<PAGE>
Rule No. 424(b)(3)
Registration No. 33-55461
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THIS PRELIMINARY PROSPECTUS SUPPLEMENT AND THE INFORMATION CONTAINED HEREIN +
+ARE SUBJECT TO COMPLETION OR AMENDMENT AND PROSPECTIVE PURCHASERS ARE +
+REFERRED TO THE RELATED FINAL PROSPECTUS SUPPLEMENT FOR DEFINITIVE +
+INFORMATION ON ANY MATTER CONTAINED HEREIN. NEITHER THIS PRELIMINARY +
+PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS SHALL CONSTITUTE AN +
+OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY +
+SALE OF THESE SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, +
+SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION +
+UNDER THE SECURITIES LAWS OF ANY SUCH JURISDICTION. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS SUPPLEMENT (Subject to Completion, Issued March 20, 1995)
(To Prospectus dated October 31, 1994)
2,000,000 Preferred Securities
United Capital Funding Partnership L.P.
% Preferred Capital Securities, Series A
(Liquidation Preference $25 per Security)
Guaranteed to the extent the Partnership has legally available funds, as
described herein, by
The United Illuminating Company
----------
The % Preferred Capital Securities, Series A (the "Series A Preferred
Capital Securities") offered hereby are being issued by, and represent limited
partner interests in, United Capital Funding Partnership L.P., a Delaware
special purpose limited partnership ("United Capital"). United Capital was
formed for the sole purpose of issuing its limited partner interests ("Limited
Partner Interests") and lending the proceeds thereof to The United Illuminating
Company ("UI"), which owns all of the general partner interests in United
Capital. The proceeds of the Series A Preferred Capital Securities, together
with the related capital contributions made by UI, will be loaned to UI in
return for % Junior Subordinated Deferrable Interest Debentures, Series A, Due
2025 (the "Series A Debentures") issued by UI. The limited partner interests
represented by the Series A Preferred Capital Securities will have a preference
with respect to cash distributions ("dividends") and amounts payable on
liquidation over the general partner interests in United Capital.
Holders of the Series A Preferred Capital Securities will be entitled to
receive, to the extent of funds held by United Capital and legally available
therefor, cumulative preferential dividends, at an annual rate of % of the
liquidation preference of $25 per security, accruing from the date of original
issue and payable monthly in arrears on the last day of each calendar month of
each year, commencing , 1995. The payment of dividends and payments on
liquidation or redemption with respect to the Series A Preferred Capital
Securities, to the extent of funds held by United Capital and legally available
therefor, will be guaranteed under a Payment and Guarantee Agreement (the
"Guarantee") of UI to the extent described herein and in the accompanying
Prospectus. The Guarantee does not cover payment of amounts in respect of the
Series A Preferred Capital Securities to the extent that United Capital does
not have legally available funds for the payment thereof and cash on hand
sufficient to make such payment. Such funds and cash on hand will be limited to
payments by UI on the Series A Debentures and any other Indenture Securities
(as defined in the accompanying Prospectus) issued in connection with the
investment of the proceeds of any other offering of Limited Partner Interests.
If UI fails to make interest payments on the Series A Debentures or any other
such Indenture Securities, United Capital will have insufficient funds to pay
dividends on the Series A Preferred Capital Securities and the Guarantee will
not cover payment of such dividends. In such event, the holders of Series A
Preferred Capital Securities may enforce certain rights in respect of the
Series A Debentures. See "Description of the Guarantee" and "Description of the
Debentures and the Indenture--Enforcement of Certain Rights by Holders of
Preferred Capital Securities" in the accompanying Prospectus.
The Guarantee and the Series A Debentures will rank subordinate in right of
payment to all Senior Indebtedness (as defined in the accompanying Prospectus)
of UI. As of December 31, 1994, UI had approximately $987 million of Senior
Indebtedness outstanding. UI has the right, from time to time, to extend
interest payment periods on the Series A Debentures for up to 60 consecutive
months, and, as a consequence, monthly dividends on the Series A Preferred
Capital Securities will be deferred by United Capital during any such extended
interest payment period. During any such extended interest payment period, UI
may not declare or pay dividends on, or redeem, purchase, acquire or make a
liquidation payment with respect to, any shares of its capital stock. UI
currently has no intention to so extend the interest payment period. See
"Description of the Debentures and the Indenture--Option to Extend Interest
Payment Period" and "Description of the Preferred Capital Securities--Voting
Rights" in the accompanying Prospectus.
(continued on next page)
----------
SEE "CERTAIN INVESTMENT CONSIDERATIONS" FOR CERTAIN FACTORS THAT SHOULD BE
CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE SERIES A PREFERRED
CAPITAL SECURITIES, INCLUDING THE PERIOD AND CIRCUMSTANCES DURING AND UNDER
WHICH DIVIDENDS ON THE SERIES A PREFERRED CAPITAL SECURITIES AND INTEREST ON
THE SERIES A DEBENTURES MAY BE DEFERRED.
----------
THE SERIES A PREFERRED CAPITAL SECURITIES HAVE BEEN APPROVED FOR LISTING ON
THE NEW YORK STOCK EXCHANGE, SUBJECT TO OFFICIAL NOTICE OF ISSUANCE.
