<PAGE>
FILED PURSUANT TO RULE 424(b)2
FILE NO. 333-14209
PROSPECTUS SUPPLEMENT
September 6, 2000
(To Prospectus dated April 7, 1999)
$250,000,000
Duke Energy Corporation
7 1/8% Remarketable or Redeemable Securities (ROARS/SM/)
Due 2012 (Remarketing Date September 3, 2002)
The ROARS will bear interest at the rate of 7 1/8% per year from their date of
issuance to but excluding September 3, 2002, which is the first Remarketing
Date, and then at a fixed or floating rate as discussed under "Description of
the ROARS." Interest on the ROARS is payable on March 3 and September 3 of
each year, beginning on March 3, 2001 and continuing to September 3, 2002, and
then at intervals as discussed under "Description of the ROARS." On any
Remarketing Date, the ROARS will either be mandatorily tendered to and
purchased by UBS AG, London Branch, as Remarketing Dealer, or mandatorily
redeemed by us, in each case at the prices discussed under "Description of the
ROARS." If purchased by the Remarketing Dealer, the ROARS will bear interest
from the Remarketing Date at a rate to be determined as described under
"Description of the ROARS." The ROARS will mature on September 3, 2012 unless
extended to the tenth anniversary of the Fixed Rate Remarketing Date. We may
redeem all of the ROARS on any Remarketing Date and after the Fixed Rate
Remarketing Date at prices described under "Description of the ROARS."
The ROARS will be our unsecured and unsubordinated obligations and will rank
equal in priority with all of our existing and future unsecured and
unsubordinated indebtedness.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this Prospectus Supplement or the accompanying
Prospectus. Any representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
Per ROARS Total
--------- ------------
<S> <C> <C>
Public Offering Price................................... 99.981% $249,952,500
Underwriting Discount................................... .250% $ 625,000
Proceeds to Duke Energy (before expenses)/1/............ 103.651% $259,127,500
</TABLE>
--------
/1/ Includes consideration for the related option.
The underwriters are offering the ROARS subject to various conditions. The
underwriters expect to deliver the ROARS to purchasers on or about September
12, 2000.
----------------
Banc of America Securities LLC
Chase Securities Inc.
----------------
--------
/SM/ "ROARS" is a service mark of Banc of America Securities LLC
<PAGE>
You should rely only on the information contained or incorporated by reference
in this Prospectus Supplement and the accompanying Prospectus. Neither we nor
the underwriters have authorized any other person to provide you with different
information. If anyone provides you with different or inconsistent information,
you should not rely on it. If this Prospectus Supplement is inconsistent with
the accompanying Prospectus, you should rely on this Prospectus Supplement.
Neither we nor the underwriters are making an offer to sell these securities in
any jurisdiction where the offer or sale is not permitted. You should assume
that the information in this Prospectus Supplement and the accompanying
Prospectus is accurate only as of the respective dates on the front of those
documents or earlier dates specified therein. Our business, financial
condition, results of operations and prospects may have changed since those
dates.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Prospectus Supplement
Page
----
<S> <C>
Duke Energy Corporation.................................................... S-3
Recent Developments........................................................ S-4
Summary of Terms of the Securities......................................... S-6
Recent Financial Data...................................................... S-9
Capitalization............................................................. S-10
Description of the ROARS................................................... S-11
Certain United States Federal Income Tax Considerations.................... S-25
Underwriting............................................................... S-28
Experts.................................................................... S-30
Legal Matters.............................................................. S-30
Prospectus
About This Prospectus...................................................... 3
Where You Can Find More Information........................................ 3
Forward-Looking Statements................................................. 4
Duke Energy Corporation.................................................... 5
Use of Proceeds............................................................ 7
Description of the New Bonds............................................... 7
Description of the New Debt Securities..................................... 11
Plan of Distribution....................................................... 21
Experts.................................................................... 22
Legal Matters.............................................................. 22
</TABLE>
S-2
<PAGE>
DUKE ENERGY CORPORATION
We, together with our subsidiaries, are an integrated energy and energy
services provider with the ability to offer physical delivery and management of
both electricity and natural gas throughout the United States and abroad. We
provide these and other services through seven business segments:
. Franchised Electric
. Natural Gas Transmission
. Field Services
. North American Wholesale Energy
. International Energy
. Other Energy Services
. Duke Ventures
Franchised Electric generates, transmits, distributes and sells electric energy
in central and western North Carolina and the western portion of South Carolina
(doing business as Duke Power or Nantahala Power and Light).
Natural Gas Transmission provides interstate transportation and storage of
natural gas for customers primarily in the Mid-Atlantic and New England states.
With the purchase of East Tennessee Natural Gas Company in March 2000, Natural
Gas Transmission also began serving the southeastern region of the United
States.
Field Services gathers, processes, transports and markets natural gas and
produces, transports and markets natural gas liquids. Field Services operates
gathering systems in western Canada and eleven contiguous states that serve
major gas-producing regions in the Rocky Mountains, Permian Basin, Mid-
Continent, East Texas-Austin Chalk-North Louisiana and onshore and offshore
Gulf Coast areas.
North American Wholesale Energy's activities include asset operation,
development and management, primarily through Duke Energy North America, LLC,
as well as commodity sales and services related to natural gas and power,
primarily through Duke Energy Trading and Marketing (DETM), a joint venture
with ExxonMobil, a 40% partner in DETM. This segment also includes Duke Energy
Merchants, which develops new business lines in the evolving energy commodity
markets. The operations of the former Trading and Marketing segment were
combined by our management into North American Wholesale Energy during the
second quarter of this year.
International Energy develops, owns and operates energy-related facilities
worldwide providing energy trading, marketing and natural gas and power
development and operations. It conducts its operations through Duke Energy
International, LLC.
Other Energy Services provides engineering, consulting, construction and
integrated energy solutions worldwide, primarily through Duke Engineering &
Services, Inc., Duke/Fluor Daniel and DukeSolutions, Inc.
Duke Ventures is comprised of Crescent Resources, Inc., DukeNet Communications,
Inc. and Duke Capital Partners. Crescent Resources develops commercial and
residential real estate projects and manages land holdings primarily in the
southeastern United States. DukeNet Communications provides fiber optic and
wireless digital networks for industrial, commercial and residential customers.
Duke Capital Partners is a newly formed, wholly owned finance company that
plans to provide lending, investment banking and asset management services to
the wholesale and commercial energy markets.
S-3
<PAGE>
RECENT DEVELOPMENTS
Formation and Financing of Duke Energy Field Services
In March 2000, we completed the approximately $1.7 billion transaction that
combined Field Services' gas gathering and processing business with Phillips
Petroleum's gas gathering, processing and marketing unit to form a new
midstream company, named Duke Energy Field Services, LLC (DEFS). In connection
with the combination, DEFS issued approximately $2.75 billion of commercial
paper in April 2000. The proceeds were used to make one-time cash distributions
of approximately $1.53 billion to us and $1.22 billion to Phillips Petroleum.
We own approximately 70% of DEFS and Phillips Petroleum owns approximately 30%.
In August 2000, DEFS issued approximately $1.7 billion of long-term debt
securities, with the proceeds being used to reduce outstanding commercial
paper. The parent company of DEFS, Duke Energy Field Services Corporation (DEFS
Corporation), plans to offer a portion of its common stock to the public later
this year or in 2001 in an initial public offering, subject to market
conditions. The proceeds of the proposed offering will be used to reduce debt.
After the offering, our ownership interest and the ownership interest of
Phillips Petroleum in DEFS Corporation will be reduced accordingly.
Completion of Acquisitions
Duke Energy International reached an agreement in August 1999 to acquire
Dominion Resources Inc.'s 1,200-megawatt portfolio of hydroelectric, natural
gas and diesel power generation businesses in Argentina, Belize, Bolivia and
Peru for approximately $405 million. The purchases of the businesses in Belize
and Peru were completed in 1999. Duke Energy International completed the
purchases of the businesses in Argentina and Bolivia in March 2000 and April
2000, respectively.
Duke Energy International entered into a series of transactions in August 1999
to complete a $761 million purchase of a controlling voting interest and an
approximately 44% economic interest in Companhia de Geracao de Energia
Electrica Paranapanema, an electric generating company in Brazil. In January
2000, Duke Energy International completed a tender offer to the minority
shareholders of that company and successfully acquired an additional 51%
economic interest for approximately $280 million. This increased our economic
ownership from approximately 44% to approximately 95%.
In March 2000, we completed the approximately $390 million acquisition of East
Tennessee Natural Gas Company from El Paso Energy. East Tennessee Natural Gas
Company owns a 1,100-mile interstate natural gas pipeline system that crosses
the pipeline of our subsidiary, Texas Eastern Transmission Corporation, and
serves the southeastern region of the United States.
Expansion into New Business
We entered into an agreement on August 30, 2000 to purchase the natural gas
salt cavern storage business commonly known as Market Hub Partners (MHP) from
subsidiaries of NiSource Inc. for $250 million in cash plus the assumption of
$150 million in debt. This new line of business, which includes the Moss Bluff
and the Egan storage facilities, has 23 billion cubic feet of storage capacity
with significant expansion capability. The Moss Bluff facilities are in Liberty
County, Texas and the Egan facilities are in Acadia Parish, Louisiana. Both are
situated near industry-recognized market hubs at the convergence of major
interstate and intrastate natural gas pipelines and serve as
S-4
<PAGE>
aggregation points for natural gas collected along the Texas and Louisiana Gulf
coasts. MHP is also developing high deliverability salt cavern storage
facilities in Copiah County, Mississippi and Tioga County, Pennsylvania. The
acquisition is expected to close later this year, subject to approval of the
Federal Trade Commission.
Construction of New Generating Facilities
Duke Energy North America began construction this year of three new 520-
megawatt, natural gas-fired, combined cycle generating plants (the McClain
Energy Facility in Oklahoma, the Hinds Energy Facility and Attala Energy
Facility in Mississippi) and two new 640-megawatt, natural gas-fired facilities
(the Lee County Facility in Illinois and the Audrain County Facility in
Missouri). Our capital commitment to these projects totals approximately $1.2
billion through June 2001.
Environmental Matters--Air Quality Control
The Environmental Protection Agency (EPA) issued a final ruling in October 1998
on regional ozone control that requires revised State Implementation Plans for
22 eastern states and the District of Columbia. The EPA ruling was challenged
in court by various states, industry and other interests, including the States
of North Carolina and South Carolina and us. In March 2000, the court upheld
most aspects of the EPA's rule. The petitioners asked the court to rehear the
case and overturn the March decision, but in June the court declined to rehear
the case and lifted its earlier stay of the obligation of the states to revise
their State Implementation Plans. Industry and state petitioners have not yet
decided if they will continue to seek review of the EPA ruling. Late in 1999,
the EPA finalized another ozone-related rule having virtually identical goals
as its October 1998 action. The 1999 rule has also been challenged in court by
the same or similar parties. The North Carolina Environmental Management
Commission (EMC) is considering several competing proposals to reduce utility
emissions of nitrogen oxides. The EMC voted in March 2000 to send three
alternative nitrogen oxide proposals to a public hearing, and adoption of a
final rule is expected in October 2000. We announced that we will undertake
additional nitrogen oxide control projects between 2000 and 2005, at a cost of
approximately $100 million as an interim step to address possible contributions
to ozone formation in North Carolina. Depending on the resolution of these
matters, our costs may range from the $100 million that we have already
committed to spend to $600 million in capital costs for additional emission
controls.
The EPA sent us a request in October 1999 seeking information on the repair and
maintenance of our coal-fired plants since 1978. This is part of the EPA's New
Source Reviews (NSR) enforcement initiative in which the EPA claims that
utilities and others have committed widespread violations of the Clean Air
Act's permitting requirements. The EPA has filed suit against several utilities
and issued administrative orders alleging numerous NSR permitting violations.
In May 2000, we received a notice of violation from the EPA alleging various
violations of the NSR pre-construction permitting requirements of the Clean Air
Act. The EPA's allegations run counter to previous EPA guidance. We believe
that all of our electric generation units are properly permitted and have been
properly maintained and are not in violation of the Clean Air Act.
Nuclear Re-licensing
In May 2000, the Nuclear Regulatory Commission renewed the operating license
for our three Oconee nuclear stations through 2033 to 2034.
S-5
<PAGE>
SUMMARY OF TERMS OF THE SECURITIES
The following summary is a short description of the main terms of the
offering of the securities. For that reason, this summary does not contain all
of the information that may be important to you. To fully understand the terms
of the offering of the securities, you will need to read both this Prospectus
Supplement and the accompanying Prospectus, each in its entirety.
Issuer............................... Duke Energy Corporation will issue the
ROARS.
Trustee.............................. The Chase Manhattan Bank.
Offered Securities................... We will issue $250,000,000 aggregate
principal amount of 7 1/8% ROARS. The
ROARS will mature on September 3, 2012
unless extended to the tenth
anniversary of the Fixed Rate
Remarketing Date; however, we may
redeem, or be required to redeem, all
of the ROARS before that date.
Interest Rates....................... The ROARS will bear interest at the
rate of 7 1/8% per year from the date
of issuance to, but excluding,
September 3, 2002, which is the first
Remarketing Date, and then at a rate or
rates described under "Description of
the ROARS."
Interest Payment Dates............... We will pay interest on March 3 and
September 3, beginning on March 3, 2001
and continuing to September 3, 2002,
and then at intervals discussed under
"Description of the ROARS."
Interest Accrual..................... The ROARS will accrue interest at a
rate of 7 1/8% per annum from the date
of issuance to, but excluding,
September 3, 2002, computed on the
basis of a 360-day year consisting of
twelve 30-day months. From September 3,
2002, the ROARS will accrue interest at
a fixed rate or at a floating rate,
depending on our decision. If the rate
is fixed, interest will be computed on
the basis of a 360-day year consisting
of twelve 30-day months. If the rate is
floating, interest will be computed on
the basis of the actual number of days
in the applicable floating rate reset
period over a 360-day year.
For a more detailed description of the
payment of interest, you should refer
to the sections of this
S-6
<PAGE>
Prospectus Supplement entitled
"Description of the ROARS--Interest and
Interest Payment Dates," "--Interest
Rate to Maturity" and "--Floating Rate
Period."
Ranking.............................. The ROARS will rank equal in priority
with all of our existing and future
unsecured and unsubordinated
indebtedness. The ROARS will rank
senior in right of payment to all of
our existing and future subordinated
debt.
Mandatory Tender..................... We have entered into a Remarketing
Agreement with UBS AG, London Branch,
as Remarketing Dealer. This agreement
gives the Remarketing Dealer the option
to purchase all of the ROARS on
September 3, 2002 or on the subsequent
Remarketing Date unless we redeem them.
