<PAGE>
Filed pursuant to Rule No. 424(b)(5)
Registration Nos. 33-51749 and 33-64343
Prospectus Supplement
(To Prospectus dated November 26, 1997)
WISCONSIN ELECTRIC POWER COMPANY
$150,000,000
6 1/2% DEBENTURES DUE JUNE 1, 2028
Interest on the 6 1/2% Debentures due June 1, 2028 (the "Debentures") of
Wisconsin Electric Power Company (the "Company") is payable on June 1 and
December 1 of each year, commencing December 1, 1998. The Debentures are not
redeemable prior to maturity. The Debentures will be issued initially under a
book-entry only system and will be represented by one or more global
securities registered in the name of The Depository Trust Company ("DTC"), as
depositary, or its nominee. Book-Entry Interests (as defined in the
accompanying Prospectus) in such global securities will be shown on, and
transfers thereof will be effected only through, records maintained by DTC or
its nominee for such global securities and on the records of DTC and its
participants. Except as described herein and in the accompanying Prospectus,
Debentures in definitive form will not be issued and owners of Book-Entry
Interests will not be considered the holders thereof. The Debentures will
trade in DTC's Same-Day Funds Settlement System. All payments of principal and
interest on global securities will be made by the Company in immediately
available funds. See "Certain Terms of the Debentures" herein and "Description
of Debt Securities" and "Book-Entry Only System" in the accompanying
Prospectus.
--------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public(/1/) Commissions(/2/) Company(/3/)
- -----------------------------------------------------------
<S> <C> <C> <C>
Per Debenture 99.477% .875% 98.602%
- -----------------------------------------------------------
Total $149,215,500 $1,312,500 $147,903,000
- -----------------------------------------------------------
</TABLE>
(1) Plus accrued interest, if any, from June 1, 1998.
(2) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(3) Before deduction of expenses payable by the Company, estimated at
$200,000.
--------------------------------------------------
The Debentures are offered subject to prior sale, when, as and if delivered to
and accepted by the Underwriters, and subject to certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify such offer and to
reject orders in whole or in part. It is expected that the Debentures will be
ready for delivery through the book-entry facilities of DTC, on or about June
1, 1998, against payment therefor in immediately available funds.
CHASE SECURITIES INC.
BEAR, STEARNS & CO. INC.
SALOMON SMITH BARNEY
ROBERT W. BAIRD & CO.
INCORPORATED
CLEARY GULL REILAND & MCDEVITT INC.
The date of this Prospectus Supplement is May 27, 1998.
<PAGE>
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE DEBENTURES,
INCLUDING OVERALLOTMENT, STABILIZING TRANSACTIONS AND SYNDICATE SHORT COVERING
TRANSACTIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING".
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Reference is made to "Incorporation of Certain Documents by Reference" in
the accompanying Prospectus. At the date of this Prospectus Supplement, the
documents incorporated by reference herein include the Company's Annual Report
on Form 10-K for the year ended December 31, 1997, the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1998 and the Company's
Current Report on Form 8-K dated as of April 28, 1998.
CERTAIN SUMMARY FINANCIAL INFORMATION
The following summary financial information is qualified in its entirety by
the financial statements and other information included in the documents
incorporated by reference herein and in the accompanying Prospectus.
CONDENSED INCOME AND RELATED INFORMATION OF THE COMPANY FOR CERTAIN PERIODS
<TABLE>
<CAPTION>
(UNAUDITED)
TWELVE MONTHS
YEAR ENDED DECEMBER 31, ENDED
---------------------------------------------------------- MARCH 31,
1993 1994 (A) 1995 1996 1997 (B) 1998 (B) (C)
---------- ---------- ---------- ---------- ---------- -------------
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues...... $1,693,235 $1,742,192 $1,770,484 $1,773,820 $1,789,602 $1,789,900
Operating Income........ $ 265,436 $ 263,273 $ 329,021 $ 305,844 $ 199,459 $ 201,233
Net Income.............. $ 192,080 $ 181,754 $ 240,668 $ 211,315 $ 70,615 $ 77,224
Ratio of Earnings to
Fixed Charges (D)...... 3.7x 3.5x 4.4x 4.1x 1.9x 1.9x
</TABLE>
CAPITALIZATION OF THE COMPANY AT MARCH 31, 1998 AND
AS OF THAT DATE AS ADJUSTED FOR THE DEBENTURES
(UNAUDITED)
<TABLE>
<CAPTION>
AS ADJUSTED
---------------------
AMOUNT AMOUNT PERCENTAGE
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-Term Debt--due after one year (E)......... $1,449,114 $1,599,114 48.0%
Preferred Stock--redemption not required....... 30,450 30,450 0.9
Common Stock Equity............................ 1,700,182 1,700,182 51.1
---------- ---------- -----
Total Capitalization......................... $3,179,746 $3,329,746 100.0%
========== ========== =====
Short-Term Debt (E) (F)........................ $ 209,278 $ 59,278 --
========== ========== =====
</TABLE>
- --------
(A) Operating Income, Net Income and Ratio of Earnings to Fixed Charges
reflect a nonrecurring $73.9 million charge in 1994 ($45 million net of
tax) related to the Company's restructuring program.
S-2
<PAGE>
(B) Operating Income, Net Income and Ratio of Earnings to Fixed Charges
reflect a nonrecurring $21.9 million charge in June 1997 ($13.2 million
net of tax) related to the write-off of Primergy Corporation merger
expenses and a nonrecurring $30.0 million writedown in December 1997
($18.1 million net of tax) of equipment purchased for the Kimberly
Cogeneration Project. For a discussion of other items affecting 1997
results of operations, including extended outages at Point Beach Nuclear
Plant during 1997 that increased fuel and purchased power expenses and
that increased other operation and maintenance expenses, and including
retail electric and gas rate decreases that became effective in February
1997, see Item 7. "Management's Discussion and Analysis of Financial
Condition and Results of Operations" in the Company's Annual Report on
Form 10-K for the year ended December 31, 1997, incorporated by reference
herein.
(C) See "Recent Developments--Financial Results from Operations for the Twelve
Months Ended March 31, 1998."
(D) For the purpose of computing this ratio, earnings consist of net income
(including total allowances for funds used during construction) plus
current and deferred income taxes, deferred investment tax credits and
fixed charges. Fixed charges consist of interest charges, amortization of
debt expenses, and amounts representing the interest factors for nuclear
fuel rental expense and for a long-term power purchase contract accounted
for as a capital lease.
(E) Does not include $77.2 million of long-term debt due currently.
(F) The "as adjusted" amount includes a $50 million loan under the Short Term
Borrowing Agreement described in "Description of New Bonds--Regarding the
Trustee" in the accompanying Prospectus.
USE OF PROCEEDS AND CAPITAL REQUIREMENTS
The net proceeds from the sale of the Debentures offered hereby will be
added to the general funds of the Company and applied to the repayment of
short-term borrowings and for other general corporate purposes, including the
possible optional redemption of $3.4 million of the Company's First Mortgage
Bonds, 9 1/8% Series due September 1, 2024. Short-term borrowings are expected
to aggregate approximately $188 million prior to the receipt of the proceeds
of this offering. The interest rates on the short-term borrowings that the
Company currently intends to repay with proceeds of this offering approximate
5.57%. Proceeds from the sale of the Debentures may be temporarily invested
pending disposition.
The Company's estimated capital requirements for the two years ending
December 31, 1999 aggregate approximately $925 million (of which approximately
$80 million has been spent during the three months ended March 31, 1998),
including $719 million for the Company's continuing construction program, $70
million for contributions to the external nuclear decommissioning trust fund,
and $155 million for maturing long term debt.
The Company anticipates that approximately $683 million of the estimated
capital requirements for such two-year period will be obtained from internal
operations. The Company's capital requirements are subject to revision from
time to time.
Certain of the information contained or incorporated by reference in this
Prospectus Supplement is based on current expectations. These statements are
forward looking and involve a number of risks and uncertainties. The Company's
actual expenditures or results may differ materially. See "Forward-Looking
Statements and Cautionary Factors" in the accompanying Prospectus.
RECENT DEVELOPMENTS
Financial Results from Operations for the Twelve Months Ended March 31,
1998: Net income for the twelve months ended March 31, 1998 increased $6.6
million or 9.4% compared to calendar year 1997. The higher net income reflects
interim Wisconsin retail electric, gas and City of Milwaukee steam
S-3
<PAGE>
rate increases that became effective January 1, 1998. The table below provides
the Company's unaudited net income for the three months ended March 31, 1998
and March 31, 1997:
<TABLE>
<CAPTION>
(UNAUDITED)
THREE MONTHS
ENDED MARCH 31,
---------------
1998
(A) 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Net Income................................................ $50,296 $43,687
</TABLE>
- --------
(A) Reflects interim Wisconsin retail electric, gas and City of Milwaukee
steam rate increases that became effective January 1, 1998.
1998 Test Year: On December 23, 1997, the Public Service Commission of
Wisconsin ("PSCW") issued an order authorizing the Company to implement
interim Wisconsin retail rate increases effective January 1, 1998 in the
amount of $154.2 million on an annualized basis, including $134.9 million for
electric operations, $18.5 million for gas operations and $0.8 million for
City of Milwaukee steam operations. The PSCW authorized permanent annualized
Wisconsin retail base rate increases effective May 1, 1998 in the amount of
$160.2 million or 12.7% for electric operations, $18.5 million or 5.4% for gas
operations, and $1.2 million or 9.3% for City of Milwaukee steam operations.
The increases were based upon an authorized regulatory return on common equity
of 12.2%.
CERTAIN TERMS OF THE DEBENTURES
The following description of the particular terms of the Debentures
supplements, and to the extent inconsistent therewith replaces, the
description of the general terms and provisions of the Debentures set forth in
the accompanying Prospectus under "Description of Debt Securities," to which
description reference is hereby made.
The Debentures will be unsecured general obligations of the Company and will
be issued as a separate series of securities under an Indenture dated as of
December 1, 1995 (the "Indenture") between the Company and Firstar Trust
Company, as Trustee. At March 31, 1998, the Company had $300,000,000 principal
amount of Securities (as defined in the accompanying Prospectus) outstanding
under the Indenture. At March 31, 1998, the Company had $863,443,000 principal
amount of secured debt outstanding. The Indenture does not limit the Company's
ability to issue additional First Mortgage Bonds or to enter into sale and
leaseback transactions. See "Description of New Bonds" in the accompanying
Prospectus.
