<PAGE>
FILED PURSUANT TO RULE 424(b)(5)
REGISTRATION NO. 333-77843
333-77843-01
Prospectus Supplement to Prospectus dated May 18, 1999.
8,000,000 Preferred Securities
Sempra Energy Capital Trust I
8.90% Cumulative Quarterly Income Preferred Securities, Series A (QUIPS(SM))*
(Liquidation Amount $25 per QUIPS)
Fully and unconditionally guaranteed, as described herein, by
Sempra Energy
----------------
A brief description of the 8.90% Cumulative Quarterly Income Preferred
Securities, Series A (QUIPS(SM)) can be found under "Summary Information--Q&A"
in this prospectus supplement.
Application has been made to list the QUIPS on the New York Stock
Exchange. If the QUIPS are approved for listing, Sempra Energy expects trading
of the QUIPS to begin within 30 days after they are first issued.
See "Risk Factors" beginning on page S-8 to read about factors you should
consider before buying the QUIPS.
----------------
Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is
a criminal offense.
----------------
<TABLE>
<CAPTION>
Per QUIPS Total
--------- ------------
<S> <C> <C>
Initial public offering price(1)........................ $25.00 $200,000,000
Underwriting commissions to be paid by Sempra Energy.... (2) (2)
Proceeds to Sempra Energy Capital Trust I............... $25.00 $200,000,000
</TABLE>
- --------
(1) Plus accumulated distributions, if any, from the date of original issuance,
which is expected to be February 23, 2000.
(2) Underwriting commissions of $0.7875 per QUIPS ($6,300,000 in the aggregate)
will be paid by Sempra Energy.
----------------
The underwriters expect to deliver the QUIPS in book-entry form only
through the facilities of The Depository Trust Company against payment in New
York, New York on February 23, 2000.
* "QUIPS" and "QUIDS" are registered service marks of Goldman, Sachs & Co.
Goldman, Sachs & Co.
Merrill Lynch & Co.
Morgan Stanley Dean Witter
Salomon Smith Barney
Electronic Syndicate Managers
Charles Schwab & Co., Inc.
PaineWebber Incorporated
Prudential Securities
----------------
Prospectus Supplement dated February 16, 2000.
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus supplement and the accompanying prospectus and the
documents they incorporate by reference contain statements that are not
historical fact and constitute "forward-looking statements." When words like
"believes," "expects," "anticipates," "intends," "plans," "estimates," "may,"
"should" or similar expressions are used, or when strategy or plans are
discussed, forward-looking statements are being made. Forward-looking
statements are not guarantees of performance. They involve risks, uncertainties
and assumptions. Sempra Energy's future results may differ materially from
those expressed in these forward-looking statements. These statements are
necessarily based upon various assumptions involving judgments with respect to
the future and other risks, including, among others:
. national, international, regional and local economic, competitive and
regulatory conditions and developments;
. capital market conditions, inflation rates and interest rates;
. energy markets, including the timing and extent of changes in
commodity prices;
. weather conditions;
. business, regulatory and legal decisions;
. the pace of deregulation of retail natural gas and electricity
delivery;
. technological developments;
. the timing and success of business development efforts; and
. other uncertainties, all of which are difficult to predict and many of
which are beyond the Trust's and Sempra Energy's control.
You are cautioned not to rely unduly on any forward-looking statements.
These risks and uncertainties are discussed in more detail under "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Sempra Energy's Annual Report on Form 10-K for the year ended
December 31, 1998 and other documents on file with the Securities and Exchange
Commission. You may obtain copies of these documents as described under "Where
You Can Find More Information" in the accompanying prospectus.
S-2
<PAGE>
SUMMARY INFORMATION--Q&A
The following information supplements, and should be read together with,
the information contained in the accompanying prospectus. This summary
highlights selected information from this prospectus supplement and the
accompanying prospectus to help you understand the 8.90% Cumulative Quarterly
Income Preferred Securities, Series A (QUIPSSM) (the "Series A QUIPS"). You
should carefully read this prospectus supplement and the accompanying
prospectus, and the information they incorporate by reference, to understand
fully the terms of the Series A QUIPS as well as the tax and other
considerations that are important to you in making a decision about whether to
invest in the Series A QUIPS. You should pay special attention to the "Risk
Factors" section beginning on Page S-8 of this prospectus supplement to
determine whether an investment in the Series A QUIPS is appropriate for you.
What are the Series A QUIPS?
Each Series A QUIPS represents an undivided beneficial interest in the
assets of Sempra Energy Capital Trust I (the "Trust"). Each Series A QUIPS will
entitle the holder to receive quarterly cash distributions as described in this
prospectus supplement. The Trust is offering 8,000,000 Series A QUIPS at a
price of $25 for each Series A QUIPS.
Who is the Trust?
The Trust is a Delaware business trust. Its principal offices are located
at 101 Ash Street, San Diego, California 92101 and its telephone number is
(619) 696-2034.
The Trust will sell its Series A QUIPS to the public and all of its Series
A common securities (the "Series A Common Securities") to Sempra Energy. The
Trust will use the proceeds from these sales to buy the 8.90% Subordinated
Deferrable Interest Notes, Series A, due February 23, 2030 (QUIDSSM) (the
"Series A QUIDS") of Sempra Energy with the same financial terms as the Series
A QUIPS. Sempra Energy will guarantee payments on the Series A QUIPS as
described below.
The Bank of New York will act as property trustee (the "Property Trustee")
of the Trust. Three officers of Sempra Energy also will act as trustees (the
"Regular Trustees") of the Trust. The Bank of New York (Delaware) will be an
additional trustee (the "Delaware Trustee") of the Trust. The Bank of New York
also will act as trustee (the "Subordinated Indenture Trustee") under the
Subordinated Indenture, as supplemented (the "Subordinated Indenture"),
pursuant to which the Series A QUIDS will be issued and will act as trustee
(the "Guarantee Trustee") under a Guarantee Agreement with Sempra Energy in
respect of the Series A QUIPS (the "Series A QUIPS Guarantee"). The Property
Trustee, Delaware Trustee and Regular Trustees are sometimes referred to as the
"Securities Trustees."
Who is Sempra Energy?
Sempra Energy, based in San Diego, is a Fortune 500 energy services
company. Sempra was formed in connection with a business combination of Pacific
Enterprises and Enova Corporation in which the shareholders of the two
companies became shareholders of Sempra Energy. The combination was completed
and Sempra Energy shares began trading in June 1998.
Through two regulated utility subsidiaries, Southern California Gas Company
and San Diego Gas & Electric Company, Sempra Energy serves over 21 million
consumers, the largest customer
S-3
<PAGE>
base of any gas, electric or combination gas and electric utility in the United
States. Natural gas service is provided throughout Southern California and
portions of Central California through over 5.5 million active meters. Electric
service is provided throughout San Diego County and portions of Orange County,
both in Southern California, through over 1.2 million active meters.
Through other subsidiaries, Sempra Energy also provides other energy-
related products and services. These subsidiaries include Sempra Energy
Solutions, Sempra Energy Trading, Sempra Energy International and Sempra Energy
Resources.
The principal executive offices of Sempra Energy are located at 101 Ash
Street, San Diego, California 92101 and the telephone number is (619) 696-2034.
When will you receive quarterly distributions?
If you purchase the Series A QUIPS, you are entitled to receive cumulative
cash distributions at an annual rate of 8.90% of the liquidation amount of $25
per Series A QUIPS. Distributions will accumulate from the date the Trust first
issues the Series A QUIPS and will be paid quarterly in arrears on March 31,
June 30, September 30 and December 31 of each year, beginning March 31, 2000.
When can payment of your distributions be deferred?
So long as no event of default under the Subordinated Indenture
("Subordinated Indenture Event of Default") has occurred and is continuing,
Sempra Energy can, on one or more occasions, defer interest payments on the
Series A QUIDS for up to 20 consecutive quarterly periods. A deferral of
interest payments cannot extend, however, beyond the maturity date of the
Series A QUIDS, which is February 23, 2030, subject to extension as described
below.
If Sempra Energy defers interest payments on the Series A QUIDS, the Trust
will also defer distributions on the Series A QUIPS. During this deferral
period, distributions will continue to accumulate on the Series A QUIPS at an
annual rate of 8.90% of the liquidation amount of $25 per Series A QUIPS. Also,
the deferred distributions will themselves accumulate additional distributions,
compounded quarterly, at an annual rate of 8.90%, to the extent permitted by
law. If Sempra Energy makes all deferred interest payments on the Series A
QUIDS, with accrued interest, it can again defer interest payments on the
Series A QUIDS.
During any period in which Sempra Energy defers interest payments on the
Series A QUIDS, with limited exceptions, Sempra Energy will not be permitted
to:
. pay a dividend or make any distributions on its capital stock or
redeem, purchase, acquire or make a liquidation payment on any of its
capital stock; or
. make an interest, principal or premium payment on, or repurchase or
redeem, any of its debt securities that rank equally with or junior to
the Series A QUIDS; or
. make any guarantee payments with respect to any guarantee by it of debt
securities of any of its subsidiaries if the guarantee is equal to or
junior in right of payment to the Series A QUIDS.
If Sempra Energy defers payments of interest on the Series A QUIDS, the
Series A QUIDS will, from the time of deferral, be treated as having been
reissued with original issue discount ("OID") for United States federal income
tax purposes. This means that you will be required to accrue interest income
and include the amounts of this income in your gross income for United States
federal
S-4
<PAGE>
income tax purposes even though you will not have received any cash
distributions relating to this interest income, and even though you may use the
cash method of accounting. See "Material United States Federal Income Tax
Considerations--Interest Income and Original Issue Discount" in this prospectus
supplement.
When can the Trust redeem the Series A QUIPS?
The Trust must redeem all of the outstanding Series A QUIPS and Series A
Common Securities when the Series A QUIDS are paid at maturity on February 23,
2030, which maturity may be shortened or extended as described under the
captions "Description of the Series A QUIPS--Redemption" and "Description of
the Series A QUIDS--Stated Maturity" in this prospectus supplement. In
addition, if Sempra Energy redeems any Series A QUIDS before their maturity,
the Trust will use the cash it receives from the redemption to redeem, on a pro
rata basis, Series A QUIPS and Series A Common Securities (collectively, the
"Series A Trust Securities") having a combined liquidation amount equal to the
principal amount of the Series A QUIDS redeemed.
Sempra Energy can redeem some or all of the Series A QUIDS before their
maturity at 100% of their principal amount on one or more occasions any time on
or after February 23, 2005. Sempra Energy also has the option to redeem the
Series A QUIDS, in whole, but not in part, at any time if specific changes in
tax or investment company law occur and other conditions are satisfied, as more
fully described under "Description of the Series A QUIDS--Optional Redemption."
In any case, Sempra Energy will pay accrued interest to the date of redemption.
What is Sempra Energy's guarantee of the Series A QUIPS?
Sempra Energy will guarantee the Series A QUIPS based on its obligations
under:
. the Series A QUIPS Guarantee, which guarantees the Trust's obligation
to pay distributions on the Series A QUIPS; and
. the Amended and Restated Declaration of Trust (the "Declaration").
The payment of distributions on the Series A QUIPS is guaranteed by Sempra
Energy under the Series A QUIPS Guarantee, but only to the extent the Trust has
funds legally and immediately available to make distributions. See "Description
of the Series A QUIPS--Status of the Series A QUIPS Guarantee" in this
prospectus supplement and "'Description of Preferred Securities Guarantees" in
the accompanying prospectus.
Sempra Energy's obligations under the Series A QUIPS Guarantee are:
. equal in rank with any other preferred securities guarantee similar to
the Series A QUIPS Guarantee issued by Sempra Energy on behalf of the
holders of preferred securities issued by any other trust established
by Sempra Energy or its affiliates;
. subordinate and junior in right of payment to all of its other
liabilities, except those that rank equally or are subordinated by
their terms;
. equal with any guarantee now or hereafter issued by Sempra Energy in
respect of the most senior preferred or preference stock now or
hereafter issued by Sempra Energy, and with any guarantee now or
hereafter issued by it in respect of any preferred or preference stock
of any of its affiliates; and
. senior to Sempra Energy's common stock.
S-5
<PAGE>
When could the Series A QUIDS be distributed to you?
Sempra Energy has the right to dissolve the Trust at any time. If Sempra
Energy dissolves the Trust, the Trust will liquidate by distributing the Series
A QUIDS to holders of the Series A Trust Securities on a pro rata basis. If the
Series A QUIDS are distributed, Sempra Energy will use its best efforts to list
the Series A QUIDS on the New York Stock Exchange or any other exchange on
which the Series A QUIPS are then listed in place of the Series A QUIPS. For a
discussion of Sempra Energy's ability to distribute the Series A QUIDS, see
"Description of the Series A QUIPS--Exchange of Series A QUIPS for Series A
QUIDS" and "--Liquidation Distribution Upon Dissolution" in this prospectus
supplement.
Will the Series A QUIPS be listed on a stock exchange?
Application has been made to list the Series A QUIPS on the New York Stock
Exchange. If approved, trading of the Series A QUIPS is expected to begin
within 30 days after they are first issued.
Will holders of the Series A QUIPS have any voting rights?
Generally, the holders of the Series A QUIPS will not have any voting
rights. See "Description of Series A QUIPS--Voting Rights; Amendment of the
Declaration" in this prospectus supplement.
In what form will the Series A QUIPS be issued?
The Series A QUIPS will be represented by one or more global securities
that will be deposited with and registered in the name of The Depository Trust
Company or its nominee. This means that you will not receive a certificate for
your Series A QUIPS and that your broker will maintain your position in the
Series A QUIPS. Sempra Energy expects that the Series A QUIPS will be ready for
delivery through The Depository Trust Company on or about February 23, 2000.
Recent Developments
Recently Announced Results of Operations of Sempra Energy for Fiscal 1999.
On January 26, 2000, Sempra Energy reported unaudited earnings for the year
ended December 31, 1999 of $394 million, or $1.66 per diluted share, an
increase of 34% from $294 million, or $1.24 per diluted share, for the year
1998. Excluding nonrecurring items, unaudited earnings in 1999 rose to $408
million, or $1.72 per diluted share, an increase of 7.7%, from $379 million, or
$1.60 per diluted share, in 1998.
Sempra Energy reported unaudited fourth quarter 1999 earnings of $105
million, or $0.44 per diluted share, an increase of 24% from $85 million, or
$0.36 per diluted share, for the fourth quarter of 1998 (or, excluding
nonrecurring items, an increase of 18% from $89 million, or $0.38 per diluted
share in 1998).
Sempra Energy's revenues increased 8.7% to $5.4 billion for the full-year
ended December 31, 1999, compared to $5.0 billion in 1998.
Tender Offer by Sempra Energy for Shares of its Common Stock.
On January 26, 2000, Sempra Energy commenced a self-tender offer to
purchase 36,000,000 shares of its common stock, including the associated
preferred stock purchase rights, or any lesser
S-6
<PAGE>
number of shares that shareholders properly tender in the tender offer at
prices at or below the $20.00 per share maximum price Sempra Energy is offering
in the tender offer. Sempra Energy's obligation to accept for payment, purchase
or pay for any shares tendered depends upon a number of conditions, including
its having obtained approximately $700 million of long-term financing on terms
and conditions satisfactory to it, in its sole judgement.
Sempra Energy is conducting the tender offer through a procedure commonly
called a modified "Dutch Auction." This procedure allows shareholders to select
the price within a specified range at which they are willing to sell their
shares. The price range for the offer is $17.50 to $20.00 for each share of
common stock. Sempra Energy will determine the lowest single per share price
within the price range that will allow it to purchase 36,000,000 shares, or if
fewer shares are tendered, all shares properly tendered. The tender offer
expires at 5:00 p.m., New York City time, on Friday, February 25, 2000, unless
Sempra Energy extends the offer. The scheduled expiration date is after the
expected completion of this offering of the Series A QUIPS by the Trust and the
concurrent offering of approximately $500 million of senior notes of Sempra
Energy. As a result, Sempra Energy does not know the total amount that will be
required to purchase shares of its common stock. In the tender offer, Sempra
Energy has reserved the right to increase the number of shares it may purchase
and to raise the maximum purchase price it may pay.
Assuming Sempra Energy purchases 36,000,000 shares pursuant to the tender
offer at a purchase price of $20.00 per share, Sempra Energy expects the
maximum aggregate cost, including fees and expenses applicable to the tender
offer, will be approximately $734 million. Sempra Energy intends to finance
$700 million of this amount on a long-term basis primarily through a
combination of the sale of $200 million of Series A QUIPS, and the concurrent
offering of approximately $500 million of senior notes of Sempra Energy. Sempra
Energy intends to obtain any additional funds needed for the purchase of common
stock in the tender offer from the issuance and sale of commercial paper.
Sempra Energy also announced on January 26, 2000 that it plans to reduce
the quarterly dividend payable on shares of its common stock to $0.25 per share
($1.00 annualized rate) from its previous level of $0.39 per share ($1.56
annualized rate) commencing with the dividend payable in the second quarter of
2000. Sempra Energy intends for this financial initiative to increase its
financial and operating flexibility and to further position Sempra Energy for
the increasingly competitive utility and energy services markets.
S-7
<PAGE>
RISK FACTORS
Your investment in the Series A QUIPS will involve risks. You should
carefully consider the following discussion of risks, and the other information
in this prospectus supplement and the accompanying prospectus, including the
documents they incorporate by reference, before deciding whether an investment
in the Series A QUIPS is suitable for you.
Sempra Energy's Obligations under the Series A QUIDS and the Series A QUIPS
Guarantee are Deeply Subordinated.
Sempra Energy's obligations under the Series A QUIDS are unsecured and will
rank junior in priority of payment to all of Sempra Energy's senior debt (as
defined under the caption "Description of the Series A QUIDS--Subordination")
and effectively subordinated to all other liabilities of Sempra Energy's
subsidiaries. Sempra Energy's obligations under the Series A QUIPS Guarantee
are unsecured and will rank in priority of payment as follows:
. equal in rank with any other preferred securities guarantee similar to
the Series A QUIPS Guarantee issued by Sempra Energy on behalf of the
holders of preferred securities issued by any other trust established
by Sempra Energy or its affiliates; and
. subordinate and junior in right of payment to all of its other
liabilities, except those that rank equally or are subordinate by
their terms.
This means that Sempra Energy cannot make any payments on the Series A
QUIDS or the Series A QUIPS Guarantee if it defaults on a payment of senior
debt and does not cure that default within the applicable grace period or if
any senior debt becomes immediately due because of a default and has not yet
been paid in full. In addition, in the event of the bankruptcy, liquidation or
dissolution of Sempra Energy, its assets would be available to pay obligations
under the Series A QUIDS or the Series A QUIPS Guarantee only after Sempra
Energy made all payments on its senior debt.
Because Sempra Energy is a holding company, Sempra Energy's right to
participate in any asset distribution of any of its subsidiaries, on
liquidation, reorganization or otherwise, will rank junior to the rights of all
creditors of its subsidiaries (except to the extent that Sempra Energy may
itself be a creditor of its subsidiaries). The rights of holders of the Series
A QUIPS or Series A QUIDS to benefit from those distributions will also be
junior to those prior claims. Consequently, the Series A QUIDS (and, therefore,
the Series A QUIPS) will be effectively subordinated to all liabilities of
Sempra Energy's subsidiaries. You should look only to the assets of Sempra
Energy for payments on the Series A QUIDS (and the Series A QUIPS).
At September 30, 1999, upon giving pro forma effect to this $200 million
offering of Series A QUIPS, Sempra Energy's concurrent offering of $500 million
of senior notes and issuance of $34 million of commercial paper, Sempra Energy
would have had consolidated total liabilities of approximately $8.6 billion,
substantially all of which would be senior debt of Sempra Energy or liabilities
of its subsidiaries that would effectively rank senior to the Series A QUIDS.
None of the Series A QUIPS, the Series A QUIDS nor the Series A QUIPS
Guarantee limits the ability of Sempra Energy to incur additional indebtedness,
including indebtedness that will rank senior in priority of payment to the
Series A QUIDS or the Series A QUIPS Guarantee. We expect that in the future
Sempra Energy may incur substantial additional amounts of senior debt to which
the Series A QUIDS will be subordinated, and its subsidiaries may incur
substantial additional liabilities to which the Series A QUIDS will be
effectively subordinated.
S-8
<PAGE>
The Series A QUIPS Guarantee Only Covers Payments if the Trust Has Cash
Available, but You May Sue Sempra Energy Directly.
The ability of the Trust to pay scheduled distributions on the Series A
QUIPS, the redemption price of the Series A QUIPS and the liquidation amount of
each Series A QUIPS is solely dependent upon Sempra Energy making the related
payments on the Series A QUIDS when due.
If Sempra Energy defaults on its obligations to pay principal or interest
on the Series A QUIDS, the Trust will not have sufficient funds to pay
distributions on, or the redemption price or liquidation amount of, the Series
A QUIPS. In those circumstances, you will not be able to rely upon the Series A
QUIPS Guarantee for payment of these amounts.
Instead, you:
. may directly sue Sempra Energy or seek other remedies to collect your
pro rata share of payments owed; or
. may rely on the Property Trustee to enforce the Trust's rights under
the Series A QUIDS.
Deferral of Distributions Would Have Tax Consequences for You and May Affect
the Trading Price of the Series A QUIPS.
So long as no Subordinated Indenture Event of Default has occurred and is
continuing, Sempra Energy can, on one or more occasions, defer interest
payments on the Series A QUIDS for up to 20 consecutive quarterly periods. If
Sempra Energy defers interest payments on the Series A QUIDS, the Trust will
defer distributions on the Series A QUIPS during any deferral period. However,
distributions would still accumulate and such deferred distributions would
themselves accumulate additional distributions, compounded quarterly, at the
annual rate of 8.90%, to the extent permitted by law.
If Sempra Energy defers payments of interest on the Series A QUIDS, you
will be required to include interest income in your gross income for United
States federal income tax purposes in the form of OID, based on your pro rata
share of the deferred interest on the Series A QUIDS held by the Trust, before
you receive any cash relating to your interest, even if you use the cash method
of accounting. In addition, you will not receive this cash if you sell the
Series A QUIPS before the end of any deferral period or before the record date
relating to distributions which are paid.
Sempra Energy has no current intention of deferring interest payments on
the Series A QUIDS. However, if Sempra Energy exercises this right in the
future, the Series A QUIPS may trade at a price that does not fully reflect the
value of accrued but unpaid interest on the Series A QUIDS. If you sell the
Series A QUIPS during an interest deferral period, you may not receive the same
return on investment as someone else who continues to hold the Series A QUIPS.
In addition, the existence of Sempra Energy's right to defer payments of
interest on the Series A QUIDS may mean that the market price for the Series A
QUIPS, each of which represents an undivided beneficial interest in the assets
of the Trust, substantially all the assets of which consist of the Series A
QUIDS, may be more volatile than the market prices of other securities that are
not subject to such optional deferrals.
See "Material United States Federal Income Tax Considerations" in this
prospectus supplement for more information regarding the tax consequences of
purchasing, holding and selling the Series A QUIPS.
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<PAGE>
The Series A QUIDS, and Therefore the Series A QUIPS, May Be Redeemed at Any
Time if Adverse Changes in Tax or Investment Company Law Occur.
If Sempra Energy receives an opinion of counsel that adverse changes in tax
or investment company law have occurred or will occur, and other conditions are
satisfied, Sempra Energy has the right to redeem the Series A QUIDS, in whole,
but not in part, at any time within 90 days of receipt of such opinion. Any
redemption of the Series A QUIDS will cause a mandatory redemption of all
Series A QUIPS and Series A Common Securities at a redemption price equal to
$25 per security plus any accrued and unpaid distributions to the date of
redemption. See "Description of Series A QUIPS--Redemption" and "Description of
the Series A QUIDS--Optional Redemption" in this prospectus supplement.
The Series A QUIDS, and Therefore the Series A QUIPS, May Be Redeemed at Par at
the Option of Sempra Energy Beginning Five Years after Issuance.
At the option of Sempra Energy, the Series A QUIDS may be redeemed, in
whole, at any time, or in part, from time to time, on or after February 23,
2005, at a redemption price equal to the principal amount to be redeemed plus
any accrued and unpaid interest to the date of redemption. See "Description of
the Series A QUIDS--Optional Redemption" in this prospectus supplement. You
should assume that Sempra Energy will exercise its redemption option if Sempra
Energy is able to refinance at a lower interest rate or it is otherwise in the
interest of Sempra Energy to redeem the Series A QUIDS. If the Series A QUIDS
are redeemed, the Trust must redeem the Series A Trust Securities having an
aggregate liquidation amount equal to the aggregate principal amount of Series
A QUIDS to be redeemed. See "Description of Series A QUIPS--Redemption" and
"Description of the Series A QUIDS--Optional Redemption" in this prospectus
supplement.
Sempra Energy May Change the Stated Maturity of the Series A QUIDS.
As long as certain conditions are met, Sempra Energy will have the right to
extend the stated maturity of the Series A QUIDS, and therefore the mandatory
Redemption Date of the Series A QUIPS, to February 23, 2049. You should assume
that Sempra Energy will exercise its option to extend the stated maturity if
Sempra Energy is unable to refinance at a lower interest rate or it is
otherwise in the interest of Sempra Energy to defer the stated maturity of the
Series A QUIDS. Consequently, you may have to wait nineteen years beyond the
initial stated maturity of the Series A QUIDS before the Trust redeems the
Series A QUIPS. See "Description of the Series A QUIDS--Stated Maturity" in
this prospectus supplement.
There Can Be No Assurance as to the Market Prices for the Series A QUIPS or the
Series A QUIDS.
There can be no assurance as to the market prices for the Series A QUIPS or
the Series A QUIDS that may be distributed in exchange for Series A QUIPS upon
a dissolution of the Trust. Accordingly, the Series A QUIPS that you purchase,
whether pursuant to the offer made by this prospectus supplement or in the
secondary market, or the Series A QUIDS that you may receive upon a dissolution
of the Trust, may trade at a discount to the price that you paid to purchase
the Series A QUIPS offered by this prospectus supplement. As a result of Sempra
Energy's right to defer interest payments on the Series A QUIDS, the market
price of the Series A QUIPS, each of which represents an undivided beneficial
interest in the assets of the Trust, substantially all the assets of which
consist of the Series A QUIDS, may be more volatile than the market prices of
other securities that are not subject to such optional deferrals.
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<PAGE>
Sempra Energy May Dissolve the Trust at Any Time.
Sempra Energy has the right to dissolve the Trust at any time. If Sempra
Energy decides to exercise its right to dissolve the Trust, after satisfying
creditors of the Trust, as provided by law, the Trust will liquidate by
distributing the Series A QUIDS to holders of the Series A QUIPS and the Series
A Common Securities on a pro rata basis.
