<PAGE>
614/223-1632
Securities and Exchange Commission
450 Fifth Street, N.W.
ATTN: Filing Desk, Stop 1-4
Washington, D.C. 20549-1004
January 10, 1994
Re: Columbus Southern Power Company
Registration Statement on Form S-3
File No. 33-50447
Gentlemen:
Pursuant to Rule 424(b)(3), transmitted herewith is the
Prospectus, dated December 17, 1993, as supplemented by the
Prospectus Supplement, dated December 20, 1993, and Pricing
Supplement Nos. 1 and 2, each dated January 7, 1994, to be used
in connection with the public offering by the Company of its
First Mortgage Bond, Designated Secured Medium Term Note, 7.45%
Series due March 1, 2024 in the principal amount of $50,000,000
and its First Mortgage Bond, Designated Secured Medium Term Note,
6.55% Series due March 1, 2004 in the principal amount of
$50,000,000, respectively.
Very truly yours,
/s/ John M. Adams, Jr.
John M. Adams, Jr.
JMA/mms
cspfinan.93b\424b3ltr.mtn
Rule 424(b)(3)
File No. 33-50447
CUSIP No.: 19958L AV7
Pricing Supplement No. 1 Dated January 7, 1994
(To Prospectus dated December 17, 1993 and
Prospectus Supplement dated December 20, 1993)
$255,000,000
COLUMBUS SOUTHERN POWER COMPANY
First Mortgage Bonds, Designated Secured Medium Term Notes
Due From Nine Months to Forty-Two Years from Date of Issue
Principal Amount: $50,000,000
Issue Price: 100%
Original Issue Date: 1-20-1994
Stated Maturity: 3-1-2024
Interest Rate: 7.45%
Form: Book-Entry
Agent's Discount or Commission: .750%
Redemption: The Notes will be redeemable on or after March 1,
2004 at the option of the Company in whole or in part at any time
upon not less than 30 days' notice, together with accrued
interest, (a) at the regular redemption prices (expressed as a
percentage of the principal amount thereof) set forth below, if
redeemed otherwise than through the use or application of cash
deposited pursuant to the maintenance and replacement provisions
of Article IV of the Supplemental Indenture dated September 1,
1940 and otherwise than by the use of cash deposited with or held
by the Trustee representing the proceeds of insurance or released
property pursuant to Section 2 of Article VIII of the Mortgage;
or (b) at the special redemption price of 100.00% of the
principal amount thereof, if redeemed by the use or application
of cash deposited pursuant to the maintenance and replacement
provisions of Article IV of the Supplemental Indenture dated
September 1, 1940 or by the use of cash deposited with or held by
the Trustee representing the proceeds of insurance or released
property pursuant to Section 2 of Article VIII of the Mortgage.
(If redeemed during
the twelve months Regular
beginning March 1) Redemption
Year Price
2004 103.73%
2005 103.36
2006 102.98
2007 102.61
2008 102.24
2009 101.87
2010 101.49
2011 101.12
2012 100.75
2013 100.38
2014 100.00
2015 100.00
2016 100.00
2017 100.00
2018 100.00
2019 100.00
2020 100.00
2021 100.00
2022 100.00
2023 100.00
The Company sold the Notes to Salomon Brothers Inc, CS First
Boston Corporation and Citicorp Securities, Inc. as principals in
this transaction for resale to one or more investors at varying
prices related to prevailing market conditions at the time or
times of resale as determined by Salomon Brothers Inc, CS First
Boston Corporation and Citicorp Securities, Inc., as the case may
be.
Rule 424(b)(3)
File No. 33-50447
CUSIP No.: 19958L AW5
Pricing Supplement No. 2 Dated January 7, 1994
(To Prospectus dated December 17, 1993 and
Prospectus Supplement dated December 20, 1993)
$255,000,000
COLUMBUS SOUTHERN POWER COMPANY
First Mortgage Bonds, Designated Secured Medium Term Notes
Due From Nine Months to Forty-Two Years from Date of Issue
Principal Amount: $50,000,000
Issue Price: 100%
Original Issue Date: 1-20-1994
Stated Maturity: 3-1-2004
Interest Rate: 6.55%
Form: Book-Entry
Agent's Discount or Commission: .625%
Redemption: The Notes will be redeemable on or after March 1,
1999 at the option of the Company in whole or in part at any time
upon not less than 30 days' notice, together with accrued
interest, (a) at the regular redemption prices (expressed as a
percentage of the principal amount thereof) set forth below, if
redeemed otherwise than through the use or application of cash
deposited pursuant to the maintenance and replacement provisions
of Article IV of the Supplemental Indenture dated September 1,
1940 and otherwise than by the use of cash deposited with or held
by the Trustee representing the proceeds of insurance or released
property pursuant to Section 2 of Article VIII of the Mortgage;
or (b) at the special redemption price of 100.00% of the
principal amount thereof, if redeemed by the use or application
of cash deposited pursuant to the maintenance and replacement
provisions of Article IV of the Supplemental Indenture dated
September 1, 1940 or by the use of cash deposited with or held by
the Trustee representing the proceeds of insurance or released
property pursuant to Section 2 of Article VIII of the Mortgage.
(If redeemed during
the twelve months Regular
beginning March 1) Redemption
Year Price
1999 101.88%
2000 100.94
2001 100.00
2002 100.00
2003 100.00
The Company sold the Notes to Salomon Brothers Inc, CS First
Boston Corporation and Citicorp Securities, Inc. as principals in
this transaction for resale to one or more investors at varying
prices related to prevailing market conditions at the time or
times of resale as determined by Salomon Brothers Inc, The First
Boston Corporation and Citicorp Securities, Inc., as the case may
be.
Prospectus Supplement
(To Prospectus Dated December 17, 1993)
$255,000,000
Columbus Southern Power Company
First Mortgage Bonds, Designated Secured Medium Term Notes,
Due From Nine Months to Forty-Two Years from Date of Issue
Columbus Southern Power Company (the "Company") may from time to
time offer its First Mortgage Bonds, Designated Secured Medium
Term Notes (the "Notes"), in the aggregate principal amount of up
to $255,000,000, subject to reduction as a result of the sale of
other Debt Securities as described in the accompanying
Prospectus. Each Note will mature from nine months to forty-two
years from its date of issue.
Each Note will bear interest at a fixed rate. Unless otherwise
indicated in a pricing supplement to this Prospectus Supplement
(a "Pricing Supplement"), interest on each Note will be payable
semiannually in arrears on each May 1 and November 1 and at
redemption, if any, or Stated Maturity.
The interest rate, Issue Price, Stated Maturity, Interest Payment
Dates, redemption provisions, if any, and certain other terms
with respect to each Note will be established at the time of
issuance and set forth in a Pricing Supplement.
Each series of Notes will be represented by a global Note
("Global Note") registered in the name of a nominee of The
Depository Trust Company, as Depository, or another depository
(such a Note, so represented, being called a "Book-Entry Note").
Beneficial interests in Global Notes representing Book-Entry
Notes will be shown on, and transfers thereof will be effected
only through, records maintained by the Depository's
participants. Book-Entry Notes will not be issuable as
Certificated Notes except under the circumstances described
herein. See "Supplemental Description of the Notes--Book-Entry
Notes".
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS SUPPLEMENT, ANY PRICING SUPPLEMENT HERETO OR
THE ACCOMPANYING PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
Price to Agents' Proceeds to
Public(1) Commission(2) the Company(2)(3)
Per Note 100.000% .125%-.750% 99.875%-99.250%
Total $255,000,000 $318,750- $254,681,250-
$1,912,500 $253,087,500
(1) Unless otherwise specified in the applicable Pricing
Supplement, the price to the public will be 100% of the
principal amount.