MATURITY AND INTEREST
The Debentures will be limited to $150,000,000 aggregate principal amount
and will mature on June 1, 2028. Each Debenture will bear interest from June
1, 1998 or from the most recent interest payment date to which interest has
been paid, at the rate per annum specified on the cover page hereof, payable
semi-annually on June 1 and December 1, commencing December 1, 1998, to the
person in whose name such Debenture is registered at the close of business on
the preceding May 15 and November 15, respectively.
NO REDEMPTION PRIOR TO MATURITY
The Debentures will not be redeemable prior to maturity at the option of the
Company or the holders thereof.
S-4
<PAGE>
OTHER
The Indenture provides that, so long as any of the Debentures remain
outstanding, the Company will not, and will not permit any Subsidiary to,
create or suffer to be created or to exist any mortgage, pledge, security
interest, or other lien on any of its properties or assets now owned or
hereafter acquired to secure any indebtedness, without making effective
provision whereby the Debentures shall be equally and ratably secured, subject
to termination upon defeasance and to certain other significant exceptions
described under "Description of Debt Securities--Certain Covenants--
Limitations on Liens" in the accompanying Prospectus, including the possible
issuance of additional First Mortgage Bonds. Future series of Securities
issued under the Indenture may or may not have different covenants.
The Debentures will be subject to defeasance under the conditions described
in the Prospectus.
BOOK-ENTRY PROCEDURES
The Debentures will be represented by one or more global securities
registered in the name of DTC or its nominee. Book-Entry Interests in such
global securities will be shown on, and transfers thereof will be effected
only through, records maintained by DTC or its nominee for such global
securities and on the records of DTC Participants. Except as described below
and in the accompanying Prospectus, Debentures in definitive form will not be
issued and owners of Book-Entry Interests will not be considered the holders
thereof.
The laws of some states require that certain purchasers of securities take
physical delivery of such securities in definitive form. Such limits and such
laws may impair the ability to transfer beneficial interests in the global
securities.
In the event that the book-entry system is discontinued, or DTC is at any
time unwilling or unable to continue as depository, and a successor depository
is not appointed by the Company within 90 days, the Company will issue
individual Debentures in certificated form to owners of Book-Entry Interests
in exchange for the Debentures held by DTC or its nominee, as the case may be.
Settlement for the Debentures will be made by the Underwriters in
immediately available funds. All payments of principal and interest on global
securities will be made by the Company in immediately available funds.
See "Book-Entry Only System" in the accompanying Prospectus.
S-5
<PAGE>
UNDERWRITING
Under the terms and conditions set forth in the Underwriting Agreement dated
the date hereof, the Company has agreed to sell to each of the Underwriters
named below, and each of the Underwriters has severally agreed to purchase,
the respective principal amount of the Debentures set forth opposite its name
below:
<TABLE>
<CAPTION>
UNDERWRITER PRINCIPAL AMOUNT
----------- ----------------
<S> <C>
Chase Securities Inc. ................................... $ 40,000,000
Bear, Stearns & Co. Inc. ................................ $ 30,000,000
Salomon Brothers Inc .................................... $ 30,000,000
Robert W. Baird & Co. Incorporated....................... $ 20,000,000
Cleary Gull Reiland & McDevitt Inc....................... $ 20,000,000
Powell Capital Markets, Inc. ............................ $ 10,000,000
------------
Total................................................ $150,000,000
============
</TABLE>
The Underwriting Agreement provides that the several obligations of the
Underwriters to pay for and accept delivery of the Debentures are subject to
approval of certain legal matters by their counsel and to certain other
conditions. The Underwriters' obligations are such that they are committed to
take and pay for all of the Debentures offered hereby if any are taken.
The Underwriters have advised the Company that they propose to offer all or
part of the Debentures directly to purchasers at the initial public offering
price set forth on the cover page of this Prospectus Supplement, and to
certain securities dealers at such price less a concession not in excess of
.50% of the principal amount of the Debentures. The Underwriters may allow,
and such dealers may reallow to certain brokers and dealers, a concession not
in excess of .25% of the principal amount of the Debentures. After the
Debentures are released for sale to the public, the offering price and other
selling terms may from time to time be varied.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended, or to make contribution with respect thereto.
The Debentures are a new issue of securities with no established trading
market. The Company does not intend to apply for listing of the Debentures on
a national securities exchange. The Company has been advised by the
Underwriters that the Underwriters presently intend to make a market in the
Debentures 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 Debentures.
In connection with the offering of the Debentures, Chase Securities Inc., on
behalf of the Underwriters, may engage in overallotment, stabilizing
transactions and syndicate covering transactions in accordance with Regulation
M under the Securities Exchange Act of 1934, as amended. Overallotment
involves sales in excess of the offering size, which creates a short position
for the Underwriters. Stabilizing transactions involve bids to purchase the
Debentures in the open market for the purpose of pegging, fixing or
maintaining the price of the Debentures. Syndicate covering transactions
involve purchases of the Debentures in the open market after the distribution
has been completed in order to cover short positions. Such stabilizing
transactions and syndicate covering transactions may cause the price of the
Debentures to be higher than it would otherwise be in the absence of such
transactions. Such activities, if commenced, may be discontinued at any time.
Certain of the Underwriters or their affiliates have engaged, and may in the
future engage, in various general financing and banking transactions with the
Company and its affiliates.
S-6
<PAGE>
PROSPECTUS
WISCONSIN ELECTRIC POWER COMPANY
FIRST MORTGAGE BONDS
DEBT SECURITIES
----------------
Wisconsin Electric Power Company (the "Company") may offer from time to time
up to $400,000,000 aggregate principal amount of its First Mortgage Bonds (the
"New Bonds") or its unsecured debt securities (the "Debt Securities") in one
or more series in amounts, at prices and upon terms to be determined at the
time or times of sale. The title, aggregate principal amount, maturity,
interest rate, payment dates, redemption provisions, sinking fund, if any, and
other terms of each series of the New Bonds or the Debt Securities will be set
forth in a supplement to this Prospectus (a "Prospectus Supplement").
The Company may sell New Bonds or Debt Securities to or through underwriters
or dealers and also may sell New Bonds or Debt Securities directly to other
purchasers or through agents. The Prospectus Supplement relating to each
series of New Bonds or Debt Securities will set forth the terms of the
offering of the New Bonds or Debt Securities, including, to the extent
applicable, the initial offering price, the proceeds to the Company, the
underwriting discounts or commissions, and any other discounts or concessions
to be allowed or re-allowed to dealers. The principal underwriters with
respect to each series sold to or through underwriters will be named in the
Prospectus Supplement relating to such series.
----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
----------------
The date of this Prospectus is November 26, 1997.
<PAGE>
No dealer, salesman or other person has been authorized to give any
information or to make any representation not contained in this Prospectus or
a Prospectus Supplement and, if given or made, such information or
representation must not be relied upon as having been authorized by the
Company or any underwriters. Neither this Prospectus nor any Prospectus
Supplement constitutes an offer to sell or a solicitation of an offer to buy
any of the securities offered hereby in any jurisdiction to any person to whom
it is unlawful to make such offer or solicitation in such jurisdiction. The
delivery of this Prospectus or any Prospectus Supplement at any time does not
imply that the information herein or therein is correct as of any time
subsequent to their respective dates.
----------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, information statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports,
statements and other information may be inspected and copied at the public
reference facilities maintained by the Commission, 450 Fifth Street, N.W.,
Washington D.C. 20549, and at the Commission's Regional Offices located at
CitiCorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60621
and 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of such
material may also be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington D.C. 20549, at prescribed
rates. The SEC maintains an Internet site on the World Wide Web at
<http://www.sec.gov> that contains reports, statements and other information.
This Prospectus omits certain information contained in the Registration
Statement on Form S-3 (the "Registration Statement") which the Company has
filed with the Commission under the Securities Act of 1933, as amended (the
"Securities Act"), and to which reference is hereby made for further
information with respect to the Company, the New Bonds and the Debt
Securities.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission pursuant to
the Exchange Act (File No. 1-1245) are incorporated in this Prospectus by
reference:
(a) Annual Report on Form 10-K for the year ended December 31, 1996.
(b) Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997,
June 30, 1997 (and Amendment No. 1 thereto on Form 10-Q/A dated
August 15, 1997) and September 30, 1997.
(c) Current Report on Form 8-K dated as of September 22, 1997.
All documents filed by the Company pursuant to sections 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior
to the termination of the offering hereunder shall be deemed to be
incorporated by reference in this Prospectus and to be a part of this
Prospectus from the date of the filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
in this Prospectus shall be deemed to be modified or superseded for purposes
of this Prospectus to the extent that a statement contained in this Prospectus
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference in this Prospectus modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the written or oral
request of such person, a copy of any or all of the documents which are
incorporated herein by reference (other than exhibits not specifically
incorporated by reference into the text of such documents). Requests should be
directed to Wisconsin Electric Power Company, at its principal executive
office, 231 West Michigan Street, P.O. Box 2046, Milwaukee, Wisconsin 53201,
Attention: Mr. Thomas H. Fehring, Corporate Secretary (telephone (800) 881-
5882).
2
<PAGE>
FORWARD-LOOKING STATEMENTS AND CAUTIONARY FACTORS
This Prospectus and any Prospectus Supplement (including the documents
incorporated herein or therein by reference) contains statements that
constitute forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Prospective investors are cautioned
that any such forward-looking statements are not guarantees of future
performance and involve known and unknown risks, uncertainties and other
factors which may cause the actual results, performance or achievements to
differ materially from the future results, performance or achievements
expressed or implied in such forward-looking statements. The words
"anticipate", "believe", "estimate", "expect", "project", "objective" and
similar expressions are intended to identify forward-looking statements. In
addition to the assumptions and other factors referred to specifically in
connection with such statements, factors that could cause the Company's actual
results to differ materially from those contemplated in the forward-looking
statements include factors described under the caption "Cautionary Factors" in
the documents incorporated herein by reference.
THE COMPANY
The Company is an operating public utility organized as a corporation under
the laws of the State of Wisconsin. The Company is a subsidiary of Wisconsin
Energy Corporation ("Wisconsin Energy"). Effective January 1, 1996, Wisconsin
Energy merged its wholly-owned natural gas utility subsidiary, Wisconsin
Natural Gas Company ("Wisconsin Natural"), into the Company to form a single
combined utility subsidiary. The Company generates, transmits, distributes and
sells electric energy in a territory of approximately 12,000 square miles with
a population estimated at 2,300,000 in southeastern (including the Milwaukee
metropolitan area), east central and northern Wisconsin and in the Upper
Peninsula of Michigan. The Company purchases, distributes and sells natural
gas to retail customers and transports customer-owned gas in three distinct
service areas totalling about 2,800 square miles in Wisconsin: west and south
of the City of Milwaukee, the Appleton area and the Prairie du Chien area. The
gas service territory, which has an estimated population of over 1,100,000, is
largely within the Company's electric service area. The Company also has
received approval recently to provide gas service to a service territory in
northern Wisconsin. The Company distributes and sells steam supplied by its
power plants to certain customers in the metropolitan Milwaukee area.