----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------
PRICE $25 PER SECURITY AND ACCRUED DIVIDENDS, IF ANY
----------
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC (1) COMMISSIONS (2) UNITED CAPITAL (3)(4)
---------- --------------- ---------------------
<S> <C> <C> <C>
Per Security.................. $25.00 (3) $25.00
Total......................... $50,000,000 (3) $50,000,000
</TABLE>
-----
(1) Plus accrued dividends, if any, from the date of original issue.
(2) United Capital and UI have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities
Act of 1933, as amended. See "Underwriting."
(3) Because the proceeds of the sale of the Series A Preferred Capital
Securities will be loaned to UI, UI has agreed, in the Underwriting
Agreement, to pay the Underwriters as compensation for their services
$ per security (or $ in the aggregate); provided that such
compensation will be $ per security sold to certain institutions.
Therefore, to the extent that Series A Preferred Capital Securities are
sold to such institutions, the actual amount of such compensation will be
less than the aggregate amount specified in the preceding sentence. See
"Underwriting."
(4) Expenses of the offering, which are payable by UI, are estimated to be
$255,000.
----------
The Series A Preferred Capital Securities are offered subject to prior sale,
when, as and if accepted by the Underwriters and subject to approval of certain
legal matters by Winthrop, Stimson, Putnam & Roberts, counsel for the
Underwriters. It is expected that delivery of the Series A Preferred Capital
Securities will be made on or about April , 1995 through the book-entry
facilities of The Depository Trust Company, against payment therefor in New
York funds.
----------
MORGAN STANLEY & CO.
Incorporated
BEAR, STEARNS & CO. INC.
GOLDMAN, SACHS & CO.
LEGG MASON WOOD WALKER
Incorporated
LEHMAN BROTHERS
PRUDENTIAL SECURITIES INCORPORATED
March , 1995
<PAGE>
(continued from front cover)
The Series A Preferred Capital Securities are redeemable, at the option of
United Capital and at the direction of UI, in whole or in part, from time to
time, on or after April , 2000, at a redemption price of $25 per security
plus accumulated and unpaid dividends and any Additional Amounts (as defined
in the accompanying Prospectus) to the date fixed for redemption (the
"Redemption Price"). The Series A Preferred Capital Securities are also
redeemable, at the option of United Capital, in whole or in part, at the
Redemption Price if at any time United Capital or UI, as a consequence of
certain events described herein, is or would be required to pay certain
additional amounts or to withhold or deduct certain amounts. In addition, upon
redemption or payment at maturity of Series A Debentures, the proceeds from
such redemption or payment will be applied to redeem Series A Preferred
Capital Securities at the Redemption Price. Under certain circumstances
following the occurrence of a Special Event (as defined in the accompanying
Prospectus), UI may cause United Capital to redeem the Series A Preferred
Capital Securities in whole at the Redemption Price or to distribute the
Series A Debentures in exchange for the Series A Preferred Capital Securities
in whole. If Series A Debentures are distributed, UI will use its best efforts
to have such Series A Debentures listed on the same exchange on which the
Series A Preferred Capital Securities are then listed. See "Certain Terms of
the Series A Preferred Capital Securities--Redemption or Exchange" and
"Certain Terms of the Series A Debentures" herein.
In the event of the liquidation of United Capital, holders of Series A
Preferred Capital Securities will be entitled to receive for each security a
liquidation preference of $25 plus accumulated and unpaid dividends and any
Additional Amounts to the date of payment, subject to certain limitations. See
"Description of the Preferred Capital Securities--Liquidation Distribution" in
the accompanying Prospectus.
-------------
NO DEALER, SALESMAN OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS, IN CONNECTION WITH THE
OFFER CONTAINED IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS,
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY UI, UNITED CAPITAL OR THE UNDERWRITERS. THIS
PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN
OFFER OR SOLICITATION BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE
IN THE AFFAIRS OF UI OR UNITED CAPITAL SINCE THE DATE HEREOF.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR
OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
-------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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PROSPECTUS SUPPLEMENT
<S> <C>
Certain Investment Considerations.......................................... S-3
The United Illuminating Company............................................ S-4
United Capital Funding Partnership L.P. ................................... S-5
Summary Financial Information.............................................. S-6
Use of Proceeds............................................................ S-6
Certain Terms of the Series A Preferred Capital Securities................. S-7
Certain Terms of the Series A Debentures................................... S-7
United States Income Taxation.............................................. S-8
Underwriting............................................................... S-11
Experts.................................................................... S-12
PROSPECTUS
Available Information...................................................... 2
Incorporation of Certain Documents by Reference............................ 2
The United Illuminating Company............................................ 3
United Capital Funding Partnership L.P. ................................... 3
Use of Proceeds............................................................ 3
UI Earnings Ratios......................................................... 4
Description of the Preferred Capital Securities............................ 4
Description of the Guarantee............................................... 15
Description of the Debentures and the Indenture............................ 18
Plan of Distribution....................................................... 27
Legal Opinions............................................................. 28
Experts.................................................................... 28
</TABLE>
S-2
<PAGE>
CERTAIN INVESTMENT CONSIDERATIONS
Prospective purchasers of the Series A Preferred Capital Securities should
carefully review the information contained in the accompanying Prospectus,
including the documents incorporated by reference therein, and elsewhere in
this Prospectus Supplement and should particularly consider the following
matters. Capitalized terms used in this Prospectus Supplement shall have the
meanings ascribed thereto in the accompanying Prospectus unless otherwise
defined in this Prospectus Supplement.
