claim for monetary damages which an indemnified party may effect without the written consent of the indemnifying party, which consent shall not be unreasonably withheld. (d) If the indemnification provided for in Section 8(a) or (b) hereof is for any reason, other than as specified in such provisions, unavailable to or insufficient to hold harmless an indemnified party, then each indemnifying party shall contribute to the aggregate losses, claims, damages or liabilities (or actions in respect thereof) referred to in Section 8(a) or (b) hereof in such proportion as is appropriate to reflect the relative fault and benefits to the Company on the one hand and such holders on the other hand in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the Company and such holders shall be determined by reference to, among other things, the parties' relative intent, knowledge, access to information and opportunity to correct or prevent any untrue statement or omission. The obligations of the holders in this Section 8(d) are several in proportion to their respective obligations hereunder and not joint. Notwithstanding the provisions of this Section 8(d), in no event shall any holder of Registrable Notes be required to contribute any amount which is in excess of (i) the aggregate principal amount of Initial Notes sold or exchanged by such holder less (ii) the amount of any damages that such person has otherwise been required to pay by reason of such alleged untrue statement or omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 8, each Holder Indemnified Party shall have the same rights to contribution as a holder, and each person who controls the Company within the meaning of either the Securities Act or the Exchange Act and each officer, director, employee and agent of such person, shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this Section 8(d). Any party entitled to contribution will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against another party or parties under this Section 8(d), notify such party or parties from whom contribution may be sought; but the omission to so notify such party or parties (x) shall not relieve the party or parties from whom contribution may be sought from any liability under 17 this paragraph (d) unless and to the extent it did not otherwise learn of such action and such omission results in the forfeiture by the party or parties from whom contribution may be sought or material impairment of substantial rights and defenses and (y) shall not, in any event, relieve such party or parties from any obligations other than under this Section 8(d). (e) The provisions of this Section 8 will remain in full force and effect, regardless of any investigation made by or on behalf of any holder of Registrable Notes, the Initial Purchasers, the Company or any of the officers, directors or controlling persons referred to in this Section 8 and will survive the sale (or, in the case of Resale Notes, the resale) by a holder of Registrable Notes of such Registrable Notes. SECTION 9. Underwritten Registrations (If Any). No holder may ----------------------------------- participate in any Underwritten Registration, which Underwritten Registration shall only be undertaken at the option of the Company, unless such holder (a) agrees to sell such holder's Initial Notes on the basis provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. SECTION 10. Termination. In the event that no Initial Notes are sold ----------- to the Initial Purchasers pursuant to the Purchase Agreement, this Agreement shall automatically terminate, without liability on the part of any party. Upon the fulfillment of all obligations on the part of the Company to register the Initial Notes as set forth herein (including maintaining the effectiveness of any applicable Registration Statements), this Agreement shall terminate; provided that the provisions of Sections 7 and 8 hereof shall survive any termination and remain in full force and effect. SECTION 11. Miscellaneous. ------------- (a) No Inconsistent Agreements. The Company neither has, as of the -------------------------- date hereof, entered into, nor shall, on or after the date hereof, enter into, any agreement with respect to its securities that is inconsistent with the rights granted to the holders of Registrable Notes herein or otherwise conflicts with the provisions hereof. (b) Amendments and Waivers. The provisions of this Agreement, ---------------------- including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of holders of at least a majority of the then outstanding aggregate principal amount of the Registrable Notes (or, after the consummation of any Exchange Offer in accordance with Section 2, of Exchange Notes); provided that, with respect to -------- any matter that directly or indirectly affects the rights of any Restricted Person hereunder occurring within the period in which the Initial Registration Statement is open for the Restricted Persons, the Company shall obtain the written consent of each such Restricted Person against which such amendment, modification, supplement, waiver or consent is to be effective. Notwithstanding the foregoing (except for the foregoing proviso), a waiver or consent to departure from the provisions hereof with respect to a matter that relates exclusively to the rights of holders of Registrable Notes whose securities are being sold or exchanged pursuant to a Registration 18 Statement and that does not directly or indirectly affect the rights of other holders of Registrable Notes may be given by holders of at least a majority in aggregate principal amount of the Registrable Notes being sold or exchanged by such holders pursuant to such Registration Statement; provided, however, that -------- ------- the provisions of this sentence may not be amended, modified or supplemented except in accordance with the provisions of the immediately preceding sentence. Notwithstanding the foregoing, a waiver or consent to depart from the provisions hereof with respect to a matter that relates exclusively to the rights of Resale Initial Purchasers and that does not directly or indirectly affect the rights of holders of Registrable Notes or Exchange Notes may be given by each of the Resale Initial Purchasers affected thereby. (c) Notices. All notices and other communications (including, without ------- limitation, any notices or other communications to the Trustee) provided for or permitted hereunder shall be made in writing and delivered by hand delivery, registered first-class mail, next-day air courier or telecopier: (i) if to a holder of Registrable Notes, at the most current address given by such holder to the Company in accordance with the provisions of this Section 11(c), which address initially is, with respect to the Initial Purchasers, at the address set forth in the Purchase Agreement and thereafter at the address for such holders of Registrable Notes set forth in the Security Register applicable to such Registrable Notes; and (ii) if to the Company, initially at the address set forth in the Purchase Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 11(c). All such notices and communications shall be deemed to have been duly given: when delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; one Business Day after being timely delivered to a next-day air courier; and when received, if telecopied. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee at the address specified in the Indenture. (d) Successors and Assigns. This Agreement shall inure to the benefit ---------------------- of and be binding upon the successors and assigns of each of the parties hereto, including, without limitation and without the need for an express assignment or any consent by the Company thereto, subsequent holders of Registrable Notes. (e) Counterparts. This Agreement may be executed in any number of ------------ counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (f) Headings. The headings in this Agreement are for convenience of -------- reference only and shall not limit or otherwise affect the meaning hereof. 19 (g) Governing Law. This Agreement and the rights and duties of the ------------- parties hereunder shall be governed by, and construed in accordance with, the laws of the State of New York. Each of the parties hereto hereby submits to the non-exclusive jurisdiction of the Federal and State Courts of the Borough of Manhattan in the City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. (h) Severability. In the event that any one or more of the provisions ------------ contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. (i) Entire Agreement. This Agreement, together with the Purchase ---------------- Agreement, is intended by the parties as a final expression of their agreement, and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein. This Agreement, together with the Purchase Agreement, supersedes all prior agreements and understandings between the parties with respect to such subject matter. (j) Notes Held by the Company, etc. Whenever the consent or approval ------------------------------- of holders of a specified percentage of principal amount of Registrable Notes is required hereunder, Registrable Notes held by the Company or any of its Affiliates (other than subsequent holders of Registrable Notes if such subsequent holders are deemed to be Affiliates solely by reason of their holdings of such Registrable Notes) shall not be counted in determining whether such consent or approval was given by the holders of such required percentage. 