The purchase price for the ROARS will
be equal to 100% of the aggregate
principal amount outstanding on the
first Remarketing Date or the Dollar
Price (as defined in the section of
this Prospectus Supplement entitled
"Description of the ROARS--Interest
Rate to Maturity") on the subsequent
Remarketing Date.
For a more detailed description of the
mandatory tender, you should refer to
the section of this Prospectus
Supplement entitled "Description of the
ROARS--Mandatory Tender."
Mandatory Redemption................. If the Remarketing Dealer does not
purchase the ROARS on any Remarketing
Date, the Trustee, on behalf of the
beneficial owners, will require us to
redeem all of the ROARS for 100% of the
aggregate principal amount outstanding
on the first Remarketing Date or at the
Dollar Price on the subsequent
Remarketing Date, in addition to all
accrued and unpaid interest, if any.
For a more detailed description of the
mandatory redemption, you should refer
to the section of this Prospectus
Supplement entitled "Description of the
ROARS--Mandatory Redemption."
S-7
<PAGE>
Optional Redemption.................. If the Remarketing Dealer elects to
purchase the ROARS, we will have the
option of redeeming all of the ROARS on
September 3, 2002 or on the subsequent
Remarketing Date at the Dollar Price,
plus accrued and unpaid interest, if
any.
Post-Remarketing Optional
Redemption........................... We may redeem some or all of the ROARS
at any time after the Fixed Rate
Remarketing Date at the redemption
prices plus accrued and unpaid
interest, if any, to the post-
remarketing redemption date, as
described in the section of this
Prospectus Supplement entitled
"Description of the ROARS--Post-
Remarketing Optional Redemption."
Ratings.............................. The ROARS are rated "A+" by Standard &
Poor's Ratings Group, "A1" by Moody's
Investors Service, Inc. and "A+" by
Fitch IBCA, Inc.
Sinking Fund......................... The ROARS are unsecured and are not
entitled to any sinking fund.
Use of Proceeds...................... The net proceeds from the sale of the
ROARS will be approximately $259
million. We expect to use the net
proceeds primarily to reduce short-term
indebtedness recently incurred to repay
maturing long-term debt securities.
S-8
<PAGE>
RECENT FINANCIAL DATA
The following shows only selected consolidated financial information. You
should refer to our consolidated financial statements, including the notes to
such financial statements, included in the documents incorporated by reference
herein for additional information. See "Where You Can Find More Information" in
the accompanying Prospectus.
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
Income Statement Data ----------------- -----------------------------
2000 1999 1999(1) 1998 1997(2)
-------- -------- ------- ------- -------
(millions, except per share data)
<S> <C> <C> <C> <C> <C>
Operating Revenues......... $ 18,216 $ 8,869 $21,779(4) $17,662(4) $16,309
Operating Expenses......... 16,610 7,693 19,947 15,177 14,339
-------- -------- ------- ------- -------
Operating Income........ 1,606 1,176 1,832 2,485 1,970
Other Income, Net.......... 90 75 211(4) 162(4) 138
-------- -------- ------- ------- -------
Earnings Before Interest
and Taxes................. 1,696 1,251 2,043 2,647 2,108
Interest Expense........... 413 252 601 514 472
Minority Interests......... 120 68 142 96 23
Income Before Extraordinary
Item...................... 722 595 847 1,260 974
Net Income................. 722 1,255(3) 1,507(3) 1,252 974
Earnings Available for Com-
mon Stock................. 712 1,245(3) 1,487(3) 1,231 902
Total Comprehensive In-
come...................... 664 1,245 1,485 1,231 902
Earnings per share of Com-
mon Stock (before extraor-
dinary item)
Basic................... $ 1.94 $ 1.60 $ 2.26 $ 3.43 $ 2.51
Dilutive................ 1.93 1.60 2.25 3.42 2.50
Earnings per share of Com-
mon Stock
Basic................... 1.94 3.42(3) 4.08(3) 3.41 2.51
Dilutive................ 1.93 3.41(3) 4.07(3) 3.40 2.50
--------
(1) Reflects a pre-tax $800 million charge for estimated injury and damages
claims. The effect per basic share of Common Stock of this charge was
$1.34.
(2) Data reflects accounting for the combination with PanEnergy Corp on June
18, 1997 as a pooling of interests. As a result, the data gives effect to
the combination as if it had occurred as of January 1, 1997.
(3) Reflects a one-time after-tax extraordinary gain of approximately $660
million, or $1.82 per basic share of Common Stock, attributable to the
sale of certain pipeline operations on March 29, 1999.
(4) Certain reclassifications have been made to be consistent with current
year presentation.
<CAPTION>
As of June 30, As of December 31,
Balance Sheet Data ----------------- -----------------------------
2000 1999 1999 1998 1997(1)
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
(millions)
Current Assets............. $ 12,774 $ 5,396 $ 6,171 $ 4,843 $ 3,685
Investments and Other As-
sets...................... 6,836 4,761 4,710 3,232 2,448
Property, Plant and Equip-
ment, Net................. 23,386 17,736 20,995 16,875 15,736
Regulatory Assets and De-
ferred Debits............. 1,439 1,663 1,533 1,856 2,160
Total Assets............... 44,435 29,556 33,409 26,806 24,029
</TABLE>
--------
(1) Data reflects accounting for the combination with PanEnergy Corp on June
18, 1997 as a pooling of interests. As a result, the data gives effect to
the combination as if it had occurred as of December 31, 1997.
Financial Ratios
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
------------------ ---------------------------------
2000 1999 1999 1998 1997(1) 1996(1) 1995(1)
-------- -------- ---- ---- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Ratio of Earnings to
Fixed Charges.......... 3.5 4.3 2.9 4.7 4.1 4.3 4.0
</TABLE>
For purposes of this ratio (a) earnings consist of income from continuing
operations before income taxes and fixed charges, and (b) fixed charges consist
of all interest deductions and the interest component of rentals.
--------
(1) Data reflects accounting for the combination with PanEnergy Corp on June
18, 1997 as a pooling of interests. As a result, the data gives effect to
the combination as if it had occurred as of January 1, 1995.
S-9
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization on a consolidated basis at
June 30, 2000 and as adjusted to give effect to the issuance of the ROARS. No
other change in our consolidated capitalization since June 30, 2000 is
reflected therein. You should refer to our consolidated financial statements,
including the notes to such financial statements, included in the documents
incorporated by reference herein for additional information. See "Where You Can
Find More Information" in the accompanying Prospectus.
<TABLE>
<CAPTION>
June 30, June 30, 2000
2000 (as adjusted)
-------- ---------------
(millions)
<S> <C> <C> <C>
Short-term Debt, including commercial paper......... $ 3,574 $ 3,574 14%
------- --------
Long-term Debt, including current maturities:
First and Refunding Mortgage Bonds................ 1,668 1,668
Other Long-term Debt.............................. 2,093 2,093
Long-term Debt of subsidiaries.................... 5,707 5,707
ROARS offered hereby.............................. -- 250
------- --------
Total Long-term Debt............................ 9,468 9,718 38
------- --------
Minority Interests.................................. 1,116 1,116 4
------- --------
Guaranteed Preferred Beneficial Interests in
Subordinated Notes of
Duke Energy or Subsidiaries........................ 1,405 1,405 6
------- --------
Preferred and Preference Stock, including current
sinking fund obligations:
With sinking fund requirements.................... 104 104
Without sinking fund requirements................. 209 209
------- --------
313 313 1
------- --------
Common Stockholders' Equity:
Common Stock...................................... 4,681 4,681
Retained Earnings................................. 4,714 4,714
Accumulated other comprehensive income............ (50) (50)
------- --------
Total Common Stockholders' Equity............... 9,345 9,345 37
------- -------- ----
Total Capitalization.......................... $25,221 $25,471 100%
======= ========
</TABLE>
S-10
<PAGE>
DESCRIPTION OF THE ROARS
The following description of the particular terms of the ROARS, which are
referred to in the accompanying Prospectus as "Senior Notes," supplements and,
to the extent it is inconsistent with the description in the accompanying
Prospectus, replaces the description of the general terms and provisions of the
Senior Notes in the Prospectus. We will issue the ROARS under our Senior
Indenture dated as of September 1, 1998 as supplemented by the Fifth
Supplemental Indenture (the Supplemental Indenture) to be dated as of September
12, 2000 between us and The Chase Manhattan Bank, as Trustee. We have
summarized select portions of our Senior Indenture below. The summary is not
complete and is qualified in its entirety by reference to our Senior Indenture.
General
The ROARS will initially be limited to $250,000,000 aggregate principal amount
and will mature on September 3, 2012 unless extended to the tenth anniversary
of the Fixed Rate Remarketing Date (as defined below). We may redeem, or be
required to redeem, the ROARS before that maturity date as described in
"Mandatory Redemption" below. We may also redeem all of the ROARS on any
Remarketing Date, as described in "Optional Redemption" and after the Fixed
Rate Remarketing Date as described in "Post-Remarketing Optional Redemption"
below. The ROARS may also be purchased by the Remarketing Dealer as described
in "Mandatory Tender" below.
The ROARS will rank equal in priority with all of our existing and future
unsecured and unsubordinated indebtedness. The ROARS will rank senior in right
of payment to all of our existing and future subordinated debt.
The ROARS are unsecured and are not entitled to any sinking fund.
The ROARS will initially be issued only in registered, book-entry form, in
denominations of $1,000 and any integral multiple of $1,000 as described under
"Book-Entry Only Issuance--DTC." We will issue global securities in
denominations that together equal the total principal amount of the outstanding
ROARS.
If any interest, principal or other payment date of the ROARS (including any
payment date in connection with the mandatory tender or any mandatory
redemption as described below) does not fall on a Business Day, a payment
otherwise payable on that day will be made on the next succeeding Business Day.
It will have the same effect as if made on the actual payment date, and no
interest will accrue for the period from and after such Interest Payment Date,
maturity date or other payment date, except in the case of an Interest Payment
Date or other payment date occurring during the Floating Rate Period.
"Business Day" means any day other than a Saturday or Sunday or a day on which
banking institutions in New York City are authorized or obligated by law or
executive order to close.
"London Business Day" means any day on which dealings in U.S. dollars are
transacted in the London Inter-Bank Market.
We have agreed with the Remarketing Dealer that we will not cause or permit the
terms or provisions of the ROARS (or the Supplemental Indenture) to be modified
in any way, and may not make open market or other purchases of the ROARS prior
to the first Remarketing Date, without the prior written consent of the
Remarketing Dealer.
S-11
<PAGE>
Interest and Interest Payment Dates
The ROARS will bear interest at 7 1/8% per year, from the date of issuance to,
but excluding, September 3, 2002. We will pay interest semiannually on March 3
and September 3, beginning on March 3, 2001.
"Remarketing Date(s)" means September 3, 2002, assuming the Remarketing Dealer
has elected to purchase the ROARS and we have not elected to exercise our
Floating Period Option (as defined under "Floating Rate Period" below) or
September 3, 2002 and the third day of any month thereafter until September 3,
2003 on which the Floating Rate Termination Date occurs, if we have elected to
exercise our Floating Period Option.
We will pay interest on the ROARS, accruing from the Fixed Rate Remarketing
Date (as defined below), semiannually on each day that is a six-month
anniversary of such date. Interest on the ROARS from the Fixed Rate Remarketing
Date will be computed on the basis of a 360-day year consisting of twelve 30-
day months.
Interest on the ROARS accruing during any Floating Rate Reset Period (as
defined under "Floating Rate Period" below) will be payable on the next
following Reference Rate Reset Date if such date is a Business Day or on the
next following Business Day. Interest on the ROARS during the Floating Rate
Period (as defined below) will be computed on the basis of the actual number of
days in such Floating Rate Reset Period over a 360-day year.
Interest payable on any Interest Payment Date will be payable to the persons in
whose names the ROARS are registered at the close of business on the fifteenth
calendar day (whether or not a Business Day) immediately preceding the related
Interest Payment Date.
"Fixed Rate Remarketing Date" means September 3, 2002, assuming the Remarketing
Dealer has elected to purchase the ROARS and we have not elected to exercise
our Floating Period Option, or the subsequent Remarketing Date on which the
Floating Rate Termination Date occurs in the event that we have elected to
exercise our Floating Period Option.
Interest payments will be in the amount of interest accrued from and including
the next preceding Interest Payment Date (or from and including the date of
issuance if no interest has been paid or duly provided with respect to the
ROARS) to but excluding the relevant Interest Payment Date, Remarketing Date or
the maturity date, as the case may be.
Interest Rate to Maturity
If the Remarketing Dealer elects to purchase the ROARS, then by 3:30 p.m., New
York City time, on the third Business Day immediately preceding any Remarketing
Date (a "Floating Rate Spread Determination Date" or the "Fixed Rate
Determination Date," depending on the following election, and each, a
"Determination Date"), the Remarketing Dealer will determine either (a) the
Floating Rate Spread (as defined below) in the case where we have elected to
exercise our Floating Period Option or (b) the Interest Rate to Maturity (as
defined below) to the nearest one hundredth of one percent per annum, unless we
have chosen to redeem, or are required to redeem, the ROARS. Each Floating
Period Interest Rate (as defined below) will equal the sum of a Reference Rate
and a Floating Rate Spread. The Interest Rate to Maturity will be equal to the
sum of 5.70% (the "Base Rate") and the Applicable Spread (as defined below),
which will be based on the Dollar Price (as
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defined below) of the ROARS. The Floating Period Interest Rate, the Interest
Rate to Maturity and the Dollar Price for the ROARS as announced by the
Remarketing Dealer, absent manifest error, will be binding and conclusive upon
the beneficial owners, us and the Trustee.
For this purpose, the following terms have the following meanings:
"Applicable Spread" means the lowest Fixed Rate Bid, expressed as a spread (in
the form of a percentage or in basis points) above the Base Rate for the ROARS,
obtained by the Remarketing Dealer by 3:30 p.m., New York City time, on the
Fixed Rate Determination Date, from the Fixed Rate Bids quoted to the
Remarketing Dealer by up to five Reference Corporate Dealers.
A "Fixed Rate Bid" means an irrevocable offer to purchase the aggregate
outstanding principal amount of the ROARS at the Dollar Price, but assuming:
(1) a settlement date that is the Fixed Rate Remarketing Date applicable
to such ROARS;
(2) a maturity date that is the tenth anniversary of the Fixed Rate
Remarketing Date; and
(3) a stated annual interest rate equal to the Base Rate plus the spread
bid by the applicable Reference Corporate Dealer.
"Comparable Treasury Issues" for the ROARS means the U.S. Treasury security or
securities selected by the Remarketing Dealer, as of the first Determination
Date, as having an actual or interpolated maturity or maturities comparable to
the remaining term of the ROARS being purchased by the Remarketing Dealer.