SUBORDINATION OF UI'S OBLIGATIONS
The payment of dividends and payments on liquidation or redemption with
respect to the Series A Preferred Capital Securities, to the extent of funds
held by United Capital and legally available to make such payments, will be
guaranteed by UI under the Guarantee. The Guarantee does not cover payment of
amounts in respect of the Series A Preferred Capital Securities to the extent
that United Capital does not have legally available funds for the payment
thereof and cash on hand sufficient to make such payment.
UI's obligations under the Guarantee and the Series A Debentures will be
subordinate in right of payment to all Senior Indebtedness of UI. As of
December 31, 1994, UI had approximately $987 million of Senior Indebtedness
outstanding (exclusive of certain guarantees and other contingent obligations,
but inclusive of capitalized lease obligations and current installments and
short-term notes payable). For a description of the terms of the Guarantee and
this subordination, see "Description of the Guarantee--Status of Guarantee" and
"Description of the Debentures and the Indenture--Subordination," respectively,
in the accompanying Prospectus. There are no provisions in the Series A
Preferred Capital Securities, the Guarantee, the Partnership Agreement (as
defined herein) or the Indenture (as defined in the accompanying Prospectus)
that limit UI's ability to incur additional indebtedness, including
indebtedness that ranks senior to the Guarantee and the Series A Debentures.
The Indenture does not contain any cross-defaults to any other indebtedness of
UI and, therefore, a default with respect to, or the acceleration of, any such
indebtedness will not constitute an "Event of Default" with respect to the
Series A Debentures. See "Description of the Indenture and the Debentures--
Subordination" and "--Events of Default; Remedies" in the accompanying
Prospectus.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
UI has the right under the Indenture, from time to time, to extend interest
payment periods on the Series A Debentures for up to 60 consecutive months,
and, as a consequence, monthly dividends on the Series A Preferred Capital
Securities will be deferred by United Capital during any such extended interest
payment period. During any such extended interest payment period, UI may not
declare or pay dividends on, or redeem, purchase, acquire or make a liquidation
payment with respect to, any shares of its capital stock. UI currently has no
intention to so extend any such interest payment period, and it believes that
such an extension of an interest payment period is unlikely. See "Description
of the Debentures and the Indenture--Option to Extend Interest Payment Period"
and "Description of the Preferred Capital Securities--Voting Rights" in the
accompanying Prospectus.
TAX CONSEQUENCES OF EXTENDED INTEREST PAYMENT PERIOD
Should an extended interest payment period occur, United Capital will
continue to accrue income for United States Federal income tax purposes that
will be allocated but not distributed to record holders of Series A Preferred
Capital Securities. As a result, such holders will include such interest in
gross income for Federal income tax purposes in advance of the receipt of cash,
and will not receive the cash related to such income if such holders dispose of
the Series A Preferred Capital Securities prior to the record date for payment
of dividends. A holder's tax basis in the Series A Preferred Capital Securities
will be increased by the amount of any interest that is included in such
holder's income without receipt of cash, and will be decreased when and if such
cash is subsequently received by such Series A Preferred Capital Securities
holder from United Capital. See "United States Income Taxation--Potential
Extension of Interest Payment Period" herein.
S-3
<PAGE>
SPECIAL EVENT REDEMPTION OR EXCHANGE
Upon the occurrence and continuation of a Special Event (as defined in the
accompanying Prospectus, which term, as so defined, relates to a change in law
or regulation or official interpretation thereof), UI, as general partner of
United Capital (the "General Partner"), will elect to cause United Capital (i)
to redeem the Series A Preferred Capital Securities in whole (and not in part)
or (ii) to distribute Series A Debentures in exchange for Series A Preferred
Capital Securities. A condition to any such exchange will be receipt by United
Capital of an opinion of counsel that such exchange will be treated as a non-
taxable exchange to the holders of the Preferred Capital Securities. In the
case of a Special Event that is a Tax Event (as defined in the accompanying
Prospectus), the General Partner may also elect to cause the Series A
Preferred Capital Securities to remain outstanding. See "Certain Terms of the
Series A Preferred Capital Securities--Redemption or Exchange" herein and
"Description of the Preferred Capital Securities--Special Event Redemption or
Exchange" in the accompanying Prospectus.
In April 1994, the Internal Revenue Service (the "IRS") issued certain
notices generally addressing the characteristics that distinguish debt from
equity for various purposes under the Federal income tax laws. In these
notices, the IRS indicated that transactions involving securities that, like
the Series A Preferred Capital Securities, have both debt and equity
characteristics would be reviewed with scrutiny to determine how they would be
treated for tax purposes. UI believes that interest on the Series A Debentures
will be deductible under the tests referred to in these notices. If, as a
result of a change in law or a pronouncement or decision interpreting or
applying any applicable law, United Capital receives an opinion of counsel to
the effect that interest on the Series A Debentures would not be deductible,
United Capital would have the option (i) to redeem the Series A Preferred
Capital Securities, (ii) to distribute the Series A Debentures in exchange
therefor or (iii) to cause the Series A Preferred Capital Securities to remain
outstanding, in each case as described under "Description of the Preferred
Capital Securities--Special Event Redemption or Exchange" in the accompanying
Prospectus.
