<PAGE>
Filed Pursuant To Rule 424(b)(5)
Registration No. 333-67525
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED DECEMBER 3, 1998)
$150,000,000
CENTRAL POWER AND LIGHT COMPANY
FLOATING RATE NOTES DUE FEBRUARY 22, 2002
-----------------
INTEREST ON THE FLOATING RATE NOTES WILL ACCRUE AT A RATE PER ANNUM EQUAL TO
THE FLOATING INTEREST RATE CALLED LIBOR, WHICH WE DESCRIBE UNDER "DESCRIPTION OF
FLOATING RATE NOTES" BEGINNING ON PAGE S-7 OF THIS PROSPECTUS SUPPLEMENT, PLUS
0.45%. INTEREST WILL ACCRUE FOR EACH QUARTER FROM FEBRUARY 23, 2000 UNTIL
FEBRUARY 22, 2002 OR THE DATE OF EARLIER REDEMPTION. WE WILL PAY INTEREST ON THE
FLOATING RATE NOTES QUARTERLY IN ARREARS ON FEBRUARY 22, MAY 22, AUGUST 22 AND
NOVEMBER 22 OF EACH YEAR, BEGINNING MAY 22, 2000.
WE MAY REDEEM SOME OR ALL OF THE FLOATING RATE NOTES ON ANY INTEREST PAYMENT
DATE ON OR AFTER FEBRUARY 22, 2001, AT A REDEMPTION PRICE EQUAL TO THE PRINCIPAL
AMOUNT OF THE FLOATING RATE NOTES TO BE REDEEMED PLUS INTEREST ACCRUED TO THE
REDEMPTION DATE. THERE IS NO SINKING FUND FOR THE FLOATING RATE NOTES.
THE FLOATING RATE NOTES ARE UNSECURED, RANK EQUALLY WITH ALL OF OUR OTHER
UNSECURED AND UNSUBORDINATED INDEBTEDNESS AND WILL BE EFFECTIVELY SUBORDINATED
TO ALL OF OUR SECURED DEBT, INCLUDING $765 MILLION OUTSTANDING FIRST MORTGAGE
BONDS AS OF DECEMBER 31, 1999.
-------------------
THE UNDERWRITERS HAVE PROPOSED TO OFFER THE FLOATING RATE NOTES FROM TIME TO
TIME FOR SALE IN NEGOTIATED TRANSACTIONS, OR OTHERWISE, AT VARYING PRICES TO BE
DETERMINED AT THE TIME OF EACH SALE. THE UNDERWRITERS HAVE AGREED TO PURCHASE
THE FLOATING RATE NOTES FROM US AT 99.75% OF THEIR PRINCIPAL AMOUNT
($149,625,000 AGGREGATE PROCEEDS TO US BEFORE DEDUCTING EXPENSES ESTIMATED AT
$150,000), SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN THE UNDERWRITING
AGREEMENT.
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The Securities and Exchange Commission and state securities regulators have
not approved or disapproved of these securities, or determined if this
prospectus supplement or the accompanying prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
The underwriters expect to deliver the Floating Rate Notes in book-entry
form through the facilities of The Depository Trust Company against payment in
New York, New York on February 23, 2000.
-------------------
MORGAN STANLEY DEAN WITTER
J.P. MORGAN & CO.
BNY CAPITAL MARKETS, INC.
February 16, 2000
<PAGE>
No dealer, salesperson or other person is authorized to give any
information or to represent anything not contained in this prospectus supplement
or the accompanying prospectus. You must not rely on any unauthorized
information or representations. This prospectus supplement is an offer to sell
only the Floating Rates Notes offered hereby, but only under circumstances and
in jurisdictions where it is lawful to do so. The information contained in this
prospectus supplement and the accompanying prospectus is current only as of
their respective dates.
----------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
<S> <C>
Incorporation of Certain Documents by Reference....... S-3
The Company........................................... S-3
Recent Developments................................... S-3
Use of Proceeds....................................... S-5
Capitalization........................................ S-6
Description of Floating Rate Notes.................... S-7
Underwriting......................................... S-11
Legal Opinions....................................... S-12
</TABLE>
PROSPECTUS
<TABLE>
<CAPTION>
<S> <C>
Where You Can Find More Information..................... 2
Documents Incorporated by Reference..................... 2
Reports to Holders of Senior Notes...................... 3
Forward-Looking Statements.............................. 3
Prospectus Summary...................................... 4
Selected Financial Information.......................... 5
Central Power and Light Company......................... 6
Ratios of Earnings to Fixed Charges..................... 6
Use of Proceeds......................................... 6
Description of the Senior Notes......................... 6
Legal Opinions......................................... 13
Experts................................................ 14
Plan of Distribution................................... 14
</TABLE>
S-2
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Subsequent to the date of the accompanying Prospectus, the Company filed
with the Commission the following documents, which documents are incorporated by
reference in this Prospectus Supplement:
- Annual Report on Form 10-K for the year ended December 31, 1998;
- Quarterly Reports on Form 10-Q for the quarters ended March 31,
June 30, September 30, 1999; and
- Current Reports on Form 8-K dated January 5, 1999, July 2, 1999,
December 7, 1999, December 17, 1999, January 25, 2000 and
February 14, 2000.
THE COMPANY
We are a public utility company engaged in the production, purchase,
transmission, distribution and sale of electricity in south Texas. At December
31, 1999, we supplied electricity to approximately 661,100 retail customers in a
44,000 square mile area with an estimated population of 1,830,000. The largest
cities in our service territory are Corpus Christi, Laredo and McAllen. The
economy of our service area is based on manufacturing, mining, agriculture,
transportation and public utilities. We provide electricity to large industrial
customers in the oil and gas extraction, food processing, apparel, metal
refining, chemical and petroleum refining, and plastics and machinery equipment
industries.
Central and South West Corporation, or CSW, a Dallas-based registered
public utility holding company under the Public Utility Holding Company Act of
1935, as amended, owns all of our outstanding common stock. On December 22,
1997, CSW and American Electric Power Company, Inc., or AEP, announced that
their boards of directors had approved a definitive merger agreement. The
shareholders of each company and the United Kingdom's Department of Trade and
Industry have approved, and the Department of Justice has given antitrust
clearance to, the merger, which is subject to other regulatory approvals and
other customary conditions.
Our principal executive offices are located at 539 North Carancahua Street,
Corpus Christi, Texas 78401-2802, and our telephone number is (518) 881-5300.
Additional information about us, including financial statements and other
information, is available in the documents incorporated by reference in this
prospectus supplement.
We continue to analyze the impact of the electric utility restructuring
legislation in Texas. Based on the overall framework and objective of the
legislation regarding recovery of stranded costs and regulatory assets, several
adjustments to earnings were recorded in the third quarter of 1999.
RECENT DEVELOPMENTS
RESULTS OF OPERATIONS. Our net income for common stock for 1999 was $173.2
million, which was $18.5 million, or 12% higher than our net income for common
stock in 1998. The factors contributing to the increase were our higher electric
operating revenues and a decrease in our income taxes and interest charges. The
increase in our net income for common stock was partially offset by an increase
in our operating expenses.
Electric operating revenues for 1999 were $1,482.5 million, which was $76.4
million, or 5% higher than our electric operating revenues in 1998. Electric
operating revenues reflect the following
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increases: $13.4 million in residential markets, $16.1 million in commercial
markets, $21.1 million in industrial markets, $9.2 million in sales for resale
and $16.6 million in other revenues. Our other revenues also reflect adjustments
related to transmission revenues. A major portion of the increase in other
revenues reflect increases in fuel related revenues. Increases in our non-fuel
revenues were partially offset by the implementation of lower base rates as
ordered by the Texas Commission.
Our operating expenses and taxes for 1999 were $1,187.8 million, which was
$64.6 million higher than operating expenses and taxes in 1998. Our operating
expenses are the combined result of the following four items. First, our fuel
and purchased power expense increased by $46.1 million, or 11% when compared to
1998. Fuel expense increased largely due to an increase in average unit fuel
costs from $1.59 per MMbtu in 1998 to $1.72 per MMbtu in 1999 as a result of
higher prices for natural gas purchased on the spot market. Increased purchased
power expense is due to an increase in economy energy purchases. Second, our
other operating expenses increased by $29.2 million, or 11% when compared to
similar operating expenses in 1998. The increase is due primarily to increases
in transmission, distribution and outside service expenses. Third, our
maintenance expenses for 1999 increased $6.4 million, or 10% when compared to
maintenance expenses in 1998. The increase reflects scheduled power plant
repairs and maintenance including the refueling and 10-year inspection of STP
Units 1 and 2. Fourth, our depreciation and amortization expenses for 1999
decreased $7.1 million, or 4% when compared to 1998, due primarily to the
reclassification of certain regulatory assets designated for securitization,
which was offset in part by the recognition of accelerated capital recovery of
stranded costs under provisions of the recently enacted Texas legislation. Our
taxes, other than income, increased $2.9 million to $73.8 million resulting from
increases in franchise taxes for 1999. Our income tax expenses associated with
utility operations decreased by $12.9 million, or 11% when compared to 1998 due
to lower taxable income, the reclassification of certain income tax related
regulatory assets designated for securitization consistent with the new Texas
legislation and adjustments related to prior year's taxes, offset in part by the
income tax related portion of the Texas state franchise tax.