Under current United States federal income tax law and interpretations and
assuming, as the Trust expects, that the Trust will not be classified as an
association taxable as a corporation, you would not be taxed if the Property
Trustee distributes the Series A QUIDS to you upon dissolution and liquidation
of the Trust. However, if a Tax Event (as defined below) were to occur and the
Trust were subject to taxation on income received or accrued on the Series A
QUIDS, you and the Trust could be taxed on that distribution.
Sempra Energy has no current intention of causing the dissolution of the
Trust and the distribution of the Series A QUIDS. Sempra Energy anticipates
that it would consider exercising this right in the event that expenses
associated with maintaining the Trust were substantially greater than currently
expected such as if specific changes in tax law or investment company law
occurred. See "Description of the Series A QUIPS--Exchange of Series A QUIPS
for Series A QUIDS" and "--Liquidation Distribution Upon Dissolution" in this
prospectus supplement. Sempra Energy cannot predict the other circumstances
under which this right would be exercised.
Although Sempra Energy intends to use its best efforts to list the Series A
QUIDS on the New York Stock Exchange or any other exchange on which the Series
A QUIPS are then listed if they are distributed, the Trust cannot assure you
that the Series A QUIDS will be approved for listing or that a trading market
will exist for those securities.
You Will Have Limited Voting Rights.
You will have limited voting rights in respect of the Series A QUIPS. In
particular, subject to specific exceptions, only Sempra Energy can appoint or
remove any of the Securities Trustees. See "Description of Series A QUIPS--
Voting Rights; Amendment of the Declaration" in this prospectus supplement.
There Has Been No Prior Market for the Series A QUIPS.
Before this offering, there has been no market for the Series A QUIPS.
Although the Trust has applied to list the Series A QUIPS on the New York Stock
Exchange, a listing does not guarantee that a trading market for the Series A
QUIPS will develop or, if a trading market for the Series A QUIPS does develop,
the depth of that market, whether it will be maintained and the ability of the
holders to easily sell their Series A QUIPS.
ACCOUNTING TREATMENT
For financial reporting purposes, the Trust will be treated as a subsidiary
of Sempra Energy and, accordingly, the accounts of the Trust will be included
in the consolidated financial statements of Sempra Energy. The Series A QUIPS
will be included in the "Mandatorily redeemable trust preferred securities"
line on the consolidated balance sheet of Sempra Energy and also in a separate
note in the "Notes to Consolidated Financial Statements." For financial
reporting purposes, distributions payable on the Series A QUIPS will be
included in the "Trust preferred distributions by subsidiaries" line on the
statement of consolidated income of Sempra Energy.
S-11
<PAGE>
USE OF PROCEEDS
The Trust will invest all of the proceeds from the sale of Series A QUIPS,
together with the proceeds from the sale of the Series A Common Securities, in
the Series A QUIDS. We estimate the net proceeds from the sale of the Series A
QUIPS to be approximately $193.4 million. Sempra Energy intends to use the net
proceeds from the sale of the Series A QUIPS, together with the net offering
proceeds from its concurrent offering of approximately $500 million of senior
notes, to purchase up to 36,000,000 shares of its common stock in the tender
offer described under "Recent Developments."
The tender offer is not scheduled to expire until after the expected
completion of the offerings of the Series A QUIPS and the senior notes. As a
result, Sempra Energy does not know the total amount that will be required to
purchase shares of its common stock. However, if Sempra Energy were to purchase
all of the 36,000,000 shares it is offering to purchase in the tender offer at
the $20.00 maximum price per share that it is willing to pay, the cost of the
purchase and the related expenses would be approximately $734 million. In the
tender offer, Sempra Energy has reserved the right to increase the number of
shares it may purchase and to raise the maximum purchase price it may pay.
Sempra Energy intends to obtain any additional funds needed for the
purchase of common stock in the tender offer from the issuance and sale by
Sempra Energy of commercial paper and short-term callable commercial notes.
Sempra Energy intends to use any remaining net proceeds from the offering of
the Series A QUIPS and the senior notes, after application for the purchase of
its common stock in the tender offer, for general corporate purposes, including
the reduction of short-term debt.
Sempra Energy estimates that the expenses for this offering, excluding
underwriting discounts and commissions, will be approximately $330,000.
S-12
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
Sempra Energy as of September 30, 1999 (i) on an historical basis and (ii) on a
pro forma basis to give effect to the sale of:
. $200 million of the Series A QUIPS by the Trust;
. $500 million of senior notes by Sempra Energy; and
. $34 million of commercial paper by Sempra Energy,
and the application of the estimated net proceeds from the issuance of these
securities for the purchase of shares of Sempra Energy common stock, assuming
that Sempra Energy purchases 36,000,000 shares of common stock at a price of
$20 per share. There can be no assurance that Sempra Energy will purchase
36,000,000 shares or that the shares will be purchased at a price of $20 per
share. See the discussions under the captions "Recent Developments" and "Use of
Proceeds" in this prospectus supplement. This table should be read in
conjunction with the Summary Historical Condensed Consolidated Financial
Information and the Summary Unaudited Condensed Consolidated Pro Forma
Financial Information and other financial information contained and
incorporated by reference into this prospectus supplement and the accompanying
prospectus.
<TABLE>
<CAPTION>
September 30, 1999
------------------------------------
Pro Forma
Historical Adjustments (1) Pro Forma
---------- --------------- ---------
(Dollars in millions)
<S> <C> <C> <C>
LIABILITIES
Current liabilities...................... $ 3,197 $ 34 $ 3,231
Total long-term debt..................... 2,934 500 3,434
Total deferred credits and other
liabilities............................. 1,909 1,909
------- ----- -------
Total liabilities...................... 8,040 534 8,574
------- ----- -------
Preferred stock of subsidiaries.......... 204 204
------- -------
Mandatorily redeemable trust preferred
securities.............................. 200 200
----- -------
SHAREHOLDERS' EQUITY
Common stock............................. 1,885 (562) 1,323
Retained earnings........................ 1,083 (162) 921
Other ................................... (73) (73)
------- ----- -------
Total shareholders' equity............. 2,895 (724) 2,171
------- ----- -------
Total liabilities and shareholders'
equity................................ $11,139 $ 10 $11,149
======= ===== =======
</TABLE>
- --------
(1)Please see the summary unaudited condensed consolidated pro forma balance
sheet at page S-18 for an explanation of the pro forma adjustments.
S-13
<PAGE>
RATIO OF SEMPRA ENERGY EARNINGS TO COMBINED FIXED CHARGES
The following table sets forth the ratio of Sempra Energy earnings to
combined fixed charges for each of the years in the five-year period ended
December 31, 1998 and for each of the nine-month periods ended September 30,
1998 and 1999. As of December 31, 1999, Sempra Energy did not have any
outstanding shares of preferred stock.
<TABLE>
<CAPTION>
Nine months
Ended
Years Ended December 31, September 30,
------------------------ -------------
1998 1997 1996 1995 1994 1999 1998
---- ---- ---- ---- ---- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Combined Fixed
Charges........................... 2.73 3.75 3.67 3.13 2.94 2.85 2.64
</TABLE>
Sempra Energy determined the ratio of earnings to combined fixed charges by
dividing (a) the sum of pretax income and fixed charges by (b) fixed charges.
Fixed charges consist of all interest expense (before allowances for borrowed
funds used during construction), preferred dividends by subsidiaries, one-third
of rent expense (which approximates the interest component of such expense) and
amortization of debt issuance costs.
S-14
<PAGE>
SUMMARY HISTORICAL CONDENSED CONSOLIDATED
FINANCIAL INFORMATION
The following table contains summary historical condensed consolidated
financial information of Sempra Energy and its subsidiaries. The summary
historical condensed consolidated financial information for the years ended
December 31, 1998 and 1997 and as of December 31, 1998 and 1997 has been
derived from the audited consolidated financial statements of Sempra Energy for
the years ended December 31, 1998 and 1997. The summary historical condensed
consolidated financial information for the nine months ended September 30, 1999
and 1998 and as of September 30, 1999 and 1998 has been derived from the
unaudited consolidated financial statements of Sempra Energy for the nine-month
periods ended September 30, 1999 and 1998. In the opinion of Sempra Energy's
management, the interim condensed consolidated financial information reflects
all adjustments necessary for a fair presentation. These adjustments are only
of a normal recurring nature. The summary historical condensed consolidated
financial information should be read in conjunction with and is qualified in
its entirety by reference to the audited and unaudited consolidated financial
statements and the related notes thereto from which it has been derived. More
comprehensive financial information is included in the consolidated financial
statements and related notes contained in Sempra Energy's Annual Report on Form
10-K and Quarterly Reports on Form 10-Q, which it files with the SEC.
SEMPRA ENERGY AND SUBSIDIARIES
STATEMENTS OF INCOME
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
For the years For the nine
ended months ended
December 31, September 30,
--------------- ---------------
1998 1997 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenue and other income(1)................... $ 5,525 $ 5,127 $ 3,962 $ 3,717
Expenses(1)................................... 4,874 4,170 3,348 3,230
Preferred dividends by subsidiaries........... 12 18 9 9
------- ------- ------- -------
Income before interest and income taxes....... 639 939 605 478
Interest...................................... 207 206 185 161
Income taxes.................................. 138 301 131 108
------- ------- ------- -------
Net income.................................. $ 294 $ 432 $ 289 $ 209
======= ======= ======= =======
Average common shares outstanding (thousands):
Basic....................................... 236,423 236,662 237,192 236,253
Diluted..................................... 237,124 237,249 237,556 236,914
Earnings per common share:
Basic....................................... $ 1.24 $ 1.83 $ 1.22 $ 0.88
Diluted..................................... $ 1.24 $ 1.82 $ 1.22 $ 0.88
Dividends declared per common share........... $ 1.56 $ 1.27 $ 1.17 $ 1.17
Book value per common share (end of
period)(2)................................... $ 12.29 $ 12.56 $ 12.20 $ 12.33
Common shares outstanding (end of period)
(thousands).................................. 236,956 235,598 237,377 236,648
</TABLE>
- --------
(1) In connection with the deregulation of California's electric-utility
industry, Sempra Energy sells and purchases electricity to and from the
independent power exchange (the "PX"). During 1998 Sempra Energy accounted
for these sales and purchases to the PX as revenue and expense. During 1999
Sempra Energy accounted for these sales and purchases on a net basis. The
nine months ended September 30, 1998 has been presented on a basis
consistent with the 1999 presentation. The year ended December 31, 1998 is
stated on a historical basis. In Sempra Energy's Annual Report on Form 10-K
for the year ended December 31, 1999, it will reflect reductions in 1998
revenue and expense of $500 million to conform the 1998 presentation of
these sales and purchases to the method of presentation adopted for 1999.
(2) Book value per common share is calculated as total shareholders' equity
divided by the number of shares outstanding at the end of the period, which
excludes shares held by Sempra Energy's Employee Stock Ownership Plan.
S-15
<PAGE>
SEMPRA ENERGY AND SUBSIDIARIES
BALANCE SHEET
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
<S> <C> <C>
ASSETS
Current assets....................................... $ 2,962 $ 2,458
Investments and other assets......................... 2,794 2,557
Property, plant and equipment........................ 5,383 5,441
------- -------
Total assets....................................... $11,139 $10,456
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Current liabilities.................................. $ 3,197 $ 2,466
Long-term debt....................................... 2,934 2,795
Deferred credits and other liabilities............... 1,909 2,078
------- -------
Total liabilities.................................. 8,040 7,339
------- -------
Preferred stock of subsidiaries...................... 204 204
------- -------
SHAREHOLDERS' EQUITY
Common stock......................................... 1,885 1,883
Retained earnings.................................... 1,083 1,075
Other................................................ (73) (45)
------- -------
Total shareholders' equity......................... 2,895 2,913
------- -------
Total liabilities and shareholders' equity......... $11,139 $10,456
======= =======
</TABLE>
S-16
<PAGE>
SUMMARY UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA FINANCIAL INFORMATION
The following summary unaudited condensed consolidated pro forma financial
information gives effect to the sale of $200 million of Series A QUIPS pursuant
to this offering, $500 million of senior notes by Sempra Energy pursuant to a
concurrent offering and $34 million of commercial paper by Sempra Energy, the
purchase of shares of Sempra Energy common stock pursuant to the tender offer
described under "Recent Developments" (assuming the purchase of
36,000,000 shares at a purchase price of $20.00 per share) and the reduction in
the dividend on the common stock as described under "Recent Developments,"
based on the assumptions described below and in the related notes below.
The summary unaudited condensed consolidated pro forma balance sheet as of
September 30, 1999 gives effect to the sale of $200 million of Series A QUIPS
pursuant to this offering, $500 million of senior notes by Sempra Energy
pursuant to a concurrent offering and $34 million of commercial paper by Sempra
Energy and the purchase of shares of Sempra Energy common stock pursuant to the
tender offer (using the assumptions stated in the preceding paragraph), as
though such events occurred as of the date of such balance sheet. The summary
unaudited condensed consolidated pro forma statements of income for the nine
months ended September 30, 1999 and for the year ended December 31, 1998 give
effect to the sale of $200 million of Series A QUIPS pursuant to this offering,
$500 million of senior notes by Sempra Energy pursuant to a concurrent offering
and $34 million of commercial paper by Sempra Energy, the purchase of shares of
Sempra Energy common stock pursuant to the tender offer and the reduction in
the dividend on the common stock, as though such events occurred on January 1,
1998.
The summary unaudited condensed consolidated pro forma financial
information should be read in conjunction with the summary historical condensed
consolidated financial information included in this prospectus supplement and
the historical consolidated financial information incorporated by reference in
this prospectus supplement and the accompanying prospectus. The summary
unaudited condensed consolidated pro forma financial information is subject to
a number of uncertainties and assumptions and does not purport to be indicative
of the operating results that would actually have been obtained, or operating
results that may be obtained in the future, or the financial position that
would have resulted had the sale of $200 million of Series A QUIPS pursuant to
this offering, the sale of $500 million of senior notes by Sempra Energy
pursuant to a concurrent offering and the sale of $34 million of commercial
paper by Sempra Energy, the purchase of shares of Sempra Energy common stock
pursuant to the tender offer and the reduction in the dividend on the common
stock, been completed at the dates indicated.
S-17
<PAGE>
SEMPRA ENERGY AND SUBSIDIARIES
SUMMARY UNAUDITED CONDENSED CONSOLIDATED PRO FORMA BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current assets............................. $ 2,962 $ 2,962
Investments and other assets............... 2,794 $ 10 (1a) 2,804
Property, plant and equipment.............. 5,383 5,383
------- ----- -------
Total assets............................. $11,139 $ 10 $11,149
======= ===== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Current liabilities........................ $ 3,197 $ 34 (1b) $ 3,231
Total long-term debt....................... 2,934 500 (1c) 3,434
Total deferred credits and other
liabilities............................... 1,909 1,909
------- ----- -------
Total liabilities........................ 8,040 534 8,574
------- ----- -------
Preferred stock of subsidiaries............ 204 204
------- -------
Mandatorily redeemable trust preferred
securities................................ 200 (1d) 200
----- -------
SHAREHOLDERS' EQUITY
Common stock............................... 1,885 (562)(2) 1,323
Retained earnings.......................... 1,083 (162)(2) 921
Other ..................................... (73) (73)
------- ----- -------
Total shareholders' equity............... 2,895 (724)(2) 2,171
------- ----- -------
Total liabilities and shareholders'
equity.................................. $11,139 $ 10 $11,149
======= ===== =======
</TABLE>
S-18
<PAGE>
SEMPRA ENERGY AND SUBSIDIARIES
SUMMARY UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA STATEMENT OF INCOME
FOR NINE MONTHS ENDED SEPTEMBER 30, 1999
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
Revenue and other income................... $ 3,962 $ 3,962
Expenses................................... 3,348 3,348
Trust preferred distributions by
subsidiaries.............................. $ 14 (3) 14
Preferred dividends by subsidiaries........ 9 9
------- ------- -------
Income before interest and income taxes.... 605 (14) 591
Interest................................... 185 32 (3) 217
Income taxes............................... 131 (18)(4) 113
------- ------- -------
Net income............................... $ 289 $ (28) $ 261
======= ======= =======
Average common shares outstanding
(thousands):
Basic.................................... 237,192 (36,000)(5) 201,192
Diluted.................................. 237,556 (36,000)(5) 201,556
Earnings per common share:
Basic.................................... $ 1.22 $ 1.30
Diluted.................................. $ 1.22 $ 1.29
Dividends declared per common share........ $ 1.17 $ (0.42)(6) $ 0.75
Book value per common share (end of
period)................................... $ 12.20 $ 10.78
Common shares outstanding (end of period)
(thousands)............................... 237,377 (36,000)(5) 201,377
Ratio of earnings to fixed charges......... 2.85 2.37
</TABLE>
S-19
<PAGE>
SEMPRA ENERGY AND SUBSIDIARIES
SUMMARY UNAUDITED CONDENSED CONSOLIDATED
PRO FORMA STATEMENT OF INCOME
FOR YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN MILLIONS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
Revenue and other income................... $ 5,525 $ (500)(7) $ 5,025
Expenses................................... 4,874 (500)(7) 4,374
Trust preferred distributions by
subsidiaries.............................. 18 (3) 18
Preferred dividends by subsidiaries........ 12 12
------- ------- -------
Income before interest and income taxes.... 639 (18) 621
Interest................................... 207 43 (3) 250
Income taxes............................... 138 (24)(4) 114
------- ------- -------
Net income............................... $ 294 $ (37) $ 257
======= ======= =======
Average common shares outstanding
(thousands):
Basic.................................... 236,423 (36,000)(5) 200,423
Diluted.................................. 237,124 (36,000)(5) 201,124
Earnings per common share:
Basic.................................... $ 1.24 $ 1.28
Diluted.................................. $ 1.24 $ 1.28
Dividends declared per common share........ $ 1.56 $ (0.56)(6) $ 1.00
Book value per common share (end of
period)................................... $ 12.29 $ 10.89
Common shares outstanding (end of year)
(thousands)............................... 236,956 (36,000)(5) 200,956
Ratio of earnings to fixed charges......... 2.73 2.19
</TABLE>
S-20
<PAGE>
SEMPRA ENERGY AND SUBSIDIARIES
NOTES TO SUMMARY UNAUDITED
CONDENSED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
(1) Represents the aggregate obligations incurred of $734 million from the
issuance of $500 million in senior notes by Sempra Energy at an assumed
annual interest rate of 8%, $200 million of Series A QUIPS by the Trust at
the annual distribution rate of 8.90% and $34 million of commercial paper
by Sempra Energy at an assumed annual interest rate of 5.7%.
<TABLE>
<S> <C>
1(a) Estimated issuance costs (annual amortization of debt issue
costs-$565,000).................................................. $ 10
1(b) Issuance of 5.7% commercial paper............................ $ 34
1(c) Issuance of 10-year 8% senior notes.......................... $500
1(d) Issuance of 8.90% Series A QUIPS............................. $200
</TABLE>
(2) Represents the purchase for cash of 36,000,000 shares of Sempra Energy
common stock at an assumed purchase price of $20 per share, the maximum
price in the tender offer. There can be no assurance that Sempra Energy
will purchase 36,000,000 shares or that the shares will be purchased at a
price of $20 per share.
<TABLE>
<S> <C>
36,000,000 shares purchased at $20 per share........................ $720
Represents estimated costs of the tender offer...................... 4
----
Total............................................................. $724
====
</TABLE>
The allocation to retained earnings and common stock of the cost for the
purchase of shares is based on first eliminating the existing retained
earnings per share and then allocating the remainder to common stock.
(3) Represents the pro forma additional interest expense on the senior notes
($41 million annually) and the commercial paper ($2 million annually) and
the distributions on the Series A QUIPS ($18 million annually) using the
assumed interest and distribution rates stated in note (1) above. A 0.125%
change in the applicable rates would impact interest and distributions by
approximately $1 million.
(4) Represents the tax benefit of the pro forma additional interest and Series
A QUIPS distributions expense calculated based on Sempra Energy's statutory
income tax rate of 40%.
(5) Represents the pro forma reduction in weighted average common shares
outstanding and in common shares outstanding assuming the purchase of
36,000,000 shares of Sempra Energy common stock.
(6) Represents the pro forma annualized dividend reduction authorized by the
Sempra Energy Board of Directors on January 25, 2000. The quarterly
dividend rate is assumed to decrease from $0.39 per share to $0.25 per
share. The annual dividend rate is assumed to decrease from $1.56 per share
to $1.00 per share.
(7) In connection with the deregulation of California's electric-utility
industry, Sempra Energy sells and purchases electricity to and from the PX.
During 1998, Sempra Energy accounted for sales and purchases to the PX as
revenue and expense. During 1999, Sempra Energy accounted for these sales
and purchases on a net basis. This adjustment reflects a reduction of $500
million of 1998 revenue and expense to conform the presentation of these
sales and purchases to the method of presentation adopted for 1999.
S-21
<PAGE>
DESCRIPTION OF THE SERIES A QUIPS
This section describes the specific terms of the Series A QUIPS. This
description supplements, and to the extent inconsistent supersedes and
replaces, the description of the general terms and provisions of the Series A
QUIPS and the Series A QUIPS Guarantee set forth in the accompanying prospectus
under the captions "Description of Preferred Securities" and "Description of
Preferred Securities Guarantees." The following description does not purport to
be complete and is subject to, and is qualified in its entirety by reference
to, the description in the accompanying prospectus, the Declaration and the
Series A QUIPS Guarantee. We have filed a form of the Declaration with the SEC
and you may obtain copies as described under "Where You Can Find More
Information" in the accompanying prospectus.
General
The Trust will issue the Series A QUIPS and the Series A Common Securities,
with a stated liquidation amount of $25 per security. The Series A QUIPS and
the Series A Common Securities will rank equally with one another. The Trust
will make payments on the Series A QUIPS pro rata with the Series A Common
Securities based on their respective aggregate liquidation amounts, except as
described in "--Ranking" below.
The Trust will use the net proceeds from the sale of the Series A Trust
Securities to purchase the Series A QUIDS from Sempra Energy. The Property
Trustee will hold legal title to the Series A QUIDS in trust for the benefit of
the holders of the Series A Trust Securities. Sempra Energy will guarantee the
payment of distributions and other amounts payable on the Series A QUIPS, but
only to the extent that the Trust has funds legally and immediately available
to make those payments. See "Description of Preferred Securities Guarantees" in
the accompanying prospectus.
The Declaration will be qualified as an indenture under the Trust Indenture
Act. The Property Trustee will act as indenture trustee for the Series A QUIPS,
in order to comply with the provisions of the Trust Indenture Act.
The Series A QUIPS will be represented by a global security that will be
deposited with and registered in the name of The Depository Trust Company
("DTC") or its nominee. Whenever we refer to a "holder" of Series A QUIPS in
this prospectus supplement, we mean the registered holder, which, for any
Series A QUIPS in book-entry form, will be DTC or its nominee. We discuss
various matters relevant to global securities under "Book-Entry Issuance" in
this prospectus supplement.
Distributions
Distributions will accumulate on the Series A QUIPS from the date they are
first issued at the annual rate of 8.90% of their liquidation amount. Unless
deferred as described below, distributions will be payable quarterly in arrears
on March 31, June 30, September 30 and December 31 of each year (each, a
"distribution date"), beginning March 31, 2000. Distributions not paid when due
will accumulate additional distributions, compounded quarterly, at the annual
rate of 8.90% on the amount of unpaid distributions, to the extent permitted by
law. Whenever we use the term "distributions" in this prospectus supplement, we
are including any of these distributions. The amount of distributions payable
for any period will be computed on the basis of a 360-day year of twelve 30-day
months.
The assets of the Trust available for distributions to holders of Series A
QUIPS will be limited to the interest payments the Trust receives from Sempra
Energy in respect of the Series A QUIDS. Consequently, if Sempra Energy defers
or for any other reason fails to make interest payments on the Series A QUIDS,
the Trust will not have funds to pay distributions on the Series A QUIPS.
S-22
<PAGE>
As long as no Subordinated Indenture Event of Default has occurred and has
not been cured, Sempra Energy will have the right to defer interest payments on
the Series A QUIDS at any time. Sempra Energy may defer interest payments on
the Series A QUIDS in each case for a period not exceeding 20 consecutive
quarters (each, a "deferral period"). No deferral period may extend beyond the
stated maturity of the Series A QUIDS. Before a deferral period ends, Sempra
Energy may extend it further if that deferral period does not exceed 20
consecutive quarters or extend beyond the stated maturity of the Series A
QUIDS. When a deferral period ends and Sempra Energy has paid all accrued and
unpaid interest on the Series A QUIDS, Sempra Energy may begin a new deferral
period, subject to the terms described above. There is no limit on the number
of deferral periods that Sempra Energy may begin.
If Sempra Energy defers interest payments on the Series A QUIDS, the Trust
also will defer the payment of distributions on the Series A QUIPS. During a
deferral period, you will still accumulate distributions at the rate stated
above, plus you will accumulate additional distributions on the deferred
distributions at the same rate, to the extent permitted by law. During a
deferral period, you will be required to accrue interest income for United
States federal income tax purposes. See "Material United States Federal Income
Tax Considerations--Interest Income and Original Issue Discount" in this
prospectus supplement.
Sempra Energy has no current intention to exercise its right to defer
interest payments on the Series A QUIDS. If Sempra Energy elects to begin a
deferral period, it will be subject to specified restrictions relating to
paying dividends on or repurchasing its common stock and making payments on
certain of its debt securities. See "Description of the Series A QUIDS--
Interest--Deferral Period Restrictions" in this prospectus supplement.
Redemption
The Series A QUIPS will remain outstanding until the Trust redeems them or
distributes the Series A QUIDS in exchange for the Series A QUIPS. Any
redemption of Series A QUIPS must occur as described below. Any exchange
distribution must occur as described below in "--Exchange of Series A QUIPS for
Series A QUIDS."
Redemption of Series A Trust Securities
If Sempra Energy repays or redeems the Series A QUIDS, whether at their
stated maturity, upon acceleration after a Subordinated Indenture Event of
Default or upon early redemption, the Property Trustee will redeem a Like
Amount of Series A Trust Securities on the Redemption Date at the Redemption
Price. In this context, "Like Amount" means Series A Trust Securities having an
aggregate liquidation amount equal to the aggregate principal amount of the
Series A QUIDS being repaid or redeemed. "Redemption Date" means the date that
the principal of the Series A QUIDS being redeemed becomes due for payment
under the Subordinated Indenture. "Redemption Price" means the aggregate
liquidation amount of the Series A Trust Securities to be redeemed, plus any
accumulated and unpaid distributions on those securities to the Redemption
Date.
Repayment and Redemption of Series A QUIDS
The Series A QUIDS initially will have a stated maturity of February 23,
2030, which Sempra Energy may shorten to a date on or after February 23, 2015,
or, subject to certain conditions being satisfied, extend to February 23, 2049.
See "Description of the Series A QUIDS--Stated Maturity" in this prospectus
supplement.