20 If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Company a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the several Initial Purchasers and the Company in accordance with its terms. Very truly yours, EDISON MISSION ENERGY By: /s/ G. Gary Garcia ------------------- Name: G. Gary Garcia Title: Treasurer The foregoing Registration Rights Agreement is hereby confirmed and accepted as of the date first above written CREDIT SUISSE FIRST BOSTON CORPORATION WESTDEUTSCHE LANDESBANK GIROZENTRALE (DUSSELDORF) By: CREDIT SUISSE FIRST BOSTON CORPORATION By: /s/ Jennifer L. Powers ------------------------- Name: Jennifer L. Powers Title: Managing Director 21 EX-5.1 4 dex51.txt OPINION OF SKADDEN ARPS SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP FOUR TIMES SQUARE NEW YORK, NY 10036 (212) 735-3000 April 24, 2001 Edison Mission Energy 18101 Von Karman Avenue Irvine, California 92612 Re: Edison Mission Energy Registration Statement on Form S-4 ---------------------------------- Ladies and Gentlemen: We are acting as special counsel to Edison Mission Energy, a California corporation (the "Company"), in connection with the registration of $600,000,000 aggregate principal amount of the Company's 9.875% Senior Notes due April 15, 2011 (the "Exchange Notes"). The Exchange Notes are to be issued pursuant to an exchange offer (the "Exchange Offer") in exchange for a like principal amount of the issued and outstanding 9.875% Senior Notes due April 15, 2011 of the Company (the "Original Notes") under the Indenture, dated as of April 5, 2001 (the "Indenture"), between the Company and United States Trust Company of New York, as Trustee (the "Trustee"), as contemplated by the Registration Rights Agreement, dated as of April 2, 2001 (the "Registration Rights Agreement"), by and among the Company, Credit Suisse First Boston Corporation and Westdeutsche Landesbank Girozentrale (Dusseldorf). This opinion is being furnished in accordance with the requirements of Item 601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended (the "Act"). In connection with this opinion, we have examined originals or copies, certified or otherwise identified to our satisfaction, of: (i) the Registration Statement on Form S-4 relating to the Exchange Notes to be filed with the Securities and Exchange Commission (the "Commission") on the date hereof under the Act (the "Registration Statement"); (ii) an executed copy of the Registration Rights Agreement; Edison Mission Energy April 24, 2001 Page 2 (iii) an executed copy of the Indenture; (iv) the Amended and Restated Articles of Incorporation of the Company, as amended to date; (v) the By-Laws of the Company, as amended to date; (vi) certain resolutions adopted by the Board of Directors of the Company relating to the Exchange Offer, the issuance of the Original Notes and the Exchange Notes, the Indenture and related matters; (vii) the Form T-1 of the Trustee filed as an exhibit to the Registration Statement; and (viii) the form of the Exchange Notes. We have also examined originals or copies, certified or otherwise identified to our satisfaction, of such records of the Company and such agreements, certificates of public officials, certificates of officers or other representatives of the Company and others, and such other documents, certificates and records as we have deemed necessary or appropriate as a basis for the opinion set forth herein. In our examination, we have assumed the legal capacity of all natural persons, the genuineness of all signatures, the authenticity of all documents submitted to us as originals, the conformity to original documents of all documents submitted to us as certified, conformed or photostatic copies and the authenticity of the originals of such latter documents. In making our examination of documents executed or to be executed, we have assumed that the parties thereto, other than the Company, had or will have the power, corporate or other, to enter into and perform all obligations thereunder and have also assumed the due authorization by all requisite action, corporate or other, and execution and delivery by such parties of such documents and the validity and binding effect thereof. As to any facts material to the opinions expressed herein which we have not independently established or verified, we have relied upon statements and representations of officers and other representatives of the Company and others. 2 Edison Mission Energy April 24, 2001 Page 3 Our opinion set forth herein is limited to California corporate law and the laws of the State of New York which are normally applicable to transactions of the type contemplated by the Exchange Offer and, to the extent that judicial or regulatory orders or decrees or consents, approvals, licenses, authorizations, validations, filings, recordings or registrations with governmental authorities are relevant, to those required under such laws (all of the foregoing being referred to as "Opined on Law"). We do not express any opinion with respect to the law of any jurisdiction other than Opined on Law or as to the effect of any such non-opined-on law on the opinions herein stated. Based upon and subject to the foregoing, and the limitations, qualifications, exceptions and assumptions set forth herein, we are of the opinion that when (i) the Registration Statement becomes effective and the Indenture has been qualified under the Trust Indenture Act of 1939, as amended and (ii) the Exchange Notes (in the form examined by us) have been duly executed and authenticated in accordance with the terms of the Indenture and have been delivered upon consummation of the Exchange Offer against receipt of Original Notes surrendered in exchange therefor in accordance with the terms of the Exchange Offer, the Exchange Notes will constitute valid and binding obligations of the Company, enforceable against the Company in accordance with their terms, except to the extent that enforcement thereof may be limited by (1) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar laws now or hereafter in effect relating to creditors' rights generally and (2) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). In rendering the opinion set forth above, we have assumed that the execution and delivery by the Company of the Indenture and the Exchange Notes and the performance by the Company of its obligations thereunder do not and will not violate, conflict with or constitute a default under any agreement or instrument to which the Company or its properties is subject, except that we do not make this assumption for those agreements and instruments which have been identified to us by the Company as being material to it and which are listed as exhibits to the Registration Statement. We hereby consent to the filing of this opinion with the Commission as an exhibit to the Registration Statement. We also consent to the reference to our firm under the caption "Legal Matters" in the prospectus included in the Registration Statement. In giving this consent, we do not thereby admit that we are included in the category of 3 Edison Mission Energy April 24, 2001 Page 4 persons whose consent is required under Section 7 of the Act or the rules and regulations of the Commission. Very truly yours, /s/ SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 4 EX-12.1 5 dex121.txt COMPUTATION OF RATIO EARNINGS EXHIBIT 12.1 Edison Mission Energy Ratio of Earnings to Fixed Charges (000s)
2000 1999 1998 1997 1996 --------- -------- -------- -------- -------- Earnings: Income before taxes and accounting change......... $ 180,098 $103,705 $202,579 $185,515 $174,110 Adjustments: Fixed charges, as below.. 797,891 439,300 260,439 275,426 261,885 Interest capitalized..... (14,281) (27,471) (26,300) (15,000) (64,400) Equity in earnings of equity method investments............. (100,569) (79,433) (45,984) (76,694) (72,272) Dividends from equity method investments...... 121,463 80,891 49,208 82,576 72,787 --------- -------- -------- -------- -------- Earnings as adjusted....... $ 984,602 $516,992 $439,942 $451,823 $372,110 ========= ======== ======== ======== ======== Fixed Charges: Interest on indebtedness (expense and capitalized).............. $ 729,201 $413,811 $245,220 $260,249 $246,895 Dividends on preferred securities................ 32,075 22,375 13,149 13,167 13,100 Interest portion of rental expense................... 36,615 3,114 2,070 2,010 1,890 --------- -------- -------- -------- -------- $ 797,891 $439,300 $260,439 $275,426 $261,885 ========= ======== ======== ======== ======== Ratio of Earnings to Fixed Charges................... 1.23 1.18 1.69 1.64 1.42