Our interest charges for 1999 were $114.4 million, a decrease of $7.7
million, or 6% when compared to the interest charges for 1998. Interest charges
declined primarily because of the maturity and reacquisition of approximately
$261.7 million of our long-term debt during the year. We also replaced a portion
of our long-term debt with lower interest rate long-term debt. During 1999, we
also recognized a loss of $2.8 million on the redemption of our preferred stock.
ELECTRIC UTILITY RESTRUCTURING. On January 10, 2000, our parent company,
CSW, filed with the Texas Commission its business separation plan required by
Section 39.051 of the Public Utility Regulatory Act and Section 25.342 of the
Texas Commission's substantive rules on electric restructuring. The business
separation plan describes the approach proposed by CSW to unbundle our utility
activities, and those of CSW's other electric operating companies in the State
of Texas, into three basic units:
- a retail electric provider, or REP, which will sell electric
service to retail customers;
- a power generation company, which will produce electricity; and
- an energy delivery company (transmission and distribution, or
T&D), which will deliver the electricity to the customer.
CSW's business separation plan envisions a two-stage structural separation
of our utility operations. In the first stage, which would be completed by
January 1, 2002, we would separate the management and control of our T&D areas
from the generation area of the company. We would also create a separate REP,
which would sell electric service to retail customers. During the first stage,
the
S-4
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T&D and generation assets, as well as certain operating employees, will
remain on the books of our company, although those assets and employees will be
managed and controlled separately.
The second stage of CSW's plan, which would occur by January 1, 2008,
includes the transfer of legal ownership of generating and T&D assets to new
entities. The plan proposes full legal entity or structural separation in two
stages in order to minimize refinancing costs and to comply with existing
contractual requirements in outstanding securities.
We cannot predict whether the plan CSW filed with the Texas Commission will
be approved, and if it is, the timing or terms of any final order the Texas
Commission might issue. For additional information concerning the business
separation plan, see our report on Form 8-K filed with the Securities and
Exchange Commission on January 25, 2000.
SECURITIZATION. On October 18, 1999, we filed an application with the Texas
Commission to securitize approximately $1.27 billion of our retail generation
related regulatory assets and approximately $47 million in other qualified
costs. Securitization is a financing structure designed to provide lower
financing costs than is available through conventional financing through the
issuance of securitization bonds. Securitized amounts are then recovered through
a non-bypassable transmission charge.
On February 10, 2000, the Texas Commission tentatively approved a
settlement, which will permit us to securitize approximately $764 million of
regulatory assets. The Texas Commission is expected to grant final approval on
February 28, 2000. The action is in accordance with the implementation of Texas
Senate Bill No. 7 on Electric Utility Restructuring.
The settlement calls for us to reduce our proposed amount to be securitized
from $1.27 billion to approximately $764 million of regulatory assets plus an
estimated $28 million of other qualified costs. The settlement also calls for
$290 million of the amount we originally requested to be included in the
calculation of stranded costs in our April 2000 transmission and distribution
cost filing. This filing will establish stranded costs of which 75% can be
securitized and 25% can be recovered through a competitive transition charge.
The securitization amount was reduced by an additional $186 million to
reflect customer benefits associated with accumulated deferred income taxes. We
previously had proposed to flow these benefits back to our customers over a
14-year transition period.
We could issue the transition bonds associated with securitization as early
as March or April 2000, depending on timing of receipt of a financing order from
the Texas Commission and depending on market conditions. A second phase of
securitization could occur later in 2000. Our stranded costs are subject to a
final determination by the Texas Commission in 2004.
USE OF PROCEEDS
We estimate the net proceeds from the sale of the Floating Rate Notes will
be approximately $149,475,000. We will use the net proceeds for general
corporate purposes, including repayment of our $100 million 6.0% First Mortgage
Bonds, Series HH, due April 1, 2000 and repayment of a portion of outstanding
short-term indebtedness with a blended rate of 6.191% as of February 1, 2000. If
we do not use the net proceeds immediately, we may temporarily invest them in
short-term interest-bearing obligations.
S-5
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CAPITALIZATION
CAPITALIZATION AT
DECEMBER 31, 1999
(UNAUDITED)
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Actual % As Adjusted(2) %
------ - -------------- -
<S> <C> <C> <C> <C>
Long-Term Debt(1)............................................... $1,304,541 47 $1,454,541 49
CPL--Obligated Mandatorily
Redeemable Preferred Securities of Subsidiary Trust
Holding Solely Junior Subordinated Debentures of CPL....... 150,000 5 150,000 5
Preferred Stock ................................................ 5,967 -- 5,967 --
Common Equity .................................................. 1,338,113 48 1,338,113 46
---------- --- ---------- ----
Total ................................................... $2,798,621 100 $2,948,621 100
---------- --- ---------- ----
Short-Term Debt ................................................ $322,158 -- $272,158 --
Long-Term Debt Currently Maturing............................... $150,000 -- $50,000 --
</TABLE>
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(1) At December 31, 1999, long-term debt includes $765 million of
outstanding first mortgage bonds which are secured by a mortgage on
substantially all of our properties, $50 million of which has been
called for redemption on March 1, 2000.
(2) Adjusted to give effect to the consummation of the offering of the
Floating Rate Notes and the application of the estimated net proceeds
therefrom. We will use a portion of the proceeds of this offering to
redeem $100 million of our 6.0% First Mortgage Bonds, Series HH, due
April 1, 2000 and to repay a portion of outstanding short-term
indebtedness with a blended rate of 6.191% as of February 1, 2000.
S-6
<PAGE>
DESCRIPTION OF FLOATING RATE NOTES
The Floating Rate Notes are a separate series of the Senior Notes described
in the accompanying prospectus. You should read the prospectus for a detailed
summary of additional provisions of the Floating Rate Notes and of the Indenture
under which the Floating Rate Notes are issued. The description of the Floating
Rate Notes below supplements the description of the Senior Notes contained in
the prospectus. If the descriptions are inconsistent, this prospectus supplement
controls. The following summary and the description set forth in the
accompanying prospectus do not purport to be complete and are subject to, and
qualified in their entirety by, all provisions of the Indenture. Capitalized
terms used but not defined in this prospectus supplement have the meanings given
to them in the prospectus.
GENERAL
The Floating Rate Notes will constitute the second series of our Senior
Notes issued under our Indenture dated as of November 15, 1999, between us and
The Bank of New York, as trustee. On November 23, 1999, we issued $200,000,000
of floating rate notes due November 23, 2001, which were the first series of
Senior Notes issued under the Indenture. The aggregate principal amount of the
Floating Rate Notes offered hereby is limited to $150,000,000, but the Indenture
does not limit the amount of other Senior Notes that we may issue. The Floating
Rate Notes will mature on February 22, 2002, the maturity date. The Floating
Rate Notes are not entitled to the benefit of any sinking fund, and may be
redeemed at our option only under the circumstances described below under
"--Optional Redemption." The Indenture permits the defeasance of the Floating
Rate Notes upon satisfaction of the conditions described under "Description of
the Senior Notes--Defeasance" in the accompanying prospectus.
We will issue the Floating Rate Notes in fully registered form in
denominations of $1,000 and in $1,000 increments above $1,000. The Bank of New
York, the trustee under the Indenture, will register transfers and exchanges of
the Floating Rate Notes. Principal on the Floating Rate Notes will be payable at
the Trustee's corporate trust office at 101 Barclay Street, New York, New York
10286. We will initially issue the Floating Rate Notes in global form. Please
refer to "--Global Securities" in this prospectus supplement and "Description of
the Senior Notes--Book-Entry Only System" in the accompanying prospectus.
If any principal, interest or other payment to be made in respect of the
Floating Rate Notes would be due on a day that is not a business day (as defined
below), payment may be made on the next day that is a business day, with the
same effect as if payment were made on the due date.
LIMITATION ON LIENS
The Second Supplemental Indenture dated as of February 16, 2000 between us
and the trustee provides that the covenant summarized in the accompanying
prospectus under "Description of the Senior Notes-- Limitation on Liens" is
applicable to the Floating Rate Notes.
INTEREST
The Floating Rate Notes will bear interest at LIBOR plus 0.45%. We will pay
interest quarterly in arrears on February 22, May 22, August 22 and November 22
of each year (each an "interest payment date"), beginning May 22, 2000, and on
the maturity date. If any of the quarterly interest payment dates listed above
falls on a day that is not a business day, we will postpone the interest payment
date to the next succeeding business day unless that business day is in the next
succeeding calendar month, in which case the interest payment date will be the
immediately preceding business day. If we pay principal and
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interest on the next succeeding business day, we will consider that payment as
being made on the date that the payment is due to you. Accordingly, no interest
will accrue on the payment for the period from and after the interest payment
date or the maturity date to the date we make the payment to you on the next
succeeding business day. Interest on the Floating Rate Notes will be computed on
the basis of a 360 day year for the actual number of days elapsed.