"Comparable Treasury Price" means, with respect to the first Remarketing Date:
(1) the offer prices for the Comparable Treasury Issues (expressed, in
each case, as a percentage of its principal amount) at 12:00 noon, New York
City time, on the first Determination Date, as set forth on "Telerate Page
500" (or such other page as may replace "Telerate Page 500") or
(2) if such page (or any successor page) is not displayed or does not
contain such offer prices on such Determination Date, the average of the
Reference Treasury Dealer Quotations for such Determination Date, after
excluding the highest and lowest such Reference Treasury Dealer Quotations,
or if the Remarketing Dealer obtains fewer than four such Reference
Treasury Dealer Quotations, the average of all such Reference Treasury
Dealer Quotations.
"Telerate Page 500" means the display designated as "Telerate Page 500" on Dow
Jones Markets (or such other page as may replace "Telerate Page 500" on such
service) or such other service displaying the offer prices for the Comparable
Treasury Issues, as may replace Dow Jones Markets.
"Reference Treasury Dealer Quotations" means, with respect to each Reference
Treasury Dealer, the offer prices for the Comparable Treasury Issues (expressed
in each case as a percentage of its principal amount) quoted in writing to the
Remarketing Dealer by such Reference Treasury Dealer, by 3:30 p.m., New York
City time, on the first Determination Date.
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"Dollar Price" means, with respect to the ROARS, (1) the principal amount of
the ROARS, plus (2) the premium equal to the excess, if any, of (A) the present
value, as of the first Remarketing Date, of the Remaining Scheduled Payments
for such ROARS, discounted to the first Remarketing Date on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at the Treasury
Rate, over (B) the principal amount of the ROARS.
"Fixed Rate Determination Date" means the third Business Day prior to the Fixed
Rate Remarketing Date.
"Reference Corporate Dealer" means each of up to five leading dealers of
publicly traded debt securities, including our debt securities, which shall be
selected by us. We will advise the Remarketing Dealer of our selection of
Reference Corporate Dealers no later than five Business Days prior to the Fixed
Rate Remarketing Date. One of the Reference Corporate Dealers we select will be
UBS Warburg LLC, if UBS AG, London Branch, is then the Remarketing Dealer.
"Reference Treasury Dealer" means each of up to five dealers to be selected by
us, and their respective successors; provided that if any of the foregoing
ceases to be, and has no affiliate that is, a primary U.S. Government
securities dealer (a "Primary Treasury Dealer"), we will substitute for it
another Primary Treasury Dealer. One of the Reference Treasury Dealers we
select will be UBS Warburg LLC, if UBS AG, London Branch, is then the
Remarketing Dealer.
"Remaining Scheduled Payments" means, with respect to the ROARS, the remaining
scheduled payments of the principal and interest thereon, calculated at the
Base Rate applicable to such ROARS, that would be due from but excluding the
first Remarketing Date to and including the maturity date; provided that if
such Remarketing Date is not an Interest Payment Date, the amount of the next
succeeding scheduled interest payment, calculated at the Base Rate, will be
reduced by the amount of interest accrued, calculated at the Base Rate only, to
the first Remarketing Date.
"Treasury Rate" for the ROARS means, with respect to the first Remarketing
Date, the rate per annum equal to the semiannual equivalent yield to maturity
or interpolated (on a day count basis) yield to maturity of the Comparable
Treasury Issues, assuming a price for the Comparable Treasury Issues (expressed
as a percentage of their principal amounts) equal to the Comparable Treasury
Price for such Remarketing Date.
Floating Rate Period
Following the Remarketing Dealer's election to purchase the ROARS in connection
with the first Remarketing Date, but prior to the fourth Business Day prior to
the first Remarketing Date (the "Floating Period Notification Date"), we may
elect to exercise our Floating Period Option. If we do, the ROARS will bear
interest at the Floating Period Interest Rate until the earlier of September 3,
2003, or such date which otherwise would be the Reference Rate Reset Date
following the date on which we elect to terminate such Floating Rate Period
(the "Floating Rate Period Termination Notification Date," such Floating Rate
Period Termination Notification Date to be at least four Business Days prior to
such Reference Rate Reset Date) (September 3, 2003 or such other Reference Rate
Reset Date herein called the "Floating Period Termination Date"). In the event
that we exercise our Floating Period Option, the maturity date of the ROARS
will be extended to the tenth anniversary of the subsequent Remarketing Date,
not to exceed September 3, 2013.
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The amount of interest payable for each day that the ROARS are outstanding
during the Floating Rate Period will be calculated by dividing the Floating
Period Interest Rate in effect for such day by 360 and multiplying the result
by the Dollar Price. The amount of interest payable for any Floating Rate Reset
Period (as defined below) will be calculated by adding the interest payable for
each day in the Floating Rate Reset Period.
For this purpose, the following terms have the following meanings:
"Floating Period Interest Rate" means the sum of the Reference Rate and the
Floating Rate Spread.
"Floating Period Option" means our right, on any date subsequent to the
Remarketing Dealer's election to purchase the ROARS in connection with the
first Remarketing Date but prior to the fourth Business Day prior to the first
Remarketing Date, to require the Remarketing Dealer to remarket the ROARS at
the Floating Period Interest Rate.
"Floating Rate Period" means the period from and including the Floating Rate
Remarketing Date to but excluding the Floating Period Termination Date.
"Floating Rate Remarketing Date" means September 3, 2002 in the event we have
elected to exercise our Floating Period Option.
"Floating Rate Reset Period" means the period from and including the first
Reference Rate Reset Date, to but excluding the next following Reference Rate
Reset Date, and thereafter the period from and including a Reference Rate Reset
Date to but excluding the next following Reference Rate Reset Date; provided
that the final Floating Rate Reset Period will run to but exclude the Floating
Period Termination Date.
"Floating Rate Spread" means the lowest Floating Rate Bid expressed as a spread
(in the form of a percentage or in basis points) above the Reference Rate for
the ROARS obtained by the Remarketing Dealer by 3:30 p.m., New York City time,
on the Floating Rate Spread Determination Date, from the Floating Rate Bids
quoted to the Remarketing Dealer by up to five Reference Money Market Dealers.
A "Floating Rate Bid" means an irrevocable offer to purchase the aggregate
outstanding principal amount of the ROARS at the Dollar Price, but assuming:
(1) a settlement date that is the Floating Rate Remarketing Date;
(2) a maturity date equal to the Floating Period Termination Date;
(3) a stated annual interest rate equal to the Reference Rate plus the
Floating Rate Spread;
(4) that the ROARS are callable by the Remarketing Dealer at the Dollar
Price on the Floating Period Termination Date; and
(5) that we will redeem the ROARS at the Dollar Price on the Floating
Period Termination Date, if not previously called by the Remarketing
Dealer.
"Floating Rate Spread Determination Date" means the third Business Day prior to
the Floating Rate Remarketing Date.
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"Reference Money Market Dealer" means each of up to five leading dealers of
publicly traded debt securities, including our debt securities, which we shall
select, who are also leading dealers in money market instruments. We will
advise the Remarketing Dealer of our selection of Reference Money Market
Dealers no later than five Business Days prior to the Floating Rate Remarketing
Date. One of the Reference Money Market Dealers we select will be UBS Warburg
LLC, if UBS AG, London Branch, is then the Remarketing Dealer.
"Reference Rate" means:
(1) The rate for each Floating Rate Reset Period which will be the rate
for deposits in U.S. dollars for a period of one month which appears on the
Telerate Page 3750 (or any successor page) as of 11:00 a.m., London time,
on the applicable Reference Rate Determination Date.
(2) If no rate appears on Telerate Page 3750 on the Reference Rate
Determination Date, the Remarketing Dealer will request the principal
London offices of four major reference banks in the London Inter-Bank
Market, to provide the Remarketing Dealer, in the case of each such bank,
with its offered quotation for deposits in U.S. dollars for the period of
one month, commencing on the first day of the Floating Rate Reset Period,
to prime banks in the London Inter-Bank Market at approximately 11:00 a.m.,
London time, on that Reference Rate Determination Date and in a principal
amount that is representative for a single transaction in U.S. dollars in
that market at that time. If at least two quotations are provided, then the
Reference Rate will be the average of those quotations. If fewer than two
quotations are provided, then the Reference Rate will be the average
(rounded, if necessary, to the nearest one hundredth of a percent) of the
rates quoted at approximately 11:00 a.m., New York City time, on the
Reference Rate Determination Date by three major banks in New York City
selected by the Remarketing Dealer for loans in U.S. dollars to leading
European banks, having a one-month maturity and in a principal amount that
is representative for a single transaction in U.S. dollars in that market
at that time. If the banks selected by the Remarketing Dealer are not
providing quotations in the manner described in this paragraph, the rate
for the Floating Rate Reset Period following the Reference Rate
Determination Date will be the rate in effect on that Reference Rate
Determination Date.
"Reference Rate Determination Date" will be the second London Business Day
preceding each Reference Rate Reset Date.
"Reference Rate Reset Date" means September 3, 2002 and the third day of each
month thereafter until, but excluding, the Floating Period Termination Date.
Mandatory Tender
On a Business Day not earlier than 20 Business Days prior to the first
Remarketing Date, and not later than 4:00 p.m., New York City time, on the 15th
Business Day prior to such Remarketing Date or not later than four Business
Days prior to the occurrence of the subsequent Remarketing Date, the
Remarketing Dealer will notify us and the Trustee as to whether it elects to
purchase the ROARS for remarketing on such Remarketing Date (the "Notification
Date").
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If the Remarketing Dealer so elects, such ROARS will be subject to mandatory
tender, and will be deemed tendered, to the Remarketing Dealer for purchase and
remarketing on such Remarketing Date, in accordance with the terms and subject
to the conditions described in this Prospectus Supplement.
The ROARS will be remarketed at a fixed rate of interest equal to the Interest
Rate to Maturity, unless we have elected to exercise our Floating Period Option
or redeem the ROARS on the applicable Remarketing Date. If we so elect, the
ROARS will bear interest at the Floating Period Interest Rate until the
Floating Period Termination Date, at which time the ROARS will be remarketed at
a fixed rate of interest equal to the Interest Rate to Maturity unless we have
chosen to redeem, or are required to redeem, the ROARS.
The purchase price of such tendered ROARS will be equal to 100% of the
aggregate principal amount thereof on the first Remarketing Date, or the Dollar
Price on the subsequent Remarketing Date.
Subject to the Remarketing Dealer's election to purchase the ROARS, then on the
applicable Remarketing Date the Remarketing Dealer will sell the aggregate
principal amount of the ROARS at the Dollar Price to the Reference Corporate
Dealer or to the Reference Money Market Dealer, whichever is applicable,
providing the lowest Fixed or Floating Rate Bid, in the case of the first
Remarketing Date, or the lowest Fixed Rate Bid, in the case of the subsequent
Remarketing Date. If the lowest applicable Bid is submitted by two or more of
the applicable Reference Dealers, the Remarketing Dealer will sell such ROARS
to one or more of such Reference Dealers, as it will determine in its sole
discretion.
If the Remarketing Dealer elects to purchase the ROARS, the obligation of the
Remarketing Dealer to purchase the ROARS on any Remarketing Date is subject to
certain conditions set forth in the Remarketing Agreement.
If for any reason the Remarketing Dealer does not purchase the ROARS on any
Remarketing Date, we will be required to redeem the ROARS at a price equal to
100% of their aggregate principal amount, plus accrued and unpaid interest, if
any, if such Remarketing Date is the first Remarketing Date, or at the Dollar
Price, plus accrued and unpaid interest, if any, on the subsequent Remarketing
Date.
Notification of Interest Rate to Maturity
Subject to the Remarketing Dealer's election to purchase the ROARS, the
Remarketing Dealer will notify us, the Trustee and The Depository Trust Company
(DTC) by telephone, confirmed in writing (which may include facsimile or other
electronic transmission), by 4:00 p.m., New York City time, on the Fixed Rate
Determination Date of the Interest Rate to Maturity effective from and
including the Fixed Rate Remarketing Date.
Mandatory Redemption
We will be required to redeem the ROARS in whole on the applicable Remarketing
Date at a price equal to 100% of the aggregate principal amount of the ROARS,
if such Remarketing Date is the first Remarketing Date, or at the Dollar Price
on the subsequent Remarketing Date, plus accrued and unpaid interest, if any,
to the applicable Remarketing Date, in the event that:
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(1) the Remarketing Dealer for any reason does not notify us of the
Floating Period Interest Rate or of the Interest Rate to Maturity by 4:00
p.m., New York City time, on the applicable Determination Date;
(2) prior to any Remarketing Date, the Remarketing Dealer resigns and no
successor has been appointed on or before the applicable Determination
Date;
(3) at any time after the Remarketing Dealer elects on the Notification
Date to remarket the ROARS, the Remarketing Dealer elects to terminate the
Remarketing Agreement in accordance with its terms;
(4) the Remarketing Dealer for any reason does not elect, by notice to
us and the Trustee not later than such Notification Date, to purchase the
ROARS for remarketing on such Remarketing Date;
(5) the Remarketing Dealer for any reason does not deliver the purchase
price of the ROARS to the Trustee in same day funds not later than 12:00
noon, New York City time, on such Remarketing Date, or does not purchase
all tendered ROARS on such Remarketing Date; or
(6) we for any reason fail to redeem the ROARS from the Remarketing
Dealer following our election to effect such optional redemption.
Optional Redemption
If the Remarketing Dealer elects to purchase the ROARS, we will notify the
Remarketing Dealer and the Trustee, not later than 4:00 p.m., New York City
time, on the Business Day immediately preceding any Determination Date, if we
irrevocably elect to exercise our right to redeem the ROARS in whole on the
first Remarketing Date or on the Floating Period Termination Date immediately
following such Determination Date.
If we exercise our right to redeem the ROARS, we will redeem the ROARS in whole
on the first Remarketing Date or the subsequent Remarketing Date at the Dollar
Price, in each case, plus all accrued and unpaid interest, if any, to such
Remarketing Date. No notice of such redemption will be provided to holders of
the ROARS. In any case, we will make payment to each beneficial owner of the
ROARS by book-entry through DTC. Other than as set forth above, we will have no
option to redeem the ROARS prior to the Fixed Rate Remarketing Date.
Post-Remarketing Optional Redemption
After the Fixed Rate Remarketing Date, the ROARS are redeemable, in whole or in
part, at any time, and at our option, at a redemption price equal to the
greater of:
. 100% of the principal amount of the ROARS then outstanding to be
redeemed, or
. the sum of the present values of the remaining scheduled payments of
principal and interest thereon (not including any portion of such
payments of interest accrued as of the post-remarketing redemption date)
discounted to such applicable redemption date on a semiannual basis
(assuming a 360-day year consisting of twelve 30-day months) at the
Adjusted Treasury Rate, plus 20 basis points as calculated by an
Independent Investment Banker,
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plus, in either case, accrued and unpaid interest thereon to the applicable
post-remarketing redemption date.