THE UNITED ILLUMINATING COMPANY
UI is an operating electric public utility company, incorporated under the
laws of the State of Connecticut in 1899. It is engaged principally in the
production, purchase, transmission, distribution and sale of electricity for
residential, commercial and industrial purposes in a service area of about 335
square miles in the southwestern part of the State of Connecticut. The
population of this area is approximately 711,000, or 22% of the population of
the State of Connecticut. The service area, largely urban and suburban in
character, includes the principal cities of Bridgeport (population 142,000)
and New Haven (population 130,000) and their surrounding areas. Situated in
the service area are retail trade and service centers, as well as large and
small industries providing a wide variety of products, including helicopters
and other transportation equipment, electrical equipment, chemicals and
pharmaceuticals. Of UI's 1994 retail electric revenues, approximately 41% were
derived from residential sales, 40% from commercial sales, 17% from industrial
sales and 2% from other sales.
In addition to United Capital, UI has three wholly-owned direct
subsidiaries. Research Center, Inc. ("RCI") has been formed to participate in
the development of one or more regulated power production ventures, including
possible participation in arrangements for the future development of
independent power production and cogeneration facilities. United Energy
International, Inc. ("UEI") was formed to facilitate participation in a
proposed joint venture relating to power production plants abroad. United
Resources, Inc. ("URI") serves as the parent corporation for UI's unregulated
businesses, each of which is incorporated separately to participate in
business ventures that will complement and enhance UI's electric utility
business and serve the interests of UI and its shareholders and customers.
Four wholly-owned subsidiaries of URI have been incorporated. Souwestcon
Properties, Inc. ("SPI") participated as a 25% partner in the ownership of a
medical hotel building in New Haven, which has recently been sold. SPI no
longer owns any property and is currently inactive. A second wholly-owned
subsidiary of
S-4
<PAGE>
URI is Thermal Energies, Inc., which is participating in the development of
district heating and cooling water facilities in the downtown New Haven area,
including the energy center for an office tower and participation as a 37%
partner in the energy center for a city hall and office tower complex. A third
URI subsidiary, Precision Power, Inc., provides power-related equipment and
services to the owners of commercial buildings and industrial facilities. A
fourth URI subsidiary, American Payment Systems, Inc., manages agents and
equipment for electronic data processing of bill payments made by customers of
utilities, including UI, at neighborhood businesses. In addition to these
subsidiaries, URI has an 90% ownership interest in Ventana Corporation, which
offers energy conservation engineering and project management services to
governmental and private institutions. The Board of Directors of UI has
authorized the investment of a maximum of $18.0 million, in the aggregate, of
UI's assets in all of these URI ventures, UEI and RCI, and, at December 31,
1994, approximately $14.5 million had been so invested.
UI has ownership and leasehold interests in three nuclear generating units
located in New England, including a 17.5% undivided ownership and leasehold
interest in Seabrook Unit 1, a 1,150-megawatt unit in Seabrook, New Hampshire
("Seabrook 1").
For further information about these and other matters affecting UI's
business, see "Incorporation of Certain Documents by Reference" in the
accompanying Prospectus.
UNITED CAPITAL FUNDING PARTNERSHIP L.P.
United Capital is a limited partnership that was formed under the Delaware
Revised Uniform Limited Partnership Act, as amended (the "Delaware Act"), on
August 18, 1994. United Capital was formed for the sole purpose of issuing
Limited Partner Interests and lending the proceeds thereof to UI. UI is the
sole General Partner and will manage the business and affairs of United
Capital. Holders of Series A Preferred Capital Securities and other Limited
Partner Interests of United Capital will be limited partners of United
Capital. UI will make capital contributions from time to time to the extent
required so that the total contributions made by UI, as the General Partner,
shall at all times be at least equal to 1% of the total contributions made by
all partners. United Capital will lend such amounts to UI from time to time in
return for Indenture Securities of UI, including the Series A Debentures. The
rights and obligations of UI, as the General Partner, and the limited partners
of United Capital will be governed by the Delaware Act and by an Amended and
Restated Agreement of Limited Partnership of United Capital (the "Partnership
Agreement") substantially in the form filed as an exhibit to the Registration
Statement of which this Prospectus Supplement is a part. United Capital has
been advised by its special Delaware counsel that, assuming a holder of
Preferred Capital Securities acts in conformity with the provisions of the
Partnership Agreement, such holder (other than the General Partner) will not
be liable for the debts, obligations and liabilities of United Capital,
whether arising in contract, tort or otherwise, solely by reason of being a
limited partner of United Capital (subject to the obligation of a limited
partner to repay any funds wrongfully distributed to it). The principal
executive office of United Capital is c/o The United Illuminating Company, 157
Church Street, New Haven, Connecticut 06506-0901, telephone number (203) 499-
2000.
S-5
<PAGE>
SUMMARY FINANCIAL INFORMATION
The following material, which is presented herein solely to furnish limited
financial information regarding UI, is qualified in its entirety by reference
to the detailed information and financial statements contained in the
Incorporated Documents (as defined in the accompanying Prospectus) and
available upon request from UI. See "Available Information" in the
accompanying Prospectus. Accordingly, the following should be read together
with the Incorporated Documents.