EX-23.1 6 dex231.txt CONSENT OF ARTHUR ANDERSEN 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. ARTHUR ANDERSEN LLP Orange County, California April 19, 2001 EX-25.1 7 dex251.txt STATEMENT OF ELIGIBILITY ON FORM T-1 EXHIBIT 25.1 FORM T-1 ---------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE ---------------- CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(B)(2) ---------------- UNITED STATES TRUST COMPANY OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-3818954 (Jurisdiction of incorporation (I.R.S. employer if not a U.S. national bank) identification No.) 114 West 47th Street 10036-1532 New York, NY (Zip Code) (Address of principal executive offices) ---------------- Edison Mission Energy (Exact name of obligor as specified in its charter) California 95-4031807 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) 18101 Von Karman Avenue Suite 1700 Irvine, California 92612 (Address of principal executive offices) (Zip Code) ---------------- 9.875% Senior Notes due April 15, 2011 (Title of the indenture securities) ---------------- GENERAL 1. General Information Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Federal Reserve Bank of New York (2nd District), New York, New York (Board of Governors of the Federal Reserve System) Federal Deposit Insurance Corporation, Washington, D.C. New York State Banking Department, Albany, New York (b) Whether it is authorized to exercise corporate trust powers. The trustee is authorized to exercise corporate trust powers. 2. Affiliations with the Obligor If the obligor is an affiliate of the trustee, describe each such affiliation. None 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15: Edison Mission Energy currently is not in default under any of its outstanding securities for which United States Trust Company of New York is Trustee. Accordingly, responses to Items 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14 and 15 of Form T-1 are not required under General Instruction B. 16. List of Exhibits T-1.1 -- Organization Certificate, as amended, issued by the State of New York Banking Department to transact business as a Trust Company, is incorporated by reference to Exhibit T-1.1 to Form T-1 filed on September 15, 1995 with the Commission pursuant to the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990 (Registration No. 33-97056). T-1.2 -- Included in Exhibit T-1.1. T-1.3 -- Included in Exhibit T-1.1. T-1.4 -- The By-Laws of United States Trust Company of New York, as amended, is incorporated by reference to Exhibit T-1.4 to Form T-1 filed on September 15, 1995 with the Commission pursuant to the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990 (Registration No. 33-97056). T-1.6 -- The consent of the trustee required by Section 321(b) of the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990. T-1.7 -- A copy of the latest report of condition of the trustee pursuant to law or the requirements of its supervising or examining authority. 2 NOTE As of December 31, 2000, the trustee had 2,999,029 shares of Common Stock outstanding, all of which are owned by its parent company, U.S. Trust Corporation. The term "trustee" in Item 2, refers to each of United States Trust Company of New York and its parent company, U. S. Trust Corporation. In answering Item 2 in this statement of eligibility as to matters peculiarly within the knowledge of the obligor or its directors, the trustee has relied upon information furnished to it by the obligor and will rely on information to be furnished by the obligor and the trustee disclaims responsibility for the accuracy or completeness of such information. ---------------- Pursuant to the requirements of the Trust Indenture Act of 1939, the trustee, United States Trust Company of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of New York, and State of New York, on the 24th day of April, 2001. UNITED STATES TRUST COMPANY OF NEW YORK, Trustee By: /s/ Christopher J. Grell --------------------------- Christopher J. Grell Assistant Vice President 3 Exhibit T-1.6 The consent of the trustee required by Section 321(b) of the Act. United States Trust Company of New York 114 West 47th Street New York, NY 10036 April 24, 2001 Securities and Exchange Commission 450 5th Street, N.W. Washington, DC 20549 Gentlemen: Pursuant to the provisions of Section 321(b) of the Trust Indenture Act of 1939, as amended by the Trust Indenture Reform Act of 1990, and subject to the limitations set forth therein, United States Trust Company of New York ("U.S. Trust") hereby consents that reports of examinations of U.S. Trust by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor. Very truly yours, UNITED STATES TRUST COMPANY OF NEW YORK By: /s/ H. William Weber ------------------------ H. William Weber Vice President 4 EXHIBIT T-1.7 UNITED STATES TRUST COMPANY OF NEW YORK CONSOLIDATED STATEMENT OF CONDITION MARCH 31, 2001 ($ IN THOUSANDS)
ASSETS ------ Cash and Due from Banks........................................ $ 60,744 Short-Term Investments......................................... 61,956 Securities, Available for Sale................................. 687,786 Loans.......................................................... 2,866,204 Less: Allowance for Credit Losses.............................. 17,858 ---------- Net Loans.................................................... 2,848,346 Premises and Equipment......................................... 65,105 Other Assets................................................... 264,387 ---------- Total Assets................................................. $3,988,324 ========== LIABILITIES ----------- Deposits: Non-Interest Bearing......................................... $ 635,939 Interest Bearing............................................. 2,338,442 ---------- Total Deposits.............................................. 2,974,381 Short-Term Credit Facilities................................... 383,958 Accounts Payable and Accrued Liabilities....................... 300,828 ---------- Total Liabilities............................................ $3,659,167 ========== STOCKHOLDER'S EQUITY -------------------- Common Stock................................................... 14,995 Capital Surplus................................................ 208,551 Retained Earnings.............................................. 123,254 Accumulated Other comprehensive Income......................... (17,643) ---------- Total Stockholder's Equity.................................... 329,157 ---------- Total Liabilities and Stockholder's Equity.................... $3,988,324 ==========
I, Richard E. Brinkmann, Managing Director & Comptroller of the named bank do hereby declare that this Statement of Condition has been prepared in conformance with the instructions issued by the appropriate regulatory authority and is true to the best of my knowledge and belief. Richard E. Brinkmann, Managing Director & Controller April 16, 2001 5 EX-99.1 8 dex991.txt FORM OF LETTER OF TRANSMITTAL EXHIBIT 99.1 LETTER OF TRANSMITTAL EDISON MISSION ENERGY Offer for all Outstanding 9.875% Senior Notes due April 15, 2011 in Exchange for 9.875% Senior Notes due April 15, 2011 Which Have Been Registered Under the Securities Act of 1933, as Amended, Pursuant to the Prospectus, dated , 2001 THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M. NEW YORK CITY TIME, ON , 2001, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. Delivery To: United States Trust Company of New York, Exchange Agent By Hand Before 4:30 p.m.: By Registered or Certified Mail: United States Trust Company of New York United States Trust Company of New York 30 Broad Street P.O. Box 112 B-Level Bowling Green Station New York, NY 10004 New York, NY 10274 Attention: Corporate Trust Services
By Hand or Overnight Delivery after 4:30 p.m. on the Expiration Date: United States Trust Company of New York 30 Broad Street, 14th Floor New York, NY 10004 For Information Call: (800) 548-6565 By Facsimile Transmission (for Eligible Institutions only): (212) 422-0183 Attention: Customer Service Confirm by Telephone: (800) 548-6565 Delivery of this instrument to an address other than as set forth above, or transmission of instructions via facsimile other than as set forth above, will not constitute a valid delivery. The undersigned acknowledges that he or she has received the Prospectus, dated , 2000 (the "Prospectus"), of Edison Mission Energy, a California corporation (the "Company"), and this Letter of Transmittal (the "Letter"), which together constitute the Company's offer (the "Exchange Offer") to exchange an aggregate principal amount of up to $600,000,000 of the Company's 9.875% Senior Notes due April 15, 2011 (the "Exchange Notes") which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for a like principal amount of the Company's issued and outstanding 9.875% Senior Notes due April 15, 2011 (the "Original Notes") from the registered holders thereof (the "Holders"). For each Original Note accepted for exchange, the Holder of such 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 or, if no interest has been paid on the Original Notes, from April 5, 2001. Accordingly, registered Holders of Exchange Notes on the relevant record date for the first interest payment date following the consummation of the Exchange Offer will receive interest accruing from the most recent date to which interest has been paid or, if no interest has been paid, from April 5, 2001. Original Notes accepted for exchange will cease to accrue interest from and after the date of consummation of the Exchange Offer. Holders of Original Notes whose Original Notes are accepted for exchange will not receive any payment in respect of accrued interest on such Original Notes otherwise payable on any interest payment date the record date for which occurs on or after consummation of the Exchange Offer. This Letter is to be completed by a holder of Original Notes either if certificates are to be forwarded herewith or if a tender of certificates for Original Notes, if available, is to be made by book-entry transfer to the account maintained by the Exchange Agent at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in "The Exchange Offer--Book-Entry Transfer" section of the Prospectus and an Agent's Message is