Interest on the Floating Rate Notes will accrue from, and including,
February 23, 2000, to, and excluding, the first interest payment date and then
from, and including, the immediately preceding interest payment date to which
interest has been paid or duly provided for to, but excluding, the next interest
payment date or the maturity date, as the case may be. We will refer to each of
these periods as an "interest period." You can calculate the amount of accrued
interest that we will pay for any interest period by multiplying the face amount
of the Floating Rate Notes by the interest rate applicable for the interest
period divided by 360 days and multiplied by the number of days in the interest
period.
We will pay the interest payable for any interest payment date to the
person in whose name the note is registered at the close of business on the
fifteenth calendar day, whether or not a business day, immediately preceding the
interest payment date. However, we will pay interest on the maturity date or on
a redemption date to the person to whom the principal will be payable.
When we use the term "business day," we mean any day except a Saturday, a
Sunday or a legal holiday in The City of New York on which banking institutions
are authorized or required by law, regulation or executive order to close;
provided, that the day is also a London business day. "London business day"
means any day on which dealings in United States dollars are transacted in the
London interbank market.
The calculation agent appointed by us, initially The Bank of New York, will
calculate the interest rate on the Floating Rate Notes. The interest rate will
be equal to LIBOR plus 0.45%. The interest rate in effect for the period from
February 23, 2000 to, but excluding, May 22, 2000, the initial interest reset
date, will be LIBOR, as determined on February 18, 2000, plus 0.45%. The
calculation agent will reset the interest rate on each interest payment date,
each of which we will refer to as an "interest reset date." The second London
business day preceding an interest reset date will be the "interest
determination date" for that interest reset date. The interest rate in effect on
each day that is not an interest reset date will be the interest rate determined
as of the interest determination date pertaining to the immediately preceding
interest reset date. The interest rate in effect on any day that is an interest
reset date will be the interest rate determined as of the interest determination
date pertaining to that interest reset date, except that the interest rate in
effect for the period from and including February 23, 2000 to the first interest
reset date will be the initial interest rate.
The calculation agent will determine "LIBOR" in accordance with the
following provisions:
(i) With respect to any interest determination date, LIBOR will be
the rate for deposits in United States dollars having a maturity of three months
commencing on the first day of the applicable interest period that appears on
Telerate Page 3750 as of 11:00 A.M., London time, on that interest determination
date. If no rate appears, LIBOR, in respect to that interest determination date,
will be determined in accordance with the provisions described in (ii) below.
(ii) With respect to an interest determination date on which no
rate appears on Telerate Page 3750, as specified in (i) above, the calculation
agent will request the principal London offices of each of four major reference
banks in the London interbank market, as selected by the calculation agent, to
provide the calculation agent with its offered quotation for deposits in United
States dollars for the period of three months, commencing on the first day of
the applicable interest period, to prime banks in the
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London interbank market at approximately 11:00 A.M., London time, on that
interest determination date and in a principal amount that is representative for
a single transaction in United States dollars in that market at that time. If at
least two quotations are provided, then LIBOR on that interest determination
date will be the arithmetic mean of those quotations. If fewer than two
quotations are provided, then LIBOR on the interest determination date will be
the arithmetic mean of the rates quoted at approximately 11:00 A.M., in The City
of New York, on the interest determination date by three major banks in The City
of New York selected by the calculation agent for loans in United States dollars
to leading European banks, having a three-month maturity and in a principal
amount that is representative for a single transaction in United States dollars
in that market at that time; provided, however, that if the banks selected by
the calculation agent are not providing quotations in the manner described by
this sentence, LIBOR determined as of that interest determination date will be
LIBOR in effect on that interest determination date.
"Telerate Page 3750" means the display designated as "Page 3750" on Bridge
Telerate, Inc., or any successor service, for the purpose of displaying the
London interbank rates of major banks for United States dollars.
OPTIONAL REDEMPTION
We may redeem all or part of the Floating Rate Notes from time to time on
any interest payment date on or after February 22, 2001 at our option, upon not
less than 30 nor more than 60 days' notice, at a redemption price equal to the
principal amount of the Floating Rate Notes to be redeemed plus interest accrued
to the redemption date.
GLOBAL SECURITIES
When the Floating Rate Notes are initially issued, one or more global
securities (the "Global Securities") will represent the Floating Rate Notes.
These Global Securities will have an aggregate principal amount equal to that of
the Floating Rate Notes they represent. Each Global Security will be deposited
with, or on behalf of, DTC, as depository (the "Depositary"), and registered in
the name of Cede & Co., a nominee of the Depositary. The Global Securities will
bear legends stating the restrictions on exchanges and registration of transfer
referred to below and any other matters provided for by the Indenture.
The Depositary has advised the Company as follows: The Depositary is a
limited-purpose trust company organized under the Banking Law of the State of
New York, 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 Securities
Exchange Act of 1934. The Depositary was created to hold securities of its
participants and to facilitate the clearance and settlement of securities
transactions among its participants through electronic book-entry changes in
accounts of the participants, thereby eliminating the need for physical movement
of securities certificates. The Depositary's participants include securities
brokers and dealers (including each of the underwriters set forth below), banks,
trust companies, clearing corporations and certain other organizations, some of
whom (and/or their representatives) own the Depositary. Access to the
Depositary's book-entry system is also available to others, such as banks,
brokers, dealers and trust companies that clear through or maintain a custodian
relationship with a participant, either directly or indirectly.
Unless otherwise provided by any provision of the Indenture or the Floating
Rate Notes described in this prospectus supplement, no Global Security may be
exchanged in whole or in part for registered Floating Rate Notes and no transfer
of a Global Security in whole or in part may be registered, in the name of any
person other than the Depositary for such Global Security or any nominee of the
Depositary
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unless (1) the Depositary has notified the Company that it is unwilling or
unable to continue as Depositary for the Global Security or has ceased to be
qualified to act as Depositary as required pursuant to the Indenture or (2)
there shall have occurred and be continuing an Event of Default with respect to
the Floating Rate Notes represented by such Global Security. All Floating Rate
Notes issued in exchange for a Global Security or any portion of a Global
Security will be registered in such names as the Depositary may direct.
As long as the Depositary, or its nominee, is the registered holder of a
Global Security, the Depositary or its nominee, as the case may be, will be
considered the sole owner and holder of such Global Security and the Floating
Rate Notes represented thereby for all purposes under the Floating Rate Notes
and the Indenture. Except in the limited circumstances referred to above, owners
of beneficial interests in a Global Security (1) will not be entitled to have
such Global Security or any Floating Rate Notes represented by the Global
Security registered in their names, (2) will not receive or be entitled to
receive physical delivery of certificated Floating Rate Notes in exchange for
the Global Security and (3) will not be considered to be the owners or holders
of such Global Security or any Floating Rate Notes represented by the Global
Security for any purpose under the Floating Rate Notes or the Indenture.
Payments of principal of and interest on a Global Security will be made to the
Depositary or its nominee, as the case may be, as the holder thereof. The laws
of some jurisdictions require that certain purchasers of securities take
physical delivery of such securities in definitive form. These laws may impair
the ability of holders to transfer beneficial interests in a Global Security.
Institutions that have accounts with the Depositary or its nominee
("participants") and persons that may hold beneficial interests through
participants are the only holders who may own beneficial interests in a Global
Security. In connection with the issuance of any Global Security, the Depositary
will credit, on its book-entry registration and transfer system, the respective
principal amounts of Floating Rate Notes represented by the Global Security to
the accounts of its participants. Ownership of beneficial interests in a Global
Security will be shown only on, and the transfer of those ownership interests
will occur only through, records maintained by the Depositary (with respect to
participants' interests) or any such participant (with respect to interests of
persons held by such participants on their behalf). Payments, transfers,
exchanges, notices and other matters relating to beneficial interests in a
Global Security may be subject to various policies and procedures adopted by the
Depositary. Neither we nor the trustee, the calculation agent, any paying agent,
or the security registrar or any of their respective agents will have any
responsibility or liability (1) for any aspect of the Depositary's or any
participant's records relating to, or for payments or notices on account of,
beneficial interests in a Global Security or (2) for maintaining, supervising or
reviewing any records relating to such beneficial interests.
CERTAIN NOTICES
With respect to any Floating Rate Notes represented by a Global Security,
notices to be given to the holders of the Floating Rate Notes will be deemed to
have been duly given to the holders when given to DTC, or its nominee, in
accordance with DTC's policies and procedures. We believe that DTC's practice is
to inform its participants of any such notice it receives in accordance with its
policies and procedures. Persons who hold beneficial interests in the Floating
Rate Notes through DTC or its direct or indirect participants may wish to
consult with them about how notices and other communications relating to the
Floating Rate Notes may be given and received through the facilities of DTC.