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED DECEMBER 31,
--------------------------------
1994 1993 1992
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Operating Revenues............................ $ 656,748 $ 653,023 $ 667,325
Operating Income.............................. 127,392 114,814 108,022
Total Allowance for Funds Used During
Construction (1)............................. 3,463 4,067 3,232
Deferred Return (2)........................... -- 7,497 15,959
Total Interest Charges........................ 84,073 92,290 101,548
Net Income.................................... 46,795 40,481 56,768
</TABLE>
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1994
----------------------------------------------------
ACTUAL AS ADJUSTED (3)
------------------------- --------------------------
PERCENT OF AMOUNT PERCENT OF
AMOUNT CAPITALIZATION (UNAUDITED) CAPITALIZATION
---------- -------------- ----------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
CAPITALIZATION:
Long-Term Debt (including
current maturities)...... $ 901,473 65.6% $ 901,473 64.5%
Preferred Stock........... 44,700 3.3 17,200 1.2
Preferred Securities of
Subsidiary............... -- -- 50,000 3.6
Common Stock Equity....... 428,028 31.1 428,028 30.7
---------- ----- ---------- -----
Total Capitalization...... $1,374,201 100.0% $1,396,701 100.0%
========== ===== ========== =====
</TABLE>
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(1) Allowance for Funds Used During Construction ("AFUDC") is a non-cash
credit to income that represents the approximate cost of debt and equity
capital devoted to plant under construction. For balance sheet purposes,
AFUDC is capitalized to UI's Plant account and depreciated and recovered
over the life of the asset.
(2) Deferred Return is a non-cash credit to income that represents the
approximate cost of debt and equity capital devoted to the portion of
Seabrook 1 that had previously been excluded from rate base in accordance
with the phase-in to rate base of UI's investment in Seabrook 1. For
balance sheet purposes, Deferred Return is capitalized as a deferred debit
and amortized and recovered over a five-year period beginning in 1995.
(3) Adjusted to give effect to (i) the issuance by United Capital of 2,000,000
Series A Preferred Capital Securities (having an aggregate stated
liquidation preference of $50,000,000) and the use of the proceeds thereof
by United Capital to purchase the Series A Debentures from UI and (ii) the
intended use of the estimated net proceeds thereof by UI to redeem
outstanding preferred stock and repay outstanding short-term debt. See
"Use of Proceeds."
USE OF PROCEEDS
The proceeds from the sale of the Series A Preferred Capital Securities,
together with the related capital contribution made by the General Partner,
will be lent to UI in return for the Series A Debentures. UI intends to apply
the net proceeds from the Series A Debentures to the payment or purchase (on
the open market, in private transactions or otherwise) or redemption of
outstanding securities of UI, which may include the redemption of $12.5
million par value of its 7.60% Preferred Stock, Series E at 101% of the par
value thereof and of $15 million par value of its 7.60% Preferred Stock,
Series F at 101% of the par value thereof, and the repayment of outstanding
short-term debt.
S-6
<PAGE>
CERTAIN TERMS OF THE SERIES A PREFERRED CAPITAL SECURITIES
The following summary of certain terms of the Series A Preferred Capital
Securities supplements the description of the Preferred Capital Securities set
forth in the accompanying Prospectus under the heading "Description of the
Preferred Capital Securities," to which description reference is hereby made.
GENERAL
The Series A Preferred Capital Securities will be issued as the initial
series of Preferred Capital Securities pursuant to the Partnership Agreement.
An aggregate of 2,000,000 Series A Preferred Capital Securities, having an
aggregate stated liquidation preference of $50,000,000, are being offered
hereby.
DIVIDENDS
Dividends on the Series A Preferred Capital Securities will be cumulative
from the date of issue and will be payable monthly in arrears on the last day
of each calendar month of each year at an annual rate of % of the liquidation
preference of $25 per security. The first dividend payment date for the Series
A Preferred Capital Securities will be , 1995. See "Description of the
Preferred Capital Securities--Dividends" in the accompanying Prospectus.
UI has the right, from time to time, to extend interest payment periods on
the Series A Debentures for up to 60 consecutive months, and, as a consequence,
monthly dividends on the Series A Preferred Capital Securities will be deferred
by United Capital during any such extended interest payment period. For a
description of UI's right to so extend interest payment periods, and the effect
of any such extension on its ability to declare and pay dividends on shares of
its capital stock, see "Description of the Debentures and the Indenture--Option
to Extend Interest Payment Period" in the accompanying Prospectus.
REDEMPTION OR EXCHANGE
On or after April , 2000, United Capital may, at its option and at the
direction of UI, redeem the Series A Preferred Capital Securities in whole or
in part at the Redemption Price. In addition, if at any time United Capital or
UI, as a consequence of (i) the Series A Debentures not being treated as
indebtedness for United States Federal income tax purposes or (ii) United
Capital not being treated as a partnership for United States Federal income tax
purposes, is or would be required to pay certain additional amounts or to
withhold or deduct certain amounts, the Series A Preferred Capital Securities
are redeemable, at the option of United Capital, in whole or in part at the
Redemption Price. See "Certain Terms of the Series A Preferred Capital
Securities--Optional Redemption" and "--Redemption Procedures" in the
accompanying Prospectus.
Series A Preferred Capital Securities will be subject to mandatory redemption
upon the payment of Series A Debentures at maturity or redemption, as described
under "Description of the Preferred Capital Securities--Mandatory Redemption"
in the accompanying Prospectus, and may be subject to redemption in whole (and
not in part) or exchange for Series A Debentures upon the occurrence and
continuation of a Special Event (which relates to a change in law or regulation
or official interpretation thereof), as described under "Description of the
Preferred Capital Securities--Special Event Redemption or Exchange" in the
accompanying Prospectus.
