<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1994
OR
[ ] Transition report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the transition period from _____ to _____
Commission Registrant; State of Incorporation; I.R.S. Employer
File Number Address; and Telephone Number Identification No.
- ----------- ---------------------------------- -----------------
1-9130 CENTERIOR ENERGY CORPORATION 34-1479083
(An Ohio Corporation)
6200 Oak Tree Boulevard
Independence, Ohio 44131
Telephone (216) 447-3100
1-2323 THE CLEVELAND ELECTRIC 34-0150020
ILLUMINATING COMPANY
(An Ohio Corporation)
55 Public Square
Cleveland, Ohio 44113
Telephone (216) 622-9800
1-3583 THE TOLEDO EDISON COMPANY 34-4375005
(An Ohio Corporation)
300 Madison Avenue
Toledo, Ohio 43652
Telephone (419) 249-5000
Indicate by check mark whether each of the registrants (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrants were required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
On November 7, 1994, there were 148,031,503 shares of Centerior Energy
Corporation Common Stock outstanding. Centerior Energy Corporation is the sole
holder of the 79,590,689 shares and 39,133,887 shares of common stock of The
Cleveland Electric Illuminating Company and The Toledo Edison Company,
respectively, outstanding on that date.
<PAGE> 2
This combined Form 10-Q is separately filed by Centerior Energy Corporation
("Centerior Energy"), The Cleveland Electric Illuminating Company ("Cleveland
Electric") and The Toledo Edison Company ("Toledo Edison"). Centerior Energy,
Cleveland Electric and Toledo Edison are sometimes referred to collectively as
the "Companies". Cleveland Electric and Toledo Edison are sometimes
collectively referred to as the "Operating Companies". Information contained
herein relating to any individual registrant is filed by such registrant on its
behalf. No registrant makes any representation as to information relating to
any other registrant, except that information relating to either or both of the
Operating Companies is also attributed to Centerior Energy.
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Centerior Energy Corporation and Subsidiaries
The Cleveland Electric Illuminating Company and Subsidiaries
The Toledo Edison Company
Notes to Financial Statements 1
Centerior Energy Corporation and Subsidiaries
Income Statement 7
Balance Sheet 8
Cash Flows 9
Management's Discussion and Analysis of Financial 10
Condition and Results of Operations
The Cleveland Electric Illuminating Company and Subsidiaries
Income Statement 15
Balance Sheet 16
Cash Flows 17
Management's Discussion and Analysis of Financial 18
Condition and Results of Operations
The Toledo Edison Company
Income Statement 22
Balance Sheet 23
Cash Flows 24
Management's Discussion and Analysis of Financial 25
Condition and Results of Operations
PART II. OTHER INFORMATION
Item 5. Other Information 29
Item 6. Exhibits and Reports on Form 8-K 29
Signatures 31
Exhibit Index 32
-i-
<PAGE> 3
CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES,
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND SUBSIDIARIES,
AND THE TOLEDO EDISON COMPANY
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
(1) Interim Financial Statements
Centerior Energy Corporation (Centerior Energy) is a holding company of
Centerior Service Company (Service Company) and two electric utilities, The
Cleveland Electric Illuminating Company (Cleveland Electric) and The Toledo
Edison Company (Toledo Edison). These two utilities are referred to collec-
tively herein as the "Operating Companies". Centerior Energy, Cleveland
Electric and Toledo Edison are referred to collectively herein as the
"Companies".
The comparative income statement and balance sheet and the related statement
of cash flows of each of the Companies have been prepared from the records of
each of the Companies without audit by independent public accountants. In the
opinion of management, all adjustments necessary for a fair statement of
financial position at September 30, 1994 and results of operations for the
three months and nine months ended September 30, 1994 and 1993 have been
included. All such adjustments were normal recurring adjustments, except for
those discussed in Notes 2 and 7.
These financial statements and notes should be read in conjunction with the
financial statements and notes included in the Companies' combined Annual
Report on Form 10-K for the year ended December 31, 1993 (1993 Form 10-K) and
the Quarterly Reports on Form 10-Q for the quarter ended March 31, 1994 (First
Quarter 1994 Form 10-Q) and the quarter ended June 30, 1994 (Second Quarter
1994 Form 10-Q). These interim period financial results are not necessarily
indicative of results for a 12-month period.
(2) New Accounting Standard
Effective January 1, 1994, the Companies adopted the new accounting standard
for certain investments in debt and equity securities (SFAS 115). SFAS 115
addresses the accounting and reporting for investments in equity securities
that have readily determinable fair values and for all investments in debt
securities. The adoption of SFAS 115 did not materially affect the financial
positions or the 1994 third quarter and nine-month results of operations of
the Companies.
(3) Equity Distribution Restrictions
The Operating Companies can make cash available for the funding of Centerior
Energy's common stock dividends by paying dividends on their respective common
stock, which is held solely by Centerior Energy. Federal law prohibits the
Operating Companies from paying dividends out of capital accounts. However,
the Operating Companies may pay preferred and common stock dividends out of
appropriated retained earnings and current earnings. At September 30, 1994,
Cleveland Electric and Toledo Edison had $160.7 million and $93.8 million,
respectively, of appropriated retained earnings for the payment of dividends.
However, Toledo Edison is prohibited from paying a common stock dividend by a
<PAGE> 4
provision in its mortgage that essentially requires such dividends to be paid
out of the total balance of retained earnings, which currently is a deficit.
(4) Common Stock Dividends
Cash dividends per common share declared by Centerior Energy during the nine
months ended September 30, 1994 and 1993 were as follows:
1994 1993
Paid February 15 $.20 $.40
Paid May 15 .20 .40
Paid August 15 .20 .40
Paid November 15 .20 .40
Common stock cash dividends declared by Cleveland Electric during the nine
months ended September 30, 1994 and 1993 were as follows:
1994 1993
(millions)
Paid in February $18.6 $46.7
Paid in May 24.2 47.0
Paid in August 24.3 47.3
Also, during the third quarter of 1994, Cleveland Electric declared property
dividends totaling $25.6 million for the transfer of its investments in three
wholly owned subsidiaries to Centerior Energy. One subsidiary's common stock
was transferred to Centerior Energy during the quarter, while the other two
subsidiaries' common stock was transferred on October 1, 1994. Cleveland
Electric's valuation of the property dividends was based on the historical
cost (carrying value) of the common stock investments in the subsidiaries,
their undistributed retained earnings and, for one subsidiary, an equity
advance (loan). The value of the noncash dividends payable by Cleveland
Electric to Centerior Energy at September 30, 1994 was $25.5 million.
Toledo Edison did not declare any common stock dividends during the nine
months ended September 30, 1994 and 1993.
(5) Financing Activity
During the three months ended September 30, 1994, the Operating Companies
retired debt and preferred stock as follows:
Cleveland Electric
Mandatory redemptions consisted of $1.2 million of bank loans, pollution
control notes and other long-term debt, and $1.0 million of Serial Preferred
Stock, $7.35 Series C.
<PAGE> 5
Toledo Edison
Mandatory redemptions consisted of $10 million of Cumulative Preferred Stock,
$25 par value, $2.81 Series, and $0.5 million of bank loans and other long-
term debt. Toledo Edison also elected to redeem an additional $10 million of
the $2.81 Preferred Stock.
(6) Revised Decommissioning Cost Estimates
In 1994, Centerior Energy, Cleveland Electric and Toledo Edison increased
their annual decommissioning expense accruals for their three nuclear
generating units to $23.6 million, $12.8 million and $10.8 million,
respectively. These revised accruals which also are required to be funded are
based on increased decommissioning cost estimates and the external trust
funding methodology required by The Public Utilities Commission of Ohio
(PUCO). The PUCO has recognized that these increases are recoverable in
rates.
The increased decommissioning cost estimates were derived from recently
updated, site-specific studies for each of the units. The updated studies
estimate total decommissioning costs to aggregate $716 million, $397 million
and $319 million for Centerior Energy, Cleveland Electric and Toledo Edison,
respectively, in 1993 and 1992 dollars. (See table below.) The updated
estimates reflect substantial increases from the prior PUCO-recognized
aggregate estimates of $257 million, $142 million and $115 million in 1987 and
1986 dollars for Centerior Energy, Cleveland Electric and Toledo Edison,
respectively. The revised estimates reflect the DECON method of
decommissioning (prompt decontamination), the locations and cost
characteristics specific to the units, and include costs associated with
decontamination, dismantlement and site restoration. The revised estimates
include additional low-level waste burial costs, higher labor and equipment
costs, and costs resulting from an additional five-year period in the
decommissioning process to allow sufficient cooling of on-site, spent nuclear
fuel. The revised estimates for the units are as follows:
License
Expiration Centerior Cleveland Toledo
Generating Unit Year Energy Electric Edison
(millions)
Davis-Besse Nuclear
Power Station (1) 2017 $346 $178 $168
Perry Power Plant
Unit 1 (1) 2026 256 156 100
Beaver Valley Power
Station Unit 2 (2) 2027 114 63 51
Total $716 $397 $319
(1) Dollar amounts in 1993 dollars.
(2) Dollar amounts in 1992 dollars.
<PAGE> 6
The estimated costs to decommission the units in future dollars, at the time
of license expiration, assuming a 4% annual inflation rate are as follows:
Centerior Cleveland Toledo
Generating Unit Energy Electric Edison
(millions)
Davis-Besse Nuclear
Power Station (1) $ 862 $ 443 $419
Perry Power Plant
Unit 1 (2) 908 554 354
Beaver Valley Power
Station Unit 2 (3) 423 233 190
Total $2,193 $1,230 $963
(1) Dollar amounts in 2017 dollars.
(2) Dollar amounts in 2026 dollars.
(3) Dollar amounts in 2027 dollars.
The PUCO requires that the decommissioning expense and payments to the
external trusts be determined on a levelized basis. Specifically, the annual
expense and investment in the trusts are calculated by dividing the
unrecovered decommissioning costs in current dollars by the remaining years in
the licensing period of each unit. Payments to the trusts are to be made
quarterly. This methodology requires that the net earnings on the trusts be
reinvested therein with the intent of allowing net earnings to offset
inflation. The PUCO requires that the estimated costs of decommissioning and
the funding level be reviewed at least every five years and updated, if
necessary.
In the Balance Sheet at September 30, 1994, Accumulated Depreciation and
Amortization included $92 million, $50 million and $42 million for Centerior
Energy, Cleveland Electric and Toledo Edison, respectively, of decommissioning
costs previously expensed and the earnings on the external trust funding. The
amounts exceed the Balance Sheet amounts of the external Nuclear Plant
Decommissioning Trusts for the Companies because the reserves began prior to
the external trust funding.
The Operating Companies record the trust earnings as an increase to the trust
assets and the related component of the decommissioning reserve (included in
Accumulated Depreciation and Amortization).
The staff of the Securities and Exchange Commission has questioned certain of
the current accounting practices of the electric utility industry, including
the Companies, regarding the recognition, measurement and classification of
decommissioning costs for nuclear generating stations in the financial state-
ments of electric utilities. In response to these questions, the Financial
Accounting Standards Board has agreed to review the accounting for removal
costs, including decommissioning. If current electric utility industry
accounting practices for such decommissioning are changed: 1) the annual
provision for decommissioning could increase, 2) the estimated cost for
decommissioning could be recorded as a liability rather than as accumulated
<PAGE> 7
depreciation, and 3) trust fund income from the external decommissioning
trusts could be reported as investment income rather than as a reduction to
decommissioning expense.
(7) Early Retirement Program in 1993
Other operation and maintenance expenses for the three months and nine months
ended September 30, 1993 included accruals for pension and other benefits for
employees retiring under an early retirement program, called the Voluntary
Transition Program (VTP). The Operating Companies' accruals for these
benefits included a pro rata share of the Service Company's costs. Over 1,500
employees elected the VTP.
The estimated amounts accrued for these benefits for the three months and nine
months ended September 30, 1993 were as follows:
<TABLE>
<CAPTION>
Centerior Cleveland Toledo
Energy Electric Edison
Three Nine Three Nine Three Nine
Months Months Months Months Months Months
(millions)
<S> <C> <C> <C> <C> <C> <C>
Pension Costs (Credits):
Special Termination and
Curtailment Costs $202.9 $208.3 $131.1 $135.5 $ 71.8 $ 72.8
Settlement Gain (81.6) (81.6) (62.1) (62.1) (19.5) (19.5)
Net Pension Costs 121.3 126.7 69.0 73.4 52.3 53.3
Enhanced VTP Benefits Payable
from Corporate Funds 3.9 10.6 2.0 4.9 1.9 5.7
Total Pension-Related Costs 125.2 137.3 71.0 78.3 54.2 59.0
SFAS 106 Curtailment Costs 79.8 80.7 38.5 39.1 41.3 41.6
Total VTP Costs $205.0 $218.0 $109.5 $117.4 $ 95.5 $100.6
</TABLE>
A portion of these accruals related to the VTP curtailment cost of postretire-
ment benefits other than pensions (shown as "SFAS 106 Curtailment Costs" in
the table), which was deferred to later years under a provision of the Rate
Stabilization Program. (For further information on the Rate Stabilization
Program, see Note 7 in the Companies' Notes to the Financial Statements for
1993 in the 1993 Form 10-K.) The deferred amounts at September 30, 1993 were
$80.7 million, $39.1 million and $41.6 million for Centerior Energy, Cleveland
Electric and Toledo Edison, respectively.
<PAGE> 8
(8) Commitments and Contingencies
Various legal actions, claims and regulatory proceedings covering several
matters are pending against the Companies. See "Item 3. Legal Proceedings"
in the 1993 Form 10-K.
The Companies continue to seek the necessary regulatory approvals to complete
the merger of the Operating Companies. The Operating Companies plan to seek
preferred stock share owner approval in early 1995. The merger is expected to
be effective in 1995.
<PAGE> 9
CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES
INCOME STATEMENT
(Unaudited)
(Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
--------------------- -------------------------
1994 1993 1994 1993
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATING REVENUES $ 666,985 $ 709,075 $ 1,850,989 $ 1,896,221
OPERATING EXPENSES
Fuel and Purchased Power 112,342 121,935 332,663 359,733
Other Operation and Maintenance 177,221 417,760 563,881 817,098
Depreciation and Amortization 72,478 64,878 208,389 195,343
Taxes, Other Than Federal Income Taxes 82,318 81,407 247,903 247,184
Deferred Operating Expenses, Net (14,877) (98,792) (45,591) (133,562)
Federal Income Taxes 51,882 15,971 95,556 55,984
-------- -------- ---------- ----------
Total Operating Expenses 481,364 603,159 1,402,801 1,541,780
-------- -------- ---------- ----------
OPERATING INCOME 185,621 105,916 448,188 354,441
NONOPERATING INCOME
Allowance for Equity Funds Used During Construction 1,197 1,498 3,291 3,916
Other Income and Deductions, Net 1,416 (1,570) 6,105 (3,773)
Deferred Carrying Charges 10,009 13,705 29,711 41,309
Federal Income Taxes - Credit (Expense) (928) 1,991 (3,672) 3,077
-------- -------- ---------- ----------
Total Nonoperating Income 11,694 15,624 35,435 44,529
-------- -------- ---------- ----------
INCOME BEFORE INTEREST CHARGES 197,315 121,540 483,623 398,970
INTEREST CHARGES
Long-term Debt 87,818 85,964 263,249 260,219
Short-term Debt 2,130 1,889 5,376 5,533
Allowance for Borrowed Funds Used During Construction (1,200) (1,133) (3,334) (2,965)
-------- -------- ---------- ----------
Net Interest Charges 88,748 86,720 265,291 262,787
-------- -------- ---------- ----------
INCOME AFTER INTEREST CHARGES 108,567 34,820 218,332 136,183
Preferred Dividend Requirements of Subsidiaries 16,429 17,584 49,655 50,181
-------- -------- ---------- ----------
NET INCOME $ 92,138 $ 17,236 $ 168,677 $ 86,002
======== ======== ========== ==========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 148,023 145,347 147,780 144,359
======== ======== ========== ==========
EARNINGS PER COMMON SHARE $ .62 $ .12 $ 1.14 $ .60
======== ======== ========== ==========
<FN>
The accompanying notes to financial statements as they relate to Centerior Energy are an integral part of this statement.
</TABLE>
<PAGE> 10
CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES
BALANCE SHEET
(Thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
(Unaudited)
----------- -----------
<S> <C> <C>
ASSETS
PROPERTY, PLANT AND EQUIPMENT
Utility Plant In Service $ 9,727,523 $ 9,571,124
Accumulated Depreciation and Amortization (2,880,768) (2,677,369)
----------- -----------
6,846,755 6,893,755
Construction Work In Progress 164,918 180,931
----------- -----------
7,011,673 7,074,686
Nuclear Fuel, Net of Amortization 306,575 344,642
Other Property, Less Accumulated Depreciation 43,128 40,808
----------- -----------
7,361,376 7,460,136
CURRENT ASSETS
Cash and Temporary Cash Investments 174,290 225,253
Amounts Due from Customers and Others, Net 243,428 220,500
Unbilled Revenues 100,844 123,844
Materials and Supplies, at Average Cost 143,010 135,511
Fossil Fuel Inventory, at Average Cost 31,827 32,159
Taxes Applicable to Succeeding Years 107,731 249,544
Other 12,919 6,235
----------- -----------
814,049 993,046
DEFERRED CHARGES AND OTHER ASSETS
Amounts Due from Customers for Future Federal Income Taxes 992,219 968,267
Unamortized Loss from Beaver Valley Unit 2 Sale 101,821 105,190
Unamortized Loss on Reacquired Debt 86,132 92,385
Carrying Charges and Operating Expenses 936,849 861,660
Nuclear Plant Decommissioning Trusts 62,392 55,682
Other 162,833 173,464
----------- -----------
2,342,246 2,256,648
----------- -----------
$ 10,517,671 $ 10,709,830
=========== ===========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common Stock Equity $ 1,847,267 $ 1,785,122
Preferred Stock
With Mandatory Redemption Provisions 262,402 313,575
Without Mandatory Redemption Provisions 450,871 450,871
Long-Term Debt 3,733,364 4,018,554
----------- -----------
6,293,904 6,568,122
OTHER NONCURRENT LIABILITIES
Nuclear Fuel Lease Obligations 229,094 253,666
Other 190,745 195,377
----------- -----------
419,839 449,043
CURRENT LIABILITIES
Current Portion of Long-Term Debt and Preferred Stock 356,853 127,253
Current Portion of Lease Obligations 77,269 111,490
Accounts Payable 141,229 188,409
Accrued Taxes 232,063 377,887
Accrued Interest 97,810 87,394
Dividends Declared 45,041 15,795
Other 57,824 57,399
----------- -----------
1,008,089 965,627
DEFERRED CREDITS
Unamortized Investment Tax Credits 291,441 329,290
Accumulated Deferred Federal Income Taxes 1,710,760 1,578,955
Unamortized Gain from Bruce Mansfield Plant Sale 531,582 551,268
Accumulated Deferred Rents for Bruce Mansfield Plant
and Beaver Valley Unit 2 139,268 127,661
Other 122,788 139,864
----------- -----------
2,795,839 2,727,038
COMMITMENTS AND CONTINGENCIES (Note 8)
----------- -----------
$ 10,517,671 $ 10,709,830
=========== ===========
<FN>
The accompanying notes to financial statements as they relate to Centerior Energy are an
integral part of this statement.
</TABLE>
<PAGE> 11
CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES
CASH FLOWS
(Unaudited)
(Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------
1994 1993
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $168,677 $86,002
-------- --------
Adjustments to Reconcile Net Income
to Cash from Operating Activities:
Depreciation and Amortization 208,389 195,343
Deferred Federal Income Taxes 85,218 17,393
Unbilled Revenues 23,000 13,000
Deferred Fuel (17,646) 3,801
Deferred Carrying Charges (29,711) (41,309)
Leased Nuclear Fuel Amortization 72,771 65,263
Deferred Operating Expenses, Net (45,591) (133,562)
Allowance for Equity Funds Used During Construction (3,291) (3,916)
Noncash Early Retirement Program Expenses, Net -- 207,351
Changes in Amounts Due from Customers and Others, Net (22,928) (44,156)
Changes in Inventories (7,167) 24,999
Changes in Accounts Payable (47,180) 3,825
Changes in Working Capital Affecting Operations 146 17,575
Other Noncash Items 16,176 12,931
------- -------
Total Adjustments 232,186 338,538
------- -------
Net Cash from Operating Activities 400,863 424,540
CASH FLOWS FROM FINANCING ACTIVITIES
Bank Loans, Commercial Paper and Other Short-Term Debt -- (49,502)
Debt Issues:
First Mortgage Bonds -- 300,200
Secured Medium-Term Notes -- 128,000
Term Bank Loan -- 40,000
Preferred Stock Issue -- 100,000
Common Stock Issues 11,902 54,194
Reacquired Common Stock -- 468
Maturities, Redemptions and Sinking Funds (107,286) (406,332)
Nuclear Fuel Lease Obligations (93,155) (72,928)
Common Stock Dividends Paid (88,621) (172,733)
Premiums, Discounts and Expenses (973) (11,940)
------- -------
Net Cash from Financing Activities (278,133) (90,573)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash Applied to Construction (149,160) (147,006)
Interest Capitalized as Allowance for Borrowed Funds Used
During Construction (3,334) (2,965)
Other Cash Applied (21,199) (20,862)
------- -------
Net Cash from Investing Activities (173,693) (170,833)
------- -------
NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS (50,963) 163,134
CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF PERIOD 225,253 92,949
------- -------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $174,290 $256,083
======= =======
Other Payment Information:
Interest (net of amounts capitalized) $216,000 $208,000
Federal Income Taxes 1,100 32,500
<FN>
The accompanying notes to financial statements as they relate to Centerior Energy are an integral
part of this statement.
</TABLE>
<PAGE> 12
CENTERIOR ENERGY CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Capital Resources and Liquidity
Reference is made to "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in Item 7 of the 1993 Form
10-K, in the First Quarter 1994 Form 10-Q and in the Second Quarter 1994 Form
10-Q. The information under "Capital Resources and Liquidity" remains un-
changed with the following exceptions:
During the third quarter of 1994, the Operating Companies redeemed various
securities as discussed in Note 5.
On August 26, 1994, Moody's Investors Service, Inc. (Moody's) downgraded the
credit ratings of certain securities of the Operating Companies. The
preferred stock of both Operating Companies was downgraded from "b1" to "b2"
and Toledo Edison's debentures were downgraded from "Ba3" to "B1". Moody's
noted that the Operating Companies' recently amended bank facilities provide
the participating banks with second mortgages on the assets of the Operating
Companies, thereby creating a new level of priority above the classes of
securities that Moody's downgraded. (For further information on this
transaction, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Capital Resources and Liquidity" and Note 7 in the
Second Quarter 1994 Form 10-Q.)