Neither we nor the calculation agent or the trustee will have any responsibility
with respect to those policies and procedures or for any notices or other
communications among DTC, its direct and indirect participants and the
beneficial owners of the Floating Rate Notes in global form.
With respect to Floating Rate Notes not represented by a Global Security,
other notices to be given to the holders of the Floating Rate Notes will be
deemed to have been duly given to the holders
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upon the mailing of such notices to the holders at their respective addresses as
they appear on the security register maintained by us or our agent as of the
close of business before the day notice is given.
Neither the failure to give any notice nor any defect in any notice given
to a particular holder will affect the sufficiency of any notice given to
another holder.
UNDERWRITING
We have entered into an underwriting agreement dated as of February 16,
2000 with respect to the Floating Rate Notes with the underwriters for the
offering named below. Subject to certain conditions, each Underwriter has agreed
to purchase from us the principal amount of Floating Rate Notes indicated in the
following table:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
UNDERWRITERS FLOATING RATE NOTES
------------- -------------------------
<S> <C>
Morgan Stanley & Co. Incorporated ...... $90,000,000
J.P. Morgan Securities Inc. ............ 37,500,000
BNY Capital Markets, Inc................ 22,500,000
-------------------------
Total .................................. $150,000,000
-------------------------
</TABLE>
The underwriters propose to offer the Floating Rate Notes from time to time
for sale in negotiated transactions, or otherwise, at varying prices to be
determined at the time of each sale. In connection with the sale of the Floating
Rate Notes, the underwriters may be deemed to have received compensation from us
in the form of underwriting discounts.
The Floating Rate Notes are a new issue of securities with no established
trading market. The underwriters have advised us that they intend to make a
market in the Floating Rate Notes but are not obligated to do so and may
discontinue market making at any time without notice. Therefore, the liquidity
of the trading market for the Floating Rate Notes may be low.
We estimate that our share of the total expenses of the offering, excluding
underwriting discounts and commissions, will be approximately $150,000.
We have agreed to indemnify the underwriters against various liabilities,
including liabilities under the Securities Act of 1933.
Certain of the underwriters and their affiliates may engage in transactions
with, or perform services for, us and our affiliates in the ordinary course of
business. In that regard, The Bank of New York, an affiliate of BNY Capital
Markets, Inc., which is an underwriter for this offering, is the trustee under
the Indenture.
S-11
<PAGE>
LEGAL OPINIONS
Milbank, Tweed, Hadley & McCloy LLP, 1 Chase Manhattan Plaza, New York, New
York 10005, our counsel, will give legal opinions relating to the validity of
the Floating Rate Notes. Sidley & Austin, Bank One Plaza, 10 S. Dearborn Street,
Chicago, Illinois 60603, counsel for the underwriters, will give legal opinions
relating to the validity of the Floating Rate Notes. All matters of Texas law
will be passed upon by Vinson & Elkins L.L.P., 3700 Trammell Crow Center, 2001
Ross Avenue, Dallas, Texas 72501-2975, our special Texas counsel. Sidley &
Austin has represented Central and South West Corporation and affiliates of
Central and South West Corporation (including the Company) from time to time in
connection with certain legal matters.
S-12
<PAGE>
PROSPECTUS
CENTRAL POWER AND LIGHT COMPANY
$350,000,000
SENIOR NOTES
----------------
Central Power and Light Company intends to offer from time to time in one or
more series up to $350,000,000 of debentures, notes or other types of senior
unsecured debt securities (the "Senior Notes").
When a particular series of Senior Notes is offered, we will prepare and
issue a supplement to this Prospectus setting forth the particular terms of the
offered Senior Notes (each such supplement, a "Prospectus Supplement"). You
should read this Prospectus and any Prospectus Supplement carefully before you
make any decision to invest in the Senior Notes.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS ANY OF THESE
ORGANIZATIONS DETERMINED THAT THIS PROSPECTUS IS ACCURATE OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
We may offer the Senior Notes directly or through underwriters, agents or
dealers. Each Prospectus Supplement will provide the terms of the plan of
distribution relating to the respective series of Senior Notes. "Plan of
Distribution" below also provides more information on this topic.
The date of this Prospectus is December 3, 1998.
<PAGE>
------------------------
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission (the "Commission")
in Washington, D.C., a Registration Statement on Form S-3 under the Securities
Act of 1933, as amended (the "Securities Act"), with respect to the securities
offered in this Prospectus. We have not included certain portions of the
Registration Statement in this Prospectus as permitted by the Commission's rules
and regulations. For further information, you should refer to the Registration
Statement and its exhibits.
We are subject to the informational requirements of the Securities Act of
l934, as amended (the "Exchange Act"), and therefore we file annual, quarterly
and current reports, proxy statements and other information with the Commission.
You may read and copy the Registration Statement (with exhibits), as well as the
reports and other information filed by the Company with the Commission, at the
Commission's public reference facilities at its principal offices at Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and its
regional offices at Northwest Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661-2511 and 7 World Trade Center, Suite 1300, New
York, New York 10048. You may obtain information on the operation of the
Commission's public reference facilities by calling 1-800-SEC-0330. Information
filed by us is also available at the Commission's Internet site at
HTTP://WWW.SEC.GOV. You can also obtain these materials at set rates from the
Public Reference Section of the Commission at its principal office at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
------------------------
YOU SHOULD RELY ONLY ON THE INFORMATION INCORPORATED BY REFERENCE OR
PROVIDED IN THIS PROSPECTUS AND ITS SUPPLEMENT(S). WE HAVE NOT AUTHORIZED ANYONE
TO PROVIDE YOU WITH DIFFERENT INFORMATION. YOU SHOULD NOT ASSUME THAT THE
INFORMATION IN THIS PROSPECTUS OR ANY PROSPECTUS SUPPLEMENT IS ACCURATE AS OF
ANY DATE OTHER THAN THE DATE ON THE FRONT OF THOSE DOCUMENTS. THIS PROSPECTUS
DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY THE
SECURITIES IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION IN SUCH JURISDICTION.
------------------------
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you by referring
you to those documents. Information incorporated by reference is considered to
be part of this Prospectus. Later information that we file with the SEC will
automatically update and supersede this information. We incorporate by reference
the documents listed below and any future filings made with the SEC under
Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 until
we sell all the Senior Notes.
- Annual Report on Form 10-K for the year ended December 31, 1997;
- Quarterly Reports on Form 10-Q for the quarters ended March 31, June 30
and September 30, 1998, and
- Current Report on Form 8-K dated April 30, 1998.
2
<PAGE>
We will provide to each person, including any beneficial owner of Senior
Notes, to whom a copy of this Prospectus is delivered, a copy of any or all of
the information that has been incorporated by reference in this Prospectus but
not delivered with this Prospectus. We will deliver this information upon
written or oral request and provide this information at no cost to the
requester. You should direct your requests to:
Ellen Whalen,
Manager of Investment Services,
Central and South West Corporation,
1616 Woodall Rodgers Freeway,
Dallas, Texas 75202
(214) 777-1000
REPORTS TO HOLDERS OF SENIOR NOTES
We are not required to furnish annual and quarterly reports to holders of
Senior Notes. Our annual report on Form 10-K contains audited financial
statements which we will provide to holders of Senior Notes upon request.
FORWARD-LOOKING STATEMENTS
We make statements in this Prospectus, any Prospectus Supplement hereto and
the documents we incorporate by reference that are considered forward-looking
statements within the meaning of the Securities Act and the Exchange Act.
Sometimes these statements will contain words such as "believes," "expects,"
"intends," "plans" and other similar words. These statements are not guarantees
of our future performance and are subject to risks, uncertainties and other
important factors that could cause our actual performance or achievements to be
materially different from those we project. These risks, uncertainties and
factors include:
- general economic, business and regulatory conditions;
- the impact of Central and South West Corporation's proposed merger with
American Electric Power, including any regulatory conditions imposed on
the merger;
- energy supply and demand;
- competition;
- federal and state regulatory developments and changes in law;
- availability, terms and use of capital;
- nuclear and environmental issues;
- weather; and
- industry restructuring and cost recovery (including the potential effect
of stranded costs).
Given these uncertainties, you should not place undue reliance on these
forward-looking statements. Please see the documents we incorporate by reference
for more information on these factors. These forward-looking statements
represent our estimates and assumptions only as of the date of this Prospectus.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
3
<PAGE>
PROSPECTUS SUMMARY
THIS SUMMARY DOES NOT CONTAIN ALL THE INFORMATION THAT MAY BE IMPORTANT TO
YOU. YOU SHOULD READ THE ENTIRE PROSPECTUS, THE PROSPECTUS SUPPLEMENT, AND THE
DOCUMENTS, FINANCIAL STATEMENTS AND OTHER INFORMATION INCORPORATED BY REFERENCE
IN THE PROSPECTUS CAREFULLY BEFORE MAKING AN INVESTMENT DECISION.