"Adjusted Treasury Rate" means, with respect to any post-remarketing
redemption date:
. the yield, under the heading which represents the average for the
immediately preceding week, appearing in the most recently published
statistical release designated "H.15(519)" or any successor publication
which is published weekly by the Board of Governors of the Federal
Reserve System and which establishes yields on actively traded U.S.
Treasury securities adjusted to constant maturity under the caption
"Treasury Constant Maturities," for the maturity corresponding to the
Post-Remarketing Comparable Treasury Issue (if no maturity is within
three months before or after the remaining term of the ROARS, yields for
the two published maturities most closely corresponding to the Post-
Remarketing Comparable Treasury Issue will be determined and the
Adjusted Treasury Rate will be interpolated or extrapolated from such
yields on a straight line basis, rounding to the nearest month); or
. if such release (or any successor release) is not published during the
week preceding the calculation date or does not contain such yields, the
rate per annum equal to the semiannual equivalent yield to maturity of
the Post-Remarketing Comparable Treasury Issue, calculated using a price
for the Post-Remarketing Comparable Treasury Issue (expressed as a
percentage of its principal amount) equal to the Post-Remarketing
Comparable Treasury Price for such redemption date.
The Adjusted Treasury Rate will be calculated on the third Business Day
preceding the applicable post-remarketing redemption date.
"Post-Remarketing Comparable Treasury Issue" for the ROARS means the U.S.
Treasury security selected by an Independent Investment Banker as having a
maturity comparable to the remaining term of the ROARS to be redeemed that
would be utilized, at the time of selection and in accordance with customary
financial practice, in pricing new issues of corporate debt securities of
comparable maturity to the remaining term of such ROARS or, if, in the
reasonable judgment of the Independent Investment Banker, there is no such
security, then the Post-Remarketing Comparable Treasury Issue will mean the
U.S. Treasury security or securities selected by an Independent Investment
Banker as having an actual or interpolated maturity or maturities comparable
to the remaining term of the ROARS.
"Post-Remarketing Comparable Treasury Price" means (1) the average of five
Post-Remarketing Reference Treasury Dealer Quotations for the post-remarketing
redemption date, after excluding the highest and lowest Post-Remarketing
Reference Treasury Dealer Quotations, or (2) if the Independent Investment
Banker obtains fewer than five such Post-Remarketing Reference Treasury Dealer
Quotations, the average of all such quotations.
"Independent Investment Banker" means Banc of America Securities LLC and any
successor firm selected by us, or if such firm is unwilling or unable to serve
as such, an independent investment and banking institution of national
standing appointed by us.
"Post-Remarketing Reference Treasury Dealer" means each of up to five dealers
to be selected by us, and their respective successors; provided that if any of
the foregoing ceases to be, and has no affiliate that is, a Primary Treasury
Dealer, we will substitute for it another Primary Treasury Dealer.
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"Post-Remarketing Reference Treasury Dealer Quotations" means, with respect to
each Post-Remarketing Reference Treasury Dealer and any post-remarketing
redemption date, the average, as determined by the Independent Investment
Banker of the bid and asked prices for the Post-Remarketing Comparable Treasury
Issue (expressed in each case as a percentage of its principal amount) quoted
in writing to the Independent Investment Banker at 5:00 p.m., New York City
time, on the third Business Day preceding such redemption date.
We will mail a notice of redemption at least 30 days but not more than 60 days
before a post-remarketing redemption date to each holder of ROARS to be
redeemed. If we elect to partially redeem the ROARS, the Trustee will select in
a fair and appropriate manner the ROARS to be redeemed.
Unless we default in payment of the redemption price, interest will cease to
accrue on or after the post-remarketing redemption date on the ROARS or
portions thereof called for redemption.
Settlement
In the event that the ROARS are purchased by the Remarketing Dealer, the
Remarketing Dealer will pay to the Trustee, in same day funds not later than
12:00 noon, New York City time, on the first Remarketing Date, an amount equal
to 100% of the aggregate principal amount of the ROARS or on the subsequent
Remarketing Date, an amount equal to the Dollar Price.
On any such Remarketing Date, the Remarketing Dealer will cause the Trustee to
make payment of the purchase price for such tendered ROARS that have been
purchased for remarketing by the Remarketing Dealer to DTC for payment to the
DTC participant of each tendering beneficial owner of ROARS. This payment will
be made against delivery through DTC of such beneficial owner's ROARS by book-
entry through DTC by the close of business on such Remarketing Date.
The purchase price of such tendered ROARS will be equal to 100% of the
aggregate principal amount thereof, on the first Remarketing Date and the
Dollar Price, on the subsequent Remarketing Date. We will make, or cause the
Trustee to make, payment of interest to DTC for payment to each beneficial
owner of ROARS, due on a Remarketing Date by book-entry through DTC, by the
close of business on such Remarketing Date.
The transactions described above will be executed on the applicable Remarketing
Date through DTC in accordance with the procedures of DTC, and the accounts of
the respective Participants will be debited and credited, and the ROARS
delivered by book-entry as necessary to effect the purchases and sales thereof.
Settlement for the ROARS will be made by the underwriters in immediately
available funds. All payments of principal and interest in respect of the ROARS
in book-entry form will be made in immediately available funds. The ROARS will
trade in DTC's Same-Day Funds Settlement System until the maturity date,
Remarketing Date or the post-remarketing redemption date, as the case may be,
or until the ROARS are issued in definitive form. Secondary market trading
activity in the ROARS will be required by DTC to settle in immediately
available funds.
The tender and settlement procedures described above, including the provisions
for payment to selling beneficial owners of tendered ROARS, or for payment by
the purchasers of ROARS, in a remarketing, may be modified to the extent
required by DTC or, if the book-entry system is no longer available for the
ROARS at the time of a remarketing, to the extent required to facilitate the
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tendering and remarketing of ROARS in certificated form. In addition, the
Remarketing Dealer may modify the settlement procedures set forth above in
order to facilitate the settlement process.
As long as DTC or its nominee holds a certificate representing the ROARS in the
book-entry system of DTC, no certificates for such ROARS will be delivered to
any beneficial owner. In addition, under the terms of the ROARS and the
Remarketing Agreement, we have agreed that (1) we will use our reasonable best
efforts to maintain the ROARS in book-entry form with DTC or any successor
thereto, and to appoint a successor depositary to the extent necessary to
maintain the ROARS in book-entry form and (2) we will waive any discretionary
right we otherwise have under our Senior Indenture to cause the ROARS to be
issued in certificated form.
Remarketing Dealer
On or prior to the date of original issuance of the ROARS, we will enter into a
Remarketing Agreement with the Remarketing Dealer. The Remarketing Dealer will
not receive any fees or reimbursement of expenses from us in connection with
the remarketing, except under certain circumstances. The aggregate amount paid
to us for the purchase of the ROARS will include an amount paid by the
Remarketing Dealer for its right to remarket the ROARS.
We will agree to indemnify the Remarketing Dealer against certain liabilities,
including liabilities under the Securities Act, arising out of or in connection
with its duties under the Remarketing Agreement.
If the Remarketing Dealer elects to purchase the ROARS, the obligation of the
Remarketing Dealer to purchase the ROARS will be subject to several conditions
set forth in the Remarketing Agreement. In addition, upon the occurrence of
certain events after the Remarketing Dealer elects to purchase the ROARS, the
Remarketing Dealer will have the right to terminate the Remarketing Agreement
or terminate its obligation to purchase the ROARS, or, until 2:00 p.m., New
York City time, on the Business Day immediately preceding the applicable
Remarketing Date, to redetermine the applicable interest rate.
No beneficial owner of the ROARS will have any rights or claims under the
Remarketing Agreement or against us or the Remarketing Dealer, as a result of
the Remarketing Dealer not purchasing the ROARS.
The Remarketing Agreement will provide that the Remarketing Dealer may resign
at any time as Remarketing Dealer, such resignation to be effective ten
Business Days after the delivery to us and the Trustee of notice of such
resignation. In such case, we have no obligation to appoint a successor
Remarketing Dealer. After it purchases the ROARS, the Remarketing Dealer may
exercise any vote or join in any action that any beneficial owner of ROARS may
be entitled to exercise, or take, as if it did not act in any capacity under
the Remarketing Agreement. The Remarketing Dealer, in its individual capacity,
either as principal or agent, may engage in or have an interest in any
financial or other transaction with us, as freely as if it did not act in any
capacity under the Remarketing Agreement.
As long as the Remarketing Agreement is in effect, we will not acquire any of
the ROARS prior to the first Remarketing Date, without the prior written
consent of the Remarketing Dealer.
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On or after the first Remarketing Date or termination of the Remarketing
Agreement prior thereto, we may at any time purchase any ROARS at any price in
the open market or otherwise. The ROARS so purchased by us may, at our
discretion, be held, resold or surrendered to the Trustee for cancellation.
Recent Accounting Developments
For purposes of financial accounting and reporting for publicly held companies,
the Securities and Exchange Commission may require prospective investors to
separately account for the Remarketing Dealer's option to purchase and to
remarket the ROARS on the first Remarketing Date. Persons considering investing
in the ROARS, who are required to file financial reports with the Securities
and Exchange Commission pursuant to the Securities Exchange Act of 1934, as
amended, should consult their own accounting advisors concerning potential
reporting requirements.
Ranking
The ROARS will be our direct, unsecured and unsubordinated obligations. The
ROARS will rank equal in priority with all of our existing and future unsecured
and unsubordinated indebtedness and senior in right of payment to all of our
existing and future subordinated debt. At June 30, 2000, we had outstanding
approximately $2,153,000,000 of unsecured and unsubordinated indebtedness and
approximately $1,702,000,000 of secured indebtedness. Our Senior Indenture
contains no restrictions on the amount of additional indebtedness that we may
issue under it.
Denominations
The ROARS will be issuable in denominations of $1,000 and integral multiples of
$1,000.
Defeasance and Covenant Defeasance
The ROARS will be subject to Defeasance and Covenant Defeasance as described in
our Senior Indenture. See "Description of the New Debt Securities--Defeasance
and Covenant Defeasance" in the accompanying Prospectus.
Under current United States federal income tax law, a Defeasance would be
treated as an exchange of the relevant ROARS in which holders of such ROARS
might recognize gain or loss. In addition, the amount, timing and character of
amounts that holders would thereafter be required to include in income might be
different from what would be includible absent that Defeasance. We urge
investors to consult their own tax advisors as to the specific consequences of
a Defeasance, including the applicability and effect of tax laws other than
United States federal income tax laws.
Under current United States federal income tax law, unless accompanied by other
changes in the terms of the ROARS, Covenant Defeasance should not be treated as
a taxable exchange.
Book-Entry Only Issuance--DTC
DTC will act as the initial securities depositary for the ROARS. The ROARS will
be initially issued as fully registered securities registered in the name of
Cede & Co., DTC's nominee. Fully registered
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global certificates will be issued, representing the total principal amount of
the ROARS, and will be deposited with DTC.
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, as amended. 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 ("direct participants"). 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.
Purchases of ROARS within the DTC system must be made by or through direct
participants, which will receive a credit for the ROARS on DTC's records. The
ownership interest of each actual purchaser of ROARS ("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
purchases, but beneficial owners are expected to receive written confirmations
providing details of the transactions, as well as periodic statements of their
holdings, from the direct or indirect participants through which the beneficial
owners entered into the transaction. Transfers of ownership interests in the
ROARS 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 ROARS, except in the
event that use of the book-entry system for the ROARS is discontinued.
To facilitate subsequent transfers, all ROARS deposited by participants with
DTC are registered in the name of DTC's partnership nominee, Cede & Co. The
deposit of ROARS 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 ROARS. DTC's records reflect only the identity of the
direct participants to whose accounts such ROARS 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.
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.
S-23
<PAGE>
Neither DTC nor Cede & Co. will consent or vote with respect to ROARS. Under
its usual procedures, DTC would mail an Omnibus Proxy to us 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 ROARS are
credited on the record date (identified in a listing attached to the Omnibus
Proxy).
Payments on the ROARS will be made to Cede & Co., as nominee of DTC. DTC's
practice is to credit direct participants' accounts, upon DTC's receipt of
funds and corresponding detailed information, on the relevant payment date in
accordance with their respective holdings shown on DTC's records. Payments by
participants to beneficial owners will be governed by standing instructions and
customary practices, as is the case with securities held for the account of
customers in bearer form or registered in "street name," and will be the
responsibility of such participant and not our responsibility or the
responsibility of DTC, subject to any statutory or regulatory requirements as
may be in effect from time to time. Payment to Cede & Co. is our responsibility
or the responsibility of the paying agent, disbursement of such payments to
direct participants is the responsibility of Cede & Co., and disbursement of
such payments to the beneficial owners is the responsibility of direct and
indirect participants.
Except as provided herein, a beneficial owner of an interest in a global ROARS
will not be entitled to receive physical delivery of ROARS. Accordingly, each
beneficial owner must rely on the procedures of DTC to exercise any rights
under the ROARS. The laws of some jurisdictions require that certain purchasers
of securities take physical delivery of securities in definitive form. Such
laws may impair the ability to transfer beneficial interests in a global ROARS.
The information in this section concerning DTC and DTC's book-entry system has
been obtained from sources that we believe to be reliable, but neither we nor
any underwriter takes any responsibility for its accuracy. We have no
responsibility for the performance by DTC or its participants of their
respective obligations, including obligations that they have under the rules
and procedures that govern their operations.
S-24
<PAGE>
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following summary of certain United States federal income tax consequences
of the purchase, ownership and disposition of the ROARS is based upon the
Internal Revenue Code of 1986, as amended (the "Code"), Treasury regulations,
Internal Revenue Service ("IRS") rulings and pronouncements and administrative
and judicial decisions currently in effect, all of which are subject to change
(possibly with retroactive effect) or possible differing interpretations. This
summary deals only with ROARS held as capital assets as defined in the Code and
does not purport to deal with persons in special tax situations, such as
financial institutions, insurance companies, regulated investment companies,
real estate investment trusts, dealers in securities or currencies, persons
holding ROARS as a hedge against currency risk or as a position in a
"straddle," or conversion transaction, or person whose functional currency is
not the U.S. dollar.
PROSPECTIVE INVESTORS CONSIDERING THE PURCHASE OF THE ROARS SHOULD CONSULT
THEIR OWN TAX ADVISORS CONCERNING THE APPLICATION OF UNITED STATES FEDERAL
INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY CONSEQUENCES OF
THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE ROARS ARISING UNDER THE LAWS OF
ANY OTHER TAXING JURISDICTION.