not delivered. Tenders by book-entry transfer may also be made by delivering an Agent's Message in lieu of this Letter. The term "Agent's Message" means a message, transmitted by the Book-Entry Transfer Facility to, and received by, the Exchange Agent and forming a part of a Book-Entry Confirmation (as defined below), which states that the Book-Entry Transfer Facility has received an express acknowledgment from the tendering participant, which acknowledgment states that such participant has received and agrees to be bound by this Letter and that the Company may enforce this Letter against such participant. Holders of Original Notes whose certificates are not immediately available, or who are unable to deliver their certificates or confirmation of the book-entry tender of their Original Notes into the Exchange Agent's account at the Book-Entry Transfer Facility (a "Book-Entry Confirmation") and all other documents required by this Letter to the Exchange Agent on or prior to the Expiration Date, must tender their Original Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus. See Instruction 1. Delivery of documents to the Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent. The undersigned has completed the appropriate boxes below and signed this Letter to indicate the action the undersigned desires to take with respect to the Exchange Offer. List below the Original Notes to which this Letter relates. If the space provided below is inadequate, the certificate numbers and principal amount of Original Notes should be listed on a separate signed schedule affixed hereto. 2
DESCRIPTION OF ORIGINAL NOTES 1 2 3 - ------------------------------------------------------------------------------------------------------- Aggregate Principal Amount of Principal Name(s) and Address(es) of Registered Holder(s) Certificate Original Amount (Please fill in, if blank) Number(s)* Note(s) Tendered** - ------------------------------------------------------------------------------------------------------- ________________ ________________ ________________ ________________ ________________ ________________ ________________ ________________ ________________ Total - -------------------------------------------------------------------------------------------------------
*Need not be completed if Original Notes are being tendered by book-entry transfer. ** Unless otherwise indicated in this column, a holder will be deemed to have tendered ALL of the Original Notes represented by the Original Notes indicated in column 2. See Instruction 2. Original Notes tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple thereof. See Instruction 1. [_]CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK- ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution_______________________________________________ Account Number___________________ Transaction Code Number___________________ By crediting the Original Notes to the Exchange Agent's account at the Book- Entry Transfer Facility's Automated Tender Offer Program ("ATOP") and by complying with applicable ATOP procedures with respect to the Exchange Offer, including transmitting to the Exchange Agent a computer-generated Agent's Message in which the holder of the Original Notes acknowledges and agrees to be bound by the terms of, and makes the representations and warranties contained in, this Letter, the participant in the Book-Entry Transfer Facility confirms on behalf of itself and the beneficial owners of such Original Notes all provisions of this Letter (including all representations and warranties) applicable to it and such beneficial owner as fully as if it had completed the information required herein and executed and transmitted this Letter to the Exchange Agent. [_]CHECK HERE IF TENDERED ORIGINAL NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s)______________________________________________ Window Ticket Number (if any)________________________________________________ Date of Execution of Notice of Guaranteed Delivery___________________________ Name of Institution Which Guaranteed Delivery________________________________ If Delivered by Book-Entry Transfer, Complete the Following: Account Number___________________ Transaction Code Number___________________ 3 [_]CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name:________________________________________________________________________ Address:_____________________________________________________________________ _____________________________________________________________________________ If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Original Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that such Original Notes were acquired by such broker-dealer as a result of market-making or other trading activities and that it 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; however, by so acknowledging and by delivering such a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. If the undersigned is a broker-dealer that will receive Exchange Notes, it represents that the Original Notes to be exchanged for the Exchange Notes were acquired as a result of market-making activities or other trading activities. 4 PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: Upon the terms and subject to the conditions of the Exchange Offer, the undersigned hereby tenders to the Company the aggregate principal amount of Original Notes indicated above. Subject to, and effective upon, the acceptance for exchange of the Original Notes tendered hereby, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to such Original Notes as are being tendered hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as the undersigned's true and lawful agent and attorney-in-fact with respect to such tendered Original Notes, with full power of substitution, among other things, to cause the Original Notes to be assigned, transferred and exchanged. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Original Notes, and to acquire Exchange Notes issuable upon the exchange of such tendered Original Notes, and that, when the same are accepted for exchange, the Company will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claim when the same are accepted by the Company. The undersigned hereby further represents that any Exchange Notes acquired in exchange for Original Notes tendered hereby will have been acquired in the ordinary course of business of the person receiving such Exchange Notes, whether or not such person is the undersigned, that neither the Holder of such Original Notes nor any such other person is participating in, intends to participate in or has an arrangement or understanding with any person to participate in the distribution of such Exchange Notes and that neither the Holder of such Original Notes nor any such other person is an "affiliate," as defined in Rule 405 under the Securities Act, of the Company. The undersigned acknowledges that this Exchange Offer is being made in reliance on interpretations by the staff of the Securities and Exchange Commission (the "SEC"), as set forth in no-action letters issued to third parties, that the Exchange Notes issued pursuant to the Exchange Offer in exchange for the Original Notes may be offered for resale, resold and otherwise transferred by Holders thereof (other than any such Holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such Holders' business and such Holders have no arrangement with any person to participate in the distribution of such Exchange Notes. However, the SEC has not considered the Exchange Offer in the context of a no-action letter and there can be no assurance that the staff of the SEC would make a similar determination with respect to the Exchange Offer as in other circumstances. If the undersigned is not a broker-dealer, the undersigned represents 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 the Company, is engaged in or intends to engage in or has any arrangement or understanding with respect to the distribution of the Exchange Notes to be acquired pursuant to the Exchange Offer, such Holder (i) could not rely on the applicable interpretations of the staff of the SEC and (ii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. If the undersigned is a broker-dealer that will receive Exchange Notes for its own account in exchange for Original Notes, it represents that the Original Notes to be exchanged for the Exchange Notes were acquired by it as a result of market-making activities or other trading activities and acknowledges that it will deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus meeting the requirements of the Securities Act, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The undersigned will, upon request, execute and deliver any additional documents deemed by the Company to be necessary or desirable to complete the sale, assignment and transfer of the Original Notes tendered hereby. All authority conferred or agreed to be conferred in this Letter and every obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators, trustees in bankruptcy and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. This tender may be withdrawn only in accordance with the procedures set forth in "The Exchange Offer--Withdrawal Rights" section of the Prospectus. 