Since the Operating Companies were unable to issue commercial paper because of
their below investment grade commercial paper ratings, the Operating Companies
requested that Standard & Poor's Rating Group (S&P) withdraw its ratings on
their commercial paper. Accordingly, S&P no longer provides any ratings with
respect to the Operating Companies' commercial paper.
In October 1994, Cleveland Electric and Toledo Edison issued $46.1 million and
$30.5 million, respectively, of first mortgage bonds as collateral security
for the sale by a public authority of equal principal amounts of tax-exempt
bonds. The proceeds from the sales of the public authority's bonds were used
to refund equal principal amounts of the authority's tax-exempt bonds that
were issued in 1988 and had been continuously remarketed on a floating rate
basis. The new bonds mature on October 1, 2023 and have an 8% fixed interest
rate. They are not redeemable prior to October 1, 2004.
Centerior Energy now expects to raise only about $12 million in 1994 from the
sale of authorized but unissued common stock under certain of its employee and
share owner stock purchase plans. Shares of common stock for these plans have
been acquired in the open market rather than issued as new shares or issued
from treasury stock.
<PAGE> 13
Additional first mortgage bonds may be issued by the Operating Companies under
their respective mortgages on the basis of property additions, cash or refund-
able first mortgage bonds. Under their respective mortgages, each Operating
Company may issue first mortgage bonds on the basis of property additions and,
under certain circumstances, refundable bonds only if the applicable interest
coverage test is met. At September 30, 1994, Cleveland Electric and Toledo
Edison would have been permitted to issue approximately $454 million and $348
million of additional first mortgage bonds, respectively, after giving effect
to the corresponding October 1994 first mortgage bond issuances and
redemptions discussed above. After the fourth quarter of 1994, Cleveland
Electric's ability to issue first mortgage bonds is expected to increase
substantially when its interest coverage ratio will no longer be affected by
the write-offs recorded at December 31, 1993.
Results of Operations
Factors contributing to the 5.9% and 2.4% decreases in 1994 operating revenues
from 1993 for the third quarter and nine months, respectively, are shown as
follows:
Changes for Period
Ended September 30, 1994
Three Nine
Factors Months Months
(millions)
Sales Volume and Mix $(21.2) $ 11.9
Wholesale Revenues (17.1) (37.5)
Fuel Cost Recovery Revenues (3.6) (25.9)
Miscellaneous Revenues (0.2) 6.3
Total $(42.1) $(45.2)
Percentage changes between 1994 and 1993 billed electric kilowatt-hour sales
are summarized as follows:
Changes for Period
Ended September 30, 1994
Three Nine
Customer Categories Months Months
Residential (5.5)% 0.7%
Commercial 0.6 3.0
Industrial 3.0 4.2
Other (43.0) (35.0)
Total (7.2) (2.4)
<PAGE> 14
Third quarter 1994 total kilowatt-hour sales decreased primarily because of
lower wholesale sales (included in the "Other" category). Increases in
industrial and commercial sales were completely offset by lower residential
sales. Industrial sales increased on the strength of increased sales to large
automotive manufacturers and the broad-based, smaller industrial customer
group. Residential sales were negatively affected by the cooler summer
weather as compared with the 1993 period.
Total kilowatt-hour sales decreased for the nine-month period in 1994 because
of lower wholesale sales. Industrial sales increased on the strength of
increased sales to large automotive manufacturers and the broad-based, smaller
industrial customer group. Residential and commercial sales increased as a
result of weather conditions.
For the 1994 nine-month period, retail operating revenues were 34.4%
residential, 32.4% commercial and 33.2% industrial and retail kilowatt-hour
sales were 26.7% residential, 28.5% commercial and 44.8% industrial. The
average price per kilowatt-hour for residential, commercial and industrial
customers was $.11, $.10 and $.06, respectively. The changes from the
comparable 1993 period were not significant.
The decreases in 1994 wholesale sales and revenues were attributable to the
expiration of a wholesale power agreement, softer market conditions and
limited power availability for bulk power transactions because of generating
plant outages.
The decreases in 1994 fuel cost recovery revenues included in customer bills
resulted from decreases in the fuel cost recovery factors used by the
Operating Companies to calculate these revenues. The weighted averages of the
fuel cost recovery factors used in the third quarter of 1994 decreased about
2% and 6% for Cleveland Electric and Toledo Edison, respectively, and during
the nine-month period in 1994 decreased about 11% and 3%, respectively,
compared to those used in 1993.
Nine-month miscellaneous revenues in 1994 increased from the 1993 amounts
primarily because of increased billings to other utilities for overhead
expenses related to the 1994 refueling and maintenance outage of the jointly
owned Perry Nuclear Power Plant Unit 1 (Perry Unit 1).
Third quarter operating expenses in 1994 decreased 20.2% from the 1993 amount.
Other operation and maintenance expenses in the 1993 third quarter included
$205 million of one-time VTP benefit expenses as discussed in Note 7. Other
operation and maintenance expenses also decreased because of expense
reductions resulting from cost reduction measures, including the major work
force reduction in 1993. Fuel and purchased power expenses decreased because
of lower fuel expense, including less amortization of previously deferred fuel
costs than the amount amortized in 1993. Depreciation and amortization
expenses increased because of higher nuclear plant decommissioning expense
accruals in 1994 as discussed in Note 6. A decrease in deferred operating
expenses resulted primarily from lower Rate Stabilization Program deferrals in
the 1994 period. The 1993 third quarter Rate Stabilization Program deferrals
<PAGE> 15
included $79.8 million of SFAS 106 curtailment cost deferrals related to the
VTP. Federal income taxes increased as a result of higher pretax operating
income.
Third quarter credits for carrying charges in 1994 decreased from the 1993
amount primarily because of the cessation at the end of 1993 of accruals
related to the rate phase-in plans for the investments in Perry Unit 1 and
Beaver Valley Power Station Unit 2 under a 1989 rate agreement for the
Operating Companies. The third quarter federal income tax provision for non-
operating income in 1994 increased from the 1993 amount because the expense
increase resulting from a lower tax allocation of interest charges to non-
operating activities exceeded the decrease related to the lower carrying
charge credits.
Third quarter net income in 1994 increased $75 million from the 1993 amount of
$17 million. Quarterly earnings per common share increased $.50 per share
from the 1993 amount of $.12. The 1993 quarterly earnings were reduced by a
one-time, after-tax VTP charge of approximately $81 million, or $.56 per
share.
Nine-month operating expenses in 1994 decreased 9% from the 1993 amount.
Fuel and purchased power expenses decreased because of lower fuel expense,
including less amortization of previously deferred fuel costs than the amount
amortized in 1993. An increase in purchased power expense partially offset
the lower fuel expense. During a June 1994 heat wave, additional power was
purchased because two large generating units were out of operation for
maintenance. Other operation and maintenance expenses decreased primarily
because the 1993 nine-month period expenses included $218 million of one-time
VTP benefit expenses as discussed in Note 7. Also, cost reduction measures
helped lower operation and maintenance expenses in 1994 despite increased
maintenance expenses related to generating plant outages in 1994.
Depreciation and amortization expenses increased primarily because of the
aforementioned higher nuclear plant decommissioning expense accruals. A
decrease in deferred operating expenses resulted primarily from lower Rate
Stabilization Program deferrals in the 1994 period. The 1993 nine-month Rate
Stabilization Program deferrals included $80.7 million of SFAS 106 curtailment
cost deferrals related to the VTP. Federal income taxes increased as a result
of higher pretax operating income.
The nine-month credits for carrying charges in 1994 decreased from the 1993
amount primarily because of the cessation at the end of 1993 of accruals
related to the phase-in plans. The nine-month federal income tax provision
for nonoperating income in 1994 increased from the 1993 amount because the
expense increase resulting from a lower tax allocation of interest charges to
nonoperating activities exceeded the decrease related to the lower carrying
charge credits.
Nine-month net income in 1994 increased $83 million, or 96.1%, from the 1993
amount. Nine-month earnings per common share increased $.54 per share, or
90%. The 1993 nine-month earnings were reduced by a one-time, after-tax VTP
charge of approximately $89 million, or $.61 per share.
<PAGE> 16
Outlook--Competition--Cleveland Public Power
Cleveland Public Power (CPP) continues to expand its operations into two areas
which Cleveland Electric has served for many years. CPP is constructing new
transmission and distribution facilities extending into eastern portions of
Cleveland and plans to expand to western portions of Cleveland. During the
1991-1993 period, Cleveland Electric had a net loss of about 7,000 customers,
including several hundred, primarily small, commercial and industrial
customers, to CPP which resulted in a reduction in 1993 annual net income of
about $14,000,000. CPP's Phase I expansion, as now planned, could take away
about 18,000 more of Cleveland Electric's customers, while its Phase II
expansion could take away about 29,000 more customers over the next several
years. If CPP's expansion is completed as planned, this could eventually
reduce annual net income by an additional estimated $27,000,000, for a total
estimated reduction in annual net income of about $41,000,000. Despite CPP's
expansion efforts, Cleveland Electric has been successful in retaining many of
its large commercial and industrial customers in Cleveland by offering them
incentive packages in return for sole-supplier contracts with Cleveland
Electric for five years. In addition, an increasing number of CPP's customers
continue to convert back to Cleveland Electric's service.
<PAGE> 17
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND SUBSIDIARIES
INCOME STATEMENT
(Unaudited)
(Thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
--------------------- -------------------------
1994 1993 1994 1993
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATING REVENUES $ 473,969 $ 506,873 $ 1,296,628 $ 1,345,453
OPERATING EXPENSES
Fuel and Purchased Power (1) 98,475 107,567 290,446 323,562
Other Operation and Maintenance 104,872 237,667 336,439 479,408
Depreciation and Amortization 50,488 45,853 146,117 137,853
Taxes, Other Than Federal Income Taxes 58,818 57,514 176,862 175,298
Deferred Operating Expenses, Net (9,225) (50,161) (29,251) (70,612)
Federal Income Taxes 38,840 19,719 67,750 44,617
-------- -------- ---------- ----------
Total Operating Expenses 342,268 418,159 988,363 1,090,126
-------- -------- ---------- ----------
OPERATING INCOME 131,701 88,714 308,265 255,327
NONOPERATING INCOME
Allowance for Equity Funds Used During Construction 860 1,204 2,437 3,133
Other Income and Deductions, Net 1,619 (1,889) 4,731 (4,197)
Deferred Carrying Charges 6,303 7,596 18,766 22,898
Federal Income Taxes - Credit (Expense) (617) 1,388 (2,579) 2,053
-------- -------- ---------- ----------
Total Nonoperating Income 8,165 8,299 23,355 23,887
-------- -------- ---------- ----------
INCOME BEFORE INTEREST CHARGES 139,866 97,013 331,620 279,214
INTEREST CHARGES
Long-term Debt 60,624 57,945 181,137 177,108
Short-term Debt 890 657 2,823 2,500
Allowance for Borrowed Funds Used During Construction (1,097) (945) (3,002) (2,464)
-------- -------- ---------- ----------
Net Interest Charges 60,417 57,657 180,958 177,144
-------- -------- ---------- ----------
NET INCOME 79,449 39,356 150,662 102,070
Preferred Dividend Requirements 11,329 12,016 34,197 32,862
-------- -------- ---------- ----------
EARNINGS AVAILABLE FOR COMMON STOCK $ 68,120 $ 27,340 $ 116,465 $ 69,208
======== ======== ========== ==========
<FN>
(1) Includes purchased power expense for
purchases from Toledo Edison. $ 27,716 $ 30,357 $ 84,329 $ 91,346
The accompanying notes to financial statements as they relate to Cleveland Electric are an integral part of this statement.
</TABLE>
<PAGE> 18
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND SUBSIDIARIES
BALANCE SHEET
(Thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
(Unaudited)
----------- -----------
<S> <C> <C>
ASSETS
PROPERTY, PLANT AND EQUIPMENT
Utility Plant In Service $ 6,830,264 $ 6,734,130
Accumulated Depreciation and Amortization (1,994,281) (1,889,584)
----------- -----------
4,835,983 4,844,546
Construction Work In Progress 130,846 141,422
----------- -----------
4,966,829 4,985,968
Nuclear Fuel, Net of Amortization 185,005 202,200
Other Property, Less Accumulated Depreciation 39,771 41,041
----------- -----------
5,191,605 5,229,209
CURRENT ASSETS
Cash and Temporary Cash Investments 18,344 77,374
Amounts Due from Customers and Others, Net 173,126 155,899
Amounts Due from Affiliates 4,165 5,399
Unbilled Revenues 84,000 99,000
Materials and Supplies, at Average Cost 96,617 92,659
Fossil Fuel Inventory, at Average Cost 18,808 20,188
Taxes Applicable to Succeeding Years 76,036 178,577
Other 4,236 2,967
----------- -----------
475,332 632,063
DEFERRED CHARGES AND OTHER ASSETS
Amounts Due from Customers for Future Federal Income Taxes 603,377 586,494
Unamortized Loss on Reacquired Debt 57,569 60,293
Carrying Charges and Operating Expenses 566,575 518,613
Nuclear Plant Decommissioning Trusts 33,115 29,955
Other 95,385 102,546
----------- -----------
1,356,021 1,297,901
----------- -----------
$ 7,022,958 $ 7,159,173
=========== ===========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common Stock Equity $ 1,075,083 $ 1,039,947
Preferred Stock
With Mandatory Redemption Provisions 255,717 285,225
Without Mandatory Redemption Provisions 240,871 240,871
Long-Term Debt 2,564,159 2,793,162
----------- -----------
4,135,830 4,359,205
OTHER NONCURRENT LIABILITIES
Nuclear Fuel Lease Obligations 140,625 150,775
Other 94,894 96,352
----------- -----------
235,519 247,127
CURRENT LIABILITIES
Current Portion of Long-Term Debt and Preferred Stock 273,983 70,394
Current Portion of Lease Obligations 44,419 62,610
Accounts Payable 73,529 122,385
Accounts and Notes Payable to Affiliates 75,187 60,956
Accrued Taxes 205,143 304,621
Accrued Interest 69,743 60,376
Dividends Declared 33,032 19,258
Other 35,733 32,632
----------- -----------
810,769 733,232
DEFERRED CREDITS
Unamortized Investment Tax Credits 202,937 235,293
Accumulated Deferred Federal Income Taxes 1,188,342 1,104,859
Unamortized Gain from Bruce Mansfield Plant Sale 330,994 343,183
Accumulated Deferred Rents for Bruce Mansfield Plant 83,856 77,304
Other 34,711 58,970
----------- -----------
1,840,840 1,819,609
COMMITMENTS AND CONTINGENCIES (Note 8)
----------- -----------
$ 7,022,958 $ 7,159,173
=========== ===========
<FN>
The accompanying notes to financial statements as they relate to Cleveland Electric are an
integral part of this statement.
</TABLE>
<PAGE> 19
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND SUBSIDIARIES
CASH FLOWS
(Unaudited)
(Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------
1994 1993
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $150,662 $102,070
-------- --------
Adjustments to Reconcile Net Income
to Cash from Operating Activities:
Depreciation and Amortization 146,117 137,853
Deferred Federal Income Taxes 43,704 15,488
Unbilled Revenues 15,000 11,000
Deferred Fuel (21,785) 6,897
Deferred Carrying Charges (18,766) (22,898)
Leased Nuclear Fuel Amortization 39,966 36,232
Deferred Operating Expenses, Net (29,251) (70,612)
Allowance for Equity Funds Used During Construction (2,437) (3,133)
Noncash Early Retirement Program Expenses, Net -- 112,449
Changes in Amounts Due from Customers and Others, Net (17,227) (29,652)
Changes in Inventories (2,578) 13,826
Changes in Accounts Payable (48,856) (21,961)
Changes in Working Capital Affecting Operations 10,527 (8,806)
Other Noncash Items 5,475 1,673
------- -------
Total Adjustments 119,889 178,356
------- -------
Net Cash from Operating Activities 270,551 280,426
CASH FLOWS FROM FINANCING ACTIVITIES
Bank Loans, Commercial Paper and Other Short-Term Debt -- (10,000)
Notes Payable to Affiliates 19,200 (11,000)
Debt Issues:
First Mortgage Bonds -- 280,000
Secured Medium-Term Notes -- 35,000
Term Bank Loan -- 40,000
Preferred Stock Issue -- 100,000
Maturities, Redemptions and Sinking Funds (55,353) (333,451)
Nuclear Fuel Lease Obligations (51,115) (40,563)
Dividends Paid (101,494) (172,358)
Premiums, Discounts and Expenses (761) (10,964)
------- -------
Net Cash from Financing Activities (189,523) (123,336)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash Applied to Construction (124,366) (119,212)
Interest Capitalized as Allowance for Borrowed Funds Used
During Construction (3,002) (2,464)
Other Cash Received (Applied) (12,690) 5,364
------- -------
Net Cash from Investing Activities (140,058) (116,312)
------- -------
NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS (59,030) 40,778
CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF PERIOD 77,374 33,524
------- -------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $18,344 $74,302
======= =======
Other Payment Information:
Interest (net of amounts capitalized) $148,000 $142,000
Federal Income Taxes 11,300 28,000
<FN>
The accompanying notes to financial statements as they relate to Cleveland Electric are an integral
part of this statement.
</TABLE>
<PAGE> 20
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Capital Resources and Liquidity
Reference is made to "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in Item 7 of the 1993 Form
10-K, in the First Quarter 1994 Form 10-Q and in the Second Quarter 1994 Form
10-Q. The information under "Capital Resources and Liquidity" remains
unchanged with the following exceptions:
During the third quarter of 1994, Cleveland Electric redeemed various
securities as discussed in Note 5.
On August 26, 1994, Moody's Investors Services, Inc. (Moody's) downgraded the
credit ratings of Cleveland Electric's preferred stock from "b1" to "b2".
Moody's noted that Cleveland Electric's recently amended bank facilities
provide the participating banks with second mortgages on Cleveland Electric's
assets, thereby creating a new level of priority above the preferred stock
that Moody's downgraded. (For further information on this transaction, see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Capital Resources and Liquidity" and Note 7 in the Second Quarter
1994 Form 10-Q.)
Since Cleveland Electric was unable to issue commercial paper because of its
below investment grade commercial paper ratings, Cleveland Electric requested
that Standard & Poor's Rating Group (S&P) withdraw its rating on Cleveland
Electric's commercial paper. Accordingly, S&P no longer provides any rating
with respect to commercial paper of Cleveland Electric.
In October 1994, Cleveland Electric issued $46.1 million of first mortgage
bonds as collateral security for the sale by a public authority of an equal
principal amount of tax-exempt bonds. The proceeds from the sale of the
public authority's bonds were used to refund $46.1 million of the authority's
tax-exempt bonds that were issued in 1988 and had been continuously remarketed
on a floating rate basis. The new bonds mature on October 1, 2023 and have an
8% fixed interest rate. They are not redeemable prior to October 1, 2004.
Additional first mortgage bonds may be issued by Cleveland Electric under its
mortgage on the basis of property additions, cash or refundable first mortgage
bonds. Under its mortgage, Cleveland Electric may issue first mortgage bonds
on the basis of property additions and, under certain circumstances, refund-
able bonds only if the applicable interest coverage test is met. At
September 30, 1994, Cleveland Electric would have been permitted to issue
approximately $454 million of additional first mortgage bonds after giving
effect to the October 1994 first mortgage bond issuance and redemption
discussed above. After the fourth quarter of 1994, Cleveland Electric's
ability to issue first mortgage bonds is expected to increase substantially
when its interest coverage ratio will no longer be affected by the write-offs
recorded at December 31, 1993.
<PAGE> 21
Results of Operations
Factors contributing to the 6.5% and 3.6% decreases in 1994 operating revenues
from 1993 for the third quarter and nine months, respectively, are shown as
follows:
Changes for Period
Ended September 30, 1994
Three Nine
Factors Months Months
(millions)
Sales Volume and Mix $(15.9) $ 4.7
Wholesale Revenues (15.9) (39.9)
Fuel Cost Recovery Revenues (1.4) (22.4)
Miscellaneous Revenues 0.3 8.8
Total $(32.9) $(48.8)
Percentage changes between 1994 and 1993 billed electric kilowatt-hour sales
are summarized as follows:
Changes for Period
Ended September 30, 1994
Three Nine
Customer Categories Months Months
Residential (6.1)% 0.2%
Commercial 1.6 3.2
Industrial - 1.9
Other (49.6) (53.3)
Total (9.1) (6.0)
Third quarter 1994 total kilowatt-hour sales decreased because of lower
wholesale sales (included in the "Other" category) and lower residential
sales. Residential sales were negatively affected by the cooler summer
weather as compared with the 1993 period. However, commercial sales increased
slightly. Industrial sales were virtually the same as in the 1993 period.
Total kilowatt-hour sales decreased for the nine-month period in 1994 because
of lower wholesale sales. Industrial sales increased on the strength of
increased sales to large automotive manufacturers and the broad-based, smaller
industrial customer group. Residential and commercial sales increased as a
result of weather conditions.
For the 1994 nine-month period, retail operating revenues were 34.2%
residential, 34.3% commercial and 31.5% industrial and retail kilowatt-hour
sales were 26.7% residential, 31.1% commercial and 42.2% industrial. The
average price per kilowatt-hour for residential, commercial and industrial
customers was $.11, $.09 and $.06, respectively. The changes from the
comparable 1993 period were not significant.
<PAGE> 22
The decreases in 1994 wholesale sales and revenues were attributable to the
expiration of a wholesale power agreement, softer market conditions and
limited power availability for bulk power transactions because of generating
plant outages.
The decreases in 1994 fuel cost recovery revenues included in customer bills
resulted from decreases in the fuel cost recovery factors used in 1994 to
calculate these revenues compared to those used in 1993. The decreases in the
weighted averages of the fuel cost recovery factors for 1994 were about 2% and
11% for the third quarter and nine months, respectively.
Miscellaneous revenues in 1994 increased from the 1993 amounts primarily
because of increased billings to other utilities for overhead expenses related
to the 1994 refueling and maintenance outage of the jointly owned Perry
Nuclear Power Plant Unit 1 (Perry Unit 1).
Third quarter operating expenses in 1994 decreased 18.1% from the 1993 amount.