THE OFFERING
<TABLE>
<S> <C>
Issuer.................................... Central Power and Light Company
Securities Offered........................ Senior Notes
Aggregate Principal Amount................ Up to $350,000,000
Interest Payment Dates.................... Semiannually on dates to be determined
Maturity Date............................. To be determined
Redemption................................ To be determined
Ranking................................... The Senior Notes are our senior unsecured notes ranking
equally with any of our other unsecured indebtedness
that is not specifically subordinated to the Senior
Notes. The Senior Notes are subordinate to
$1,026,700,000 of our outstanding First Mortgage Bonds,
which are secured by a mortgage on substantially all of
the Company's properties. The Senior Notes rank junior
to the First Mortgage Bonds with respect to rights in
and to such mortgaged property. We may in the future
issue additional series of First Mortgage Bonds.
Use of Proceeds........................... We will use the net proceeds from the sale of the Senior
Notes to repay a portion of our long-term debt, all or a
portion of our short-term borrowings, and for other
general corporate purposes.
THE COMPANY
Business.................................. We are a public utility engaged in the production,
purchase, transmission, distribution and sale of
electricity
Service Area.............................. Our service area is approximately 44,000 square miles in
south Texas
Population of Service Area
(December 31, 1997)..................... Approximately 1,778,000
Customers (December 31, 1997)............. Approximately 627,900
</TABLE>
4
<PAGE>
SELECTED FINANCIAL INFORMATION
We have derived the summary selected financial data set forth below for the
years ended December 31, 1995, 1996 and 1997 and the nine months ended
September 30, 1998 from our financial statements. Arthur Andersen LLP,
independent public accountants, have audited the financial statements for the
three-year period ended December 31, 1997 and the reports of Arthur Andersen LLP
thereon are incorporated by reference in this Prospectus. We have derived the
summary selected financial data as of and for the nine-month period ended
September 30, 1998 from our unaudited interim financials for the period.
You should read the information presented below in conjunction with the
historical financial statements and notes thereto contained in our 1997 Annual
Report on Form 10-K and our Quarterly Report on Form 10-Q for the period ended
September 30, 1998, which are incorporated by reference in this Prospectus.
(DOLLAR AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED DECEMBER 31,
ENDED ------------------------------------
SEPTEMBER 30, 1998 1997 1996 1995
------------------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
(UNAUDITED)
Operating Revenues....................... $1,092,506 $1,376,282 $1,300,688 $1,073,469
Operating Income......................... 253,299 251,367 285,647 282,184
Net Income............................... 162,339 128,471 147,051 206,447
Net Utility Plant........................ 3,276,097 3,324,343 3,419,018 3,469,945
</TABLE>
<TABLE>
<CAPTION>
CAPITALIZATION AT
SEPTEMBER 30, 1998
----------------------
<S> <C> <C> <C>
(UNAUDITED)
<CAPTION>
ACTUAL %
---------- --------
Long-Term Debt. $1,170,325 41
<S> <C> <C> <C>
Company Obligated Mandatorily Redeemable Preferred
Securities of Subsidiary Trust Holding Solely
Parent Junior Subordinated Debentures........... 150,000 5
Preferred Stock................................... 163,204 6
Common Equity..................................... 1,392,580 48
---------- ---
Total........................................... $2,876,109 100
========== ===
Short-Term Debt................................... $ 127,781
Long-Term Debt Currently Maturing................. $ 100,000
</TABLE>
5
<PAGE>
CENTRAL POWER AND LIGHT COMPANY
We are a public utility company engaged in the production, purchase,
transmission, distribution and sale of electricity in South Texas. We serve
approximately 627,900 retail customers in the south Texas area. Central and
South West Corporation ("CSW"), a Dallas-based registered public utility holding
company under the Public Utility Holding Company Act of 1935, as amended (the
"1935 Act"), owns all of our issued and outstanding common stock. Our executive
offices are located at 539 North Carancahua Street, Corpus Christi, Texas
78401-2802, telephone number (512) 881-5300.
RATIOS OF EARNINGS TO FIXED CHARGES
Our ratios of earnings to fixed charges for the twelve months ended
September 30, 1998 and for each of the years ended December 31, 1993 through
1997 are as follows:
<TABLE>
<CAPTION>
TWELVE MONTHS
ENDED YEAR ENDED DECEMBER 31,
SEPTEMBER 30, ----------------------------------------------------
1998 1997 1996 1995 1994 1993
------------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges(1).... 3.14 2.48 2.86 2.63 3.24 2.69(2)
</TABLE>
- ------------------------
(1) For purposes of computing the ratios: (i) earnings consist of operating
income plus federal income taxes, deferred income taxes and investment tax
credits, other income and deductions, allowance for funds (both borrowed and
equity) used during construction and mirror construction work in progress
amortization, and (ii) fixed charges consist of interest on long-term debt
and short-term debt, and other interest charges.
(2) The ratio of earnings to fixed charges for 1993 was calculated before
cumulative effect of a change in accounting principles.
USE OF PROCEEDS
The net proceeds from the sale of the Senior Notes will be used to repay a
portion of our long-term debt, all or a portion of our short-term borrowings and
for other general corporate purposes, subject to applicable regulatory
requirements. If we do not use the net proceeds immediately, we may temporarily
invest them in short-term, interest-bearing obligations.
DESCRIPTION OF THE SENIOR NOTES
GENERAL. The following description sets forth certain general terms and
provisions of the Senior Notes to which any Prospectus Supplement may relate.
The description does not purport to be complete and is subject to, and qualified
in its entirety by, all of the provisions of the Senior Note Indenture (as
defined below), which is incorporated herein by reference and the form of which
is an exhibit to the Registration Statement of which this Prospectus is a part.
The particular terms of the Senior Notes offered by any Prospectus Supplement
and the extent, if any, to which such general provisions may apply to the Senior
Notes so offered will be described therein. References to section numbers under
this caption are references to the section numbers of the Senior Note Indenture.
Capitalized terms not defined herein have the meanings given to them in the
Senior Note Indenture.
The Senior Notes will be issued under an indenture (the "Senior Note
Indenture"), the form of which is an exhibit to the Registration Statement,
between the Company and The Bank of New York, a New York banking corporation, as
trustee (the "Senior Note Trustee").
There is no requirement under the Senior Note Indenture that future issues
of debt securities of the Company be issued under the Senior Note Indenture, and
the Company will be free to use other indentures or documentation, containing
provisions different from those included in the Senior Note
6
<PAGE>
Indenture or applicable to one or more issues of Senior Notes, in connection
with future issues of such other debt securities.
The Senior Note Indenture does not limit the aggregate principal amount of
the Senior Notes that may be issued thereunder. The Senior Note Indenture
provides that the Senior Notes will be issued in one or more series as notes or
debentures. The Senior Notes may be issued at various times and may have
differing maturity dates and may bear interest at differing rates. The
Prospectus Supplement applicable to each issue of Senior Notes will specify:
(1) the designation and aggregate principal amount of such Senior Notes;
(2) the date on which such Senior Notes will mature; (3) the interest rate or
rates or method of calculation of such rate or rates, on such Senior Notes, and
the date from which such interest shall accrue; (4) the dates on which such
interest will be payable; (5) the record dates for payments of interest;
(6) any redemption terms; (7) the period or periods within which the price or
prices at which and the terms and conditions upon which such Senior Notes may be
repaid, in whole or in part, at the option of the Holder thereof; (8) the place
or places, if any, in addition to or in the place of the office of the Trustee,
where the principal of (and premium, if any) and interest, if any, on such
Senior Notes shall be payable; and (9) other specific terms applicable to such
Senior Notes. Unless otherwise indicated in the applicable Prospectus
Supplement, the Senior Notes will be denominated in United States currency in
minimum denominations of $1,000 and integral multiples thereof.
Unless otherwise indicated in the applicable Prospectus Supplement, there
are no provisions in the Senior Note Indenture or the Senior Notes that require
the Company to redeem, or permit the Holders to cause a redemption of, the
Senior Notes or that otherwise protect the Holders in the event that the Company
incurs substantial additional indebtedness, whether or not in connection with a
change in control of the Company. However, any change in control transaction
that involves the incurrence of additional long-term indebtedness (as notes or
otherwise) by the Company in such a transaction would require approval of state
utility regulatory authorities and, possibly, of federal utility regulatory
authorities. Management believes that such approvals would be unlikely in any
transaction that would result in the Company, or a successor to the Company,
having a highly leveraged capital structure.