5 Unless otherwise indicated herein in the box entitled "Special Issuance Instructions" below, please deliver the Exchange Notes (and, if applicable, substitute certificates representing Original Notes for any Original Notes not exchanged) in the name of the undersigned or, in the case of a book-entry delivery of Original Notes, please credit the account indicated above maintained at the Book-Entry Transfer Facility. Similarly, unless otherwise indicated under the box entitled "Special Delivery Instructions" below, please send the Exchange Notes (and, if applicable, substitute certificates representing Original Notes for any Original Notes not exchanged) to the undersigned at the address shown above in the box entitled "Description of Original Notes." THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF ORIGINAL NOTES" ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE ORIGINAL NOTES AS SET FORTH IN SUCH BOX ABOVE. SPECIAL ISSUANCE INSTRUCTIONS SPECIAL ISSUANCE INSTRUCTIONS (See Instructions 3 and 4) (See Instructions 3 and 4) - -------------------------------------- -------------------------------------- To be completed ONLY if To be completed ONLY if certificates for Original Notes not certificates for Original Notes not exchanged and/or Exchange Notes are exchanged and/or Exchange Notes are to be issued in the name of and to be sent to someone other than sent to someone other than the the person or persons whose person or persons whose signature(s) appear(s) on this signature(s) appear(s) on this Letter above or to such person or Letter above, or if Original Notes persons at an address other than delivered by book-entry transfer shown in the box entitled which are not accepted for exchange "Description of Original Notes" on are to be returned by credit to an this Letter above. account maintained at the Book- Entry Transfer Facility other than the account indicated above. Mail Exchange Notes and/or Original Notes to: Issue Exchange Notes and/or Name(s)_____________________________ Original Notes to: (Please Type or Print) Name(s)_____________________________ ____________________________________ (Please Type or Print) (Please Type or Print) ____________________________________ Address_____________________________ (Please Type or Print) ____________________________________ Address_____________________________ (Zip Code) ____________________________________ (Zip Code) (Complete Substitute Form W-9) [_]Credit unexchanged Original Notes delivered by book-entry transfer to the Book-Entry Transfer Facility account set forth below. ____________________________________ (Book-Entry Transfer Facility Account Number, if applicable) IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF OR AN AGENT'S MESSAGE IN LIEU THEREOF (TOGETHER WITH THE CERTIFICATES FOR ORIGINAL NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. 6 PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE COMPLETING ANY BOX ABOVE. PLEASE SIGN HERE (TO BE COMPLETED BY ALL TENDERING HOLDERS) (Complete Accompanying Substitute Form W-9 Below) X_____________________________________________________ ____________ , 2001 X_____________________________________________________ ____________ , 2001 (Signature(s) of Owner) (Date) Area Code and Telephone Number________________________________________________ If a holder is tendering any Original Notes, this Letter must be signed by the registered holder(s) as the name(s) appear(s) on the certificate(s) for the Original Notes or by any person(s) authorized to become registered holder(s) by endorsements and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, officer or other person acting in a fiduciary or representative capacity, please set forth full title. See Instruction 3. Name(s):______________________________________________________________________ (Please Type or Print) Capacity:_____________________________________________________________________ Address:______________________________________________________________________ (Including Zip Code) SIGNATURE GUARANTEE (If required by Instruction 3) Signature(s) Guaranteed by an Eligible Institution:______________________________________________________ (Authorized Signature) ______________________________________________________________________________ (Title) ______________________________________________________________________________ (Name and Firm) Dated: , 2001 7 INSTRUCTIONS Forming Part of the Terms and Conditions of the Exchange Offer for the 9.875% Senior Notes Due April 15, 2011 of Edison Mission Energy in Exchange for the 9.875% Senior Notes Due April 15, 2011 of Edison Mission Energy Which Have Been Registered Under the Securities Act of 1933, as Amended I. Delivery of this Letter and Notes; Guaranteed Delivery Procedures. This Letter is to be completed by holders of Original Notes either if certificates are to be forwarded herewith or if tenders are to be made pursuant to the procedures for delivery by book-entry transfer set forth in "The Exchange Offer--Book-Entry Transfer" section of the Prospectus and an Agent's Message is not delivered. Tenders by book-entry transfer may also be made by delivering an Agent's Message in lieu of this Letter. The term "Agent's Message" means a message, transmitted by the Book-Entry Transfer Facility to and received by the Exchange Agent and forming a part of a Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has received an express acknowledgment from the tendering participant, which acknowledgment states that such participant has received and agrees to be bound by the Letter of Transmittal and that the Company may enforce the Letter of Transmittal against such participant. Certificates for all physically tendered Original Notes, or Book-Entry Confirmation, as the case may be, as well as a properly completed and duly executed Letter (or manually signed facsimile hereof or Agent's Message in lieu thereof) and any other documents required by this Letter, must be received by the Exchange Agent at the address set forth herein on or prior to the Expiration Date, or the tendering holder must comply with the guaranteed delivery procedures set forth below. Original Notes tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple thereof. Holders whose certificates for Original Notes are not immediately available or who cannot deliver their certificates and all other required documents to the Exchange Agent on or prior to the Expiration Date, or who cannot complete the procedure for book-entry transfer on a timely basis, may tender their Original Notes pursuant to the guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to such procedures, (i) such tender must be made through an Eligible Institution, (ii) prior to 5:00 P.M., New York City time, on the Expiration Date, the Exchange Agent (as defined below) must receive from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Company (by facsimile transmission, mail or hand delivery), setting forth the name and address of the holder of Original Notes and the amount of Original Notes tendered, stating that the tender is being made thereby and guaranteeing that within three New York Stock Exchange ("NYSE") trading days after the date of execution of the Notice of Guaranteed Delivery, the certificates for all physically tendered Original Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, together with a properly completed and duly executed Letter (or facsimile thereof or Agent's Message in lieu thereof) with any required signature guarantees and any other documents required by this Letter will be deposited by the Eligible Institution with the Exchange Agent, and (iii) the certificates for all physically tendered Original Notes, in proper form for transfer, or a Book-Entry Confirmation, as the case may be, together with a properly completed and duly executed Letter (or facsimile thereof or Agent's Message in lieu thereof) with any required signature guarantees and all other documents required by this Letter, are received by the Exchange Agent within three NYSE trading days after the date of execution of the Notice of Guaranteed Delivery. The method of delivery of this Letter, the Original Notes and all other required documents is at the election and risk of the tendering holders, but the delivery will be deemed made only when actually received or confirmed by the Exchange Agent. If Original Notes are sent by mail, it is suggested that the mailing be registered mail, properly insured, with return receipt requested, made sufficiently in advance of the Expiration Date to permit delivery to the Exchange Agent prior to 5:00 P.M., New York City time, on the Expiration Date. See "The Exchange Offer" section of the Prospectus. 8 2. Partial Tenders (not applicable to noteholders who tender by book-entry transfer). If less than all of the Original Notes evidenced by a submitted certificate are to be tendered, the tendering holder(s) should fill in the aggregate principal amount of Original Notes to be tendered in the box above entitled "Description of Original Notes--Principal Amount Tendered." A reissued certificate representing the balance of nontendered Original Notes will be sent to such tendering holder, unless otherwise provided in the appropriate box on this Letter, promptly after the Expiration Date. All of the Original Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. 