Wisconsin Energy is an exempt holding company by order of the Commission under
Section 3(a)(1) of the Public Utility Holding Company Act of 1935, as amended,
and accordingly is exempt from the provisions of that Act, other than with
respect to certain acquisitions of securities of a public utility. The
Company's principal executive offices are located at 231 West Michigan Street,
P.O. Box 2046, Milwaukee, Wisconsin 53201 (telephone (414) 221-2345). See
"Recent Developments--Wisconsin Energy's Merger Agreement With ESELCO" for
discussion of a pending business combination.
USE OF PROCEEDS
Unless otherwise specified in a Prospectus Supplement, the net proceeds from
the sale of New Bonds and Debt Securities will be added to the general funds
of the Company and applied to the Company's continuing construction program
and other capital requirements or, depending on market conditions, possible
refunding of existing indebtedness. Short-term indebtedness outstanding when
net proceeds from the New Bonds and Debt Securities are received may be
reduced through application of such proceeds. Proceeds from the New Bonds and
Debt Securities may be temporarily invested pending disposition. Further
information concerning the use of proceeds from the sale of each series of the
New Bonds and Debt Securities will be set forth in the Prospectus Supplement
relating to such series.
3
<PAGE>
CERTAIN SUMMARY FINANCIAL INFORMATION
The following summary financial information is qualified in its entirety by
the financial statements and other information included in the documents
incorporated by reference in this Prospectus.
CONDENSED INCOME AND RELATED INFORMATION
OF THE COMPANY FOR CERTAIN PERIODS
<TABLE>
<CAPTION>
TWELVE MONTHS
YEAR ENDED DECEMBER 31, ENDED
---------------------------------------------------------- SEPTEMBER 30,
1992 1993 1994 (A) 1995 1996 1997 (B)(C)
---------- ---------- ---------- ---------- ---------- -------------
(IN THOUSANDS EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues...... $1,595,515 $1,693,235 $1,742,192 $1,770,484 $1,773,820 $1,792,087
Operating Income........ $ 241,706 $ 265,436 $ 263,273 $ 329,021 $ 305,844 $ 219,418
Net Income.............. $ 175,950 $ 192,080 $ 181,754 $ 240,668 $ 211,315 $ 111,668
Ratio of Earnings to
Fixed Charges (D)...... 3.8x 3.7x 3.5x 4.4x 4.1x 2.5x
</TABLE>
CAPITALIZATION OF THE COMPANY AT SEPTEMBER 30, 1997 AND AS OF THAT DATE AS
ADJUSTED
FOR THE NEW BONDS AND DEBT SECURITIES
<TABLE>
<CAPTION>
AS ADJUSTED
---------------------
AMOUNT AMOUNT PERCENTAGE
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Long-Term Debt--due after one year (E)......... $1,451,646 $1,851,646 52.7%
Preferred Stock--redemption not required....... 30,450 30,450 0.9
Common Stock Equity............................ 1,628,772 1,628,772 46.4
---------- ---------- -----
Total Capitalization....................... $3,110,868 $3,510,868 100.0%
========== ========== =====
Short-Term Debt (E)(F)......................... $ 163,006 $ 50,000 --
========== ========== =====
</TABLE>
- --------
(A) Operating Income, Net Income and Ratio of Earnings to Fixed Charges
reflect a nonrecurring $73.9 million charge in 1994 ($45 million net of
tax) related to the Company's Revitalization Program.
(B) Operating Income, Net Income and Ratio of Earnings to Fixed Charges
reflect a nonrecurring $21.9 million charge in June 1997 ($13.2 million
net of tax) related to the write-off of Primergy Corporation ("Primergy")
merger expenses. See "Recent Developments--Wisconsin Energy--Termination
of Merger Agreement with Northern States Power Company" and "Recent
Developments--Financial Results from Operations for the Twelve Months
Ended September 30, 1997."
(C) See "Recent Developments--Financial Results from Operations for the Twelve
Months Ended September 30, 1997."
(D) For the purpose of computing this ratio, earnings consist of net income
(including total Allowances for Funds Used During Construction) plus
current and deferred income taxes, deferred investment tax credits and
fixed charges. Fixed charges consist of interest charges, amortization of
debt expenses, and amounts representing the interest factor of nuclear
fuel rental expense.
(E) Does not include $208.0 million of long-term debt due currently.
(F) The "as adjusted" amount includes the $50 million loan under the Short
Term Borrowing Agreement described in "Description of New Bonds--Regarding
the Trustee."
RECENT DEVELOPMENTS
FINANCIAL RESULTS FROM OPERATIONS FOR THE TWELVE MONTHS ENDED SEPTEMBER 30,
1997: Net income for the twelve months ended September 30, 1997 decreased
$99.6 million or 47% compared to the calendar year 1996. The decrease reflects
the $13.2 million net of tax nonrecurring write-off in the second quarter of
1997 of
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Primergy merger related expenses and higher purchased power, fuel and
maintenance expenses due to the unscheduled outages at the Company's Point
Beach Nuclear Plant ("Point Beach") and the Oak Creek Power Plant ("Oak
Creek"). The table below provides the Company's unaudited net income for the
three and nine months ended September 30, 1997 and September 30, 1996:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------- -------------------------
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
1997 1996 1997(A) 1996
------------ ------------ ------------ ------------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net Income........... $22,622 $52,693 $60,256 $159,903
</TABLE>
- --------
(A) Includes a nonrecurring $21.9 million charge in June 1997 ($13.2 million
net of tax) related to the write-off of Primergy merger expenses.
Ongoing extended outages at Point Beach, an extended maintenance outage at
Oak Creek that was concluded in June 1997 and higher than projected purchased
power costs due to regional generation outages, have resulted in increased
fuel and purchased power costs. WE estimates that such costs will be $112
million higher than those reflected in 1997 base electric rates. In March and
September 1997, WE submitted separate fuel filings with the Public Service
Commission of Wisconsin ("PSCW") requesting recovery of the portion of these
increased fuel costs attributable to retail electric service in Wisconsin. If
the PSCW approves the fuel surcharges included in the filings, WE would
recover approximately $59 million during the 1997-1998 biennial period.
Currently, WE does not expect to recover approximately $52 million of
increased 1997 fuel costs from customers. WE anticipates that the PSCW will
issue final orders on the two 1997 fuel filings in late December 1997.
Effective May 24, 1997, the PSCW approved a $0.00109 per kilowatt-hour interim
fuel surcharge, subject to refund, in response to WE's first fuel filing.
During the three months ended September 30, 1997, WE collected approximately
$6.3 million in additional revenues through the interim surcharge. For further
information concerning WE's two 1997 fuel filings, see Item 2 "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
Wisconsin Electric's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997, which is incorporated by reference herein. The results of
operations for the twelve months ended September 30, 1997 are not necessarily
indicative of the results which may be expected for the fiscal year ending
December 31, 1997 because of seasonal and other factors.
WISCONSIN ENERGY TERMINATION OF MERGER AGREEMENT WITH NORTHERN STATES POWER
COMPANY: On May 16, 1997, the Boards of Directors of Wisconsin Energy and
Northern States Power Company ("NSP") agreed to terminate the Amended and
Restated Agreement and Plan of Merger, dated as of April 28, 1995, as amended
and restated as of July 26, 1995 (the "Merger Agreement"), by and among NSP,
Wisconsin Energy and their respective subsidiaries, Northern Power Wisconsin
Corp. and WEC Sub Corp., which provided for a business combination of
Wisconsin Energy and NSP to form Primergy Corporation (the "Transaction").
Accordingly, the parties to the Merger Agreement entered into a Termination
Agreement, dated as of May 16, 1997, which terminated the Merger Agreement by
mutual written consent. The Termination Agreement also terminated the mutual
Stock Option Agreements, dated as of April 28, 1995, entered into between
Wisconsin Energy and NSP in connection with the Merger Agreement.
On May 14, 1997, the Federal Energy Regulatory Commission ("FERC") issued an
Opinion and Order in which it concluded that it could not approve the
Transaction at that time and reversed the earlier decision of its own
administrative law judge who had found that the proposed Transaction, as
conditioned, was consistent with the public interest. The FERC remanded the
case to a settlement judge and directed the participants to attempt to reach a
resolution of the market power issues which formed the basis of the FERC's
reversal of the administrative law judge's findings.
The Board of Directors of Wisconsin Energy (the "Wisconsin Energy Board")
concluded that continuing the proposed Transaction, given the current
regulatory climate, was not in the best interest of Wisconsin Energy's
shareholders, customers and employees. In reaching its decision to terminate
the Merger Agreement, the
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<PAGE>
Wisconsin Energy Board considered many factors, including: the May 14, 1997
FERC ruling; the fact that any regulatory approvals that might be obtained
appeared to involve conditions which would significantly reduce the benefits
of the Transaction; and the impact on shareholders and other constituencies of
further delays in the regulatory approval process as a result of the FERC
action.
As reported in the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997, the Company charged to expense in the second quarter of
1997 $21.9 million ($13.2 million net of tax) of deferred transaction costs
and costs to achieve the cancelled Primergy merger.
1998 TEST YEAR: On September 22, 1997, the Company filed testimony and
exhibits with the PSCW related to the 1998 test year showing a $220.4 million
revenue deficiency for its utility operations based upon a regulatory return
on equity of 12.5%, up from 11.8% authorized since February 13, 1997. The
dollar impacts and percentage increases on an annualized basis requested for
Wisconsin retail services are $192.7 million or 15.3% for electric operations,
$26.5 million or 7.9% for gas operations and $1.2 million or 9.0% for the City
of Milwaukee steam operations. In the filing, the Company asked that the PSCW
provide interim rate relief effective January 1, 1998 for 90% of the revenue
deficiency, subject to refund, if the PSCW does not issue a final order by
this date. In November 1997, the PSCW is expected to conclude public hearings
on the Company's request for interim rate relief and issue an order on interim
rate relief in December 1997. Public hearings on the 1998 Test Year filing are
anticipated in the first quarter of 1998. Further information regarding this
matter is contained in Item 5. "Other Information--1998 Test Year" in Part II
of the Company's Quarterly Report on Form 10-Q for the quarter ended September
30, 1997, which is incorporated by reference herein.