(2) The Company will pay to Salomon Brothers Inc, CS First
Boston Corporation and Citicorp Securities, Inc., each as
agent (together, the "Agents"), a commission of from .125%
to .750% of the principal amount of any Note, depending upon
its Stated Maturity, sold through such Agent. The Company
may also sell Notes to any Agent, as principal, at a
discount for resale to one or more investors or to another
broker-dealer (acting as principal for purposes of resale)
at varying prices related to prevailing market prices at the
time of resale, as determined by such Agent. Unless
otherwise indicated in the applicable Pricing Supplement,
any Note sold to an Agent as principal shall be purchased by
such Agent at a price equal to 100% of the principal amount
thereof less the percentage equal to the commission
applicable to an agency sale of a Note of identical maturity
and may be resold by such Agent. The Notes may also be sold
by the Company directly to investors, in which case no
commission will be payable to the Agents. The Company has
agreed to indemnify the Agents for certain liabilities,
including certain liabilities under the Securities Act of
1933, as amended. See "Plan of Distribution" herein.
(3) Before deduction of expenses payable by the Company
estimated at $416,688, including reimbursement of certain
expenses of the Agents.
The Notes are being offered on a continuous basis by the Company
through the Agents which have agreed to use their reasonable best
efforts to solicit offers to purchase Notes. The Company may
sell Notes at a discount to any Agent, as principal, for resale
to one or more investors or other purchasers at varying prices
related to prevailing market prices at the time of resale, as
determined by such Agent. The Company also may sell Notes
directly to investors on its own behalf. The Notes will not be
listed on any securities exchange, and there is no assurance that
the maximum amount of Notes offered by this Prospectus Supplement
will be sold or that there will be a secondary market for the
Notes. The Company reserves the right to withdraw, cancel or
modify the offer made hereby without notice. The Company or an
Agent may reject an order, whether or not solicited, in whole or
in part. See "Plan of Distribution" herein.
Salomon Brothers Inc
CS First Boston
Citicorp Securities, Inc.
The date of this Prospectus Supplement is December 20, 1993.
IN CONNECTION WITH THIS OFFERING, THE AGENTS MAY OVER-ALLOT
OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET
PRICES OF THE NOTES OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
____________________
SUPPLEMENTAL DESCRIPTION OF THE NOTES
The following description of the particular terms of the
Notes supplements, and to the extent inconsistent therewith
replaces, the description of the general terms and provisions of
the Debt Securities set forth under "Description of Debt
Securities" in the accompanying Prospectus, to which description
reference is hereby made. Certain capitalized terms used herein
are defined under "Description of Debt Securities" in the
accompanying Prospectus.
General
The Notes will be issued in one or more series of Debt
Securities under the Mortgage. The Notes will be limited in
aggregate principal amount to $255,000,000, subject to reduction
as a result of the sale of other Debt Securities as described in
the accompanying Prospectus.
The Notes will be issued in fully registered form only,
without coupons. Each series of Notes will be issued initially
as a Book-Entry Note. Except as set forth herein under "Book-
Entry Notes" or in any Pricing Supplement relating to specific
Notes, the Notes will not be issuable as Certificated Notes. The
authorized denominations of Global Notes will be $1,000 and any
integral multiple thereof up to $150,000,000.
Each Note will mature from 9 months to 42 years from its
date of issue, as selected by the purchaser and agreed to by the
Company. Each Note may also be subject to redemption at the
option of the Company prior to its Stated Maturity (as defined
below).
The Pricing Supplement relating to a Note will describe the
following terms: (i) the price (expressed as a percentage of the
aggregate principal amount thereof) at which such Note will be
issued (the "Issue Price"); (ii) the date on which such Note will
be issued (the "Original Issue Date"); (iii) the date on which
such Note will mature (the "Stated Maturity"); (iv) the rate per
annum at which such Note will bear interest, and the Interest
Payment Dates (as defined below); (v) any applicable discounts or
commissions; (vi) whether such Note may be redeemed at the option
of the Company prior to Stated Maturity and, if so, the
provisions relating to such redemption; and (vii) any other terms
of such Note not inconsistent with the provisions of the
Mortgage.
"Business Day" with respect to any Note means any day, other
than a Saturday or Sunday, which is not a day on which banking
institutions or trust companies in The City of New York, New York
or the city in which is located any office or agency maintained
for the payment of principal of or premium, if any, or interest
on such Note are authorized or required by law, regulation or
executive order to remain closed.
Payment of Principal and Interest
Payments of interest on the Notes (other than interest
payable at redemption, if any, or Stated Maturity) will be made,
except as provided below, in immediately available funds to the
Owners of such Notes (which, in the case of Global Notes
representing Book-Entry Notes, will be a nominee of the
Depository, as defined below) as of the Regular Record Date (as
defined below) for each Interest Payment Date; provided, however,
that if the Original Issue Date of a Note issued as a Global Note
is after a Regular Record Date and before the corresponding
Interest Payment Date, interest for the period from and including
the Original Issue Date for such Note to but excluding such
Interest Payment Date will be paid on the next succeeding
Interest Payment Date to the Owner of such Note on the related
Regular Record Date.
Unless otherwise specified in the applicable Pricing
Supplement, the principal of the Notes and any premium and
interest thereon payable at redemption, if any, or Stated
Maturity will be paid in immediately available funds upon
surrender thereof at the office of Citibank, N.A., at 111 Wall
Street in New York, New York. Should any Note be issued other
than as a Global Note, interest (other than interest payable at
redemption or Stated Maturity) may, at the option of the Company,
be paid to the person entitled thereto by check mailed to any
such person. See "Book-Entry Notes" herein.
If, with respect to any Note, any Interest Payment Date,
redemption date or Stated Maturity is not a Business Day, payment
of amounts due on such Note on such date may be made on the next
succeeding Business Day, and, if such payment is made or duly
provided for on such Business Day, no interest shall accrue on
such amounts for the period from and after such Interest Payment
Date, redemption date or Stated Maturity, as the case may be, to
such Business Day.
The "Regular Record Date" with respect to a Note (unless
otherwise specified in the applicable Pricing Supplement) will be
the April 15 or October 15, as the case may be, next preceding an
Interest Payment Date for Notes or if such April 15 or October 15
is not a Business Day, the next preceding Business Day.
Each Note issued as a Global Note will bear interest from
its Original Issue Date at the fixed interest rate per annum
stated on the face thereof until the principal amount thereof is
paid or made available for payment. Unless otherwise set forth
in the applicable Pricing Supplement, interest on each Note will
be payable semiannually in arrears on each May 1 and November 1
(each such date, an "Interest Payment Date") and at redemption,
if any, or Stated Maturity. Each payment of interest in respect
of an Interest Payment Date shall include interest accrued
through the day before such Interest Payment Date. Interest on
Notes will be computed on the basis of a 360-day year of twelve
30-day months.
Redemption
The Pricing Supplement relating to each Note will indicate
either that such Note cannot be redeemed prior to Stated Maturity
or that such Note will be redeemable at the option of the Company
in whole or in part, under the terms and conditions and at the
prices specified therein, together with accrued interest to the
date of redemption. Any such redemption may be made upon not
less than 30 days' notice.
Book-Entry Notes
Except under the circumstances described below, the Notes
will be issued in whole or in part in the form of one or more
Global Notes that will be deposited with, or on behalf of, The
Depository Trust Company, New York, New York ("DTC"), or such
other depository as may be subsequently designated (the
"Depository"), and registered in the name of a nominee of the
Depository.