REGISTRATION, TRANSFER, EXCHANGE AND FORM. Senior Notes of any series will
be exchangeable for other Senior Notes of the same series of any authorized
denominations and of a like aggregate principal amount and tenor. (Section 305)
Unless otherwise indicated in the applicable Prospectus Supplement, Senior
Notes may be presented for registration of transfer (duly endorsed or
accompanied by a duly executed written instrument of transfer), at the office or
agency maintained for such purpose with respect to any series of Senior Notes
and referred to in the applicable Prospectus Supplement, without service charge
and upon payment of any taxes and other governmental charges as described in the
Senior Note Indenture. (Section 305)
In the event of any redemption of Senior Notes of any series, the Senior
Note Trustee will not be required to exchange or register a transfer of any
Senior Notes of such series selected, called or being called for redemption
except, in the case of any Senior Note to be redeemed in part, the portion
thereof not to be so redeemed. (Section 305)
BOOK-ENTRY ONLY SYSTEM. Each series of Senior Notes may be issued in the
form of one or more global notes (the "Global Notes") representing all or part
of such series of Senior Notes and which will be deposited with or on behalf of
The Depository Trust Company as Depositary under the Senior Note Indenture (the
"Depositary") and registered in the name of the Depositary or nominee of the
Depositary. Certificated Senior Notes will not be exchangeable for Global Notes
and, except under the circumstances described below, the Global Notes will not
be exchangeable for certificated Senior Notes.
The Depositary has advised the Company as follows: The Depositary is a
limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking 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
7
<PAGE>
provisions of Section 17A of the Exchange Act. The Depositary holds securities
that its participants ("Participants") deposit with the Depositary. The
Depositary also facilitates the settlement among Participants of securities
transactions, such as transfers and pledges, in deposited securities through
electronic computerized book-entry changes in Participants' accounts, thereby
eliminating the need for physical movement of securities certificates.
Participants include securities brokers and dealers, banks, trust companies,
clearing corporations and certain other organizations. The Depositary is owned
by a number of its Participants and by the New York Stock Exchange, Inc., the
American Stock Exchange Inc. and the National Association of Securities
Dealers, Inc. Access to The Depository Trust Company system is also available to
others such as securities brokers and dealers, banks and trust companies that
clear through or maintain a custodial relationship with a Participant, either
directly or indirectly. The Rules applicable to the Depositary and its
Participants are on file with the Commission.
Upon the issuance of the Global Notes in registered form, the Depositary
will credit, on its book-entry registration and transfer system, the respective
principal amounts of the Senior Notes represented by the Global Notes to the
accounts of Participants. The accounts to be credited shall be designated by the
Underwriters. Ownership of beneficial interests in the Global Notes will be
limited to Participants or persons that may hold interests through Participants.
Ownership of beneficial interests by Participants in the Global Notes will be
shown on, and the transfer of that ownership interest will be effected only
through, records maintained by the Depositary or its nominee. Ownership of
beneficial interests in the Global Notes by persons that hold through
Participants will be shown on, and the transfer of that ownership interest
within such Participant will be effected only through, records maintained by
such Participant. Owners of beneficial interests in the Global Notes will not
receive written confirmation from the Depositary of their purchases, but they
are expected to receive written confirmation providing details of the
transactions, as well as periodic statements of their holdings, from the
Participants through which they purchased beneficial interests in the Global
Notes. The laws of some jurisdictions 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 Notes.
So long as the Depositary, or its nominee, is the registered owner of the
Global Notes, the Depositary or its nominee, as the case may be, will be
considered the sole owner or Holder of the Senior Notes represented by the
Global Notes for all purposes under the Senior Note Indenture. Except as set
forth below, owners of beneficial interests in the Global Notes will not be
entitled to have Senior Notes registered in their names, will not receive or be
entitled to receive physical delivery of the Senior Notes in definitive form and
will not be considered the owner or Holders thereof under the Senior Note
Indenture.
Payment of principal of, premium, if any, and any interest on the Senior
Notes will be made to the Depositary or its nominee, as the case may be, as the
registered owner or the Holder of the Global Notes representing the Senior
Notes. None of the Company, the Senior Note Trustee, any paying agent or the
registrar for the Senior Notes will have any responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
ownership interests in the Global Notes or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
The Company has been advised by the Depositary that, upon receipt of any
payment of principal, premium or interest in respect of the Global Notes, the
Depositary will credit immediately Participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of the Global Notes as shown on the records of the Depositary. The
Company also expects that payments by Participants to owners of beneficial
interests in the Global Notes held through such Participants 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 Participants.
The Global Notes may not be transferred except as a whole by the Depositary
to a nominee of the Depositary or by a nominee of the Depositary to the
Depositary or another nominee of the Depositary or by the Depositary or any such
nominee to a successor of the Depositary or a nominee of such successor. If
8
<PAGE>
the Depositary is at any time unwilling or unable to continue as Depositary and
a successor Depositary is not appointed by the Company within ninety days, the
Company will issue certificated notes in definitive registered form in exchange
for the Global Notes representing the Senior Notes. In addition, the Company may
at any time and in its sole discretion determine not to have any Senior Notes in
registered form represented by one or more global notes and, in such event, will
issue certificated notes in definitive form in exchange for the Global Notes
representing the Senior Notes. In any such instance, an owner of a beneficial
interest in the Global Notes will be entitled to physical delivery in definitive
form of certificated Senior Notes represented by the Global Notes equal in
principal amount to such beneficial interest and to have such certificated notes
registered in its name.
Management of the Depositary is aware that some computer applications,
systems, and the like for processing data ("Systems") that are dependent upon
calendar dates, including dates before, on, and after January 1, 2000, may
encounter "Year 2000 problems." The Depositary has informed its Participants and
other members of the financial community (the "Industry") that it has developed
and is implementing a program so that its Systems, as the same relate to the
timely payment of distributions (including principal and interest payments) to
securityholders, book-entry deliveries, and settlement of trades within the
Depositary (the "Depositary Services"), continue to function appropriately. This
program includes a technical assessment and a remediation plan, each of which is
complete. Additionally, the Depositary's plan includes a testing phase, which is
expected to be completed within appropriate time frames.
However, the Depositary's ability to perform properly its services is also
dependent upon other parties, including but not limited to issuers and their
agents, as well as third party vendors from whom the Depositary licenses
software and hardware, and third party vendors on whom the Depositary relies for
information or the provision of services, including telecommunication and
electrical utility service providers, among others. The Depositary has informed
the Industry that it is contacting (and will continue to contact) third party
vendors from whom the Depositary acquires services to: (i) impress upon them the
importance of such services being Year 2000 compliant; and (ii) determine the
extent of their efforts for Year 2000 remediation (and, as appropriate, testing)
of their services. In addition, the Depositary is in the process of developing
such contingency plans as it deems appropriate.
According to the Depositary, the foregoing information with respect to the
Depositary has been provided to the Industry for informational purposes only and
is not intended to serve as a representation, warranty, or contract modification
of any kind.