WISCONSIN ENERGY'S MERGER AGREEMENT WITH ESELCO: On May 13, 1997, Wisconsin
Energy and ESELCO, Inc. ("ESELCO"), parent company of Edison Sault Electric
Company ("Edison Sault"), entered into an Agreement and Plan of Reorganization
setting forth the terms of the proposed acquisition of ESELCO by Wisconsin
Energy. On October 7, 1997, the shareholders of ESELCO voted to approve the
proposed transaction. Consummation of the proposed transaction is contingent
upon several conditions including receipt of appropriate regulatory approvals
and other customary conditions. There can be no assurance that the conditions
will be satisfied, or that the proposed transaction will be consummated.
Edison Sault is an electric utility engaged in the generation, purchase,
transmission, distribution and sale, at wholesale and retail, of electric
energy and serves more than 21,000 residential, commercial and industrial
customers throughout Michigan's Eastern Upper Peninsula in a service territory
of over 2,000 square miles with a population of approximately 55,000. After
the transaction, Edison Sault would continue to operate as a separate utility
subsidiary of Wisconsin Energy.
DESCRIPTION OF NEW BONDS
The New Bonds will be issued under the Mortgage and Deed of Trust dated
October 28, 1938 between the Company and Firstar Trust Company (formerly First
Wisconsin Trust Company), as Trustee, as amended and supplemented and as to be
supplemented by one or more Supplemental Indentures creating series of New
Bonds (collectively, the "Mortgage"). At September 30, 1997, the aggregate
principal amount of Bonds outstanding under the Mortgage was $993,443,000, of
which $130,000,000 of 5 7/8% First Mortgage Bonds matured on October 1, 1997
and were retired.
The following statements about the Mortgage and the New Bonds are summary
outlines of provisions contained therein, do not purport to be complete and
are qualified by reference thereto. The specific references below are to
provisions of the Mortgage unless otherwise indicated. Certain terms used
below are defined in the Mortgage. The term "Bonds" refers to Bonds issued
under the Mortgage, as amended and supplemented from time to time. Copies of
the documents constituting the Mortgage are filed as exhibits to the
Registration Statement or documents incorporated by reference in this
Prospectus.
THE NEW BONDS. The New Bonds of any series will be issued in aggregate
principal amount, will mature and bear interest, and will be redeemable (if
issued with redemption provisions) at the option of the Company, at
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<PAGE>
the prices and on the other terms as to be set forth in the Prospectus
Supplement relating to such series. The Prospectus Supplement will also
indicate whether the New Bonds of such series will be originally issued solely
in book-entry form as described under "Book-Entry Only System" below.
The New Bonds will be available only in fully registered form, without
coupons, in the denomination of $1,000 or any multiple thereof. The Company
will not impose charges for exchanges of New Bonds.
Principal and interest on the New Bonds will be payable in lawful money of
the United States, at the agency of the Company in the City of Milwaukee;
provided, however, at the option of the Company, payment of interest on any
New Bond may be made by check, mailed to the person entitled thereto at such
address as shall appear on the transfer register, or as otherwise may be
provided for in the Supplemental Indenture creating a series of New Bonds. The
interest paid on a New Bond on any interest payment date will, with certain
exceptions, be payable to the person in whose name such New Bond is registered
at the close of business on the last business day which is more than ten days
prior to such date.
SECURITY. In the opinion of Walter T. Woelfle, Director-Legal Services
Department of the Company, the New Bonds will be secured, together with all
other Bonds now or hereafter issued under the Mortgage, by a valid and direct
first lien (subject to certain leases, Permitted Liens and other minor
matters) on substantially all the properties and franchises of the Company,
other than cash, accounts receivable and other liquid assets, securities not
specifically pledged, and electric energy, materials, supplies or other
products produced or purchased by the Company for use, sale or lease. At
September 30, 1997, the gross amount (before depreciation) at which the
properties subject to the lien of the Mortgage were carried in the Company's
utility plant accounts was approximately $5,354,329,000. The Mortgage contains
provisions subjecting to the lien thereof after-acquired property (other than
property of types excepted as indicated above). (Granting Clauses and Excepted
Property)
ADDITIONAL BONDS. Additional Bonds ranking equally with the New Bonds may be
issued for an aggregate principal amount up to (i) 60% of the amount of Net
Bondable Value of Property Additions Not Subject to an Unfunded Prior Lien
which the Company elects to use for such purpose, (ii) the amount of cash
which the Company deposits with the Trustee for such purpose, and (iii) the
previously unutilized amount of Bonds retired or to be retired (except out of
trust moneys). (Art. III, Sections 4, 5 and 6) Cash so deposited may be
withdrawn upon the bases and up to the amounts indicated in the foregoing
clauses (i) and (iii). (Art. VIII, Section 3)
Additional Bonds may not be issued unless Net Earnings of the Company
Available for Interest for a specified twelve-month period shall have been at
least equal to the greater of twice the annual interest charges on, or 10% of
the principal amount of, all Bonds and Prior Lien Bonds then outstanding and
then being issued, unless (i) such Additional Bonds are being issued to refund
Bonds or to refund a Prior Lien which simultaneously becomes a Funded Prior
Lien on Property Additions used for such issuance, and (ii) application to
issue Additional Bonds for either of these refunding purposes is made within
two years prior to the maturity of the Bonds or Prior Lien Bonds being
refunded. (Art. III, Sections 3, 4(h) and 6(b); Fifth Supp. Ind., Art. VI)
The New Bonds are to be issued against 60% of the Net Bondable Value of
Property Additions Not Subject to an Unfunded Prior Lien or the principal
amount of unutilized retired Bonds. Before reflecting the assumed issuance of
any of the New Bonds, as of September 30, 1997, the amount of such Property
Additions available for issuance of Bonds under the Mortgage was approximately
$1,266,479,000, sufficient under this 60% provision for the issuance of
approximately $759,888,000 principal amount of Additional Bonds. In addition,
approximately $1,177,407,000 of Additional Bonds could be issued under the
Mortgage on the basis of Bonds retired on or before that date.
Prior Lien Bonds secured by an Unfunded Prior Lien may be issued under the
circumstances and subject to the limitations provided in the Mortgage. (Art.
IV, Section 16)
DIVIDEND RESTRICTION. So long as any New Bonds are outstanding, the Company
may not declare any dividend on its Common Stock (other than in Common Stock)
or make any other distribution on, or acquire for
7
<PAGE>
value any shares of its Common Stock (except in exchange for Common Stock), if
after giving effect thereto the aggregate of all such dividends, distributions
or acquisitions during the period commencing October 1, 1997 and ending on the
last day of the third month preceding the month in which any such dividend,
distribution or acquisition is paid or made shall exceed the sum of
$1,013,759,569 plus the net income of the Company during such period
applicable to its Common Stock. (Art. IV or other designated article of each
Supplemental Indenture creating series of New Bonds)
DEFAULT. Events of default under the Mortgage are: (i) default in the
payment of the principal of any Bond; (ii) default in the payment of any
installment of interest on any Bond or in the payment or satisfaction of any
sinking, improvement, maintenance or analogous fund and the continuation
thereof for a period of 30 days; (iii) default by the Company in the
performance or observance of any of the covenants, agreements or conditions in
the Mortgage or Bonds and the continuation thereof for 60 days after written
notice from the Trustee or the holders of 15% in amount of the outstanding
Bonds; (iv) default in the payment of principal of or interest on any Prior
Lien Bonds and the continuation thereof beyond the period of grace in such
Bonds; (v) certain events in bankruptcy, assignments for the benefit of
creditors and establishments of receiverships or similar arrangements; (vi)
failure to discharge or provide for the discharge of a final judgment in
excess of $100,000 within 30 days of the rendering thereof or affirmance
thereof on appeal; and (vii) termination of the Company's corporate franchise
without transferring its assets before or within 120 days after such
termination to a successor corporation. (Art. IX, Section 1) The Company is
required to furnish the Trustee, not less than annually, a brief certificate
as to the Company's compliance with all conditions and covenants under the
Mortgage.
In case of an event of default, either the Trustee or the holders of 25% in
amount of the outstanding Bonds may declare the principal of all Bonds due and
payable, but the holders of a majority may, under certain circumstances,
rescind such acceleration if such event of default has been cured. No holder
of Bonds may enforce the lien of the Mortgage unless such holder has given the
Trustee written notice of default and unless the holders of 25% in amount of
the outstanding Bonds have requested the Trustee in writing to act, such
holder or holders have offered the Trustee security and indemnity satisfactory
to it and the Trustee has not acted within a reasonable time. (Art. IX,
Sections 1 and 12)
MODIFICATION OF MORTGAGE. With the consent of holders of 66 2/3% in amount
of the Bonds entitled to vote then outstanding, and holders of 66 2/3% in
amount of the Bonds of each series entitled to vote then outstanding and
affected if less than all of such series are affected, the Mortgage may be
changed, except to affect the terms of payment of the principal or interest on
any Bond or to reduce the percentage in amount of Bonds required to effect any
change. (Art. XV, Section 6, as amended by Twenty-Second Supp. Ind., effective
October 5, 1995).
Certain additional modifications of the Mortgage set forth in the Twenty-
Second Supplemental Indenture were made effective by a resolution adopted at a
meeting of Bondholders called at the Company's request and held on October 23,
1992, following approval by the Board of Directors of the Company on October
28, 1992. The amendments, in general terms: amend the definition of "Board of
Directors" to include a Committee of the Board; broaden the definition of
"Property Additions" by adding the phrase "gas (either natural or artificial)"
so that such definition refers in part to property "used or useful for the
business of generating, manufacturing, transmitting, distributing or supplying
electricity, gas (either natural or artificial) or steam," by deleting a
requirement that the properties be located in, or directly connected with
properties located in, Wisconsin, by including certain leasehold interests in
electric and gas plants and other properties, and by deleting an exclusion for
gas properties and adding a definition of transportation properties; require
certain opinions of counsel to refer to pipelines; increase to $250,000 the
amount above which certain insured losses must be payable to the Trustee;
permit the issuance of certain prior lien bonds secured by purchase money
mortgage on certain conditions; and permit Bondholders' action by written
consent.