Other operation and maintenance expenses in the 1993 third quarter included
$109.5 million of one-time VTP benefit expenses as discussed in Note 7. Other
operation and maintenance expenses also decreased because of expense
reductions resulting from cost reduction measures, including the major work
force reduction in 1993. Fuel and purchased power expenses decreased because
of lower fuel expense, including less amortization of previously deferred fuel
costs than the amount amortized in 1993. Depreciation and amortization
expenses increased because of higher nuclear plant decommissioning expense
accruals in 1994 as discussed in Note 6. A decrease in deferred operating
expenses resulted primarily from lower Rate Stabilization Program deferrals in
the 1994 period. The 1993 third quarter Rate Stabilization Program deferrals
included $38.5 million of SFAS 106 curtailment cost deferrals related to the
VTP. Federal income taxes increased as a result of higher pretax operating
income.
Third quarter credits for carrying charges in 1994 decreased from the 1993
amount primarily because of the cessation at the end of 1993 of accruals
related to the rate phase-in plan for the investments in Perry Unit 1 and
Beaver Valley Power Station Unit 2 under a 1989 rate agreement. The third
quarter federal income tax provision for nonoperating income in 1994 increased
from the 1993 amount because the expense increase resulting from a lower tax
allocation of interest charges to nonoperating activities exceeded the
decrease related to the lower carrying charge credits.
Third quarter earnings available for common stock in 1994 increased $41
million from the 1993 amount of $27 million. The 1993 quarterly earnings were
reduced by a one-time, after-tax VTP charge of approximately $46 million.
Nine-month operating expenses in 1994 decreased 9.3% from the 1993 amount.
Fuel and purchased power expenses decreased because of lower fuel expense,
including less amortization of previously deferred fuel costs than the amount
amortized in 1993. An increase in purchased power expense partially offset
the lower fuel expense. During a June 1994 heat wave, additional power was
purchased because two large generating units were out of operation for
maintenance. Other operation and maintenance expenses decreased primarily
<PAGE> 23
because the 1993 nine-month period expenses included $117.4 million of
one-time VTP benefit expenses as discussed in Note 7. Also, cost reduction
measures helped lower operation and maintenance expenses in 1994 despite
increased maintenance expenses related to generating plant outages in 1994.
Depreciation and amortization expenses increased primarily because of the
aforementioned higher nuclear plant decommissioning expense accruals. A
decrease in deferred operating expenses resulted primarily from lower Rate
Stabilization Program deferrals in the 1994 period. The 1993 nine-month Rate
Stabilization Program deferrals included $39.1 million of SFAS 106 curtailment
cost deferrals related to the VTP. Federal income taxes increased as a result
of higher pretax operating income.
The nine-month credits for carrying charges in 1994 decreased from the 1993
amount primarily because of the cessation at the end of 1993 of accruals
related to the phase-in plan. The nine-month federal income tax provision for
nonoperating income in 1994 increased from the 1993 amount because the expense
increase resulting from a lower tax allocation of interest charges to non-
operating activities exceeded the decrease related to the lower carrying
charge credits.
Nine-month earnings available for common stock in 1994 increased $47 million,
or 68.3%, from the 1993 amount. The 1993 nine-month earnings available for
common stock were reduced by a one-time, after-tax VTP charge of approximately
$51 million.
Outlook--Competition--Cleveland Public Power
Cleveland Public Power (CPP) continues to expand its operations into two areas
which Cleveland Electric has served for many years. CPP is constructing new
transmission and distribution facilities extending into eastern portions of
Cleveland and plans to expand to western portions of Cleveland. During the
1991-1993 period, Cleveland Electric had a net loss of about 7,000 customers,
including several hundred, primarily small, commercial and industrial
customers, to CPP which resulted in a reduction in 1993 annual net income of
about $14,000,000. CPP's Phase I expansion, as now planned, could take away
about 18,000 more of Cleveland Electric's customers, while its Phase II
expansion could take away about 29,000 more customers over the next several
years. If CPP's expansion is completed as planned, this could eventually
reduce annual net income by an additional estimated $27,000,000, for a total
estimated reduction in annual net income of about $41,000,000. Despite CPP's
expansion efforts, Cleveland Electric has been successful in retaining many of
its large commercial and industrial customers in Cleveland by offering them
incentive packages in return for sole-supplier contracts with Cleveland
Electric for five years. In addition, an increasing number of CPP's customers
continue to convert back to Cleveland Electric's service.
<PAGE> 24
THE TOLEDO EDISON COMPANY
INCOME STATEMENT
(Unaudited)
(Thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
--------------------- -------------------------
1994 1993 1994 1993
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
OPERATING REVENUES (1) $ 227,447 $ 238,543 $ 660,471 $ 663,708
OPERATING EXPENSES
Fuel and Purchased Power 42,018 45,220 129,041 130,113
Other Operation and Maintenance 79,301 185,783 247,665 357,931
Depreciation and Amortization 21,990 19,025 62,271 57,490
Taxes, Other Than Federal Income Taxes 23,326 23,775 70,517 71,530
Deferred Operating Expenses, Net (5,653) (48,630) (16,341) (62,949)
Federal Income Taxes 13,105 (3,699) 28,099 11,570
-------- -------- ---------- ----------
Total Operating Expenses 174,087 221,474 521,252 565,685
-------- -------- ---------- ----------
OPERATING INCOME 53,360 17,069 139,219 98,023
NONOPERATING INCOME
Allowance for Equity Funds Used During Construction 336 294 853 783
Other Income and Deductions, Net 780 (27) 2,402 854
Deferred Carrying Charges 3,706 6,109 10,945 18,411
Federal Income Taxes - Credit (Expense) (158) 807 (536) 1,613
-------- -------- ---------- ----------
Total Nonoperating Income 4,664 7,183 13,664 21,661
-------- -------- ---------- ----------
INCOME BEFORE INTEREST CHARGES 58,024 24,252 152,883 119,684
INTEREST CHARGES
Long-term Debt 27,195 28,020 82,112 83,111
Short-term Debt 1,983 1,232 3,923 3,637
Allowance for Borrowed Funds Used During Construction (104) (188) (332) (501)
-------- -------- ---------- ----------
Net Interest Charges 29,074 29,064 85,703 86,247
-------- -------- ---------- ----------
NET INCOME (LOSS) 28,950 (4,812) 67,180 33,437
Preferred Dividend Requirements 5,099 5,568 15,457 17,319
-------- -------- ---------- ----------
EARNINGS (LOSS) AVAILABLE FOR COMMON STOCK $ 23,851 $ (10,380) $ 51,723 $ 16,118
======== ======== ========== ==========
<FN>
(1) Includes revenues from bulk power sales
to Cleveland Electric. $ 27,716 $ 30,357 $ 84,329 $ 91,346
The accompanying notes to financial statements as they relate to Toledo Edison are an integral part of this statement.
</TABLE>
<PAGE> 25
THE TOLEDO EDISON COMPANY
BALANCE SHEET
(Thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
(Unaudited)
----------- -----------
<S> <C> <C>
ASSETS
PROPERTY, PLANT AND EQUIPMENT
Utility Plant In Service $ 2,897,259 $ 2,836,993
Accumulated Depreciation and Amortization (886,487) (787,785)
----------- -----------
2,010,772 2,049,208
Construction Work In Progress 34,072 39,509
----------- -----------
2,044,844 2,088,717
Nuclear Fuel, Net of Amortization 121,570 142,442
Other Property, Less Accumulated Depreciation 3,357 (234)
----------- -----------
2,169,771 2,230,925
CURRENT ASSETS
Cash and Temporary Cash Investments 77,353 82,042
Amounts Due from Customers and Others, Net 69,316 62,979
Amounts Due from Affiliates 39,532 15,682
Unbilled Revenues 16,844 24,844
Materials and Supplies, at Average Cost 46,392 42,852
Fossil Fuel Inventory, at Average Cost 13,020 11,971
Taxes Applicable to Succeeding Years 31,695 70,966
Other 1,528 2,284
----------- -----------
295,680 313,620
DEFERRED CHARGES AND OTHER ASSETS
Amounts Due from Customers for Future Federal Income Taxes 388,798 381,729
Unamortized Loss from Beaver Valley Unit 2 Sale 101,821 105,190
Unamortized Loss on Reacquired Debt 28,563 32,093
Carrying Charges and Operating Expenses 370,274 343,046
Nuclear Plant Decommissioning Trusts 29,277 25,727
Other 69,195 77,524
----------- -----------
987,928 965,309
----------- -----------
$ 3,453,379 $ 3,509,854
=========== ===========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common Stock Equity $ 673,959 $ 622,375
Preferred Stock
With Mandatory Redemption Provisions 6,685 28,350
Without Mandatory Redemption Provisions 210,000 210,000
Long-Term Debt 1,169,205 1,225,392
----------- -----------
2,059,849 2,086,117
OTHER NONCURRENT LIABILITIES
Nuclear Fuel Lease Obligations 88,469 102,891
Other 78,762 82,757
----------- -----------
167,231 185,648
CURRENT LIABILITIES
Current Portion of Long-Term Debt and Preferred Stock 82,870 56,859
Current Portion of Lease Obligations 32,849 48,880
Accounts Payable 55,852 63,384
Accounts Payable to Affiliates 29,705 26,608
Accrued Taxes 25,883 89,574
Accrued Interest 28,443 27,022
Other 14,687 16,948
----------- -----------
270,289 329,275
DEFERRED CREDITS
Unamortized Investment Tax Credits 88,504 93,997
Accumulated Deferred Federal Income Taxes 520,798 471,471
Unamortized Gain from Bruce Mansfield Plant Sale 200,588 208,085
Accumulated Deferred Rents for Bruce Mansfield Plant
and Beaver Valley Unit 2 55,412 50,357
Other 90,708 84,904
----------- -----------
956,010 908,814
COMMITMENTS AND CONTINGENCIES (Note 8)
----------- -----------
$ 3,453,379 $ 3,509,854
=========== ===========
<FN>
The accompanying notes to financial statements as they relate to Toledo Edison are an
integral part of this statement.
</TABLE>
<PAGE> 26
THE TOLEDO EDISON COMPANY
CASH FLOWS
(Unaudited)
(Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------
1994 1993
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $67,180 $33,437
------- -------
Adjustments to Reconcile Net Income
to Cash from Operating Activities:
Depreciation and Amortization 62,271 57,490
Deferred Federal Income Taxes 42,521 1,726
Unbilled Revenues 8,000 2,000
Deferred Fuel 4,139 (3,096)
Deferred Carrying Charges (10,945) (18,411)
Leased Nuclear Fuel Amortization 32,805 29,031
Deferred Operating Expenses, Net (16,341) (62,949)
Allowance for Equity Funds Used During Construction (853) (783)
Noncash Early Retirement Program Expenses, Net -- 94,902
Changes in Amounts Due from Customers and Others, Net (6,337) (13,562)
Changes in Inventories (4,589) 11,174
Changes in Accounts Payable (7,532) 13,663
Changes in Working Capital Affecting Operations (26,057) 3,163
Other Noncash Items 10,701 11,258
------ ------
Total Adjustments 87,783 125,606
------ ------
Net Cash from Operating Activities 154,963 159,043
CASH FLOWS FROM FINANCING ACTIVITIES
Bank Loans, Commercial Paper and Other Short-Term Debt -- (39,502)
Debt Issues:
First Mortgage Bonds -- 20,200
Secured Medium-Term Notes -- 93,000
Maturities, Redemptions and Sinking Funds (51,933) (72,881)
Nuclear Fuel Lease Obligations (42,040) (32,365)
Dividends Paid (15,596) (17,577)
Premiums, Discounts and Expenses (212) (882)
------- ------
Net Cash from Financing Activities (109,781) (50,007)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash Applied to Construction (24,794) (27,794)
Interest Capitalized as Allowance for Borrowed Funds Used
During Construction (332) (501)
Loans to Affiliates (19,200) --
Other Cash Applied (5,545) (1,431)
------ ------
Net Cash from Investing Activities (49,871) (29,726)
------ ------
NET CHANGE IN CASH AND TEMPORARY CASH INVESTMENTS (4,689) 79,310
CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF PERIOD 82,042 15,731
------- -------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $77,353 $95,041
======= =======
Other Payment Information:
Interest (net of amounts capitalized) $69,000 $66,000
Federal Income Taxes 5,700 4,800
<FN>
The accompanying notes to financial statements as they relate to Toledo Edison are an integral
part of this statement.
</TABLE>
<PAGE> 27
THE TOLEDO EDISON COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Capital Resources and Liquidity
Reference is made to "Management's Discussion and Analysis of Financial
Condition and Results of Operations" contained in Item 7 of the 1993 Form
10-K, in the First Quarter 1994 Form 10-Q and in the Second Quarter 1994 Form
10-Q. The information under "Capital Resources and Liquidity" remains
unchanged with the following exceptions:
During the third quarter of 1994, Toledo Edison redeemed various securities as
discussed in Note 5.
On August 26, 1994, Moody's Investors Service, Inc. (Moody's) downgraded the
credit ratings of certain securities of Toledo Edison. Toledo Edison's
preferred stock was downgraded from "b1" to "b2" and Toledo Edison's
debentures were downgraded from "Ba3" to "B1". Moody's noted that Toledo
Edison's recently amended bank facilities provide the participating banks with
second mortgages on Toledo Edison's assets, thereby creating a new level of
priority above the classes of securities that Moody's downgraded. (For
further information on this transaction, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Capital Resources
and Liquidity" and Note 7 in the Second Quarter 1994 Form 10-Q.)
Since Toledo Edison was unable to issue commercial paper because of its below
investment grade commercial paper ratings, Toledo Edison requested that
Standard & Poor's Rating Group (S&P) withdraw its rating on Toledo Edison's
commercial paper. Accordingly, S&P no longer provides any rating with respect
to commercial paper of Toledo Edison.
In October 1994, Toledo Edison issued $30.5 million of first mortgage bonds as
collateral security for the sale by a public authority of an equal principal
amount of tax-exempt bonds. The proceeds from the sale of the public
authority's bonds were used to refund $30.5 million of the authority's tax-
exempt bonds that were issued in 1988 and had been continuously remarketed on
a floating rate basis. The new bonds mature on October 1, 2023 and have an 8%
fixed interest rate. They are not redeemable prior to October 1, 2004.
Additional first mortgage bonds may be issued by Toledo Edison under its
mortgage on the basis of property additions, cash or refundable first mortgage
bonds. Under its mortgage, Toledo Edison may issue first mortgage bonds on
the basis of property additions and, under certain circumstances, refundable
bonds only if the applicable interest coverage test is met. At September 30,
1994, Toledo Edison would have been permitted to issue approximately $348
million of additional first mortgage bonds after giving effect to the October
1994 first mortgage bond issuance and redemption discussed above.
<PAGE> 28
Results of Operations
Factors contributing to the 4.7% and 0.5% decreases in 1994 operating revenues
from 1993 for the third quarter and nine months, respectively, are shown as
follows:
Changes for Period
Ended September 30, 1994
Three Nine
Factors Months Months
(millions)
Sales Volume and Mix $ (5.3) $ 7.2
Wholesale Revenues (3.9) (4.7)
Fuel Cost Recovery Revenues (2.2) (3.5)
Miscellaneous Revenues 0.3 (2.2)
Total $(11.1) $ (3.2)
Percentage changes between 1994 and 1993 billed electric kilowatt-hour sales
are summarized as follows:
Changes for Period
Ended September 30, 1994
Three Nine
Customer Categories Months Months
Residential (4.1)% 2.0%
Commercial (2.8) 2.3
Industrial 9.4 9.0
Other (8.3) 5.8
Total (0.3) 5.6
Third quarter 1994 total kilowatt-hour sales decreased slightly because of
lower residential and commercial sales and lower wholesale sales (included in
the "Other" category). Residential and commercial sales were negatively
affected by the cooler summer weather as compared with the 1993 period.
Industrial sales increased on the strength of increased sales to large
automotive manufacturers and the broad-based, smaller industrial customer
group.
Total kilowatt-hour sales increased for the nine-month period in 1994 as a
result of increased wholesale sales, increased economic activity and
weather-related demand. Industrial sales increased on the strength of
increased sales to large automotive manufacturers and the broad-based, smaller
industrial customer group. Residential and commercial sales increased as a
result of weather conditions.
<PAGE> 29
For the 1994 nine-month period, retail operating revenues were 34.9%
residential, 27.8% commercial and 37.3% industrial and retail kilowatt-hour
sales were 26.8% residential, 22% commercial and 51.2% industrial. The
average price per kilowatt-hour for residential, commercial and industrial
customers was $.11, $.11 and $.06, respectively. The changes from the
comparable 1993 period were not significant.
The decreases in 1994 fuel cost recovery revenues included in customer bills
resulted from decreases in the fuel cost recovery factors used in 1994 to
calculate these revenues compared to those used in 1993. The decreases in the
weighted averages of the fuel cost recovery factors for 1994 were about 6% and
3% for the third quarter and nine months, respectively.
Nine-month miscellaneous revenues in 1994 decreased from the 1993 amounts
because of lower overhead expense billings in 1994 to Cleveland Electric for
the jointly owned Davis-Besse Nuclear Power Station.
Third quarter operating expenses in 1994 decreased 21.4% from the 1993 amount.
Other operation and maintenance expenses in the 1993 third quarter included
$95.5 million of one-time VTP benefit expenses as discussed in Note 7. Other
operation and maintenance expenses also decreased because of expense
reductions resulting from cost reduction measures, including the major work
force reduction in 1993. Fuel and purchased power expenses decreased because
of lower fuel expense resulting from less generation. Depreciation and
amortization expenses increased because of higher nuclear plant
decommissioning expense accruals in 1994 as discussed in Note 6. A decrease
in deferred operating expenses resulted primarily from lower Rate
Stabilization Program deferrals in the 1994 period. The 1993 third quarter
Rate Stabilization Program deferrals included $41.3 million of SFAS 106
curtailment cost deferrals related to the VTP. Federal income taxes increased
as a result of higher pretax operating income.
Third quarter credits for carrying charges in 1994 decreased from the 1993
amount primarily because of the cessation at the end of 1993 of accruals
related to the rate phase-in plan for the investments in Perry Nuclear Power
Plant Unit 1 and Beaver Valley Power Station Unit 2 under a 1989 rate
agreement. The third quarter federal income tax provision for nonoperating
income in 1994 increased from the 1993 amount because the expense increase
resulting from a lower tax allocation of interest charges to nonoperating
activities exceeded the decrease related to the lower carrying charge credits.
Third quarter earnings available for common stock in 1994 increased $34
million from the 1993 loss of $10 million. The 1993 quarterly earnings were
reduced by a one-time, after-tax VTP charge of approximately $35 million.
Nine-month operating expenses in 1994 decreased 7.9% from the 1993 amount.
Other operation and maintenance expenses decreased primarily because the 1993
nine-month period expenses included $100.6 million of one-time VTP benefit
expenses as discussed in Note 7. Also, cost reduction measures helped lower
operation and maintenance expenses in 1994 despite increased maintenance
expense related to a generating plant outage in 1994. Depreciation and
amortization expenses increased primarily because of the aforementioned higher
<PAGE> 30
nuclear plant decommissioning expense accruals. A decrease in deferred
operating expenses resulted primarily from lower Rate Stabilization Program
deferrals in the 1994 period. The 1993 nine-month Rate Stabilization Program
deferrals included $41.6 million of SFAS 106 curtailment cost deferrals
related to the VTP. Federal income taxes increased as a result of higher
pretax operating income.
The nine-month credits for carrying charges in 1994 decreased from the 1993
amount primarily because of the cessation at the end of 1993 of accruals
related to the phase-in plan. The nine-month federal income tax provision for
nonoperating income in 1994 increased from the 1993 amount because the expense
increase resulting from a lower tax allocation of interest charges to non-
operating activities exceeded the decrease related to the lower carrying
charge credits.
Nine-month preferred dividend requirements in 1994 decreased from the 1993
amount because of the retirement of preferred stock.
Nine-month earnings available for common stock in 1994 increased $36 million
from the 1993 amount of $16 million. The 1993 nine-month earnings available
for common stock were reduced by a one-time, after-tax VTP charge of
approximately $38 million.
<PAGE> 31
PART II. OTHER INFORMATION
Item 5. Other Information
-----------------
1. Management Changes
------------------
For background relating to this topic, see "Item 10. Directors and
Executive Officers of the Registrants" in the 1993 Form 10-K.
On October 25, 1994, the respective Boards of Directors of Centerior
Energy, Cleveland Electric, Toledo Edison and Centerior Service Company
("Service Company") each elected the following officers effective November
1, 1994:
Officer Title
------- -----
E. Lyle Pepin Controller
David M. Blank Treasurer
Janis T. Percio Secretary
Mr. Blank's business experience over the past five years included various
positions with the Service Company. He was Director--Rates Administration
and Economic Analysis from May 1986 to May 1990; Director--Rates and
Corporate Planning from May 1990 to October 1993; and Director--Strategic
Planning since October 1993. He will continue in the latter position in
conjunction with his office of Treasurer.
Mrs. Percio's business experience over the past five years included
positions as Assistant Secretary of Cleveland Electric from October 1982
to November 1994 and Assistant Secretary of Centerior Energy, Toledo
Edison and the Service Company from April 1986 to November 1994.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a. Exhibits
--------
See Exhibit Index following.
b. Reports on Form 8-K
-------------------
During the quarter ended September 30, 1994, Centerior Energy, Cleveland
Electric and Toledo Edison each filed the following Current Report on Form
8-K:
A Form 8-K dated August 26, 1994 was filed on September 15, 1994 to
report, under "Item 5. Other Events", on the following: 1. Ratings
Downgrade (Moody's Investors Service, Inc. lowered its ratings on the
Operating Companies' preferred stock and on Toledo Edison's debentures);
2. Retail Wheeling (the status of a bill introduced in the Ohio General
Assembly in February 1994 concerning retail wheeling); 3. Garfield
Heights (Cleveland Electric filed a complaint and appeal with The Public
Utilities Commission of Ohio concerning Garfield Heights' March 1994
ordinance for a 30% reduction in Cleveland Electric's rates; city council
removed from the November 1994 ballot an issue for the creation of a
public utilities department in the City); and 4. Replacement of Trustee
for Cleveland Electric Mortgage (The Chase Manhattan Bank (National
Association) was appointed successor Trustee, Paying Agent and Transfer
Agent under the Cleveland Electric senior mortgage, replacing Morgan
Guaranty Trust Company of New York).