PAYING AGENTS. The Company will maintain an office or agency where Senior
Notes may be presented or surrendered for payment. The Company will give prompt
written notice to the Senior Note Trustee of the location, and any change in the
location, of such office or agency. If at any time the Company shall fail to
maintain any such required office or agency or shall fail to furnish the Senior
Note Trustee with the address thereof, such presentations and surrenders may be
made or served at the corporate trust office of the Senior Note Trustee, and, in
such event, the Senior Note Trustee shall act as the Company's agent to receive
all such presentations and surrenders. (Section 1002)
All monies paid by the Company to a paying agent for the payment of
principal of, interest or premium, if any, on any Senior Note which remain
unclaimed at the end of two years after such principal, interest or premium
shall have become due and payable will be repaid to the Company and the Holder
of such Senior Note will thereafter look only to the Company for payment
thereof. (Section 1003)
CONSOLIDATION, MERGER, CONVEYANCE, SALE OR TRANSFER. Nothing contained in
the Senior Note Indenture prevents the Company from consolidating with or
merging into another corporation or conveying, selling or otherwise transferring
its properties and assets substantially as an entirety to any Person, provided
that the corporation formed by such consolidation or into which the Company is
merged or the Person which acquires by conveyance, sale or transfer the
properties and assets of the Company substantially as an entirety is a
corporation organized and existing under the laws of the United States of
America, any State thereof or the District of Columbia and expressly assumes by
an indenture supplemental thereto, executed
9
<PAGE>
and delivered to the Senior Note Trustee, in form satisfactory to the Senior
Note Trustee, the due and punctual payment of the principal of (and premium, if
any) and interest, if any, on all the Senior Notes and the performance of every
covenant of the Senior Note Indenture on the part of the Company to be performed
or observed. (Section 801)
LIMITATION ON LIENS. Nothing contained in the Senior Note Indenture or in
the Senior Notes in any way restricts or prevents the Company or any subsidiary
from incurring any indebtedness; provided that if this covenant is made
applicable to the Senior Notes of any particular series, the Company will not,
and will not permit any subsidiary to, issue, assume or guarantee any notes,
bonds, debentures or other similar evidences of indebtedness for money borrowed
("Debt") secured by a mortgage, lien, pledge, security interest or other
encumbrance ("Mortgage") upon any property without effectively providing that
the outstanding Senior Notes (together with, if the Company so determines, any
other indebtedness or obligation then existing or thereafter created ranking
equally with the Senior Notes) shall be secured equally and ratably with (or
prior to) such Debt so long as such Debt shall be so secured. This restriction
will not, however, apply to (a) Mortgages in existence on the date of the
original issue of the Senior Notes to which this restriction is made applicable;
(b) Mortgages created solely for the purpose of securing Debt incurred to
finance, refinance or refund the purchase price or cost (including the cost of
construction) of property acquired after the date hereof (by purchase,
construction or otherwise), or Mortgages in favor of guarantors of obligations
or Debt representing, or incurred to finance, refinance or refund, such purchase
price or cost, provided that no such Mortgage shall extend to or cover any
property other than the property so acquired and improvements thereon;
(c) Mortgages which secure only indebtedness owing by a subsidiary to the
Company, to one or more subsidiaries, or to the Company and one or more
subsidiaries; (d) Mortgages on any property or assets acquired from a
corporation which is merged with or into the Company or any subsidiary, or any
Mortgages on the property or assets of any corporation or other entity existing
at the time such corporation or other entity becomes a subsidiary and, in either
such case, is not created as a result of or in connection with or in
anticipation of any such transaction (unless such Mortgage was created to secure
or provide for the payment of any part of the purchase price of such
corporation); (e) any Mortgage on any property or assets existing at the time of
acquisition thereof and which is not created as a result of or in connection
with or in anticipation of such acquisition (unless such Mortgage was created to
secure or provide for the payment of any part of the purchase price of such
property or assets); or (f) any extension, renewal or replacement of any
Mortgage referred to in the foregoing clauses (a) through (e), provided that the
principal amount of Debt so secured thereby shall not exceed the principal
amount of Debt so secured at the time of such extension, renewal or replacement,
and that such extension, renewal or replacement Mortgage shall be limited to all
or part of substantially the same property which secured the Mortgage extended,
renewed or replaced (plus improvements on such property). Notwithstanding the
foregoing, the Company and one or more subsidiaries may issue, assume or
guarantee Debt secured by Mortgages which would otherwise be subject to the
foregoing restrictions in an aggregate principal amount which, together with the
aggregate outstanding principal amount of all other Debt of the Company which
would otherwise be subject to the foregoing restrictions (not including Debt
permitted to be secured under clauses (a) through (f) above) does not at the
time of issuance, assumption or guarantee thereof exceed twenty percent of the
Net Tangible Assets, which is defined as the total of all assets (including
revaluations thereof as a result of commercial appraisals, price level
restatement or otherwise) appearing on a balance sheet of the Company and its
subsidiaries, net of applicable reserves and deductions, but excluding goodwill,
trade names, trademarks, patents, unamortized debt discount and all other like
intangible assets (which term shall not be construed to include such
revaluations), less the aggregate of the current liabilities of the Company and
its subsidiaries appearing on such balance sheet. The following types of
transactions, among others, shall not be deemed to create Debt secured by
Mortgages: Mortgages required by any contract or statute in order to permit the
Company or a subsidiary to perform any contract or subcontract made by it with
or at the request of a governmental entity or any department, agency or
instrumentality thereof, or to secure partial, progress, advance or any other
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payments to the Company or any subsidiary by such governmental unit pursuant to
the provisions of any contract or statute. (Section 1007)
MODIFICATION OF THE SENIOR NOTE INDENTURE. The Senior Note Indenture
contains provisions permitting the Company and the Senior Note Trustee, with the
consent of the Holders of a majority in principal amount of the outstanding
Senior Notes, of all series affected by the modification (voting as one class),
to modify the Senior Note Indenture or any supplemental indenture or the rights
of the Holders of the Senior Notes of such series; provided that no such
modification shall without the consent of the Holders of each outstanding Senior
Note affected thereby (a) change the fixed date upon which the principal of or
the interest on any Senior Note is due and payable, or reduce the principal
amount thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or reduce the amount of the principal of an Original Issue
Discount Security that would be payable upon a declaration of acceleration of
the maturity thereof, or change any place of payment where, or the currency in
which, any Senior Note or any premium or the interest thereon is payable, or
impair the right to institute suit for the enforcement of any payment on or
after the date such payment is due (or, in the case of redemption, on or after
the date fixed for such redemption (the "Redemption Date")), (b) reduce the
aforesaid percentage of Senior Notes, the consent of the Holders of which is
required for any modification of the applicable Senior Note Indenture or for
waiver by the Holders of certain of their rights or (c) modify certain
provisions of the Senior Note Indenture. (Section 902) An Original Issue
Discount Security means any security authenticated and delivered under the
Senior Note Indenture which provides for an amount less than the principal
amount thereof to be due and payable upon the declaration of acceleration of the
maturity thereof.
The Senior Note Indenture also contains provisions permitting the Company
and the Senior Note Trustee to amend the Senior Note Indenture in certain
circumstances without the consent of the Holders of any Senior Notes to evidence
the merger of the Company, the replacement of the Senior Note Trustee and for
certain other purposes.
EVENTS OF DEFAULT. An Event of Default with respect to the Senior Notes is
defined in the Senior Note Indenture as being: default for 30 days in payment of
any interest of the Senior Notes; default for three days in payment of
principal, including the payment of principal (or premium, if any) when due
pursuant to any redemption provision of the Senior Notes; default in the payment
of any sinking fund installment, if any, pursuant to the terms of the Senior
Notes, and continuance of such default for a period of three days; default in
the performance, or breach, of any covenant or warranty of the Company in the
Senior Note Indenture (other than certain covenants or warranties a default in
whose performance or whose breach is specifically dealt with elsewhere in the
Senior Note Indenture) and continuance of such default or breach for a period of
90 days after written notice is given to the Company by the Senior Note Trustee
or to the Company and the Senior Note Trustee by the Holders of 33% or more in
aggregate principal amount of the Senior Notes; and certain events of
bankruptcy, insolvency, reorganization, receivership or liquidation involving
the Company. (Section 501) The Company will be required to file with the Senior
Note Trustee annually an officers' certificate as to the absence of default in
performance of certain covenants in the Senior Note Indenture. (Section 1008)
The Senior Note Indenture provides that the Senior Note Trustee may withhold
notice to the Holders of the Senior Notes of any default (except in payment of
principal of (or premium, if any), or interest on, the Senior Notes or in the
payment of any sinking fund installment with respect to the Senior Notes) if the
Senior Note Trustee in good faith determines that it is in the interest of the
Holders of the Senior Notes to do so. (Section 602) The Senior Note Indenture
provides that, if an Event of Default with respect to the Senior Notes specified
therein shall have happened and be continuing, either the Senior Note Trustee or
the Holders of 33% or more in aggregate principal amount of the Senior Notes may
declare the principal amount of all the Senior Notes to be due and payable
immediately, but if the Company shall cure all defaults and certain other
conditions are met, such declaration may be annulled and past defaults may be
waived by the Holders of a majority in aggregate principal amount of the Senior
Notes. (Section 502)
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Subject to the provisions of the Senior Note Indenture relating to the
duties of the Senior Note Trustee, the Senior Note Trustee will be under no
obligation to exercise any of its rights or powers under the Senior Note
Indenture at the request or direction of any of the Holders of the Senior Notes,
unless such Holders shall have offered to the Senior Note Trustee reasonable
indemnity. (Section 603)
Subject to such provision for indemnification, the Holders of a majority in
principal amount of the Senior Notes will have the right to direct the time,
method and place of conducting any proceeding for any remedy available to the
Senior Note Trustee, or exercising any trust or power conferred on the Senior
Note Trustee with respect to the Senior Notes, provided that the Senior Note
Trustee shall have the right to decline to follow any such direction if the