Book-Entry Notes represented by a Global Note will not be
exchangeable for Certificated Notes and, except under the
circumstances described below, will not otherwise be issuable as
Certificated Notes.
So long as the Depository, or its nominee, is the registered
owner of a Global Note, such Depository or such nominee, as the
case may be, will be considered the sole owner of the individual
Book-Entry Notes represented by such Global Note for all purposes
under the Mortgage. Payments of principal of and premium, if
any, and any interest on individual Book-Entry Notes represented
by a Global Note will be made to the Depository or its nominee,
as the case may be, as the Owner of such Global Note. Except as
set forth below, owners of beneficial interests in a Global Note
will not be entitled to have any of the individual Book-Entry
Notes represented by such Global Note registered in their names,
will not receive or be entitled to receive physical delivery of
any such Book-Entry Notes and will not be considered the Owners
thereof under the Mortgage, including, without limitation, for
purposes of consenting to any amendment thereof or supplement
thereto.
If the Depository is at any time unwilling or unable to
continue as depository and a successor depository is not
appointed, the Company will issue individual Certificated Notes
in exchange for the Global Note or Notes representing the
corresponding Book-Entry Notes. In addition, the Company may at
any time and in its sole discretion determine not to have any
Notes represented by one or more Global Notes and, in such event,
will issue individual Certificated Notes in exchange for the
Global Notes representing the corresponding Book-Entry Notes. In
any such instance, an owner of a Book-Entry Note represented by a
Global Note will be entitled to physical delivery of individual
Certificated Notes equal in principal amount to such Book-Entry
Note and to have such Certificated Notes registered in its name.
Individual Certificated Notes so issued will be issued as
registered Notes in denominations, unless otherwise specified by
the Company, of $1,000 and integral multiples thereof.
DTC has confirmed to the Company and the Agents the
following information:
1. DTC will act as securities depository for the
Global Notes. The Notes will be issued as fully-registered
securities registered in the name of Cede & Co. (DTC's
partnership nominee). One fully-registered Global Note will
be issued for each series of the Notes, each in the
aggregate principal amount of such series, and will be
deposited with DTC. If, however, the aggregate principal
amount of any series of Notes exceeds $150,000,000, one
certificate will be issued with respect to each $150,000,000
of principal amount and an additional certificate will be
issued with respect to any remaining principal amount of
such series.
2. DTC is a limited-purpose trust company organized
under the New York Banking Law, a "banking organization"
within the meaning of the New York Banking Law, a member of
the Federal Reserve System, a "clearing corporation" within
the meaning of the New York Uniform Commercial Code, and a
"clearing agency" registered pursuant to the provisions of
Section 17A of the Securities Exchange Act of 1934. DTC
holds securities that its participants ("Participants")
deposit with DTC. DTC also facilitates the settlement among
Participants of securities transactions, such as transfers
and pledges, in deposited securities through electronic
computerized book-entry changes in Participants' accounts,
thereby eliminating the need for physical movement of
securities certificates. Direct Participants include
securities brokers and dealers, banks, trust companies,
clearing corporations, and certain other organizations. DTC
is owned by a number of its Direct Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange,
Inc., and the National Association of Securities Dealers,
Inc. Access to the DTC system is also available to others
such as securities brokers and dealers, banks, and trust
companies that clear through or maintain a custodial
relationship with a Direct Participant, either directly or
indirectly ("Indirect Participants"). The Rules applicable
to DTC and its Participants are on file with the Securities
and Exchange Commission.
3. Purchases of Notes under the DTC system must be
made by or through Direct Participants, which will receive a
credit for the Notes on DTC's records. The ownership
interest of each actual purchaser of each Note ("Beneficial
Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchase, but
Beneficial Owners are expected to receive written
confirmations providing details of the transaction, as well
as periodic statements of their holdings, from the Direct or
Indirect Participant through which the Beneficial Owner
entered into the transaction. Transfers of ownership
interests in the Notes are to be accomplished by entries
made on the books of Participants acting on behalf of
Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in
Notes, except in the event that use of the book-entry system
for the Notes is discontinued.
4. To facilitate subsequent transfers, all Notes
deposited by Participants with DTC are registered in the
name of DTC's partnership nominee, Cede & Co. The deposit
of Notes with DTC and their registration in the name of Cede
& Co. effect no change in beneficial ownership. DTC has no
knowledge of the actual Beneficial Owners of the Notes;
DTC's records reflect only the identity of the Direct
Participants to whose accounts such Notes are credited,
which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of
their holdings on behalf of their customers.
5. Conveyance of notices and other communications by
DTC to Direct Participants, by Direct Participants to
Indirect Participants, and by Direct Participants and
Indirect Participants to Beneficial Owners will be governed
by arrangements among them, subject to any statutory or
regulatory requirements as may be in effect from time to
time.
6. Redemption notices shall be sent to Cede & Co. If
less than all of the Notes within an issue are being
redeemed, DTC's practice is to determine by lot the amount
of the interest of each Direct Participant in such issue to
be redeemed.
7. Neither DTC nor Cede & Co. will consent or vote
with respect to the Notes. Under its usual procedures, DTC
mails an Omnibus Proxy to the Company as soon as possible
after the record date. The Omnibus Proxy assigns Cede &
Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Notes are credited on the
record date (identified in a listing attached to the Omnibus
Proxy).
8. Principal and interest payments on the Notes will
be made to DTC. DTC's practice is to credit Direct
Participants' accounts on the date on which interest is
payable in accordance with their respective holdings shown
on DTC's records unless DTC has reason to believe that it
will not receive payment on such date. Payments by
Participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the
case with securities held for the accounts of customers in
bearer form or registered in "street name", and will be the
responsibility of such Participant and not of DTC, the
Agents or the Company, subject to any statutory or
regulatory requirements as may be in effect from time to
time. Payment of principal and interest to DTC is the
responsibility of the Company or the Trustee, disbursement
of such payments to Direct Participants shall be the
responsibility of DTC, and disbursement of such payments to
the Beneficial Owners shall be the responsibility of Direct
and Indirect Participants.
9. DTC may discontinue providing its services as
securities depository with respect to the Notes at any time
by giving reasonable notice to the Company and the Trustee.
Under such circumstances, in the event that a successor
securities depository is not obtained, Certificated Notes
are required to be printed and delivered.
10. The Company may decide to discontinue use of the
system of book-entry transfers through DTC (or a successor
securities depository). In that event, Certificated Notes
will be printed and delivered.
The information in this section concerning DTC and DTC's
book-entry system has been obtained from sources that the Company
believes to be reliable, but the Company takes no responsibility
for the accuracy thereof.
The Agents are Direct Participants of DTC.
None of the Company, the Trustee or any agent for payment on
or registration of transfer or exchange of any Global Note will
have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial
interests in such Global Note or for maintaining, supervising or
reviewing any records relating to such beneficial interests.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following summary describes certain United States
federal income tax consequences of the ownership of Notes as of
the date hereof. Except where noted, it deals only with Notes
held by initial purchasers who have purchased Notes at the
initial offering price thereof and who hold such Notes as capital
assets and does not deal with special situations, such as those
of dealers in securities, financial institutions, life insurance
companies, United States Holders (as defined below) whose
"functional currency" is not the U.S. dollar, or Non-United
States Holders (as defined below) owning (actually or
constructively) ten percent or more of the combined voting power
of all classes of voting stock of the Company. Persons
considering the purchase, ownership or disposition of Notes
should consult their own tax advisors concerning the federal
income tax consequences in light of their particular situations
as well as any consequences arising under the laws of any other
taxing jurisdiction. Furthermore, the discussion below is based
upon the provisions of the Internal Revenue Code of 1986, as
amended (the "Code") and regulations, rulings and judicial
decisions thereunder as of the date hereof, and such authorities
may be repealed, revoked or modified so as to result in federal
income tax consequences different from those discussed below.