Certain further modifications of the Mortgage set forth in the Twenty-Sixth
Supplemental Indenture became effective on October 5, 1995 when the last Bonds
of any series created prior to January 15, 1988 were redeemed and ceased to be
outstanding. (Twenty-Sixth Supp. Ind., Art. VI) These amendments provide more
flexibility in
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<PAGE>
setting forth in an engineer's certificate the time period during which gross
property additions were purchased, constructed or otherwise acquired by the
Company in connection with a Company request to withdraw monies held by the
Trustee, and alter the ratio used to determine the dollar amount of funds that
the Company may request the Trustee to pay over to the Company on the basis of
refundable Bonds.
Certain additional modifications of the Mortgage set forth in Art. VII of
the Thirty-Third Supplemental Indenture will become effective upon the earlier
of the date when no Bonds of any series created prior to October 1, 1992
remain outstanding or the date such modifications are consented to by
Bondholders. Such modifications will, in general, (i) allow for the issuance
of Additional Bonds for an aggregate principal amount of up to 70% of the
amount of Net Bondable Value of Property Addition Not Subject to an Unfunded
Prior Lien, as compared with the limitation of 60% now set forth in the
Mortgage, (ii) permit the issuance of Prior Lien Bonds for an aggregate
principal amount of up to 70% of the amount of Net Bondable Value of Property
Additions Subject to an Unfunded Prior Lien, as compared with the limitation
of 60% now set forth in the Mortgage, (iii) allow the Company to acquire
property subject to any Unfunded Prior Lien, if at the time of acquisition the
principal amount of outstanding indebtedness subject to such lien or liens
does not exceed 70% (as compared to 60% currently) of the lesser of the cost
or fair value to the Company of the property of the nature of Property
Additions subject to such lien or liens, (iv) amend the definitions of "Net
Bondable Value of Property Additions Not Subject to an Unfunded Prior Lien"
and "Net Bondable Value of Property Additions Subject to an Unfunded Prior
Lien" by changing the ratio to be applied to certain dollar amounts in each
definition's calculation from ten-sixths to ten-sevenths, (v) provide that, in
the case of a proposed merger in which the Company would not be the survivor,
such a transaction may not occur if the principal amount of indebtedness
outstanding immediately after the merger subject to a lien or liens prior to
that of the Company's exceeds 70% (as compared to 60% currently) of the lesser
of cost or fair value of the property of the nature of Property Additions then
owned by the survivor, and (vi) make certain conforming and other changes.
Each holder of a New Bond shall be deemed to have consented to all such
modifications. An aggregate of $303,443,000 principal amount of Bonds of
series created prior to October 1, 1992 were outstanding as of September 30,
1997.
WISCONSIN NATURAL DEBT INDENTURES. In conjunction with the merger of
Wisconsin Natural into the Company effective January 1, 1996, the Company
assumed Wisconsin Natural's outstanding indebtedness under, and agreed to
abide by all of the applicable terms and conditions of, the Mortgage and Deed
of Trust dated June 1, 1950 between Wisconsin Natural and Firstar Trust
Company, as Trustee, as amended and supplemented (the "Wisconsin Natural
Mortgage"), and the Debt Securities Indenture dated as of September 1, 1992
between Wisconsin Natural and Firstar Trust Company, as Trustee, as
supplemented (the "Wisconsin Natural DSI"). All of the first mortgage bonds
issued under the Wisconsin Natural Mortgage have been retired and the
Wisconsin Natural Mortgage was discharged as of March 14, 1997. At September
30, 1997, $31,300,000 aggregate principal amount of debentures were
outstanding under the Wisconsin Natural DSI. Under the terms of the Wisconsin
Natural DSI, which does not currently subject any property to a lien, certain
restrictive covenants setting forth limitations on the existence and creation
of liens, the issuance of first mortgage bonds and the entering into sale and
leaseback transactions terminated upon consummation of the merger with the
Company.
REGARDING THE TRUSTEE. The Trustee provides services for the Company and
certain affiliates, including its parent, Wisconsin Energy, as a depository of
funds, registrar, trustee under other indentures and similar services. The
Trustee or certain affiliates of the Trustee may make loans to or otherwise
extend credit to the Company or affiliated companies from time to time. The
Company and the Trustee have entered into a Short Term Borrowing Agreement
providing for the Trustee to make loans to the Company from time to time. The
aggregate principal balance outstanding at any time on all loans made pursuant
to the Short Term Borrowing Agreement may not exceed $50,000,000. As of
September 30, 1997, a loan for $50,000,000 was outstanding under the Company's
Short Term Borrowing Agreement and WISPARK Corporation, a nonutility
subsidiary of Wisconsin Energy, had a term loan of $9.5 million from the
Trustee. Firstar Trust Company is also the trustee under the Indenture (as
defined below) providing for the Debt Securities as well as trustee under the
Wisconsin Natural DSI. See "Description of Debt Securities--Regarding the
Trustee." The Trustee also presently acts as trustee for the Company's master
pension trust, the decommissioning trust fund for the Company's Point Beach
Nuclear Plant and certain other employee benefit trusts. Geneva B. Johnson, a
director of the Company and Wisconsin Energy, is also a director of Firstar
Bank Milwaukee, N.A., an affiliate of the Trustee.
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The holders of a majority of the outstanding Bonds have the right to direct
the time, method and place of conducting any proceeding for any remedy open to
the Trustee and of exercising any power or trust conferred upon the Trustee
under the Mortgage. (Art. IX, Section 11) Subject to the duty of the Trustee
to act with the required standard of care during a default, the Trustee is
under no obligation to exercise any trust or power of the Mortgage at the
request, order or direction of any of the Bondholders unless such Bondholders
provide security or indemnity satisfactory to the Trustee against any costs,
expenses and liabilities to be incurred. (Art. XIII, Sections 1(d) and 2)
DESCRIPTION OF DEBT SECURITIES
The Debt Securities will be issued in one or more series under the Indenture
dated as of December 1, 1995 between the Company and Firstar Trust Company, as
Trustee, as the same may be amended or supplemented (the "Indenture"). The
following summaries of certain provisions of the Indenture do not purport to
be complete and are qualified in their entirety by express reference to the
Indenture and the Securities Resolutions or the indentures supplemental
thereto (copies of which have been or will be filed with the Commission).
Certain terms defined in the Indenture are used in this summary without
definition.
The term "Securities," as used under this caption, refers to all Securities
issued under the Indenture and includes the Debt Securities.
GENERAL. The Indenture will not limit the amount of Securities that can be
issued thereunder and provides that the Securities may be issued from time to
time in one or more series pursuant to the terms of one or more Securities
Resolutions or supplemental indentures creating such series. At September 30,
1997, there were $300,000,000 aggregate principal amount of Securities
outstanding under the Indenture. The Debt Securities will be unsecured and
will rank on a parity with all other unsecured and unsubordinated debt of the
Company. Although the Indenture provides for the possible issuance of
Securities in other forms or currencies, the only Securities covered by this
Prospectus will be Securities denominated in U.S. dollars in registered form
without coupons.
Substantially all of the fixed properties and franchises of the Company are
subject to the lien of the Mortgage under which the Company's First Mortgage
Bonds are outstanding. See "Description of New Bonds."
TERMS. Reference is made to the Prospectus Supplement for the following
terms, if applicable, of the Securities offered thereby: (1) the designation,
aggregate principal amount, currency or composite currency and denominations;
(2) the price at which such Securities will be issued and, if an index formula
or other method is used, the method for determining amounts of principal or
interest; (3) the maturity date and other dates, if any, on which principal
will be payable; (4) the interest rate (which may be fixed or variable), if
any; (5) the date or dates from which interest will accrue and on which
interest will be payable, and the record dates for the payment of interest;
(6) the manner of paying principal and interest; (7) the place or places where
principal and interest will be payable; (8) the terms of any mandatory or
optional redemption by the Company; (9) the terms of any redemption at the
option of Holders; (10) whether such Securities are to be issuable as
registered Securities, bearer Securities, or both, and whether and upon what
terms any registered Securities may be exchanged for bearer Securities and
vice versa; (11) whether such Securities are to be represented in whole or in
part by a Security in global form and, if so, the terms thereof and the
identity of the depositary ("Depositary") for any global Security; (12) any
tax indemnity provisions; (13) if the Securities provide that payments of
principal or interest may be made in a currency other than that in which
Securities are denominated, the manner for determining such payments; (14) the
portion of principal payable upon acceleration of a Discounted Security (as
defined below); (15) whether and upon what terms Securities may be defeased;
(16) whether the covenant referred to below under "Certain Covenants--
Limitations on Liens" applies, and any events of default or restrictive
covenants in addition to or in lieu of those set forth in the Indenture; (17)
provisions for electronic issuance of Securities or for Securities in
uncertificated form; and (18) any additional provisions or other special terms
not inconsistent with the provisions of the Indenture, including any terms
that may be required or advisable under United States or other applicable laws
or regulations, or advisable in connection with the marketing of the
Securities. (Section 2.01)
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The Securities of a series may be issued in whole or in part in the form of
one or more global Securities that will be deposited with, or on behalf of, a
Depositary identified in the Prospectus Supplement relating to the series.
Global Securities may be issued in registered, bearer or uncertificated form
and in either temporary or permanent form. Unless and until it is exchanged in
whole or in part for Securities in definitive form, a global Security may not
be transferred except as a whole by the Depositary to a nominee or a successor
depositary. (Section 2.12) The specific terms of the depositary arrangement
with respect to any Securities of a series will be described in the Prospectus
Supplement relating to the series.
Securities of any series may be issued as registered Securities, bearer
Securities or uncertificated Securities, as specified in the terms of the
series. (Section 2.01) Unless otherwise indicated in the Prospectus
Supplement, registered Securities will be issued in denominations of $1,000
and whole multiples thereof and bearer Securities will be issued in
denominations of $5,000 and whole multiples thereof. One or more global
Securities will be issued in a denomination or aggregate denominations equal
to the aggregate principal amount of outstanding Securities of the series to
be represented by such global Security or Securities. (Section 2.12)
In connection with its original issuance, no bearer Security will be
offered, sold, resold, or mailed or otherwise delivered to any location in the
United States and a bearer Security in definitive form may be delivered in
connection with its original issuance only if the person entitled to receive
the bearer Security furnishes certification as described in United States
Treasury regulation section 1.163-5(c)(2)(i)(D)(3). (Section 2.04)
For purposes of this Prospectus, unless otherwise indicated, "United States"
means the United States of America (including the States and the District of
Columbia), its territories and possessions and all other areas subject to its
jurisdiction. "United States person" means a citizen or resident of the United
States, any corporation, partnership or other entity created or organized in
or under the laws of the United States or a political subdivision thereof or
any estate or trust the income of which is subject to United States federal
income taxation regardless of its source. Any special United States federal
income tax considerations applicable to bearer Securities will be described in
the Prospectus Supplement relating thereto.