Senior Note Trustee shall determine that the action so directed conflicts with
any law or the provisions of the Senior Note Indenture or if the Senior Note
Trustee shall determine that such action would be prejudicial to Holders not
taking part in such direction. (Section 512)
DEFEASANCE. The Company, at its option, (a) will be Discharged from any and
all obligations in respect of the Senior Notes (except in each case for certain
obligations to register the transfer or exchange of Senior Notes, replace
stolen, lost or mutilated Senior Notes, maintain paying agencies and hold moneys
for payment in trust) or (b) need not comply with certain covenants of the
Senior Note Indenture described under "--Consolidation, Merger, Conveyance, Sale
or Transfer" and "--Limitation of Liens" or to certain covenants relating to
corporate existence and maintenance of properties and insurance, in each case,
if (1) the Company irrevocably deposits with the Senior Note Trustee, in trust,
(i) money or (ii) in certain cases, (A) U.S. Government Obligations which
through the payment of interest and principal in respect thereof in accordance
with their terms will provide money in an amount, or (B) a combination thereof,
in each case sufficient to pay and discharge (x) the principal of (and premium,
if any) and each installment of principal (and premium, if any) and interest, if
any, on the outstanding Senior Notes on the dates such payments are due, in
accordance with the terms of the Senior Notes, or to and including the
Redemption Date irrevocably designated by the Company pursuant to the final
sentence of this section and (y) any mandatory sinking fund payments applicable
to the Senior Notes on the day on which payments are due and payable in
accordance with the terms of the Senior Note Indenture and of the Senior Notes;
(2) no Event of Default or event which with notice or lapse of time would become
an Event of Default (including by reason of such deposit) with respect to the
Senior Notes shall have occurred and be continuing on the date of such deposit;
(3) the Company delivers to the Senior Note Trustee an opinion of counsel to the
effect (i) that the Holders will not recognize income, gain or loss for Federal
income tax purposes as a result of such deposit and defeasance of certain
obligations; (ii) that such provision would not cause any outstanding Senior
Notes then listed on any national securities exchange to be delisted as a result
thereof; and (iii) that the defeasance trust is not, or is registered as, an
investment company under the Investment Company Act of 1940; and (4) the Company
has delivered to the Senior Note Trustee an officers' certificate and an opinion
of counsel, each stating that all conditions precedent provided for in the
Senior Note Indenture relating to the satisfaction and discharge of the Senior
Notes have been complied with. (Sections 403, 1011) Discharged means, with
respect to the Senior Notes of any series, the discharge of the entire
indebtedness represented by, and obligations of the Company under, the Senior
Notes of such series and in the satisfaction of all the obligations of the
Company under the Senior Note Indenture relating to the Senior Notes of such
series, except (A) the rights of Holders of the Senior Notes of such series to
receive, from the trust fund established pursuant to the Senior Note Indenture,
payment of the principal of and interest and premium, if any, on the Senior
Notes of such series when such payments are due, (B) the Company's obligations
with respect to the Senior Notes of such series with respect to registration,
transfer, exchange and maintenance of a place of payment and (C) the rights,
powers, trusts, duties, protections and immunities of the Senior Note Trustee
under the Senior Note Indenture. (Section 101) If the Company has deposited or
caused to be deposited money or U.S. Government Obligations to pay or discharge
the principal of (and premium, if any) and interest, if any, on the outstanding
Senior Notes to and including a Redemption Date on which all of the outstanding
Senior Notes are to be redeemed, such Redemption Date shall be irrevocably
designated by a Board of Directors resolution delivered to the Senior Note
Trustee on or prior to the date of deposit of such money or U.S. Government
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Obligations, and such Board of Directors resolution shall be accompanied by an
irrevocable Company Request that the Senior Note Trustee give notice of such
redemption in the name and at the expense of the Company not less than 30 nor
more than 60 days prior to such Redemption Date in accordance with the Senior
Note Indenture. (Sections 403) U.S. Government Obligations means direct
obligations of the United States for the payment of which its full faith and
credit is pledged, or obligations of a person controlled or supervised by and
acting as an agency or instrumentality of the United States and the payment of
which is unconditionally guaranteed by the United States, and shall also include
a depositary receipt issued by a bank or trust company as custodian with respect
to any such U.S. Government Obligation or a specific payment of interest on or
principal of any such U.S. Government Obligation held by such custodian for the
account of a holder of a depositary receipt; provided that (except as required
by law) such custodian is not authorized to make any deduction from the amount
payable to the holder of such depositary receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific payment
of interest on or principal of the U.S. Government Obligation evidenced by such
depositary receipt. (Section 101)
RESIGNATION OR REMOVAL OF SENIOR NOTE TRUSTEE. The Senior Note Trustee may
resign at any time upon written notice to the Company specifying the day upon
which the resignation is to take effect and such resignation will take effect
immediately upon the later of the appointment of a successor Senior Note Trustee
and such specified day. (Section 610)
The Senior Note Trustee may be removed at any time by an instrument or
concurrent instruments in writing delivered to the Senior Note Trustee and the
Company and signed by the Holders, or their attorneys-in-fact, of at least a
majority in principal amount of the then outstanding Senior Notes. In addition,
under certain circumstances, the Company may remove the Senior Note Trustee upon
notice to the Holder of each Senior Note outstanding and the Senior Note
Trustee, and appointment of a successor Senior Note Trustee. (Section 610)
NO RECOURSE AGAINST OTHERS. The Senior Note Indenture provides that no
recourse for the payment of the principal of or any premium or interest on any
Security, or for any claim based thereon or otherwise in respect thereof, and no
recourse under or upon any obligation, covenant or agreement of the Company,
contained in the Senior Note Indenture or in any supplemental indenture, or in
any Senior Note, or because of the creation of any indebtedness represented
thereby, will be had against any incorporator, stockholder, officer or director,
as such, past, present or future of the Company or any successor corporation,
either directly or through the Company or any successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise; it being expressly understood that all such
liability is expressly waived and released as a condition of, and in
consideration for, the execution of the Senior Note Indenture and the issuance
of the Senior Notes. (Section 114) Such waiver may not be effective to waive
liabilities under the Federal securities laws and it is the view of the
Commission that such a waiver is against public policy.
CONCERNING THE SENIOR NOTE TRUSTEE. The Trustee under the Senior Note
Indenture, and affiliates of the Trustee, are also trustees under other
indentures and trust agreements of the Company.
LEGAL OPINIONS
Legal opinions relating to the validity of the Senior Notes will be given by
Milbank, Tweed, Hadley & McCloy, 1 Chase Manhattan Plaza, New York, New York
10005, counsel for the Company, and Sidley & Austin, One First National Plaza,
Chicago, Illinois 60603, counsel for any underwriters, agents or dealers.
Sidley & Austin and Milbank, Tweed, Hadley & McCloy have represented Central and
South West Corporation and affiliates of Central and South West Corporation
(including the Company) from time to time in connection with certain legal
matters. All matters of Texas law will be passed upon by Vinson &
Elkins L.L.P., Dallas, Texas.
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EXPERTS
The audited financial statements and schedules incorporated by reference in
this Prospectus and elsewhere in the Registration Statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
report dated February 16, 1998, with respect thereto, and are incorporated
herein by reference in reliance upon the authority of said firm as experts in
accounting and auditing in giving said reports.
PLAN OF DISTRIBUTION
We may sell the Senior Notes offered hereby (i) through negotiation with one
or more underwriters; (ii) through one or more agents or dealers designated from
time to time; (iii) directly to purchasers; or (iv) through any combination of
the above. The distribution of the Senior Notes may be effected from time to
time in one or more transactions at a fixed price or prices which may be
changed, at market prices prevailing at the time of sale, at prices related to
such prevailing market prices or at negotiated prices. A Prospectus Supplement
or a supplement thereto will describe the method of distribution of the Senior
Notes of any series.
If we use any underwriters in the sale of Senior Notes, we will enter into
an underwriting agreement, distribution agreement or similar agreement with such
underwriters prior to the time of sale, and the names of the underwriters used
in the transaction will be set forth in the Prospectus Supplement or a
supplement thereto relating to such sale. If an underwriting agreement is
executed, the Senior Notes will be acquired by the underwriters for their own
account and may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of the sale. Unless otherwise indicated in
the Prospectus Supplement, the underwriting or purchase agreement will provide
that the underwriter or underwriters are obligated to purchase all of the Senior
Notes offered in the Prospectus Supplement if any are purchased.
If any of the Senior Notes are sold through agents designated by us from
time to time, the Prospectus Supplement or a supplement thereto will name any
such agent, set forth any commissions payable by us to any such agent and the
obligations of such agent with respect to the Senior Notes. Unless otherwise
indicated in the Prospectus Supplement or a supplement thereto, any such agent
will be acting on a best efforts basis for the period of its appointment.
Certain persons participating in an offering of the Senior Notes may engage
in transactions that stabilize, maintain or otherwise affect the price of the
Senior Notes. Specifically, the underwriters, if any, may overallot in
connection with the offering, and may bid for, and purchase, the Senior Notes in
the open market.
The Senior Notes of any series, when first issued, will have no established
trading market. Any underwriters or agents to or through whom Senior Notes are
sold by us for public offering and sale may make a market in such Senior Notes,
but underwriters and agents will not be obligated to do so and may discontinue
any market making at any time without notice. No assurance can be given as to
the liquidity of the trading market for any Senior Notes.
In connection with the sale of the Senior Notes, any purchasers,
underwriters or agents may receive compensation from us or from purchasers in
the form of concessions or commissions. The underwriters will be, and any agents
and any dealers participating in the distribution of the Senior Notes may be,
deemed to be underwriters within the meaning of the Securities Act. The
agreement between us and any purchasers, underwriters or agents will contain
reciprocal covenants of indemnity, and will provide for contribution by us in
respect of our indemnity obligations, between us and the purchasers,
underwriters, or agents against certain liabilities, including liabilities under
the Securities Act.
Certain of the underwriters or agent and their associates may engage in
transactions with, or perform services for, us and our affiliates in the
ordinary course of business.
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