United States Holders
As used herein, a "United States Holder" of a Note means a
holder that is a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in
or under the laws of the United States or any political
subdivision thereof, or an estate or trust the income of which is
subject to United States federal income taxation regardless of
its source. A "Non-United States Holder" is a holder that is not
a United States Holder.
Payments of Interest. Except as set forth below, interest
on a Note will generally be taxable to a United States Holder as
ordinary income from domestic sources at the time it is paid or
accrued in accordance with the United States Holder's method of
accounting for tax purposes.
Notes with a maturity of one year or less will be subject to
special tax rules that apply to the timing of inclusion in income
of interest on such obligations ("Short-Term Notes"). An
obligation which is issued for an amount less than its "stated
redemption price at maturity" will generally be considered to be
issued at a discount for federal income tax purposes. Under
proposed Treasury Regulations (the "Proposed Regulations")
involving original issue discount ("OID"), all payments
(including all stated interest) with respect to a Short-Term Note
will be included in the stated redemption price at maturity and,
thus, holders will be taxable on discount in lieu of stated
interest. This discount will be equal to the excess of the
stated redemption price at maturity over the initial offering
price to the public at which a substantial amount of the Notes is
sold (for purposes of this section of the Prospectus Supplement,
the "issue price"), unless a holder elects to compute this
discount as acquisition discount using tax basis instead of issue
price. In general, individual and certain other cash method
holders of a Short-Term Note are not required to include accrued
discount in income before receiving cash unless an election is
made to do so. Holders who report income for federal income tax
purposes on the accrual method and certain other holders,
including banks and dealers in securities, are required to
include discount on such Short-Term Notes in income on a
straight-line method (as ordinary income) unless an election is
made based on daily compounding. The amount of discount which
accrues in respect of a Short-Term Note while held by a holder
will be added to such holder's tax basis for such Note to the
extent included in income.
The Proposed Regulations were issued on December 21, 1992
and withdrew previously proposed regulations. The Proposed
Regulations state that their provisions are to be applicable to
Notes issued at any time 60 days after the regulations are
published in final form. They are not final and are subject to
change. It is impossible to predict whether or in what form the
Proposed Regulations will become final and what the scope or
effective date of any such final regulations might be. Holders
should therefore consult their tax advisers as to the potential
application of the above-discussed provisions of the Proposed
Regulations.
Sale, Exchange and Retirement of Notes. Upon the sale,
exchange or retirement of a Note, a United States Holder will
recognize gain or loss equal to the difference between the amount
realized upon the sale, exchange or retirement and the adjusted
tax basis of the Note. Under the Proposed Regulations, a United
States Holder's tax basis in a Note will, in general, be the
United States Holder's cost therefor, increased by any discount
included in income by the United States Holder and reduced by any
cash payments on the Note other than "qualified stated interest"
payments. (In general, "qualified stated interest" includes
interest at a single fixed rate unconditionally payable at least
annually, other than interest on Short-Term Notes.) Except as
described below with respect to certain Short-Term Notes, such
gain or loss will be capital gain or loss and will be long-term
capital gain or loss if at the time of sale, exchange or
retirement the Note has been held for more than one year. Under
current law, net capital gains of individuals are, under certain
circumstances, taxed at lower rates than items of ordinary
income. The deductibility of capital losses is subject to
limitations.
In the case of a cash basis holder who does not include
discount income currently, any gain realized on the sale,
exchange or retirement of the Short-Term Note will be ordinary
interest income to the extent of the discount accrued on a
straight-line basis (or, if elected, according to a constant
yield method based on daily compounding) through the date of
sale, exchange or retirement. In addition, such non-electing
holders which are not subject to the current inclusion
requirement described above will be required to defer deductions
for any interest paid on indebtedness incurred or continued to
purchase or carry such Short-Term Notes in an amount not
exceeding the deferred interest income, until such deferred
interest income is realized.
Non-United States Holders
Non-United States Holders will not be subject to United
States federal income taxes, including withholding taxes, on the
interest income (including any OID) on, or gain from the sale or
disposition of, any Note provided that (1) the interest income or
gain is not effectively connected with the conduct by the
Non-United States Holder of a trade or business within the United
States, (2) the Non-United States Holder is not a controlled
foreign corporation related to the Company through stock
ownership, (3) with respect to any gain, the Non-United States
Holder, if an individual, is not present in the United States for
183 days or more during the taxable year and (4) the Non-United
States Holder provides the correct certification of his status
(which may generally be satisfied by providing an Internal
Revenue Service Form W-8 certifying that the beneficial owner is
not a United States Holder and providing the name and address of
the beneficial owner).
An individual holder of a Note who is not a citizen or
resident of the United States at the time of the holder's death
will not be subject to United States federal estate tax as a
result of the holder's death, as long as any interest received on
the Note, if received by the holder at the time of the holder's
death, would not be effectively connected with the conduct of a
trade or business by such individual in the United States.
Backup Withholding
In general, if a holder other than a corporate holder fails
to furnish a correct taxpayer identification number or
certification of foreign or other exempt status, fails to report
dividend and interest income in full, or fails to certify that
such holder has provided a correct taxpayer identification number
and that the holder is not subject to backup withholding, a 31
percent federal backup withholding tax may be withheld from
amounts paid to such holder. An individual's taxpayer
identification number is such individual's social security
number. The backup withholding tax is not an additional tax and
may be credited against a holder's regular federal income tax
liability or refunded by the Internal Revenue Service where
applicable.
PLAN OF DISTRIBUTION
The Notes are being offered on a continuous basis by the
Company through the Agents, which have agreed to use their
reasonable best efforts to solicit offers to purchase Notes.
Initial purchasers may propose certain terms of the Notes, but
the Company will have the right to accept offers to purchase
Notes and may reject proposed purchases in whole or in part. The
Agents will have the right, in their discretion reasonably
exercised and without notice to the Company, to reject any
proposed purchase of Notes in whole or in part. The Company will
pay each Agent a commission of from .125% to .750% of the
principal amount of Notes sold through it, depending upon Stated
Maturity. The Company also may sell Notes to any Agent, acting
as principal, at a discount to be agreed upon at the time of
sale, for resale to one or more investors or to another broker-
dealer (acting as principal for purposes of resale) at varying
prices related to prevailing market prices at the time of such
resale, as determined by such Agent. An Agent may resell a Note
purchased by it as principal to another broker-dealer at a
discount, provided such discount does not exceed the commission
or discount received by such Agent from the Company in connection
with the original sale of such Note. The Company may also sell
Notes directly to investors on its own behalf at a price to be
agreed upon at the time of sale or through negotiated
underwritten transactions with one or more underwriters. In the
case of sales made directly by the Company, no commission or
discount will be paid or allowed.
No Note will have an established trading market when
issued. The Notes will not be listed on any securities
exchange. The Agents may make a market in the Notes, but the
Agents are not obligated to do so and may discontinue any market-
making at any time without notice. There can be no assurance of
a secondary market for any Notes, or that the Notes will be sold.
The Agents, whether acting as agent or principal, may be
deemed to be "underwriters" within the meaning of the Securities
Act of 1933, as amended (the "Securities Act"). The Company has
agreed to indemnify the Agents against certain liabilities,
including certain liabilities under the Securities Act.
Salomon Brothers Inc, CS First Boston Corporation and
Citicorp Securities, Inc. and certain affiliates thereof engage
in transactions with and perform services for the Company and its
affiliates in the ordinary course of business. The Company and
its affiliates also utilize many of the banking services offered
by Citibank, N.A. (the Trustee), an affiliate of Citicorp
Securities, Inc., in the normal course of their businesses.