To the extent set forth in the Prospectus Supplement, except in special
circumstances set forth in the Indenture, principal and interest on bearer
Securities will be payable only upon surrender of bearer Securities and
coupons at a paying agency of the Company located outside of the United
States. During any period thereafter for which it is necessary in order to
conform to United States tax law or regulations, the Company will maintain a
paying agent outside the United States to which the bearer Securities and
coupons may be presented for payment and will provide the necessary funds
therefor to the paying agent upon reasonable notice. (Section 2.04)
Registration of transfer of registered Securities may be requested upon
surrender thereof at any agency of the Company maintained for that purpose and
upon fulfillment of all other requirements of the agent. (Sections 2.03 and
2.07) Bearer Securities and the coupons related thereto will be transferable
by delivery.
Securities may be issued under the Indenture as Discounted Securities to be
offered and sold at a substantial discount from the principal amount thereof.
Special United States federal income tax and other considerations applicable
thereto will be described in the Prospectus Supplement relating to such
Discounted Securities. "Discounted Security" means a Security where the amount
of principal due upon acceleration is less than the stated principal amount.
CERTAIN COVENANTS. The Debt Securities will not be secured by any properties
or assets and will represent unsecured debt of the Company. The Indenture does
not limit the amount of unsecured debt that the Company can incur. As
indicated under "General" above, substantially all of the fixed properties and
franchises of the Company are subject to the lien of the Mortgage securing the
Company's First Mortgage Bonds.
As discussed below, the Indenture includes certain limitations on the
Company's ability to create liens. Such limitations will apply if the
Securities Resolution establishing the terms of a series so provides. If
applicable, the limitations are subject to a number of qualifications and
exceptions. The Indenture does not limit the Company's ability to issue
additional First Mortgage Bonds or to enter into sale and leaseback
transactions.
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The covenant described below will apply if so indicated in a Prospectus
Supplement. Any obligations thereunder are subject to termination upon
defeasance. See "Legal Defeasance and Covenant Defeasance" below. Also, unless
otherwise indicated in a Prospectus Supplement, such covenant, if applicable,
does not afford holders of the Securities protection in the event of a highly
leveraged or other transaction involving the Company that may adversely affect
holders of the Securities.
LIMITATIONS ON LIENS. The Indenture provides that, so long as there remain
outstanding any Securities of any series to which this limitation applies, and
subject to termination as referred to above, the Company will not, and will
not permit any Subsidiary to, create or suffer to be created or to exist any
mortgage, pledge, security interest, or other lien (collectively, "Lien") on
any of its properties or assets now owned or hereafter acquired to secure any
indebtedness, without making effective provision whereby the Securities of
such series shall be equally and ratably secured. (At the date of this
Prospectus, the Company had no Subsidiaries.) This restriction does not apply
to or prevent the creation or existence of (1) the Mortgage securing the
Company's First Mortgage Bonds or any indenture supplemental thereto
subjecting any property to the Lien thereof or confirming the Lien thereof
upon any property, whether owned before or acquired after the date of the
Indenture; (2) Liens on property existing at the time of acquisition or
construction of such property (or created within one year after completion of
such acquisition or construction), whether by purchase, merger, construction
or otherwise (or on the property of a Subsidiary at the date it became a
Subsidiary), or to secure the payment of all or any part of the purchase price
or construction cost thereof, including the extension of any such Liens to
repairs, renewals, replacements, substitutions, betterments, additions,
extensions and improvements then or thereafter made on the property subject
thereto; (3) any extensions, renewals or replacements (or successive
extensions, renewals or replacements), in whole or in part, of Liens permitted
by the foregoing clauses (1) and (2); (4) the pledge of any bonds or other
securities at any time issued under any of the Liens permitted by clauses (1),
(2) or (3) above; or (5) Permitted Encumbrances. (Section 4.07)
"Permitted Encumbrances" include, among other items, (a) the pledge or
assignment in the ordinary course of business of electricity, gas (either
natural or artificial) or steam, accounts receivable or customers' installment
paper, (b) Liens affixing to property of the Company or a Subsidiary at the
time a Person consolidates with or merges into, or transfers all or
substantially all of its assets to, the Company or a Subsidiary, provided that
in the opinion of the Board of Directors of the Company or Company management
(evidenced by a certified Board resolution or an Officers' Certificate
delivered to the Trustee) the property acquired pursuant to the consolidation,
merger or asset transfer is adequate security for the Lien; and (c) Liens or
encumbrances not otherwise permitted if, at the incurrence of and after giving
effect thereto, the aggregate of all obligations of the Company and its
Subsidiaries secured thereby does not exceed 10% of Tangible Net Worth.
"Tangible Net Worth" means (i) common stockholders' equity appearing on the
most recent balance sheet of the Company (or consolidated balance sheet of the
Company and its Subsidiaries if the Company then has one or more consolidated
Subsidiaries) prepared in accordance with generally accepted accounting
principles less (ii) intangible assets (excluding intangible assets
recoverable through rates as prescribed by applicable regulatory authorities).
(Section 4.06)
Further, this restriction will not apply to or prevent the creation or
existence of leases made, or existing on property acquired, in the ordinary
course of business. (Section 4.07)
OTHER COVENANTS. Any other restrictive covenants which may apply to a
particular series of Securities will be described in the Prospectus Supplement
relating thereto.
SUCCESSOR OBLIGOR. The Indenture provides that, unless otherwise specified
in the Securities Resolution establishing a series of Securities, the Company
will not consolidate with or merge into, or transfer all or substantially all
of its assets to, any person, unless (1) the Person is organized under the
laws of the United States or a State thereof; (2) the Person assumes by
supplemental indenture all the obligations of the Company under the Indenture,
the Securities and any coupons; and (3) immediately after the transaction no
Default (as defined) exists. The successor will be substituted for the
Company, and thereafter all obligations of the Company under the Indenture,
the Securities and any coupons shall terminate. (Section 5.01)
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EXCHANGE OF SECURITIES. Registered Securities may be exchanged for an equal
aggregate principal amount of registered Securities of the same series and
date of maturity in such authorized denominations as may be requested upon
surrender of the registered Securities at an agency of the Company maintained
for such purpose and upon fulfillment of all other requirements of the agent.
(Section 2.07)
To the extent permitted by the terms of a series of Securities authorized to
be issued in registered form and bearer form, bearer Securities may be
exchanged for an equal aggregate principal amount of registered or bearer
Securities of the same series and date of maturity in such authorized
denominations as may be requested upon surrender of the bearer Securities with
all unpaid coupons relating thereto (except as may otherwise be provided in
the Securities) at an agency of the Company maintained for such purpose and
upon fulfillment of all other requirements of the agent. (Section 2.07) As of
the date of this Prospectus, it is expected that the terms of a series of
Securities will not permit registered Securities to be exchanged for bearer
Securities.
DEFAULTS AND REMEDIES. Unless the Securities Resolution establishing the
series otherwise provides, an "Event of Default" with respect to a series of
Securities will occur if:
(1) the Company defaults in any payment of interest on any Securities of
the series when the same becomes due and payable and the Default continues
for a period of 60 days;
(2) the Company defaults in the payment of the principal of any
Securities of the series when the same becomes due and payable at maturity
or upon redemption, acceleration or otherwise;
(3) the Company defaults in the payment or satisfaction of any sinking
fund obligation with respect to any Securities of a series as required by
the Securities Resolution establishing such series and the Default
continues for a period of 60 days;
(4) the Company defaults in the performance of any of its other
agreements applicable to the series and the Default continues for 90 days
after the notice specified below;
(5) the Company pursuant to or within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief against it in an
involuntary case,
(C) consents to the appointment of a Custodian for it or for all or
substantially all of its property, or
(D) makes a general assignment for the benefit of its creditors;
(6) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(A) is for relief against the Company in an involuntary case,
(B) appoints a Custodian for the Company or for all or substantially
all of its property, or
(C) orders the liquidation of the Company, and the order or decree
remains unstayed and in effect for 60 days; or
(7) there occurs any other Event of Default provided for in the series.
(Section 6.01)
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar Federal
or State law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator or a similar official under any
Bankruptcy Law. (Section 6.01)
"Default" means any event which is, or after notice or passage of time would
be, an Event of Default. A Default under subparagraph (4) above is not an
Event of Default until the Trustee or the Holders of at least 25% in principal
amount of the series notify the Company of the Default and the Company does
not cure the Default within the time specified after receipt of the notice.
(Section 6.01) The Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Securities of the series. (Section 7.01) Subject
to certain limitations, Holders of a majority in principal amount of the
Securities of the series may direct the Trustee in its exercise of any trust
or power. (Section 6.05) The Trustee may withhold from Securityholders of the
series notice
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of any continuing Default (except a Default in payment of principal or
interest) if it determines that withholding notice is in their interest.
(Section 7.04) The Company is required to furnish the Trustee, not less than
annually, a brief certificate as to the Company's compliance with all
conditions and covenants under the Indenture. (Section 4.04)
The failure to redeem any Securities subject to a Conditional Redemption (as
defined) is not an Event of Default if any event on which such redemption is
so conditioned does not occur before the redemption date. (Section 6.01)
The Indenture does not have a cross-default provision. Thus, a default by
the Company on any other debt would not constitute an Event of Default.
AMENDMENTS AND WAIVERS. The Indenture and the Securities or any coupons of
the series may be amended, and any default may be waived as follows: The
Securities and the Indenture may be amended with the consent of the Holders of
a majority in principal amount of the Securities of all series affected voting
as one class. (Section 9.02) A Default on a series may be waived with the
consent of the holders of a majority in principal amount of the Securities of
the series. (Section 6.04) However, without the consent of each Securityholder
affected, no amendment or waiver may (1) reduce the amount of Securities whose
Holders must consent to an amendment or waiver, (2) reduce the interest on or
change the time for payment of interest on any Security, (3) change the fixed
maturity of any Security, (4) reduce the principal of any non-Discounted
Security or reduce the amount of principal of any Discounted Security that
would be due on acceleration thereof, (5) change the currency in which
principal or interest on a Security is payable, or (6) waive any Default in
payment of interest on or principal of a Security. (Sections 6.04 and 9.02)
Without the consent of any Securityholder, the Indenture, the Securities or
any coupons may be amended to cure any ambiguity, omission, defect or
inconsistency; to provide for assumption of Company obligations to
Securityholders in the event of a merger or consolidation requiring such
assumption; to provide that specific provisions of the Indenture shall not
apply to a series of Securities not previously issued; to create a series and
establish its terms; to provide for a separate Trustee for one or more series;
or to make any change that does not materially adversely affect the rights of
any Securityholder. (Section 9.01)
LEGAL DEFEASANCE AND COVENANT DEFEASANCE. Securities of a series may be
defeased in accordance with their terms and, unless the Securities Resolution
establishing the terms of the series otherwise provides, as set forth below.
