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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, 1998
[ ] 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 76-6122939
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
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 pursuant Name of Exchange on
to Section 12(b) of the Act: which registered:
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, 1999, 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.
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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. 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 $1,800,000 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.
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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 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, 1998 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.
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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, 1998, the high and low
prices of the Trust Preferred Securities on the NYSE were $26.75 and $24.25,
respectively. As of March 14, 1999, 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 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 1998, 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.
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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.
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(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.
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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, 1999 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, 1999.
Name Title
- ---- -----
/s/ Keith A. Crane Regular Trustee
- -------------------------
Keith A. Crane
/s/ Phillip M. Sisneros Regular Trustee
- -------------------------
Phillip M. Sisneros
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EXHIBIT INDEX
27.1 -- Financial Data Schedule
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<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