PROSPECTUS
Columbus Southern Power Company
$255,000,000
Debt Securities
Columbus Southern Power Company (the "Company") intends to
offer from time to time up to $255,000,000 aggregate principal
amount of its Debt Securities, consisting of First Mortgage Bonds
(the "new Bonds") in one or more series and/or First Mortgage
Bonds, Designated Secured Medium Term Notes (the "Notes"), in one
or more series, at prices and on terms to be determined at the
time or times of sale (the new Bonds and the Notes are
hereinafter collectively referred to as the "Debt Securities").
The aggregate principal amount, rate and time of payment of
interest, maturity, initial public offering price, if any,
redemption provisions, if any, credit enhancement, if any,
improvement fund, if any, dividend restrictions in addition to
those described herein, if any, and other specific terms of each
series of Debt Securities in respect of which this Prospectus is
being delivered will be set forth in an accompanying prospectus
or pricing supplement ("Prospectus Supplement").
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The Company may sell the Debt Securities through
underwriters, dealers or agents, or directly to one or more
institutional purchasers. A Prospectus Supplement will set forth
the names of underwriters or agents, if any, any applicable
commissions or discounts and the net proceeds to the Company from
any such sale.
The date of this Prospectus is December 17, 1993
No dealer, salesperson or other person has been authorized
to give any information or to make any representation not
contained in this Prospectus in connection with the offer made by
this Prospectus or any Prospectus Supplement relating hereto,
and, if given or made, such information or representation must
not be relied upon as having been authorized by the Company or
any underwriter, agent or dealer. Neither this Prospectus nor
this Prospectus as supplemented by any Prospectus Supplement
constitutes an offer to sell, or a solicitation of an offer to
buy, by any underwriter, agent or dealer in any jurisdiction in
which it is unlawful for such underwriter, agent or dealer to
make such an offer or solicitation. Neither the delivery of this
Prospectus or this Prospectus as supplemented by any Prospectus
Supplement nor any sale made thereunder shall, under any
circumstances, create any implication that there has been no
change in the affairs of the Company since the date hereof or
thereof.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934 (the "1934 Act") and in
accordance therewith files reports and other information with the
Securities and Exchange Commission (the "SEC"). Such reports and
other information may be inspected and copied at the public
reference facilities maintained by the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549; Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661; and 7
World Trade Center, 13th Floor, New York, New York 10048. Copies
of such material can be obtained from the Public Reference
Section of the SEC, 450 Fifth Street, N.W., Washington, D.C.
20549 at prescribed rates.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by the Company with the SEC
are incorporated in this Prospectus by reference:
-- The Company's Annual Report on Form 10-K for the year
ended December 31, 1992; and
-- The Company's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1993, June 30, 1993 and
September 30, 1993.
All documents subsequently filed by the Company pursuant to
Section 13(a), 13(c), 14 or 15(d) of the 1934 Act after the date
of this Prospectus and prior to the termination of the offering
made by this Prospectus shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the
date of filing of such documents.
Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other
subsequently filed document which is deemed to be incorporated by
reference herein or in a Prospectus Supplement modifies or
supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to
whom a copy of this Prospectus has been delivered, upon the
written or oral request of any such person, a copy of any or all
of the documents described above which have been incorporated by
reference in this Prospectus, other than exhibits to such
documents. Requests for copies of such documents should be
addressed to Mr. G. C. Dean, American Electric Power Service
Corporation, 1 Riverside Plaza, Columbus, Ohio 43215 (telephone
number: 614-223-1000). The information relating to the Company
contained in this Prospectus or any Prospectus Supplement
relating hereto does not purport to be comprehensive and should
be read together with the information contained in the documents
incorporated by reference.
THE COMPANY
The Company is an electric utility operating in substantial
areas of central and southern Ohio. Its principal executive
offices are located at 215 North Front Street, Columbus, Ohio
43215 (telephone number: 614-464-7700). The Company is a
subsidiary of American Electric Power Company, Inc. ("AEP") and
is a part of the AEP integrated utility system (the "AEP
System"). Executive offices of AEP are located at 1 Riverside
Plaza, Columbus, Ohio 43215 (telephone number: 614-223-1000).
The Company is engaged in the generation, purchase,
transmission and distribution of electric power to approximately
569,000 residential, commercial, industrial and other customers
in Ohio. The Company's service area is comprised of two areas in
Ohio, which include portions of twenty-five counties. One area
includes the City of Columbus and the other is a predominantly
rural area in south central Ohio. Approximately 80% of the
Company's electric operating revenues, other than sales for
resale, are derived from the Columbus area. Wholesale electric
service is furnished to three small municipalities which own and
operate their own distribution systems.
RECENT DEVELOPMENTS
Reference is made to pages 16 and 17 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1992 (the
"1992 Form 10-K"), pages D-5 and D-8 of the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1993, pages
D-5 and D-9 of the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1993 (the "Second Quarter Form 10-Q")
and pages D-6 and D-8 of the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 1993 (the "Third Quarter
Form 10-Q").
The Wm. H. Zimmer Generating Station ("Zimmer Plant") was
placed in commercial operation as a 1,300-megawatt coal-fired
plant on March 30, 1991. The Company owns 25.4% of the Zimmer
Plant with the remainder owned by two unaffiliated companies, The
Cincinnati Gas & Electric Company (46.5%) and The Dayton Power
and Light Company (28.1%).
On April 2, 1991, the Company filed with The Public
Utilities Commission of Ohio ("PUCO") a request to increase rates
in the annual amount of $202,500,000. On May 12, 1992, the PUCO
issued its order which provided for a phased-in increase of
$123,000,000 to be implemented in three steps over a two year
period and excluded from rate base $165,000,000 of Zimmer Plant
costs composed of an allowance for funds used during construction
accrued from February 1984 through February 1986, nuclear wind-
down costs and loss on the sale of nuclear fuel.
On November 3, 1993, the Ohio Supreme Court by a 4 to 3 vote
affirmed the disallowance but found that the PUCO did not have
statutory authority to order phased-in rates. The Court
instructed the PUCO to fix rates to provide the Company with
gross annual revenues in accordance with the law and to provide a
mechanism by which the Company is able to recover the revenues
deferred under the phase-in order which through September 30,
1993 totaled $85,000,000. The Court-ordered recovery of
previously deferred revenues and the increase in rates to the
full rate level will not affect results of operations.
As a result of the ruling, the Company reflected the
disallowance and its adverse impact on the results of operations
in the third quarter of 1993 reducing net income by $144,534,000
after tax. See "Selected Consolidated Financial Data".
CLEAN AIR ACT AMENDMENTS AND GLOBAL CLIMATE CHANGE
Reference is made to pages 28 through 32 of the 1992 Form
10-K, page II-3 of the Second Quarter Form 10-Q, Note 3 of the
Notes to Consolidated Financial Statements in the Company's 1992
Annual Report and page II-2 of the Third Quarter Form 10-Q for a
discussion of the Clean Air Act Amendments of 1990. As a result
of Phase I of the Clean Air Act Amendments of 1990, the Company
intends to convert some generating units to natural gas and to
make certain other capital expenditures. Such expenditures are
expected to total approximately $50,000,000 and be completed by
the end of 1995.