3. Signatures on this Letter; Bond Powers and Endorsements; Guarantee of Signatures. If this Letter is signed by the registered holder of the Original Notes tendered hereby, the signature must correspond exactly with the name as written on the face of the certificates without any change whatsoever. If any tendered Original Notes are owned of record by two or more joint owners, all of such owners must sign this Letter. If any tendered Original Notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter as there are different registrations of certificates. When this Letter is signed by the registered holder or holders of the Original Notes specified herein and tendered hereby, no endorsements of certificates or separate bond powers are required. If, however, the Exchange Notes are to be issued, or any untendered Original Notes are to be reissued, to a person other than the registered holder, then endorsements of any certificates transmitted hereby or separate bond powers are required. Signatures on such certificate(s) must be guaranteed by an Eligible Institution. If this Letter is signed by a person other than the registered holder or holders of any certificate(s) specified herein, such certificate(s) must be endorsed or accompanied by appropriate bond powers, in either case signed exactly as the name or names of the registered holder or holders appear(s) on the certificate(s) and signatures on such certificate(s) must be guaranteed by an Eligible Institution. If this Letter or any certificates or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and, unless waived by the Company, proper evidence satisfactory to the Company of their authority to so act must be submitted. Endorsements on certificates for Original Notes or signatures on bond powers required by this Instruction 3 must be guaranteed by a firm that 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 (each an "Eligible Institution"). Signatures on this Letter need not be guaranteed by an Eligible Institution, provided the Original Notes are tendered: (i) by a registered holder of Original Notes (which term, for purposes of the Exchange Offer, includes any participant in the Book-Entry Transfer Facility system whose name appears on a security position listing as the holder of such Original Notes) who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on this Letter, or (ii) for the account of an Eligible Institution. 4. Special Issuance and Delivery Instructions. Tendering holders of Original Notes should indicate in the applicable box the name and address to which Exchange Notes issued pursuant to the Exchange Offer and or substitute certificates evidencing Original Notes not exchanged are to be issued or sent, if different from the name or address of the person signing this Letter. In the case of issuance in a different name, the employer identification or social security number of the person named must also be indicated. Noteholders tendering Original Notes by book-entry transfer may request that Original Notes not exchanged be credited to 9 such account maintained at the Book-Entry Transfer Facility as such noteholder may designate hereon. If no such instructions are given, such Original Notes not exchanged will be returned to the name and address of the person signing this Letter. 5. Taxpayer Identification Number. Federal income tax law generally requires that a tendering holder whose Original Notes are accepted for exchange must provide the Company (as payor) with such holder's correct Taxpayer Identification Number ("TIN") on Substitute Form W-9 below, which in the case of a tendering holder who is an individual, is his or her social security number. If the Company is not provided with the current TIN or an adequate basis for an exemption from backup withholding, such tendering holder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, the Exchange Agent may be required to withhold 31% of the amount of any reportable payments made after the exchange to such tendering holder of Exchange Notes. If withholding results in an overpayment of taxes, a refund may be obtained. Exempt holders of Original Notes (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. See the enclosed Guidelines of Certification of Taxpayer Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for additional instructions. To prevent backup withholding, each tendering holder of Original Notes must provide its correct TIN by completing the Substitute Form W-9 set forth below, certifying, under penalties of perjury, that the TIN provided is correct (or that such holder is awaiting a TIN), the holder is a U.S. Person (including a U.S. resident alien) and that (i) the holder is exempt from backup withholding, or (ii) the holder has not been notified by the Internal Revenue Service that such holder is subject to backup withholding as a result of a failure to report all interest or dividends or (iii) the Internal Revenue Service has notified the holder that such holder is no longer subject to backup withholding. If the tendering holder of Original Notes is a nonresident alien or foreign entity not subject to backup withholding, such holder must give the Exchange Agent a completed Form W-8 BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding. These forms may be obtained from the Exchange Agent. If the Original Notes are in more than one name or are not in the name of the actual owner, such holder should consult the W-9 Guidelines for information on which TIN to report. If such holder does not have a TIN, such holder should consult the W-9 Guidelines for instructions on applying for a TIN, check the box in Part 2 of the Substitute Form W-9 and write "applied for" in lieu of its TIN. Note: Checking this box and writing "applied for" on the form means that such holder has already applied for a TIN or that such holder intends to apply for one in the near future. If the box in Part 2 of the Substitute Form W-9 is checked, the Exchange Agent will retain 31% of reportable payments made to a holder during the sixty (60) day period following the date of the Substitute Form W-9. If the holder furnishes the Exchange Agent with his or her TIN within sixty (60) days of the Substitute Form W-9, the Exchange Agent will remit such amounts retained during such sixty (60) day period to such holder and no further amounts will be retained or withheld from payments made to the holder thereafter. If, however, such holder does not provide its TIN to the Exchange Agent within such sixty (60) day period, the Exchange Agent will remit such previously withheld amounts to the Internal Revenue Service as backup withholding and will withhold 31% of all reportable payments to the holder thereafter until such holder furnishes its TIN to the Exchange Agent. 6. Transfer Taxes. The Company will pay all transfer taxes, if any, applicable to the transfer of Original Notes to it or its order pursuant to the Exchange Offer. If, however, Exchange Notes and/or substitute Original Notes not exchanged are to be delivered to, or are to be registered or issued in the name of, any person other than the registered holder of the Original Notes tendered hereby, or if tendered Original Notes are registered in the name of any person other than the person signing this Letter, or if a transfer tax is imposed for any reason other than the transfer of Original Notes to the Company or its order pursuant to the Exchange Offer, the amount of any such transfer taxes (whether imposed on the registered holder or any other persons) will be payable by the tendering holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering holder. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Original Notes specified in this letter. 10 7. Waiver of Conditions. The Company reserves the absolute right to waive satisfaction of any or all conditions enumerated in the Prospectus. 8. No Conditional Tenders. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering holders of Original Notes, by execution of this Letter, shall waive any right to receive notice of the acceptance of their Original Notes for exchange. Neither the Company, the Exchange Agent nor any other person is obligated to give notice of any defect or irregularity with respect to any tender of Original Notes nor shall any of them incur any liability for failure to give any such notice. 9. Mutilated, Lost, Stolen or Destroyed Original Notes. Any holder whose Original Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at the address indicated above for further instructions. 