As used herein, the term "U.S. Holder" means a beneficial owner of ROARS that
is for United States federal income tax purposes (1) a citizen or resident of
the United States, (2) a corporation, partnership or other entity created or
organized in or under the laws of the United States or of any political
subdivision thereof (other than a partnership that is not treated as a United
States person under any applicable Treasury regulations), (3) an estate the
income of which is subject to United States federal income tax regardless of
its source, or (4) a trust if a court within the United States is able to
exercise primary supervision over the administration of the trust and one or
more United States persons have the authority to control all substantial
decisions of the trust. As used herein, the term "non-U.S. Holder" means a
beneficial owner of a ROARS that is not a U.S. Holder.
The United States federal income tax treatment of debt obligations such as
ROARS is not entirely certain. Because the ROARS are subject to mandatory
tender on the Remarketing Date, we intend to treat the ROARS as maturing on the
Remarketing Date for United States federal income tax purposes. Based on such
treatment, interest on the ROARS should constitute "qualified stated interest"
and generally should be taxable to a U.S. Holder as ordinary interest income at
the time such payments are accrued or received, in accordance with the U.S.
Holder's regular method of tax accounting. Under the foregoing, if the ROARS
are issued to the U.S. Holder at par value or the excess of par value over the
issue price does not exceed a statutory de minimis amount (generally 1/4 of 1%
of the ROARS' stated redemption price at the Remarketing Date multiplied by the
number of complete years to the Remarketing Date from its issue date), the
ROARS will not be treated as having original issue discount. If the ROARS are
issued at a discount greater than the statutory de minimis amount, a Holder
will include original issue discount in income as ordinary interest for United
States federal income tax purposes as it accrues under a constant yield method
in advance of receipt of the cash payments attributable to such income,
regardless of the U.S. Holder's regular method of tax accounting.
Under the foregoing treatment, upon the sale, exchange or retirement of a
ROARS, a U.S. Holder generally will recognize taxable gain or loss equal to the
difference between the amount realized on
S-25
<PAGE>
the sale, exchange or retirement (other than amounts representing accrued and
unpaid interest) and such U.S. Holder's adjusted tax basis in the ROARS. A U.S.
Holder's adjusted tax basis in a ROARS generally will equal such U.S. Holder's
initial investment in the ROARS increased by any original issue discount
included in income and decreased by the amount of any payments, other than
qualified stated interest payments, received with respect to the ROARS. Such
gain or loss will generally be capital gain or loss and will be long-term
capital gain or loss if the ROARS are held by the U.S. Holder for more than one
year on the date of disposition.
There can be no assurance that the IRS will agree with our treatment of the
ROARS, and it is possible that the IRS could assert another treatment. For
instance, it is possible that the IRS could seek to treat the ROARS as maturing
on their stated maturity date. In the event the ROARS were treated as maturing
on their stated maturity date for United States federal income tax purposes,
the ROARS would be treated as having contingent interest under the Code. In
such event, under Treasury regulations governing debt instruments that provide
for contingent payments, we would be required to construct a projected payment
schedule for the ROARS, based upon our current borrowing costs for our
comparable debt instruments, from which an estimated yield on the ROARS would
be calculated. A U.S. Holder would be required to include in income original
issue discount in an amount equal to the product of the adjusted issue price of
the ROARS at the beginning of each interest accrual period and the estimated
yield of the ROARS. In general, for these purposes, a ROARS' adjusted issue
price would equal the ROARS' issue price increased by the interest previously
accrued on the ROARS, and reduced by all payments made on the ROARS. As a
result of such a calculation, a U.S. Holder might be required to include
interest in income in excess of actual cash payments received for certain
taxable years. Also, the character of any gain or loss, upon the sale or
exchange of a ROARS (including a sale pursuant to the mandatory tender on the
Remarketing Date) by a U.S. Holder, will likely differ if the ROARS were
treated as contingent payment obligations. Any such taxable gain generally
would be treated as ordinary income. Any such taxable loss generally would be
ordinary to the extent of previously accrued original issue discount, and any
excess would generally be treated as capital loss.
Non-U.S. Holders
A non-U.S. Holder will not be subject to United States federal income taxes on
payments of principal, premium (if any) or interest (including original issue
discount, if any) on a ROARS, unless such non-U.S. Holder is a direct or
indirect 10% or greater shareholder of Duke Energy, a controlled foreign
corporation related to Duke Energy through stock ownership or a bank receiving
interest on an extension of credit made pursuant to a loan agreement entered
into in the ordinary course of its trade or business. To qualify for the
exemption from taxation, a non-U.S. Holder must provide a statement signed by
the beneficial owner of the ROARS under penalties of perjury that certifies
that such owner is not a U.S. Holder and provides the name and address of the
beneficial owner.
Any gain or income realized by non-U.S. Holders upon the sale, exchange,
retirement or other disposition of ROARS generally will not be subject to
United States federal income tax unless (i) such gain or income is effectively
connected with the conduct of a trade or business in the United States of the
non-U.S. Holder or (ii) in the case of a non-U.S. Holder who is an individual,
such individual is present in the United States for 183 days or more in the
taxable year of such sale, exchange, retirement or other disposition, and
certain other conditions are met.
S-26
<PAGE>
ROARS beneficially owned by an individual who at the time of death is not a
United States citizen or resident will not be subject to the United States
federal estate tax as a result of such individual's death, provided that such
individual does not actually or constructively own 10% or more of the total
combined voting power of all classes of stock of Duke Energy entitled to vote
and provided that the interest payments with respect to such ROARS would not
have been, if received at the time of such individual's death, effectively
connected with the conduct of a United States trade or business by such
individual.
Backup Withholding
Backup withholding of United States federal income tax at a rate of 31% may
apply to payments made in respect of the ROARS to registered owners who are not
"exempt recipients" and who fail to provide certain identifying information
(such as the registered owner's taxpayer identification number) in the required
manner. Generally, individuals are not exempt recipients, whereas corporations
and certain other entities generally are exempt recipients. Payments made in
respect of the ROARS to a U.S. Holder must be reported to the IRS, unless the
U.S. Holder is an exempt recipient or establishes an exemption. Compliance with
the identification procedures described in the preceding section would
establish an exemption from backup withholding for non-U.S. Holders.
Upon the sale of ROARS to or through a broker, the broker must withhold 31% of
the entire purchase price, unless either (i) the broker determines that the
seller is a corporation or other exempt recipient or (ii) the seller provides,
in the required manner, certain identifying information and, in the case of a
non-U.S. Holder, certifies that such seller is a non-U.S. Holder and certain
other conditions are met. Such a sale must also be reported by the broker to
the IRS, unless either (i) the broker determines that the seller is an exempt
recipient or (ii) the seller certifies its non-U.S. status and certain other
conditions are met. Certification of the registered owner's non-U.S. status
would be made normally on an IRS form under penalties of perjury.
Any amounts withheld under the backup withholding rules from a payment to a
beneficial owner would be allowed as a refund or a credit against such
beneficial owner's United States federal income tax, provided the required
information is furnished to the IRS.
Final Withholding Regulations
The Treasury Department recently issued final Treasury regulations (the "Final
Regulations") which make certain modifications to the withholding, backup
withholding and information reporting rules described above. The Final
Regulations will generally be effective for payments made on or after January
1, 2001 subject to certain transition rules. Prospective investors are urged to
consult their own tax advisors regarding the Final Regulations.
S-27
<PAGE>
UNDERWRITING
Subject to the terms and conditions stated in the underwriting agreement dated
September 6, 2000 among us and the underwriters named below, we have agreed to
sell to each of the underwriters and each of the underwriters has severally
agreed to purchase, the principal amount of ROARS set forth opposite the name
of such underwriter:
<TABLE>
<CAPTION>
Principal Amount
Underwriters of ROARS
------------ ----------------
<S> <C>
Banc of America Securities LLC................................ $187,500,000
Chase Securities Inc. ........................................ 62,500,000
------------
Total..................................................... $250,000,000
============
</TABLE>
The underwriting agreement provides that the obligations of the several
underwriters to purchase the ROARS included in this offering are subject to
approval of a number of legal matters by counsel and to some other conditions.
The underwriters are obligated to purchase all of the ROARS if they purchase
any of the ROARS.
The underwriters propose to offer the ROARS directly to the public at the
public offering price set forth on the cover page of this Prospectus Supplement
and to certain dealers at the public offering price less a concession not in
excess of 0.150% of the principal amount of the ROARS. The underwriters may
allow, and such dealers may reallow, a discount not in excess of 0.100% of the
principal amount of the ROARS on sales to certain other dealers. After the
initial offering of the ROARS to the public, the public offering price and such
concessions may be changed by the underwriters.
We have agreed that, without the prior written consent of Banc of America
Securities LLC, we will not offer, sell or otherwise dispose of any debt
securities in the United States issued or guaranteed by us (other than the
ROARS), or publicly announce an intention to effect any such transaction,
within 30 days after the closing of this offering.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act.
The ROARS are a new issue of securities with no established trading market. We
do not intend to apply for listing of the ROARS on any securities exchange or
for quotation through any inter-dealer quotation system. We have been advised
by the underwriters that they intend to make a market in the ROARS as permitted
by applicable laws and regulations. The underwriters are not obligated,
however, to make a market in the ROARS, and any market making may be
discontinued at any time without notice. No assurances can be given as to the
liquidity of, or trading market for, the ROARS.
In connection with the offering, Banc of America Securities LLC, on behalf of
the underwriters, may purchase and sell ROARS in the open market. These
transactions may include over-allotment, syndicate covering transactions and
stabilizing transactions. Over-allotment involves syndicate sales of ROARS in
excess of the principal amount of the ROARS to be purchased by the underwriters
in the offering, which creates a syndicate short position. Syndicate covering
transactions involves
S-28
<PAGE>
purchases of the ROARS in the open market after the distribution has been
completed in order to cover syndicate short positions. Stabilizing transactions
consist of certain bids or purchases of ROARS made for the purpose of
preventing or retarding a decline in the market price of the ROARS while the
offering is in progress.
The underwriters may also impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when Banc
of America Securities LLC, in covering syndicate short positions or making
stabilizing purchases, repurchases ROARS originally sold by that syndicate
member.
Any of these activities may cause the price of the ROARS to be higher than the
price that otherwise would exist in the open market in the absence of such
transactions. These transactions may be effected in the over-the-counter market
or otherwise and, if commenced, may be discontinued at any time.
We estimate that our total expenses of this offering will be $250,000.
The Remarketing Dealer will pay to us 3.92% of the aggregate principal amount
of the ROARS as consideration for the right to repurchase the ROARS at 100% of
their aggregate principal amount on the first Remarketing Date.
If the Remarketing Dealer purchases the ROARS on the first Remarketing Date and
subsequently offers the ROARS for resale, the resale of the ROARS may have to
be registered with the Securities and Exchange Commission under the Securities
Act of 1933, as amended. If the resale of the ROARS has to be registered, we
have agreed to pay the expenses incident to such a registration.
The underwriters and their affiliates may have performed certain investment
banking or commercial banking transactions on our behalf from time to time for
which they have received customary fees and expenses. The underwriters and
their affiliates may, from time to time, engage in transactions with and
perform services on our behalf in the ordinary course of their business. Harold
S. Hook, one of our directors, is a director of The Chase Manhattan Corporation
and The Chase Manhattan Bank, which are affiliates of Chase Securities Inc. The
Chase Manhattan Bank is the Trustee under our Senior Indenture.
S-29
<PAGE>
EXPERTS
Our consolidated financial statements as of December 31, 1999 and 1998 and for
each of the three years in the period ended December 31, 1999 included in our
annual report on Form 10-K for the year ended December 31, 1999, which are
incorporated herein by reference, have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report, which is incorporated herein
by reference, and have been so incorporated in reliance upon the report of such
firm given upon their authority as experts in accounting and auditing.
LEGAL MATTERS
Ellen T. Ruff, Esq., who is our Vice President and General Counsel, Corporate
and Electric Operations, and Dewey Ballantine LLP will issue opinions about the
validity of the ROARS and certain related matters on our behalf. Brown & Wood
llp will issue an opinion about the validity of the ROARS for the underwriters.
In giving their respective opinions, Dewey Ballantine LLP and Brown & Wood llp
may rely as to matters of North Carolina law upon the opinion of Ms. Ruff. As
of July 31, 2000, Ms. Ruff owned 11,257 shares of our Common Stock and options
to purchase 44,800 shares, 8,765 of which were exercisable.
S-30
<PAGE>
P R O S P E C T U S
$1,300,000,000
Duke Energy Corporation
First and Refunding Mortgage Bonds
Debt Securities
----------------
This Prospectus contains summaries of the general terms of these securities. We
will provide specific terms of these securities, and the manner in which they
are being offered, in supplements to this Prospectus. You should read this
Prospectus and any supplement carefully before you invest. We cannot sell any
of these securities unless this Prospectus is accompanied by a Prospectus
Supplement.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this Prospectus. Any representation to the contrary is
a criminal offense.
----------------
The date of this Prospectus is April 7, 1999.
<PAGE>
You should rely only on the information provided or incorporated by reference
in this Prospectus or any accompanying Prospectus Supplement. We have not
authorized anyone else to provide you with different information. We are not
making an offer of these securities in any state where the offer is not
permitted. You should not assume that the information in this Prospectus or any
accompanying Prospectus Supplement is accurate as of any date other than the
date on the front of those documents.
----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
About This Prospectus...................................................... 3
Where You Can Find More Information........................................ 3
Forward-Looking Statements................................................. 4
Duke Energy Corporation.................................................... 5
Use of Proceeds............................................................ 7
Description of the New Bonds............................................... 7
Description of the New Debt Securities..................................... 11
Plan of Distribution....................................................... 21
Experts.................................................................... 22
Legal Matters.............................................................. 22
</TABLE>
2
<PAGE>
ABOUT THIS PROSPECTUS
This Prospectus is part of a Registration Statement that we filed with the
Securities and Exchange Commission ("SEC") utilizing a "shelf" registration
process. Under the shelf registration process, we may sell any combination of
the securities described in this Prospectus in one or more offerings up to a
total dollar amount of $1,300,000,000. The securities that we may offer are
First and Refunding Mortgage Bonds, Senior Notes and Subordinated Notes.
This Prospectus provides you with a general description of the securities we
may offer. Each time we sell securities, we will provide a Prospectus
Supplement that will contain specific information about the terms of that
offering. The Prospectus Supplement may also add, update or change information
contained in this Prospectus. The Registration Statement we filed with the SEC
includes exhibits that provide more details about the matters discussed in this
Prospectus. You should read this Prospectus and the related exhibits filed with
the SEC and any Prospectus Supplement together with the additional information
described under the next caption, "Where You Can Find More Information."