- 29 -
<PAGE> 32
Also, the Form 8-K filed, under "Item 7. Financial Statements
and Exhibits", as Exhibit 4(a), an Open-End Subordinate Indenture of
Mortgage between Cleveland Electric and Bank One, Columbus, N.A., as
Trustee, dated as of June 1, 1994 and, as Exhibit 4(b), an Open-End
Subordinate Indenture of Mortgage between Toledo Edison and Bank One,
Columbus, N.A., as Trustee, dated as of June 1, 1994.
- - 30 -
<PAGE> 33
Signatures
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, each
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized. The person signing this report on
behalf of each such registrant is also signing in his capacity as each
registrant's Chief Accounting Officer.
CENTERIOR ENERGY CORPORATION
----------------------------
(Registrant)
THE CLEVELAND ELECTRIC
----------------------
ILLUMINATING COMPANY
--------------------
(Registrant)
THE TOLEDO EDISON COMPANY
-------------------------
(Registrant)
By: E. LYLE PEPIN
-----------------------------------
E. Lyle Pepin, Controller and Chief
Accounting Officer of each Registrant
Date: November 10, 1994
- 31 -
<PAGE> 34
EXHIBIT INDEX
-------------
The following exhibits are filed or, in the case of Financial Data
Schedules, submitted herewith:
CENTERIOR ENERGY EXHIBIT
------------------------
Exhibit Number Description
- -------------- -----------
27(a) Financial Data Schedule for the period
ended September 30, 1994.
CLEVELAND ELECTRIC EXHIBITS
---------------------------
Exhibit Number Description
- -------------- -----------
4(a) Sixty-Eighth Supplemental Indenture dated
September 15, 1994 to Cleveland Electric's
Mortgage and Deed of Trust, creating and
securing First Mortgage Bonds, 8% Series
due 2023-F (including therein the form of
the Bonds of such Series).
27(b) Financial Data Schedule for the period ended
September 30, 1994.
TOLEDO EDISON EXHIBITS
----------------------
Exhibit Number Description
- -------------- -----------
4(b) Forty-first Supplemental Indenture dated as
of September 15, 1994 to Toledo Edison's
Indenture of Mortgage and Deed of Trust,
creating and securing First Mortgage Bonds,
8% Series due 2023-G (including therein the
form of the Bonds of such Series).
27(c) Financial Data Schedule for the period ended
September 30, 1994.
- 32 -
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements contained in the Form 10-Q for the quarterly period ended
September 30, 1994 of Centerior Energy Corporation and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000774197
<NAME> CENTERIOR ENERGY CORP.
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 7,011,673
<OTHER-PROPERTY-AND-INVEST> 412,490
<TOTAL-CURRENT-ASSETS> 814,049
<TOTAL-DEFERRED-CHARGES> 2,279,459
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 10,517,671
<COMMON> 2,319,638
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> (472,371)
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,847,267
262,402
450,871
<LONG-TERM-DEBT-NET> 3,733,364
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 305,674
51,179
<CAPITAL-LEASE-OBLIGATIONS> 229,094
<LEASES-CURRENT> 77,269
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,560,551
<TOT-CAPITALIZATION-AND-LIAB> 10,517,671
<GROSS-OPERATING-REVENUE> 1,850,989
<INCOME-TAX-EXPENSE> 95,556
<OTHER-OPERATING-EXPENSES> 1,307,245
<TOTAL-OPERATING-EXPENSES> 1,402,801
<OPERATING-INCOME-LOSS> 448,188
<OTHER-INCOME-NET> 35,435
<INCOME-BEFORE-INTEREST-EXPEN> 483,623
<TOTAL-INTEREST-EXPENSE> 265,291
<NET-INCOME> 168,677
0
<EARNINGS-AVAILABLE-FOR-COMM> 0
<COMMON-STOCK-DIVIDENDS> 118,228
<TOTAL-INTEREST-ON-BONDS> 290,225
<CASH-FLOW-OPERATIONS> 400,863
<EPS-PRIMARY> 1.14
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE CLEVELAND ELECTRIC ILLUMINATING
COMPANY
TO
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION)
(herein becoming successor to Morgan Guaranty Trust Company
of New York,
formerly Guaranty Trust Company of New York)
As Trustee under
The Cleveland Electric Illuminating Company's
Mortgage and Deed of Trust,
Dated July 1, 1940
------------------------
SIXTY-EIGHTH SUPPLEMENTAL INDENTURE
DATED SEPTEMBER 15, 1994
FIRST MORTGAGE BONDS, 8% SERIES DUE 2023-F
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
i
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
Sixty-Eighth Supplemental Indenture
Dated September 15, 1994
TABLE OF CONTENTS*
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
PARTIES..................................................... 1
RECITALS:
Indenture and Supplemental Indentures..................... 1
First Mortgage Bonds outstanding.......................... 2
Authorization by Indenture of issue of additional Bonds... 2
Bonds of this Series...................................... 2
Purpose of Sixty-Eighth Supplemental Indenture............ 2
Authorization of Sixty-Eighth Supplemental Indenture...... 3
Compliance with conditions to making of Sixty-Eighth Sup-
plemental Indenture.................................... 3
GRANTING CLAUSES:
Grant and Conveyance...................................... 3
ARTICLE I -- CONFIRMATION OF 1940 MORTGAGE AND SUPPLEMENTAL
INDENTURES................................................ 4
ARTICLE II -- CREATION, PROVISIONS, REDEMPTION, PRINCIPAL
AMOUNT AND FORM OF BONDS OF THIS SERIES................... 5
Section 1 -- Creation and designation of Bonds and
compliance with Indenture............................ 5
Section 2 -- Date of Bonds, maturity date, interest
rate, accrual date, payment dates, Record Date and
place of payments.................................... 5
Section 3 -- Principal amount of Bonds................. 6
Section 4 -- Registration and denomination of Bonds.... 6
Section 5 -- Transfer and exchange of Bonds............ 6
Section 6 -- Redemption of Bonds....................... 7
Section 7 -- Redemption of Bonds pursuant to Section
4.01(a) of the OWDA Trust Indenture.................. 7
Section 8 -- Redemption of Bonds pursuant to Section
4.01(b) of the OWDA Trust Indenture.................. 8
Section 9 -- Redemption of Bonds pursuant to Section
4.01(c) of the OWDA Trust Indenture.................. 8
Section 10 -- Redemption of Bonds in an "Event of De-
fault" under the OWDA Trust Indenture................ 9
- ---------------
<FN>
*The Table of Contents, the page headings and the recording data are not
part of the Sixty-Eighth Supplemental Indenture as executed.
</TABLE>
<PAGE> 3
ii
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Section 11 -- Notice of redemption under Sections 7
through 10 of Article II of this Supplemental
Indenture............................................ 9
Section 12 -- Bonds deemed to be paid in full upon
surrender of State of Ohio Bonds for cancellation
under the OWDA Trust Indenture....................... 10
Section 13 -- Payment on the State of Ohio Bonds deemed
to be payment of corresponding obligation on Bonds... 10
Section 14 -- Surrender of Bonds in the event of
payment in full or partial payment thereof and
issuance of new Bonds for the unpaid balance......... 11
Section 15 -- Form of Fully Registered Bond of this
Series.................................. 11
Form of Trustee's Certificate of
Authentication.......................... 18
Form of Schedule of Payments............. 19
ARTICLE III -- THE TRUSTEE.................................. 20
Section 1 -- Acceptance by Trustee..................... 20
Section 2 -- Responsibility of Trustee................. 20
Section 3 -- Reliance by Trustee upon certain demands,
certificates and opinions............................ 20
Section 4 -- Records kept and indemnity given by agency
of the Company....................................... 20
Section 5 -- Certain advices to the Company............ 21
ARTICLE IV -- APPOINTMENT OF SUCCESSOR TRUSTEE.............. 21
ARTICLE V -- MISCELLANEOUS PROVISIONS....................... 21
EXECUTION................................................... 21
COMPANY'S ACKNOWLEDGMENT.................................... S-1
TRUSTEE'S ACKNOWLEDGMENT.................................... S-2
SCHEDULE A.................................................. P-1
RECORDING AND FILING DATA................................... R-1
</TABLE>
<PAGE> 4
SIXTY-EIGHTH SUPPLEMENTAL INDENTURE, dated September 15, 1994, made by and
between THE CLEVELAND ELECTRIC ILLUMINATING COMPANY, a corporation organized and
existing under the laws of the State of Ohio (the "Company"), and THE CHASE
MANHATTAN BANK (NATIONAL ASSOCIATION) (successor to MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, formerly GUARANTY TRUST COMPANY OF NEW YORK), a national
banking association existing under the laws of the United States of America,
with its head office at 1 Chase Manhattan Plaza, The City of New York (the
"Trustee"), as Trustee under the Mortgage and Deed of Trust dated July 1, 1940,
hereinafter mentioned:
RECITALS
In order to secure First Mortgage Bonds of the Company ("Bonds"), the
Company has heretofore executed and delivered to the Trustee the Mortgage and
Deed of Trust dated July 1, 1940 (the "1940 Mortgage") and sixty-seven
Supplemental Indentures thereto dated, respectively, July 1, 1940, August 18,
1944, December 1, 1947, September 1, 1950, June 1, 1951, May 1, 1954, March 1,
1958, April 1, 1959, December 20, 1967, January 15, 1969, November 1, 1969, June
1, 1970, November 15, 1970, May 1, 1974, April 15, 1975, April 16, 1975, May 28,
1975, February 1, 1976, November 23, 1976, July 26, 1977, September 27, 1977,
May 1, 1978, September 1, 1979, April 1, 1980, April 15, 1980, May 28, 1980,
June 9, 1980, December 1, 1980, July 28, 1981, August 1, 1981, March 1, 1982,
July 15, 1982, September 1, 1982, November 1, 1982, November 15, 1982, May 24,
1983, May 1, 1984, May 23, 1984, June 27, 1984, September 4, 1984, November 14,
1984, November 15, 1984, April 15, 1985, May 28, 1985, August 1, 1985, September
1, 1985, November 1, 1985, April 15, 1986, May 14, 1986, May 15, 1986, February
25, 1987, October 15, 1987, February 24, 1988, September 15, 1988, May 15, 1989,
June 13, 1989, October 15, 1989, January 1, 1990, June 1, 1990, August 1, 1990,
May 1, 1991, May 1, 1992, July 31, 1992, January 1, 1993, February 1, 1993, May
20, 1993 and June 1, 1993; and
The 1940 Mortgage, as supplemented and modified by said Supplemental
Indentures and by this Sixty-Eighth Supplemental Indenture, will be hereinafter
collectively referred to as the "Indenture" and this Sixty-Eighth Supplemental
Indenture will be hereinafter referred to as "this Supplemental Indenture"; and
WHEREAS, an instrument, dated September 14, 1994, was executed by Morgan
Guaranty Trust Company of New York resigning as Trustee under the Indenture, by
the Company appointing The Chase Manhattan Bank (National Association) as
Trustee in succession to said Morgan Guaranty Trust Company of New York under
the Indenture,
<PAGE> 5
2
and by The Chase Manhattan Bank (National Association) accepting said
appointment; and
Pursuant to the provisions of the Indenture, the Company has issued 109
series of Bonds in the aggregate principal amount of $4,912,052,000, of which 72
series in the aggregate principal amount of $1,950,272,000 are no longer
outstanding; and
The Indenture provides among other things that the Company, from time to
time, in addition to the Bonds authorized to be executed, authenticated and
delivered pursuant to other provisions therein, may execute and deliver
additional Bonds to the Trustee and the Trustee shall thereupon authenticate and
deliver such Bonds to or upon the order of the Company; and
The Company has determined to create pursuant to the provisions of the
Indenture one new series of Bonds designated as "First Mortgage Bonds, 8% Series
due 2023-F" (the "Bonds of this Series") with the denominations, rate of
interest, date of maturity, redemption provisions and other provisions and
agreements in respect thereof as in this Supplemental Indenture set forth; and
The Bonds of this Series are to be issued by the Company to the Ohio Water
Development Authority (hereinafter called the "OWDA") to evidence and secure the
obligations of the Company to repay the loan (hereinafter called the "OWDA
Loan") made by the OWDA to the Company pursuant to a certain loan agreement,
dated as of September 15, 1994, between the OWDA and the Company (hereinafter
called the "OWDA Loan Agreement") to assist the Company in refunding certain
bonds which had been previously issued by the OWDA, the proceeds of which were
loaned to the Company to assist in financing a portion of the costs of the
acquisition, construction and installation of certain facilities comprising
waste water and solid waste disposal facilities located at the Perry Nuclear
Power Plant Unit No. 1 in Lake County, Ohio. The OWDA Loan is to be funded with
proceeds derived from the sale by the OWDA of one series of State of Ohio 8%
Collateralized Pollution Control Revenue Refunding Bonds, 1994 Series A (The
Cleveland Electric Illuminating Company Project) in an aggregate principal
amount of not more than $46,100,000 (said series hereinafter called the "State
of Ohio Bonds"). The State of Ohio Bonds are to be issued under a certain trust
indenture, dated as of September 15, 1994 (hereinafter called the "OWDA Trust
Indenture"), between the OWDA and Society National Bank, Cleveland, Ohio, as
trustee (hereinafter called the "OWDA Trustee"). The Bonds of this Series are to
be assigned and pledged by the OWDA to the OWDA Trustee as security for the
payment of the principal of and premium, if any, and interest on the State of
Ohio Bonds and are to be delivered by the Company on behalf of the OWDA directly
to, and registered in the name of, the
<PAGE> 6
3
OWDA Trustee as trustee for the holders of the State of Ohio Bonds; and
The Company, in the exercise of the powers and authority conferred upon and
reserved to it under the provisions of the Indenture, and pursuant to
appropriate resolutions of the Board of Directors, has duly resolved and
determined to make, execute and deliver to the Trustee this Supplemental
Indenture in the form hereof for the purposes herein provided; and
All conditions and requirements necessary to make this Supplemental
Indenture a valid, binding and legal instrument have been done, performed and
fulfilled and the execution and delivery hereof have been in all respects duly
authorized.
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:
That The Cleveland Electric Illuminating Company, in consideration of the
premises and of the mutual covenants herein contained and of the sum of One
Dollar ($1.00) to it duly paid by the Trustee at or before the ensealing and
delivery of these presents and for other valuable considerations, the receipt
whereof is hereby acknowledged, and in order to secure the payment of the
principal of and interest (and premium, if any) on all Bonds at any time issued
and outstanding under the Indenture according to their tenor and effect and the
performance and observance of all the covenants and conditions contained in such
Bonds, and in the Indenture, has granted, bargained, sold, warranted, aliened,
remised, released, conveyed, assigned, transferred, mortgaged, pledged, set over
and confirmed, and by these presents does grant, bargain, sell, warrant, alien,
remise, release, convey, assign, transfer, mortgage, pledge, set over and
confirm unto the Trustee and to its successors in said trust, and to its and
their assigns, forever, all of the Company's interests in the parcels of land
described in Schedule A attached hereto and made a part hereof.
Together with all and singular the buildings, improvements, tenements,
hereditaments and appurtenances belonging or in any wise appertaining, or
hereafter to belong or appertain, to the aforesaid property or any part thereof,
with the reversion and reversions, remainder and remainders, tolls, rents,
revenues, issues, income, products and profits thereof, and all the estate,
right, title, interest and claim whatsoever which the Company now has or may
hereafter acquire in and to the same, at law as well as in equity, and every
part and parcel thereof.
TO HAVE AND TO HOLD the same unto the Trustee and to its successors and
assigns forever;
<PAGE> 7
4
SUBJECT, HOWEVER, to the exceptions and reservations and matters
hereinabove and in the Indenture recited, to existing leases other than leases
which by their terms are subordinate to the lien of the Indenture, to existing
"liens upon rights-of-way for transmission or distribution line purposes," as
defined in Article I of the Indenture, and any extensions thereof, and subject
to existing easements for streets, alleys, highways, rights-of-way and railroad
purposes over, upon or across certain of the property hereinbefore described,
and also any restrictions as to use imposed by law and to the lien of certain
judgments against the Company not exceeding $75,000 in aggregate amount, and
subject also to all the terms, conditions, agreements, covenants, exceptions and
reservations expressed or provided in the deeds or other instruments,
respectively, under and by virtue of which the Company now owns or may hereafter
acquire any property subject to the lien of the Indenture and to undetermined
liens and charges, if any, incidental to construction or other existing
permitted liens as defined in Article I of the Indenture.
IN TRUST, NEVERTHELESS, upon the terms and trusts set forth in the
Indenture for the equal and proportionate benefit and security of all present
and future holders of the Bonds and coupons issued and to be issued under the
Indenture, without preference of any of such Bonds and coupons of any particular
series over the Bonds and coupons of any other series, by reason of priority in
the time of the issue, sale or negotiation thereof, or by reason of the purpose
of issue or otherwise, howsoever, except as otherwise provided in Section 2 of
Article IV of the Indenture.
ARTICLE I
CONFIRMATION OF 1940 MORTGAGE AND
SUPPLEMENTAL INDENTURES
The 1940 Mortgage (as modified in Article V of the Supplemental Indenture
dated December 1, 1947, Article V of the Supplemental Indenture dated May 1,
1954, Article V of the Supplemental Indenture dated March 1, 1958, Article V of
the Supplemental Indenture dated January 15, 1969, Article III of the
Supplemental Indenture dated November 23, 1976 and Article III of the
Supplemental Indenture dated April 15, 1985) and the Supplemental Indentures
dated July 1, 1940, August 18, 1944, December 1, 1947, September 1, 1950, June
1, 1951, May 1, 1954, March 1, 1958, April 1, 1959, December 20, 1967, January
15, 1969, November 1, 1969, June 1, 1970, November 15, 1970, May 1, 1974, April
15, 1975, April 16, 1975, May 28, 1975, February 1, 1976, November 23, 1976,
July 26, 1977, September 27, 1977, May 1, 1978, September 1, 1979, April 1,
1980, April 15, 1980, May 28, 1980, June 9, 1980, December 1, 1980, July 28,
1981, August 1, 1981, March 1, 1982, July 15, 1982, September 1, 1982, November
1,
<PAGE> 8
5
1982, November 15, 1982, May 24, 1983, May 1, 1984, May 23, 1984, June 27, 1984,
September 4, 1984, November 14, 1984, November 15, 1984, April 15, 1985, May 28,
1985, August 1, 1985, September 1, 1985, November 1, 1985, April 15, 1986, May
14, 1986, May 15, 1986, February 25, 1987, October 15, 1987, February 24, 1988,
September 15, 1988, May 15, 1989, June 13, 1989, October 15, 1989, January 1,
1990, June 1, 1990, August 1, 1990, May 1, 1991, May 1, 1992, July 31, 1992,
January 1, 1993, February 1, 1993, May 20, 1993 and June 1, 1993, respectively,
are hereby in all respects confirmed.
ARTICLE II
CREATION, PROVISIONS, REDEMPTION, PRINCIPAL AMOUNT
AND FORM OF BONDS OF THIS SERIES
SECTION 1. The Company hereby creates a new series of Bonds to be issued
under and secured by the Indenture and to be designated as "First Mortgage
Bonds, 8% Series due 2023-F" of the Company. The Bonds of this Series shall be
executed, authenticated and delivered in accordance with the provisions of, and
shall in all respects be subject to, all of the terms, conditions and covenants
of the Indenture.
SECTION 2. The Bonds of this Series shall be dated the date of their
authentication, shall mature October 1, 2023, and shall bear interest from the
time hereinafter provided at the rate of 8% per annum payable semiannually on
the same dates as interest is payable on the State of Ohio Bonds (each such date
herein called an "interest payment date") until the maturity of the Bonds of
this Series, or, in the case of any Bonds of this Series duly called for
redemption, until the redemption date, or, in the case of any default by the
Company in the payment of the principal due on any Bonds of this Series, until
the Company's obligation with respect to the payment of the principal shall be
discharged as provided in the Indenture.
Except as hereinafter provided, each Bond of this Series shall bear
interest (a) from the interest payment date next preceding the date of such Bond
to which interest has been paid, or (b) if the date of such Bond is an interest
payment date to which interest has been paid, then from such date, or (c) if no
interest has been paid thereon, then from September 15, 1994. Notwithstanding
the foregoing, if the date of such Bond is after a Record Date (as hereinafter
defined) and before the next following interest payment date, then it shall bear
interest from such interest payment date; provided, however, that (i) if the
Company shall default in the payment of the interest due on such interest
payment date, then such Bond shall bear interest from the interest payment date
next preceding the date of such Bond to which interest
<PAGE> 9
6
has been paid, or (ii) if no interest has been paid thereon, then it shall bear
interest from September 15, 1994.
The interest payable on any interest payment date shall be paid to the
respective persons in whose names the Bonds of this Series shall be registered
at the close of business on the Record Date next preceding such interest payment
date, notwithstanding the cancellation of any such Bond upon any transfer or
exchange thereof subsequent to such Record Date and prior to such interest
payment date; provided, however, that, if and to the extent the Company shall
default in the payment of the interest due on such interest payment date, such
defaulted interest shall be paid to the respective persons in whose names such
outstanding Bonds of this Series are registered at the close of business on a
date (the "Subsequent Record Date") not less than ten days nor more than 15 days
next preceding the date of payment of such defaulted interest, such Subsequent
Record Date to be established by the Company by notice given by mail by or on
behalf of the Company to the registered owners of Bonds of this Series not less
than 10 days next preceding such Subsequent Record Date.
The term "Record Date" shall mean, with respect to any regular interest
payment date of any Bond of this Series, the date which would be the "Regular
Record Date", as defined in the OWDA Trust Indenture, applicable to such regular
interest payment date, if it were an "Interest Payment Date", as defined in the
OWDA Trust Indenture.
The Bonds of this Series shall be payable as to principal (and premium, if
any) and interest in any coin or currency of the United States of America which
at the time of payment is legal tender for the payment of public and private
debts and shall be payable (as well the interest as the principal thereof and
the premium thereon, if any) at the agency of the Company in the City of
Cleveland, State of Ohio, or, at the option of the Company, at the agency of the
Company in The City of New York. Unless the context indicates a different
meaning, any reference in this Article II to "agency of the Company" means
either the agency of the Company in the City of Cleveland, State of Ohio or the
agency of the Company in The City of New York.
SECTION 3. The principal amount of Bonds of this Series which may be
authenticated and delivered hereunder shall not exceed $46,100,000, except as
otherwise provided in the Indenture.
SECTION 4. The Bonds of this Series shall be issued as fully registered
Bonds only, without coupons, in the denominations of $100,000 and any integral
multiple thereof.