Reference is made to page 32 of the 1992 Form 10-K and pages
II-2 and II-3 of the Third Quarter Form 10-Q for a discussion of
global climate change. In an Earth Day Address on April 21,
1993, President Clinton committed the United States to reduce
greenhouse gas emissions, including carbon dioxide, to their 1990
levels by the year 2000. To achieve this target, the President
unveiled a climate change action plan on October 19 that relies
extensively on voluntary, cost-effective measures to be taken by
all sectors of the economy. Corporate initiatives will be
fostered through the development of partnerships between
businesses and governmental agencies. The Company has agreed to
identify cost-effective programs that could be implemented to
limit greenhouse gas emissions in the future. Such actions will
not be undertaken if they threaten the Company's economic
competitiveness or if they are unacceptable to its regulators.
However, if legislation to mandate carbon dioxide reduction is
enacted in the future, the results of operations and financial
condition of the Company would be adversely affected if the costs
incurred are not fully recovered from ratepayers.
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be
read in conjunction with the information and financial statements
(including notes) appearing in documents incorporated herein by
reference.
<TABLE>
Twelve
Months
Ended
Year Ended December 31, September 30,
<CAPTION> 1988 1989 1990 1991 1992 1993
<C> <C> <C> <C> <C> <C>
(Dollars in Thousands)
INCOME STATEMENTS DATA:
Operating Revenues . . . . . . . . . $797,902 $864,786 $845,864 $858,290 $843,996 $928,779
Operating Expenses . . . . . . . . . 656,155 738,552 742,119 757,416 721,681 781,637
Operating Income . . . . . . . . . . 141,747 126,234 103,745 100,874 122,315 147,142
Nonoperating Income. . . . . . . . . 49,882 51,860 60,497 54,999 47,170 35,647
Loss from Zimmer Plant
Disallowance (net of tax). . . . . - - - - - 144,534
Income Before Interest Charges . . . 191,629 178,094 164,242 155,873 169,485 38,255
Interest Charges (net) . . . . . . . 73,407 64,718 68,242 88,894 93,241 89,757
Net Income (Loss). . . . . . . . . . 118,222 113,376 96,000 66,979 76,244 (51,502)
Preferred and Preference Stock
Dividend Requirements. . . . . . . 13,662 11,951 4,950 7,125 10,220 11,062
Earnings (Loss) Applicable to
Common Stock . . . . . . . . . . . $104,560 $101,425 $ 91,050 $ 59,854 $ 66,024 $(62,564)
Ratio of Earnings to Fixed Charges . 2.39 2.43 1.98 1.65 2.05 0.83(a)
Gross Additions to Utility Plant . . . $156,438 $221,114 $196,147 $111,856 $ 80,279 $ 92,339
December 31, September 30,
1988 1989 1990 1991 1992 1993
(Dollars in Millions)
BALANCE SHEETS DATA:
Electric Utility Plant . . . . . . . $2,191 $2,398 $2,575 $2,667 $2,725 $2,623
Accumulated Depreciation . . . . . . 570 605 639 693 755 796
Net Electric Utility Plant . . . . . 1,621 1,793 1,936 1,974 1,970 1,827
Total Assets . . . . . . . . . . . . 2,055 2,109 2,223 2,297 2,371 2,600
Common Stock and Paid-in Capital . . 471 511 547 587 607 607
Retained Earnings . . . . . . . . . 102 135 148 131 128 20
Total Common Shareowner's Equity . . 573 646 695 718 735 627
Cumulative Preferred Stock:
Not Subject to Mandatory
Redemption . . . . . . . . . . . 8 8 - - - -
Subject to Mandatory Redemption(b) 58 52 75 75 125 125
Cumulative Preference Stock(b) . . . 32 26 - - - -
Long-term Debt (b) . . . . . . . . . 998 913 1,000 992 978 1,033
(a) Ratio includes the effect of the Loss from Zimmer Plant Disallowance. As a result, earnings for the twelve months ended
September 30, 1993 were inadequate to cover fixed charges by $15,838,000. If the effect of the Loss from Zimmer Plant Disallowance
were excluded, the ratio would be 2.51 for the twelve months ended September 30, 1993.
(b) Including portion due within one year.
</TABLE>
USE OF PROCEEDS
The Company proposes to use the proceeds from the sale of
the Debt Securities to refund long-term debt, and to the extent
internally generated funds are insufficient, to fund its
construction program, or to repay short-term unsecured
indebtedness incurred to refund long-term debt or to fund its
construction program. The Company's First Mortgage Bonds, 8-5/8%
Series due 1996 ($100,000,000 principal amount outstanding), may
be redeemed at a regular redemption price of 100% of the
principal amount thereof; the Company's First Mortgage Bonds, 9%
Series due 2017 ($100,000,000 principal amount outstanding), may
be redeemed at a regular redemption price of 106.30% of the
principal amount thereof; and the Company's First Mortgage Bonds,
9% Series due 1999 ($20,000,000 principal amount outstanding),
may be redeemed at a regular redemption price of 101.74% of the
principal amount thereof. The Company may redeem said series of
Bonds if they can be refunded at a lower effective interest cost.
The Company has estimated that its construction costs (inclusive
of allowance for funds used during construction) during 1993 will
be approximately $90,000,000. At November 30, 1993, the Company
had approximately $13,050,000 of short-term unsecured
indebtedness outstanding.
DESCRIPTION OF THE DEBT SECURITIES
The Debt Securities will be issued under the Indenture of
Mortgage and Deed of Trust, dated September 1, 1940 of the
Company, under which Citibank, N.A., New York, New York (the
"Trustee") is acting as Trustee, as heretofore supplemented and
amended and as to be further supplemented (the "Mortgage"). All
First Mortgage Bonds (including the Debt Securities) issued and
to be issued under the Mortgage are herein sometimes referred to
as "Bonds". Copies of the Mortgage, including the form of
Supplemental Indenture pursuant to which each series of the Debt
Securities will be issued (a "new Supplemental Indenture"), are
filed as exhibits to the Registration Statement.
The following statements include brief summaries of certain
provisions of instruments under which securities of the Company,
including Bonds, have been issued. Certain of these instruments
apply to the issuance of Debt Securities. Such instruments,
including amendments and supplements thereto, have been filed by
the Company as exhibits to the Registration Statement. Such
summaries do not purport to be complete and reference is made to
such instruments for complete statements of such provisions.
Such statements are qualified in their entirety by such
reference and do not relate or give effect to the provisions of
statutory or common law.
Form and Exchange
Unless otherwise set forth in a Prospectus Supplement, the
Debt Securities in definitive form will be issued only as
registered Bonds without coupons in denominations of $1,000 and
in multiples thereof authorized by the Company. Debt Securities
will be exchangeable for a like aggregate principal amount of the
same series of Debt Securities of other authorized denominations,
and will be transferable, at the office or agency of the Company
in New York City, and at such other office or agency of the
Company as the Company may from time to time designate, in either
case without payment, until further action by the Company, of any
charge other than for any tax or taxes or other governmental
charge required to be paid by the Company. Citibank, N.A. is to
be designated by the Company as agent for payment, registration,
transfer and exchange of the Debt Securities in New York City.
Maturity, Interest, Payment, Redemption, Credit Enhancement,
Improvement Fund and Dividend Restrictions
Information concerning the maturity, interest, payment,
redemption provisions, if any, credit enhancement, if any,
improvement fund, if any, and any dividend restrictions in
addition to those described herein with respect to any series of
the Debt Securities will be contained in a Prospectus Supplement.
Security
The Debt Securities will be secured, pari passu, with Bonds
of all other series now or hereafter issued, by the lien of the
Mortgage which constitutes, in the opinion of counsel for the
Company, a first lien on substantially all of the fixed physical
property and franchises of the Company; subject to (i) the
conditions and limitations in the instruments through which the
Company claims title to its properties and (ii) "permissible
encumbrances", as defined in Article I of the Mortgage.