CERTAIN TERMS OF THE SERIES A DEBENTURES
The following summary of certain terms and provisions of the Series A
Debentures supplements the description of the Debentures set forth in the
accompanying Prospectus under the heading "Description of the Debentures and
the Indenture," to which description reference is hereby made.
GENERAL
Pursuant to the Indenture dated as of April 1, 1995 between UI and The Bank
of New York, as trustee (as supplemented from time to time, the "Indenture"),
and to evidence the loan by United Capital to UI of the proceeds of the
issuance of the Series A Preferred Capital Securities and the related capital
contribution made by the General Partner, UI will issue the Series A Debentures
to United Capital in an aggregate principal amount equal to the sum of the
aggregate liquidation preference of the Series A Preferred Capital Securities
and the amount of such capital contribution.
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The entire principal amount of the Series A Debentures will become due and
payable, together with any accumulated and unpaid interest thereon, including
Additional Interest (as defined in the accompanying Prospectus), if any, on
April , 2025 (subject to UI's rights and obligations to redeem the Series A
Debentures). See "Redemption" below.
INTEREST
The Series A Debentures will bear interest at a rate of % per annum from
the date they are issued until paid. Such interest will be payable monthly on
the last day of each calendar month of each year, commencing , 1995. See
"Description of the Debentures and the Indenture--Interest" and "--Option to
Extend Interest Payment Period" in the accompanying Prospectus.
REDEMPTION
The Series A Debentures may be redeemed at the option of UI, at any time on
or after April , 2000, in whole or in part, at a redemption price equal to
100% of the principal amount thereof plus any accrued but unpaid interest,
including Additional Interest, if any, to the date fixed for redemption. In
addition, if United Capital redeems Series A Preferred Capital Securities in
accordance with the terms thereof, UI shall redeem Series A Debentures in a
principal amount equal to the aggregate liquidation preference of the Series A
Preferred Capital Securities so redeemed, at a redemption price equal to 100%
of the aggregate principal amount of such Series A Debentures to be redeemed,
plus any accrued but unpaid interest, including Additional Interest, if any,
any such redemption to be made on the date the Series A Preferred Capital
Securities are redeemed or on such earlier date as United Capital and UI shall
agree.
UNITED STATES INCOME TAXATION
GENERAL
This section is a summary of certain United States Federal income tax
considerations that may be relevant to prospective purchasers of Series A
Preferred Capital Securities and represents the opinion of Reid & Priest,
special tax counsel to UI and United Capital, insofar as it relates to matters
of law and legal conclusions. This section is based upon current provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), existing and
proposed regulations thereunder and current administrative rulings and court
decisions, all of which are subject to change. Subsequent changes may cause tax
consequences to vary substantially from the consequences described below.
No attempt has been made in the following discussion to comment on all
Federal income tax matters affecting purchasers of Series A Preferred Capital
Securities. Moreover, the discussion focuses on holders of Series A Preferred
Capital Securities who are individual citizens or residents of the United
States and has only limited application to corporations, estates, trusts and
non-resident aliens. Accordingly, each prospective purchaser of Series A
Preferred Capital Securities should consult, and should depend upon, his or her
own tax advisor in analyzing the Federal, state, local and foreign income tax
consequences of the purchase, ownership or disposition of Series A Preferred
Capital Securities.
INCOME FROM SERIES A PREFERRED CAPITAL SECURITIES
In the opinion of Reid & Priest, United Capital will be treated as a
partnership for Federal income tax purposes. Accordingly, each Series A
Preferred Capital Securities holder will be required to include in gross income
his or her distributive share of United Capital's net income. Any amount so
included in a Series A Preferred Capital Securities holder's gross income will
increase his or her tax basis in the Series A Preferred Capital Securities, and
the amount of cash dividends distributed to the Series A Preferred Capital
Securities holder will be a non-taxable reduction in his or her tax basis in
the Series A Preferred Capital Securities. The income included in a Series A
Preferred Capital Securities holder's gross income should not exceed dividends
received on such Series A Preferred Capital Securities, except in the limited
circumstances described under "Potential Extension of Interest Payment Period"
below. No portion of such income will be eligible for the dividends received
deduction.
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DISPOSITION OF SERIES A PREFERRED CAPITAL SECURITIES
Upon the sale or redemption for cash of Series A Preferred Capital
Securities, gain or loss realized will be recognized by each Series A Preferred
Capital Securities holder in an amount equal to the difference between (i) the
amount realized by the Series A Preferred Capital Securities holder for such
Series A Preferred Capital Securities and (ii) such holder's tax basis in such
Series A Preferred Capital Securities. Depending upon the particular
circumstances of a Series A Preferred Capital Securities holder, gain or loss
recognized by such holder on the sale or exchange of Series A Preferred Capital
Securities held for more than one year will generally be taxable as long-term
capital gain or loss.
EXCHANGE OF SERIES A PREFERRED CAPITAL SECURITIES FOR SERIES A DEBENTURES
Under certain circumstances relating to changes in law, as described under
the caption "Description of the Series A Preferred Capital Securities--Special
Event Redemption or Exchange" in the accompanying Prospectus, United Capital
may distribute the Series A Debentures to Series A Preferred Capital Securities
holders in exchange for the Series A Preferred Capital Securities. As described
in "Description of the Series A Preferred Capital Securities--Special
Redemption or Exchange" in the accompanying Prospectus, in the case of a
Special Event, Series A Debentures may not be distributed to the holders of
Series A Preferred Capital Securities unless United Capital receives an opinion
of counsel to the effect that holders of Series A Preferred Capital Securities
will not recognize gain or loss for Federal income tax purposes as a result of
such distribution. Such an exchange will result in each Series A Preferred
Capital Securities holder receiving an aggregate basis in its Series A
Debentures equal to such holder's aggregate tax basis in its Series A Preferred
Capital Securities. A Series A Preferred Capital Securities holder's holding
period in the Series A Debentures received in such an exchange will include the
period for which the Series A Preferred Capital Securities were held by such
holder, provided the Series A Preferred Capital Securities were held as a
capital asset.