The Company at any time may terminate as to a series all of its obligations
(except for certain obligations, including obligations with respect to the
defeasance trust and obligations to register the transfer or exchange of a
Security, to replace destroyed, lost or stolen Securities and coupons and to
maintain agencies in respect of the Securities) with respect to the Securities
of the series and any related coupons and the Indenture ("legal defeasance").
The Company at any time may terminate as to a series its obligations with
respect to the Securities and coupons of the series under the covenant
described under "Certain Covenants--Limitations on Liens" and any other
restrictive covenants which may be applicable to a particular series
("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, a series may not be accelerated because of an Event
of Default. If the Company exercises its covenant defeasance option, a series
may not be accelerated by reference to the covenant described under "Certain
Covenants--Limitations on Liens" or any other restrictive covenants which may
be applicable to a particular series. (Section 8.01)
To exercise either defeasance option as to a series, the Company must
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal, premium, if any, and
interest on the Securities of the series to redemption or maturity and must
comply with certain other conditions. In particular, the Company must obtain
an opinion of tax counsel that the defeasance will not result in recognition
of any gain or loss to holders for Federal income tax purposes. "U.S.
Government Obligations" are direct obligations of the United States of America
which have the full faith and credit of the United States of America pledged
for payment and which are not callable at the issuer's option, or certificates
representing an ownership interest in such obligations. (Section 8.02)
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REGARDING THE TRUSTEE. Firstar Trust Company will act as Trustee and
Registrar for Securities issued under the Indenture and, unless otherwise
indicated in a Prospectus Supplement, the Trustee will also act as Transfer
Agent and Paying Agent with respect to the Securities. (Section 2.03) The
Company may remove the Trustee with or without cause if the Company so
notifies the Trustee six months in advance and if no Default occurs during the
six-month period. (Section 7.07) The Trustee is also trustee under the
Mortgage for the Company's First Mortgage Bonds, including the New Bonds, and
provides services for the Company and certain affiliates, including Wisconsin
Energy, as a depository of funds, registrar, trustee under other indentures
and similar services. See "Description of New Bonds--Regarding the Trustee."
BOOK-ENTRY ONLY SYSTEM
The New Bonds and Debt Securities of any series may be issued initially in
the form of one or more global securities under a book-entry only system
operated by a securities depository. Unless otherwise specified in the
Prospectus Supplement, The Depository Trust Company ("DTC") will act as
securities depository for the New Bonds and Debt Securities, which would be
registered in the name of CEDE & Co., as registered securityholder and nominee
for DTC. Individual purchases of Book-Entry Interests (as herein defined) in
any such New Bonds or Debt Securities will be made in book-entry form.
Purchasers of Book-Entry Interests in such New Bonds or Debt Securities will
not receive certificates representing their interests in such New Bonds or
Debt Securities. So long as CEDE & Co., as nominee of DTC, is the
securityholder, references herein to holders of the Bonds or Debt Securities
or registered owners will mean CEDE & Co., rather than the owners of Book-
Entry Interests in New Bonds or Debt Securities.
DTC is a limited purpose trust company organized under the banking laws of
the State of New York and a "banking organization" within the meaning of that
law, a member of the Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Exchange Act. DTC
holds securities deposited by its participants (the "DTC Participants") and
facilitates the settlement of securities transactions among DTC Participants
in such securities through electronic computerized book-entry changes in
accounts of the DTC Participants, thereby eliminating the need for physical
movement of securities certificates. Direct DTC Participants include
securities brokers and dealers, banks, trust companies, clearing corporations
and certain other organizations, some of whom (including, possibly, the
underwriters with respect to the New Bonds or Debt Securities), together with
the New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc., own DTC. Access to the DTC
system is also available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a DTC
Participant, either directly or indirectly (the "Indirect Participants").
DTC Participants purchasing Book-Entry Interests (as defined below) in any
New Bonds or Debt Securities will not receive certificates. Each DTC
Participant will receive a credit balance in the records of DTC in the amount
of such DTC Participant's interest in such New Bonds or Debt Securities, which
will be confirmed in accordance with DTC's standard procedures. The ownership
interest of each actual purchaser of a Book-Entry Interest in a New Bond or
Debt Security (the "Book-Entry Interests") will be recorded through the
records of the DTC Participant or through the records of the Indirect
Participant. Owners of Book-Entry Interests should receive from the DTC
Participant or Indirect Participant a written confirmation of their purchase
providing details of the Book-Entry Interests acquired. Transfers of Book-
Entry Interests will be accomplished by book entries made by the DTC
Participants or Indirect Participants who act on behalf of the owners of Book-
Entry Interests. Owners of Book-Entry Interests will not receive certificates
representing their ownership of Book-Entry Interests with respect to any New
Bonds or Debt Securities except as described below upon the resignation of
DTC.
Under the Mortgage and Indenture, payments made by the respective Trustee to
DTC or its nominee will satisfy the Company's obligations under the Mortgage
or Indenture, as the case may be, to the extent of the payments so made.
Owners of Book-Entry Interests will not be or be considered by the Company or
the respective Trustee to be, and will not have any rights as, holders of New
Bonds under the Mortgage or Debt Securities under the Indenture, as the case
may be.
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NEITHER THE COMPANY NOR THE TRUSTEE UNDER THE MORTGAGE AND INDENTURE WILL
HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY DTC PARTICIPANT, INDIRECT
PARTICIPANT OR ANY OWNER OF A BOOK-ENTRY INTEREST OR ANY OTHER PERSON NOT
SHOWN ON THE REGISTRATION BOOKS OF SUCH TRUSTEE AS BEING A HOLDER OF NEW BONDS
OR DEBT SECURITIES WITH RESPECT TO: (1) ANY NEW BONDS OR DEBT SECURITIES, AS
THE CASE MAY BE; (2) THE ACCURACY OF ANY RECORDS MAINTAINED BY DTC OR ANY DTC
PARTICIPANT OR INDIRECT PARTICIPANT; (3) THE PAYMENT BY DTC OR ANY DTC
PARTICIPANT OR INDIRECT PARTICIPANT OF ANY AMOUNT DUE TO ANY OWNER OF A BOOK-
ENTRY INTEREST IN RESPECT OF THE PRINCIPAL OR REDEMPTION PRICE OF OR INTEREST
ON SUCH NEW BONDS OR DEBT SECURITIES; (4) THE DELIVERY BY DTC OR ANY DTC
PARTICIPANT OR INDIRECT PARTICIPANT OF ANY NOTICE TO ANY OWNER OF A BOOK-ENTRY
INTEREST WHICH IS REQUIRED OR PERMITTED UNDER THE TERMS OF THE MORTGAGE OR
INDENTURE TO BE GIVEN TO HOLDERS OF NEW BONDS OR DEBT SECURITIES; (5) THE
SELECTION OF THE OWNERS OF A BOOK-ENTRY INTEREST TO RECEIVE PAYMENT IN THE
EVENT OF ANY PARTIAL REDEMPTION OF ANY NEW BONDS OR DEBT SECURITIES; OR (6)
ANY CONSENT GIVEN OR OTHER ACTION TAKEN BY DTC OR ITS NOMINEE AS HOLDER OF NEW
BONDS OR DEBT SECURITIES.
Principal and redemption price of, and interest payments on, New Bonds and
Debt Securities registered in the name of DTC or its nominee will be made to
DTC or such nominee, as registered owner of such New Bonds or Debt Securities.
DTC is responsible for disbursing such payments to the appropriate DTC
Participants and such DTC Participants, and any Indirect Participants, are in
turn responsible for disbursing the same to the owners of Book-Entry
Interests. Unless it has reason to believe it will not receive payment, DTC's
current practice is to credit the accounts of the DTC Participants on a
payment date in accordance with their respective holdings shown on the records
of DTC. Payments by DTC Participants and Indirect Participants to owners of
Book-Entry Interests will be governed by standing instructions and customary
practices, as is now the case with securities held for the accounts of
customers in bearer form or registered in "street name", and will be the
responsibility of such DTC Participant or Indirect Participant and not of DTC,
the Company or the respective Trustee, subject to any statutory and regulatory
requirements as may be in effect from time to time.
DTC Participants and Indirect Participants carry the "position" of the
ultimate Book-Entry Interest owner on their records, and will be responsible
for providing information to the ultimate Book-Entry Interest owner as to the
New Bonds or Debt Securities in which the Book-Entry Interest is held, debt
service payments received, and other information. Each person for whom a DTC
Participant or Indirect Participant acquires an interest in New Bonds or Debt
Securities, as nominee, may desire to make arrangements with such DTC
Participant or Indirect Participant to receive a credit balance in the records
of such DTC Participant or Indirect Participant, to have all notices of
redemption or other communications to or by DTC which may affect such persons
forwarded in writing by such DTC Participant or Indirect Participant, and to
have notification made of all debt service payments.
Purchases, transfers and sales of Book-Entry Interests by the ultimate Book-
Entry Interest owners may be made through book entries made by DTC
Participants or Indirect Participants or others who act for the ultimate Book-
Entry Interest owner. The Trustee under the Mortgage and Indenture, the
Company and the underwriters, as such, have no role in those purchases,
transfers or sales.
Owners of Book-Entry Interests may be charged a sum sufficient to cover any
tax, fee, or other governmental charge that may be imposed in relation to any
transfer or exchange of a Book-Entry Interest.