The Mortgage contains an after-acquired property clause, but
property hereafter acquired may be subject to liens, ranking
prior to the Mortgage, existing thereon at the time of the
acquisition of such property. The provisions of the Mortgage, in
substance, permit releases of property from the lien and the
withdrawal of cash proceeds of property released from the lien,
not only against new property then becoming subject to the lien,
but also against property already subject to the lien of the
Mortgage unless such property was owned at June 30, 1940 or has
been made the basis of the issue of Bonds or a credit under any
sinking fund, improvement fund or maintenance, renewal or similar
fund created by indentures supplemental to the Mortgage.
Issuance of Additional Bonds
Additional Bonds of other series may be issued in principal
amount equal to:
(1) 60% of unbonded net property additions, less the
principal amount of prior lien bonds secured thereby if not
theretofore deducted;
(2) specified amounts of unbonded Bonds retired or then
to be retired;
(3) specified amounts of unbonded prior lien bonds (no
prior lien bonds being outstanding at the date of this
Prospectus) retired or then to be retired; and
(4) the amount of cash deposited with the Trustee for
such purpose;
but in each case involving the issuance of additional Bonds only
if (A) so long as any of the Bonds of any of the series created
prior to October 1, 1980 remain outstanding, net earnings
available for interest and depreciation, as defined, for any
specified twelve consecutive calendar months during the period of
fifteen calendar months immediately preceding the first day of
the calendar month in which the additional Bonds are to be
issued, after deduction of interest on all indebtedness at the
time outstanding other than (i) outstanding Bonds, and (ii)
outstanding indebtedness secured by prior lien, are at least 2-
1/2 times the annual interest requirements on all Bonds
outstanding under the Mortgage (including the additional Bonds to
be issued) and on all outstanding indebtedness secured by prior
lien, and (B) net earnings available for interest, as defined,
for any specified twelve consecutive calendar months during the
period of fifteen calendar months immediately preceding the first
day of the calendar month in which the additional Bonds are to be
issued, are at least 2 times the annual interest requirements on
all Bonds outstanding under the Mortgage (including the
additional Bonds to be issued) and on all outstanding
indebtedness secured by prior lien. (Mortgage, Article III,
Sections 3, 4, 5 and 6; Third Supplemental Indenture, Article VI,
Sections 1, 2 and 3; Twenty-Eighth Supplemental Indenture,
Article IV, Sections 2 and 3; Thirty-Sixth, Thirty-Seventh and
Thirty-Eighth Supplemental Indentures, Article IV; Forty-First,
Forty-Second, Forty-Third, Forty-Fourth, Forty-Fifth, Forty-Sixth
and new Supplemental Indentures, Article III; Forty-Seventh,
Forty-Eighth and Forty-Ninth Supplemental Indentures, Article V.)
The requirements, referred to above, that (1) net earnings
available for interest and depreciation be at least 2-1/2 times,
and (2) net earnings available for interest be at least 2 times,
annual interest requirements on all outstanding Bonds and
indebtedness having an equal or prior lien, including a proposed
additional issue of Bonds, are not applicable under certain
circumstances where additional Bonds are issued in a principal
amount equal to the principal amount of Bonds or prior lien bonds
retired or to be retired. In calculating earnings coverages
under the provisions of its Mortgage, the Company includes, as a
component of earnings, to the extent a reserve has not been
established, revenues being collected subject to refund and, to
the extent not limited by the terms of the Mortgage, an allowance
for funds used during construction, including amounts positioned
and classified as an allowance for borrowed funds used during
construction.
It is estimated that as of September 30, 1993, the Company
had available for use in connection with the authentication of
Bonds approximately $795,000,000 of unbonded net property
additions. The coverage of the Company under the most
restrictive of the requirements referred to above (the one
requiring net earnings to be at least 2 times specified annual
interest requirements), calculated as of September 30, 1993 based
on the amounts then recorded in the accounts of the Company, was
2.79. The Company expects that the Debt Securities will be
authenticated upon the basis of Bonds retired and/or to be
retired.
Other Restrictions Upon Creation and/or Issuance of Senior
Securities
There is, in addition to the foregoing restrictions, an
additional limitation upon the creation and/or issuance by the
Company of long-term debt securities. Under a certain note
agreement, the Company may not create, incur, assume or suffer to
exist any debt (as defined) if the total of all its debt exceeds
65% of total capitalization (as defined).
The restrictions and limitations described or referred to
above, which are designed to protect the relative positions of
the holders of outstanding senior securities of the Company, can
operate in such manner as to limit substantially the additional
amounts of senior securities which can be issued by the Company.
The Company believes that its ability to issue short and long-
term debt securities in the amounts required to finance its
construction program will depend upon the timely approval of
future rate increase applications. If the Company is unable to
continue the issue and sale of securities on an orderly basis,
the Company will be required to consider the obtaining of
additional amounts of common equity, the use of possibly more
costly alternative financing arrangements, if available, or the
curtailment of its construction program and other outlays.
Other than the security afforded by the lien of the Mortgage
and restrictions on the incurrence of additional debt described
above and under "Description of the Debt Securities -- Issuance
of Additional Bonds" herein, there are no provisions of the
Mortgage which afford holders of Debt Securities protection in
the event of a highly leveraged transaction involving the
Company. However, such a transaction would require regulatory
approval and management of the Company believes such approval
would be unlikely in a transaction which would result in the
Company having a highly leveraged capital structure.
Maintenance and Replacement Provisions
The new Supplemental Indenture will provide for the annual
deposit by the Company before May 1 of each year, so long as any
of the Debt Securities are outstanding, of an amount in cash or
principal amount of Bonds of any series which, when added to
amounts previously used to satisfy the maintenance and
replacement provisions of the Mortgage, is equal to the amount by
which the aggregate of the sums expended by the Company from July
1, 1940 through the end of the preceding calendar year for
repairs and maintenance of, and any substitutions for retirements
of, the mortgaged property fails to equal an amount equal to 3%
of the average amount of the gross property account of the
Company for the last six months of 1940 and for each full
calendar year thereafter. The Company may, in lieu of depositing
such cash or Bonds, elect (1) to certify net property additions
not theretofore bonded (calculated on the basis of 100% of the
lesser of the cost or fair value of such property additions),
less 150% of the principal amount of any prior lien bonds secured
by such property additions if not theretofore deducted under
other provisions of the Mortgage, or (2) to make the basis of a
credit specified amounts of prior lien bonds retired or then to
be retired.
Release and Substitution of Property
The Mortgage permits property to be released from the lien
of the Mortgage upon compliance with the provisions thereof.
Such provisions require that, in certain specified cases, cash be
deposited with the Trustee in an amount equal to the excess of
the greater of the fair value of the property to be released or
the consideration received from the disposition thereof over the
aggregate of certain computations required by the Mortgage. The
Mortgage also contains certain requirements relating to the
withdrawal of cash deposited to obtain a release of property.
(Mortgage, Articles VII and VIII.)
Limitations on Use of Certain Property
The Mortgage does not permit any application for
authentication of additional Bonds, withdrawal or reduction of
any cash or release of any property, if as a result thereof two-
thirds of the amount of property additions then constituting
"restricted property" would exceed 10% of the aggregate principal
amount of all Bonds and prior lien bonds to be outstanding.
"Restricted property" includes bonded property additions subject
to a prior lien or consisting of property other than that used or
useful for or to be used in the business of generating,
manufacturing, transmitting, distributing or supplying
electricity. (Mortgage, Article V, Section 10.)