S-23
<PAGE>
Sempra Energy also may redeem the Series A QUIDS, at its option, before
their stated maturity as follows:
. at any time on or after February 23, 2005, in whole or in part,
provided that no partial redemption may occur during a deferral
period; and
. at any time in whole, but not in part, within 90 days after a Tax
Event or an Investment Company Act Event has occurred.
See "Description of Series A QUIDS--Optional Redemption" in this prospectus
supplement for the definitions of "Tax Event" and "Investment Company Act
Event."
If a Tax Event is continuing and Sempra Energy does not elect to redeem the
Series A QUIDS or dissolve the Trust, Sempra Energy may be required to pay
additional sums on the Series A QUIDS. The provisions regarding repayment and
redemption of the Series A QUIDS, as well as information about the effect that
possible tax law changes may have on the Series A QUIDS and Series A QUIPS, are
discussed in "Description of the Series A QUIDS--Stated Maturity" and "--
Optional Redemption--Payment of Additional Sums" in this prospectus supplement.
Redemption Procedures
The Property Trustee will give you at least 30 days, but not more than 60
days, notice before the Redemption Date, unless the redemption results from
acceleration after a Subordinated Indenture Event of Default and the Property
Trustee is not able to give notice during this period. In that case, the
Property Trustee will give the notice as soon as practicable. The Property
Trustee will give the notice of redemption in the manner described below under
"--Notices."
The Property Trustee will irrevocably deposit with DTC (in the case of any
book-entry Series A QUIPS) or the Paying Agent (as defined below) (in the case
of any non-book-entry Series A QUIPS) funds sufficient to pay the Redemption
Price for all Series A Trust Securities being redeemed on that date, to the
extent that such funds are deposited with the Property Trustee. The Property
Trustee will deposit such funds by 2:00 p.m., New York City time, on the
Redemption Date provided that the Property Trustee has received such funds by
10:00 a.m. New York City time on such Redemption Date.
DTC will pay the Redemption Price for Series A QUIPS held in book-entry
form and called for redemption in accordance with the procedures of DTC, to the
extent the Property Trustee has deposited sufficient funds with DTC. The Paying
Agent will pay the Redemption Price for Series A QUIPS held in definitive form
and called for redemption, to the extent the Property Trustee has deposited
sufficient funds with the Paying Agent, against surrender of the certificates
representing those Series A QUIPS. The Series A QUIPS will be issued in
definitive form only in the special circumstances described under the caption
"Book-Entry Issuance--Global Securities" in this prospectus supplement. Any
distributions that are due on a distribution date that is on or before the
Redemption Date will be payable to the holders of those Series A QUIPS on the
record date for the related distribution date.
Once the Property Trustee gives notice of redemption and deposits funds as
discussed above, all rights of the holders of the Series A Trust Securities
called for redemption will cease at the time of the deposit, except the right
of those holders to receive the Redemption Price, but without interest on that
amount. In addition, those Series A Trust Securities will no longer be
outstanding.
On the Redemption Date, distributions will stop accumulating on the Series
A QUIDS called for redemption. However, if payment of the Redemption Price for
any Series A QUIPS is not made, distributions on those Series A QUIPS will
continue to accumulate to the date the Redemption Price is paid.
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If the Trust redeems less than all the Series A Trust Securities, then the
liquidation amount of Series A Trust Securities to be redeemed will be
allocated pro rata between the outstanding Series A QUIPS and the outstanding
Series A Common Securities, based upon their respective aggregate liquidation
amounts. The Property Trustee will select the Series A Trust Securities to be
redeemed from among the outstanding Series A Trust Securities not previously
called for redemption. The Property Trustee may use any method of selection
that it deems to be fair and appropriate.
Other Purchases of Series A QUIPS
Sempra Energy or its subsidiaries may purchase outstanding Series A QUIPS
by tender, in the open market or by private agreement, subject to applicable
laws, including United States federal securities laws.
Exchange of Series A QUIPS for Series A QUIDS
Sempra Energy will have the right at any time, in its sole discretion, to
dissolve the Trust. After the Trust has satisfied all liabilities to its
creditors, as provided by law, the Property Trustee will distribute a Like
Amount of Series A QUIDS to the holders of the Series A Trust Securities in
exchange for all the outstanding Series A Trust Securities, in liquidation of
the Trust. In this context, "Like Amount" means Series A QUIDS having an
aggregate principal amount equal to the aggregate liquidation amount of all
outstanding Series A Trust Securities.
Sempra Energy must use its best efforts to list the Series A QUIDS on the
New York Stock Exchange or such other stock exchange or organization, if any,
on which the Series A QUIPS are listed if an exchange distribution occurs.
Exchange Procedures
The Property Trustee will make the exchange distribution to holders of
Series A QUIPS listed in the Trust's records at the close of business on the
record date for the exchange distribution. If the Series A QUIPS are held in
book-entry form, the record date will be one Business Day (as defined below)
before the date that Sempra Energy sets as the exchange distribution date (the
"Exchange Date"). If the Series A QUIPS are not held in book-entry form, the
record date will be the 15th day (whether or not a Business Day) before the
Exchange Date.
The Property Trustee will give holders at least 30 days, but not more than
60 days, notice before the Exchange Date. The Property Trustee will give the
notice of an Exchange Date in the manner described below under "--Notices."
On the Exchange Date:
. the Series A QUIPS will no longer be outstanding;
. certificates representing a Like Amount of Series A QUIDS will be
issued to holders of Series A QUIPS upon their surrender to the
Property Trustee or its agent for exchange;
. any certificates representing Series A QUIPS that are not surrendered
for exchange will be deemed to represent a Like Amount of Series A
QUIDS (and until such certificates are surrendered for exchange, no
payments of interest or principal on such Series A QUIDS will be made
to the holders of those Series A QUIPS); and
. the holders of Series A QUIPS will not have any further rights with
respect to the Series A QUIPS, except the right to receive
certificates representing Series A QUIDS upon surrender of their
certificates as described above.
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Certain Tax Consequences
Under current United States federal income tax law and interpretations and
assuming, as the Trust expects, that the Trust will not be classified as an
association taxable as a corporation, you would not be taxed if the Property
Trustee distributes the Series A QUIDS to you upon liquidation of the Trust.
However, if a Tax Event were to occur and the Trust were subject to taxation on
income received or accrued on the Series A QUIDS, you and the Trust could be
taxed on that distribution. See "Material United States Federal Income Tax
Considerations--Distribution of Series A QUIDS to Holders of Series A QUIPS
Upon Liquidation of the Trust" in this prospectus supplement.
Ranking
The Series A QUIPS will rank equally with the Series A Common Securities.
The Trust will make payments of distributions and the Redemption Price on the
Series A QUIPS and the Series A Common Securities pro rata, based on the
aggregate liquidation amounts of the Series A QUIPS and Series A Common
Securities, except as follows. If a Subordinated Indenture Event of Default has
occurred and has not been cured, the Trust will not make any payments on the
Series A Common Securities until the Trust has paid in full or provided in full
all unpaid amounts on the Series A QUIPS.
If a Subordinated Indenture Event of Default occurs, the holders of the
Series A Common Securities will be deemed to have waived all rights to act with
respect to the related Declaration Event of Default (as defined below) until
all such Declaration Events of Default have been cured, waived or eliminated.
Until any such Declaration Events of Default have been cured, waived or
eliminated, the Property Trustee will act solely on your behalf (and not on
behalf of the holders of the Series A Common Securities), and only you will
have the right to direct the Property Trustee to act on your behalf.
Status of The Series A QUIPS Guarantee
The Series A QUIPS Guarantee will constitute an unsecured obligation of
Sempra Energy and will rank:
(a) equal in rank with any other preferred securities guarantee similar to
the Series A QUIPS Guarantee issued by Sempra Energy on behalf of the
holders of preferred securities issued by any other trust established
by Sempra Energy or its affiliates;
(b) subordinate and junior in right of payment to all of its other
liabilities, except those that rank equally or are subordinate by
their terms;
(c) equal with any guarantee now or hereafter issued by Sempra Energy in
respect of the most senior preferred or preference stock now or
hereafter issued by Sempra Energy, and with any guarantee now or
hereafter issued by it in respect of any preferred or preference stock
of any of its affiliates; and
(d) Senior to Sempra Energy's common stock.
The Declaration will require that the holders of the Series A QUIPS accept
the subordination provisions and other terms of the Series A QUIPS Guarantee.
The Series A QUIPS Guarantee will constitute a guarantee of payment and not of
collection (in other words the holder of the Series A QUIPS Guarantee may sue
Sempra Energy, or seek other remedies, to enforce its rights under the Series A
QUIPS Guarantee without first suing any other person or entity). The Series A
QUIPS Guarantee will not be discharged except by payment of the Series A QUIPS
Guarantee payments in full to the extent not previously paid or upon
distribution of the Series A QUIDS to the holders of the Series A QUIPS
pursuant to the Declaration.
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Liquidation Distribution Upon Dissolution
The Declaration states that the Trust shall be dissolved:
(a) on the expiration of the term of the Trust;
(b) upon the bankruptcy of Sempra Energy;
(c) upon the filing of a certificate of dissolution or its equivalent with
respect to Sempra Energy;
(d) 90 days after the revocation of the articles of incorporation of
Sempra Energy (but only if the articles of incorporation are not
reinstated during that 90-day period);
(e) upon the written direction to the Property Trustee from Sempra Energy
at any time to dissolve the Trust and distribute the Series A QUIDS to
holders in exchange for the Series A QUIPS;
(f) upon the redemption of all of the Series A Trust Securities; or
(g) upon entry of a court order for the dissolution of Sempra Energy or
the Trust.
In the event of a dissolution, after the Trust satisfies (whether by
payment or reasonable provision for payment) all amounts owed to creditors of
the Trust, the holders of the Series A Trust Securities will be entitled to
receive:
(a) cash equal to the aggregate liquidation amount of each Series A Trust
Security, plus accumulated and unpaid distributions to the date of
payment; unless
(b) Series A QUIDS in an aggregate principal amount equal to the aggregate
liquidation amount of the Series A Trust Securities are distributed to
the holders of the Series A Trust Securities.
If the Trust cannot pay the full amount due on its Series A Trust
Securities because insufficient assets are available for payment, then the
amounts payable by the Trust on its Series A Trust Securities shall be paid pro
rata. However, if an event of default under the Declaration has occurred, the
total amounts due on the Series A QUIPS will be paid before any distribution on
the Series A Common Securities.
Declaration Events of Default
The term "Declaration Event of Default" means any of the following:
. a Subordinated Indenture Event of Default occurs (see "Description of
Series A QUIDS--Events of Default" in this prospectus supplement);
. the Trust does not pay any distribution within 30 days of its due
date, provided that no deferral period is continuing;
. the Trust does not pay any Redemption Price on its due date;
. the Securities Trustees remain in breach in a material respect of any
term of the Declaration for 90 days after the Securities Trustees
receive notice of default stating the Securities Trustees are in
breach. The notice must be sent by the holders of at least 25% in
liquidation amount of the outstanding Series A QUIPS; and
. the Property Trustee files for bankruptcy or certain other events in
bankruptcy or insolvency occur and a successor Property Trustee is not
appointed within 60 days.
If a Subordinated Indenture Event of Default occurs and the Subordinated
Indenture Trustee and the holders of not less than 25% in principal amount of
the outstanding Series A QUIDS fail to
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declare the principal of all of the Series A QUIDS to be immediately due and
payable, the holders of at least 25% in aggregate liquidation amount of the
outstanding Series A QUIPS will have the right to declare such principal
immediately due and payable, by providing notice to Sempra Energy and the
Subordinated Indenture Trustee.
If Sempra Energy fails to pay principal, premium, if any, or interest on
the Series A QUIDS when payable, then a holder of the Series A QUIPS may
directly sue Sempra Energy or seek other remedies to collect its pro rata share
of payments owed.
Within 90 days after learning of a Declaration Event of Default, the
Property Trustee will notify the holders of the Series A Trust Securities, the
Regular Trustees and Sempra Energy, unless the Declaration Event of Default has
been cured or waived.
Sempra Energy and the Regular Trustees must provide the Property Trustee
with an annual certificate stating whether they are in compliance with all the
conditions and covenants applicable to them under the Declaration.
If a Declaration Event of Default has occurred and has not been cured, the
Series A QUIPS will have a preference in right of payment over the Series A
Common Securities as discussed above. The holders of Series A Trust Securities
are not entitled to accelerate the maturity of the Series A QUIPS upon a
Declaration Event of Default.
Voting Rights; Amendment of the Declaration
The holders of the Series A QUIPS will have no voting rights except as
discussed below and under "Description of the Series A QUIDS--Consolidation,
Merger and Conveyance of Assets as an Entirety; No Financial Covenants" in this
prospectus supplement and "Description of Preferred Securities Guarantees--
Amendments and Assignment" in the accompanying prospectus, and as otherwise
required by law or the Declaration.
If any proposed amendment to the Declaration provides for, or the Regular
Trustees otherwise propose to effect:
(a) any action that would adversely affect the powers, preferences or
special rights of the Series A QUIPS in any material respect, whether
by way of amendment to the Declaration or otherwise; or
(b) the dissolution, winding-up or termination of the Trust other than
pursuant to the terms of the Declaration,
then the holders of the Series A QUIPS as a class will be entitled to vote on
the amendment or proposal. In that case, the amendment or proposal will be
effective only if approved by the holders of at least a majority in aggregate
liquidation amount of the Series A QUIPS.
The Declaration may be amended from time to time by Sempra Energy and the
Property Trustee and the Regular Trustees without the consent of the holders of
Series A QUIPS, to:
(a) cure any ambiguity, correct or supplement any provision which may be
inconsistent with any other provision, or make provisions not
inconsistent with any other provisions with respect to matters or
questions arising under the Declaration, in each case to the extent
that the amendment does not adversely affect the interests of any
holder of Series A QUIPS in any material respect; or
(b) modify, eliminate or add to any provisions to the extent necessary to
ensure that the Trust will not be classified as other than a grantor
trust for United States federal income tax
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purposes or to ensure that the Trust will not be required to register
as an "investment company" under the Investment Company Act.
Except as provided in the next paragraph, other amendments to the
Declaration may be made by Sempra Energy and the Securities Trustees upon:
(a) approval of the holders of a majority in aggregate liquidation amount
of the outstanding Series A QUIPS; and
(b) receipt by the Securities Trustees of an opinion of counsel to the
effect that such amendment will not affect the Trust's status as a
grantor trust for United States federal income tax purposes or the
Trust's exemption from the Investment Company Act.
Notwithstanding the foregoing, without the consent of each affected holder
of the Series A Trust Securities, the Declaration may not be amended to:
(a) change the amount or timing of any distribution on the Series A Trust
Securities or otherwise adversely affect the amount of any
distribution required to be made in respect of the Series A Trust
Securities as of a specified date; or
(b) restrict the right of a holder of the Series A Trust Securities to
institute suit for the enforcement of any such payment on or after
such date.
In addition, no amendment may be made to the Declaration if the amendment
would:
(a) cause the Trust to be characterized as other than a grantor trust for
United States federal income tax purposes;
(b) cause the Trust to be deemed to be an "investment company" which is
required to be registered under the Investment Company Act; or
(c) impose any additional obligation on Sempra Energy, the Property
Trustee or the Delaware Trustee without its consent.
Without obtaining the prior approval of the holders of a majority in
aggregate liquidation amount of the Series A QUIPS, the Securities Trustees
may not:
(a) direct the time, method and place of conducting any proceeding for any
remedy available to the Subordinated Indenture Trustee or executing
any trust or power conferred on the Property Trustee with respect to
the Series A QUIDS;
(b) waive any default that is waivable under the Subordinated Indenture;
(c) cancel an acceleration of the principal of the Series A QUIDS; or
(d) consent to any amendment, modification or termination of the
Subordinated Indenture or the Series A QUIDS where such consent is
required.
However, if a consent under the Subordinated Indenture requires the
consent of each affected holder of the Series A QUIDS, then the Property
Trustee must obtain the prior consent of each holder of the Series A QUIPS. In
addition, before taking any of the foregoing actions, the Regular Trustees
must obtain an opinion of counsel stating that the action will not cause the
Trust to be classified as other than a grantor trust for United States federal
income tax purposes.
The Property Trustee will notify all holders of the Series A QUIPS of any
notice of default received from the Subordinated Indenture Trustee with
respect to the Series A QUIDS.
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Enforcement Rights
If a Subordinated Indenture Event of Default occurs, the holders of Series
A QUIPS must rely on the Property Trustee, as the holder of the Series A QUIDS,
to enforce its rights under the Series A QUIDS and the Subordinated Indenture
against Sempra Energy, subject to the following:
Right of Direct Action
If Sempra Energy does not make full and timely payments on the Series A
QUIDS, the Trust will not have funds available to make payments of
distributions or other amounts due on the Series A QUIPS. In this event, a
holder of Series A QUIPS may sue Sempra Energy directly to collect its pro rata
share of payments owed. Sempra Energy may not amend the Subordinated Indenture
to remove the right of any holder of Series A QUIPS to bring a direct action
against Sempra Energy without the prior written consent of all of the holders
of Series A QUIPS. Sempra Energy will be able to set-off any payment made to a
holder of Series A QUIPS in connection with a direct action.
Other Rights under the Subordinated Indenture
The holders of 25% or more in liquidation amount of the outstanding Series
A QUIPS may accelerate the maturity of the Series A QUIDS when a Subordinated
Indenture Event of Default has occurred and has not been cured and neither the
Subordinated Indenture Trustee nor the holders of the Series A QUIDS have
exercised such acceleration rights. In addition, the holders of a majority in
liquidation amount of the outstanding Series A QUIPS may cancel a declaration
of acceleration of the Series A QUIDS and may waive specified Subordinated
Indenture Events of Default. See "Description of Series A QUIDS--Events of
Default" and "--Remedies" in this prospectus supplement.
Notices
Notices to be given to holders of Series A QUIPS held in book-entry form
will be given to DTC in accordance with its procedures. Notices to be given to
holders of Series A QUIPS held in definitive form may be given by mail to their
addresses set forth in the Trust's records.
Payment and Paying Agency
If the Series A QUIPS are held in book-entry form, distributions will be
paid to DTC, which will credit the relevant accounts at DTC on the applicable
distribution dates in accordance with its procedures. If the Series A QUIPS are
issued in definitive form, distributions will be paid by check mailed to the
address of the holder entitled to such payments, as such address appears in the
Trust's records. The paying agent of the Trust (the "Paying Agent") will
initially be the Property Trustee. Any Paying Agent may resign upon 30 days'
written notice to the Regular Trustees and the Property Trustee. In such event,
the Property Trustee will appoint a successor acceptable to the Regular
Trustees to act as Paying Agent.
Persons holding their Series A QUIPS in "Street Name" or indirectly through
DTC should consult their banks or brokers for information on how they will
receive payments. See "Book-Entry Issuance--"Street Name' and Other Indirect
Holders" in this prospectus supplement.
Any money paid to the Property Trustee or any Paying Agent for payments on
the Series A QUIPS that remains unclaimed at the end of two years after the
amount is due will be repaid to Sempra Energy. After that two-year period, you
may look only to Sempra Energy for payment of those amounts.
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Business Day
If any payment is due on a day that is not a Business Day, the payment will
be made on the following Business Day (unless that Business Day is in a
different calendar year, in which case the payment will be made on the
preceding Business Day). Each payment made on the following or preceding
Business Day will have the same force and effect as if made on the original
payment due date. "Business Day" means any day other than a Saturday, a Sunday,
a day on which banking institutions in New York City are authorized or required
by law or executive order to remain closed or a day on which the corporate
trust office of the Property Trustee or the Subordinated Indenture Trustee is
closed for business.
Record Date
The Trust will pay distributions to holders of Series A QUIPS listed in the
Trust's records on the record date for the payment. If the Series A QUIPS are
held in book-entry form, the record date will be one Business Day before the
relevant distribution date. If the Series A QUIPS are issued in definitive
form, the record date will be the 15th day, whether or not a Business Day,
before the relevant distribution date.
Registrar and Transfer Agent
The Property Trustee will initially act as the Trust's agent for
registering Series A QUIPS in the names of holders and transferring Series A
QUIPS. The Property Trustee also will perform the role of maintaining the list
of registered holders of Series A QUIPS. Holders will not be required to pay a
service charge to transfer or exchange Series A QUIPS, but may be required to
pay for any tax or other governmental charge associated with the exchange or
transfer.
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DESCRIPTION OF THE SERIES A QUIDS
This section describes the specific terms of the Series A QUIDS. This
description supplements, and to the extent inconsistent supersedes and
replaces, the description of the general terms and provisions of the Series A
QUIDS set forth in the accompanying prospectus under the caption "Description
of Debt Securities." The following description does not purport to be complete
and is subject to, and is qualified in its entirety by reference to, the
Subordinated Indenture. We have filed a form of the Subordinated Indenture with
the SEC and you may obtain copies as described under "Where You Can Find More
Information" in the accompanying prospectus.
General
Sempra Energy will issue Series A QUIDS in denominations that are integral
multiples of $25 and in an aggregate principal amount of approximately $206.2
million. The Trust will use the proceeds from the sale of the Series A Trust
Securities to purchase the Series A QUIDS. The Property Trustee will hold legal
title to the Series A QUIDS in trust for the benefit of the holders of the
Series A Trust Securities.
The Subordinated Indenture will be qualified as an indenture under the
Trust Indenture Act. The Subordinated Indenture Trustee will act as indenture
trustee for the Series A QUIDS, in order to comply with the provisions of the
Trust Indenture Act.
The Series A QUIDS are not secured by any property or assets of Sempra
Energy. The Series A QUIDS will rank junior in priority of payment to specified
existing and future debt and other liabilities of Sempra Energy which are
described below under "--Subordination."
Interest
Interest will accrue on the Series A QUIDS from February 23, 2000 at the
annual rate of 8.90% of their principal amount. Unless deferred as described
below, interest will be payable quarterly in arrears on March 31, June 30,
September 30 and December 31 of each year (including at stated maturity) (each,
an "interest payment date"), beginning March 31, 2000. The amount of interest
payable for any period will be computed on the basis of a 360-day year of
twelve 30-day months.
Deferral Periods
As long as no Subordinated Indenture Event of Default has occurred and has
not been cured, Sempra Energy will have the right to defer the payment of
interest on the Series A QUIDS as described in "Description of the Series A
QUIPS--Distributions" in this prospectus supplement. During a deferral period,
the holders of Series A QUIDS will continue to accrue interest at the rate
stated above, plus will accrue additional interest on each deferred interest
payment at the annual rate of 8.90%, compounded quarterly, from the
corresponding interest payment date, to the extent permitted by law. Whenever
we use the term "interest" with respect to the Series A QUIDS in this
prospectus supplement, we are including any of this additional interest.
Deferral Period Restrictions
During a deferral period, Sempra Energy and its subsidiaries may not take
any of the following actions, except as described below:
. declare or pay any dividend or other distribution on, redeem, purchase
or acquire, or make a liquidation payment on any shares of Sempra
Energy's capital stock;
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. pay any amount on or repay, redeem or repurchase any debt securities
issued by Sempra Energy that rank equally with or junior to the Series
A QUIDS; or
. make any payments under any of Sempra Energy's guarantees if such
guarantee ranks equally with or junior to the Series A QUIDS and
guarantees payments on any debt security of any of Sempra Energy's
subsidiaries.
Notwithstanding the foregoing, Sempra Energy may take any of the following
actions during a deferral period:
. declare dividends in, or make any payment in, shares of common stock
of Sempra Energy;
. redeem, purchase or acquire its common stock if related to the
issuance of common stock under any of Sempra Energy's benefit plans
for its directors, officers or employees;
. declare or pay a dividend in connection with any shareholder's rights
plan, issue stock under such plan or redeem, repurchase or acquire any
rights distributed pursuant to the plan; or
. make payments under the Series A QUIPS Guarantee or any other
preferred securities guarantee (as described under "Description of the
Series A QUIPS--Status of the Series A QUIPS Guarantee" in this
prospectus supplement and under "Description of Preferred Securities
Guarantee" in the accompanying prospectus).
Deferral Period Procedures
Sempra Energy will give the Property Trustee, the Regular Trustees and the
Subordinated Indenture Trustee notice of its election to begin a deferral
period at least one Business Day before the earlier of:
. the next distribution date for the Series A QUIPS; or
. the date the Regular Trustees are required to give notice of the
record date or the distribution date to (1) the New York Stock
Exchange or other applicable self-regulatory organization or (2) the
holders of the Series A QUIPS.
The Subordinated Indenture Trustee must notify the holders of the Series A
QUIDS in the manner described below in "--Notices" of Sempra Energy's election
to begin a deferral period.
Stated Maturity
The Series A QUIDS initially will have a stated maturity of February 23,
2030. However, Sempra Energy may shorten the stated maturity to a date on or
after February 23, 2015. You should expect that Sempra Energy will exercise
this option if, for example, a tax development occurs that prohibits Sempra
Energy from deducting interest payments on the Series A QUIDS unless the
Series A QUIDS have a shorter maturity date.
Sempra Energy also will have the option to extend the stated maturity to
February 23, 2049, if:
. Sempra Energy is not in bankruptcy, insolvent or in liquidation;
. Sempra Energy is not in default on the payment of interest or
principal on the Series A QUIDS;
. the Trust is not in arrears on payments of distributions on the Series
A QUIPS;
. no deferred distributions are accumulated on the Series A QUIPS; and
. the Series A QUIPS are rated at least BBB- by Standard & Poor's
Ratings Services or Baa3 by Moody's Investors Services, Inc. or an
equivalent rating by a successor rating agency.
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You should assume that Sempra Energy will exercise its option to extend the
stated maturity if Sempra Energy is unable to refinance the Series A QUIDS at a
lower interest rate or it is otherwise in the interest of Sempra Energy to
defer the stated maturity of the Series A QUIDS.
Procedures
Sempra Energy will pay principal of and any premium on the Series A QUIDS
at stated maturity, upon redemption or otherwise, upon presentation of the
Series A QUIDS at the office of the Subordinated Indenture Trustee, as our
paying agent. In Sempra Energy's discretion, it may appoint one or more
additional paying agents and security registrars and designate one or more
additional places for payment and for registration of transfer, but Sempra
Energy must at all times maintain a place of payment of the Series A QUIDS and
a place for registration of transfer of the Series A QUIDS in the Borough of
Manhattan, The City of New York.
Sempra Energy will give notice to the Subordinated Indenture Trustee of its
selection of a new stated maturity at least 30 days, but not more than 60 days,
prior to the effective date of the change. The Subordinated Indenture Trustee
will give holders of Series A QUIDS notice of the new stated maturity promptly
upon its receipt of the notice from Sempra Energy. The Subordinated Indenture
Trustee will give the notice in the manner described below under "--Notices."
Optional Redemption
Sempra Energy may redeem the Series A QUIDS, at its option, before their
stated maturity as follows:
. at any time on or after February 23, 2005, in whole or in part,
provided that no partial redemption may occur during a deferral
period; and
. at any time in whole, but not in part, within 90 days after a Tax
Event or an Investment Company Act Event has occurred.