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports and other information with the
SEC. You may read and copy any document we file at the SEC's public reference
rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please
call the SEC's toll-free telephone number at 1-800-SEC-0330 for further
information about the operation of the public reference rooms. In addition, you
may inspect our reports and other information at the offices of the New York
Stock Exchange, Inc., 20 Broad Street, New York, New York 10005, where certain
of our securities are listed. Our SEC filings are available on the SEC's Web
site at http://www.sec.gov. Information about us is also available on our Web
site at http://www.duke-energy.com.
The SEC allows us to "incorporate by reference" the information we file with
it, which means that we can disclose important information to you by referring
you to those documents. The information incorporated by reference is an
important part of this Prospectus and should be read with the same care.
Information that we file later with the SEC will automatically update and
supersede this information.
The following documents are incorporated in and made a part of this Prospectus
by reference:
. our annual report on Form 10-K for the year ended December 31, 1998;
. our current reports on Form 8-K dated January 25, 1999, February 11,
1999, March 8, 1999 and March 10, 1999;
. the definitive joint proxy statement-prospectus that we and PanEnergy
Corp filed dated March 13, 1997;
. the annual report on Form 10-K of PanEnergy Corp for the year ended
December 31, 1996; and
. the quarterly reports on Form 10-Q of PanEnergy Corp for the quarters
ended March 31, 1997 and June 30, 1997.
Any documents that we file with the SEC in the future under Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 will also be
incorporated by reference into this Prospectus until we sell all of the
securities being registered.
3
<PAGE>
You may request a copy of these filings at no cost by writing or calling us
at the following address or one of the following telephone numbers:
Investor Relations Department
Duke Energy Corporation
P.O. Box 1005
Charlotte, North Carolina 28201
(704) 382-3853 or (800) 488-3853 (toll-free)
FORWARD-LOOKING STATEMENTS
This Prospectus contains or incorporates by reference statements that do not
directly or exclusively relate to historical facts. Such statements are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. You can typically identify forward-looking
statements by the use of forward-looking words, such as "may," "will," "could,"
"project," "believe," "anticipate," "expect," "estimate," "continue,"
"potential," "plan," "forecasts" and the like. These statements represent our
intentions, plans, expectations and beliefs about future events and are subject
to risks, uncertainties and other factors. Many of these factors are outside
our control and could cause actual results to differ materially from the
results expressed or implied by those forward-looking statements. These factors
include:
. state and federal legislative and regulatory initiatives that affect
cost and investment recovery, have an impact on rate structures, and
affect the speed and degree to which competition enters the electric and
natural gas industries;
. industrial, commercial and residential growth in our service territories
or the service territories of our subsidiaries;
. the weather and other natural phenomena;
. the timing and extent of changes in commodity prices and interest rates;
. changes in environmental and other laws and regulations to which we and
our subsidiaries are subject or other external factors over which we
have no control;
. the results of financing efforts;
. growth in opportunities for our business units;
. achievement of Year 2000 readiness; and
. the effect of accounting policies issued periodically by accounting
standard-setting bodies.
We undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events referred to in this Prospectus and any accompanying Prospectus
Supplement might not occur.
4
<PAGE>
DUKE ENERGY CORPORATION
We, together with our subsidiaries, are an integrated energy and energy
services provider with the ability to offer physical delivery and management of
both electricity and natural gas throughout the United States and abroad. We,
directly or through our subsidiaries, provide these and other services through
seven business segments:
. Electric Operations
. Natural Gas Transmission
. Field Services
. Trading and Marketing
. Global Asset Development
. Other Energy Services
. Real Estate Operations
Electric Operations generates, transmits, distributes and sells electric
energy in central and western North Carolina and the western portion of
South Carolina (doing business as Duke Power or Nantahala Power and Light).
Natural Gas Transmission, through its northeast pipelines, provides
interstate transportation and storage of natural gas for customers
primarily in the Mid-Atlantic and New England states. Until the sale of the
midwest pipelines to a subsidiary of CMS Energy Corporation, which was
consummated on March 29, 1999, Natural Gas Transmission provided interstate
transportation and storage services in the midwest states.
Field Services gathers, processes, transports and markets natural gas and
produces and markets natural gas liquids. Field Services operates gathering
systems in ten states that serve major gas-producing regions in the Rocky
Mountains, Permian Basin, Mid-Continent and Gulf Coast areas. Field
Services significantly expanded its operations by the acquisition on March
31, 1999 of the natural gas gathering, processing, fractionation and
natural gas liquids pipeline business of a unit of Union Pacific Resources.
Trading and Marketing markets natural gas, electricity and other energy-
related products across North America. We own a 60% interest in Trading and
Marketing, with Mobil Corporation owning a 40% minority interest.
Global Asset Development develops, owns and operates energy-related
facilities worldwide. Global Asset Development conducts its operations
primarily through Duke Energy Power Services, LLC and Duke Energy
International, LLC.
Other Energy Services provides engineering, consulting, construction and
integrated energy solutions worldwide, primarily through Duke Engineering &
Services, Inc., Duke/Fluor Daniel and DukeSolutions, Inc.
Real Estate Operations develops high-quality commercial and residential
real estate projects and manages forest holdings in the southeastern United
States. Real Estate Operations conducts its business through Crescent
Resources, Inc.
5
<PAGE>
We completed a merger with PanEnergy Corp on June 18, 1997 which was accounted
for as a pooling of interests. PanEnergy Corp was involved in the gathering,
processing, transportation and storage of natural gas, the production of
natural gas liquids and the marketing of natural gas, electricity and other
energy-related products.
The foregoing information about us and our subsidiaries is only a general
summary and is not intended to be comprehensive. For additional information
about us and our subsidiaries you should refer to the information described
under the caption "Where You Can Find More Information."
Our principal executive offices are located at 526 South Church Street,
Charlotte, North Carolina 28202, telephone (704) 594-6200.
Recent Financial Data
The following shows only selected consolidated financial information. You
should refer to the financial statements included in the documents incorporated
by reference in this Prospectus for additional information. See "Where You Can
Find More Information."
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1998 1997(1) 1996(1)
------- ------- -------
(Millions, except per
share data)
<S> <C> <C> <C>
Operating Revenues.................................... $17,610 $16,309 $12,302
Net Income............................................ 1,252 974 1,074
Earnings Available for Common Stock................... 1,231 902 1,030
Earnings per share of Common Stock (before
extraordinary item)
Basic............................................... $3.43 $2.51 $2.90
Dilutive............................................ 3.42 2.50 2.88
Earnings per share of Common Stock
Basic............................................... 3.41 2.51 2.85
Dilutive............................................ 3.40 2.50 2.83
</TABLE>
--------
(1) Data reflects accounting for the combination with PanEnergy Corp on June
18, 1997 as a pooling of interests. As a result, the data gives effect to
the combination as if it had occurred as of January 1, 1996.
<TABLE>
<CAPTION>
Capitalization as of
December 31, 1998
--------------------
(Millions)
<S> <C> <C>
Common Stock Equity........................................ $ 8,150 49%
Preferred Stocks........................................... 333 2
Trust Preferred Securities................................. 919 6
Debt (including short-term debt)........................... 7,168 43
----------- --------
Total.................................................... $ 16,570 100%
=========== ========
</TABLE>
Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------
1998 1997(1) 1996(1) 1995(1) 1994(1)
---- ------- ------ ------- -------
<S> <C> <C> <C> <C> <C>
Ratio of Earnings to Fixed Charges........ 4.7 4.1 4.3 4.0 3.6
</TABLE>
For purposes of this ratio (a) earnings consist of income from continuing
operations before income taxes and fixed charges, and (b) fixed charges consist
of all interest deductions and the interest component of rentals.
--------
(1) Data reflects accounting for the combination with PanEnergy Corp on June
18, 1997 as a pooling of interests. As a result, the data gives effect to
the combination as if it had occurred as of January 1, 1994.
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USE OF PROCEEDS
Unless we state otherwise in any Prospectus Supplement, we will use the net
proceeds from the sale of the First and Refunding Mortgage Bonds, Senior Notes
and Subordinated Notes being offered:
. to redeem or purchase from time to time presently outstanding securities
when we anticipate those transactions will result in an overall cost
savings;
. to repay maturing securities;
. to finance our ongoing construction program; or
. for general corporate purposes.
If we do not use the net proceeds immediately, we may temporarily invest them
in short-term interest-bearing obligations or deposit them with banks.
DESCRIPTION OF THE NEW BONDS
We will issue the First and Refunding Mortgage Bonds as one or more series
under our First and Refunding Mortgage, dated as of December 1, 1927, to The
Chase Manhattan Bank, as Trustee, as supplemented and amended. In the following
discussion, we will refer to the First and Refunding Mortgage as the
"Mortgage." We will refer to all of our First and Refunding Mortgage Bonds as
"Bonds" and the Bonds to be issued under this shelf registration as the "New
Bonds." We will refer to the Trustee under the Mortgage as the "Bond Trustee."
The Mortgage and the form of supplemental indenture to the Mortgage relating to
the New Bonds are exhibits to the Registration Statement.
The following description of the New Bonds is only a summary and is not
intended to be comprehensive. For additional information you should refer to
the Mortgage.
General
The amount of Bonds which we may issue under the Mortgage is unlimited. Our
Board of Directors will determine the terms of each series of the New Bonds,
including denominations, maturity, interest rate and payment terms and whether
the series will have redemption or sinking fund provisions.
Unless we state otherwise in the applicable Prospectus Supplement, we will
issue the New Bonds only in fully registered form, without coupons. There will
be no service charge for any transfers and exchanges of the New Bonds. We may,
however, require payment to cover any stamp tax or other governmental charge
payable in connection with any transfer or exchange. Transfers and exchanges of
the New Bonds may be made at The Chase Manhattan Bank, 55 Water Street, New
York, New York 10041.
The New Bonds will be issuable in denominations of $1,000 and multiples of
$1,000, unless we state otherwise in the applicable Prospectus Supplement. New
Bonds will be exchangeable for an equivalent principal amount of New Bonds of
other authorized denominations of the same series.
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The applicable Prospectus Supplement will describe the maturity, interest rate
and payment terms of the New Bonds and any relevant redemption or sinking fund
provisions.
Security
The Mortgage creates a continuing lien to secure the payment of principal and
interest on the Bonds. All the Bonds are equally and ratably secured without
preference, priority or distinction. The lien of the Mortgage covers
substantially all of our properties, real, personal and mixed, and our
franchises, including properties acquired after the date of the Mortgage, with
certain exceptions. Those exceptions include cash, accounts receivable,
inventories of materials and supplies, merchandise held for sale, securities
that we hold, certain after-acquired property not useful in our electric
business, certain after-acquired franchises and certain after-acquired non-
electric properties.
The lien of the Mortgage is subject to certain permitted liens and to liens
that exist upon properties that we acquired after we entered into the Mortgage
to the extent of the amounts of prior lien bonds secured by those properties
(not, however, exceeding 75% of the cost or value of those properties) and
additions to those properties. "Prior lien bonds" are bonds or other
indebtedness that are secured at the time of acquisition by a lien upon
property that we acquire after the date of the Mortgage that becomes subject to
the lien of the Mortgage.
Issuance of Additional Bonds
If we satisfy the conditions in the Mortgage, the Bond Trustee may authenticate
and deliver additional Bonds in an aggregate principal amount not exceeding:
. the amount of cash that we have deposited with the Bond Trustee for that
purpose;
. the amount of previously authenticated and delivered Bonds or refundable
prior lien bonds that have been or are to be retired which, with certain
exceptions, we have deposited with the Bond Trustee for that purpose; or
. 66 2/3% of the aggregate of the net amounts of additional property
(electric) certified to the Bond Trustee after February 18, 1949.
The Bond Trustee may not authenticate and deliver any additional Bonds under
the Mortgage, other than certain types of refunding Bonds, unless our available
net earnings for twelve consecutive calendar months within the immediately
preceding fifteen calendar months have been at least twice the amount of the
annual interest charges on all Bonds outstanding under the Mortgage, including
the Bonds proposed to be issued, and on all outstanding prior lien bonds that
the Bond Trustee does not hold under the Mortgage.
We may not apply to the Bond Trustee to authenticate and deliver any Bonds (1)
in an aggregate principal amount exceeding $26,000,000 on the basis of
additional property (electric) that we acquired or constructed prior to January
1, 1949 or (2) on the basis of Bonds or prior lien bonds paid, purchased or
redeemed prior to February 1, 1949. We may not certify any additional property
(electric) which is subject to the lien of any prior lien bonds for the purpose
of establishing those prior lien bonds as refundable if the aggregate principal
amount of those prior lien bonds exceeds 66 2/3% of the net amount of the
additional property that is subject to the lien of such prior lien bonds.
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Release Provisions
The Mortgage permits us to dispose of certain property and to take other
actions without the Bond Trustee releasing that property. The Mortgage also
permits the release of mortgaged property if we deposit cash or other
consideration equal to the value of the mortgaged property to be released. In
certain events and within certain limitations, the Bond Trustee is required to
pay out cash that the Bond Trustee receives--other than for the Replacement
Fund or as the basis for issuing Bonds--upon our application.
We may withdraw cash that we deposited with the Bond Trustee as the basis for
issuing Bonds in an amount equal to the principal amount of any Bonds that we
are entitled to have authenticated and delivered on the basis of additional
property (electric), on the basis of Bonds previously authenticated and
delivered or on the basis of refundable prior lien bonds.
Replacement Fund
The Mortgage requires us to deposit with the Bond Trustee annually, for the
Replacement Fund established under the Mortgage, the sum of the "replacement
requirements" for all years beginning with 1949 and ending with the last
calendar year preceding the deposit date, less certain deductions. Those
deductions are (1) the aggregate original cost of all fixed property (electric)
retired during that time period, not exceeding the aggregate of the gross
amounts of additional property (electric) that we acquired or constructed
during the same period, and (2) the aggregate amount of cash that we deposited
with the Bond Trustee up to that time, or that we would have been required to
deposit except for permitted reductions, under the Replacement Fund.
The "replacement requirement" for any year is 2 1/2% of the average "amount of
depreciable fixed property" (electric) owned by us at the beginning and end of
that year, not exceeding, however, the amount we are permitted to charge as an
operating expense for depreciation or retirement by any governmental authority,
or the amount deductible as depreciation or similar expense for federal income
tax purposes. The "amount of depreciable fixed property" (electric) is the
amount by which the sum of $192,913,385 plus the aggregate gross amount of all
depreciable additional property (electric) that we acquired or constructed from
January 1, 1949 to the date as of which such amount is determined exceeds the
original cost of all of our depreciable fixed property (electric) retired
during that period or released from the lien of the Mortgage.