Modification of the Mortgage
Article XIV, Sections 6 and 7, of the Mortgage provides that
any modification of the Mortgage or any indenture supplemental
thereto and of the rights of the Bondholders may be made with the
approval of the Company and the consent of the holders of at
least 66-2/3% in principal amount of the Bonds (and of at least
66-2/3% in principal amount of Bonds of each series affected, if
less than all of the series of Bonds are affected); provided that
no such modification shall affect the terms of payment of
principal or interest or premium on any Bonds, or permit the
creation by the Company of any lien ranking prior to or on a
parity with the lien of the Mortgage with respect to any property
covered thereby except as referred to hereinabove under the
heading "Security" or reduce the above 66-2/3% requirement, or
affect the rights or obligations of the Trustee without its
assent.
Restriction on Common Stock Dividends
Various restrictions on the use of retained earnings for
cash dividends on common stock and other purposes are contained
in or result from covenants in the Mortgage relating to
outstanding series of Bonds. At September 30, 1993, the
Company's retained earnings amounted to $20,347,000, none of
which was so restricted under these provisions.
Concerning the Trustee
The AEP System companies, including the Company, utilize
many of the banking services offered by Citibank, N.A. in the
normal course of their businesses. Among such services are the
making of short-term loans and in certain cases term loans,
generally at rates related to the prime commercial interest rate,
and acting as a depositary.
The Trustee or the holders of 25% in principal amount of the
Bonds may declare the principal due upon occurrence of an event
of default, but the holders of a majority in principal amount of
the Bonds may annul such declaration if the default has been
cured. (Mortgage, Article IX, Sections 2 and 20.) The holders of
a majority in principal amount of the Bonds may direct the time,
method and place of conducting any proceeding for the enforcement
of the Mortgage. (Mortgage, Article IX, Section 18.) No
bondholder has the right to institute any proceedings for the
enforcement of the Mortgage unless such holder shall have given
the Trustee written notice of an event of default, the holders of
25% in principal amount of the Bonds shall have requested the
Trustee to take action and given the Trustee reasonable
opportunity to take such action and such holder or holders shall
have offered to the Trustee indemnity against costs, expenses and
liabilities. (Mortgage, Article IX, Section 19.)
Events of Default
Article IX, Section 2 of the Mortgage provides that the
following are defaults:
(a) Failure to pay any installment of interest on any
Bond or to pay or satisfy any sinking fund obligation and
continuance of either such failure for a period of thirty
days;
(b) Failure to pay the principal of any Bond when due
and payable;
(c) Failure to pay any installment of interest on any
prior lien bonds, and continuance of such failure beyond the
period of grace, if any, or failure to pay the principal of
any prior lien bond when due and payable;
(d) Failure on the part of the Company to perform or
observe any other covenant, agreement or condition contained
in the Mortgage or any indenture supplemental thereto or in
the Bonds or any prior lien, or prior lien bonds, provided
that in order to constitute a default under the Mortgage,
such failure must continue for sixty days after written
notice to the Company by the Trustee or by the holders of
not less than 25% in principal amount of the Bonds; and
(e) Insolvency or bankruptcy, receivership or similar
proceedings initiated by the Company, or initiated against
the Company and not dismissed within forty-five days.
The Trustee may withhold notice to Bondholders of defaults
(except in the payment of principal, interest or sinking fund
obligations) if its responsible officers determine that
withholding of notice is in the interest of the Bondholders.
(Mortgage, Article XII, Section 3.) Upon the occurrence of a
default either the Trustee or the holders of not less than 25% in
principal amount of the Bonds may declare all of the outstanding
Bonds to be immediately due and payable. (Mortgage, Article IX,
Section 2.) The Company is required to furnish annually to the
Trustee a certificate as to compliance with all conditions and
covenants under the Mortgage.
LEGAL OPINIONS
Opinions with respect to the legality of the Debt Securities
will be rendered by Simpson Thacher & Bartlett (a partnership
which includes professional corporations), 425 Lexington Avenue,
New York, New York, and 1 Riverside Plaza, Columbus, Ohio,
counsel for the Company, and by Winthrop, Stimson, Putnam &
Roberts, One Battery Park Plaza, New York, New York, counsel for
any agents, underwriters or dealers. Simpson Thacher & Bartlett
and Winthrop, Stimson, Putnam & Roberts will rely as to matters
of Ohio law upon the opinion of Jeffrey D. Cross, counsel for the
Company. Jeffrey D. Cross is a Senior Attorney in the Legal
Department of American Electric Power Service Corporation, a
wholly-owned subsidiary of AEP.
EXPERTS
The financial statements and the related financial statement
schedules incorporated in this Prospectus by reference from the
Company's Annual Report on Form 10-K have been audited by
Deloitte & Touche, independent auditors, as stated in their
reports, which are incorporated herein by reference, which
express an unqualified opinion and contain an explanatory
paragraph related to the Company's appeal of the disallowance, by
The Public Utilities Commission of Ohio, of certain costs related
to its investment in the Zimmer Plant to the Ohio Supreme Court,
and have been so incorporated in reliance upon the reports of
such firm given upon their authority as experts in accounting and
auditing.
The legal conclusions in "Security" under the caption
"Description of Debt Securities", as to those matters governed by
the laws of the State of Ohio, are made on the authority of
Jeffrey D. Cross, counsel for the Company.
PLAN OF DISTRIBUTION
The Company may sell the Debt Securities in any of three
ways: (i) through underwriters or dealers; (ii) directly to a
limited number of purchasers or to a single purchaser; or (iii)
through agents. The Prospectus Supplement relating to a series
of the Debt Securities will set forth the terms of the offering
of the Debt Securities, including the name or names of any
underwriters, dealers or agents, the purchase price of such Debt
Securities and the proceeds to the Company from such sale, any
underwriting discounts and other items constituting underwriters'
or agents' compensation, any initial public offering price and
any discounts or concessions allowed or reallowed or paid to
dealers. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be
changed from time to time after the initial public offering.
If underwriters are used in the sale, the Debt Securities
will be acquired by the underwriters for their own account and
may be resold from time to time in one or more transactions,
including negotiated transactions, at a fixed public offering
price or at varying prices determined at the time of the sale.
The underwriters with respect to a particular underwritten
offering of Debt Securities will be named in the Prospectus
Supplement relating to such offering and, if an underwriting
syndicate is used, the managing underwriters will be set forth on
the cover page of such Prospectus Supplement. Unless otherwise
set forth in the Prospectus Supplement, the obligations of the
underwriters to purchase the Debt Securities will be subject to
certain conditions precedent, and the underwriters will be
obligated to purchase all such Debt Securities if any are
purchased.
Debt Securities may be sold directly by the Company or
through agents designated by the Company from time to time. The
Prospectus Supplement will set forth the name of any agent
involved in the offer or sale of the Debt Securities in respect
of which the Prospectus Supplement will be delivered as well as
any commissions payable by the Company to such agent. Unless
otherwise indicated in the Prospectus Supplement, any such agent
will be acting on a reasonable best efforts basis for the period
of its appointment.
If so indicated in the Prospectus Supplement, the Company
will authorize agents, underwriters or dealers to solicit offers
by certain specified institutions to purchase Debt Securities
from the Company at the public offering price set forth in the
Prospectus Supplement pursuant to delayed delivery contracts
providing for payment and delivery on a specified date in the
future. Such contracts will be subject to those conditions set
forth in the Prospectus Supplement, and the Prospectus Supplement
will set forth the commission payable for solicitation of such
contracts.
Subject to certain conditions, the Company may agree to
indemnify any underwriters, dealers, agents or purchasers and
their controlling persons against certain civil liabilities,
including certain liabilities under the Securities Act of 1933.