Sempra Energy will pay the Redemption Price on the Redemption Date to the
holders of Series A QUIDS to be redeemed. In this context, "Redemption Price"
means the aggregate principal amount of the Series A QUIDS to be redeemed, plus
any accrued and unpaid interest on those securities to the Redemption Date.
Notwithstanding the foregoing, installments of interest on the Series A QUIDS
that are due and payable on interest payment dates falling on or prior to a
Redemption Date will be payable on the interest payment date to the registered
holders as of the close of business on the relevant record date according to
the Series A QUIDS and the Subordinated Indenture. The Redemption Price will be
calculated on the basis of a 360-day year consisting of twelve 30-day months.
Sempra Energy will mail notice of any redemption at least 30 days but not
more than 60 days before the Redemption Date to each registered holder of the
Series A QUIDS to be redeemed. Once notice of redemption is mailed, the Series
A QUIDS called for redemption will become due and payable on the Redemption
Date and at the applicable Redemption Price, plus accrued and unpaid interest
to the Redemption Date. If Sempra Energy elects to redeem all or a portion of
the Series A QUIDS, that redemption will not be conditional upon receipt by the
paying agent or the Subordinated Indenture Trustee of monies sufficient to pay
the Redemption Price. See "Description of Debt Securities--Redemption" in the
accompanying prospectus.
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Tax Event
"Tax Event" means that Sempra Energy receives an opinion of counsel,
experienced in such matters, that as a result of any Tax Change (as defined
below), there is more than an insubstantial risk that:
. the Trust is, or will be within 90 days after the date of the opinion
of counsel, subject to United States federal income tax with respect
to income received or accrued on the Series A QUIDS;
. interest payable by Sempra Energy or OID accruing on the Series A
QUIDS is not, or within 90 days after the date of the opinion, will
not be, deductible by Sempra Energy, in whole or in part, for United
States federal income tax purposes; or
. the Trust is, or will be within 90 days after the date of the opinion,
subject to more than a minimal amount of other taxes, duties or
governmental charges.
As used above, "Tax Change" means any of the following that are enacted,
promulgated or announced on or after the date of this prospectus supplement:
. amendment to or change, including any announced prospective change, in
the laws or any regulations under the laws of the United States or of
any political subdivision or taxing authority of the United States; or
. official administrative pronouncement or judicial decision
interpreting or applying the laws or regulations stated above whether
or not the pronouncement or decision is issued to or in connection
with a proceeding involving Sempra Energy or the Trust or is subject
to review or appeal.
Please see "Material United States Federal Income Tax Considerations--
Possible Tax Law Changes" in this prospectus supplement for a description of
certain tax law developments that could result in a Tax Event.
Investment Company Act Event
"Investment Company Act Event" means that Sempra Energy receives an opinion
of counsel, experienced in such matters, that as a result of the occurrence of
a change in law or regulation, or a written change in interpretation or
application of law or regulation, by any legislative body, court, governmental
agency or regulatory authority effective on or after the date of this
prospectus supplement, there is more than an insubstantial risk that the Trust
is or will be considered an "investment company" that is required to be
registered under the Investment Company Act of 1940, as amended.
Payment of Additional Sums
If a Tax Event is continuing and Sempra Energy does not elect to redeem the
Series A QUIDS or liquidate the Trust, Sempra Energy will pay additional
amounts, if any, to the holders of the Series A QUIDS so that, notwithstanding
any additional taxes, duties or charges imposed on the Trust because of a Tax
Event, the Trust will have sufficient funds to pay the full amount of
distributions due on the outstanding Series A Trust Securities.
Redemption Procedures
Sempra Energy will give the holders of the Series A QUIDS at least 30 days,
but not more than 60 days, notice before the Redemption Date, in the manner
described below under "--Notices" in this prospectus supplement. Once notice of
redemption is mailed, the Series A QUIDS called for
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redemption become due and payable on the Redemption Date and at the redemption
price, including accrued and unpaid interest and premium, if any, to the
Redemption Date. In all other respects, the procedures for redeeming the Series
A QUIDS will be similar to those for redeeming the Series A QUIPS. See
"Description of the Series A QUIPS-- Redemption--Redemption Procedures" in this
prospectus supplement.
On the Redemption Date, interest will stop accruing on the Series A QUIDS
called for redemption. However, if payment of the Redemption Price for any
Series A QUIDS is not made, interest on those Series A QUIDS will continue to
accrue to the date the Redemption Price is paid.
Exchange of Series A QUIPS for Series A QUIDS
Sempra Energy will have the right at any time to dissolve the Trust. In
such event, the Property Trustee will distribute the Series A QUIDS to the
holders of the Series A Trust Securities in exchange for their securities. See
"Description of the Series A QUIPS--Exchange of Series A QUIPS for Series A
QUIDS" in this prospectus supplement for the terms and procedures relating to
such an exchange.
Restrictions on Payments
If any Series A QUIDS are outstanding, Sempra Energy will be prohibited
from taking specified actions described below if:
. an event has occurred that constitutes a Subordinated Indenture Event
of Default or, after notice or passage of time, or both, would
constitute a Subordinated Indenture Event of Default, and Sempra
Energy has knowledge of such event but does not take reasonable steps
to cure the default;
. Sempra Energy does not pay any amount due under the Series A QUIPS
Guarantee relating to the Series A QUIPS, if the Series A QUIDS are
held by the Trust; or
. Sempra Energy has given notice of its election to begin a deferral
period and has not rescinded such notice, or any deferral period is
continuing.
In such event, Sempra Energy may not take any of the following actions,
except as described below:
. declare or pay any dividend or other distribution on, redeem, purchase
or acquire, or make a liquidation payment on any shares of Sempra
Energy's capital stock;
. pay any amount on or repay, redeem or repurchase any debt securities
issued by Sempra Energy that rank equal with or junior to the Series A
QUIDS; or
. make any payments under any of Sempra Energy's guarantees if such
guarantee ranks equal with or junior to the Series A QUIDS and
guarantees payments on any debt securities of any of Sempra Energy's
subsidiaries.
Notwithstanding the foregoing, Sempra Energy may:
. declare dividends in, or make any payment in, shares of common stock
of Sempra Energy;
. redeem, purchase or acquire its common stock if related to the
issuance of common stock under any of Sempra Energy's benefit plans
for its directors, officers or employees;
. declare or pay a dividend in connection with any shareholder's rights
plan, issue stock under such plan or redeem, repurchase or acquire any
rights distributed pursuant to the plan; or
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. make payments under the Series A QUIPS Guarantee or any other
preferred securities guarantee (as described under "Description of the
Series A QUIPS--Status of the Series A QUIPS Guarantee" in this
prospectus supplement and "Description of Preferred Securities
Guarantee" in the accompanying prospectus).
Events of Default
A "Subordinated Indenture Event of Default" occurs with respect to the
Series A QUIDS if:
(a) Sempra Energy does not pay any interest on any Series A QUIDS within
30 days of the due date, provided that, if Sempra Energy elects to
defer an interest payment, the date on which that payment is due will
be the date on which Sempra Energy is required to make payment
following its deferral;
(b) Sempra Energy does not pay any principal of or premium on any Series A
QUIDS on the due date;
(c) Sempra Energy remains in breach of a covenant or warranty (excluding
covenants and warranties solely applicable to another series of debt
securities issued under the Subordinated Indenture) in the
Subordinated Indenture or the Series A QUIDS for 60 days after Sempra
Energy receives a written notice of default stating Sempra Energy is
in breach and requiring remedy of the breach; the notice must be sent
by either the Subordinated Indenture Trustee or registered holders of
at least 25% of the principal amount of the outstanding Series A
QUIDS; or
(d) Sempra Energy files for bankruptcy or other specified events in
bankruptcy, insolvency, receivership or reorganization occur.
Remedies
Acceleration
If a Subordinated Indenture Event of Default occurs and is continuing with
respect to the Series A QUIDS, then either the Subordinated Indenture Trustee
or the registered holders of at least 25% in principal amount of the
outstanding Series A QUIDS may declare the principal amount of all of the
Series A QUIDS, together with accrued and unpaid interest thereon, to be due
and payable immediately.
Rescission of Acceleration
After the declaration of acceleration has been made with respect to the
Series A QUIDS and before the Subordinated Indenture Trustee has obtained a
judgment or decree for payment of the money due, the declaration and its
consequences will be rescinded and annulled, if:
(a) Sempra Energy pays or deposits with the Subordinated Indenture Trustee
a sum sufficient to pay:
(1) all overdue interest on the Series A QUIDS, other than interest
which has become due by declaration of acceleration;
(2) the principal of and any premium on the Series A QUIDS which have
become due otherwise than by the declaration of acceleration and
overdue interest on these amounts;
(3) interest on overdue interest, other than interest which has become
due by declaration of acceleration, on the Series A QUIDS to the
extent lawful;
(4) all amounts due to the Subordinated Indenture Trustee under the
Subordinated Indenture; and
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(b) all Subordinated Indenture Events of Default with respect to the
Series A QUIDS, other than the nonpayment of the principal and
interest which has become due solely by the declaration of
acceleration, have been cured or waived as provided in the
Subordinated Indenture.
For more information as to waiver of defaults, see "Waiver of Default and
of Compliance" below.
Control by Registered Holders; Limitations
If a Subordinated Indenture Event of Default with respect to the Series A
QUIDS occurs and is continuing, the registered holders of a majority in
principal amount of the outstanding Series A QUIDS, voting as a single class,
without regard to the holders of outstanding debt securities of any other
series that may also be in default, will have the right to direct the time,
method and place of:
(a) conducting any proceeding for any remedy available to the Subordinated
Indenture Trustee with respect to the Series A QUIDS; and
(b) exercising any trust or power conferred on the Subordinated Indenture
Trustee with respect to the Series A QUIDS.
These rights of registered holders to give directions are subject to the
following limitations:
(a) the registered holders' directions do not conflict with any law or the
Subordinated Indenture; and
(b) the direction is not unduly prejudicial to the rights of holders of
the Series A QUIDS who do not join in that action.
The Subordinated Indenture Trustee may also take any other action it deems
proper which is consistent with the registered holders' direction.
In addition, the Subordinated Indenture provides that no registered holder
of Series A QUIDS will have any right to institute any proceeding, judicial or
otherwise, with respect to the Subordinated Indenture or for the appointment of
a receiver or for any other remedy thereunder unless:
(a) that registered holder has previously given the Subordinated Indenture
Trustee written notice of a continuing Subordinated Indenture Event of
Default;
(b) the registered holders of at least 25% in aggregate principal amount
of the outstanding Series A QUIDS have made written request to the
Subordinated Indenture Trustee to institute proceedings in respect of
that Subordinated Indenture Event of Default and have offered the
Subordinated Indenture Trustee reasonable indemnity against costs and
liabilities incurred in complying with the request; and
(c) for 60 days after receipt of the notice, the Subordinated Indenture
Trustee has failed to institute a proceeding and no direction
inconsistent with the request has been given to the Subordinated
Indenture Trustee during the 60-day period by the registered holders
of a majority in aggregate principal amount of outstanding Series A
QUIDS.
Furthermore, no registered holder will be entitled to institute any action if
and to the extent that the action would disturb or prejudice the rights of
other registered holders of Series A QUIDS.
However, each registered holder has an absolute and unconditional right to
receive payment when due and to bring a suit to enforce that right.
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Notice of Default
The Subordinated Indenture Trustee is required to give the registered
holders of Series A QUIDS notice of any default under the Subordinated
Indenture to the extent required by the Trust Indenture Act, unless the default
has been cured or waived; except that in the case of an event of default of the
character specified above in clause (c) under "Events of Default," no notice
shall be given to the registered holders until at least 30 days after the
occurrence of the default. The Trust Indenture Act currently permits the
Subordinated Indenture Trustee to withhold notices of default (except for
certain payment defaults) if the Subordinated Indenture Trustee in good faith
determines the withholding of the notice to be in the interests of the
registered holders.
Sempra Energy will furnish the Subordinated Indenture Trustee with an
annual statement as to its compliance with the conditions and covenants in the
Subordinated Indenture.
Waiver of Default and of Compliance
The registered holders of a majority in aggregate principal amount of the
outstanding Series A QUIDS, voting as a single class, without regard to the
holders of outstanding debt securities of any other series, may waive, on
behalf of all registered holders of the Series A QUIDS, any past default under
the Subordinated Indenture, except a default in the payment of principal,
premium or interest, or with respect to compliance with certain provisions of
the Subordinated Indenture that cannot be amended without the consent of the
registered holder of each outstanding Series A QUIPS.
Consolidation, Merger and Conveyance of Assets as an Entirety; No Financial
Covenants
Sempra Energy has agreed not to consolidate or merge with or into any other
entity, or to sell, transfer, lease or otherwise convey its properties and
assets as an entirety or substantially as an entirety to any entity, unless:
(a) either Sempra Energy is the continuing entity (in the case of a
merger) or the successor entity formed by such consolidation or into
which Sempra Energy is merged or which acquires by sale, transfer,
lease or other conveyance Sempra Energy's properties and assets, as an
entirety or substantially as an entirety, is a corporation is an
entity organized and existing under the laws of the United States of
America or any State thereof or the District of Columbia, and
expressly assumes, by supplemental indenture, the due and punctual
payment of the principal, premium and interest on all the Series A
QUIDS and the performance of all of the covenants of Sempra Energy
under the Subordinated Indenture; and
(b) immediately after giving effect to the transaction, no Subordinated
Indenture Event of Default, and no event which after notice or lapse
of time or both would become a Subordinated Indenture Event of
Default, has or will have occurred and be continuing.
In addition to these conditions, the successor entity must assume all of
Sempra Energy's obligations with respect to the Series A QUIPS Guarantee, and
such transaction must be permitted under, and not give rise to any violation
of, the Declaration or the Series A QUIPS Guarantee.
Neither the Subordinated Indenture nor the Series A QUIPS Guarantee
contains any financial or other similar restrictive covenants.
Modification of Subordinated Indenture
Without Registered Holder Consent. Without the consent of any registered
holders of Series A QUIDS or any other debt securities which may in the future
be issued under the Subordinated
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Indenture, Sempra Energy and the Subordinated Indenture Trustee may enter into
one or more supplemental indentures for any of the following purposes:
(a) to evidence the succession of another entity to Sempra Energy; or
(b) to add one or more covenants for the benefit of the holders of all or
any series of debt securities, including the Series A QUIDS, or to
surrender any right or power conferred upon Sempra Energy; or
(c) to add any additional events of default for all or any series of debt
securities, including the Series A QUIDS; or
(d) to change or eliminate any provision of the Subordinated Indenture so
long as the change or elimination does not apply to any debt
securities, including the Series A QUIDS, entitled to the benefit of
such provision or to add any new provision to the Subordinated
Indenture (in addition to the provisions which may otherwise be added
to the Subordinated Indenture pursuant to the other clauses of this
paragraph) so long as the addition does not apply to any outstanding
debt securities, including the Series A QUIDS; or
(e) to provide security for the debt securities of any series, including
the Series A QUIDS; or
(f) to establish the form or terms of debt securities of any series other
than the Series A QUIDS as permitted by the Subordinated Indenture; or
(g) to evidence and provide for the acceptance of appointment of a
separate or successor Subordinated Indenture Trustee; or
(h) to cure any ambiguity, defect or inconsistency or to make any other
changes with respect to any series of debt securities, including the
Series A QUIDS, that do not adversely affect the interests of the
holders of debt securities of that series in any material respect.
The last paragraph under the caption "Description of Debt Securities--
Modification of Indenture--Without Registered Holder Consent" in the
accompanying prospectus will not apply to the Series A QUIDS.
With Registered Holder Consent. Subject to the following sentence, Sempra
Energy and the Subordinated Indenture Trustee may, with some exceptions, amend
or modify the Subordinated Indenture with the consent of the registered holders
of at least a majority in aggregate principal amount of the debt securities of
each series affected by the amendment or modification. However, no amendment or
modification may, without the consent of the registered holder of each
outstanding debt security, including the Series A QUIDS, affected thereby:
(a) change the stated maturity of the principal or interest on any debt
security, including the Series A QUIDS, or reduce the principal
amount, interest or premium payable or change any place of payment
where or the currency in which any debt security, including the Series
A QUIDS, is payable, or impair the right to bring suit to enforce any
payment;
(b) reduce the percentages of registered holders whose consent is required
for any supplemental indenture or waiver;
(c) modify certain of the provisions in the Subordinated Indenture
relating to supplemental indentures and waivers of certain covenants
and past defaults; or
(d) modify any provisions relating to subordination or the definition of
"senior debt" in a manner adverse to the holders of the subordinated
debt securities, including the Series A QUIDS.
A supplemental indenture which changes or eliminates any provision of the
Subordinated Indenture expressly included solely for the benefit of holders of
debt securities of one or more
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particular series, including the Series A QUIDS, will be deemed not to affect
the interests under the Subordinated Indenture of the holders of debt
securities of any other series. However, any amendment that adversely affects
the holders of the Series A QUIPS in any material respect, as well as any
termination of the Subordinated Indenture and any waiver of a Subordinated
Indenture Event of Default, will require the consent of the holders of a
majority in liquidation amount of the Series A QUIPS.
Subordination
The Series A QUIDS will be subordinated in right of payment to the prior
payment in full of all senior debt of Sempra Energy. This means that, upon:
(a) any distribution of Sempra Energy's assets upon its dissolution,
winding-up, liquidation or reorganization in bankruptcy, insolvency,
receivership or other proceedings; or
(b) acceleration of the maturity of the Series A QUIDS; or
(c) a failure to pay any senior debt or interest thereon when due and
continuance of that default beyond any applicable grace period; or
(d) acceleration of the maturity of any senior debt as a result of a
default,
the holders of all of Sempra Energy's senior debt will be entitled to receive:
. in the case of clauses (a) and (b) above, payment of all amounts
due or to become due on all senior debt; and
. in the case of clauses (c) and (d) above, payment of all amounts
due on all senior debt,
before the holders of any of the Series A QUIDS are entitled to receive any
payment. So long as any of the events in clauses (a), (b), (c) or (d) above has
occurred and is continuing, any amounts payable on the Series A QUIDS will
instead by paid directly to the holders of all senior debt to the extent
necessary to pay the senior debt in full and, if any payment is received by the
Subordinated Indenture Trustee under the Subordinated Indenture or the holders
of any of the Series A QUIDS before all senior debt is paid in full, the
payment or distribution must be paid over to the holders of the unpaid senior
debt. Subject to paying the senior debt in full, the holders of the Series A
QUIDS will be subrogated to the rights of the holders of the senior debt to the
extent that payments are made to the holders of senior debt out of the
distributive share of the Series A QUIDS.
"senior debt" means with respect to the Series A QUIDS, the principal of,
and premium, if any, and interest on any other payment in respect of
indebtedness due pursuant to any of the following, whether outstanding on the
date the Series A QUIDS are issued or thereafter incurred, created or assumed:
(a) all of Sempra Energy's indebtedness evidenced by notes, debentures,
bonds or other securities sold by it for money or other obligations
for money borrowed;
(b) all indebtedness of others of the kinds described in the preceding
clause (a) assumed by or guaranteed in any manner by Sempra Energy or
in effect guaranteed by Sempra Energy through an agreement to
purchase, contingent or otherwise; and
(c) all renewals, extensions or refundings of indebtedness of the kinds
described in either of the preceding clauses (a) and (b), unless, in
the case of any particular indebtedness, renewal, extension or
refunding, the instrument creating or evidencing the same or the
assumption or guarantee of the same by its terms provides that such
indebtedness, renewal, extension or refunding is not superior in right
of payment to or is pari passu with such securities.
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Due to the subordination, if Sempra Energy's assets are distributed upon
insolvency, certain of its general creditors may recover more, ratably, than
holder of Series A QUIDS. The subordination provisions will not apply to money
and securities held in trust under the satisfaction and discharge and the
defeasance and covenant defeasance provisions of the Subordinated Indenture.
At September 30, 1999, upon giving pro forma effect to this $200 million
offering of Series A QUIPS, Sempra Energy's concurrent offering of $500 million
of senior notes and issuance of $34 million of commercial paper, Sempra Energy
would have had consolidated total liabilities of approximately $8.6 billion,
substantially all of which would be senior debt of Sempra Energy or liabilities
of its subsidiaries that would effectively rank senior to the Series A QUIDS.
The Series A QUIDS, the Subordinated Indenture and the Series A QUIPS
Guarantee do not limit Sempra Energy's or any of its subsidiaries' ability to
incur additional indebtedness, including indebtedness that ranks senior to the
Series A QUIDS and the Series A QUIPS Guarantee. We expect that Sempra Energy
and its subsidiaries will incur substantial additional amounts of indebtedness
in the future.
Defeasance and Covenant Defeasance
The defeasance provisions of the Subordinated Indenture described under the
caption "Description of Debt Securities--Defeasance and Covenant Defeasance" in
the accompanying prospectus will apply to the Series A QUIDS. However, because
the Series A QUIDS and the related Subordinated Indenture do not contain any
financial or other similar restrictive covenants, the covenant defeasance
provisions described under that caption in the accompanying prospectus will not
apply to the Series A QUIDS. In addition to the conditions of defeasance
specified in the accompanying prospectus, Sempra Energy will be required to
deliver an opinion of counsel to the effect that a holder of Series A QUIDS
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
amounts, at the same times and in the same manner as if that defeasance had not
occurred. The opinion of counsel must be based upon a ruling of the Internal
Revenue Service or a change in law after the date of the Subordinated
Indenture. As a result, the tax consequences discussed in the accompanying
prospectus in the last two paragraphs under "Description of Debt Securities--
Defeasance and Covenant Defeasance" will not be applicable in the event of a
defeasance of the Series A QUIDS.
Satisfaction and Discharge
The Subordinated Indenture will cease to be of further effect with respect
to the Series A QUIDS, and Sempra Energy will be deemed to have satisfied and
discharged all of its obligations under the Subordinated Indenture, except as
noted below, when:
. all outstanding Series A QUIDS have become due or will become due
within one year at their stated maturity or on a Redemption Date; and
. Sempra Energy deposits with the Subordinated Indenture Trustee, in
trust, funds that are sufficient to pay and discharge all remaining
indebtedness on the outstanding Series A QUIDS.
Sempra Energy will remain obligated to pay all other amounts due under the
Subordinated Indenture and to perform certain ministerial tasks as described in
the Subordinated Indenture.
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Resignation and Removal of the Trustee; Deemed Resignation
The Subordinated Indenture Trustee with respect to any series of debt
securities, including the Series A QUIDS, may resign at any time by giving
written notice to Sempra Energy. The Subordinated Indenture Trustee may also be
removed with respect to the Series A QUIDS by act of the registered holders of
a majority in principal amount of the then outstanding Series A QUIDS. No
resignation or removal of the Subordinated Indenture Trustee and no appointment
of a successor trustee will become effective until the acceptance of
appointment by a successor trustee in accordance with the requirements of the
Subordinated Indenture. Under certain circumstances, Sempra Energy may appoint
a successor trustee with respect to any series of debt securities, including
the Series A QUIDS, and if the successor trustee accepts, the Subordinated
Indenture Trustee will be deemed to have resigned.
Payments
Sempra Energy will pay interest to the direct holders of Series A QUIDS
listed in Sempra Energy's records at the close of business on the record date,
as discussed below, in advance of each interest payment date. If the Series A
QUIDS are distributed in exchange for the Series A QUIPS, Sempra Energy will
make payments on the Series A QUIDS in accordance with procedures similar to
those described under "Description of the Series A QUIPS--Payment and Paying
Agency" in this prospectus supplement.
Any money paid to the Subordinated Indenture Trustee or any paying agent,
or held in trust by Sempra Energy, for payments on any Series A QUIDS, that
remains unclaimed at the end of two years after the amount is due will be
repaid to Sempra Energy. After that two-year period, a holder of Series A QUIDS
may look only to Sempra Energy for payment of those amounts.
Business Day
If any payment is due on a day that is not a Business Day, the payment will
be made on the following Business Day unless that Business Day is in a
different calendar year, in which case the payment will be made on the
preceding Business Day. Each payment made on the following or preceding
Business Day will have the same force and effect as if made on the original
payment due date.
Record Date
If the Series A QUIDS are held in book-entry form, the record date will be
one Business Day before the relevant interest payment date. If the Series A
QUIDS are held in certificated form, the record date will be the 15th day,
whether or not a Business Day, before the relevant interest payment date.
Notices
Notices to be given to holders of Series A QUIDS held in certificated form
may be given by mail to their addresses as set forth in Sempra Energy's
records. Notices to be given to holders of Series A QUIDS held in book-entry
form will be given to DTC in accordance with its procedures.
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BOOK-ENTRY ISSUANCE
Global Securities
What is a Global Security?
The Series A QUIPS initially will be issued in the form of global
securities, and, therefore, the ultimate beneficial owners can only be indirect
holders. The Trust does this by requiring that the global security be
registered in the name of DTC or its nominee, as Depositary, and by requiring
that the Series A QUIPS included in the global security not be transferred in
the name of any other direct holder unless the special circumstances described
below occur. Any person wishing to own Series A QUIPS must do so indirectly by
virtue of an account with a broker, bank or other financial institution that in
turn has an account with DTC.
Special Investor Considerations for Global Securities
As an indirect holder, an investor's rights relating to a global security
will be governed by the account rules of the investor's financial institution
and of DTC, as well as the general laws relating to securities transfers. The
Trust does not recognize this type of investor as a holder of Series A QUIPS
and instead deals only with DTC or its nominee. See "--The DTC System" below.
An investor should be aware that because Series A QUIPS are issued only in
the form of global securities:
. the investor cannot get Series A QUIPS registered in his or her or its
own name;
. the investor cannot receive physical certificates for his or her or
its interest in the Series A QUIPS;
. the investor will be a "Street Name" holder and must look to his or
her or its own bank or broker for payments on the Series A QUIPS and
protection of his or her or its legal rights relating to the Series A
QUIPS (see "--"Street Name' and Other Indirect Holders" below);
. the investor may not be able to sell interests in the Series A QUIPS
to some insurance companies and other institutions that are required
by law to own their securities in the form of physical certificates;
. DTC's policies will govern payments, transfers, exchange and other
matters relating to the investor's interest in the global security
(see "--The DTC System" below); the Trust, Sempra Energy and the
Securities Trustees have no responsibility for any aspect of DTC's
actions or for its records of ownership interests in the global
security, nor do they supervise DTC in any way; and
. payment for purchases and sales in the market for corporate bonds and
notes is generally made in next-day funds. In contrast, DTC will
usually require that interests in a global security be purchased or
sold within its system using same-day funds. This difference could
have some effect on how global security interests trade, but neither
Sempra Energy nor the Trust knows what that effect will be.
