SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended December 31, 1997
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Commission File Number 1-3423-01
ENRON CAPITAL TRUST II
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction 76-6122939
of incorporation or organization) (IRS Employer Identification No.)
1400 Smith Street, Houston Texas 77002
(Address of principal executive offices) (Zip Code)
(713) 853-6161
(Registrant's telephone number, including area code)
Securities registered pursuantName of Exchange on which registered:
to Section 12(b) of the Act:
8 1/8% Trust Preferred Securities New York Stock Exchange
(Title of Class)
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days.
[X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
As of March 15, 1998, the registrant had an aggregate of
6,000,000 8 1/8% Trust Preferred Securities and 186,000 8
1/8% Trust Common Securities outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
PART I
ITEM 1. BUSINESS.
Enron Capital Trust II (the "Trust") is a statutory
business trust created under the Delaware Business Trust
Act, as amended (the "Trust Act"), pursuant to an amended
and restated declaration of trust (the "Declaration") and
the filing of a certificate of trust with the Secretary of
State of the State of Delaware. As of December 31, 1996,
the Trust had no assets or operations. On January 16, 1997,
the Trust completed its initial public offering of the Trust
Preferred Securities described below, as a result of which
the Trust's sole assets are 6,186,000 8 1/8% Partnership
Preferred Securities ($25 liquidation amount per security)
representing an 85% limited partnership interest in Enron
Preferred Funding II, L.P., a Delaware limited partnership
(the "Partnership"). Ownership of the assets of the Trust
is evidenced by an aggregate of 6,000,000 8 1/8% Trust
Preferred Securities (the "Trust Preferred Securities"),
which are listed and traded on the New York Stock Exchange
under the symbol "ENE PrR", and 186,000 Trust Common
Securities (the "Trust Common Securities," and, together
with the Trust Preferred Securities, the "Trust
Securities"), all of which are owned by Enron Corp., an
Oregon corporation ("Enron"). The Trust makes distributions
on the Trust Securities to the extent it receives
distributions from the Partnership on the Partnership
Preferred Securities. Payments on the Partnership Preferred
Securities represent the sole source of revenue for the
Trust. Distributions on the Trust Securities are guaranteed
by Enron, but only to the extent that the Trust has
available funds to pay such distributions. The Trust was
created for the sole purpose of issuing the Trust
Securities, investing the proceeds of such issuance in the
Partnership Preferred Securities and engaging in only those
other activities necessary or incidental thereto. The Trust
Securities are subject to redemption at any time on or after
March 31, 2002 and earlier in the event of certain tax law
changes or other events.
The general partner of the Partnership is Enron, which
owns a 15% general partnership interest in the Partnership.
Since completion of the offering of the Trust Preferred
Securities on January 16, 1997, the assets of the
Partnership have been invested primarily in a $136,450,000
principal amount 7.75% Subordinated Debenture due 2016,
Series II of Enron (the "Enron Debenture") and $21,836,000
principal amount 7.75% Debentures due 2016, Series II, of
each of Enron Capital & Trade Resources Corp. and Enron
Pipeline Company (the "Subsidiary Debentures" and, together
with the Enron Debenture, the "Debentures"), each of which
is a wholly owned subsidiary of Enron. The obligations under
the Subsidiary Debentures are guaranteed by Enron. The
respective issuers of the Debentures have certain rights to
elect to defer any payments of principal and interest on the
Debentures for up to five years at a time. In addition to
the Debentures, the Partnership owns an aggregate of
approximately $1,831,000 in short-term, investment grade
debt securities (the "Eligible Debt Securities"). Under
certain circumstances, upon repayment of one or more of the
Debentures, the assets of the Partnership may be reinvested
in one or more debt securities of Enron or its subsidiaries.
Payments of interest and principal on the Enron Debenture
and the Subsidiary Debentures (or the guarantees thereof)
and the Eligible Debt Securities are the sole source of
revenue for the Partnership. The Partnership pays
distributions to the Trust as holder of the Partnership
Preferred Securities when, as and if Enron, as the general
partner, determines to do so, although Enron has no
obligation to do so.