UNITED CAPITAL INFORMATION RETURNS AND AUDIT PROCEDURES
UI, as the General Partner of United Capital, will furnish each Series A
Preferred Capital Securities holder with a Schedule K-1 for each year setting
forth such Series A Preferred Capital Securities holder's allocable share of
income for the prior calendar year. Because UI and United Capital believe that
the Series A Debentures will be properly treated as indebtedness for federal
income tax purposes, such allocable share of income will generally be reflected
as interest income on such Schedule K-1. UI is currently required to furnish
such Schedule K-1 to each holder as soon as practicable following the end of
each year, but in any event prior to March 31.
Any person who holds Series A Preferred Capital Securities as a nominee for
another person is required to furnish to United Capital: (i) the name, address
and taxpayer identification number of the beneficial owner and nominee; (ii)
information as to whether the beneficial owner is (A) a person that is not a
United States person, (B) a foreign government, an international organization
or any wholly-owned agency or instrumentality of the foregoing or (C) a tax-
exempt entity; (iii) the amount and description of the Series A Preferred
Capital Securities held, acquired or transferred for the beneficial owner; and
(iv) certain information including the dates of acquisitions and transfers,
means of acquisitions and transfers, and acquisition costs for purchases, as
well as the amount of net proceeds from sales. Brokers and financial
institutions are required to furnish additional information, including whether
they are United States persons, and certain information on Series A Preferred
Capital Securities that they acquire, hold or transfer for their own accounts.
A penalty of $50 per failure (up to a maximum of $100,000 per calendar year) is
imposed by the Code for failure to report such information to United Capital.
The nominee is required to supply the beneficial owners of the Series A
Preferred Capital Securities with the information furnished to United Capital.
POTENTIAL EXTENSION OF INTEREST PAYMENT PERIOD
Under the terms of the Indenture, UI has the right to extend from time to
time interest payment periods on the Series A Debentures for up to 60
consecutive months. Because the interest payment period is extendable, the
interest on the Series A Debentures will be treated as "original issue
discount" ("OID") pursuant to Code sections 1271 et seq. and the Treasury
Regulations promulgated thereunder. Pursuant
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thereto, United Capital will be required to include the interest on the Series
A Debentures in income as it accrues in accordance with a constant yield method
based upon a compounding of interest, before actual receipt of the cash payment
representing such interest.
Accrued income includible by United Capital during an extended interest
payment period pursuant to the OID rules will be allocated, but not
distributed, to Series A Preferred Capital Securities holders of record on the
Business Day (as defined in the accompanying Prospectus) preceding the last day
of each calendar month. As a result, during an extended interest payment
period, Series A Preferred Capital Securities holders of record will include
interest in gross income in advance of the receipt of cash and any such holders
who dispose of Series A Preferred Capital Securities prior to the record date
for the payment of dividends following such extended interest payment period
will include interest in gross income but will not receive any cash related
thereto from United Capital. The tax basis of Series A Preferred Capital
Securities will be increased by the amount of any interest that is included in
a Series A Preferred Capital Securities holder's income without receipt of
cash, and will be decreased when and if such cash is subsequently received by
such Series A Preferred Capital Securities holder from United Capital.
UNITED STATES ALIEN HOLDERS
For purposes of this discussion, a "United States Alien holder" is any holder
of Series A Preferred Capital Securities that is (i) a nonresident alien
individual, (ii) a foreign corporation or partnership or (iii) an estate or
trust that has a foreign fiduciary, in each case not subject to Federal income
taxation on a net income basis in respect of such Series A Preferred Capital
Securities.
Under current Federal income tax law, subject to the discussion below with
respect to backup withholding:
(a) payments by United Capital or any of its paying agents to any United
States Alien holder will not be subject to Federal withholding tax provided
that (i) the beneficial owner of Series A Preferred Capital Securities does
not actually or constructively own 10% or more of the total combined voting
power of all classes of stock of UI entitled to vote, (ii) the beneficial
owner of Series A Preferred Capital Securities is not a controlled foreign
corporation that is related to UI through stock ownership, and (iii) either
(A) the beneficial owner of Series A Preferred Capital Securities certifies
to United Capital or its agent, under penalties of perjury, that it is a
United States Alien holder and provides its name and address or (B) the
holder of Series A Preferred Capital Securities is a securities clearing
organization, bank or other financial institution that holds customers'
securities in the ordinary course of its trade or business (a "Financial
Institution") and such Financial Institution certifies to United Capital or
its agent under penalties of perjury that such certification has been
received from the beneficial owner by it or by another Financial
Institution between it and the beneficial owner and furnishes United
Capital or its agent with a copy thereof; and
(b) a United States Alien holder will generally not be subject to Federal
tax on any gain realized upon the sale or exchange of Series A Preferred
Capital Securities unless such holder is an individual present in the
United States for 183 days or more in the taxable year of the sale and
either has a "tax home" in the United States or certain other requirements
are met.