SECTION 5. In the manner and subject to the limitations provided in the
Indenture, Bonds of this Series may be transferred or may be exchanged for a
like aggregate principal amount of Bonds of this Series
<PAGE> 10
7
of other authorized denominations, in either case without charge, except for any
tax or taxes or other governmental charges incident to such transfer or
exchange, at the agency of the Company in The City of New York.
In the event less than all of the Bonds of this Series at the time
outstanding are called for redemption, the Company shall not be required (a) to
register any transfer or make any exchange of any such Bond for a period of 15
days before the mailing of the notice of redemption of any such Bond, (b) to
register any transfer or make any exchange of any such Bond so called for
redemption in its entirety, or (c) to register any transfer or make any exchange
of any portion of any such Bond so called for redemption.
Except as otherwise provided in Section 2 of this Article II with respect
to the payment of interest, the Company, the agencies of the Company and the
Trustee may deem and treat the person in whose name a Bond of this Series is
registered as the absolute owner thereof for the purpose of receiving any
payment and for all other purposes.
SECTION 6. The Bonds of this Series shall be redeemable only to the extent
provided in this Article II, subject to the provisions contained in Article V of
the Indenture and the form of Bond of this Series.
SECTION 7. The Bonds of this Series shall be subject to redemption by the
Company prior to maturity in whole at any time or in part from time to time at a
redemption price of 100% of the principal amount to be redeemed, but in each
instance only upon receipt by the Trustee of an officers' certificate to the
effect (a) that the OWDA, at the direction of the Company, or the Company, on
behalf of the OWDA, has given notice to the OWDA Trustee that the Company is
exercising its option to direct the redemption of all or a part (specifying the
principal amount) of the State of Ohio Bonds as provided in Section 4.01(a) of
the OWDA Trust Indenture and (b) that an equivalent principal amount of Bonds of
this Series shall be concurrently called for redemption. Such officers'
certificate shall specify the principal amount of the Bonds of this Series to be
redeemed and the accrued and unpaid interest to the redemption date, shall have
attached to it a copy of said notice to the OWDA Trustee and said direction of
the Company and shall specify the redemption date of such Bonds of this Series
(which redemption date shall be not less than forty-five (45) days from the date
of the Trustee's receipt of such certificate and shall be the same date as the
redemption date of the State of Ohio Bonds being concurrently redeemed which is
specified in said attached notice). The redemption of the Bonds of this Series
shall be made upon the notice and in the manner provided in this Article II,
subject to the provisions of the Indenture.
<PAGE> 11
8
SECTION 8. The Bonds of this Series shall be redeemed by the Company prior
to maturity in whole at any time or in part from time to time upon a final
determination by any federal judicial or administrative authority that interest
on the State of Ohio Bonds is includable for federal income tax purposes in the
gross income of the holders of the State of Ohio Bonds (other than because a
holder is a "substantial user" of the projects being financed pursuant to the
OWDA Loan Agreement or a "related person" thereof as those terms are used in
Section 147(a) of the Internal Revenue Code of 1986, as amended) at a redemption
price of 100% of the principal amount to be redeemed plus accrued and unpaid
interest to the redemption date, but in each instance only upon receipt by the
Trustee of an officers' certificate to the effect (a) that the OWDA, at the
direction of the Company, or the Company, on behalf of the OWDA, has given
notice to the OWDA Trustee that it is required to redeem all or a part
(specifying the principal amount) of the State of Ohio Bonds as provided in
Section 4.01(b) of the OWDA Trust Indenture and (b) that an equivalent principal
amount of Bonds of this Series shall be concurrently called for redemption. Such
officers' certificate shall specify the principal amount of the Bonds of this
Series to be redeemed and the redemption price thereof and accrued and unpaid
interest to the redemption date, shall have attached to it a copy of said notice
to the OWDA Trustee and said direction of the Company and shall specify the
redemption date of such Bonds of this Series (which redemption date shall be not
less than forty-five (45) days from the date of the Trustee's receipt of such
certificate and shall be the same date as the redemption date of the State of
Ohio Bonds being concurrently redeemed which is specified in said attached
notice). The redemption of the Bonds of this Series shall be made upon the
notice and in the manner provided in this Article II, subject to the provisions
of the Indenture.
SECTION 9. The Bonds of this Series shall be subject to redemption by the
Company prior to maturity in whole at any time or in part from time to time, but
in no instance before October 1, 2004, at the same redemption price plus accrued
and unpaid interest, if any, as shall be payable on the State of Ohio Bonds to
be redeemed concurrently therewith, to the redemption date as follows:
<TABLE>
<CAPTION>
REDEMPTION PRICE
(EXPRESSED AS A
PERCENTAGE OF THE
REDEMPTION PERIODS PRINCIPAL AMOUNT
(DATES INCLUSIVE) BEING REDEEMED)
------------------ --------------------
<S> <C>
October 1, 2004 through September 30, 2005... 102%
October 1, 2005 through September 30, 2006... 101
October 1, 2006 and thereafter............... 100
</TABLE>
<PAGE> 12
9
but in each instance only upon receipt by the Trustee of an officers'
certificate to the effect (a) that the OWDA, at the direction of the Company, or
the Company, on behalf of the OWDA, has given notice to the OWDA Trustee that
the Company is exercising its option to direct the redemption of all or part
(specifying the principal amount) of the State of Ohio Bonds as provided in
Section 4.01(c) of the OWDA Trust Indenture and (b) that an equivalent principal
amount of Bonds of this Series shall be concurrently called for redemption. Such
officers' certificate shall specify the principal amount of the Bonds of this
Series to be redeemed and the redemption price thereof and accrued and unpaid
interest to the redemption date, shall have attached to it a copy of said notice
to the OWDA Trustee and said direction of the Company and shall specify the
redemption date of such Bonds of this Series (which redemption date shall be not
less than forty-five (45) days from the date of the Trustee's receipt of such
certificate and shall be the same date as the redemption date of the State of
Ohio Bonds being concurrently redeemed which is specified in said attached
notice). The redemption of the Bonds of this Series shall be made upon the
notice and in the manner provided in this Article II, subject to the provisions
of the Indenture.
SECTION 10. The Bonds of this Series shall be redeemed by the Company in
whole at any time prior to maturity at a redemption price of 100% of the
principal amount to be redeemed, plus accrued and unpaid interest to the
redemption date, but only if the Trustee shall receive a written demand from the
OWDA Trustee for redemption of all Bonds of this Series held by the OWDA Trustee
stating that an "Event of Default" under the OWDA Trust Indenture has occurred
and is continuing and that payment of the principal of the State of Ohio Bonds
has been accelerated; provided, however, that the Bonds of this Series shall not
be redeemed in the event that prior to the date of mailing of notice of such
redemption as provided in Section 11 of this Article II (a) the Trustee shall
have received a certificate of the OWDA Trustee (i) stating that there has been
a waiver of such acceleration or (ii) withdrawing said written demand or (b) if
an event of default under Section 1 of Article IX of the Indenture shall have
occurred and be continuing, there has been a declaration of acceleration of the
principal of the Bonds of this Series. The redemption of the Bonds of this
Series shall be made on a date selected by the Company not more than forty-five
(45) days after receipt of the written demand and shall be made upon the notice
and in the manner provided in this Article II, subject to the provisions of the
Indenture.
SECTION 11. Subject to the provisions of the Indenture, written notice of
redemption of Bonds of this Series pursuant to any of Sections 7 through 10,
inclusive, of this Article II shall be given by the Trustee by mailing to the
registered owner or owners of such Bonds to
<PAGE> 13
10
be redeemed a notice of such redemption, first class postage prepaid, at its
last address as it shall appear upon the books of the Company for the
registration and transfer of such Bonds. Any notice of redemption pursuant to
said Section 7, 8 or 9 shall be mailed at least 30 days and not more than 60
days before the redemption date and any notice of redemption pursuant to said
Section 10 shall be mailed not more than 45 days before the redemption date;
provided, however, that the registered owner or owners of all Bonds of this
Series may consent in writing to a shorter notice period, and such consent, if
filed with the Trustee, shall be binding upon the Company and such registered
owner or owners and their transferees. In the event of a partial redemption, the
Trustee shall select the Bonds of this Series to be redeemed in such manner as
the Trustee shall deem appropriate and fair.
SECTION 12. In the event any State of Ohio Bonds shall be purchased by the
Company and surrendered by the Company to the OWDA Trustee for cancellation or
shall be otherwise surrendered to the OWDA Trustee or other person for
cancellation pursuant to the OWDA Trust Indenture (except upon exchange for
other State of Ohio Bonds), Bonds of this Series equal in principal amount to
the State of Ohio Bonds so surrendered shall be deemed to have been paid, but
only when and to the extent that (a) such payment of such principal amount of
such Bonds of this Series shall be noted by an agency of the Company on the
Schedule of Payments on such Bonds of this Series and (if such agency is not the
Trustee) written notice by such agency of such notation shall have been received
by the Trustee or (b) such principal amount of such Bonds of this Series shall
have been surrendered to and cancelled by the Trustee as provided in Section 14
of this Article II.
SECTION 13. In the event and to the extent the principal of (or premium, if
any) or interest on any State of Ohio Bonds shall be paid out of funds held by
the OWDA Trustee or out of any other funds or shall otherwise be deemed to be
paid, an equal amount of principal (or premium, if any) or interest, as the case
may be, payable with respect to an aggregate principal amount of Bonds of this
Series equal to the aggregate principal amount of such State of Ohio Bonds shall
be deemed to have been paid, but, in the case of such payment of principal of
such Bonds of this Series, only when and to the extent that (a) such payment of
the principal amount thereof shall be noted by an agency of the Company on the
Schedule of Payments on such Bonds of this Series and (if such agency is not the
Trustee) written notice by such agency of such notation shall have been received
by the Trustee or (b) such principal amount of Bonds of this Series shall have
been surrendered to and cancelled by the Trustee as provided in Section 14 of
this Article II. If the State of Ohio Bonds are issued in an aggregate principal
amount of less than $46,100,000, an aggregate principal
<PAGE> 14
11
amount of the Bonds of this Series equal to the difference between $46,100,000
and the aggregate principal amount of the State of Ohio Bonds issued (and all
related premium and interest, if any) shall be deemed to have been paid.
SECTION 14. When payment of any principal amount of a Bond of this Series
is made as provided in Section 12 or 13 of this Article II, the registered owner
thereof shall surrender such Bond to an agency of the Company for notation and
notification or to the Trustee for cancellation as provided in such Section. All
Bonds of this Series deemed to have been paid in full as provided in Section 12
or 13 of this Article II shall be surrendered to the Trustee for cancellation
and the Trustee shall forthwith cancel the same. In the event that part of a
Bond of this Series shall be deemed to have been paid as provided in said
Section 12 or 13, the registered owner shall surrender such Bond to the Trustee
for cancellation, in which event the Trustee shall cancel such Bond and the
Company shall execute and the Trustee shall authenticate and deliver, without
charge to the registered owner, Bonds of this Series in such authorized
denominations as shall be specified by the registered owner in an aggregate
principal amount equal to the unpaid balance of the principal amount of such
surrendered Bond.
SECTION 15. The form of the fully registered Bonds of this Series and of
the Trustee's certificate of authentication thereon shall be substantially as
follows:
[FORM OF FULLY REGISTERED BOND OF THIS SERIES]
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
Incorporated under the laws of the State of Ohio
FIRST MORTGAGE BOND, 8% SERIES DUE 2023-F
Due October 1, 2023
No. $
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY, a corporation organized and
existing under the laws of the State of Ohio (hereinafter called the "Company",
which term shall include any successor corporation as defined in the Indenture
hereinafter referred to), for value received, hereby promises to pay to
, or registered assigns,
the sum of Dollars or the
aggregate unpaid principal amount hereof (as shown on the Schedule of Payments
hereon), whichever is less, on October 1, 2023, in any coin or currency of the
United States of America which at the time of payment is legal tender for the
payment of public and private debts, and to pay interest on the unpaid principal
amount hereof in like coin or currency from the time hereinafter provided at
such rate per annum on each interest payment date (hereinafter defined) as shall
cause the
<PAGE> 15
12
amount of interest payable on such interest payment date on the Bonds of this
Series (hereinafter defined) to equal the amount of interest payable on such
interest payment date on the State of Ohio Bonds (hereinafter defined) and
payable semiannually on the same dates as interest is payable on said State of
Ohio Bonds (each such date herein called an "interest payment date") until the
maturity of this Bond, or, if this Bond shall be duly called for redemption,
until the redemption date, or, if the Company shall default in the payment of
the principal amount of this Bond, until the Company's obligation with respect
to the payment of such principal shall be discharged as provided in said
Indenture. Except as hereinafter provided, this Bond shall bear interest (a)
from the interest payment date next preceding the date of this Bond to which
interest has been paid, or (b) if the date of this Bond is an interest payment
date to which interest has been paid, then from such date, or (c) if no interest
has been paid on this Bond, then from September 15, 1994. Notwithstanding the
foregoing, if the date of this Bond is after the Record Date (as defined in
Section 2 of Article II of the Supplemental Indenture hereinafter defined) which
next precedes an interest payment date and before such interest payment date,
then it shall bear interest from such interest payment date; provided, however,
that (i) if the Company shall default in the payment of the interest due on such
interest payment date, then this Bond shall bear interest from the interest
payment date next preceding the date of this Bond to which interest has been
paid, or (ii) if no interest has been paid on this Bond, then it shall bear
interest from September 15, 1994. Subject to certain exceptions provided in said
Indenture, the interest payable on any interest payment date shall be paid to
the person in whose name this Bond shall be registered at the close of business
on the Record Date or, in the case of defaulted interest, on a day preceding the
date of payment thereof established by notice to the registered owner of this
Bond in the manner provided in said Supplemental Indenture. Principal of (and
premium, if any) and interest on this Bond are payable at the agency of the
Company in The City of New York, or, at the option of the registered owner, at
the agency of the Company in the City of Cleveland, State of Ohio.
This Bond is one of the duly authorized First Mortgage Bonds of the Company
(herein called the "Bonds"), all issued and to be issued under and equally
secured by a Mortgage and Deed of Trust dated July 1, 1940, executed by the
Company to Guaranty Trust Company of New York as Trustee, under which The Chase
Manhattan Bank (National Association) is successor trustee (herein called the
"Trustee"), and all indentures supplemental thereto (said Mortgage as so
supplemented herein called the "Indenture") to which reference is hereby made
for a description of the properties mortgaged and pledged, the nature and extent
of the security, the rights of the registered owner or owners of
<PAGE> 16
13
the Bonds and of the Trustee in respect thereof and the terms and conditions
upon which the Bonds are, and are to be, secured. The Bonds may be issued in
series, for various principal sums, may mature at different times, may bear
interest at different rates and may otherwise vary as in the Indenture provided.
This Bond is one of a series designated as the First Mortgage Bonds, 8% Series
due 2023-F (herein called the "Bonds of this Series") limited, except as
otherwise provided in the Indenture, in aggregate principal amount to
$46,100,000, issued under and secured by the Indenture and described in the
Supplemental Indenture dated September 15, 1994, between the Company and the
Trustee (herein called the "Supplemental Indenture").
The Bonds of this Series have been issued by the Company to the Ohio Water
Development Authority (herein called the "OWDA") to evidence and secure the
obligations of the Company to repay the loan (herein called the "OWDA Loan")
made by the OWDA to the Company pursuant to a certain loan agreement, dated as
of September 15, 1994, between the OWDA and the Company to assist the Company in
refunding certain bonds which had been previously issued by OWDA, the proceeds
of which were loaned to the Company to assist in financing a portion of the
costs of the acquisition, construction and installation of certain facilities
comprising waste water and solid waste disposal facilities located at the Perry
Nuclear Power Plant Unit No. 1 in Lake County, Ohio. To provide funds for the
OWDA Loan, the OWDA will issue one series of State of Ohio Collateralized
Pollution Control Revenue Refunding Bonds, 1994 Series A (The Cleveland Electric
Illuminating Company Project) in an aggregate principal amount of not more than
$46,100,000 (herein called the "State of Ohio Bonds") under a certain trust
indenture, dated as of September 15, 1994 (herein called the "OWDA Trust
Indenture"), between the OWDA and Society National Bank, as trustee (herein
called the "OWDA Trustee"). All right, title and interest of the OWDA in the
Bonds of this Series have been assigned and pledged by the OWDA to the OWDA
Trustee as security for the payment of the principal of and premium, if any, and
interest on the State of Ohio Bonds; and the Bonds of this Series have been
delivered to the OWDA Trustee, as trustee for the holders of the State of Ohio
Bonds.
In the event any State of Ohio Bonds shall be surrendered to the OWDA
Trustee or other person for cancellation pursuant to the OWDA Trust Indenture
(except upon exchange for other State of Ohio Bonds), Bonds of this Series equal
in principal amount to such State of Ohio Bonds shall be deemed to have been
paid, but only when and to the extent (a) so noted on the Schedule of Payments
hereon by one of the agencies of the Company hereinabove specified and (if such
agency is not the Trustee) written notice by such agency of such notation has
been received by the Trustee or (b) such Bond is surrendered to and
<PAGE> 17
14
cancelled by the Trustee as provided in the next paragraph; and in the event and
to the extent the principal of (or premium, if any) or interest on any State of
Ohio Bonds shall be paid or deemed to be paid, an equal amount of principal (or
premium, if any) or interest, as the case may be, payable with respect to an
aggregate principal amount of Bonds of this Series equal to the aggregate
principal amount of such State of Ohio Bonds shall be deemed to have been paid,
but, in the case of such payment of principal, only when and to the extent (i)
so noted on the Schedule of Payments hereon by one of the agencies of the
Company hereinabove specified and (if such agency is not the Trustee) written
notice by such agency of such notation has been received by the Trustee or (ii)
such Bond is surrendered to and cancelled by the Trustee as provided in the next
paragraph. When any such payment of principal of this Bond is made, such Bond
shall be surrendered by the registered owner hereof to an agency of the Company
for such notation or to the Trustee for cancellation. If the State of Ohio Bonds
are issued in an aggregate principal amount of less than $46,100,000, an
aggregate principal amount of the Bonds of this Series equal to the difference
between $46,100,000 and the aggregate principal amount of the State of Ohio
Bonds issued (and all related premium and interest, if any) shall be deemed to
have been paid.
In the event that this Bond shall be deemed to have been paid in full, this
Bond shall be surrendered to the Trustee for cancellation. In the event that
this Bond shall be deemed to have been paid in part, this Bond may, at the
option of the registered holder, be surrendered to the Trustee for cancellation,
in which event the Trustee shall cancel this Bond and the Company shall execute
and the Trustee shall authenticate and deliver Bonds of this Series in
authorized denominations in aggregate principal amount equal to the unpaid
balance of the principal amount of this Bond.
The Bonds of this Series are subject to redemption by the Company prior to
maturity in whole at any time or in part from time to time as provided in
Section 7 of Article II of the Supplemental Indenture at a redemption price of
100% of the principal amount to be redeemed, plus accrued and unpaid interest to
the redemption date.
The Bonds of this Series shall be redeemed by the Company prior to maturity
in whole at any time or in part from time to time as provided in Section 8 of
Article II of the Supplemental Indenture at a redemption price of 100% of the
principal amount to be redeemed, plus accrued and unpaid interest to the
redemption date, at the earliest practicable date selected by the OWDA Trustee
after consultation with the Company, but in no event later than 180 days
following the OWDA Trustee's notification of the Determination of Taxability (as
defined in the OWDA Trust Indenture).
<PAGE> 18
15
The Bonds of this Series are subject to redemption by the Company prior to
maturity in whole at any time or in part from time to time, but in no instance
before October 1, 2004, as provided in Section 9 of Article II of the
Supplemental Indenture at a redemption price, plus accrued and unpaid interest,
if any, to the redemption date as follows:
<TABLE>
<CAPTION>
REDEMPTION PRICE
(EXPRESSED AS A
PERCENTAGE OF THE
REDEMPTION PERIODS PRINCIPAL AMOUNT
(DATES INCLUSIVE) BEING REDEEMED)
------------------ --------------------
<S> <C>
October 1, 2004 through September 30, 2005... 102%
October 1, 2005 through September 30, 2006... 101
October 1, 2006 and thereafter............... 100
</TABLE>
The Bonds of this Series shall be redeemed by the Company prior to maturity
in whole at any time as provided in Section 10 of Article II of the Supplemental
Indenture at a redemption price of 100% of the principal amount to be redeemed,
plus accrued and unpaid interest to the redemption date.
Any redemption of the Bonds of this Series shall be made after written
notice to the registered owner or owners of such Bonds, sent by the Trustee by
first class mail, postage prepaid, at least 30 days and not more than 60 days
before the redemption date (except in the event of redemption described in the
next preceding paragraph in which case such notice shall be mailed not more than
45 days before the redemption date), unless a shorter notice period is consented
to in writing by the registered owner or owners of all Bonds of this Series and
such consent is filed with the Trustee, and such redemption and notice shall be
made in the manner provided in Article II of the Supplemental Indenture, subject
to the provisions of the Indenture. In the event of a partial redemption, the
Trustee shall select the Bonds of this Series to be redeemed in such manner as
the Trustee shall deem appropriate and fair.
In the Forty-Third Supplemental Indenture dated April 15, 1985 between the
Company and the Trustee, the Company has modified, in certain respects, the
redemption provisions in the Indenture effective only with respect to the Bonds
of all series established or created in said Forty-Third Supplemental Indenture
and all supplemental indentures dated after May 28, 1985.
To the extent permitted by and as provided in the Indenture, modifications
or alterations of the Indenture, or of any indenture supplemental thereto, and
of the rights and obligations of the Company and of the holders of the Bonds and
coupons may be made with the consent of the Company by an affirmative vote of
not less than 80% in principal amount of the Bonds entitled to vote then
outstanding at a
<PAGE> 19
16
meeting of Bondholders called and held as provided in the Indenture and, in case
one or more but less than all of the series of Bonds then outstanding under the
Indenture are so affected, by an affirmative vote of not less than 80% in
principal amount of the Bonds of any series entitled to vote then outstanding
and affected by such modification or alteration; provided, however, that no such
modification or alteration shall be made which will affect the terms of payment
of the principal of (or premium, if any) or interest on this Bond. In the
Nineteenth Supplemental Indenture dated November 23, 1976 between the Company
and the Trustee, the Company has modified the Indenture effective from and after
the time when none of the Bonds of any series established prior to the execution
of the Nineteenth Supplemental Indenture shall remain outstanding so as to
change "80%" in the foregoing sentence to "60%" and to make certain other
modifications of the Indenture and has reserved the right to make certain other
modifications of the Indenture without any vote, consent or other action by the
holders of Bonds of any series established in the Nineteenth Supplemental
Indenture or in any subsequent supplemental indenture.