10. Withdrawal Rights. Tenders of Original Notes may be withdrawn at any time prior to 5:00 P.M., New York City time, on the Expiration Date. For a withdrawal of a tender of Original Notes to be effective, a written notice of withdrawal must be received by the Exchange Agent at the address set forth above prior to 5:00 P.M., New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having tendered the Original Notes to be withdrawn (the "Depositor"), (ii) identify the Original Notes to be withdrawn (including certificate number or numbers and the principal amount of such Original Notes), (iii) contain a statement that such holder is withdrawing his election to have such Original Notes exchanged, (iv) be signed by the holder in the same manner as the original signature on the Letter by which such 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 such Original Notes in the name of the person withdrawing the tender and (v) specify the name in which such Original Notes are registered, if different from that of the Depositor. If Original Notes have been tendered pursuant to the procedure for book-entry transfer set forth in "The Exchange Offer--Book-Entry Transfer" section of the Prospectus, 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 and otherwise comply with the procedures of such facility. All questions as to the validity, form and eligibility (including time of receipt) of such notices will be determined by the Company, whose determination shall be final and binding on all parties. Any Original Notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the Exchange Offer and no Exchange Notes will be issued with respect thereto unless the Original Notes so withdrawn are validly retendered. Any Original Notes that have been tendered for exchange but which are not exchanged for any reason will be returned to the Holder thereof without cost to such Holder (or, in the case of Original Notes tendered by book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry transfer procedures set forth in "The Exchange Offer--Book- Entry Transfer" section of the Prospectus, such Original Notes will be credited to an account maintained with the Book-Entry Transfer Facility for the Original Notes) as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Original Notes may be retendered by following the procedures described above at any time on or prior to 5:00 P.M., New York City time, on the Expiration Date. 11. Requests for Assistance or Additional Copies. Questions relating to the procedure for tendering, as well as requests for additional copies of the Prospectus and this Letter, and requests for Notices of Guaranteed Delivery and other related documents may be directed to the Exchange Agent, at the address and telephone number indicated above. 11 TO BE COMPLETED BY ALL TENDERING HOLDERS (See Instruction 5) PAYER'S NAME: UNITED STATES TRUST COMPANY OF NEW YORK Part 1--PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND TIN:_____________________ CERTIFY BY SIGNING AND Social Security Number DATING BELOW. or Employer Identification Number SUBSTITUTE Form W-9 Department of the Treasury CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I Internal CERTIFY THAT: Revenue -------------------------------------------------------- Service Part 2--TIN Applied For [_] Payer's Request -------------------------------------------------------- for Taxpayer (1) the number shown on this form is my correct TIN Identification (or I am waiting for a number to be issued to me), Number ("TIN") and Certification (2) I am not subject to backup withholding either because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding, (3) I am a U.S. person (including a U.S. resident alien, and (4) any other information provided on this form is true and correct. SIGNATURE _______________________ DATE ______________ You must cross out item (2) of the above certification if you have been notified by the IRS that you are subject to backup withholding because of underreporting of interest or dividends on your tax return and you have not been notified by the IRS that you are no longer subject to backup withholding. - -------------------------------------------------------------------------------- YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2 OF THE SUBSTITUTE FORM W-9 CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (a) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of the exchange, 31 percent of all reportable payments made to me thereafter will be withheld until I provide a number. SIGNATURE ________________________________ DATE _______________________ 12 EX-99.2 9 dex992.txt FORM OF NOTICE OF GUARANTEED DELIVERY EXHIBIT 99.2 NOTICE OF GUARANTEED DELIVERY FOR EDISON MISSION ENERGY This form or one substantially equivalent hereto must be used to accept the Exchange Offer of Edison Mission Energy (the "Company") made pursuant to the Prospectus, dated , 2001 (the "Prospectus"), if certificates for the outstanding 9.875% Senior Notes due April 15, 2011 of the Company (the "Original Notes") are not immediately available or if the procedure for book- entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach United States Trust Company of New York, as exchange agent (the "Exchange Agent") prior to 5:00 P.M., New York City time, on the Expiration Date of the Exchange Offer. Such form may be delivered or transmitted by facsimile transmission, mail or hand delivery to the Exchange Agent as set forth below. In addition, in order to utilize the guaranteed delivery procedure to tender Original Notes pursuant to the Exchange Offer, a completed, signed and dated Letter of Transmittal (or facsimile thereof or Agent's Message in lieu thereof) must also be received by the Exchange Agent prior to 5:00 P.M., New York City time, on the Expiration Date. Capitalized terms not defined herein shall have the respective meanings ascribed to them in the Prospectus. Delivery To: United States Trust Company of New York, Exchange Agent By Hand Before 4:30 p.m.: By Registered or Certified Mail: United States Trust Company of New York United States Trust Company of New York 30 Broad Street P.O. Box 112 B-Level Bowling Green Station New York, NY 10004 New York, NY 10274 Attention: Corporate Trust Services
By Hand or Overnight Delivery after 4:30 p.m. on the Expiration Date: United States Trust Company of New York 30 Broad Street, 14th Floor New York, NY 10004 For Information Call: (800) 548-6565 By Facsimile Transmission (for Eligible Institutions only): (212) 422-0183 Attention: Customer Service Confirm by Telephone: (800) 548-6565 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF THIS INSTRUMENT VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY. Ladies and Gentlemen: Upon the terms and conditions set forth in the Prospectus and the accompanying Letter of Transmittal, the undersigned hereby tenders to the Company the principal amount of Original Notes set forth below pursuant to the guaranteed delivery procedure described in "The Exchange Offer-- Guaranteed Delivery Procedures" section of the Prospectus. Must be signed by the holder(s) of Original Notes as their name(s) appear(s) on certificates for Original Notes or on a security position listing, or by person(s) authorized to become registered holder(s) by endorsement and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person must set forth his or her full title below. Principal Amount of Original Notes Tendered:* $ _________________________________________________________________________ Certificate Nos. (if available): __________________________________________ If Original Notes will be delivered by book-entry transfer to The Depository Trust Company, provide account number. ___________________________________________________________________________ Total Principal Amount Represented by Original Notes Certificate(s): $ _________________________________________________________________________ Account Number ____________________________________________________________ * Must be in denominations of principal amount at maturity of $1,000 and any integral multiple thereof. 2 PLEASE SIGN HERE Principal Amount at Maturity of Total Principal Amount at Original Notes Tendered:* _______ Maturity Represented by Original Notes Certificate(s): _________________________________ $ _______________________________ Certificate Nos. (if available): ____________________ Account Number __________________ If Original Notes will be X _______________________________ delivered by book-entry transfer to the Depository Trust Company, X _______________________________ provide account number. Signature(s) of Owner(s) or Authorized Signatory X _______________________________ Date ____________________________ X _______________________________ Area Code and Telephone Number: Signature(s) of Owner(s) or Authorized Signatory _________________________________ Date ____________________________ Please Print Name(s) and Address(es) Area Code and Telephone Number: Name(s): ________________________ _________________________________ _________________________________ Please Print Name(s) and Address(es) _________________________________ Name(s): ________________________ Capacity: _______________________ _________________________________ _________________________________ _________________________________ Address(es): ____________________ Capacity: _______________________ _________________________________ _________________________________ _________________________________ Address(es): ____________________ _________________________________ _________________________________ ALL AUTHORITY HEREIN CONFERRED OR AGREED TO BE CONFERRED SHALL SURVIVE THE DEATH OR INCAPACITY OF THE UNDERSIGNED AND EVERY OBLIGATION OF THE UNDERSIGNED HEREUNDER SHALL BE BINDING UPON THE HEIRS, PERSONAL REPRESENTATIVES, SUCCESSORS AND ASSIGNS OF THE UNDERSIGNED. 