Each Trustee will recognize and treat DTC (or any successor securities
depository) or its nominee as the holder of New Bonds and Debt Securities
registered in its name or the name of its nominee for all purposes, including
payment of debt service, notices, enforcement of remedies and voting. Under
DTC's current practice, a proxy will be given to the DTC Participants holding
Book-Entry Interests in New Bonds and Debt Securities in connection with any
matter on which holders of such New Bonds or Debt Securities are asked to vote
or give
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their consent. Crediting of debt service payments and transmittal of notices
and other communications by DTC to DTC Participants, by DTC Participants to
Indirect Participants and by DTC Participants and Indirect Participants to the
ultimate Book-Entry Interest owners are the responsibility of those persons
and will be handled by arrangements among them and are not the responsibility
of either Trustee, the Company or any underwriter, as such. Each Trustee, so
long as a book-entry system is used for any series of New Bonds or Debt
Securities, will send any notice of redemption and any other notices required
by the Mortgage or Indenture to be sent to holders of such New Bonds or Debt
Securities, respectively, only to DTC (or such successor securities
depository) or its nominee. Any failure of DTC to advise any DTC Participant,
or of any DTC Participant or Indirect Participant to notify the Book-Entry
Interest owner, of any such notice and its content or effect will not affect
the validity of the redemption of the New Bonds or Debt Securities called for
redemption, or any other action premised on that notice. In the event of a
call for redemption, the Trustee's notification to DTC will initiate DTC's
standard call process, and, in the event of a partial call, its lottery
process by which the call will be randomly allocated to DTC Participants
holding positions in the New Bonds or Debt Securities to be redeemed. When DTC
and DTC Participants allocate the call for redemption, the owners of the Book-
Entry Interests that have been called should be notified by the broker or
other person responsible for maintaining the records of those interests and
subsequently credited by that person with the proceeds once such New Bonds or
Debt Securities are redeemed.
The Company, the Trustee under the Mortgage and the Indenture and any
underwriter or agent cannot and do not give any assurances that DTC, DTC
Participants or others will distribute payments of debt service on New Bonds
or Debt Securities made to DTC or its nominee as the registered owner, or any
redemption or other notices, to the Book-Entry Interest owners, or that they
will do so on a timely basis, or that DTC will serve and act in the manner
described in this Prospectus.
The Company understands that the current "Rules" applicable to DTC are on
file with the Commission, and that the current "Procedures" of DTC to be
followed in dealing with DTC Participants are on file with DTC.
If DTC is at any time unwilling or unable to continue as depository, and a
successor depository is not appointed by the Company within 90 days, the
Company will issue individual certificates to owners of Book-Entry Interests
in exchange for the New Bonds or Debt Securities held by DTC or its nominee,
as the case may be. In such instance, an owner of a Book-Entry Interest will
be entitled to physical delivery of certificates equal in principal amount to
such Book-Entry Interest and to have such certificates registered in its name.
Individual certificates so issued will be issued in denominations of $1,000 or
any multiple thereof.
Neither the Company, the Trustee under the Mortgage and the Indenture nor
any underwriter makes any representation as to the accuracy of the above
description of DTC's business, organization and procedures, which is based
upon information furnished by DTC.
PLAN OF DISTRIBUTION
The Company may sell New Bonds and Debt Securities to or through
underwriters or dealers and also may sell New Bonds and Debt Securities
directly to other purchasers or through agents.
The distribution of New Bonds and Debt Securities of any series may be
effected from time to time in one or more transactions at a fixed price or
prices, which may be changed, or at market prices prevailing at the time of
sale, at prices related to such prevailing market prices or at negotiated
prices.
In connection with the sale of New Bonds and Debt Securities, underwriters
may receive compensation from the Company or from purchasers of New Bonds and
Debt Securities for whom they may act as agents, in the form of discounts,
concessions or commissions. Underwriters, dealers and agents that participate
in the distribution of New Bonds and Debt Securities may be deemed to be
"underwriters", and any discounts or commissions received by them from the
Company and any profit on the resale of New Bonds and Debt Securities by them
may be deemed to be underwriting discounts and commissions, under the
Securities Act.
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The Prospectus Supplement relating to each series of New Bonds will also set
forth the terms of the offering of the New Bonds of each series, including, to
the extent applicable, the initial offering price, the proceeds to the
Company, the underwriting discounts or commissions, and any other discounts or
concessions to be allowed or re-allowed to dealers. The principal underwriters
with respect to each series sold to or through underwriters will be named in
the Prospectus Supplement relating to such series and only the underwriters
named in such Prospectus Supplement are deemed to be underwriters in
connection with the New Bonds offered thereby.
The Prospectus Supplement relating to each series of Debt Securities will
also set forth the terms of the offering of the Debt Securities of each
series, including, to the extent applicable, the initial offering price, the
proceeds to the Company, the underwriting discounts or commissions and any
other discounts or concessions to be allowed or re-allowed to dealers. The
principal underwriters with respect to each series sold to or through
underwriters will be named in the Prospectus Supplement relating to such
series and only the underwriters named in such Prospectus Supplement are
deemed to be underwriters in connection with the Debt Securities offered
thereby.
If so indicated in the Prospectus Supplement, the Company will authorize
agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase New Bonds or Debt Securities from the Company at the
public offering price set forth in the Prospectus Supplement pursuant to
delayed delivery contracts providing for payment and delivery on a specified
date in the future. Such contracts will be subject only to those conditions
set forth in the Prospectus Supplement and the Prospectus Supplement will set
forth the commission payable for the solicitation of such contracts.
Under agreements which may be entered into by the Company, underwriters,
dealers and agents who participate in the distribution of New Bonds and Debt
Securities may be entitled to indemnification by the Company against certain
liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments which the agents, underwriters or
dealers may be required to make in respect thereto. Agents, underwriters and
dealers may be customers of, engage in transactions with or perform services
for the Company in the ordinary course of business.
In connection with the offering of the New Bonds and Debt Securities,
underwriters may engage in transactions that stabilize, maintain or otherwise
affect the price of the New Bonds or Debt Securities. Specifically, the
underwriters may over-allot in connection with the offerings of the New Bonds
or Debt Securities, creating a syndicate short position. In addition,
underwriters may bid for, and purchase, New Bonds or Debt Securities in the
open market to cover syndicate shorts or to stabilize the price of the New
Bonds or Debt Securities, as the case may be. Finally, the underwriting
syndicate may reclaim selling concessions allowed for distributing the new
Bonds or Debt Securities in the offering of the New Bonds or Debt Securities,
as the case may be, if the syndicate repurchases previously distributed New
Bonds or Debt Securities, as the case may be, in syndicate covering
transactions, syndicate transactions or otherwise. Any of these activities may
stabilize or maintain the market prices of the New Bonds or Debt Securities
above independent market levels. The underwriters are not required to engage
in any of these activities, and may end any of them at any time.
The New Bonds and Debt Securities are not proposed to be listed on a
securities exchange, and any underwriters will not be obligated to make a
market in the New Bonds and Debt Securities. The Company cannot predict the
activity or liquidity of any trading in the New Bonds and Debt Securities.
EXPERTS
The financial statements incorporated in this Prospectus by reference to the
Company's Annual Report on Form 10-K for the year ended December 31, 1996 have
been so incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
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Future audited financial statements incorporated in this Prospectus by
reference to future filings under the Exchange Act, as provided under
"Incorporation of Certain Documents by Reference" above, will be so
incorporated in reliance on the related report or reports of the firm of
independent accountants auditing such financial statements, given on such
authority of such firm, if and to the extent such filings include the consent
of such firm to the incorporation of such report or reports herein.
LEGAL OPINIONS
Certain legal matters in connection with the New Bonds and Debt Securities
will be passed upon for the Company by Walter T. Woelfle, Director-Legal
Services Department of the Company, James D. Zakrajsheck, Counsel of the
Company, or A. William Finke, Counsel of the Company, and by Quarles & Brady,
411 East Wisconsin Avenue, Milwaukee, Wisconsin. Certain legal matters in
connection with the New Bonds and Debt Securities will be passed upon for the
underwriters by Cahill Gordon & Reindel (a partnership including a
professional corporation), 80 Pine Street, New York, New York. Cahill Gordon &
Reindel have acted and will continue to act as counsel to Wisconsin Energy in
connection with various other matters. Quarles & Brady and Cahill Gordon &
Reindel will not pass upon the incorporation of the Company, franchise
matters, questions of title or the lien of the Mortgage. Cahill Gordon &
Reindel will rely upon the opinion of Mr. Woelfle, Mr. Zakrajsheck or Mr.
Finke as to all matters of Wisconsin law. Cahill Gordon & Reindel and Quarles
& Brady will rely upon such opinion as to matters of Michigan law and the
exempt status of the Company and Wisconsin Energy under the Public Utility
Holding Company Act of 1935, as amended. Also, such firms, Mr. Woelfle, Mr.
Zakrajsheck and Mr. Finke will rely on the opinion of Loomis, Ewert, Parsley,
Davis & Gotting, P.C., 232 South Capitol Avenue, Lansing, Michigan, as to
matters of Michigan law relating to authority to do business and certain
regulatory matters in Michigan.
The statements as to matters of law and legal conclusions under "Description
of New Bonds--Security" have been prepared under the supervision of, and
reviewed by, Walter T. Woelfle, Director-Legal Services Department of the
Company, and such statements are made on his authority. As of September 30,
1997, Mr. Woelfle, Mr. Zakrajsheck and Mr. Finke owned beneficially 6,992
shares, 350 shares and 15,383 shares of Common Stock of Wisconsin Energy,
respectively, and Mr. Woelfle held options to acquire 11,400 shares of
Wisconsin Energy Common Stock.
19
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS SUPPLE-
MENT OR THE PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTA-
TION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE
UNDERWRITERS. THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE
AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE SECURITIES OFFERED
HEREBY TO ANYONE IN ANY JURISDICTION IN WHICH THE PERSON MAKING SUCH OFFER OR
SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE ANY SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER OR THEREUNDER SHALL,
UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE
IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION
CONTAINED HEREIN OR THEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<S> <C>
Incorporation of Certain Documents by Reference S-2
Certain Summary Financial Information S-2
Use of Proceeds and Capital Requirements S-3
Recent Developments S-3
Certain Terms of the Debentures S-4
Underwriting S-6
PROSPECTUS
Available Information 2
Incorporation of Certain Documents by Reference 2
Forward-Looking Statements and Cautionary Factors 3
The Company 3
Use of Proceeds 3
Certain Summary Financial Information 4
Recent Developments 4
Description of New Bonds 6
Description of Debt Securities 10
Book-Entry Only System 15
Plan of Distribution 17
Experts 18
Legal Opinions 19
</TABLE>
Prospectus Supplement
WISCONSIN
ELECTRIC POWER COMPANY
$150,000,000
6 1/2% DEBENTURES DUE JUNE 1, 2028
CHASE SECURITIES INC.
BEAR, STEARNS & CO. INC.
SALOMON SMITH BARNEY
ROBERT W. BAIRD & CO.
INCORPORATED
CLEARY GULL REILAND & MCDEVITT INC.
May 27, 1998