For more information concerning the Trust, the
Partnership and the rights of the holders of the Trust
Securities, see the Amended and Restated Declaration of
Trust relating to the Trust, the Amended and Restated
Agreement of Limited Partnership relating to the
Partnership, the Indentures relating to each of the
Debentures and the Guarantee Agreements of Enron with
respect to the Trust Preferred Securities, the Partnership
Preferred Securities and the Subsidiary Debentures, each of
which is included as an exhibit to this Form 10-K.
Enron, an Oregon corporation, is an integrated natural
gas and electricity company headquartered in Houston, Texas.
The common stock of Enron is traded on the New York Stock
Exchange under the symbol "ENE." Essentially all of Enron's
operations are conducted through its subsidiaries and
affiliates, which are principally engaged in the exploration
for and production of natural gas and crude oil in the
United States and internationally; the transportation of
natural gas through pipelines to markets throughout the
United States; the generation and transmission of
electricity to markets in the northwestern United States;
the marketing of natural gas, electricity and other
commodities and related risk management and finance services
worldwide; and the development, construction and operation
of power plants, pipelines and other energy related assets
in international markets.
The location of the principal executive offices of the
Trust and the Partnership is c/o Enron Corp., 1400 Smith
Street, Houston, Texas 77002, and its phone number at such
address is (713) 853-6161.
NOTE: Because the Trust and the Partnership had no
assets or liabilities or operations as of December 31, 1996,
and because the Trust and the Partnership are special
purpose financing entities with no separate business
operations, the only assets of the Trust are the Partnership
Preferred Securities, and substantially all of the assets of
the Partnership consist of a debt security of Enron and debt
securities of subsidiaries of Enron that are guaranteed by
Enron, the Trust does not believe that financial statements
for the Trust or the Partnership are meaningful.
Accordingly, financial statements and related financial
information have not been included in this Form 10-K. For
further information concerning Enron and its subsidiaries,
including financial statements and other financial
information, see the Annual Report on Form 10-K of Enron for
the year ended December 31, 1997 as filed with the
Securities and Exchange Commission, a copy of which may be
obtained from the Corporate Secretary of Enron at the
address listed on the cover of this Form 10-K.
ITEM 2. PROPERTIES.
Not applicable.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS.
Not applicable.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
The Trust Preferred Securities were issued on January
16, 1997 and have been listed on the New York Stock Exchange
("NYSE") under the symbol "ENE PrR" since that time. From
such date through December 31, 1997, the high and low prices
of the Trust Preferred Securities on the NYSE were $26.06
and $24.25, respectively. As of March 14, 1998, the
approximate number of holders of record of the Trust
Preferred Securities was 66. All of the Trust Common
Securities are held by Enron.
The Trust has declared its first scheduled regular
quarterly distribution on the Trust Preferred Securities of
$.4232 per Trust Preferred Security payable to holders of
record on March 31, 1997, such initial distribution accruing
from January 16, 1997, the date of original issuance of the
Trust Preferred Securities. During the remainder of 1997, the
Trust paid quarterly distributions on the Trust Preferred
Securities of $.5078 per quarter, and the Trust expects to
continue to pay distributions on the Trust Preferred
Securities of $.5078 per quarter to the extent the Trust has
funds available for the payment of such distributions.
The Trust issued an aggregate of 186,000 Trust Common
Securities to Enron on January 16, 1997 in a transaction
exempt from the Securities Act of 1933 pursuant to Section
4(2) thereof.
ITEM 6. SELECTED FINANCIAL AND OPERATING DATA.
See Note to Item 1.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
See Note to Item 1.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See Note to Item 1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE
REGISTRANT.