Special Situations When Global Security Will Be Terminated
In a few special situations, the global security will terminate and
interests in it will be exchanged for physical certificates representing Series
A QUIPS. After that exchange, the choice of whether to hold Series A QUIPS
directly or in "Street Name" will be up to the investor. Investors must consult
their own bank or brokers to find out how to have their interests in Series A
QUIPS transferred to their own name, so that they will be direct holders. The
rights of "Street Name" investors and direct
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holders in the Series A QUIPS are described below under "--"Street Name' and
Other Indirect Holders" and "--Direct Holders."
The special situations for termination of a global security are:
. DTC notifies Sempra Energy or the Trust that it is unwilling, unable
or no longer qualified to continue as the depositary for the Series A
QUIPS;
. Sempra Energy in its sole discretion determines that the global
security will be exchangeable for certificated Series A QUIPS; or
. a Declaration Event of Default has occurred and has not been cured and
the holders of a majority in liquidation amount of the outstanding
Series A QUIPS determine that the global security will be exchangeable
for certificated Series A QUIPS.
When a global security terminates, DTC (and not the Trust, Sempra Energy or
the Securities Trustees) is responsible for deciding the names of the
institutions that will be the initial direct holders.
"Street Name" and Other Indirect Holders
Investors who hold Series A QUIPS in accounts at banks or brokers will
generally not be recognized by the Trust as legal holders of Series A QUIPS.
This is called holding in "Street Name." Instead, the Trust would recognize
only the bank or broker that directly holds, or the financial institution the
bank or broker uses to hold, its Series A QUIPS. These intermediary banks,
brokers and other financial institutions pass along distributions and other
payments on the Series A QUIPS, either because they agree to do so in their
customer agreements or because they are legally required to. If you plan to
hold Series A QUIPS in "Street Name," you should check with your own
institution to find out:
. how it handles securities payments and notices;
. whether it imposes fees or charges;
. how it would handle voting if ever required;
. whether and how you can instruct it to send you Series A QUIPS
registered in your own name so you can be a direct holder as described
below; and
. how it would pursue rights under the Series A QUIPS if there were a
default or other event triggering the need for holders to act to
protect their interests.
Direct Holders
The Trust's obligations, as well as the obligations of Sempra Energy, the
Securities Trustees and those of any third parties employed by the Trust,
Sempra Energy or the Securities Trustees, run only to individuals, corporations
or other entities who are registered as holders of Series A QUIPS. As noted
above, the Trust does not have obligations to you if you hold in "Street Name"
or other indirect means, either because you choose to hold Series A QUIPS in
that manner or because the Series A QUIPS are issued in the form of global
securities as described above. For example, once the Trust makes payment to the
registered holder, the Trust has no further responsibility for the payment even
if that holder is legally required to pass the payment along to you as a
"Street Name" customer but does not do so.
The DTC System
DTC has advised us that it is a limited-purpose trust company created to
hold securities for its participating organizations (the "Participants"). DTC
also facilitates the clearance and settlement between Participants of
transactions of securities deposited with DTC through changes in the
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account records of its Participants. The Participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. The Underwriters are Participants of the DTC System.
Access to DTC's system is also available to other entities such as securities
brokers and dealers, banks and trust companies that work through a Participant
(the "Indirect Participants").
When you purchase Series A QUIPS through the DTC system, the purchases must
be made by or through a Participant, who will receive credit for the Series A
QUIPS on DTC's records. Since you actually own the Series A QUIPS, you are the
beneficial owner and your ownership interest will only be recorded on the
Participants' or Indirect Participants' records. DTC has no knowledge of your
individual ownership of the Series A QUIPS. DTC's records only show the
identity of the Participants and the amount of the Series A QUIPS held by or
through them. You will not receive a written confirmation of your purchase or
sale or any periodic statement directly from DTC. You will receive these from
your Participant or Indirect Participant. Thus, the Participants or Indirect
Participants are responsible for keeping accurate account of the holdings of
their customers like you.
Any redemption notices will be sent by Sempra Energy and the Trust directly
to DTC, who will in turn inform the Participants, who will then contact you as
a beneficial holder. If less than all of the Series A QUIPS are being redeemed,
DTC's current practice is to choose by lot the amount of the interest of each
Participant to be redeemed. The Participant will then use an appropriate method
to allocate the redemption price among its beneficial holders like you.
It is DTC's current practice, upon receipt of any payment of distributions
or liquidation amount, to credit Participants' accounts on the payment date
based on their holdings of beneficial interests in the global securities as
shown on DTC's records. In addition, it is DTC's current practice to assign any
consenting or voting rights to Participants whose accounts are credited with
Series A QUIPS on a record date, by using an omnibus proxy. Payments by
Participants to owners of beneficial interests in the global securities, and
voting by Participants, will be based on the customary practices between the
Participants and owners of beneficial interests, as is the case with the Series
A QUIPS held for the account of customers registered in "Street Name." However,
payments will be the responsibility of the Participants and not of DTC, the
Securities Trustees, the Trust or Sempra Energy.
We obtained the information in this section and elsewhere in this
prospectus supplement concerning DTC and DTC's book-entry system from sources
that we believe to be reliable, but we take no responsibility for the accuracy
of this information.
Registration of Series A QUIDS
The Series A QUIDS initially will be issued in certificated form and
registered in the name of the Property Trustee. If in the future the Series A
QUIDS are distributed to the holders of Series A QUIPS in exchange for the
Series A QUIPS and at that time the Series A QUIPS are represented by a global
security, the Series A QUIDS would also be represented by a global security. In
this event, we expect that the book-entry arrangements applicable to the Series
A QUIDS would be similar to those applicable to the Series A QUIPS.
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MATERIAL UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
General
In the opinion of Latham & Watkins, counsel to Sempra Energy and the Trust,
the following is a summary of the material U.S. federal income tax consequences
relating to the purchase, ownership and disposition of Series A QUIPS. This
summary addresses only the tax consequences to a person that acquires Series A
QUIPS on their original issue date at their original offering price and who is
a United States Holder. A "United States Holder" is:
. an individual citizen or resident of the United States;
. a corporation organized under the laws of the United States, any state
or the District of Columbia;
. an estate the income of which is subject to U.S. federal income tax
without regard to its source; or
. a trust if a U.S. court is able to exercise primary supervision over
administration of the trust and one or more U.S. persons have
authority to control all substantial decisions of the trust.
This summary does not purport to deal with all aspects of taxation that may
be relevant to a holder in light of such holder's personal investments or tax
circumstances, or to holders who receive special treatment under the federal
income tax laws, including, without limitation:
. persons that are not United States Holders, except as described below
under "--Non-United States Holders";
. financial institutions;
. insurance companies;
. regulated investment companies;
. real estate investment trusts;
. tax exempt organizations;
. broker-dealers;
. persons who will hold Series A QUIPS as part of a position in a
"straddle" or as part of a "hedging," "conversion" or other integrated
investment transaction for U.S. federal income tax purposes;
. persons whose functional currency is not the U.S. dollar; or
. persons who do not hold Series A QUIPS as capital assets.
This summary is based upon the U.S. Internal Revenue Code of 1986, as
amended (the "Code"), Treasury regulations, Internal Revenue Service rulings
and pronouncements and judicial decisions now in effect, all of which are
subject to change at any time. These changes may be applied retroactively in a
manner that could cause the tax consequences to vary substantially from the
consequences described below, possibly having an adverse affect on a beneficial
owner of Series A QUIPS.
The authorities on which this summary is based are subject to various
interpretations, and it is possible that the U.S. federal income tax treatment
of the purchase, ownership and disposition of Series A QUIPS may differ from
the treatment described below.
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You are advised to consult with your own tax advisors in light of your own
particular circumstances as to the U.S. federal tax consequences of the
purchase, ownership and disposition of Series A QUIPS, as well as the effect of
any state, local or foreign tax laws and potential changes in applicable tax
laws.
Classification of the Series A QUIDS and the Trust
Sempra Energy, the Trust and the holders of the Series A QUIPS (by the
acceptance of a beneficial interest in a Series A QUIPS) have agreed to treat
the Series A QUIDS as indebtedness for all United States tax purposes and the
Series A QUIPS as evidence of an indirect beneficial ownership interest in the
Series A QUIDS. Given such treatment and assuming full compliance with the
terms of the Declaration, the Indenture and certain other documents, the Trust
will be treated as a "grantor trust" and not as an association taxable as a
corporation and the Series A QUIDS will be treated as indebtedness for U.S.
federal income tax purposes. As a result, each beneficial owner of Series A
QUIPS will be required to include in its gross income its pro rata share of the
interest income, including original issue discount ("OID"), paid or accrued
with respect to the Series A QUIDS, whether or not cash is actually distributed
to the holders. See "--Interest Income and Original Issue Discount" below.
Interest Income and Original Issue Discount
Under Treasury regulations applicable to debt instruments issued on or
after August 13, 1996, a "remote" contingency that stated interest will not be
timely paid will be ignored in determining whether the debt instrument is
issued with OID. As a result of terms and conditions of the Series A QUIDS that
prohibit certain payments with respect to Sempra Energy's capital stock and
indebtedness if Sempra Energy elects to defer interest payment periods, Sempra
Energy believes that the likelihood of its exercising its option to defer
payments is remote. See "Description of the Series A QUIPS--Distributions."
Based on the foregoing, Sempra Energy believes that the Series A QUIDS will not
be considered to be issued with OID at the time of their original issuance.
Accordingly, the following discussion assumes that unless and until Sempra
Energy exercises its option to defer any payment of interest, the Series A
QUIDS will not be treated as issued with OID.
Under the Treasury regulations, if Sempra Energy exercises its option to
defer any payment of interest, the Series A QUIDS would at that time be treated
as issued with OID, and all stated interest on the Series A QUIDS would
thereafter be treated as OID as long as the Series A QUIDS remained
outstanding. In this event, all of a holder's taxable interest income with
respect to the Series A QUIDS would be accounted for as OID on an economic
accrual basis regardless of such holder's method of tax accounting.
Consequently, a holder would be required to include OID in gross income even
though Sempra Energy would not make any actual cash payments during a deferral
period and actual distributions of stated interest would not be reported as
taxable income.
The Regulations have not been addressed in any rulings or other
interpretations by the IRS, and it is possible that the IRS could take a
position contrary to the interpretation described above.
Because income on the Series A QUIPS will constitute interest or OID,
corporate United States Holders of the Series A QUIPS will not be entitled to a
dividends-received deduction with respect to any income taken into account with
respect to the Series A QUIPS.
Subsequent uses of the term "interest" in this summary include income in
the form of OID.
Distribution of Series A QUIDS to Holders of Series A QUIPS Upon Liquidation of
the Trust
A distribution by the Trust of the Series A QUIDS as described under the
caption "Description of the Series A QUIPS--Exchange of Series A QUIPS for
Series A QUIDS" will be nontaxable. This
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distribution will result in the holder of Series A QUIPS receiving directly its
pro rata share of the Series A QUIDS, with a holding period and aggregate tax
basis equal to the aggregate tax basis the holder had in its Series A QUIPS
before the distribution.
If, however, the liquidation of the Trust were to occur because the Trust
is subject to U.S. federal income tax with respect to income accrued or
received on the Series A QUIDS, the distribution of Series A QUIDS to a holder
of Series A QUIPS would be a taxable event to the Trust and each holder of
Series A QUIPS, and each such holder would recognize gain or loss as if the
holder had exchanged its Series A QUIPS for the Series A QUIDS upon liquidation
of the Trust. A holder of Series A QUIPS will include interest in income in
respect of Series A QUIDS received from the Trust in the manner described above
under "--Interest Income and Original Issue Discount."
Sale or Redemption of Series A QUIPS
A holder that sells Series A QUIPS, including through a redemption for
cash, will recognize gain or loss equal to the difference between such holder's
adjusted tax basis in the Series A QUIPS and the amount realized on the sale of
such Series A QUIPS. Assuming that Sempra Energy does not defer interest
payments on the Series A QUIDS, a holder's adjusted tax basis in the Series A
QUIPS generally will be such holder's initial purchase price. If the Series A
QUIDS are deemed to be issued with OID as a result of Sempra Energy's deferral
of interest payments, a holder's adjusted tax basis in the Series A QUIPS
generally will be such holder's initial purchase price, increased by OID
previously includible in such United States Holder's gross income to the date
of disposition and decreased by distributions or other payments received on the
Series A QUIPS from, and including, the date of the first deferral period.
This gain or loss generally will be a capital gain or loss, except to the
extent any amount realized is treated as a payment of accrued interest with
respect to such holder's pro rata share of the Series A QUIDS required to be
included in income, and generally will be long-term capital gain or loss if the
Series A QUIPS have been held for more than one year. Long-term capital gain of
a non-corporate holder is generally subject to a maximum tax rate of 20%.
If Sempra Energy defers any interest payment on the Series A QUIDS, the
Series A QUIPS may trade at a price that does not fully reflect the value of
accrued but unpaid interest with respect to the Series A QUIDS. A holder who
sells Series A QUIPS between record dates for payments of distributions will be
required to include accrued but unpaid interest on the Series A QUIDS through
the date of disposition as ordinary income and to add the amount of the accrued
but unpaid interest to the holder's adjusted tax basis in the Series A QUIPS.
To the extent the selling price is less than the holder's adjusted tax basis,
such holder will recognize a capital loss. Subject to certain limited
exceptions, a holder cannot offset ordinary income against capital losses for
U.S. federal income tax purposes.
Backup Withholding Tax and Information Reporting for United States Holders
The amount of interest income paid and OID accrued on the Series A QUIPS
held of record by United States Holders, other than corporations and other
exempt United States Holders, will be reported to the IRS. "Backup" withholding
at a rate of 31% will apply to payments of interest to a non-exempt United
States Holder unless the United States Holder furnishes its taxpayer
identification number in the manner prescribed in applicable Treasury
regulations, certifies that such number is correct, certifies as to no loss of
exemption from backup withholding and meets certain other conditions.
Payment of the proceeds from the disposition of Series A QUIPS to or
through the U.S. office of a broker is subject to information reporting and
backup withholding unless the holder establishes an exemption from information
reporting and backup withholding.
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Any amounts withheld from a holder under the backup withholding rules will
be allowed as a refund or a credit against such holder's U.S. federal income
tax liability, provided the required information is furnished to the IRS. It is
anticipated that income on the Series A QUIPS will be reported to holders on
Form 1099, and mailed to holders of the Series A QUIPS by January 31 following
each calendar year.
Possible Tax Law Changes
You should be aware that legislation has been proposed by the Clinton
Administration in the past that, if enacted, would have denied an interest
expense deduction to issuers of instruments such as the Series A QUIDS. While
legislation of that kind is not currently pending, the Trust can give no
assurance that similar legislation will not ultimately be enacted into law, or
that other developments will not occur on or after the date of this prospectus
supplement that would adversely affect the tax treatment of the Series A QUIDS
or the Trust. Changes of that kind also could give rise to a Tax Event.
Non-United States Holders
A "Non-United States Holder" is a person who is not a United States Holder.
Please note that if you pay federal income tax on a net basis on income or gain
with respect to the Series A QUIPS because such income or gain is effectively
connected with the conduct of a United States trade or business, this
disclosure does not cover the United States federal tax rules that apply to
you.
Payments by the Trust to any holder of Series A QUIPS who or which is a
Non-United States Holder will generally not be subject to U.S. federal income
tax or withholding tax, provided that:
(1) the beneficial owner of the Series A QUIPS does not actually or
constructively own 10 percent or more of the total combined voting
power of all classes of voting stock of Sempra Energy;
(2) the beneficial owner of the Series A QUIPS is not a controlled foreign
corporation that is related to Sempra Energy through stock ownership;
and
(3) either (A) the beneficial owner of the Series A QUIPS certifies to the
Trust, under penalty of perjury, that it is not a United States Holder
and provides its name and address on a Form W-8 or suitable substitute
form, or (B) a securities clearing organization, bank or other
financial institution that holds customers' securities in the ordinary
course of its trade or business, and holds the Series A QUIPS in such
capacity, certifies to the Trust, under penalty of perjury, that it
has received such statement from the beneficial owner or from another
entity described in (B) between it and the beneficial owner and
furnishes the Trust with a copy thereof.
A Non-United States Holder of a Series A QUIPS will generally not be
subject to U.S. federal income tax or withholding tax on any gain realized upon
the sale, redemption, retirement, or other disposition of a Series A QUIPS
(other than gain attributable to accrued interest, which is addressed in the
preceding paragraph) unless:
(1) the Non-United States Holder is an individual who is present in the
U.S. for 183 days or more during the taxable year and meets certain
other conditions; or
(2) the Non-United States Holder is subject to tax under provisions of
U.S. tax law applicable to U.S. expatriates, including former citizens
or residents of the United States.
Treasury regulations that are generally effective with respect to payments
after December 31, 2000, would provide alternative methods for satisfying the
certification requirement described in
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clauses (3)(A) and (3)(B) above. Such regulations also would require, in the
case of Series A QUIPS held by a foreign partnership, that:
. the certification described in clause (3) above be provided by the
partners rather than by the foreign partnership; and
. the partnership provides certain information, including a U.S.
taxpayer identification number.
A look-through rule would apply in the case of tiered partnerships.
Backup Withholding and Information Reporting for Non-United States Holders
If a Non-United States Holder receives payments of interest or principal
directly from the Trust or through the United States office of a custodian,
nominee, agent or broker, there is the possibility that both backup withholding
at a rate of 31% and information reporting will apply to such payments. With
respect to interest payments made on the Series A QUIPS, however, backup
withholding and information reporting will not apply if you certify, generally
on a Form W-8 or substitute form, that you are not a United States person for
United States federal income tax purposes.
Moreover, backup withholding or information reporting generally will not
apply to proceeds received on the sale, exchange, redemption, or other
disposition of the Series A QUIPS, if a Non-United States Holders properly
provides, generally on Form W-8 or a substitute form, a statement that he or
she is an "exempt foreign person" for purposes of the broker reporting rules
and other required information. If a Non-United States Holder is not required
to pay United States federal income or withholding tax on the sale or other
disposition of the Series A QUIPS, as described above under "Non-United States
Holders," he or she will generally qualify as an "exempt foreign person" for
purposes of the broker reporting rules.
If payments of principal and interest are made to a Non-United States
Holder outside the United States by or through the foreign office of its
foreign custodian, nominee or other agent, or if such Non-United States Holder
receives the proceeds of the sale of the Series A QUIPS through a foreign
office of a "broker," as defined in the pertinent Treasury regulations, backup
withholding or information reporting will generally not apply to such payments.
Backup withholding and information reporting will apply, however, if the
foreign custodian, nominee, agent or broker has actual knowledge or reason to
know that the payee is a United States person. Information reporting, but not
backup withholding, will apply to payments if the payment is made by a foreign
office of a custodian, nominee, agent or broker that is a United States person
or a controlled foreign corporation for United States federal income tax
purposes, or that derives 50% or more of its gross income from the conduct of a
United States trade or business for a specified three year period, unless the
broker has in its records documentary evidence that you are a Non-United States
Holder and other conditions specified in the Code are met.
Any amounts withheld under the backup withholding rules may be refunded or
credited against the Non-United States Holder's United States federal income
tax liability, provided the required information is furnished to the IRS.
New Backup Withholding Regulations
New regulations relating to withholding tax on income paid to foreign
persons will generally be effective for payments made after December 31, 2000,
subject to some transition rules. The new withholding regulations modify and,
in general, unify the way in which a Non-United States Holder establishes its
status as a Non-United States "beneficial owner" eligible for withholding
exemptions including the portfolio interest exemption, a reduced treaty rate or
an exemption from backup
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withholding. For example, the new regulations will require new forms, which you
will generally have to provide earlier than you would have had to provide
replacements for expiring existing forms.
The new withholding regulations clarify withholding agents' reliance
standards. They also require additional certifications for claiming treaty
benefits. The new withholding regulations also provide somewhat different
procedures for foreign intermediaries and flow-through entities, such as
foreign partnerships, to claim the benefit of applicable exemptions on behalf
of non-United States beneficial owners for which or for whom they receive
payments.
When a Non-United States Holder purchases the Series A QUIPS, the holder
will be required to submit certification that complies with the temporary
Treasury regulations in order to obtain an available exemption from or
reduction in withholding tax. The new withholding regulations provide that
certifications satisfying the requirements of the new withholding regulations
will be deemed to satisfy the requirement of the Treasury regulations now in
effect. In any case, the Non-United States Holder must provide certifications
that comply with the provisions of the new withholding regulations, where
required, not later than December 31, 2000, if the United States Holder remains
as a holder on such date, unless the Non-United States Holder receives payments
on the Series A QUIPS through a qualified intermediary, as defined in the new
withholding regulations, that has provided a proper certification on the Non-
United States Holder's behalf. If the Non-United States Holder is claiming a
benefit under an income tax treaty and not relying on the portfolio interest
exemption, the holder should be aware that the holder may be required to obtain
a taxpayer identification number and to certify the holder's eligibility under
the applicable treaty's limitations on benefits article in order to comply with
the new withholding regulations' certification requirements.
The new withholding regulations are complex and this summary does not
completely describe them. Please consult your tax advisor to determine how the
new withholding regulations will affect your particular circumstances.
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UNDERWRITING
Sempra Energy, the Trust and the underwriters for the offering (the
"Underwriters") named below have entered into an underwriting agreement (the
"Underwriting Agreement") and a pricing agreement (the "Pricing Agreement")
with respect to the Series A QUIPS. Subject to certain conditions, each
Underwriter has severally agreed to purchase the number of Series A QUIPS
indicated in the following table. Goldman, Sachs & Co., Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated, Salomon Smith
Barney Inc., Charles Schwab & Co., Inc., PaineWebber Incorporated and
Prudential Securities Incorporated are the representatives of the Underwriters.
<TABLE>
<CAPTION>
Number of
Underwriters Series A QUIPS
------------ --------------
<S> <C>
Goldman, Sachs & Co. ......................................... 890,000
Merrill Lynch, Pierce, Fenner & Smith Incorporated............ 885,000
Morgan Stanley & Co. Incorporated............................. 885,000
Salomon Smith Barney Inc. .................................... 885,000
Charles Schwab & Co., Inc. ................................... 885,000
PaineWebber Incorporated...................................... 885,000
Prudential Securities Incorporated............................ 885,000
Banc of America Securities LLC................................ 80,000
Bear, Stearns & Co. Inc. ..................................... 80,000
CIBC World Markets Corp. ..................................... 80,000
Dain Rauscher Incorporated.................................... 80,000
Deutsche Bank Securities Inc. ................................ 80,000
Donaldson, Lufkin & Jenrette Securities Corporation........... 80,000
A.G. Edwards & Sons, Inc. .................................... 80,000
First Union Securities, Inc. ................................. 80,000
Lehman Brothers Inc. ......................................... 80,000
Sutro & Co. Incorporated...................................... 80,000
Wachovia Securities, Inc...................................... 80,000
Advest, Inc................................................... 40,000
Robert W. Baird & Co. Incorporated............................ 40,000
J.C. Bradford & Co............................................ 40,000
Crowell, Weedon & Co.......................................... 40,000
Fahnestock & Co. Inc.......................................... 40,000
Fifth Third Securities, Inc................................... 40,000
First Security Van Kasper..................................... 40,000
Gruntal & Co., L.L.C.......................................... 40,000
J.J.B. Hilliard, W.L. Lyons, Inc.............................. 40,000
Janney Montgomery Scott LLC................................... 40,000
Legg Mason Wood Walker, Incorporated.......................... 40,000
McDonald Investments Inc., a KeyCorp Company.................. 40,000
McGinn, Smith & Co., Inc...................................... 40,000
Morgan Keegan & Company, Inc.................................. 40,000
Olde Discount Corporation..................................... 40,000
Raymond James & Associates, Inc............................... 40,000
Redwood Securities Group, Inc................................. 40,000
The Robinson-Humphrey Company, LLC............................ 40,000
Muriel Siebert & Co., Inc. ................................... 40,000
TD Securities (USA) Inc....................................... 40,000
Tucker Anthony Incorporated................................... 40,000
U.S. Bancorp Piper Jaffray Inc................................ 40,000
Wedbush Morgan Securities Inc. ............................... 40,000
---------
Total....................................................... 8,000,000
=========
</TABLE>
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Because the Trust will invest the proceeds from the sale of the Series A
QUIPS in the Series A QUIDS issued by Sempra Energy, the Underwriting Agreement
provides that Sempra Energy will pay an underwriting commission of $0.7875 per
Series A QUIPS (or $6,300,000 for all Series A QUIPS) to the Underwriters, as
compensation.
The Series A QUIPS sold by the Underwriters to the public will initially be
offered at the initial public offering price set forth on the cover page of
this prospectus supplement. Any Series A QUIPS sold by the Underwriters to
securities dealers may be sold at a discount of up to $0.50 per Series A QUIPS
from the initial public offering price. Any such securities dealers may resell
any Series A QUIPS purchased from the Underwriters to certain other brokers or
dealers at a discount from the initial public offering price of up to $0.45 per
Series A QUIPS. If all the Series A QUIPS are not sold at the initial public
offering price, the representatives of the Underwriters may change the offering
price and other selling terms.
Sempra Energy and the Trust have agreed with the Underwriters, during the
period beginning from the date of the Pricing Agreement and continuing to and
including the later of (i) the termination of trading restrictions on the
Series A QUIPS, as determined by the representatives of the Underwriters and
(ii) 30 days after the Time of Delivery (as defined in the Underwriting
Agreement), not to offer, sell, contract to sell or otherwise dispose of any
preferred securities, any other beneficial interests in the assets of any
trust, or any preferred securities or any other securities of any trust or of
Sempra Energy, as the case may be, that are substantially similar to the Series
A QUIPS (including any guarantee of such securities) or any securities that are
convertible into or exchangeable for, or that represent the right to receive
preferred securities or any substantially similar securities of any trust or of
Sempra Energy, or any debt securities of Sempra Energy (other than the Series A
QUIDS and the senior notes to be issued by Sempra Energy) which mature more
than one year after the Time of Delivery (other than the commercial notes
issued pursuant to Sempra Energy Holdings' commercial paper program) and which
are substantially similar to the Series A QUIPS, without the prior written
consent of the representatives of the Underwriters.
Prior to this offering, there has been no public market for the Series A
QUIPS. Application has been made to list the Series A QUIPS on the New York
Stock Exchange. If approved, trading in the Series A QUIPS on the New York
Stock Exchange is expected to begin within the 30-day period after the initial
delivery of the Series A QUIPS. In order to meet one of the requirements for
listing the Series A QUIPS, the Underwriters have undertaken to sell the Series
A QUIPS to a minimum of 400 beneficial owners. The representatives of the
Underwriters have advised Sempra Energy and the Trust that they intend to make
a market in the Series A QUIPS 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. No assurance can be given as to the
liquidity of the trading market for the Series A QUIPS.
In connection with the offering, the Underwriters may purchase and sell the
Series A QUIPS in the open market. These transactions may include short sales,
stabilizing transactions and purchases to cover positions created by short
sales. Short sales involve the sale by the Underwriters of a greater amount of
Series A QUIPS than they are required to purchase in the offering. Stabilizing
transactions consist of certain bids or purchases made for the purpose of
preventing or retarding a decline in the market price of the Series A QUIPS
while the offering is in progress.