We may reduce the amount of cash at any time required to be deposited in the
Replacement Fund and may withdraw any cash that we previously deposited that is
held in the Replacement Fund:
. in an amount equal to 150% of the principal amount of Bonds previously
authenticated and delivered under the Mortgage, or refundable prior lien
bonds, deposited with the Bond Trustee and on the basis of which we
would otherwise have been entitled to have additional Bonds
authenticated and delivered; and
. in an amount equal to 150% of the principal amount of Bonds which we
would otherwise be entitled to have authenticated and delivered on the
basis of additional property (electric).
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Upon our application, the Bond Trustee will apply cash that we deposited in the
Replacement Fund and have not previously withdrawn to the payment, purchase or
redemption of Bonds issued under the Mortgage or to the purchase of refundable
prior lien bonds.
We have never deposited any cash with the Bond Trustee for the Replacement
Fund. If we deposit any cash in the future, we have agreed not to apply that
cash to the redemption of the New Bonds as long as any Bonds now outstanding
remain outstanding.
Amendments of the Mortgage
We may amend the Mortgage with the consent of the holders of 66 2/3% of the
Bonds, except that no such amendment may:
. affect the terms of payment of principal at maturity or of interest or
premium on any Bond;
. affect the rights of Bondholders to sue to enforce any such payment at
maturity; or
. reduce the percentage of Bonds required to consent to an amendment.
No amendment may affect the rights under the Mortgage of the holders of less
than all of the series of Bonds outstanding unless the holders of 66 2/3% of
the Bonds of each series affected consent to the amendment.
The covenants included in the supplemental indenture for any series of New
Bonds will be solely for the benefit of the holders of those New Bonds. We may
modify any such covenant only with the consent of the holders of 66 2/3% of
those New Bonds outstanding, without the consent of Bondholders of any other
series.
Events of Default
The Bond Trustee may, and at the written request of the holders of a majority
of the outstanding Bonds will, declare the principal of all outstanding Bonds
due when any event of default under the Mortgage occurs. The holders of a
majority of the outstanding Bonds may, however, waive the default and rescind
the declaration if we cure the default.
Events of default under the Mortgage include:
. default in the payment of principal;
. default for 60 days in the payment of interest;
. default in the performance of any other covenant in the Mortgage
continuing for 60 days after the Bond Trustee or the holders of not less
than 10% in principal amount of the Bonds then outstanding give notice
of the default; and
. certain bankruptcy or insolvency events with respect to the Corporation.
The Bond Trustee is under no obligation to exercise any of its powers at the
request of any of the holders of the Bonds unless those Bondholders have
offered to the Bond Trustee security or indemnity satisfactory to it against
the cost, expenses and liabilities it might incur as a result. The
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holders of a majority of the Bonds outstanding may direct the time, method and
place of conducting any proceeding for any remedy available to the Bond
Trustee, or the exercise of any trust or power of the Bond Trustee. The Bond
Trustee will not be liable for any action that it takes or omits to take in
good faith in accordance with any such direction.
We provide an officers' certificate each year to the Bond Trustee stating
whether we have complied with the covenants of the Mortgage.
Concerning the Bond Trustee
The Chase Manhattan Bank is the Bond Trustee. We and certain of our affiliates
maintain deposit accounts and banking relationships with The Chase Manhattan
Bank.
DESCRIPTION OF THE NEW DEBT SECURITIES
The New Debt Securities will be either senior unsecured debt securities or
subordinated unsecured debt securities. In the following discussion, we
sometimes refer to the senior unsecured debt securities as "Senior Notes" and
to the subordinated unsecured debt securities as "Subordinated Notes."
We will issue New Debt Securities that are Senior Notes in one or more series
under our Senior Indenture dated as of September 1, 1998 between us and The
Chase Manhattan Bank, as Trustee, as supplemented and amended. We will issue
New Debt Securities that are Subordinated Notes in one or more series under our
Subordinated Indenture dated as of December 1, 1997 between us and The Chase
Manhattan Bank, as Trustee, as supplemented and amended. Each of the Senior
Indenture and the Subordinated Indenture is, as applicable, sometimes called
the "Indenture." The Senior Indenture and the Subordinated Indenture, together,
are sometimes called the "Indentures." Each of the Trustee under the Senior
Indenture and the Trustee under the Subordinated Indenture is, as applicable,
called the "Trustee." The Indentures and the forms of supplemental indenture to
the Indentures are exhibits to the Registration Statement.
The Debt Securities are unsecured obligations. The Bonds are effectively senior
to the Debt Securities to the extent of the value of the properties securing
them. As of December 31, 1998, we had approximately $2,265,000,000 of Bonds
outstanding.
We conduct our non-electric operations, and certain of our electric operations
outside our service area in the Carolinas, through subsidiaries. Accordingly,
our ability to meet our obligations under the Debt Securities is partly
dependent on the earnings and cash flows of those subsidiaries and the ability
of those subsidiaries to pay dividends or to advance or repay funds to us. In
addition, the rights that we and our creditors would have to participate in the
assets of any such subsidiary upon the subsidiary's liquidation or
recapitalization will be subject to the prior claims of the subsidiary's
creditors. We anticipate that certain of our subsidiaries will incur
substantial amounts of debt in the expansion of their businesses.
Neither Indenture protects the holders of Debt Securities if we engage in a
highly leveraged transaction.
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The following description of the Debt Securities is only a summary and is not
intended to be comprehensive. For additional information you should refer to
the applicable Indenture.
General
Neither Indenture limits the amount of Debt Securities that we may issue under
it. We may issue Debt Securities from time to time under each Indenture in one
or more series by entering into supplemental indentures or by our Board of
Directors or a duly authorized committee authorizing the issuance. The Debt
Securities of a series need not be issued at the same time, bear interest at
the same rate or mature on the same date.
Provisions Applicable to Particular Series
The Prospectus Supplement for a particular series of Debt Securities will
specify the terms of that series, including, if applicable:
. the title of the series;
. any limit on the principal amount of the Debt Securities of the series;
. the date or dates on which principal is payable or the method for
determining the date or dates, and any right that we have to change the
date on which principal is payable;
. the interest rate or rates, if any, or the method for determining the
rate or rates, and the date or dates from which interest will accrue;
. any interest payment dates and the regular record date, if any;
. whether we may extend the interest payment periods and, if so, the terms
of the extension;
. the place or places where payments will be made, if other than the
principal corporate trust office of the Trustee;
. any obligation that we have to redeem the Debt Securities through a
sinking fund or purchase the Debt Securities through a purchase fund or
at the option of the holder;
. whether we have the option to redeem the Debt Securities and, if so, the
terms of our redemption option;
. whether the provisions described under the caption "Defeasance and
Covenant Defeasance" will not apply to the Debt Securities;
. the currency in which payments will be made if other than U.S. dollars,
and the manner of determining the equivalent of those amounts in U.S.
dollars;
. if payments may be made, at our election or at the holder's election, in
a currency other than that in which the Debt Securities are stated to be
payable, then the currency in which those payments may be made, the
terms and conditions of the election and the manner of determining those
amounts;
. the portion of the principal payable upon acceleration of maturity, if
other than the entire principal;
. whether the Debt Securities will be issuable as global securities and,
if so, the depositary;
. any changes in the events of default or covenants with respect to the
Debt Securities;
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. any index or formula used for determining principal, premium or
interest;
. if the principal payable on the maturity date will not be determinable
on one or more dates prior to the maturity date, the amount which will
be deemed to be such principal amount (or the manner of determining it);
. the subordination of the Debt Securities to any other of our
indebtedness, including other series of Subordinated Notes (for series
of Subordinated Notes only); and
. any other terms.
Unless we state otherwise in the applicable Prospectus Supplement, we will
issue the New Debt Securities only in fully registered form, without coupons.
There will be no service charge for any registration of transfer or exchange of
the Debt Securities. We may, however, require payment to cover any tax or other
governmental charge payable in connection with any transfer or exchange.
Transfers and exchanges of the Debt Securities may be made at The Chase
Manhattan Bank, 55 Water Street, New York, New York 10041.
The New Debt Securities will be issuable in denominations of $1,000 and any
multiples of $1,000, unless we state otherwise in the applicable Prospectus
Supplement.
We may offer and sell the New Debt Securities, including original issue
discount Debt Securities, at a substantial discount below their principal
amount. The applicable Prospectus Supplement will describe special United
States federal income tax and any other considerations applicable to those
securities. In addition, the applicable Prospectus Supplement may describe
certain special United States federal income tax or other considerations, if
any, applicable to any New Debt Securities which are denominated in a currency
other than U.S. dollars.
Global Securities
We may issue some or all of the Debt Securities of any series as Global
Securities. We will register each Global Security in the name of a depositary
identified in the applicable Prospectus Supplement. The Global Securities will
be deposited with the depositary or nominee or custodian for the depositary.
As long as the depositary or its nominee is the registered holder of a Global
Security, that person will be considered the sole owner and holder of the
Global Security and the Debt Securities it represents for all purposes. Except
in limited circumstances, owners of a beneficial interest in a Global Security:
. may not have the Global Security or any Debt Securities it represents
registered in their names;
. may not receive or be entitled to receive physical delivery of
certificated Debt Securities in exchange for the Global Security; and
. will not be considered the owners or holders of the Global Security or
any Debt Securities it represents for any purposes under the Debt
Securities or the applicable Indenture.
We will make all payments of principal and any premium and interest on a Global
Security to the depositary or its nominee as the holder of the Global Security.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of securities in definitive form. These laws may impair
the ability to transfer beneficial interests in a Global Security.
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Ownership of beneficial interests in a Global Security will be limited to
institutions having accounts with the depositary or its nominee, which are
called "participants" in this discussion, and to persons that hold beneficial
interests through participants. When a Global Security is issued, the
depositary will credit on its book entry, registration and transfer system the
principal amounts of Debt Securities the Global Security represents to the
accounts of its participants. Ownership of beneficial interests in a Global
Security will be shown only on, and the transfer of those ownership interests
will be effected only through, records maintained by:
. the depositary, with respect to participants' interests; and
. any participant, with respect to interests the participant holds on behalf
of other persons.
Payments participants make to owners of beneficial interests held through those
participants will be the responsibility of those participants. The depositary
may from time to time adopt various policies and procedures governing payments,
transfers, exchanges and other matters relating to beneficial interests in a
Global Security. None of the following will have any responsibility or
liability for any aspect of the depositary's or any participant's records
relating to beneficial interests in a Global Security, for payments made on
account of those beneficial interests or for maintaining, supervising or
reviewing any records relating to those beneficial interests:
. the Corporation;
. the Trustee under the Senior Indenture;
. the Trustee under the Subordinated Indenture; or
. an agent of any of the above.
Redemption
Any provisions relating to the redemption of Debt Securities will be set forth
in the applicable Prospectus Supplement. Unless we state otherwise in the
applicable Prospectus Supplement, we may redeem Debt Securities only upon
notice mailed at least 30 but not more than 60 days before the date fixed for
redemption. Unless we state otherwise in the applicable Prospectus Supplement,
that notice may state that the redemption will be conditional upon the Trustee,
or the applicable Paying Agent, receiving sufficient funds to pay the
principal, premium and interest on those Debt Securities on the date fixed for
redemption and that if the Trustee or the applicable Paying Agent does not
receive those funds, the redemption notice will not apply, and we will not be
required to redeem those Debt Securities.
We will not be required to:
. issue, register the transfer of, or exchange any Debt Securities of a
series during the period beginning 15 days before the date the notice is
mailed identifying the Debt Securities of that series that have been
selected for redemption; or
. register the transfer of, or exchange any Debt Security of that series
selected for redemption except the unredeemed portion of a Debt Security
being partially redeemed.
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Consolidation, Merger, Conveyance or Transfer
Each Indenture provides that we may consolidate or merge with or into, or
convey or transfer all or substantially all of our properties and assets to,
another corporation or other entity. Any successor must, however, assume our
obligations under that Indenture and the Debt Securities issued under it, and
we must deliver an officers' certificate and an opinion of counsel to the
Trustee that affirm compliance with all conditions in the Indenture relating to
the transaction. When those conditions are satisfied, the successor will
succeed to and be substituted for us under the Indenture, and we will be
relieved of our obligations under that Indenture and the Debt Securities issued
under it.
Modification; Waiver
We may amend or modify either Indenture with the consent of the holders of a
majority of the outstanding Debt Securities of all series of Debt Securities
issued under the Indenture that are affected by the amendment or modification,
voting as one class. The consent of the holder of each outstanding Debt
Security affected is, however, required to:
. change the maturity date of the principal, or any installment of
principal or interest on that Debt Security;
. reduce the principal amount, the interest rate or any premium payable
upon redemption on that Debt Security;
. reduce the amount of principal due and payable upon acceleration of
maturity;
. change the currency of payment of principal, premium or interest on that
Debt Security;
. impair the right to institute suit to enforce any such payment on or
after the maturity date or redemption date;
. reduce the percentage in principal amount of Debt Securities of any
series required to amend or modify the applicable Indenture, to waive
compliance with certain restrictive provisions of the applicable
Indenture or to waive certain defaults; or
. with certain exceptions, modify the provisions of the applicable
Indenture governing amendments of the Indenture or governing waiver of
covenants or past defaults.
In addition, we may supplement either Indenture to create new series of Debt
Securities and for other purposes, without the consent of any holders of Debt
Securities issued under that Indenture.
The holders of a majority of the outstanding Debt Securities of any series may
waive, for that series, our compliance with certain restrictive provisions of
the Indenture under which those Debt Securities were issued. The holders of a
majority of the outstanding Debt Securities of all series under an Indenture
with respect to which a default has occurred and is continuing, all holders of
those series voting as one class, may waive that default for all those series,
except a default in the payment of principal or any premium or interest on any
Debt Security or a default with respect to a covenant or provision which cannot
be amended or modified without the consent of the holder of each outstanding
Debt Security of the series affected.
We may not amend the Subordinated Indenture to change the subordination of any
outstanding Subordinated Notes without the consent of each holder of Senior
Indebtedness that the amendment would adversely affect.
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If certain payments on a series of Debt Securities are insured by a financial
guaranty insurance policy or other policy, terms other than those that are
described in the preceding two paragraphs may apply to that series.
Events of Default
The following are Events of Default under each Indenture with respect to any
series, unless we state otherwise in the applicable Prospectus Supplement:
. failure to pay principal of or any premium on any Debt Security of that
series when due;
. failure to pay any interest on any Debt Security of that series, when
due, that continues for 60 days; for this purpose, the date on which
interest is due is the date on which we are required to make payment
following any deferral of interest payments by us under the terms of
Debt Securities that permit such deferrals;
. failure to make any sinking fund payment when required for any Debt
Security of that series that continues for 60 days;
. failure to perform any covenant in the applicable Indenture (other than
a covenant expressly included solely for the benefit of other series)
that continues for 90 days after the Trustee or the holders of at least
33% of the outstanding Debt Securities of that series give us written
notice of the default; and
. certain bankruptcy, insolvency or reorganization events with respect to
the Corporation.