If an event of default, as defined in the Indenture, shall occur, the
principal of all the Bonds at any such time outstanding under the Indenture may
be declared or may become due and payable upon the conditions and in the manner
and with the effect provided in the Indenture. The Indenture provides that such
declaration may in certain events be waived by the holders of a majority in
principal amount of the Bonds outstanding.
Subject to the limitations provided in the Indenture, this Bond is
transferable by the registered owner hereof, in person or by duly authorized
attorney, on the books of the Company to be kept for that purpose at the agency
of the Company in The City of New York upon surrender and cancellation of this
Bond, and upon presentation of a duly executed written instrument of transfer,
and thereupon a new fully registered Bond or Bonds of this Series, of the same
aggregate principal amount and in authorized denominations will be issued to the
transferee or transferees in exchange herefor; and this Bond, with or without
other Bonds of this Series, may in like manner be exchanged for one or more new
fully registered Bonds of this Series of other authorized denominations but of
the same aggregate principal amount; all without charge except for any tax or
taxes or other governmental charges incidental to such transfer or exchange and
all subject to the terms and conditions set forth in the Indenture. In the event
less than all of the Bonds of this Series at the time outstanding are called for
redemption, the Company shall not be required (a) to register any transfer or
make any exchange of any such Bond for a period of 15 days before the mailing of
the notice of redemption of any such Bond,
<PAGE> 20
17
(b) to register any transfer or make any exchange of any such Bond so called for
redemption in its entirety, or (c) to register any transfer or make any exchange
of any portion of any such Bond so called for redemption. Except as otherwise
provided herein with respect to the payment of interest, the Company, the
agencies of the Company and the Trustee may deem and treat the person in whose
name this Bond is registered as the absolute owner hereof for the purpose of
receiving any payment and for all other purposes.
No recourse shall be had for the payment of the principal of or the
interest or premium, if any, on this Bond, or for any claim based hereon or on
the Indenture or any indenture supplemental thereto, against any incorporator,
or against any stockholder, director or officer, past, present or future, of the
Company, or of any predecessor or successor corporation, as such, either
directly or through the Company or any such predecessor or successor
corporation, whether by virtue of any constitution, statute or rule of law, or
by the enforcement of any assessment or penalty or otherwise, all such
liability, whether at common law, in equity, by any constitution or statute or
otherwise, of incorporators, stockholders, directors or officers being released
by every owner hereof by the acceptance of this Bond and as part of the
consideration for the issue hereof and being likewise released by the terms of
the Indenture.
This Bond shall not be entitled to any benefit under the Indenture or any
indenture supplemental thereto, or become valid or obligatory for any purpose,
until the Trustee under the Indenture, or a successor trustee thereto under the
Indenture, shall have signed the form of certificate of authentication endorsed
hereon.
<PAGE> 21
18
IN WITNESS WHEREOF, The Cleveland Electric Illuminating Company has caused
this Bond to be signed in its name by its President or a Vice President (whose
signature may be manual or a facsimile thereof) and its corporate seal (or a
facsimile thereof) to be hereto affixed and attested by its Secretary or an
Assistant Secretary (whose signature may be manual or a facsimile thereof).
Dated:
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
By ....................................................
VICE PRESIDENT
Attest:
............................
Secretary
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This Bond is one of the Bonds of the series designated and described in the
within-mentioned Indenture and Supplemental Indenture.
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
TRUSTEE
By ...........................................
AUTHORIZED OFFICER
<PAGE> 22
19
<TABLE>
[FORM OF SCHEDULE OF PAYMENTS]
SCHEDULE OF PAYMENTS
<CAPTION>
AGENCY
OF THE
UNPAID COMPANY
PRINCIPAL PRINCIPAL PREMIUM INTEREST MAKING AUTHORIZED
DATE PAYMENT AMOUNT PAYMENT PAYMENT NOTATION OFFICER TITLE
- --------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
[END OF FORM OF FULLY REGISTERED BOND]
<PAGE> 23
20
ARTICLE III
THE TRUSTEE
SECTION 1. The Trustee hereby accepts the trusts hereby declared and
provided upon the terms and conditions in the Indenture set forth and upon the
terms and conditions set forth in this Article III.
SECTION 2. The Trustee shall not be responsible in any manner whatsoever
for or in respect of the validity or sufficiency of this Supplemental Indenture
or the due execution hereof by the Company or for or in respect of the recitals
contained herein, all of which recitals are made by the Company solely. In
general, each and every term and condition contained in Article XIII of the
Indenture shall apply to this Supplemental Indenture with the same force and
effect as if the same were herein set forth in full, with such omissions,
variations and modifications thereof as may be appropriate.
SECTION 3. For purposes of this Supplemental Indenture, (a) the Trustee may
conclusively rely and shall be protected in acting upon the written demand from,
or certificate of, the OWDA Trustee or any officers' certificate or opinion of
counsel as to the truth of the statements and the correctness of the opinions
expressed therein, without independent investigation or verification thereof,
subject to Article XIII of the Indenture and (b) a written demand from, or
certificate of, the OWDA Trustee shall mean a written demand or certificate
executed by the president, any vice president or any trust officer of the OWDA
Trustee.
SECTION 4. The Company shall cause any agency of the Company, other than
the Trustee, which it may appoint from time to time to act as such agency in
respect of the Bonds of this Series, to execute and deliver to the Trustee an
instrument in which such agency shall:
(a) Agree to keep and maintain, and furnish to the Trustee from time
to time as reasonably requested by the Trustee, appropriate records of all
transactions carried out by it as such agency and to furnish the Trustee
such other information and reports as the Trustee may reasonably require;
(b) Certify that it is eligible for appointment as such agency and
agree to notify the Trustee promptly if it shall cease to be so eligible;
and
(c) Agree to indemnify the Trustee, in a manner satisfactory to the
Trustee, against any loss, liability or expense incurred by, and defend any
claim asserted against, the Trustee by reason of any acts or failures to
act as such agency, except for any liability resulting from any action
taken by it at the specific direction of the Trustee;
<PAGE> 24
21
provided, however, that the Company, in lieu of causing any such agency to
furnish such an instrument, may make such other arrangements with the Trustee in
respect of any such agency as shall be satisfactory to the Trustee.
SECTION 5. The Trustee shall advise the Company in writing of the receipt
of any notification provided for in or any cancellation made pursuant to Section
12, 13 or 14 of Article II of this Supplemental Indenture.
ARTICLE IV
APPOINTMENT OF SUCCESSOR TRUSTEE
Pursuant to Section 6 of Article XIII of the 1940 Mortgage, as heretofore
supplemented and amended, Morgan Guaranty Trust Company of New York has resigned
as Trustee under the Indenture and the Company appointed The Chase Manhattan
Bank (National Association) as successor Trustee under the Indenture effective
at the close of business on September 14, 1994.
ARTICLE V
MISCELLANEOUS PROVISIONS
This Supplemental Indenture may be executed in any number of counterparts,
each of which when so executed shall be deemed to be an original; but such
counterparts shall together constitute but one and the same instrument.
EXECUTION
IN WITNESS WHEREOF, said The Cleveland Electric Illuminating Company has
caused this Supplemental Indenture to be executed on its behalf by its President
or one of its Vice Presidents and its corporate seal to be hereto affixed and
said seal and this Supplemental Indenture to be attested by its Secretary or an
Assistant Secretary, and said The Chase Manhattan Bank (National Association),
in evidence of its acceptance of the trust hereby created, has caused this
Supplemental Indenture to be executed on its behalf by one of its Vice
Presidents or one of its Trust Officers and its corporate seal to be hereto
affixed and said seal and this Supplemental Indenture to be attested by one of
its Assistant Secretaries or Corporate Trust Officers, all as of the day and
year first above written.
<PAGE> 25
S-1
THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
By Gary R. Leidich
--------------------------------
Vice President
Attest: E. Lyle Pepin
-----------------------------------
Secretary
Signed, sealed and acknowledged by
The Cleveland Electric Illuminating Company
in the presence of:
Patricia Barkey
- ------------------------------------------
Patricia Barkey
Amy McCabe
- ------------------------------------------
Amy McCabe
As witnesses
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
AS TRUSTEE
By Valerie Dunbar
------------------------------
Second Vice President
Attest: Mary Lewicki
----------------------------
Corporate Trust Officer
Signed, sealed and acknowledged on
behalf of The Chase Manhattan Bank
(National Association)
in the presence of:
Ronald J. Halleran
- ------------------------------------------
Ronald J. Halleran
Timothy E. Burke
- ------------------------------------------
Timothy E. Burke
As witnesses
<PAGE> 26
S-2
STATE OF OHIO
SS:
COUNTY OF CUYAHOGA
On this 29th day of September, 1994, before me personally appeared GARY R.
LEIDICH and E. LYLE PEPIN to me personally known, who being by me severally duly
sworn, did say that they are a Vice President and the Secretary, respectively,
of The Cleveland Electric Illuminating Company, that the seal affixed to the
foregoing instrument is the corporate seal of said corporation and that said
instrument was signed and sealed in behalf of said corporation by authority of
its Board of Directors; and said officers severally acknowledged said instrument
to be the free act and deed of said corporation.
Sondra Y. Clarke
---------------------------------------------
Notary Public
Sondra Y. Clarke
Notary Public, State of Ohio
Recorded in Cuyahoga County
My Commission expires November 25, 1998
STATE OF NEW YORK
SS:
COUNTY OF NEW YORK
On this 27th day of September, 1994, before me personally appeared VALERIE
DUNBAR and MARY LEWICKI to me personally known, who being by me severally duly
sworn, did say that they are a Second Vice President and a Corporate Trust
Officer, respectively, of The Chase Manhattan Bank (National Association), that
the seal affixed to the foregoing instrument is the corporate seal of said
corporation and that said instrument was signed and sealed in behalf of said
corporation by authority of its Board of Directors; and said officers severally
acknowledged said instrument to be the free act and deed of said corporation.
Della K. Benjamin
-----------------------------------------
Notary Public
Della K. Benjamin
Notary Public, State of New York
No. 24-4659567
Qualified in Kings County
Commission Expires April 30, 1995
This instrument prepared by Bruce T. Rosenbaum, attorney at law.
<PAGE> 27
P-1
SCHEDULE A
DESCRIPTION OF REAL ESTATE
IROQUOIS SUBSTATION
Situated in the City of Cleveland, County of Cuyahoga and State of Ohio and
known as being part of sublots 17, 18 and 20 in the Dennis Ford and Arey's
Subdivision a part of Original One Hundred Acre Lot No. 404 as shown by plat
recorded in Volume 13, Page 15 of Cuyahoga County Deed Records, and also being
part of Arey Road, S.E., vacated by ordinance No. 88217, passed by the Council
of the City of Cleveland on August 26, 1929 and more fully described as follows:
Beginning at an iron pin, set by A.C.L.A., at the southwest corner of a
parcel of land conveyed to Michael W. Sands and known as being Auditor's
Permanent Parcel No. 121-12-32, said point also on the northerly right-of-way
line of Arey Road, 50 feet wide, now vacated;
Thence South 38 degrees 29' 23" West, 50.00 feet to a point on the
southerly right-of- way line of Arey Road, now vacated, as aforesaid;
Thence North 51 degrees 33' 42" West, 17.26 feet to an iron pin set;
Thence North, 30 degrees 30' 00"" East and along the easterly right-of-way
line of a parcel of land conveyed to the Greater Cleveland R.T.A. and known as
being Auditor's Permanent Parcel No. 121-12-63, 252.42 feet to an iron pin set;
Thence South 51 degrees 33' 42" East, 52.34 feet to a point; Thence South
38 degrees 29' 23" West, 200 feet to the Place of Beginning and containing
0.1997 acres of land according to a survey by Adache-Ciuni-Lynn Associates
August 9, 1993, be the same, more or less, but subject to all legal highways.
Situated in the City of Cleveland, County of Cuyahoga and State of Ohio:
and known as being Sublot No. 15 in Dennis, Ford and Arey's Subdivision of part
of Original 100 acre Lot No. 404, as shown by the recorded plat in Volume 13 of
Maps, Page 15 of Cuyahoga County Records, and having a frontage of 41 feet on
the Northeasterly side of Arey Road, S.E., and extending back of equal width 173
feet, as appears by said plat. Situated in the City of Cleveland, County of
Cuyahoga and State of Ohio; and known as being all of Sublot No. 16 and part of
Sublot No. 20 in Dennis, Ford and Arey's Subdivision of part of original 100
Acre Lot No. 403, as shown by the recorded plat in Volume 13 of Maps, Page 15 of
Cuyahoga County Records, and together forming a parcel of land bounded and
described as follows:
Beginning on the Northeasterly line of Arey Road S.E., (50 feet wide) at
the most Southerly corner of said Sublot No. 16; thence
<PAGE> 28
P-2
Northwesterly along the Northeasterly line of Arey Road S.E. 42 feet to the most
Westerly corner of said Sublot No. 16; thence Northeasterly along the
Northwesterly line of said Sublot No. 16 and along the Northeasterly
prolongation thereof, 200 feet to the most Northerly corner of land conveyed to
Luigi and Maria Sepe by deed dated october 31, 1952 and recorded in Volume 7653,
Page 381 of Cuyahoga County Records; thence Southeasterly along the
Northeasterly line of land so conveyed 42 feet to the Southeasterly line of said
Sublot No. 20; thence Southwesterly along the Southeasterly line of said Sublots
Nos. 20 and 16, 200 feet to the place of beginning.
EAST POINT FLY ASH SITE ADDITION
Situated in the Village of North Kingsville, County of Ashtabula and State
of Ohio: Known as being part of Original Kingsville Township Lot No. 34, and
bounded and described as follows:
Beginning at the point of intersection of the center line of Middle Rd.
with the west line of Lot #34; Thence Southerly along the easterly line of land
formerly owned by Angelo Ray, a distance of 12 rods to a stake; Thence Easterly
and along a northerly line of land now or formerly owned by Walter H. Balcomb
and Bessie E. Balcomb, a distance of 10 rods to a stake; Thence northerly along
a westerly line of said Balcomb land, a distance of 12 rods to a point in the
center line of Middle Rd.; Thence Westerly along the center line of Middle Rd.
to the place of beginning, and containing 0.75 of an acre of land, be the same
more or less, but subject to all legal highways.
EASTLAKE PLANT ADDITIONS
Situated in the City of Eastlake, County of Lake and State of Ohio, an
accurate description and plat of which are as follows, to-wit:
and known as being the Easterly portions of Sublots 11 and 12 in Block 18
of The Elworthy Helwick Company's Lake Shore Boulevard Estates Allotment No. 1
of part of Original Willoughby Township Lot 24, Gore Tract, as shown by the Plat
of said Allotment recorded in Volume D, Page 55 of the Map Records of said Lake
County, and together forming a parcel of land containing 0.2923 of an acre. And
bounded and described as follows: BEGINNING at a point in the Westerly line of
Erie Road, 60 feet wide, at the Southeasterly corner of said Sublot No. 12;
THENCE North 12 deg. 50' 30" West, along said Westerly line of Erie Road 111.11
feet to the point at the Northeasterly corner of said Sublot 11; THENCE North 86
deg. 00' 00" West, along the Northerly line of said Sublot 11 a distance of
115.38 feet to a point; THENCE South 9 deg. 47' 45" East, 102.97 feet to a point
in the
<PAGE> 29
P-3
Southerly line of said Sublot 12; THENCE South 86 deg. 00' 00" East, 139.26 feet
to the place of beginning.
Situated in the City of Eastlake, County of Lake and State of Ohio, an
accurate description and plat of which are as follows, to-wit:
and known as being a part of Willoughby Lot No. 24 in the Gore and is
bounded and described as follows: BEGINNING on the centerline of River Road, now
known as Erie Road, also known as Lake Road, at a point South 21 deg. 57' East,
along the centerline of said road distant 246.3 feet from the Southwest corner
of one acre of land now owned by Emma S. Trimmer; THENCE North 80 deg. 55' East,
550.8 feet to the centerline of dead branch of Chagrin River passing through
iron stakes at 30.77 feet on the East line of said road and 47.74 feet from the
centerline of said dead branch; THENCE South 44 deg. 37' East, along the
centerline of said dead branch and said line extending 134.11 feet to an iron
pipe stake; THENCE South 68 deg. 03' West, 588.7 feet to the centerline of said
River Road, now known as Erie Road, passing through iron pipe stakes 210.85 feet
and 30.0 feet from the centerline of said River Road, now known as Erie Road;
THENCE North 21 deg. 57' West, along the centerline of said River Road, now
known as Erie Road, 246.3 feet to the place of beginning and containing 2.354
acres of land, according to a survey thereof made by the Clark and Pike Co.,
Registered Surveyor No. 798, be the same more or less, but subject to all legal
highways.
ASHTABULA MALL SUBSTATION
Situated in the State of Ohio, County of Ashtabula, and the Township of
Ashtabula, and being known as a part of Lot 8 and Lot 9 of the Erie Tract, New
Survey, of said Ashtabula Township, and being more fully described as follows:
Beginning at the point of intersection of the centerline of North Ridge
Road (U.S. Route 20) 66 feet in width, with the relocated centerline of Eureka
Road, 50 feet in width, as shown in Plat Volume 11, Page 58 & 59, recorded in
the Ashtabula County Recorders Office;
Thence N 78 deg. 10' 46" E, along the centerline of North Ridge Road (U.S.
Route 20), a distance of 618.01 feet to a point, said point being the
southeasterly corner of lands owned by The Cleveland Electric Illuminating
Company as recorded in Volume 307, Page 250, in the Ashtabula County Recorders
Office;
Thence N 00 deg. 00' 00" E, along the easterly line of said Cleveland
Electric Illuminating Company lands, a distance of 2,745.62 feet to a point,
said point being the TRUE PLACE OF BEGINNING for the herein described parcel of
land;
<PAGE> 30
P-4
Thence continuing N 00 deg. 00' 00" E, along the easterly line of said
Cleveland Electric Illuminating Company lands, a distance of 200.00 feet to a
point;
Thence S 90 deg. 00' 00" E, 90 deg. to the right, a distance of 150 feet to
a point;
Thence S 00 deg. 00' 00" W, 90 deg. to the right, a distance of 200.00 feet
to a point;
Thence N 90 deg. 00' 00" W, 90 deg. to the right, a distance of 150.00 feet
to a point on the easterly line of said Cleveland Electric Illuminating Company
lands, returning to the True Place of Beginning and containing an area of 0.688
acres of land more or less.
<PAGE> 31
R-1
This page contains information as to recording and filing which was not set
forth in this Supplemental Indenture at the time of execution. This page is not
a part of this Supplemental Indenture.
RECORDING AND FILING DATA
This Supplemental Indenture was filed for record and recorded in the record
of mortgages in the offices of the Recorders of the following Counties:
<TABLE>
<CAPTION>
COUNTY VOLUME PAGE FILED FOR RECORD
- ------------------------------- --------------- -------------------------
<S> <C> <C> <C>
Ohio
Ashtabula
Cuyahoga
Geauga
Lake
Lorain
Ottawa
Portage
Stark
Summit
Trumbull
Pennsylvania
Warren
Beaver
</TABLE>
This Supplemental Indenture was filed for record and recorded in the
Registered Land Department of the offices of the Recorders of the following
Counties in the State of Ohio:
<TABLE>
<CAPTION>
COUNTY DOCUMENT NUMBER FILED FOR RECORD
- --------------------------------------------- -------------------------
<S> <C> <C>
Cuyahoga
Lake
</TABLE>
An amendment to a previously filed financing statement and a counterpart of
this Supplemental Indenture were filed in the office of the Secretary of the
Commonwealth of Pennsylvania on under original or
amendment file number , microfilm number , to comply with
the filing requirements of the Pennsylvania enactment of the Uniform Commercial
Code.
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements contained in the Form 10-Q for the quarterly period ended
September 30, 1994 of The Cleveland Electric Illuminating Company and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000020947
<NAME> THE CLEVELAND ELECTRIC ILLUMINATING COMPANY
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 4,966,829
<OTHER-PROPERTY-AND-INVEST> 257,941
<TOTAL-CURRENT-ASSETS> 475,332
<TOTAL-DEFERRED-CHARGES> 1,322,856
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 7,022,958
<COMMON> 1,241,087
<CAPITAL-SURPLUS-PAID-IN> 78,625
<RETAINED-EARNINGS> (244,629)
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,075,083
255,717
240,871
<LONG-TERM-DEBT-NET> 2,564,159
<SHORT-TERM-NOTES> 19,200
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 234,469
39,514
<CAPITAL-LEASE-OBLIGATIONS> 140,625
<LEASES-CURRENT> 44,419
<OTHER-ITEMS-CAPITAL-AND-LIAB> 2,408,901
<TOT-CAPITALIZATION-AND-LIAB> 7,022,958
<GROSS-OPERATING-REVENUE> 1,296,628
<INCOME-TAX-EXPENSE> 67,750
<OTHER-OPERATING-EXPENSES> 920,613
<TOTAL-OPERATING-EXPENSES> 988,363
<OPERATING-INCOME-LOSS> 308,265
<OTHER-INCOME-NET> 23,355
<INCOME-BEFORE-INTEREST-EXPEN> 331,620
<TOTAL-INTEREST-EXPENSE> 180,958
<NET-INCOME> 150,662
34,197
<EARNINGS-AVAILABLE-FOR-COMM> 116,465
<COMMON-STOCK-DIVIDENDS> 92,628
<TOTAL-INTEREST-ON-BONDS> 227,349
<CASH-FLOW-OPERATIONS> 270,551
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE TOLEDO EDISON COMPANY
TO
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
TRUSTEE.