The Underwriters also may impose a penalty bid. This occurs when a
particular Underwriter repays to the Underwriters a portion of the underwriting
commissions received by it because the Underwriters have repurchased Series A
QUIPS sold by or for the account of such Underwriter in stabilizing or short
covering transactions.
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These activities by the Underwriters may stabilize, maintain or otherwise
affect the market price of the Series A QUIPS. As a result, the price of the
Series A QUIPS may be higher than the price that otherwise might exist in the
open market. If these activities are commenced, they may be discontinued by the
Underwriters at any time. These transactions may be effected on the New York
Stock Exchange, in the over-the-counter market or otherwise.
A prospectus in electronic format will be made available on the web sites
maintained by the electronic syndicate managers of this offering or their
affiliates and may also be made available on web sites maintained by other
Underwriters or their affiliates. The Underwriters may agree to allocate a
number of shares to Underwriters for sale to their online brokerage account
holders. Allocations will be made by the lead managers to Underwriters that may
make internet distributions on the same basis as other allocations.
Sempra Energy estimates that its share of the total expenses of the
offering, excluding underwriting discounts and commissions, will be
approximately $330,000.
Sempra Energy and the Trust have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
Certain of the Underwriters or their affiliates have provided from time to
time, and expect to provide in the future, investment or commercial banking
services to Sempra Energy and its affiliates, for which such Underwriters or
their affiliates have received or will receive customary fees and commissions.
LEGAL MATTERS
Certain legal matters in connection with the offering will be passed upon
on behalf of Sempra Energy and the Trust by Latham & Watkins, Los Angeles,
California. Matters of Delaware law relating to the validity of the Series A
QUIPS will be passed upon on behalf of Sempra Energy and the Trust by Richards,
Layton & Finger, P.A., Wilmington, Delaware, special Delaware counsel to Sempra
Energy and the Trust. The validity of the Series A QUIDS and the Series A QUIPS
Guarantee will be passed upon on behalf of Sempra Energy and the Trust by Gary
W. Kyle, Chief Corporate Counsel of Sempra Energy. Latham & Watkins, Los
Angeles, California, also will pass upon matters relating to United States
federal income tax considerations. Certain legal matters will be passed upon
for the Underwriters by Brown & Wood llp, San Francisco, California.
INDEPENDENT ACCOUNTANTS
The consolidated financial statements, the related financial statement
schedule and the supplemental schedule of summarized financial information as
of December 31, 1998 and 1997 and for each of the three years in the period
ended December 31, 1998 incorporated by reference into Sempra Energy's
registration statement on Form S-3 filed with the Securities and Exchange
Commission on May 5, 1999 have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports.
S-55
<PAGE>
PROSPECTUS
$1,000,000,000
SEMPRA ENERGY
Debt Securities, Common Stock, Preferred Stock and Guarantees
SEMPRA ENERGY HOLDINGS
Debt Securities Guaranteed by Sempra Energy
SEMPRA ENERGY CAPITAL TRUST I
SEMPRA ENERGY CAPITAL TRUST II
SEMPRA ENERGY CAPITAL TRUST III
Preferred Securities Guaranteed by Sempra Energy
----------------
We may offer and sell the securities from time to time in one or more
offerings. This prospectus provides you with a general description of the
securities we may offer.
Each time we sell securities we will provide a supplement to this
prospectus that contains specific information about the offering and the terms
of the securities. The supplement may also add, update or change information
contained in this prospectus. You should carefully read this prospectus and
any supplement before you invest in any of our securities.
Sempra Energy
Sempra Energy may offer and sell the following securities:
. debt securities
. common stock
. preferred stock
. guarantees of debt securities and preferred securities
Sempra Energy Holdings
Sempra Energy Holdings may offer and sell debt securities, guaranteed by
Sempra Energy.
The Sempra Energy Trusts
Sempra Energy Capital Trust I, Sempra Energy Capital Trust II and Sempra
Energy Capital Trust III may offer and sell preferred securities, guaranteed
by Sempra Energy.
----------------
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 May 18, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ABOUT THIS PROSPECTUS.................................................... 1
FORWARD-LOOKING STATEMENTS............................................... 2
WHERE YOU CAN FIND MORE INFORMATION...................................... 2
SEMPRA ENERGY............................................................ 4
SEMPRA ENERGY HOLDINGS................................................... 4
THE TRUSTS............................................................... 5
USE OF PROCEEDS.......................................................... 6
RATIO OF SEMPRA ENERGY EARNINGS TO FIXED CHARGES AND PREFERRED
STOCK DIVIDENDS......................................................... 6
DESCRIPTION OF SECURITIES................................................ 7
DESCRIPTION OF DEBT SECURITIES........................................... 7
DESCRIPTION OF SEMPRA ENERGY'S COMMON STOCK AND PREFERRED STOCK.......... 18
DESCRIPTION OF PREFERRED SECURITIES...................................... 22
DESCRIPTION OF PREFERRED SECURITIES GUARANTEES .......................... 28
EXPERTS.................................................................. 31
VALIDITY OF THE SECURITIES AND THE GUARANTEES............................ 31
PLAN OF DISTRIBUTION..................................................... 31
</TABLE>
ABOUT THIS PROSPECTUS
This prospectus is part of a "shelf" registration statement that we filed
with the United States Securities and Exchange Commission, or the "SEC." By
using a shelf registration statement, we may sell up to $1,000,000,000 offering
price of any combination of the securities described in this prospectus from
time to time and in one or more offerings. This prospectus only provides you
with a general description of the securities that we may offer. Each time we
sell securities, we will provide a supplement to this prospectus that contains
specific information about the terms of the securities. The supplement may also
add, update or change information contained in this prospectus. Before
purchasing any securities, you should carefully read both this prospectus and
any supplement, together with the additional information described under the
heading "Where You Can Find More Information."
This prospectus does not contain separate financial statements for Sempra
Energy Holdings or the trusts. Sempra Energy files consolidated financial
information with the SEC that includes Sempra Energy Holdings and each of the
trusts. The trusts do not have any independent function other than to issue
securities and to purchase subordinated notes from Sempra Energy. We do not
believe that additional financial information regarding Sempra Energy Holdings
or the Trusts would be useful to you.
You should rely only on the information contained or incorporated by
reference in this prospectus and in any supplement. We have not authorized any
other person to provide you with different information. If anyone provides you
with different or inconsistent information, you should not rely on it. We will
not make an offer to sell these securities in any jurisdiction where the offer
or sale is not permitted. You should assume that the information appearing in
this prospectus and the supplement to this prospectus is accurate as of the
dates on their covers. Our business, financial condition, results of operations
and prospects may have changed since that date.
1
<PAGE>
FORWARD-LOOKING STATEMENTS
This prospectus, any accompanying prospectus supplement and the additional
information described under the heading "Where You Can Find More Information"
may contain forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements are subject to risks
and uncertainties and are based on the beliefs and assumptions of our
management, based on information currently available to our management. When we
use words such as "believes," "expects," "anticipates," "intends," "plans,"
"estimates," "should" or similar expressions, we are making forward-looking
statements. Forward-looking statements include the information concerning
possible or assumed future results of operations set forth under "Business" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in our Annual Report on Form 10-K incorporated by reference into
this prospectus.
Forward-looking statements are not guarantees of performance. They involve
risks, uncertainties and assumptions. Our future results and shareholder value
may differ materially from those expressed in these forward-looking statements.
Many of the factors that will determine these results and value are beyond our
ability to control or predict. These statements are necessarily based upon
various assumptions involving judgments with respect to the future including,
among others, our ability to achieve synergies and revenue growth, national,
international, regional and local economic, competitive and regulatory
conditions and developments, technological developments, capital market
conditions, inflation rates, interest rates, energy markets, weather
conditions, business and regulatory or legal decisions, the pace of
deregulation of retail natural gas and electricity, the timing and extent of
changes in commodity prices for oil, natural gas and electricity, and some
agricultural products, the timing and success of business development efforts,
and other uncertainties, all of which are difficult to predict and many of
which are beyond our control. You are cautioned not to put undue reliance on
any forward-looking statements. For those statements, we claim the protection
of the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995.
You should also consider any other factors contained in this prospectus or
in any accompanying supplement, including the information incorporated by
reference into this prospectus or into any accompanying supplement.
WHERE YOU CAN FIND MORE INFORMATION
Available Information
Sempra Energy files reports, proxy statements and other information with
the SEC. Information filed with the SEC by Sempra Energy can be inspected and
copied at the Public Reference Room maintained by the SEC and at the Regional
Offices of the SEC as follows:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2551
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, at prescribed rates. Further information on the operation of the
SEC's Public Reference Room in Washington, D.C. can be obtained by calling the
SEC at 1-800-SEC-0330.
2
<PAGE>
The SEC also maintains a web site that contains reports, proxy statements
and other information about issuers, such as Sempra Energy, who file
electronically with the SEC. The address of that site is http://www.sec.gov.
Sempra Energy's common stock is listed on the New York Stock Exchange
(NYSE: SRE), and reports, proxy statements and other information concerning
Sempra Energy can also be inspected at the offices of the New York Stock
Exchange at 20 Broad Street, New York, New York 10005. In addition, reports,
proxy statements and other information concerning Sempra Energy can be
inspected at its offices at 101 Ash Street, San Diego, California 92101.
This prospectus is part of a registration statement that we filed with the
SEC. The full registration statement may be obtained from the SEC or Sempra
Energy, as indicated below. Forms of the indentures, the declarations of trust
and other documents establishing the terms of the offered securities and the
guarantees are filed as exhibits to the registration statement. Statements in
this prospectus about these documents are summaries. You should refer to the
actual documents for a more complete description of the relevant matters.
Incorporation by Reference
The rules of the SEC allow us to "incorporate by reference" information
into this prospectus, which means that we can disclose important information to
you by referring you to another document filed separately with the SEC. The
information incorporated by reference is deemed to be part of this prospectus,
and later information that we file with the SEC will automatically update and
supersede that information. The prospectus incorporates by reference the
documents set forth below that have been previously filed with the SEC. These
documents contain important information about Sempra Energy.
<TABLE>
<CAPTION>
Sec Filings (File No. 1-14201) Period
------------------------------ ------
<C> <S>
Annual Report on Form 10-K.......... Year ended December 31, 1998
Current Reports on Form 8-K......... Filed February 23, 1999, April 2, 1999,
April 14, 1999 and May 5, 1999
Registration Statement on Form 8-A.. Filed June 5, 1998
</TABLE>
We are also incorporating by reference all additional documents that we
file with the SEC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934, as amended, between the date of this
prospectus and the termination of the offering of securities described in this
prospectus.
Sempra Energy will provide without charge to each person to whom a copy of
this prospectus has been delivered a copy of any and all of these filings. You
may request a copy of these filings by writing or telephoning us at:
Sempra Energy
101 Ash Street
San Diego, California 92101
Attention: Corporate Secretary
Telephone: (619) 696-2034
3
<PAGE>
SEMPRA ENERGY
Sempra Energy, based in San Diego, is a Fortune 500 energy services
company. Through two regulated utility subsidiaries, Southern California Gas
Company and San Diego Gas & Electric Company, Sempra Energy serves over 21
million consumers, the largest customer base of any gas, electric or
combination gas and electric utility in the United States. Natural gas service
is provided throughout Southern California and portions of Central California
through over 5.5 million active meters. Electric service is provided throughout
San Diego County and portions of Orange County, both in Southern California,
through over 1.2 million active meters. Through other subsidiaries, Sempra
Energy also provides other energy-related products and services.
The information above concerning Sempra Energy and its subsidiaries is only
a summary and does not purport to be comprehensive. For additional information
concerning Sempra Energy and its subsidiaries, you should refer to the
information described in "Where You Can Find More Information."
Sempra Energy's offices are located at 101 Ash Street, San Diego,
California 92101 and the telephone number is (619) 696-2000.
SEMPRA ENERGY HOLDINGS
Sempra Energy Holdings is a wholly-owned subsidiary of Sempra Energy. It is
a holding company for some of the other subsidiaries of Sempra Energy that are
not subject to California utility regulation. Its principal direct and indirect
subsidiaries currently are:
. Sempra Energy Solutions provides energy-related products and services
to commercial, industrial, governmental, institutional and consumer
markets. Its principal subsidiaries are Sempra Energy Trading and
CES/Way.
. Sempra Energy Trading, a wholesale trader of physical and financial
energy products, including natural gas, power, crude oil and
associated commodities. Sempra Energy Trading serves a broad range of
customers, including electric and gas utilities, industrial and large
commercial end users, and major energy marketers. It specializes in
high-volume transactions and provides its customers with customized
energy delivery and pricing programs.
. CES/Way provides energy-efficiency engineering services for government
and institutional customers.
. Sempra Energy Resources acquires and develops power plants for the
competitive market and operates natural gas storage, production and
transportation assets. Sempra Energy Resources' power plants use
state-of-the-art, combined-cycle power generation technology and
natural gas to generate electricity for the wholesale market and
retail electric providers, including utilities, marketers and large
energy users.
. Sempra Energy International engages in energy-infrastructure projects
outside the United States, including natural gas transmission and
distribution systems. It currently has interests in gas distribution
partnerships in Mexico, Argentina and Uruguay.
Sempra Energy Holdings may, in the future, engage in other businesses.
Sempra Energy Holdings' offices are located at 101 Ash Street, San Diego,
California 92101 and the telephone number is (619) 696-2034.
4
<PAGE>
THE TRUSTS
Sempra Energy created three Delaware business trusts pursuant to three
Declarations of Trust. The trusts are named Sempra Energy Capital Trust I,
Sempra Energy Capital Trust II and Sempra Energy Capital Trust III. Sempra
Energy will file an Amended and Restated Declaration of Trust (a "Declaration")
for each trust, which will state the terms and conditions for each trust to
issue and sell its preferred securities and common securities. A form of
Declaration is filed as an exhibit to the registration statement of which this
prospectus forms a part.
Each trust will exist solely to:
. issue and sell its preferred securities (representing undivided
beneficial interests in the trust) to the public;
. issue and sell its common securities (representing undivided
beneficial interests in the trust) to Sempra Energy;
. use the proceeds from the sale of its preferred and common securities
to purchase a series of Sempra Energy's subordinated debt securities;
. distribute the cash payments it receives on the subordinated debt
securities it owns to the holders of the preferred and common
securities;
. maintain its status as a grantor trust for federal income tax
purposes; and
. engage in other activities that are necessary or incidental to these
purposes.
Sempra Energy will purchase all of the common securities of each trust. The
common securities will represent an aggregate liquidation amount equal to at
least 3% of each trust's total capitalization. The preferred securities will
represent the remaining 97% of the trust's total capitalization. The common
securities will have terms substantially identical to, and will rank equal in
priority of payment with, the preferred securities. However, if Sempra Energy
defaults on the related subordinated debt securities, then cash distributions
and liquidation, redemption and other amounts payable on the common securities
will be subordinate to the preferred securities in priority of payment.
The preferred securities will be guaranteed by Sempra Energy as described
later in this prospectus.
Sempra Energy has appointed five trustees to conduct each trust's business
and affairs:
. The Bank of New York ("property trustee");
. The Bank of New York ("Delaware trustee"); and
. Three Sempra Energy officers ("regular trustees").
Only Sempra Energy, as owner of the common securities, can remove or
replace the trustees. In addition, Sempra Energy can increase or decrease the
number of trustees. However, the majority of trustees will always be regular
trustees.
Sempra Energy will pay all fees and expenses related to each trust and each
offering of the related preferred securities and will pay all ongoing costs and
expenses of each trust, except the respective trust's obligations under the
related preferred and common securities.
The trusts will not have separate financial statements. The statements
would not be material to holders of the preferred securities because no trust
will have any independent operations. Each trust exists solely for the reasons
summarized above.
5
<PAGE>
USE OF PROCEEDS
Unless stated otherwise in the applicable prospectus supplement, the net
proceeds from the sale of the offered securities will be:
. used by Sempra Energy and/or its subsidiaries for general corporate
purposes, including investing in unregulated business activities and
reducing short-term debt incurred to provide interim financing for
such purposes; and
. used by the respective trusts to purchase subordinated debt securities
of Sempra Energy.
RATIO OF SEMPRA ENERGY EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
The following table sets forth the ratio of Sempra Energy earnings to
combined fixed charges and preferred stock dividends for Sempra Energy for each
of the five years in the five-year period ended December 31, 1998:
<TABLE>
<CAPTION>
December 31,
------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends....................... 2.94 3.13 3.67 3.75 2.73
</TABLE>
6
<PAGE>
DESCRIPTION OF SECURITIES
The following is a general description of the terms and provisions of the
securities we may offer and sell by this prospectus. These summaries are not
meant to be a complete description of each security. This prospectus and any
accompanying prospectus supplement will contain the material terms and
conditions for each security. The prospectus supplement may add, update or
change the terms and conditions of the securities as described in this
prospectus. For more information about the securities offered by us, please
refer to:
. the indenture between Sempra Energy and Citibank, N.A., as trustee
relating to the issuance of each series of senior debt securities by
Sempra Energy;
. the indenture ("subordinated indenture") between Sempra Energy and The
Bank of New York, as trustee relating to the issuance of each series
of subordinated debt securities by Sempra Energy;
. the indenture among Sempra Energy Holdings, Sempra Energy, as
Guarantor and U.S. Bank Trust Company, as trustee relating to the
issuance of each series of senior debt securities by Sempra Energy
Holdings;
. the Declaration of each trust; and
. Sempra Energy's guarantee of the preferred securities issued by each
trust.
Forms of these documents are filed as exhibits to the registration
statement. The indentures listed above are sometimes collectively referred to
as the "indentures" and individually referred to as an "indenture." The
indentures are subject to and governed by the Trust Indenture Act of 1939, as
amended, and may be supplemented or amended from time to time following their
execution.
DESCRIPTION OF DEBT SECURITIES
The following description sets forth the general terms and provisions of
the debt securities that Sempra Energy and Sempra Energy Holdings may offer by
this prospectus. The debt securities may be issued as senior debt securities or
subordinated debt securities in the case of Sempra Energy and as senior debt
securities in the case of Sempra Energy Holdings. The indebtedness represented
by the senior debt securities will rank equally with all other unsecured and
unsubordinated debt of the company issuing the senior debt security (either
Sempra Energy or Sempra Energy Holdings). The indebtedness represented by the
subordinated debt securities will rank junior and subordinate in right of
payment to the prior payment in full of the senior debt of Sempra Energy, to
the extent and in the manner set forth in the prospectus supplement for the
securities. See "--Subordination" below. Throughout this description,
references to "we," "us" and "our" should be read to refer to the company
issuing the particular securities, unless the context indicates that "we," "us"
or "our" refers to both Sempra Energy and Sempra Energy Holdings.
Each indenture gives us broad authority to set the particular terms of each
series of debt securities, including the right to modify certain of the terms
contained in the indenture. The particular terms of a series of debt securities
and the extent, if any, to which the particular terms of the issue modify the
terms of the indenture will be described in the prospectus supplement relating
to the debt securities.
Each indenture contains the full legal text of the matters described in
this section. Because this section is a summary, it does not describe every
aspect of the debt securities or the applicable indentures. This summary is
subject to and qualified in its entirety by reference to all the provisions of
the applicable indenture, including definitions of terms used in the indenture.
We also include
7
<PAGE>
references in parentheses to certain sections of the indentures. Whenever we
refer to particular sections or defined terms of the indentures in this
prospectus or in a prospectus supplement, these sections or defined terms are
incorporated by reference herein or in the prospectus supplement. This summary
also is subject to and qualified by reference to the description of the
particular terms of the debt securities described in the applicable prospectus
supplement or supplements.
General
We may issue an unlimited amount of debt securities under the indentures in
one or more series. We need not issue all debt securities of one series at the
same time and, unless otherwise provided, we may reopen a series, without the
consent of the holders of the debt securities of that series, for issuances of
additional debt securities of that series.
The debt securities of Sempra Energy and Sempra Energy Holdings will be
unsecured obligations of the company issuing the security, and the debt
securities of Sempra Energy Holdings will be unconditionally guaranteed by
Sempra Energy as to payment of principal, premium, if any, and interest. See
"Guarantee of Sempra Energy; Holding Company Structure."
Prior to the issuance of each series of debt securities, the terms of the
particular securities will be specified in a supplemental indenture (including
any pricing supplement) and a board resolution of the issuing company or in one
or more officer's certificates of the issuing company pursuant to a
supplemental indenture or a board resolution. We refer you to the applicable
prospectus supplement for a description of the following terms of the series of
debt securities:
(a) the title of the debt securities;
(b) any limit upon the principal amount of the debt securities;
(c) the date or dates on which principal will be payable or how to
determine the dates;
(d) the rate or rates or method of determination of interest; the date
from which interest will accrue; the dates on which interest will be
payable, which we refer to as the "interest payment dates;" and any
record dates for the interest payable on the interest payment dates;
(e) any obligation or option of the issuing company to redeem, purchase or
repay debt securities, or any option of the registered holder to
require the issuing company to redeem or repurchase debt securities,
and the terms and conditions upon which the debt securities will be
redeemed, purchased or repaid;
(f) the denominations in which the debt securities will be issuable (if
other than denominations of $1,000 and any integral multiple thereof);
(g) whether the debt securities are to be issued in whole or in part in
the form of one or more global debt securities and, if so, the
identity of the depositary for the global debt securities; and
(h) any other terms of the debt securities.
(See Section 301.)
Guarantee of Sempra Energy; Holding Company Structure
Sempra Energy will unconditionally guarantee the payment of principal of
and any premium and interest on the debt securities issued by Sempra Energy
Holdings, when due and payable, whether at the stated maturity date, by
declaration of acceleration, call for redemption or otherwise, in accordance
with the terms of the debt securities and the indenture. These guarantees are
referred to as the "debt
8
<PAGE>
securities guarantees" in this prospectus. The debt securities guarantees will
remain in effect until the entire principal of and any premium and interest on
the debt securities has been paid in full or otherwise discharged in accordance
with the provisions of the indenture. (See Article Fourteen.)
Sempra Energy conducts its operations primarily through its subsidiaries
and substantially all of its consolidated assets are held by its subsidiaries.
Accordingly, Sempra Energy's cash flow and its ability to meet its obligations
under its debt securities and the debt securities guarantees are largely
dependent upon the earnings of its subsidiaries and the distribution or other
payment of these earnings to Sempra Energy in the form of dividends or loans or
advances and repayment of loans and advances from Sempra Energy. The
subsidiaries are separate and distinct legal entities and have no obligation to
pay any amounts due on the Sempra Energy debt securities or to make any funds
available for payment of amounts due on these debt securities or, except for
Sempra Energy Holdings, the debt securities guarantees.
Because Sempra Energy is a holding company, its obligations under the debt
securities and the debt securities guarantees will be effectively subordinated
to all existing and future liabilities of its subsidiaries. Therefore, Sempra
Energy's rights and the rights of its creditors, including the rights of the
holders of the debt securities issued by Sempra Energy and any debt securities
guarantees, to participate in the assets of any subsidiary upon the liquidation
or reorganization of the subsidiary will be subject to the prior claims of the
subsidiary's creditors. To the extent that Sempra Energy may itself be a
creditor with recognized claims against any of its subsidiaries, Sempra
Energy's claims would still be effectively subordinated to any security
interest in, or mortgages or other liens on, the assets of the subsidiary and
would be subordinated to any indebtedness or other liabilities of the
subsidiary senior to that held by Sempra Energy. Although agreements to which
Sempra Energy and its subsidiaries are parties limit the incurrence of
additional indebtedness, both Sempra Energy and its subsidiaries retain the
ability to incur substantial additional indebtedness and other liabilities.
In addition, Sempra Energy Holdings also conducts its operations primarily
through its subsidiaries and substantially all of its consolidated assets are
held by its subsidiaries. Accordingly, the discussion above is equally
applicable to Sempra Energy Holdings and the debt securities it issues.
Payment of Debt Securities--Interest
Unless indicated differently in a prospectus supplement, we will pay
interest on the debt security on each interest payment date by check mailed to
the person in whose name the debt security is registered as of the close of
business on the regular record date relating to the interest payment date,
except that interest payable at stated maturity, upon redemption or otherwise,
will be paid to the person to whom principal is paid.
However, if we default in paying interest on a debt security, we will pay
defaulted interest in either of the two following ways:
(a) We will first propose to the trustee a payment date for the defaulted
interest. Next, the trustee will choose a special record date for
determining which registered holders are entitled to the payment. The
special record date will be between 10 and 15 days before the payment
date we propose. Finally, we will pay the defaulted interest on the
payment date to the registered holder of the debt security as of the
close of business on the special record date.
(b) Alternatively, we can propose to the trustee any other lawful manner
of payment that is consistent with the requirements of any securities
exchange on which the debt securities are listed for trading. If the
trustee thinks the proposal is practicable, payment will be made as
proposed.
(See Section 307.)
9
<PAGE>
Payment of Debt Securities--Principal
Unless we indicate differently in a prospectus supplement, we will pay
principal of and any premium and interest on the debt securities at stated
maturity, upon redemption or otherwise, upon presentation of the debt
securities at the office of the trustee, as our paying agent. Any other paying
agent initially designated for the debt securities of a particular series will
be named in the applicable prospectus supplement.
In our discretion, we may change the place of payment on the debt
securities, and may remove any paying agent and may appoint one or more
additional paying agents. (See Section 1002.)
Form; Transfers; Exchanges
The debt securities will be issued
(a) only in fully registered form;
(b) without interest coupons; and
(c) in denominations that are even multiples of $1,000.
You may have your debt securities divided into debt securities of smaller
denominations (of at least $1,000) or combined into debt securities of larger
denominations, as long as the total principal amount is not changed. This is
called an "exchange."
You may exchange or transfer debt securities at the office of the trustee.
The trustee acts as our agent for registering debt securities in the names of
holders and transferring debt securities. We may appoint another agent or act
as our own agent for this purpose. The entity performing the role of
maintaining the list of registered holders is called the "security registrar."
It will also perform transfers.
In our discretion, we may change the place for registration of transfer of
the debt securities and may remove and/or appoint one or more additional
security registrars. (See Sections 305 and 1002.)
Except as otherwise provided in a prospectus supplement, there will be no
service charge for any transfer or exchange of the debt securities, but you may
be required to pay a sum sufficient to cover any tax or other governmental
charge payable in connection with the transfer or exchange. We may block the
transfer or exchange of (a) debt securities during a period of 15 days prior to
giving any notice of redemption or (b) any debt security selected for
redemption in whole or in part, except the unredeemed portion of any debt
security being redeemed in part. (See Section 305.)