BACKUP WITHHOLDING AND INFORMATION REPORTING
In general, information reporting requirements will apply to payments to
noncorporate United States holders of Series A Preferred Capital Securities of
the sale proceeds of Series A Preferred Capital Securities within the United
States, and "backup withholding" at a rate of 31% will apply to such payments
if any such Series A Preferred Capital Securities holder fails to provide to
United Capital an accurate taxpayer identification number.
In general, information reporting requirements will also apply to payments of
principal of and interest on Series A Debentures distributed to noncorporate
United States holders of Series A Preferred Capital Securities and to the
proceeds received by such holders from the sale of Series A Debentures prior to
maturity within the United States, and "backup withholding" at a rate of 31%
will apply to such payments or proceeds if the United States holder fails to
provide an accurate taxpayer identification number or to report all interest
and dividends required to be shown on his or her Federal income tax returns.
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Information reporting and backup withholding will not apply to payments of
principal and interest made by UI or a paying agent to a United States Alien
holder in respect of Series A Debentures distributed to such holder if the
certification described in clause (iii) of paragraph (a) under "United States
Alien Holders" above is received, provided that the payor does not have actual
knowledge that the holder is a United States Alien holder.
Payments of the proceeds from the sale by a United States Alien holder of
Series A Preferred Capital Securities or Series A Debentures distributed to
such a holder made to or through a foreign office of a broker will not be
subject to information reporting or backup withholding. However, if the broker
is a United States person, a controlled foreign corporation for United States
Federal income tax purposes or a foreign person 50% or more of whose gross
income is effectively connected with a United States trade or business for a
specified three year period, information reporting may apply to such payments.
Payments of the proceeds from the sale by a United States Alien holder of
Series A Preferred Capital Securities or Series A Debentures distributed to a
Series A Preferred Capital Securities holder to or through the United States
office of a broker is subject to information reporting and backup withholding,
unless the holder or beneficial owner certifies as to its non-United States
status or otherwise establishes an exemption from information reporting and
backup withholding.
UNDERWRITING
Under the terms and subject to the conditions of an Underwriting Agreement
dated the date hereof (the "Underwriting Agreement"), United Capital has agreed
to sell to each of the Underwriters named below (the "Underwriters"), and each
of the Underwriters, for whom Morgan Stanley & Co. Incorporated, Bear, Stearns
& Co. Inc., Goldman, Sachs & Co., Legg Mason Wood Walker, Incorporated, Lehman
Brothers Inc. and Prudential Securities Incorporated are acting as
representatives (the "Representatives"), has severally agreed to purchase from
United Capital, the respective number of Series A Preferred Capital Securities
set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
SERIES A
PREFERRED
CAPITAL
UNDERWRITERS SECURITIES
------------ ----------
<S> <C>
Morgan Stanley & Co. Incorporated....................................
Bear, Stearns & Co. Inc. ............................................
Goldman, Sachs & Co. ................................................
Legg Mason Wood Walker, Incorporated.................................
Lehman Brothers Inc. ................................................
Prudential Securities Incorporated...................................
---------
Total.............................................................. 2,000,000
=========
</TABLE>
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The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Series A Preferred Capital
Securities are subject to the approval of certain legal matters by their
counsel and to certain other conditions. The Underwriters are committed to take
and pay for all such Series A Preferred Capital Securities offered hereby, if
any are taken.
The Underwriters propose to offer all or part of the Series A Preferred
Capital Securities directly to the public at the public offering price set
forth on the cover page hereof, and all or part to certain dealers at a price
that represents a concession not in excess of $ per security. The
Underwriters may allow, and such dealers may reallow, a concession not in
excess of $ per security to certain other dealers. After the initial
offering date of the Series A Preferred Capital Securities, the offering price
and other selling terms may from time to time be varied by the Representatives.
Because the proceeds of the sale of the Series A Preferred Capital Securities
will be loaned to UI, UI has agreed, in the Underwriting Agreement, to pay to
the Underwriters as compensation for their services an amount of $ per
security ($ per security sold to certain institutions) for the accounts of
the several Underwriters.
Certain of the Underwriters engage in transactions with, and from time to
time have performed services for, UI in the ordinary course of business.
The Series A Preferred Capital Securities have been approved for listing on
the New York Stock Exchange, subject to official notice of issuance. Listing
will be contingent upon meeting the requirements of the New York Stock
Exchange, including those relating to distribution. Trading of the Series A
Preferred Capital Securities on the New York Stock Exchange is expected to
commence within a seven-day period after the initial delivery of the Series A
Preferred Capital Securities. UI and United Capital have been advised by the
Representatives that the Underwriters intend to make a market in the Series A
Preferred Capital Securities prior to the commencement of trading on the New
York Stock Exchange, but are not obligated to do so and may discontinue market
making at any time without notice.
United Capital and UI have agreed to indemnify the several Underwriters
against certain liabilities, including liabilities under the Securities Act of
1933, as amended, or to contribute with respect to payments that the
Underwriters may be required to make in respect thereof.
EXPERTS
The consolidated financial statements and related financial statement
schedule incorporated in the accompanying Prospectus by reference to UI's
Annual Report on Form 10-K for the fiscal year ended December 31, 1994 have
been audited by Coopers & Lybrand L.L.P., independent accountants, as stated in
their report, which is incorporated therein by reference, and have been so
incorporated in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
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