In the case of the fourth Event of Default listed above, the Trustee may extend
the grace period. In addition, if holders of a particular series have given a
notice of default, then holders of at least the same percentage of Debt
Securities of that series, together with the Trustee, may also extend the grace
period. The grace period will be automatically extended if we have initiated
and are diligently pursuing corrective action.
Additional Events of Default may be established for a particular series and, if
established, will be described in the applicable Prospectus Supplement.
If an Event of Default with respect to Debt Securities of a series occurs and
is continuing, then the Trustee or the holders of at least 33% of the
outstanding Debt Securities of that series may declare the principal amount of
all Debt Securities of that series to be immediately due and payable. However,
that Event of Default will be deemed waived at any time after the declaration
but before a judgment for payment of the money due has been obtained if:
. we have paid or deposited with the Trustee all overdue interest, the
principal and any premium due otherwise than by the declaration and any
interest on such amounts, and any interest on overdue interest, to the
extent legally permitted, in each case with respect to that series, and
all amounts due to the Trustee under the applicable Indenture; and
. all Events of Default with respect to that series, other than the
nonpayment of the principal which became due solely by virtue of the
declaration, have been cured or waived.
The Trustee is under no obligation to exercise any of its rights or powers at
the request or direction of any holders of Debt Securities unless those holders
have offered the Trustee security or indemnity against the costs, expenses and
liabilities which it might incur as a result. The holders of a majority
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of the outstanding Debt Securities of any series have, with certain exceptions,
the right to direct the time, method and place of conducting any proceedings
for any remedy available to the Trustee or the exercise of any trust or power
of the Trustee with respect to those Debt Securities. The Trustee may withhold
notice of any default (except a default in the payment of principal or
interest) from the holders of any series if the Trustee in good faith considers
it in the interest of the holders to do so.
The holder of any Debt Security will have an absolute and unconditional right
to receive payment of the principal, any premium and, within certain
limitations, any interest on that Debt Security on its maturity date or
redemption date and to enforce those payments.
If certain payments on a series of Debt Securities are insured by a financial
guaranty insurance policy or other policy, terms other than those that are
described in the preceding three paragraphs may apply to that series.
We are required to furnish each year to the Trustee under each Indenture an
officers' certificate to the effect that we are not in default under the
applicable Indenture or, if there has been a default, specifying the default
and its status.
Paying Agent
Unless we state otherwise in the applicable Prospectus Supplement, the Trustee
will act as Paying Agent for the Debt Securities, and the principal corporate
trust office of the Trustee will be the office through which the Paying Agent
acts. We may, however, change or add Paying Agents or approve a change in the
office through which a Paying Agent acts.
Any money that we have paid to a Paying Agent for principal or interest on any
Debt Securities which remains unclaimed at the end of two years after that
principal or interest has become due will be repaid to us at our request. After
repayment to us, holders should look only to us for those payments.
Negative Pledge
While any of the Senior Notes remain outstanding, we will not create, or permit
to be created or to exist, any mortgage, lien, pledge, security interest or
other encumbrance upon any of our property, whether owned on or acquired after
the date of the Senior Indenture, to secure any of our indebtedness for
borrowed money, unless the Senior Notes then outstanding are equally and
ratably secured for so long as any such indebtedness is so secured.
The foregoing restriction does not apply to, among other things:
. purchase money mortgages, or other purchase money liens, pledges,
security interests or encumbrances upon property that we acquired after
the date of the Senior Indenture;
. mortgages, liens, pledges, security interests or other encumbrances
existing on any property at the time we acquired it, including those
which exist on any property of an entity with which we are consolidated
or merged or which transfers or leases all or substantially all of its
properties to us;
. mortgages, liens, pledges, security interests or other encumbrances upon
any of our property that existed on the date of the initial issuance of
the Senior Notes;
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. pledges or deposits to secure performance in connection with bids,
tenders, contracts--other than contracts for the payment of money--or
leases to which we are a party;
. liens created by or resulting from any litigation or proceeding which at
the time is being contested in good faith by appropriate proceedings;
. liens incurred in connection with the issuance of bankers' acceptances
and lines of credit, bankers' liens or rights of offset and any security
given in the ordinary course of business to banks or others to secure
any indebtedness payable on demand or maturing within 12 months of the
date that such indebtedness is originally incurred;
. liens incurred in connection with repurchase, swap or other similar
agreements (including commodity price, currency exchange and interest
rate protection agreements);
. liens securing industrial revenue or pollution control bonds;
. liens, pledges, security interests or other encumbrances on any property
arising in connection with any defeasance, covenant defeasance or in-
substance defeasance of any of our indebtedness;
. liens created in connection with, and created to secure, a non-recourse
obligation;
. Bonds issued or to be issued from time to time under the Mortgage, and
the "permitted liens" specified in the Mortgage;
. indebtedness which we issue in connection with our consolidation or
merger with any other entity, which may be our affiliate, in exchange or
in substitution for secured indebtedness of that entity ("Third Party
Debt") which by its terms (1) is secured by a mortgage on all or a
portion of the property of that entity, (2) prevents that entity from
incurring secured indebtedness, unless the Third Party Debt is secured
equally and ratably with such secured indebtedness or (3) prevents that
entity from incurring secured indebtedness;
. indebtedness of any entity which we are required to assume in connection
with a consolidation or merger of that entity, with respect to which any
of our property is subjected to a mortgage, lien, pledge, security
interest or other encumbrance;
. mortgages, liens, pledges, security interests or other encumbrances upon
any property that we acquired, constructed, developed or improved after
the date of the Senior Indenture which are created before, at the time
of, or within 18 months after such acquisition--or in the case of
property constructed, developed or improved, after the completion of the
construction, development or improvement and commencement of full
commercial operation of that property, whichever is later--to secure or
provide for the payment of any part of its purchase price or cost;
provided that, in the case of such construction, development or
improvement, the mortgages, liens, pledges, security interests or other
encumbrances shall not apply to any property that we own other than real
property that is unimproved up to that time; and
. the replacement, extension or renewal of any mortgage, lien, pledge,
security interest or other encumbrance described above; or the
replacement, extension or renewal (not exceeding the principal amount of
indebtedness so secured together with any premium, interest, fee or
expense payable in connection with any such replacement, extension or
renewal) of the indebtedness so secured; provided that such replacement,
extension or
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renewal is limited to all or a part of the same property that secured
the mortgage, lien, pledge, security interest or other encumbrance
replaced, extended or renewed, plus improvements on it or additions or
accessions to it.
In addition, we may create or assume any other mortgage, lien, pledge, security
interest or other encumbrance not excepted in the Senior Indenture without
equally and ratably securing the Senior Notes, if immediately after that
creation or assumption, the principal amount of our indebtedness for borrowed
money that all such other mortgages, liens, pledges, security interests and
other encumbrances secure does not exceed an amount equal to 10% of our common
stockholders' equity as shown on our consolidated balance sheet for the
accounting period occurring immediately before the creation or assumption of
that mortgage, lien, pledge, security interest or other encumbrance.
Defeasance and Covenant Defeasance
Unless the particular series of Debt Securities provides otherwise, we may be:
. discharged from our obligations (with certain exceptions) with respect
to any series of Debt Securities, such a discharge being called a
"Defeasance" in this Prospectus; and
. released from our obligations under certain restrictive covenants
especially established with respect to any series of Debt Securities,
including the obligations described above under the caption "Negative
Pledge" with respect to any series of Senior Notes, such a release being
called a "Covenant Defeasance" in this Prospectus.
To effect a Defeasance or Covenant Defeasance, we must satisfy certain
conditions. Those conditions include the irrevocable deposit with the Trustee,
in trust, of money or government obligations which through their scheduled
payments of principal and interest would provide sufficient money to pay the
principal and any premium and interest on such Debt Securities on the maturity
dates of such payments or upon redemption.
Following a Defeasance, payment of the Debt Securities defeased may not be
accelerated because of an Event of Default. Following a Covenant Defeasance,
the payment of Debt Securities may not be accelerated by reference to the
covenants from which we have been released. A Defeasance may occur after a
Covenant Defeasance.
Under current United States federal income tax law, a Defeasance would be
treated as an exchange of the relevant Debt Securities in which holders of Debt
Securities might recognize gain or loss. In addition, the amount, timing and
character of amounts that holders would thereafter be required to include in
income might be different from what would be includible absent that Defeasance.
We urge investors to consult their own tax advisors as to the specific
consequences of a Defeasance, including the applicability and effect of tax
laws other than United States federal income tax laws.
Under current United States federal income tax law, unless accompanied by other
changes in the terms of the Debt Securities, Covenant Defeasance should not be
treated as a taxable exchange.
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Subordination
Each series of Subordinated Notes will be subordinate and junior in right of
payment, to the extent set forth in the Subordinated Indenture, to all "Senior
Indebtedness" as defined below. If:
. we make a payment or distribution of any of our assets to creditors upon
our dissolution, winding-up, liquidation or reorganization, whether in
bankruptcy, insolvency or otherwise;
. a default beyond any grace period has occurred and is continuing with
respect to the payment of principal, interest or any other monetary
amounts due and payable on any Senior Indebtedness; or
. the maturity of any Senior Indebtedness has been accelerated because of
a default on that Senior Indebtedness,
then the holders of Senior Indebtedness generally will have the right to
receive payment, in the case of the first instance, of all amounts due or to
become due upon that Senior Indebtedness, and, in the case of the second and
third instances, of all amounts due on that Senior Indebtedness, or we will
make provision for those payments, before the holders of any Subordinated Notes
have the right to receive any payments of principal or interest on their
Subordinated Notes.
"Senior Indebtedness" means, with respect to any series of Subordinated Notes,
the principal, premium, interest and any other payment in respect of any of the
following:
. all of our indebtedness that is evidenced by notes, debentures, bonds or
other securities we sell for money or other obligations for money
borrowed;
. all indebtedness of others of the kinds described in the preceding
category which we have assumed or guaranteed or which we have in effect
guaranteed through an agreement to purchase, contingent or otherwise;
and
. all renewals, extensions or refundings of indebtedness of the kinds
described in either of the preceding two categories.
Any such indebtedness, renewal, extension or refunding, however, will not be
"Senior Indebtedness" if the instrument creating or evidencing it or the
assumption or guarantee of it provides that it is not superior in right of
payment to or is equal in right of payment with those Subordinated Notes.
Senior Indebtedness will be entitled to the benefits of the subordination
provisions in the Subordinated Indenture irrespective of the amendment,
modification or waiver of any term of the Senior Indebtedness.
Some future series of Subordinated Notes may rank senior to other series of
Subordinated Notes and would constitute Senior Indebtedness with respect to
those series.
The Subordinated Indenture does not limit the amount of Senior Indebtedness
that we may issue. As of December 31, 1998, our Senior Indebtedness totaled
approximately $4,044,000,000.
Concerning the Trustee
The Chase Manhattan Bank is the Bond Trustee under the Mortgage and the Trustee
under each Indenture. We and some of our affiliates maintain deposit accounts
and banking relationships with The Chase Manhattan Bank.
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PLAN OF DISTRIBUTION
We may sell the New Bonds and the New Debt Securities in any of three ways:
. through underwriters or dealers;
. directly to a limited number of institutional purchasers or to a single
purchaser; or
. through agents.
The applicable Prospectus Supplement will describe the terms under which the
New Bonds and the New Debt Securities are offered, including:
. the names of any underwriters, dealers or agents;
. the purchase price and our net proceeds from the sale;
. any underwriting discounts and other items constituting underwriters'
compensation;
. any initial public offering price; and
. any discounts or concessions allowed, re-allowed or paid to dealers.
We or any underwriters or dealers may change from time to time any initial
public offering price and any discounts or concessions allowed, re-allowed or
paid to dealers.
If we use underwriters in the sale of New Bonds and New Debt Securities, those
underwriters will acquire the New Bonds and the New Debt Securities for their
own account and may resell them in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of the sale. Unless we state otherwise in the applicable
Prospectus Supplement, the obligations of any underwriter to purchase the New
Bonds and the New Debt Securities will be subject to conditions, and the
underwriter will be obligated to purchase all the New Bonds and the New Debt
Securities, except that in some cases involving a default by an underwriter,
less than all of the New Bonds and the New Debt Securities may be purchased. If
we sell the New Bonds and the New Debt Securities through an agent, the
applicable Prospectus Supplement will state the name and any commission we may
pay to the agent. Unless we state otherwise in the Prospectus Supplement, that
agent will be acting on a best-efforts basis for the period of its appointment.
The applicable Prospectus Supplement will state whether we will authorize
agents, underwriters or dealers to solicit offers by certain specified
institutions to purchase securities at the public offering price specified in
the Prospectus Supplement under delayed delivery contracts providing for
payment and delivery on a specified future date. These contracts will be
subject to the conditions specified in the applicable Prospectus Supplement.
Additionally, the applicable Prospectus Supplement will set forth the
commission payable for solicitation of those contracts.
Agents and underwriters may be entitled under agreements entered into with us
to indemnification against certain civil liabilities, including liabilities
under the Securities Act of 1933.
Underwriters and their affiliates may engage in transactions with, or perform
services for, us or our affiliates in the ordinary course of their business.
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EXPERTS
Our consolidated financial statements as of December 31, 1998 and 1997 and for
each of the three years in the period ended December 31, 1998, except PanEnergy
Corp and subsidiaries as of and for the period ended December 31, 1996,
included in our annual report on Form 10-K, which are incorporated by reference
in this Prospectus, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report which is incorporated by reference in this
Prospectus. The financial statements of PanEnergy Corp and subsidiaries
(consolidated with our financial statements) as of and for the period ended
December 31, 1996 have been audited by KPMG LLP, independent auditors, as
stated in their report incorporated by reference in this Prospectus. Those
financial statements are incorporated in this Prospectus in reliance upon the
respective reports of such firms given upon their authority as experts in
accounting and auditing.
LEGAL MATTERS
Ellen T. Ruff, Esq., who is our Vice President and General Counsel, Corporate,
Gas and Electric Operations, or another of our lawyers and Dewey Ballantine
LLP, our outside counsel, will issue opinions about the legality of the New
Bonds and the New Debt Securities. Ms. Ruff owns, and such other lawyer likely
would own, our Common Stock and options to purchase shares of our Common Stock.
Counsel named in the applicable Prospectus Supplement will issue opinions about
the legality of the New Bonds and the New Debt Securities on behalf of any
underwriters, dealers or agents.
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$250,000,000
Duke Energy Corporation
7 1/8% Remarketable or Redeemable Securities (ROARS/SM/)
Due 2012 (Remarketing Date September 3, 2002)
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Prospectus Supplement
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Banc of America Securities LLC
Chase Securities Inc.
September 6, 2000
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