Redemption
We will set forth any terms for the redemption of debt securities in a
prospectus supplement. Unless we indicate differently in a prospectus
supplement, and except with respect to debt securities redeemable at the option
of the registered holder, debt securities will be redeemable upon notice by
mail between 30 and 60 days prior to the redemption date. If less than all of
the debt securities of any series or any tranche of a series are to be
redeemed, the trustee will select the debt securities to be redeemed. In the
absence of any provision for selection, the trustee will choose a method of
random selection it deems fair and appropriate. (See Sections 1102, 1103 and
1104.)
Debt securities will cease to bear interest on the redemption date. We will
pay the redemption price and any accrued interest once you surrender the debt
security for redemption. (See Section 1105.) If only part of a debt security is
redeemed, the trustee will deliver to you a new debt security of the same
series for the remaining portion without charge. (Section 1106.)
10
<PAGE>
We may make any redemption conditional upon the receipt by the paying
agent, on or prior to the date fixed for redemption, of money sufficient to pay
the redemption price. If the paying agent has not received the money by the
date fixed for redemption, we will not be required to redeem the debt
securities. (See Section 1104.)
Events of Default
An "event of default" occurs with respect to debt securities of any series
if:
(a) we do not pay any interest on any debt securities of the applicable
series within 60 days of the due date;
(b) we do not pay principal or premium on any debt securities of the
applicable series on its due date;
(c) we remain in breach of a covenant or warranty (excluding covenants and
warranties solely applicable to a specific series) of the indenture
for 90 days after we receive a written notice of default stating we
are in breach and requiring remedy of the breach; the notice must be
sent by either the trustee or registered holders of 25% of the
principal amount of debt securities of the affected series;
(d) the debt securities guarantees on any series
(1) cease to be effective (except in accordance with their terms),
(2) are found in any judicial proceeding to be unenforceable or
invalid, or
(3) are denied or disaffirmed (except in accordance with their terms);
(e) we file for bankruptcy or other specified events in bankruptcy,
insolvency, receivership or reorganization occur; or
(f) any other event of default specified in the prospectus supplement
occurs.
(See Section 501.)
No event of default with respect to a series of debt securities necessarily
constitutes an event of default with respect to the debt securities of any
other series issued under the indenture.
Remedies
Acceleration
If an event of default occurs and is continuing with respect to any series
of debt securities, then either the trustee or the registered holders of 25% in
principal amount of the outstanding debt securities of that series may declare
the principal amount of all of the debt securities of that series to be due and
payable immediately. (See Section 502.)
Rescission of Acceleration
After the declaration of acceleration has been made and before the trustee
has obtained a judgment or decree for payment of the money due, the declaration
and its consequences will be rescinded and annulled, if
(a) we pay or deposit with the trustee a sum sufficient to pay
(1) all overdue interest;
(2) the principal of and any premium which have become due otherwise
than by the declaration of acceleration and overdue interest on
these amounts;
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(3) interest on overdue interest to the extent lawful;
(4) all amounts due to the trustee under the indenture; and
(b) all events of default, other than the nonpayment of the principal
which has become due solely by the declaration of acceleration, have
been cured or waived as provided in the indenture.
(See Section 502.)
For more information as to waiver of defaults, see "Waiver of Default and
of Compliance" below.
Control by Registered Holders; Limitations
Subject to the indenture, if an event of default with respect to the debt
securities of any one series occurs and is continuing, the registered holders
of a majority in principal amount of the outstanding debt securities of that
series will have the right to
(a) direct the time, method and place of conducting any proceeding for any
remedy available to the trustee, or
(b) exercise any trust or power conferred on the trustee with respect to
the debt securities of the series.
If an event of default is continuing with respect to more than one series
of debt securities, the registered holders of a majority in aggregate principal
amount of the outstanding debt securities of all the series, considered as one
class, will have the right to make such direction, and not the registered
holders of the debt securities of any one of the series. These rights of
registered holders to make direction are subject to the following limitations:
(a) the registered holders' directions will not conflict with any law or
the indenture; and
(b) the registered holders' directions may not involve the trustee in
personal liability where the trustee believes indemnity is not
adequate.
The trustee may also take any other action it deems proper which is
consistent with the registered holders' direction. (See Sections 512 and 603.)
In addition, the indenture provides that no registered holder of any debt
security will have any right to institute any proceeding, judicial or
otherwise, with respect to the indenture for the appointment of a receiver or
for any other remedy thereunder unless
(a) that registered holder has previously given the trustee written notice
of a continuing event of default;
(b) the registered holders of 25% in aggregate principal amount of the
outstanding debt securities of all affected series, considered as one
class, have made written request to the trustee to institute
proceedings in respect of that event of default and have offered the
trustee reasonable indemnity against costs and liabilities incurred in
complying with the request; and
(c) for 60 days after receipt of the notice, the trustee has failed to
institute a proceeding and no direction inconsistent with the request
has been given to the trustee during the 60-day period by the
registered holders of a majority in aggregate principal amount of
outstanding debt securities of all affected series, considered as one
class.
Furthermore, no registered holder will be entitled to institute any action if
and to the extent that the action would disturb or prejudice the rights of
other registered holders. (See Sections 507 and 603.)
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However, each registered holder has an absolute and unconditional right to
receive payment when due and to bring a suit to enforce that right. (See
Sections 507 and 508.)
Notice of Default
The trustee is required to give the registered holders of the debt
securities notice of any default under the indenture to the extent required by
the Trust Indenture Act, unless the default has been cured or waived; except
that in the case of an event of default of the character specified above in
clause (c) under "Events of Default," no notice shall be given to the
registered holders until at least 75 days after the occurrence thereof. (See
Section 602.) The Trust Indenture Act currently permits the trustee to withhold
notices of default (except for certain payment defaults) if the trustee in good
faith determines the withholding of the notice to be in the interests of the
registered holders.
We will furnish the trustee with an annual statement as to the compliance
by the company issuing the debt security with the conditions and covenants in
the indenture. (See Section 1005.)
Waiver of Default and of Compliance
The registered holders of a majority in aggregate principal amount of the
outstanding debt securities of any series may waive, on behalf of the
registered holders of all debt securities of the series, any past default under
the indenture, except a default in the payment of principal, premium or
interest, or with respect to compliance with certain provisions of the
indenture that cannot be amended without the consent of the registered holder
of each outstanding debt security. (See Section 513.)
Compliance with certain covenants in the indenture or otherwise provided
with respect to debt securities may be waived by the registered holders of a
majority in aggregate principal amount of the affected debt securities,
considered as one class. (See Section 1006.)
Consolidation, Merger and Conveyance of Assets as an Entirety; No Financial
Covenants
Subject to the provisions described in the next paragraph, each of Sempra
Energy and Sempra Energy Holdings will preserve its corporate existence. (See
Section 1004.)
Sempra Energy and Sempra Energy Holdings have each agreed not to
consolidate with or merge into any other entity, and Sempra Energy has agreed
not to convey, transfer or lease its properties and assets substantially as an
entirety to any entity, unless:
(a) the entity formed by the consolidation or into which Sempra Energy or
Sempra Energy Holdings, as the case may be, is merged, or the entity
which acquires or which leases the property and assets of Sempra
Energy substantially as an entirety, is an entity organized and
existing under the laws of the United States of America or any State
thereof or the District of Columbia, and expressly assumes, by
supplemental indenture, the due and punctual payment of the principal,
premium and interest on all the outstanding debt securities (or the
debt securities guarantees endorsed thereon, as the case may be) and
the performance of all of the covenants of Sempra Energy or Sempra
Energy Holdings, as the case may be, under the indenture, and
(b) immediately after giving effect to the transactions, no event of
default, and no event which after notice or lapse of time or both
would become an event of default, will have occurred and be
continuing.
(See Section 801.)
Neither the indenture nor the debt security guarantee contains any
financial or other similar restrictive covenants. Any such covenants with
respect to any particular series of debt securities will be set forth in the
applicable prospectus supplement.
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Modification of Indenture
Without Registered Holder Consent. Without the consent of any registered
holders of debt securities, we and the applicable trustee may enter into one or
more supplemental indentures for any of the following purposes:
(a) to evidence the succession of another entity to Sempra Energy or
Sempra Energy Holdings; or
(b) to add one or more covenants of Sempra Energy or Sempra Energy
Holdings or other provisions for the benefit of the registered holders
of all or any series or tranche of debt securities, or to surrender
any right or power conferred upon Sempra Energy or Sempra Energy
Holdings; or
(c) to add any additional events of default for all or any series of debt
securities; or
(d) to change or eliminate any provision of the indenture or to add any
new provision to the indenture that does not adversely affect the
interests of the registered holders; or
(e) to provide security for the debt securities of any series; or
(f) to establish the form or terms of debt securities of any series or
tranche or any debt securities guarantees as permitted by the
indenture; or
(g) to provide for the issuance of bearer securities; or
(h) to evidence and provide for the acceptance of appointment of a
separate or successor trustee; or
(i) to provide for the procedures required to permit the utilization of a
noncertificated system of registration for any series or tranche of
debt securities; or
(j) to change any place or places where
(1) we may pay principal, premium and interest,
(2) debt securities may be surrendered for transfer or exchange, or
(3) notices and demands to or upon Sempra Energy or Sempra Energy
Holdings may be served; or
(k) to cure any ambiguity, defect or inconsistency or to make any other
changes that do not adversely affect the interests of the registered
holders in any material respect.
(See Section 901.)
If the Trust Indenture Act is amended after the date of the indenture so as
to require changes to the indenture or so as to permit changes to, or the
elimination of, provisions which, at the date of the indenture or at any time
thereafter, were required by the Trust Indenture Act to be contained in the
indenture, the indenture will be deemed to have been amended so as to conform
to the amendment or to effect the changes or elimination, and Sempra Energy,
Sempra Energy Holdings and the applicable trustee may, without the consent of
any registered holders, enter into one or more supplemental indentures to
effect or evidence the amendment.
With Registered Holder Consent. We and the trustee may, with some
exceptions, amend or modify any indenture with the consent of the registered
holders of at least a majority in aggregate principal amount of the debt
securities of all series affected by the amendment or modification (voting as
one class). However, no amendment or modification may, without the consent of
the registered holder of each outstanding debt security directly affected
thereby,
(a) change the stated maturity of the principal or interest on any debt
security (other than pursuant to the terms thereof), or reduce the
principal amount, interest or premium
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payable or change the currency in which any debt security is payable,
or impair the right to bring suit to enforce any payment;
(b) reduce the percentages of registered holders whose consent is required
for any supplemental indenture or waiver or reduce the requirements
for quorum and voting under the indenture; or
(c) modify certain of the provisions in the indenture relating to
supplemental indentures and waivers of certain covenants and past
defaults.
A supplemental indenture which changes or eliminates any provision of the
indenture expressly included solely for the benefit of registered holders of
debt securities of one or more particular series or tranches will be deemed not
to affect the rights under the indenture of the registered holders of debt
securities of any other series or tranche. (See Section 902.)
Miscellaneous Provisions
The indenture provides that certain debt securities, including those for
which payment or redemption money has been deposited or set aside in trust as
described under "Satisfaction and Discharge" below, will not be deemed to be
"outstanding" in determining whether the registered holders of the requisite
principal amount of the outstanding debt securities have given or taken any
demand, direction, consent or other action under the indenture as of any date,
or are present at a meeting of registered holders for quorum purposes. (See
Section 101.)
We will be entitled to set any day as a record date for the purpose of
determining the registered holders of outstanding debt securities of any series
entitled to give or take any demand, direction, consent or other action under
the indenture, in the manner and subject to the limitations provided in the
indenture. In certain circumstances, the trustee also will be entitled to set a
record date for action by registered holders. If a record date is set for any
action to be taken by registered holders of particular debt securities, the
action may be taken only by persons who are registered holders of the
respective debt securities on the record date. (See Section 104.)
Defeasance and Covenant Defeasance
The indentures provide, unless the terms of the particular series of debt
securities provide otherwise, that we may, upon satisfying several conditions,
cause ourselves to be:
(a) discharged from our obligations, with some exceptions, with respect to
any series of debt securities, which we refer to as "defeasance"; and
(b) released from our obligations under certain covenants with respect to
any series of debt securities, which we refer to as "covenant
defeasance".
One condition we must satisfy is the irrevocable deposit with the trustee,
in trust, of money and/or government obligations which, through the scheduled
payment of principal and interest on those obligations, would provide
sufficient moneys to pay the principal of and any premium and interest on those
debt securities on the maturity dates of the payments or upon redemption.
The indentures permit defeasance with respect to any series of debt
securities even if a prior covenant defeasance has occurred with respect to the
debt securities of that series. Following a defeasance, payment of the debt
securities defeased may not be accelerated because of an event of default.
Following a covenant defeasance, payment of the debt securities may not be
accelerated by reference to the covenants described in the description of
covenant defeasance above. However, if such an acceleration were to occur, the
realizable value at the acceleration date of the money and government
obligations in the defeasance trust could be less than the principal and
interest then due
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on the respective debt securities, since the required deposit in the defeasance
trust would be based upon scheduled cash flows rather than market value, which
would vary depending upon interest rates and other factors.
Under current United States federal income tax law, the defeasance
contemplated in the preceding paragraphs would be treated as an exchange of the
relevant debt securities in which holders of the debt securities might
recognize gain or loss. In addition, the amount, timing and character of
amounts that holders would be required thereafter to include in income might be
different from that which would be includible in the absence of such
defeasance. Prospective investors are urged to consult their own tax advisors
as to the specific consequences of a defeasance, including the applicability
and effect of tax laws other than United States federal income tax laws.
Under current United States federal income tax laws, unless accompanied by
other changes in the terms of the debt securities, covenant defeasance should
not be treated as a taxable exchange.
Resignation and Removal of the Trustee; Deemed Resignation
The trustee may resign at any time by giving written notice to us.
The trustee may also be removed by act of the registered holders of a
majority in principal amount of the then outstanding debt securities of any
series.
No resignation or removal of the trustee and no appointment of a successor
trustee will become effective until the acceptance of appointment by a
successor trustee in accordance with the requirements of the indenture.
Under certain circumstances, we may appoint a successor trustee and if the
successor accepts, the trustee will be deemed to have resigned.
(Section 610).
Subordination
Unless we indicate differently in a prospectus supplement, any subordinated
debt securities will be subordinated in the following manner. If Sempra
Energy's assets are distributed upon our dissolution, winding up, liquidation
or reorganization, the payment of the principal of (and premium, if any) and
interest on any subordinated debt securities will be subordinated, to the
extent provided in the subordinated debt security indenture and the applicable
supplemental indenture, to the prior payment in full of all senior
indebtedness, including senior debt securities. However, Sempra Energy's
obligation to pay principal (and premium, if any) or interest on the
subordinated debt securities will not otherwise be affected. No payment on
account of principal (or premium, if any), sinking fund or interest may be made
on the subordinated debt securities at any time when there is a default in the
payment of principal, premium, if any, sinking fund or interest on senior
indebtedness. If, while Sempra Energy is in default on senior indebtedness, any
payment is received by the trustee under the subordinated debt security
indenture or the holders of any of the subordinated debt securities before it
has paid all senior indebtedness in full, the payment or distribution must be
paid over to the holders of the unpaid senior indebtedness or applied to the
repayment of the unpaid senior indebtedness. Subject to paying the senior
indebtedness in full, the holders of the subordinated debt securities will be
subrogated to the rights of the holders of the senior indebtedness to the
extent that payments are made to the holders of senior indebtedness out of the
distributive share of the subordinated debt securities.
Due to the subordination, if Sempra Energy's assets are distributed upon
insolvency, certain of its general creditors may recover more, ratably, than
holders of subordinated debt securities. The
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subordinated debt security indenture or applicable supplemental indenture may
state that its subordination provisions will not apply to money and securities
held in trust under the satisfaction and discharge, and the legal defeasance
provisions of the subordinated debt security indenture.
If this prospectus is being delivered in connection with the offering of a
series of subordinated debt securities, the accompanying prospectus supplement
or the information incorporated by reference in it will set forth the
approximate amount of senior indebtedness outstanding as of a recent date.
Conversion Rights
The terms and conditions of any debt securities being offered that are
convertible into common stock of Sempra Energy will be set forth in a
prospectus supplement. These terms will include the conversion price, the
conversion period, provisions as to whether conversion will be at the option of
the holder or us, the events requiring an adjustment of the conversion price
and provisions affecting conversion in the event that the debt securities are
redeemed.
Governing Law
Each indenture and the related debt securities will be governed by and
construed in accordance with the laws of the State of New York.
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DESCRIPTION OF SEMPRA ENERGY'S
COMMON STOCK AND PREFERRED STOCK
The following description of Sempra Energy's common stock and preferred
stock is only a summary and is qualified in its entirety by reference to the
articles of incorporation and bylaws of Sempra Energy. Therefore, you should
read carefully the more detailed provisions of Sempra Energy's Amended and
Restated Articles of Incorporation, Sempra Energy's Amended and Restated
Bylaws, and Sempra Energy's Rights Agreement, dated May 26, 1998, between
Sempra Energy and First Chicago Trust Company of New York, as rights agent,
copies of which are incorporated by reference as exhibits to the registration
statement of which this prospectus is a part.
General
The authorized capital stock of Sempra Energy consists of (1) 750,000,000
shares of Sempra Energy common stock, without par value, and (2) 50,000,000
shares of preferred stock, without par value. As of February 27, 1999, there
were issued and outstanding 240,119,972 shares of Sempra Energy common stock
and no shares of Sempra Energy preferred stock. No other classes of capital
stock are authorized under the Sempra Energy articles of incorporation. The
issued and outstanding shares of Sempra Energy common stock are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights.
Sempra Energy Common Stock
The holders of Sempra Energy common stock are entitled to receive such
dividends as the Sempra Energy board of directors may from time to time
declare, subject to any rights of holders of outstanding shares of Sempra
Energy preferred stock. Except as otherwise provided by law, each holder of
Sempra Energy common stock is entitled to one vote per share on each matter
submitted to a vote of a meeting of shareholders, subject to any class or
series voting rights of holders of Sempra Energy preferred stock. Under the
Sempra Energy articles of incorporation, the Sempra Energy board of directors
is classified into three classes each consisting of a number as nearly equal as
possible to one-third of the total number of directors constituting the entire
Sempra Energy board of directors. The holders of shares of Sempra Energy common
stock are not entitled to cumulate votes for the election of directors.
In the event of any liquidation, dissolution or winding up of Sempra
Energy, whether voluntary or involuntary, the holders of shares of Sempra
Energy common stock, subject to any rights of the holders of outstanding shares
of Sempra Energy preferred stock, are entitled to receive any remaining assets
of Sempra Energy after the discharge of its liabilities.
Holders of Sempra Energy common stock are not entitled to preemptive rights
to subscribe for or purchase any part of any new or additional issue of stock
or securities convertible into stock. Sempra Energy common stock does not
contain any redemption provisions or conversion rights and is not liable to
assessment or further call.
Each outstanding share of Sempra Energy common stock is accompanied by a
right to purchase one one-hundredth of a share of Class A Junior Participating
Preferred Stock, without par value, of Sempra Energy at a price of $80.00 per
right, subject to certain anti-dilution adjustments. The Sempra Energy board of
directors has reserved 7,500,000 shares of such Class A
preferred stock for issuance upon exercise of the rights, as more fully
discussed below under the heading "--Description of Preferred Share Purchase
Rights."
The registrar and transfer agent for the Sempra Energy common stock is
First Chicago Trust Company of New York.
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Preferred Stock
The Sempra Energy board of directors is authorized, pursuant to the Sempra
Energy articles of incorporation, to issue up to 50,000,000 shares of Sempra
Energy preferred stock in one or more series and to fix and determine the
number of shares of preferred stock of any series, to determine the designation
of any such series, to increase or decrease the number of shares of any such
series subsequent to the issue of shares of that series, and to determine or
alter the rights, preferences, privileges and restrictions granted to or
imposed upon any such series. Currently there are no shares of Sempra Energy
preferred stock outstanding. However, the Sempra Energy board of directors has
reserved 7,500,000 shares of Class A preferred stock for issuance in connection
with rights issued under the Sempra Energy rights agreement.
Prior to the issuance of shares of each series of preferred stock, the
board of directors is required to adopt resolutions and file a certificate of
determination with the Secretary of State of the State of California. The
certificate of determination will fix for each series the designation and
number of shares and the rights, preferences, privileges and restrictions of
the shares including, but not limited to, the following:
(a) the title and stated value of the preferred stock;
(b) voting rights, if any, of the preferred stock;
(c) any rights and terms of redemption (including sinking fund
provisions);
(d) the dividend rate(s), period(s) and/or payment date(s) or method(s) of
calculation applicable to the preferred stock;
(e) whether dividends are cumulative or non-cumulative and, if cumulative,
the date from which dividends on the preferred stock will accumulate;
(f) the relative ranking and preferences of the preferred stock as to
dividend rights and rights upon the liquidation, dissolution or
winding up of our affairs;
(g) the terms and conditions, if applicable, upon which the preferred
stock will be convertible into common stock, including the conversion
price (or manner of calculation) and conversion period;
(h) the provision for redemption, if applicable, of the preferred stock;
(i) the provisions for a sinking fund, if any, for the preferred stock;
(j) liquidation preferences;
(k) any limitations on issuance of any class or series of preferred stock
ranking senior to or on a parity with the class or series of preferred
stock as to dividend rights and rights upon liquidation, dissolution
or winding up of our affairs; and
(l) any other specific terms, preferences, rights, limitations or
restrictions of the preferred stock.
All shares of preferred stock will, when issued, be fully paid and
nonassessable and will not have any preemptive or similar rights.
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In addition to the terms listed above, we will set forth in a prospectus
supplement the following terms relating to the class or series of preferred
stock being offered:
(a) the number of shares of the preferred stock offered, the liquidation
preference per share and the offering price of the preferred stock;
(b) the procedures for any auction and remarketing, if any, for the
preferred stock;
(c) any listing of the preferred stock on any securities exchange; and
(d) a discussion of any material and/or special United States federal
income tax considerations applicable to the preferred stock.
Rank
Unless we specify otherwise in the applicable prospectus supplement, the
preferred stock will rank, with respect to dividends and upon our liquidation,
dissolution or winding up:
(a) senior to all classes or series of our common stock and to all of our
equity securities ranking junior to the preferred stock;
(b) on a parity with all of our equity securities the terms of which
specifically provide that the equity securities rank on a parity with
the preferred stock; and
(c) junior to all of our equity securities the terms of which specifically
provide that the equity securities rank senior to the preferred stock.
Description of Preferred Share Purchase Rights
On May 26, 1998, the Sempra Energy board of directors adopted a preferred
share purchase rights plan providing that one preferred share purchase right
will attach to each share of Sempra Energy common stock. The description and
terms of the rights are set forth in a rights agreement, dated as of May 26,
1998, by and between Sempra Energy and First Chicago Trust Company of New York,
as rights agent. The purchase rights have an anti-takeover effect that is
intended to discourage coercive or unfair takeover tactics and to encourage any
potential acquirer to negotiate a fair price to all Sempra Energy shareholders.
The purchase rights may cause substantial dilution to any party that may
attempt to acquire Sempra Energy on terms not approved by the Sempra Energy
board of directors. However, the purchase rights are structured in a way so as
not to interfere with any negotiated merger or other business combination. The
rights will expire on May 31, 2008. Until a right is exercised, the holder of
the right will have no rights as a shareholder of Sempra Energy beyond those
rights afforded to existing shareholders, including the right to vote or to
receive dividends.
The rights are designed to assure that all of Sempra Energy's shareholders
receive fair and equal treatment in the event of any proposed takeover of
Sempra Energy and to guard against partial tender offers, open market
accumulations and other abusive tactics that may be deployed to gain control of
Sempra Energy without a control premium paid to all shareholders. Any time
prior to the first date that a person or group has become an "acquiring person"
as defined in the rights agreement, the rights should not interfere with any
merger or other business combination as long as it is approved by the Sempra
Energy board of directors.
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Anti-Takeover Provisions
The Sempra Energy articles of incorporation and bylaws contain provisions
that may have the effect of discouraging persons from acquiring large blocks of
Sempra Energy stock or delaying or preventing a change in control of Sempra
Energy. The material provisions which may have such an effect are:
(a) classification of the Sempra Energy board of directors into three
classes with the term of only one class expiring each year;
(b) a provision permitting the Sempra Energy board of directors to make,
amend or repeal the Sempra Energy bylaws;
(c) authorization for the Sempra Energy board of directors to issue Sempra
Energy preferred stock in series and to fix rights and preferences of
the series (including, among other things, whether, and to what
extent, the shares of any series will have voting rights and the
extent of the preferences of the shares of any series with respect to
dividends and other matters);
(d) a provision that shareholders may take action only at annual or
special meetings or by unanimous written consent in lieu of a meeting;
(e) advance notice procedures with respect to nominations of directors or
proposal other than those adopted or recommended by the Sempra Energy
board of directors; and
(f) provisions permitting amendment of certain of these provisions only by
an affirmative vote of the holders of at least two-thirds of the
outstanding shares of Sempra Energy common stock entitled to vote.
Some acquisitions of Sempra Energy's outstanding voting shares would also
require approval of the SEC under the Public Utility Holding Company Act of
1935 and of various state and foreign regulatory authorities.
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DESCRIPTION OF PREFERRED SECURITIES
General
Each Declaration authorizes the regular trustees to issue on behalf of each
trust one series of preferred securities which will have the terms described in
a prospectus supplement. The proceeds from the sale of a trust's preferred and
common securities will be used by the trust to purchase a series of
subordinated debt securities issued by Sempra Energy. The subordinated debt
securities will be held in trust by the property trustee for the benefit of the
holders of the preferred and common securities.
Under each preferred securities guarantee, Sempra Energy will agree to make
payments of distributions and payments on redemption or liquidation with
respect to a trust's preferred securities, but only to the extent the trust has
funds available to make those payments and has not made the payments. See
"Description of Preferred Securities Guarantees."
The assets of a trust available for distribution to the holders of its
preferred securities will be limited to payments from Sempra Energy under the
series of subordinated debt securities held by the trust. If Sempra Energy
fails to make a payment on the subordinated debt securities, the trust will not
have sufficient funds to make related payments, including distributions, on its
preferred securities.
Each preferred securities guarantee, when taken together with Sempra
Energy's obligations under the related series of subordinated debt securities,
the subordinated indenture and the related Declaration, will provide a full and
unconditional guarantee of amounts due on the preferred securities issued by a
trust.
Each Declaration will be qualified as an indenture under the Trust
Indenture Act. Each property trustee will act as indenture trustee for the
preferred securities to be issued by the applicable trust, in order to comply
with the provisions of the Trust Indenture Act.
Each series of preferred securities will have the terms, including
distributions, redemption, voting, liquidation rights and the other preferred,
deferred or other special rights or other restrictions as described in the
relevant Declaration or made part of the Declaration by the Trust Indenture Act
or the Delaware Business Trust Act. The terms of the preferred securities will
mirror the terms of the subordinated debt securities held by the trust.