------------------------
FORTY-FIRST SUPPLEMENTAL INDENTURE
DATED AS OF SEPTEMBER 15, 1994
------------------------
(SUPPLEMENTAL TO INDENTURE DATED AS OF APRIL 1, 1947)
------------------------
FIRST MORTGAGE BONDS, 8% SERIES DUE 2023-G
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
PARTIES.................................................. 1
RECITALS................................................. 1
FORM OF BOND OF THIS SERIES.............................. 4
GRANTING CLAUSES......................................... 11
ARTICLE I
CREATION AND DESCRIPTION OF BONDS OF THIS SERIES
SECTION 1. Creation of Bonds of this Series, limit on
amount issuable........................... 12
SECTION 2. Interest Rates, Computation and Payment
Dates..................................... 12
SECTION 3. Place and coin of payment................... 12
SECTION 4. Denominations............................... 13
SECTION 5. Transfer and Exchange....................... 13
SECTION 6. Record date for payment of interest......... 13
SECTION 7. Date of Bonds of this Series................ 14
SECTION 8. Authentication of Bonds of this Series
by Trustee................................ 14
ARTICLE II
REDEMPTION OF BONDS OF THIS SERIES
SECTION 1. Bonds of this Series redeemable............. 14
SECTION 2. Mandatory redemption provisions............. 15
SECTION 3. Certain provisions of Original Indenture
applicable to redemption of Bonds of this
Series.................................... 16
SECTION 4. Bondholder agrees to accept payment of Bonds
of this Series redeemed prior to
maturity.................................. 16
</TABLE>
<PAGE> 3
ii
<TABLE>
<CAPTION>
PAGE
---------
<S> <C> <C>
ARTICLE III
PAYMENT DEEMED MADE OF BONDS OF THIS SERIES
SECTION 1. Upon surrender of Water Bonds purchased..... 16
SECTION 2. Upon payment of Water Bonds................. 17
SECTION 3. Surrender and cancellation of Bonds of this
Series.................................... 17
ARTICLE IV
THE TRUSTEE
SECTION 1. The Trustee accepts trust created by
Forty-first Supplemental Indenture........ 17
SECTION 2. Agency of the Company other than the
Trustee................................... 18
SECTION 3. Trustee advises Company of notations
provided for in Article III............... 18
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 1. Ratification and approval of Original
Indenture as supplemented................. 18
Covenants of Original Indenture, except as
modified, continue in effect.............. 18
SECTION 2. Forty-first Supplemental Indenture may be
executed in counterparts.................. 19
TESTIMONIUM CLAUSE....................................... 19
SIGNATURES AND SEALS..................................... S-1
ACKNOWLEDGMENTS.......................................... S-2
RECORDING AND FILING DATA................................ R-1
</TABLE>
<PAGE> 4
FORTY-FIRST SUPPLEMENTAL INDENTURE, dated as of September 15, 1994, between
THE TOLEDO EDISON COMPANY, a corporation organized and existing under the laws
of the State of Ohio (hereinafter called the "Company"), and THE CHASE MANHATTAN
BANK (NATIONAL ASSOCIATION), a national banking association existing under the
laws of the United States of America, with its head office at 1 Chase Manhattan
Plaza, The City of New York (hereinafter called the "Trustee"), as Trustee.
RECITALS
The Company has heretofore executed and delivered an Indenture of Mortgage
and Deed of Trust dated as of April 1, 1947 (hereinafter referred to as the
"Original Indenture") to The Chase National Bank of the City of New York,
predecessor Trustee, to secure an issue of First Mortgage Bonds of the Company,
issuable in series, and created thereunder an initial series of bonds designated
as First Mortgage Bonds, 2 7/8% Series due 1977, being the initial series of
bonds issued under the Original Indenture; and
The Company has heretofore executed and delivered to The Chase National
Bank of the City of New York, predecessor Trustee, four Supplemental Indentures
supplementing the Original Indenture dated, respectively, September 1, 1948,
April 1, 1949, December 1, 1950 and March 1, 1954 and has heretofore executed
and delivered to The Chase Manhattan Bank, which on March 31, 1955, became the
Trustee under the Original Indenture by virtue of the merger of The Chase
National Bank of the City of New York into President and Directors of The
Manhattan Company under the name of The Chase Manhattan Bank, the Fifth and the
Sixth Supplemental Indentures dated, respectively, February 1, 1956, and May 1,
1958, supplementing the Original Indenture; and
The Chase Manhattan Bank was converted into a national banking association
under the name The Chase Manhattan Bank (National Association), effective
September 23, 1965; and by virtue of said conversion the continuity of the
business of The Chase Manhattan Bank, including its business of acting as
corporate trustee, and its corporate existence, have not been affected, so that
The Chase Manhattan Bank (National Association) is vested with all the trusts,
powers, discretion, immunities, privileges and all other matters as were vested
in said The Chase Manhattan Bank under the Indenture, with like effect as if
originally named as Trustee therein; and
<PAGE> 5
2
The Company has heretofore executed and delivered to the Trustee 34
Supplemental Indentures dated, respectively, as follows: Seventh, August 1,
1967, Eighth, November 1, 1970, Ninth, August 1, 1972, Tenth, November 1, 1973,
Eleventh, July 1, 1974, Twelfth, October 1, 1975, Thirteenth, June 1, 1976,
Fourteenth, October 1, 1978, Fifteenth, September 1, 1979, Sixteenth, September
1, 1980, Seventeenth, October 1, 1980, Eighteenth, April 1, 1981, Nineteenth,
November 1, 1981, Twentieth, June 1, 1982, Twenty-first, September 1, 1982,
Twenty-second, April 1, 1983, Twenty-third, December 1, 1983, Twenty-fourth,
April 1, 1984, Twenty-fifth, October 15, 1984, Twenty-sixth, October 15, 1984,
Twenty-seventh, August 1, 1985, Twenty-eighth, August 1, 1985, Twenty-ninth,
December 1, 1985, Thirtieth, March 1, 1986, Thirty-first, October 15, 1987,
Thirty-second, September 15, 1988, Thirty-third, June 15, 1989, Thirty-fourth,
October 15, 1989, Thirty-fifth, May 15, 1990, Thirty-sixth, March 1, 1991,
Thirty-seventh, May 1, 1992, Thirty-eighth, August 1, 1992, Thirty-ninth,
October 1, 1992 and Fortieth, January 1, 1993 supplementing the Original
Indenture (The Original Indenture, all the aforementioned Supplemental
Indentures, this Forty-first Supplemental Indenture and any other indentures
supplemental to the Original Indenture are herein collectively called the
"Indenture" and this Forty-first Supplemental Indenture is hereinafter called
"this Supplemental Indenture"); and
Pursuant to the provisions of the Indenture, the Company has issued 46
series of bonds in the aggregate principal amount of $1,987,300,000, of which 28
series (including the Bonds of the 1977 Series issued pursuant to the Original
Indenture) in the aggregate principal amount of $1,115,300,000 are no longer
outstanding and of which additional portions, aggregating $36,875,000 in
principal amount, of 4 other series have been retired; and
The Company covenanted in and by the Original Indenture to execute and
deliver such further instruments and do such further acts as may be necessary or
proper to carry out more effectually the purposes of the Original Indenture and
to make subject to the lien thereof property acquired after the execution and
delivery of the Original Indenture; and
Under Article 3 of the Original Indenture, the Company is authorized to
issue additional bonds upon the terms and conditions expressed in the Original
Indenture; and
The Company proposes to create one new series of First Mortgage Bonds to be
designated as First Mortgage Bonds, 8% Series due 2023-G (hereinafter called the
"Bonds of this Series"), with the denominations, rate of interest,
<PAGE> 6
3
date of maturity, redemption provisions and other provisions and agreements in
respect thereof as in this Supplemental Indenture set forth; and
The Bonds of this Series are to be issued by the Company to the Ohio Water
Development Authority (hereinafter called the "Water Authority"), and registered
initially in the name of The Fifth Third Bank of Northwestern Ohio, N.A.,
Toledo, Ohio, Trustee (hereinafter called the "Water Bond Trustee") for the
account of the Water Authority, to evidence and secure the obligations of the
Company to repay a loan (hereinafter called the "Water Loan") made by the Water
Authority to the Company pursuant to a certain loan agreement, dated as of
September 15, 1994, between the Water Authority and the Company (hereinafter
called the "Water Authority Loan Agreement") to assist the Company in refunding
certain bonds which had been previously issued by the Water Authority the
proceeds of which had been loaned to the Company to assist in financing a
portion of the costs of the acquisition, construction and installation of
certain facilities comprising waste water and solid waste disposal facilities
located at the Perry Nuclear Power Plant Unit No. 1 in Lake County, Ohio. The
Water Loan is to be funded with proceeds to be derived from the sale by the
Authority of one series of State of Ohio Collateralized Pollution Control
Revenue Refunding Bonds, 1994 Series A (The Toledo Edison Company Project)
(hereinafter called the "Water Bonds") in the aggregate principal amount of
$30,500,000, to be issued under a Trust Indenture, dated as of September 15,
1994 (hereinafter called the "Water Bond Indenture"), between the Water Bond
Trustee and the Water Authority. All right, title and interest of the Water
Authority in the Bonds of this Series are to be assigned and pledged by the
Water Authority to the Water Bond Trustee as further security for the payment of
the principal of and premium, if any, and interest on the Water Bonds; and
The Company, by appropriate corporate action, has duly resolved and
determined to execute this Supplemental Indenture for the purpose of providing
for the creation of the Bonds of this Series and of specifying the form,
provisions and particulars thereof as in said Original Indenture, as amended,
provided or permitted, including the issuance only of fully registered Bonds,
and of giving to the Bonds of this Series the protection and security of the
Indenture; and
<PAGE> 7
4
The text of the Bonds of this Series is to be substantially in the form
following:
[FORM OF BOND OF THIS SERIES]
THE TOLEDO EDISON COMPANY
FIRST MORTGAGE BOND, 8% SERIES DUE 2023-G
DUE OCTOBER 1, 2023
No. OA- $
THE TOLEDO EDISON COMPANY, an Ohio corporation (hereinafter called the
Company), for value received, hereby promises to pay to
, or registered assigns, the principal sum of
Dollars or the aggregate unpaid principal amount hereof (as shown on the
Schedule of Payments hereon), whichever is less, on October 1, 2023, at its
office or agency in The City of New York, or, so long as the registered owner of
this Bond is the Water Bond Trustee (hereinafter defined), at the agency of the
Company in the City of Toledo, State of Ohio, and semiannually on the same dates
as interest is payable on the Water Bonds (hereinafter defined; each such date
hereinafter called an interest payment date) and to pay interest on the unpaid
principal amount hereof to the registered owner hereof at said office or
agencies at the rate per annum specified in the title of this Bond, until
maturity, or, if this Bond shall be duly called for redemption, until the
redemption date, or, if the Company shall default in the payment of the
principal amount of this Bond, until the Company's obligation with respect to
the payment of such principal shall be discharged as provided in the Indenture
(hereinafter defined). Except as hereinafter provided, this Bond shall bear
interest from the interest payment date next preceding the date of this Bond to
which interest has been paid, unless this Bond is dated on an interest payment
date, in which case from the date hereof; or unless this Bond is dated prior to
the first interest payment date in respect hereof, in which case from September
15, 1994, and except that if this Bond is delivered on a transfer or exchange of
or in substitution for one or more Bonds of this Series (hereinafter defined) it
shall bear interest from the last preceding date to which interest shall have
been paid on the Bond or Bonds of this Series in respect of which this Bond is
delivered (except that if this Bond is dated between the record date
(hereinafter defined) for any interest payment date and such interest payment
date, then from such interest payment date; provided, however, that if the
Company shall default in the payment of interest due on such interest payment
date, then from the next preceding interest payment date to which interest has
been paid on the
<PAGE> 8
5
Bonds of this Series, or if such interest payment date is the first interest
payment date for Bonds of this Series, then from September 15, 1994). The
interest so payable on any interest payment date will, subject to certain
exceptions provided in the Indenture, be paid to the person in whose name this
Bond is registered at the close of business on the record date, which shall be
the "Regular Record Date" as defined in the Water Bond Indenture, applicable to
the regular interest payment date of any Bond of this Series, if it were an
"Interest Payment Date" as defined in the Water Bond Indenture. Both the
principal of and the interest on this Bond shall be payable in any coin or
currency of the United States of America which at the time of payment is legal
tender for the payment of public and private debts.
This Bond is one of the Bonds of the Company, known as its First Mortgage
Bonds, issued and to be issued in one or more series under and equally and
ratably secured (except as any sinking, amortization, improvement or other fund,
established in accordance with the provisions of the Indenture, may afford
additional security for the Bonds of any particular series) by a certain
Indenture of Mortgage and Deed of Trust, dated as of April 1, 1947 (hereinafter
called the Original Indenture), made by the Company to The Chase National Bank
of the City of New York (The Chase Manhattan Bank (National Association),
successor), as Trustee (hereinafter called the Trustee), and by certain
indentures supplemental thereto, including the Forty-first Supplemental
Indenture dated as of September 15, 1994 (the Original Indenture and said
indentures supplemental thereto herein collectively called the Indenture and
said Forty-first Supplemental Indenture hereinafter called the Supplemental
Indenture), to which Indenture reference is hereby made for a description of the
property mortgaged, the nature and extent of the security, the rights and
limitations of rights of the Company, the Trustee and the holders of said Bonds
and of the coupons appurtenant to coupon Bonds under the Indenture and the terms
and conditions upon which said Bonds are and are to be issued and secured, to
all of the provisions of which Indenture and of all such supplemental indentures
in respect of such security, including the provisions of the Indenture
permitting the issue of Bonds of any series for property which, under the
restrictions and limitations therein specified, may be subject to liens prior to
the lien of the Indenture, the holder, by accepting this Bond, assents. To the
extent permitted by and as provided in the Indenture, the rights and obligations
of the Company and of the holders of said Bonds and coupons (including those
pertaining to any sinking or other fund) may be changed and modified, with the
consent of the Company, by the holders of at least 75% in aggregate principal
amount of the Bonds then outstanding, such percentage
<PAGE> 9
6
being determined as provided in the Indenture; provided, however, that in case
such changes and modifications affect one or more but less than all series of
Bonds then outstanding, they shall be required to be adopted only by the
affirmative vote of the holders of at least 75% in aggregate principal amount of
outstanding Bonds of such one or more series so affected; and further provided,
that without the consent of the holder hereof no such change or modification
shall be made which will extend the time of payment of the principal of, or of
the interest or premium, if any, on this Bond or reduce the principal amount
hereof or the rate of interest or the premium, if any, hereon, or affect any
other modification of the terms of payment of such principal or interest, or
premium, if any, or will permit the creation of any lien ranking prior to or on
a parity with the lien of the Indenture on any of the mortgaged property, or
will deprive the holder hereof of the benefit of a lien upon the mortgaged
property for the security of this Bond, or will reduce the percentage of Bonds
required for the adoption of changes or modifications as aforesaid.
This Bond is one of a series of Bonds designated as the First Mortgage
Bonds, 8% Series due 2023-G, of the Company (herein called Bonds of this Series)
limited, except as otherwise provided in the Indenture, in aggregate principal
amount to $30,500,000 and issued under and secured by the Supplemental
Indenture. The Bonds of this Series have been issued by the Company to the Ohio
Water Development Authority (herein called the Water Authority) to evidence and
secure the obligations of the Company to repay a loan (herein called the Water
Authority Loan) made by the Water Authority to the Company pursuant to a certain
loan agreement, dated as of September 15, 1994 (herein called the Water
Authority Loan Agreement), between the Water Authority and the Company to assist
the Company in refunding certain bonds which have been previously issued by the
Water Authority the proceeds of which had been loaned to the Company to assist
in financing its portion of the costs of the acquisition, construction and
installation of certain facilities comprising waste water and solid waste
disposal facilities. The Water Authority Loan has been funded with the proceeds
derived from the sale by the Water Authority of one series of State of Ohio
Collateralized Pollution Control Revenue Refunding Bonds, 1994 Series A (The
Toledo Edison Company Project) (herein called the Water Bonds) in the aggregate
principal amount of $30,500,000, issued under a Trust Indenture, dated as of
September 15, 1994 (herein called the Water Bond Indenture), between The Fifth
Third Bank of Northwestern Ohio, N.A., as trustee (herein called the Water Bond
Trustee) and the Water Authority. All right, title and interest of the Water
Authority in the Bonds of this Series have been assigned and pledged by the
Water
<PAGE> 10
7
Authority to the Water Bond Trustee as security for the payment of the principal
of and premium, if any, and interest on the Water Bonds; and the Bonds of this
Series have been delivered to the Water Bond Trustee, as trustee, for the
benefit of the holders of the Water Bonds.
In the event any Water Bonds shall be surrendered to the Water Bond Trustee
or other person for cancellation pursuant to the Water Bond Indenture (except
upon exchange for other Water Bonds), Bonds of this Series equal in principal
amount to such Water Bonds shall be deemed to have been paid, but only when and
to the extent (a) so noted on the Schedule of Payments hereon by one of the
agencies of the Company hereinabove specified and (if such agency is not the
Trustee) written notice by such agency of such notation has been received by the
Trustee or (b) such Bond is surrendered to and cancelled by the Trustee as
provided in the next paragraph; and in the event and to the extent the principal
of (or premium, if any) or interest on any Water Bonds shall be paid or deemed
to be paid, an equal amount of principal (or premium, if any) or interest, as
the case may be, payable with respect to an aggregate principal amount of Bonds
of this Series equal to the aggregate principal amount of such Water Bonds shall
be deemed to have been paid, but, in the case of such payment of principal, only
when and to the extent (i) so noted on the Schedule of Payments hereon by one of
the agencies of the Company hereinabove specified and (if such agency is not the
Trustee) written notice by such agency of such notation has been received by the
Trustee or (ii) this Bond is surrendered to and cancelled by the Trustee as
provided in the next paragraph. When any such payment of principal of this Bond
is made, this Bond shall be surrendered by the registered owner hereof to an
agency of the Company for such notation and notification or to the Trustee for
cancellation.
In the event that this Bond shall be deemed to have been paid in full, this
Bond shall be surrendered to the Trustee for cancellation. In the event that
this Bond shall be deemed to have been paid in part, this Bond may, at the
option of the registered owner, be surrendered to the Trustee for cancellation,
in which event the Trustee shall cancel this Bond and the Company shall execute
and the Trustee shall authenticate and deliver Bonds of this Series in
authorized denominations in aggregate principal amount equal to the unpaid
balance of the principal amount of this Bond.
The Bonds of this Series are subject to mandatory redemption by the Company
prior to maturity, upon not less than thirty days prior notice, in whole or in
part at any time, all as more fully provided in Section 1 of Article II of the
Supplemental Indenture, in the event the Company exercises its option to
<PAGE> 11
8
direct the redemption of Water Bonds pursuant to Section 6.2 of the Water
Authority Loan Agreement, and an equivalent principal amount of Water Bonds are
being concurrently called for redemption, at a redemption price of 100% of the
principal amount to be redeemed, plus accrued interest to the date fixed for
redemption.
The Bonds of this Series are also subject to mandatory redemption by the
Company prior to maturity at any time (a) in whole upon notice of the occurrence
of an event of default under the Water Bond Indenture and of the acceleration of
the payment of the principal of the Water Bonds or (b) in whole or in part upon
a final determination by any federal judicial or administrative authority that
interest on the Water Bonds is includable for federal income tax purposes in the
gross income of the holders of the Water Bonds (other than because a holder is a
"substantial user" of the project being financed pursuant to the Water Authority
Loan Agreement or a "related person" thereof, as those terms are used in Section
147(a) of the Internal Revenue Code of 1986, as amended) and an equivalent
amount of Water Bonds are being concurrently called for redemption, in each case
as provided in Section 2 of Article II of the Supplemental Indenture, at a
redemption price of 100% of the principal amount to be redeemed, plus accrued
interest to the date fixed for redemption.
The Bonds of this Series are also subject to mandatory redemption by the
Company prior to stated maturity, all as more fully provided in Section 1 of
Article II of the Supplemental Indenture, in whole or in part, on any date on or
after October 1, 2004, in the event that and to the extent that the Company
exercises its option to direct the redemption of Water Bonds pursuant to Section
6.1 of the Water Authority Loan Agreement, and an equivalent principal amount of
Water Bonds are being concurrently called for redemption, at redemption prices,
plus accrued and unpaid interest if any, to the redemption date as follows:
<TABLE>
<CAPTION>
REDEMPTION PRICE
(EXPRESSED AS A
PERCENTAGE
REDEMPTION PERIODS OF THE PRINCIPAL AMOUNT
(DATES INCLUSIVE) BEING REDEEMED)
------------------ -----------------------
<S> <C>
October 1, 2004 through September 30,
2005 102%
October 1, 2005 through September 30,
2006 101
October 1, 2006 and thereafter 100
</TABLE>
Any redemption of the Bonds of this Series shall be made in accordance with
the applicable provisions of Sections 5.02, 5.03, 5.04 and 5.05 of the
<PAGE> 12
9
Original Indenture, unless and to the extent waived in writing by the registered
owner or owners of all Bonds of this Series and such waiver is filed with the
Trustee.
If this Bond shall be called for redemption and payment of the redemption
price shall be duly provided by the Company as specified in the Indenture,
interest shall cease to accrue hereon from and after the date of redemption
fixed in the notice thereof.
The principal of this Bond may be declared or may become due before the
maturity hereof, on the conditions, in the manner and at the times set forth in
the Indenture, upon the happening of a default as therein defined.
This Bond is transferable by the registered owner hereof in person or by
his or her duly authorized attorney at the office or agency of the Company in
The City of New York, upon surrender and cancellation of this Bond, and
thereupon a new fully registered Bond or Bonds of this Series and maturity, for
the same aggregate principal amount, in authorized denominations, will be issued
to the transferee in exchange therefor, as provided in the Indenture. The
Company and the Trustee and any paying agent may deem and treat the person in
whose name this Bond is registered as the absolute owner hereof for the purpose
of receiving payment and for all other purposes. This Bond, alone or with other
Bonds of this Series and maturity, may in like manner be exchanged at such
office or agency for one or more new fully registered Bonds of this Series and
maturity, in authorized denominations, of the same aggregate principal amount.
Upon each such transfer, exchange and re-exchange, the Company will not require
the payment of any charges, other than for any tax or other governmental charge
required to be paid by the Company in connection therewith. In the event less
than all of the Bonds of this Series at the time outstanding are called for
redemption, the Company shall not be required (a) to register any transfer or
make any exchange of any such Bond for a period of 15 days before the mailing of
the notice of redemption of any such Bond, (b) to register any transfer or make
any exchange of any such Bond so called for redemption in its entirety, or (c)
to register any transfer or make any exchange of any portion of any such Bond so
called for redemption.
No recourse under or upon any covenant or obligation of the Indenture, or
of any indenture supplemental thereto, or of this Bond, for the payment of the
principal of or the interest on this Bond, or for any claim based thereon, or
otherwise in any manner in respect thereof, shall be had against any
incorporator, subscriber to the capital stock, stockholder, officer or director,
as such, of
<PAGE> 13
10
the Company, whether former, present or future, either directly, or indirectly
through the Company or any predecessor or successor corporation or the Trustee,
by the enforcement of any subscription to capital stock, assessment or
otherwise, or by any legal or equitable proceeding by virtue of any
constitution, statute, or otherwise (including, without limiting the generality
of the foregoing, any proceeding to enforce any claimed liability of
stockholders of the Company based upon any theory of disregarding the corporate
entity of the Company or upon any theory that the Company was acting as the
agent or instrumentality of the stockholders), any and all such liability of
incorporators, stockholders, subscribers, officers and directors, as such, being
released by the holder hereof, by the acceptance of this Bond, and being
likewise waived and released by the terms of the Indenture.