3 GUARANTEE (Not to be Used for Signature Guarantees) The undersigned, 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, hereby guarantees that the certificates representing the principal amount of Original Notes tendered hereby in proper form for transfer, or timely confirmation of the book-entry transfer of such Original Notes into the Exchange Agent's account at The Depository Trust Company pursuant to the procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus, together with one or more properly and duly executed Letters of Transmittal (or facsimile thereof or Agent's Message in lieu thereof) and any required signature guarantee and any other documents required by the Letter of Transmittal, will be received by the Exchange Agent at the address set forth above, no later than three New York Stock Exchange trading days after the Expiration Date. ___________________________________________________________________________ Name of Firm ___________________________________________________________________________ Authorized Signature ___________________________________________________________________________ Title Name: _____________________________________________________________________ (Please Type or Print) ___________________________________________________________________________ Address ___________________________________________________________________________ Zip Code Area Code and Tel. No. ____________________________________________________ Dated: ____________________________________________________________________ NOTE: DO NOT SEND THE ORIGINAL NOTES WITH THIS FORM. ORIGINAL NOTES SHOULD BE SENT ONLY WITH A COPY OF YOUR PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL. 4 EX-99.3 10 dex993.txt FORM OF LETTER TO CLIENTS EXHIBIT 99.3 EDISON MISSION ENERGY OFFER FOR ALL OUTSTANDING 9.875% SENIOR NOTES DUE APRIL 15, 2011 IN EXCHANGE FOR 9.875% SENIOR NOTES DUE APRIL 15, 2011 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED To Our Clients: Enclosed for your consideration is a Prospectus, dated , 2001 (the "Prospectus"), and the related Letter of Transmittal (the "Letter of Transmittal"), relating to the offer (the "Exchange Offer") of Edison Mission Energy (the "Company") to exchange its 9.875% Senior Notes due April 15, 2011, which have been registered under the Securities Act of 1933, as amended (the "Exchange Notes"), for its outstanding 9.875% Senior Notes due April 15, 2011 (the "Original Notes"), upon the terms and subject to the conditions described in the Prospectus and the Letter of Transmittal. The Exchange Offer is being made in order to satisfy certain obligations of the Company contained in the Registration Rights Agreement, dated April 2, 2001, by and among the Company and the initial purchasers referred to therein. This material is being forwarded to you as the beneficial owner of the Original Notes held by us for your account but not registered in your name. A TENDER OF SUCH ORIGINAL NOTES MAY ONLY BE MADE BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. Accordingly, we request instructions as to whether you wish us to tender on your behalf the Original Notes held by us for your account, pursuant to the terms and conditions set forth in the enclosed Prospectus and Letter of Transmittal. Your instructions should be forwarded to us as promptly as possible in order to permit us to tender the Original Notes on your behalf in accordance with the provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 P.M., New York City time, on , 2001, unless extended by the Company. Any Original Notes tendered pursuant to the Exchange Offer may be withdrawn at any time before the Expiration Date. Your attention is directed to the following: 1. The Exchange Offer is for any and all Original Notes. 2. The Exchange Offer is subject to certain conditions set forth in the Prospectus in the section captioned "The Exchange Offer--Conditions to the Exchange Offer." 3. Any transfer taxes incident to the transfer of Original Notes from the holder to the Company will be paid by the Company, except as otherwise provided in the Instructions in the Letter of Transmittal. 4. The Exchange Offer expires at 5:00 P.M., New York City time, on , 2001, unless extended by the Company. If you wish to have us tender your Original Notes, please so instruct us by completing, executing and returning to us the instruction form on the back of this letter. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR INFORMATION ONLY AND MAY NOT BE USED DIRECTLY BY YOU TO TENDER ORIGINAL NOTES. INSTRUCTIONS WITH RESPECT TO THE EXCHANGE OFFER The undersigned acknowledge(s) receipt of your letter and the enclosed material referred to therein relating to the Exchange Offer made by Edison Mission Energy with respect to its Original Notes. This will instruct you to tender the Original Notes held by you for the account of the undersigned, upon and subject to the terms and conditions set forth in the Prospectus and the related Letter of Transmittal. The undersigned expressly agrees to be bound by the enclosed Letter of Transmittal and that such Letter of Transmittal may be enforced against the undersigned. Please tender the Original Notes held by you for my account as indicated below: [_]9.875% Senior Notes due April 15, 2011 $ (Aggregate Principal Amount of Original Notes) [_]Please do not tender any Original Notes held by you for my account. Dated: , 2001 Signature(s): ________________________________________________________________ Print Name(s) here: __________________________________________________________ (Print Address(es)): _________________________________________________________ (Area Code and Telephone Number(s)): _________________________________________ (Tax Identification or Social Security Number(s)): ___________________________ None of the Original Notes held by us for your account will be tendered unless we receive written instructions from you to do so. Unless a specific contrary instruction is given in the space provided, your signature(s) hereon shall constitute an instruction to us to tender all the Original Notes held by us for your account. 2 EX-99.4 11 dex994.txt FORM OF LETTER TO BROKERS/DEALERS EXHIBIT 99.4 EDISON MISSION ENERGY OFFER FOR ALL OUTSTANDING 9.875% SENIOR NOTES DUE APRIL 15, 2011 IN EXCHANGE FOR 9.875% SENIOR NOTES DUE APRIL 15, 2011 WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED To: BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES AND OTHER NOMINEES: Edison Mission Energy (the "Company") is offering, upon and subject to the terms and conditions set forth in the Prospectus, dated , 2001 (the "Prospectus"), and the enclosed letter of transmittal (the "Letter of Transmittal"), to exchange (the "Exchange Offer") its 9.875% Senior Notes due April 15, 2011, which have been registered under the Securities Act of 1933, as amended, for its outstanding 9.875% Senior Notes due April 15, 2011 (the "Original Notes"). The Exchange Offer is being made in order to satisfy certain obligations of the Company contained in the Registration Rights Agreement, dated April 2, 2001, by and among the Company and the initial purchasers referred to therein. We are requesting that you contact your clients for whom you hold Original Notes regarding the Exchange Offer. For your information and for forwarding to your clients for whom you hold Original Notes registered in your name or in the name of your nominee, or who hold Original Notes registered in their own names, we are enclosing the following documents: 1. Prospectus dated , 2001; 2. The Letter of Transmittal for your use and for the information of your clients; 3. A Notice of Guaranteed Delivery to be used to accept the Exchange Offer if certificates for Original Notes are not immediately available or time will not permit all required documents to reach the Exchange Agent prior to the Expiration Date (as defined below) or if the procedure for book-entry transfer cannot be completed on a timely basis; 4. A form of letter which may be sent to your clients for whose account you hold Original Notes registered in your name or the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Exchange Offer; 5. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9; and 6. Return envelopes addressed to United States Trust Company of New York, the Exchange Agent for the Exchange Offer. YOUR PROMPT ACTION IS REQUESTED. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2001, UNLESS EXTENDED BY THE COMPANY (THE "EXPIRATION DATE"). ORIGINAL NOTES TENDERED PURSUANT TO THE EXCHANGE OFFER MAY BE WITHDRAWN AT ANY TIME BEFORE THE EXPIRATION DATE. To participate in the Exchange Offer, a duly executed and properly completed Letter of Transmittal (or facsimile thereof or Agent's Message in lieu thereof), with any required signature guarantees and any other required documents, should be sent to the Exchange Agent and certificates representing the Original Notes should be delivered to the Exchange Agent, all in accordance with the instructions set forth in the Letter of Transmittal and the Prospectus. If a registered holder of Original Notes desires to tender, but such Original Notes are not immediately available, or time will not permit such holder's Original Notes or other required documents to reach the Exchange Agent before the Expiration Date, or the procedure for book-entry transfer cannot be completed on a timely basis, a tender may be effected by following the guaranteed delivery procedures described in the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery Procedures." The Company will, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary costs and expenses incurred by them in forwarding the Prospectus and the related documents to the beneficial owners of Original Notes held by them as nominee or in a fiduciary capacity. The Company will pay or cause to be paid all stock transfer taxes applicable to the exchange of Original Notes pursuant to the Exchange Offer, except as set forth in Instruction 6 of the Letter of Transmittal. Any inquiries you may have with respect to the Exchange Offer, or requests for additional copies of the enclosed materials, should be directed to United States Trust Company of New York, the Exchange Agent for the Exchange Offer, at its address and telephone number set forth on the front of the Letter of Transmittal. Very truly yours, EDISON MISSION ENERGY NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL. Enclosures -----END PRIVACY-ENHANCED MESSAGE-----