The prospectus supplement relating to the preferred securities of a trust
will describe the specific terms of the preferred securities, including:
(a) the name of the preferred securities;
(b) the dollar amount and number of securities issued;
(c) any provision relating to deferral of distribution payments;
(d) the annual distribution rate(s) (or method of determining the
rate(s)), the payment date(s) and the record dates used to determine
the holders who are to receive distributions;
(e) the date from which distributions shall be cumulative;
(f) the optional redemption provisions, if any, including the prices, time
periods and other terms and conditions for which the preferred
securities shall be purchased or redeemed, in whole or in part;
(g) the terms and conditions, if any, upon which the applicable series of
subordinated debt securities may be distributed to holders of the
preferred securities;
(h) the voting rights, if any, of holders of the preferred securities;
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(i) any securities exchange on which the preferred securities will be
listed;
(j) whether the preferred securities are to be issued in book-entry form
and represented by one or more global certificates and, if so, the
depository for the global certificates and the specific terms of the
depositary arrangements; and
(k) any other relevant rights, preferences, privileges, limitations or
restrictions of the preferred securities.
Each prospectus supplement will describe certain United States federal
income tax considerations applicable to the purchase, holding and disposition
of the series of preferred securities covered by the prospectus supplement.
Liquidation Distribution Upon Dissolution
Unless otherwise specified in an applicable prospectus supplement, each
Declaration states that the related trust shall be dissolved:
(a) on the expiration of the term of the trust;
(b) upon the bankruptcy of Sempra Energy;
(c) upon the filing of a certificate of dissolution or its equivalent with
respect to Sempra Energy;
(d) after obtaining the consent of at least a majority in liquidation
amount of the preferred and common securities of the trust, voting
together as a single class;
(e) 90 days after the revocation of the articles of incorporation of
Sempra Energy (but only if the articles of incorporation are not
reinstated during that 90-day period);
(f) upon the distribution of the related subordinated debt securities
directly to the holders of the preferred and common securities of the
trust;
(g) upon the redemption of all of the common and preferred securities of
the trust; or
(h) upon entry of a court order for the dissolution of Sempra Energy, or
the trust.
Unless otherwise specified in an applicable prospectus supplement, in the
event of a dissolution, after the trust satisfies (whether by payment or
reasonable provision for payment) all amounts owed to creditors, the holders of
the preferred and common securities will be entitled to receive:
(a) cash equal to the aggregate liquidation amount of each preferred and
common security specified in an accompanying prospectus supplement,
plus accumulated and unpaid distributions to the date of payment;
unless
(b) subordinated debt securities in an aggregate principal amount equal to
the aggregate liquidation amount of the preferred and common
securities are distributed to the holders of the preferred and common
securities.
If the trust cannot pay the full amount due on its preferred and common
securities because insufficient assets are available for payment, then the
amounts payable by the trust on its preferred and common securities shall be
paid pro rata. However, if an event of default under the related Declaration
has occurred, the total amounts due on the preferred securities will be paid
before any distribution on the common securities.
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Declaration Events of Default
An event of default under the subordinated indenture relating to a series
of subordinated debt securities is an event of default under the Declaration of
the trust that owns these subordinated debt securities (a "Declaration event of
default"). See "Description of Debt Securities--Events of Default."
Sempra Energy and the regular trustees of a trust must file annually with
the property trustee for the trust a certificate stating whether or not they
are in compliance with all the applicable conditions and covenants under the
related Declaration.
Upon the occurrence of a Declaration event of default, the property trustee
of the applicable trust, as the sole holder of the subordinated debt securities
held by the trust, will have the right under the subordinated indenture to
declare the principal of, premium, if any, and interest on the subordinated
debt securities to be immediately due and payable.
If a property trustee fails to enforce its rights under the related
Declaration or the subordinated indenture, any holder of the preferred
securities issued by the related trust may, to the fullest extent permitted by
law and subject to the terms of the Declaration and the subordinated indenture,
sue Sempra Energy, or seek other remedies, to enforce the property trustee's
rights under the Declaration or the subordinated indenture without first
instituting a legal proceeding against the property trustee or any other
person.
If Sempra Energy fails to pay principal, premium, if any, or interest on a
series of subordinated debt securities when payable, then a holder of the
related preferred securities issued by a trust which owns the notes may
directly sue Sempra Energy or seek other remedies to collect its pro rata share
of payments owed.
Consolidation, Merger or Amalgamation of the Trusts
A trust may not consolidate, amalgamate, merge with or into, convert into,
or be replaced by or convey, transfer or lease its properties and assets
substantially as an entirety to any other corporation or other body ("Merger
Event"), except as described below or as described in "Liquidation Distribution
Upon Dissolution." A trust may, with the consent of a majority of its regular
trustees and without the consent of the holders of its preferred and common
securities, consolidate, amalgamate, merge with or into, convert into, or be
replaced by another trust, if:
(a) the successor entity either
(1) assumes all of the obligations of the trust relating to its
preferred and common securities; or
(2) substitutes for the trust's preferred and common securities other
securities substantially similar to the preferred and common
securities ("successor securities"), so long as the successor
securities rank the same as the preferred and common securities
for distributions and payments upon liquidation, redemption and
otherwise;
(b) Sempra Energy acknowledges a trustee of the successor entity who has
the same powers and duties as the property trustee of the trust as the
holder of the particular series of subordinated debt securities;
(c) the preferred securities are listed, or any successor securities will
be listed, upon notice of issuance, on the same national securities
exchange or other organization that the preferred securities are then
listed;
(d) the Merger Event does not cause its preferred securities or successor
securities to be downgraded by any national rating agency;
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<PAGE>
(e) the Merger Event does not adversely affect the rights, preferences and
privileges of the holders of its preferred and common securities or
successor securities in any material way (other than with respect to
any dilution of the holders' interest in the new entity);
(f) the successor entity has a purpose substantially identical to that of
the trust;
(g) prior to the Merger Event, Sempra Energy has received an opinion of
counsel from a nationally recognized law firm stating that:
(1) the Merger Event does not adversely affect the rights of the
holders of the trust's preferred securities or any successor
securities in any material way (other than with respect to any
dilution of the holders' interest in the new entity); and
(2) following the Merger Event, neither the trust nor the successor
entity will be required to register as an investment company under
the Investment Company Act of 1940, as amended; and
(h) Sempra Energy guarantees the obligations of the successor entity under
the successor securities in the same manner as in the applicable
preferred securities guarantee and the guarantee of the common
securities for the trust.
In addition, unless all of the holders of the preferred and common
securities approve otherwise, a trust shall not consolidate, amalgamate, merge
with or into, convert into, or be replaced by any other entity or permit any
other entity to consolidate, amalgamate, merge with or into, or replace it, if
the transaction would cause the trust or the successor entity to be classified
other than as a grantor trust for United States federal income tax purposes.
Voting Rights; Amendment of Declarations
The holders of preferred securities have no voting rights except as
discussed under "--Consolidation, Merger or Amalgamation of the Trusts" and
"Description of the Preferred Securities Guarantees--Amendments and
Assignment," and as otherwise required by law and the Declaration for the
trust.
A Declaration may be amended if approved by a majority of the regular
trustees of the applicable trust. However, if any proposed amendment provides
for, or the regular trustees otherwise propose to effect:
(a) any action that would adversely affect the powers, preferences or
special rights of the trust's preferred and common securities, whether
by way of amendment to the Declaration or otherwise; or
(b) the dissolution, winding-up or termination of the trust other than
pursuant to the terms of its Declaration,
then the holders of the trust's preferred and common securities as a single
class will be entitled to vote on the amendment or proposal. In that case, the
amendment or proposal will be effective only if approved by at least a majority
in liquidation amount of the preferred and common securities affected by the
amendment or proposal.
If any amendment or proposal referred to in clause (a) above would
adversely affect only the preferred securities or the common securities of a
trust, then only the affected class will be entitled to vote on the amendment
or proposal and the amendment or proposal will only be effective with the
approval of at least a majority in liquidation amount of the affected class.
No amendment may be made to a Declaration if the amendment would:
(a) cause the related trust to be characterized as other than a grantor
trust for United States federal income tax purposes;
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<PAGE>
(b) adversely affect the powers, liabilities or duties of the property
trustee or the Delaware trustee; or
(c) cause the related trust to be deemed to be an "investment company"
which is required to be registered under the Investment Company Act.
The holders of a majority in aggregate liquidation amount of the preferred
securities of each trust have the right to:
(a) direct the time, method and place of conducting any proceeding for any
remedy available to the property trustee of the trust; or
(b) direct the exercise of any trust or power conferred upon the property
trustee under that trust's Declaration, including the right to direct
the property trustee, as the holder of a series of subordinated debt
securities, to:
(1) exercise the remedies available under the subordinated indenture
with respect to the subordinated debt securities;
(2) waive any event of default under the subordinated indenture that
is waivable; or
(3) cancel an acceleration of the principal of the subordinated debt
securities.
However, if the subordinated indenture requires the consent of the holders
of more than a majority in aggregate principal amount of a series of
subordinated debt securities (a "super-majority"), then the property trustee
for the series must get approval of the holders of a super-majority in
liquidation amount of the series of preferred securities.
In addition, before taking any of the foregoing actions, the property
trustee must obtain an opinion of counsel stating that, as a result of the
action, the trust will continue to be classified as a grantor trust for United
States federal income tax purposes.
The property trustee of a trust will notify all preferred securities
holders of the trust of any notice received from the trustee of the
subordinated indenture with respect to the subordinated debt securities held by
the trust.
As described in each Declaration, the property trustee may hold a meeting
to have preferred securities holders vote on a change or have them approve the
change by written consent.
If a vote of preferred securities holders is taken or a consent is
obtained, any preferred securities that are owned by Sempra Energy or any of
its affiliates will, for purposes of the vote or consent, be treated as if they
were not outstanding. This means:
(a) Sempra Energy and any of its affiliates will not be able to vote on or
consent to matters requiring the vote or consent of holders of
preferred securities; and
(b) any preferred securities owned by Sempra Energy or any of its
affiliates will not be counted in determining whether the required
percentage of votes or consents has been obtained.
Removal and Replacement of Trustees
Only the holder of a trust's common securities has the right to remove, or
replace the regular trustees and, prior to an event of default, property and
Delaware trustees of the trust. If an event of default occurs, only the holders
of a trust's preferred securities have the right to remove or replace the
property and Delaware trustees. The resignation or removal of any trustee and
the appointment of a successor trustee shall be effective only on the
acceptance of appointment by the successor trustee in accordance with the
provisions of the Declaration for the trust.
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Information Concerning the Property Trustees
For matters relating to compliance with the Trust Indenture Act, the
property trustee of each trust will have all of the duties and responsibilities
of an indenture trustee under the Trust Indenture Act. Each property trustee,
other than during the occurrence and continuance of a Declaration event of
default under the applicable trust, undertakes to perform only the duties as
are specifically set forth in the applicable Declaration and, upon a
Declaration event of default, must use the same degree of care and skill as a
prudent person would exercise or use in the conduct of his or her own affairs.
Subject to this provision, a property trustee is under no obligation to
exercise any of the powers given it by the applicable Declaration at the
request of any holder of preferred securities unless it is offered reasonable
security or indemnity against the costs, expenses and liabilities that it might
incur. However, the holders of the preferred securities will not be required to
offer an indemnity where the holders, by exercising their voting rights, direct
the property trustee to take any action following a Declaration event of
default.
Miscellaneous
The regular trustees of each trust are authorized and directed to conduct
the affairs of and to operate the trust in such a way that:
(a) it will not be deemed to be an "investment company" required to be
registered under the Investment Company Act;
(b) it will be classified as a grantor trust for United States federal
income tax purposes; and
(c) the subordinated debt securities held by it will be treated as
indebtedness of Sempra Energy for United States federal income tax
purposes.
Sempra Energy and the regular trustees of a trust are authorized to take
any action (so long as it is consistent with applicable law or the applicable
certificate of trust or Declaration) that Sempra Energy and the regular
trustees of the trust determine to be necessary or desirable for such purposes.
Registered holders of preferred securities have no preemptive or similar
rights.
A trust may not borrow money, issue debt, execute mortgages or pledge any
of its assets.
Governing Law
Each Declaration and the related preferred securities will be governed by
and construed in accordance with the laws of the State of Delaware.
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DESCRIPTION OF PREFERRED SECURITIES GUARANTEES
General
Sempra Energy will execute a preferred securities guarantee, which benefits
the holders of preferred securities, at the time that a trust issues those
preferred securities. Each preferred securities guarantee will be qualified as
an indenture under the Trust Indenture Act. The Bank of New York will act as
indenture trustee ("preferred securities guarantee trustee") under each
preferred securities guarantee for the purposes of compliance with the Trust
Indenture Act.
The preferred securities guarantee trustee will hold each preferred
securities guarantee for the benefit of the preferred securities holders of the
applicable trust.
Sempra Energy will irrevocably agree, as described in each preferred
securities guarantee, to pay in full, to the holders of the preferred
securities issued by the applicable trust, the preferred securities guarantee
payments (as defined below) (except to the extent previously paid), when and as
due, regardless of any defense, right of set-off or counterclaim which the
trust may have or assert. The following payments, to the extent not paid by a
trust ("preferred securities guarantee payments"), will be covered by the
applicable preferred securities guarantee:
(a) any accrued and unpaid distributions required to be paid on the
applicable preferred securities, to the extent that the trust has funds
available to make the payment;
(b) the redemption price, to the extent that the trust has funds
available to make the payment; and
(c) upon a voluntary or involuntary dissolution and liquidation of the
trust (other than in connection with a distribution of subordinated debt
securities to holders of the preferred securities or the redemption of all
the preferred securities), the lesser of:
(1) the aggregate of the liquidation amount specified in the
prospectus supplement for each preferred security plus all accrued and
unpaid distributions on the preferred security to the date of payment,
to the extent the trust has funds available to make the payment; and
(2) the amount of assets of the trust remaining available for
distribution to holders of its preferred securities upon a dissolution
and liquidation of the trust.
Sempra Energy's obligation to make a preferred securities guarantee payment
may be satisfied by directly paying the required amounts to the holders of the
preferred securities or by causing the trust to pay the amounts to the holders.
No single document executed by Sempra Energy relating to the issuance of
preferred securities will provide for its full, irrevocable and unconditional
guarantee of the preferred securities. It is only the combined operation of
Sempra Energy's obligations under the subordinated indenture, the subordinated
debt securities and the applicable preferred securities guarantee and
Declaration that has the effect of providing a full, irrevocable and
unconditional guarantee of a trust's obligations under its preferred
securities.
Status of the Preferred Securities Guarantees
Each preferred securities guarantee will constitute an unsecured obligation
of Sempra Energy and will rank:
(a) subordinate and junior in right of payment to all of Sempra Energy's
other liabilities (except any guarantee now or hereafter issued by Sempra
Energy in respect of any preferred or preference stock of any of its
affiliates);
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(b) equal with any guarantee now or hereafter issued by Sempra Energy in
respect of the most senior preferred or preference stock now or hereafter
issued by Sempra Energy, and with any guarantee now or hereafter issued by
it in respect of any preferred or preference stock of any of its
affiliates; and
(c) senior to Sempra Energy's common stock.
Each Declaration will require that the holder of preferred securities
accept the subordination provisions and other terms of the preferred securities
guarantee. Each preferred securities guarantee will constitute a guarantee of
payment and not of collection (in other words the holder of the guaranteed
security may sue Sempra Energy, or seek other remedies, to enforce its rights
under the preferred securities guarantee without first suing any other person
or entity). A preferred securities guarantee will not be discharged except by
payment of the preferred securities guarantee payments in full to the extent
not previously paid or upon distribution to the applicable preferred securities
holders of the corresponding series of subordinated debt securities pursuant to
the appropriate Declaration.
Amendments and Assignment
Except with respect to any changes which do not adversely affect the rights
of holders of a series of preferred securities in any material respect (in
which case no consent of the holders will be required), a preferred securities
guarantee may be amended only with the prior approval of the holders of at
least a majority in aggregate liquidation amount of the preferred securities
(excluding any the preferred securities held by Sempra Energy or any of its
affiliates). A description of the way to obtain any approval is described under
"Description of the Preferred Securities--Voting Rights; Amendment of
Declarations." All guarantees and agreements contained in a preferred
securities guarantee will be binding on Sempra Energy's successors, assigns,
receivers, trustees and representatives and are for the benefit of the holders
of the applicable preferred securities.
Preferred Securities Guarantee Events of Default
An event of default under a preferred securities guarantee occurs if Sempra
Energy fails to make any of its required payments or perform its obligations
under the preferred securities guarantee.
The holders of at least a majority in aggregate liquidation amount of the
preferred securities relating to each preferred securities guarantee (excluding
any preferred securities held by Sempra Energy or any of its affiliates) will
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the preferred securities guarantee
trustee relating to the preferred securities guarantee or to direct the
exercise of any trust or power given to the preferred securities guarantee
trustee under the preferred securities guarantee.
Information Concerning the Preferred Securities Guarantee Trustees
The preferred securities guarantee trustee under a preferred securities
guarantee, other than during the occurrence and continuance of a default under
the preferred securities guarantee, will perform only the duties that are
specifically described in the preferred securities guarantee. After such a
default, the preferred securities guarantee trustee will exercise the same
degree of care and skill as a prudent person would exercise or use in the
conduct of his or her own affairs. Subject to this provision, a preferred
securities guarantee trustee is under no obligation to exercise any of its
powers as described in the applicable preferred securities guarantee at the
request of any holder of covered preferred securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that it might
incur.
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Termination of the Preferred Securities Guarantees
Each preferred securities guarantee will terminate once the applicable
preferred securities are paid in full or upon distribution of the corresponding
series of subordinated debt securities to the holders of the preferred
securities. Each preferred securities guarantee will continue to be effective
or will be reinstated if at any time any holder of preferred securities issued
by the applicable trust must restore payment of any sums paid under the
preferred securities or the preferred securities guarantee.
Governing Law
The preferred securities guarantees will be governed by and construed in
accordance with the laws of the State of New York.
Relationship Among Preferred Securities, Preferred Securities Guarantees and
Subordinated Debt Securities Held By Each Trust
Payments of distributions and redemption and liquidation payments due on
each series of preferred securities (to the extent the applicable trust has
funds available for the payments) will be guaranteed by Sempra Energy to the
extent described under "Description of the Preferred Securities Guarantees." No
single document executed by Sempra Energy in connection with the issuance of
any series of preferred securities will provide for its full, irrevocable and
unconditional guarantee of the preferred securities. It is only the combined
operation of Sempra Energy's obligations under the applicable preferred
securities guarantee, Declaration, subordinated indenture and subordinated debt
securities that has the effect of providing a full, irrevocable and
unconditional guarantee of a trust's obligations under its preferred
securities.
As long as Sempra Energy makes payments of interest and other payments when
due on the subordinated debt securities held by a trust, the payments will be
sufficient to cover the payment of distributions and redemption and liquidation
payments due on the preferred securities issued by that trust, primarily
because:
(a) the aggregate principal amount of the subordinated debt securities
will be equal to the sum of the aggregate liquidation amount of the
preferred and common securities;
(b) the interest rate and interest and other payment dates on the
subordinated debt securities will match the distribution rate and
distribution and other payment dates for the preferred securities;
(c) Sempra Energy shall pay for any and all costs, expenses and
liabilities of each trust except the trust's obligations under its
preferred securities (and Sempra Energy has agreed to guarantee such
payment); and
(d) each Declaration provides that the related trust will not engage in
any activity that is not consistent with the limited purposes of the
trust.
If and to the extent that Sempra Energy does not make payments on the
subordinated debt securities, the trust will not have funds available to make
payments of distributions or other amounts due on its preferred securities. In
those circumstances, you will not be able to rely upon the preferred securities
guarantee for payment of these amounts. Instead, you may directly sue Sempra
Energy or seek other remedies to collect your pro rata share of payments owed.
If you sue Sempra Energy to collect payment, then Sempra Energy will assume
your rights as a holder of preferred securities under the trust's Declaration
to the extent Sempra Energy makes a payment to you in any legal action.
A holder of any preferred security may sue Sempra Energy, or seek other
remedies, to enforce its rights under the applicable preferred securities
guarantee without first suing the applicable
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preferred securities guarantee trustee, the trust which issued the preferred
security or any other person or entity.
EXPERTS
The consolidated financial statements, the related financial statement
schedule and the supplemental schedule of summarized financial information as
of December 31, 1998 and 1997 and for each of the three years in the period
ended December 31, 1998 incorporated by reference in this prospectus have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
reports, which are incorporated by reference herein, and have been so
incorporated in reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
VALIDITY OF THE SECURITIES AND THE GUARANTEES
John R. Light, Esq., Executive Vice President and General Counsel of Sempra
Energy will pass upon the validity of the securities and the guarantees.
Richards, Layton & Finger, P.A., special Delaware counsel to Sempra Energy and
the trusts, will pass upon certain matters of Delaware law relating to the
validity of the preferred securities. Latham & Watkins, Los Angeles, will pass
upon the validity of the securities and the guarantees for any underwriters or
agents.
PLAN OF DISTRIBUTION
We may sell the securities described in this prospectus from time to time
in one or more transactions
(a) to purchasers directly;
(b) to underwriters for public offering and sale by them;
(c) through agents;
(d) through dealers; or
(e) through a combination of any of the foregoing methods of sale.
We may distribute the securities from time to time in one or more
transactions at:
(a) a fixed price or prices, which may be changed;
(b) market prices prevailing at the time of sale;
(c) prices related to such prevailing market prices; or
(d) negotiated prices.
Direct Sales
We may sell the securities directly to institutional investors or others
who may be deemed to be underwriters within the meaning of the Securities Act
with respect to any resale of the securities. A prospectus supplement will
describe the terms of any sale of securities we are offering hereunder.
To Underwriters
The applicable prospectus supplement will name any underwriter involved in
a sale of securities. Underwriters may offer and sell securities at a fixed
price or prices, which may be changed, or from time to time at market prices or
at negotiated prices. Underwriters may be deemed to have received compensation
from us from sales of securities in the form of underwriting discounts
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or commissions and may also receive commissions from purchasers of securities
for whom they may act as agent. Credit Suisse First Boston Corporation,
Goldman, Sachs & Co., Merrill Lynch & Co., Morgan Stanley Dean Witter and
Salomon Smith Barney Inc. may be involved in any at the market offering of
equity securities by or on our behalf.
Underwriters may sell securities to or through dealers, and such dealers
may receive compensation in the form of discounts, concessions or commissions
from the underwriters and/or commissions (which may be changed from time to
time) from the purchasers for whom they may act as agent.
Unless otherwise provided in a prospectus supplement, the obligations of
any underwriters to purchase securities will be subject to certain conditions
precedent, and the underwriters will be obligated to purchase all the
securities if any are purchased.
Through Agents and Dealers
We will name any agent involved in a sale of securities, as well as any
commissions payable by us to such agent, in a prospectus supplement. Unless we
indicate differently in the prospectus supplement, any such agent will be
acting on a reasonable efforts basis for the period of its appointment.
If we utilize a dealer in the sale of the securities being offered pursuant
to their prospectus, we will sell the securities to the dealer, as principal.
The dealer may then resell the securities to the public at varying prices to be
determined by the dealer at the time of resale.
Delayed Delivery Contracts
If we so specify in the applicable prospectus supplement, we will authorize
underwriters, dealers and agents to solicit offers by certain institutions to
purchase the securities pursuant to contracts providing for payment and
delivery on future dates. Such contracts will be subject to only those
conditions set forth in the applicable Prospectus Supplement.
The underwriters, dealers and agents will not be responsible for the
validity or performance of the contracts. We will set forth in the prospectus
supplement relating to the contracts the price to be paid for the securities,
the commissions payable for solicitation of the contracts and the date in the
future for delivery of the securities.
General Information
Underwriters, dealers and agents participating in a sale of the securities
may be deemed to be underwriters as defined in the Securities Act, and any
discounts and commissions received by them and any profit realized by them on
resale of the securities may be deemed to be underwriting discounts and
commissions, under the Securities Act. We may have agreements with
underwriters, dealers and agents to indemnify them against certain civil
liabilities, including liabilities under the Securities Act, and to reimburse
them for certain expenses.
Underwriters or agents and their associates may be customers of, engage in
transactions with or perform services for us or our affiliates in the ordinary
course of business.
Unless we indicate differently in a prospectus supplement, we will not list
the securities on any securities exchange. The securities will be a new issue
of securities with no established trading market. Any underwriters that
purchase securities for public offering and sale may make a market in such
securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. We make no assurance
as to the liquidity of or the trading markets for any securities.
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No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus. You
must not rely on any unauthorized information or representations. This
prospectus is an offer to sell only the QUIPS offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so. The
information contained in this prospectus is current only as of its date.
----------------
TABLE OF CONTENTS
Prospectus Supplement
<TABLE>
<CAPTION>
Page
----
<S> <C>
Forward-Looking Statements............................................... S-2
Summary Information--Q&A................................................. S-3
Recent Developments...................................................... S-6
Risk Factors............................................................. S-8
Accounting Treatment..................................................... S-11
Use of Proceeds.......................................................... S-12
Capitalization........................................................... S-13
Ratio of Sempra Energy Earnings to Combined Fixed Charges................ S-14
Summary Historical Condensed Consolidated Financial Information.......... S-15
Summary Unaudited Condensed Consolidated Pro Forma Financial
Information............................................................. S-17
Description of the Series A QUIPS........................................ S-22
Description of the Series A QUIDS........................................ S-32
Book-Entry Issuance...................................................... S-44
Material United States Federal Income Tax Considerations................. S-47
Underwriting............................................................. S-53
Legal Matters............................................................ S-55
Independent Accountants.................................................. S-55
Prospectus
About This Prospectus.................................................... 1
Forward-Looking Statements............................................... 2
Where You Can Find More Information...................................... 2
Sempra Energy............................................................ 4
Sempra Energy Holdings................................................... 4
The Trusts............................................................... 5
Use of Proceeds.......................................................... 6
Ratio of Sempra Energy Earnings to Fixed Charges and Preferred Stock
Dividends............................................................... 6
Description of Securities................................................ 7
Description of Debt Securities........................................... 7
Description of Sempra Energy's Common Stock and Preferred Stock.......... 18
Description of Preferred Securities...................................... 22
Description of Preferred Securities Guarantees........................... 28
Experts.................................................................. 31
Validity of the Securities and the Guarantees............................ 31
Plan of Distribution..................................................... 31
</TABLE>
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8,000,000 Preferred Securities
Sempra Energy Capital Trust I
8.90% Cumulative Quarterly
Income Preferred Securities, Series A (QUIPSSM)
(Liquidation Amount $25 per QUIPS)
Fully and unconditionally guaranteed, as described herein, by
Sempra Energy
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PROSPECTUS SUPPLEMENT
----------------
Goldman, Sachs & Co.
Merrill Lynch & Co.
Morgan Stanley Dean Witter
Salomon Smith Barney
Electronic Syndicate Managers
Charles Schwab & Co., Inc.
PaineWebber Incorporated
Prudential Securities
Representatives of the Underwriters
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