This Bond shall not be valid or become obligatory for any purpose until the
certificate of authentication endorsed hereon shall have been signed by The
Chase Manhattan Bank (National Association) or its successor, as Trustee under
the Indenture.
IN WITNESS WHEREOF, THE TOLEDO EDISON COMPANY has caused this Bond to be
signed in its name by its President or a Vice-President, manually or in
facsimile, and its corporate seal to be impressed or imprinted hereon and
attested by a manual or facsimile signature of its Secretary or an Assistant
Secretary.
Dated
THE TOLEDO EDISON COMPANY
By
-------------------------
Vice President.
Attest:
----------------------
Secretary.
<PAGE> 14
11
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This Bond is one of the Bonds of the series designated herein, described in
the within-mentioned Indenture.
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION), AS TRUSTEE
By
----------------------------------------
Authorized Officer.
[FORM OF SCHEDULE OF PAYMENTS]
SCHEDULE OF PAYMENTS
<TABLE>
<CAPTION>
AGENCY OF
THE
UNPAID COMPANY
PRINCIPAL PRINCIPAL PREMIUM INTEREST MAKING AUTHORIZED
DATE PAYMENT AMOUNT PAYMENT PAYMENT NOTATION OFFICER TITLE
- ------------ ---------- ---------- -------- --------- ---------- ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
[END OF FORM OF BOND OF THIS SERIES]
<PAGE> 15
12
All conditions and requirements necessary to make this Supplemental
Indenture a valid, legal and binding instrument in accordance with its terms and
to make the Bonds of this Series, when duly executed by the Company and
authenticated and delivered by the Trustee, and duly issued, the valid, binding
and legal obligations of the Company, have been done and performed, and the
execution and delivery of this Supplemental Indenture have been in all respects
duly authorized;
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH: That The Toledo
Edison Company, the Company herein named, in consideration of the premises and
of One Dollar ($1.00) to it duly paid by the Trustee at or before the ensealing
and delivery of these presents, the receipt whereof is hereby acknowledged, does
hereby covenant and agree to and with the Trustee and its successors in the
trust under the Indenture, for the benefit of those who shall hold the bonds to
be issued hereunder and thereunder, as hereinafter provided, as follows:
ARTICLE I
CREATION AND DESCRIPTION OF BONDS OF THIS SERIES
SECTION 1. A new series of bonds to be issued under and secured by the
Indenture is hereby created, to be designated as First Mortgage Bonds, 8% Series
due 2023-G (such bonds herein referred to as the "Bonds of this Series"). The
Bonds of this Series shall be limited to an aggregate principal amount of
$30,500,000, excluding any Bonds of this Series which may be authenticated in
exchange for or in lieu of or in substitution for or on transfer of other Bonds
of this Series pursuant to any provisions of the Original Indenture or of this
Supplemental Indenture. The Bonds of this Series shall be substantially in the
form hereinbefore recited.
SECTION 2. All Bonds of this Series shall mature October 1, 2023 and shall
bear interest from September 15, 1994 at the rate of 8% per annum payable
semiannually on the same dates as interest is payable on the Water Bonds.
SECTION 3. Both principal and interest shall be payable, so long as the
registered owner of the Bonds of this Series is the Water Bond Trustee, at the
agency of the Company in the City of Toledo, State of Ohio, but if and when the
registered owner of the Bonds of this Series is not the Water Bond Trustee,
shall be payable at the office or agency of the Company in The City of New
<PAGE> 16
13
York; and both principal and interest shall be payable in any coin or currency
of the United States of America which at the time of payment is legal tender for
the payment of public and private debts.
SECTION 4. The Bonds of this Series shall be issued only as fully
registered Bonds in denominations of $100,000 and any integral multiple thereof.
SECTION 5. Bonds of this Series shall be transferable and exchangeable for
other Bonds of the same series at the office or agency of the Company in The
City of New York, in the manner and upon the terms set forth in sec. 2.05 of the
Original Indenture, but notwithstanding the provisions of sec. 2.08 of the
Original Indenture, no charge shall be made upon any transfer or exchange of
Bonds of said series other than for any tax or taxes or other governmental
charge required to be paid by the Company. In the event less than all of the
Bonds of this Series at the time outstanding are called for redemption, the
Company shall not be required (a) to register any transfer or make any exchange
of any such Bond for a period of 15 days before the mailing of the notice of
redemption of any such Bond, (b) to register any transfer or make any exchange
of any such Bond so called for redemption in its entirety, or (c) to register
any transfer or make any exchange of any portion of any such Bond so called for
redemption.
SECTION 6. The person in whose name any Bond of this Series is registered
at the close of business on any record date (as defined in the text of the Form
of Bond of this Series set forth in this Supplemental Indenture) with respect to
any interest payment date shall be entitled to receive the interest payable on
such interest payment date notwithstanding the cancellation of such registered
Bond upon any transfer or exchange thereof subsequent to the record date and
prior to such interest payment date, except if and to the extent the Company
shall default in the payment of the interest due on such interest payment date,
in which case such defaulted interest shall be paid to the person in whose name
such Bond (or any Bond or Bonds of this Series issued, directly or after
intermediate transactions, upon transfer or exchange or in substitution thereof)
is registered on the date of payment of such defaulted interest or on a
subsequent record date for such payment if one shall have been established as
hereinafter provided. A subsequent record date may be established by the Company
by notice mailed to the holders of Bonds of this Series not less than 10 days
preceding such record date, which record date shall be not more than 15 days
prior to the subsequent interest payment date.
<PAGE> 17
14
SECTION 7. Except as provided in this Article I, every Bond of this Series
shall be dated and shall bear interest as provided in sec. 2.04 of the Original
Indenture; provided, however, that, so long as there is no existing default in
the payment of interest on said Bonds, the holder of any Bond of this Series
authenticated by the Trustee between the record date for any interest payment
date and such interest payment date shall not be entitled to the payment of the
interest due on such interest payment date and shall have no claim against the
Company with respect thereto; provided, further, that, if and to the extent the
Company shall default in the payment of the interest due on such interest
payment date, then any such Bond shall bear interest from the interest payment
date next preceding the date of such Bond to which interest has been paid or, if
the Company shall be in default with respect to the interest due on the first
interest payment date of such Bond, then from September 15, 1994.
SECTION 8. The Bonds of this Series may be executed by the Company and
delivered to the Trustee and, upon compliance with all applicable provisions and
requirements of the Original Indenture in respect thereof, shall be
authenticated by the Trustee and delivered (without awaiting the filing or
recording of this Supplemental Indenture) in accordance with the written order
or orders of the Company.
ARTICLE II
REDEMPTION OF BONDS OF THIS SERIES
SECTION 1. The Bonds of this Series shall, in the manner provided in
Article 5 of the Original Indenture, be subject to redemption by the Company
prior to maturity, as follows:
(a) In the event the Company exercises its option to direct the
redemption of Water Bonds upon the occurrence of any of the events
described in Section 6.2 of the Water Authority Loan Agreement, in whole or
in part, in each case at a redemption price of 100% of the principal
amount, plus accrued interest to the date fixed for redemption; or
(b) In whole or in part on any date on or after October 1, 2004, in
the event that and to the extent that the Company exercises its option to
direct the redemption of Water Bonds pursuant to Section 6.1 of the Water
Authority Loan Agreement, at redemption prices equal to the following
percentages of the principal amount to be redeemed, plus accrued interest
to the date fixed for redemption:
<PAGE> 18
15
<TABLE>
<CAPTION>
REDEMPTION PRICE
(EXPRESSED AS A
PERCENTAGE
REDEMPTION PERIODS OF THE PRINCIPAL AMOUNT
(DATES INCLUSIVE) BEING REDEEMED)
------------------ -----------------------
<S> <C>
October 1, 2004 through September 30,
2005................................... 102%
October 1, 2005 through September 30,
2006................................... 101
October 1, 2006 and thereafter........... 100
</TABLE>
Any redemption under this Section 1 shall occur only upon receipt by the
Trustee of a certificate of the Company to the effect that (i) the Company has
given notice to the Water Bond Trustee that the Company is exercising its option
to direct redemption of Water Bonds as provided in Section 6.1 or 6.2 of the
Water Authority Loan Agreement and (ii) an equivalent principal amount of Water
Bonds are being currently called for redemption. Such certificate shall specify
the principal amount of the Bonds of this Series to be redeemed, shall have
attached to it a copy of said notice to the Water Bond Trustee and shall specify
the redemption date of such Bonds of this Series, which redemption date shall
not be less than forty-five (45) days from the date of the Trustee's receipt of
such certificate and shall be the same as the redemption date specified in the
attached notice for the Water Bonds being concurrently redeemed.
SECTION 2.(a) The Bonds of this Series shall be subject to mandatory
redemption by the Company in whole at any time prior to maturity if the Trustee
shall receive a written demand from the Water Bond Trustee for redemption of all
Bonds of this Series held by the Water Bond Trustee, stating that an "event of
default" under the Water Bond Indenture has occurred and is continuing and that
payment of the principal of the Water Bonds has been accelerated; provided,
however, that the Bonds of this Series shall not be redeemed under this Section
2(a) in the event that prior to the date fixed for redemption: (i) the Trustee
shall have received a certificate of the Water Bond Trustee (a) stating that
there has been a waiver of such acceleration or (b) withdrawing said written
demand, or (ii) if an event of default under Section 9.01 of Article 9 of the
Original Indenture shall have occurred and be continuing, there has been an
acceleration of the principal of the Bonds of this Series. Any such redemption
shall be made on a date selected by the Company not more than 45 days after
receipt of the written demand at a redemption price of 100% of the principal
amount to be redeemed, plus accrued interest to the date fixed for redemption.
<PAGE> 19
16
(b) The Bonds of this Series shall also be subject to special mandatory
redemption by the Company in whole or in part at any time at a redemption price
of 100% of the principal amount thereof, plus accrued interest to the date fixed
for redemption, at the earliest practicable date selected by the Water Bond
Trustee, after consultation with the Company, but in any event no later than 180
days following the Water Bond Trustee's notification of a Determination of
Taxability (as defined in the Water Bond Indenture). Any special mandatory
redemption hereunder shall be made upon receipt by the Trustee of a certificate
of the Company to the effect that the Company is delivering moneys to redeem
Bonds of this Series in order to provide the Water Bond Trustee with the moneys
needed to redeem Water Bonds in accordance with Section 6.3 of the Water
Authority Loan Agreement and Section 4.01(b) of the Water Bond Indenture. Such
certificate shall specify the principal amount of Water Bonds to be redeemed and
the redemption date of the Bonds of this Series, which date shall be the same as
the redemption date for the Water Bonds being concurrently redeemed.
SECTION 3. The provisions of sec.5.02, sec.5.03, sec.5.04 and sec.5.05 of
the Original Indenture shall be applicable to Bonds of this Series, provided
that upon deposit with the Trustee of money to redeem Bonds of this Series, such
money shall be immediately available for payment.
SECTION 4. The holder of each and every Bond of this Series issued
hereunder hereby agrees to accept payment thereof prior to maturity on the terms
and conditions provided for in this Article II.
ARTICLE III
PAYMENT DEEMED MADE OF BONDS OF THIS SERIES
SECTION 1. In the event any Water Bonds shall be purchased by the Company
and surrendered by it to the Water Bond Trustee for cancellation or shall be
otherwise surrendered to the Water Bond Trustee for cancellation pursuant to the
Water Bond Indenture (except upon exchange for other Water Bonds), Bonds of this
Series equal in principal amount and maturity to the Water Bonds so surrendered
shall be deemed to have been paid, but only when and to the extent that (a) such
payment of the principal amount of such Bonds of this Series shall be noted by
an agency of the Company on the Schedule of Payments on such Bonds of this
Series and (if such agency is not the Trustee) written notice by such agency of
such notation shall have been received by the
<PAGE> 20
17
Trustee or (b) such Bonds of this Series shall have been surrendered to and
cancelled by the Trustee as provided in Section 3 of this Article III.
SECTION 2. In the event and to the extent the principal of or premium, if
any, or interest on any Water Bonds shall be paid out of funds held by the Water
Bond Trustee or out of any other funds or shall otherwise be deemed to be paid,
an equal amount of principal of or premium, if any, or interest on, as the case
may be, Bonds of this Series shall be deemed to have been paid, but in the case
of such payments of principal on such Bonds of this Series, only when and to the
extent that (a) such payment of the principal amount of such Bonds of this
Series shall be noted by an agency of the Company on the Schedule of Payments on
such Bonds of this Series and (if such agency is not the Trustee) written notice
by such agency of such notation shall have been received by the Trustee or (b)
such Bonds of this Series shall have been surrendered to and cancelled by the
Trustee as provided in Section 3 of this Article III.
SECTION 3. When payment of any principal amount of a Bond of this Series
shall be deemed to have been made as provided in Section 1 or 2 of this Article
III, the registered owner thereof shall surrender such Bond to an agency of the
Company for notation and notification or to the Trustee for cancellation as
provided in said Section. All Bonds of this Series which shall be deemed to have
been paid in full as provided in said Section 1 or 2 shall be surrendered to the
Trustee for cancellation and the Trustee shall forthwith cancel the same. In the
event that part of a Bond of this Series shall be deemed to have been paid as
provided in said Section 1 or 2, the registered owner may at its option
surrender such Bond to the Trustee for cancellation, in which event the Trustee
shall cancel such Bond and the Company shall execute and the Trustee shall
authenticate and deliver, without charge to the registered owner, Bonds of this
Series in such authorized denominations as shall be specified by the registered
owner in an aggregate principal amount equal to the unpaid balance of the
principal amount of such surrendered Bond.
ARTICLE IV
THE TRUSTEE
SECTION 1. The Trustee accepts the trusts created by this Supplemental
Indenture upon the terms and conditions in the Original Indenture and in this
Supplemental Indenture set forth. The recitals in this Supplemental Indenture
are made by the Company only and not by the Trustee. Each and every term and
condition contained in Article 13 of the Original Indenture shall apply to
<PAGE> 21
18
this Supplemental Indenture with the same force and effect as if the same were
herein set forth in full, with such omissions, variations and modifications
thereof as may be appropriate to make the same conform to this Supplemental
Indenture.
SECTION 2. The Company shall cause any agency of the Company, other than
the Trustee, which it may appoint from time to time to act as such agency in
respect of the Bonds of this Series, to execute and deliver to the Trustee an
instrument in which such agency shall:
(a) Agree to keep and maintain, and furnish to the Trustee from time
to time as reasonably requested by the Trustee, appropriate records of all
transactions carried out by it as such agency and to furnish the Trustee
such other information and reports as the Trustee may reasonably require;
and
(b) Certify that it is eligible for appointment as such agency and
agree to notify the Trustee promptly if it shall cease to be so eligible;
provided, however, that the Company, in lieu of causing any such agency to
furnish such an instrument, may make such other arrangements with the Trustee in
respect of any such agency as shall be satisfactory to the Trustee.
SECTION 3. The Trustee shall advise the Company, promptly, in writing of
the notation or receipt of written notice of notation on or cancellation of any
Bond of this Series provided for in Article III of this Supplemental Indenture.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 1. The Original Indenture, as heretofore supplemented, is in all
respects ratified and confirmed, and the Original Indenture, this Supplemental
Indenture and all other indentures supplemental to the Original Indenture shall
be read, taken and construed as one and the same instrument. Neither the
execution of this Supplemental Indenture nor anything herein contained shall be
construed to impair the lien of the Indenture on any of the property subject
thereto, and such lien shall remain in full force and effect as security for all
bonds now outstanding or hereafter issued under the Indenture. All covenants and
provisions of the Original Indenture, except as modified by this Supplemental
Indenture and all other indentures supplemental to the Original Indenture, shall
continue in full force and effect for the respective periods of
<PAGE> 22
19
time therein specified, and this Supplemental Indenture shall form part of the
Indenture. All terms defined in Article 1 of the Original Indenture shall, for
all purposes of this Supplemental Indenture, have the meanings in said Article 1
specified, except as modified by this Supplemental Indenture and all other
indentures supplemental to the Original Indenture and unless the context
otherwise requires.
SECTION 2. This Supplemental Indenture may be simultaneously executed in
any number of counterparts, and all said counterparts executed and delivered,
each as an original, shall constitute but one and the same instrument.
IN WITNESS WHEREOF, The Toledo Edison Company has caused its corporate name
to be hereunto affixed, this instrument to be signed by its President or a Vice
President and its corporate seal to be hereunto affixed and attested by its
Secretary or an Assistant Secretary for and in its behalf and The Chase
Manhattan Bank (National Association), as Trustee, in evidence of its acceptance
of the trust hereby created, has caused its corporate name to be hereunto
affixed, this instrument to be signed by its President or a Vice President and
its corporate seal to be hereunto affixed and attested by its Secretary, an
Assistant Secretary or a Corporate Trust Officer, for and in its behalf, all as
of the day and year first above written.
<PAGE> 23
S-1
THE TOLEDO EDISON COMPANY
BY Gary R. Leidich
-------------------------------------
VICE PRESIDENT
Attest: E. Lyle Pepin
---------------------------------------
Secretary
Signed, sealed and acknowledged on behalf of
The Toledo Edison Company
in the presence of
Patricia Barkey
- ------------------------------------------
Patricia Barkey
Amy McCabe
- ------------------------------------------
Amy McCabe
As witnesses
THE CHASE MANHATTAN BANK
(NATIONAL ASSOCIATION),
as Trustee,
By Valerie Dunbar
-----------------------------------
Second Vice President
Attest: Mary Lewicki
-------------------------------------
Corporate Trust Officer
Signed, sealed and acknowledged on behalf of
The Chase Manhattan Bank
(National Association)
in the presence of
Ronald J. Halleran
- ------------------------------------------
Ronald J. Halleran
Timothy E. Burke
- ------------------------------------------
Timothy E. Burke
As witnesses
<PAGE> 24
S-2
STATE OF OHIO
SS.:
COUNTY OF CUYAHOGA
On this 29th day of September, 1994, before me personally appeared GARY R.
LEIDICH and E. LYLE PEPIN to me personally known, who being by me severally duly
sworn, did say that they are a Vice President and the Secretary, respectively,
of The Toledo Edison Company, that the seal affixed to the foregoing instrument
is the corporate seal of said corporation and that said instrument was signed
and sealed in behalf of said corporation by authority of its Board of Directors;
and said officers severally acknowledged said instrument to be the free act and
deed of said corporation.
Sondra Y. Clarke
------------------------------------------
Notary Public
Sondra Y. Clarke
Notary Public, State of Ohio
Recorded in Cuyahoga County
My commission expires November 25,
1998
STATE OF NEW YORK
SS.:
COUNTY OF NEW YORK
On this 27th day of September, 1994, before me personally appeared VALERIE
DUNBAR and MARY LEWICKI to me personally known, who being by me severally duly
sworn, did say that they are a Second Vice President and a Corporate Trust
Officer, respectively, of The Chase Manhattan Bank (National Association), that
the seal affixed to the foregoing instrument is the corporate seal of said
association and that said instrument was signed and sealed in behalf of said
association by authority of its Board of Directors; and said officers severally
acknowledged said instrument to be the free act and deed of said association.
Della K. Benjamin
------------------------------------------
Notary Public
Della K. Benjamin
Notary Public, State of New York
No. 24-4659567
Qualified in Kings County
Commission Expires April 30, 1995
THIS INSTRUMENT PREPARED BY BRUCE T. ROSENBAUM, ATTORNEY AT LAW.
<PAGE> 25
R-1
This page contains information as to recording and filing which was not set
forth in this Supplemental Indenture at the time of execution. This page is not
a part of this Supplemental Indenture.
RECORDING AND FILING DATA
This Supplemental Indenture was filed for record and recorded in the record
of mortgages in the offices of the Recorders of the following Counties:
<TABLE>
<CAPTION>
FILED FOR
COUNTY VOLUME PAGE(S) RECORD
------ ------ ------- ---------
<S> <C> <C> <C>
Ohio
Belmont................
Defiance...............
Erie...................
Fulton.................
Henry..................
Lake...................
Monroe.................
Ottawa.................
Paulding...............
Putnam.................
Sandusky...............
Seneca.................
Williams...............
Wood...................
Pennsylvania
Beaver.................
</TABLE>
<TABLE>
<CAPTION>
MICROFICHE
----------
<S> <C> <C> <C>
Lucas, Ohio..........
</TABLE>
An amendment to a previously filed financing statement and a counterpart of
this Supplemental Indenture were filed in the office of the Secretary of the
Commonwealth of Pennsylvania on under original or amendment file
number , microfilm number , to comply with the filing
requirements of the Pennsylvania enactment of the Uniform Commercial Code.
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements contained in the Form 10-Q for the quarterly period ended
September 30, 1994 of The Toledo Edison Company and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0000352049
<NAME> THE TOLEDO EDISON COMPANY
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,044,844
<OTHER-PROPERTY-AND-INVEST> 154,549
<TOTAL-CURRENT-ASSETS> 295,680
<TOTAL-DEFERRED-CHARGES> 958,306
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 3,453,379
<COMMON> 195,687
<CAPITAL-SURPLUS-PAID-IN> 602,116
<RETAINED-EARNINGS> (123,844)
<TOTAL-COMMON-STOCKHOLDERS-EQ> 673,959
6,685
210,000
<LONG-TERM-DEBT-NET> 1,169,205
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 71,205
11,665
<CAPITAL-LEASE-OBLIGATIONS> 88,469
<LEASES-CURRENT> 32,849
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,189,342
<TOT-CAPITALIZATION-AND-LIAB> 3,453,379
<GROSS-OPERATING-REVENUE> 660,471
<INCOME-TAX-EXPENSE> 28,099
<OTHER-OPERATING-EXPENSES> 493,153
<TOTAL-OPERATING-EXPENSES> 521,252
<OPERATING-INCOME-LOSS> 139,219
<OTHER-INCOME-NET> 13,664
<INCOME-BEFORE-INTEREST-EXPEN> 152,883
<TOTAL-INTEREST-EXPENSE> 85,703
<NET-INCOME> 67,180
15,457
<EARNINGS-AVAILABLE-FOR-COMM> 51,723
<COMMON-STOCK-DIVIDENDS> 0
<TOTAL-INTEREST-ON-BONDS> 62,876
<CASH-FLOW-OPERATIONS> 154,963
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