The Trust is administered by four trustees (the
"Trustees"). Two of the Trustees, Keith A. Crane and
Phillip M. Sisneros (the "Regular Trustees") are employees
of Enron or its subsidiaries. The third trustee is The
Chase Manhattan Bank, which is unaffiliated with Enron and
acts as indenture trustee for purposes of compliance with
the provisions of the Trust Indenture Act (the "Property
Trustee"). The fourth trustee, Chase Manhattan Bank
Delaware, is also unaffiliated with Enron and serves as
Delaware Trustee to fulfill a requirement of the Trust Act.
ITEM 11. EXECUTIVE COMPENSATION.
The Regular Trustees are not compensated by the Trust
or Enron for their services as trustees. The Property
Trustee and Delaware Trustee are not compensated by the
Trust but are paid customary compensation for their services
by Enron.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.
Not applicable.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Except as described above under Item 1, the Trust is
not party to any transactions with affiliates.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K.
(a)(1) Financial Statements
None. See Note to Item 1.
(a)(2) Financial Statement Schedules
None. See Note to Item 1.
(a)(3) List of Exhibits
4.1 Certificate of Trust (incorporated by reference to
Exhibit 4(a) of the Registration Statement on Form
S-1 of the Trust (No. 333-18669)).
4.2 Amended and Restated Declaration of Trust dated as
of January 13, 1997 (incorporated by reference to
Exhibit 4.2 to Enron Capital Trust II Form 10-K
for the year ended 1996).
4.3 Amended and Restated Agreement of Limited
Partnership of the Enron Preferred Funding II,
L.P. dated as of January 16, 1997 (incorporated by
reference to Exhibit 4.3 to Enron Capital Trust II
Form 10-K for the year ended 1996).
4.4 Trust Preferred Guarantee Agreement dated as of
January 16, 1997 (incorporated by reference to
Exhibit 4.4 to Enron Capital Trust II Form 10-K
for the year ended 1996).
4.5 Partnership Preferred Guarantee Agreement dated as
of January 16, 1997 (incorporated by reference to
Exhibit 4.5 to Enron Capital Trust II Form 10-K
for the year ended 1996).
4.6 Indenture dated as of January 16, 1997 relating to
the Enron's 7.75% Subordinated Debentures due
2016, Series II (incorporated by reference to
Exhibit 4.6 to Enron Capital Trust II Form 10-K
for the year ended 1996).
4.7 Indenture dated as of January 16, 1997 relating to
Enron Pipeline Company's 7.75% Debentures due
2016, Series II (incorporated by reference to
Exhibit 4.7 to Enron Capital Trust II Form 10-K
for the year ended 1996).
4.8 Indenture dated as of January 16, 1997 relating to
the Enron Capital & Trade Resources Corp. 7.75%
Debentures due 2016, Series II (incorporated by
reference to Exhibit 4.8 to Enron Capital Trust II
Form 10-K for the year ended 1996).
4.9 Guarantee Agreement of Enron dated as of January
16, 1997 relating to Enron Pipeline Company's
7.75% Debentures due 2016, Series II (incorporated
by reference to Exhibit 4.9 to Enron Capital Trust
II Form 10-K for the year ended 1996).
4.10 Guarantee Agreement of Enron dated as of
January 16, 1997 relating to Enron Capital & Trade
Resources Corp. 7.75% Debentures due 2016, Series
II (incorporated by reference to Exhibit 4.10 to
Enron Capital Trust II Form 10-K for the year
ended 1996).
4.11 Form of certificate representing Trust
Preferred Securities (included in Exhibit 4.2)
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the last
quarter of the period covered by this report.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned
thereunto duly authorized.
ENRON CAPITAL TRUST II
(Registrant)
Date: March 30, 1998 By: /s/ PHILLIP M. SISNEROS
Name: Phillip M. Sisneros
Title: Regular Trustee
Pursuant to the requirements of the Securities
Exchange Act of 1934, this Report has been signed below by
the following persons on behalf of the Registrant and in the
capacities indicated as of March 30, 1998.
Name Title
/s/ KEITH A. CRANE Regular Trustee
Keith A. Crane
/s/ PHILLIP M. SISNEROS Regular Trustee
Phillip M. Sisneros
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