<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required] for the fiscal year ended
December 31, 1994 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required] for the transition period
from to
--------- ---------
Commission Registrant; State of Incorporation; I.R.S. Employer
File Number Address; and Telephone Number Identification No.
------------- ----------------------------------- ------------------
1-956 DUQUESNE LIGHT COMPANY 25-0451600
(A Pennsylvania Corporation)
One Oxford Centre
301 Grant Street
Pittsburgh, Pennsylvania 15279
Telephone (412) 393-6000
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
----- -----
DQE is the holder of all shares of outstanding common stock ($1 par value) of
Duquesne Light Company consisting of 10 shares as of February 16, 1995.
[ ] Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of the registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.
<PAGE>
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Registrant Title of each class on which registered
------------------- --------------------------------- ---------------------
Duquesne Light Preferred Stock (par value $50) New York Stock
Company Exchange
Involuntary
Series Liquidation Value
------ -----------------
3.75% $50 per share
4.00% $50 per share
4.10% $50 per share
4.15% $50 per share
4.20% $50 per share
$2.10 $50 per share
$7.20 $100 per share
Sinking Fund Debentures, due March 1, 2010 (5%) New York Stock Exchange
DOCUMENTS INCORPORATED BY REFERENCE
Part of Form 10-K
Into Which Document
Description Is Incorporated
------------------------------------ -------------------
DQE Annual Report to Shareholders Parts I and II
for the year ended December 31, 1994
Proxy Statement for DQE Annual Part III
Meeting of Shareholders to be held on
April 19, 1995
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TABLE OF CONTENTS
Page
----
PART I
ITEM 1. BUSINESS 1
General 1
Service Territory 1
Regulation 1
Seasonality 2
Results of Operations 2
Sales of Electricity to Customers 2
Phase-in Deferrals 3
Sales to Other Utilities 3
Operating Expenses 3
Other Income and Deductions 4
Construction 5
Capital Resources and Liquidity 5
Financing 5
Short-Term Borrowings 5
Interest Charges 5
Sales of Accounts Receivable 6
Nuclear Fuel Leasing 6
Rate Matters 6
Energy Cost Rate Adjustment Clause (ECR) 6
Deferred Rate Synchronization Costs 7
Generating Units 7
Joint Interests 7
Beaver Valley Power Station 8
Perry Unit 1 8
Property Held for Future Use 8
Employees 8
Electric Utility Operations 9
Fossil Fuel 9
Nuclear Fuel 10
Nuclear Decommissioning 11
Environmental Matters 11
Outlook 12
Competition 12
Transmission Access 13
Retirement Plan Measurement Assumptions 13
Executive Officers of the Registrant 14
ITEM 2. PROPERTIES 15
ITEM 3. LEGAL PROCEEDINGS 16
Westinghouse Lawsuit 16
Rate-Related and Environmental Litigation 16
ITEM 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS 16
Page
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PART II
ITEM 5. MARKET FOR REGISTRANT'S
COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS 17
ITEM 6. SELECTED FINANCIAL DATA 17
ITEM 7. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 17
ITEM 8. CONSOLIDATED FINANCIAL
STATEMENTS AND SUPPLEMENTARY
DATA 17
ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL
DISCLOSURE 17
PART III
ITEM 10. DIRECTORS AND EXECUTIVE
OFFICERS OF THE REGISTRANT 17
ITEM 11. EXECUTIVE COMPENSATION 18
ITEM 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND
MANAGEMENT 18
ITEM 13. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS 18
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT
SCHEDULES AND REPORTS ON
FORM 8-K 18
SCHEDULE VIII 35
SCHEDULE X 36
SIGNATURES 37
INDEPENDENT AUDITORS' REPORT 38
FINANCIAL STATEMENTS 40 to 62
SELECTED FINANCIAL DATA 63
<PAGE>
PART I
ITEM 1. BUSINESS.
General
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Duquesne Light Company (Duquesne) is a wholly owned subsidiary of DQE, an
energy services holding company formed in 1989. Duquesne is engaged in the
production, transmission, distribution and sale of electric energy. Duquesne
was formed under the laws of Pennsylvania by the consolidation and merger in
1912 of three constituent companies.
Service Territory
Duquesne provides electric service to customers in Allegheny County,
including the City of Pittsburgh, and Beaver County. This represents a service
territory of approximately 800 square miles. The population of the area served
by Duquesne, based on 1990 census data, is approximately 1,510,000, of whom
370,000 reside in the City of Pittsburgh. In addition to serving approximately
580,000 customers within this service area, Duquesne also sells electricity to
other utilities beyond its service territory.
Regulation
Duquesne's operations are subject to regulation by the Pennsylvania Public
Utility Commission (PUC). Duquesne is also subject to regulation by the Federal
Energy Regulatory Commission (FERC) under the Federal Power Act in respect of
rates for interstate sales, transmission of electric power, accounting and other
matters.
Duquesne is subject to regulation by the Nuclear Regulatory Commission (NRC)
under the Atomic Energy Act of 1954, as amended, with respect to the operation
of its jointly owned/leased nuclear power plants, Beaver Valley Unit 1, Beaver
Valley Unit 2 and Perry Unit 1.
Duquesne is subject to the accounting and reporting requirements of the
Securities and Exchange Commission. As a result, Duquesne's consolidated
financial statements contain regulatory assets and liabilities in accordance
with Statement of Financial Accounting Standards No. 71, Accounting For the
Effects of Certain Types of Regulation (SFAS No. 71) and reflect the effects of
the ratemaking process. In accordance with SFASNo. 71, Duquesne's financial
statements reflect regulatory assets and costs based on current cost-based
ratemaking regulations. The regulatory assets represent probable future revenue
to Duquesne because provisions for these costs are currently included, or are
expected to be included, in charges to utility customers through the ratemaking
process.
Duquesne's operations currently satisfy the SFAS No. 71 criteria. However,
Duquesne's operations, or a portion thereof, could cease to meet these criteria
for various reasons, including a change in PUC or FERC regulations. In such an
event, Duquesne would be required to write-off any regulatory assets or
liabilities for those operations that no longer meet the SFAS No. 71
requirements.
1
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Seasonality
Sales of electricity to ultimate customers by Duquesne tend to increase
during the warmer summer and cooler winter seasons because of greater customer
use of electricity for cooling and heating.
Vertical Bar Graph appears here as follows:
Quarterly Kilowatt-Hour Sale
In millions
Year 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
1992 2936 2732 3036 2865
1993 2994 2762 3279 2816
1994 3121 2861 3294 2846
The overall level of business activity in Duquesne's service territory and
weather conditions are expected to continue to be the primary factors affecting
sales of electricity to ultimate customers in the near term. Duquesne's
electric sales may also be affected in the long-term by increased competition in
the electric utility industry. (See "Competition" discussion on page 12.)
Results of Operations
Pie Chart appears here as follows:
1994 Energy Sales by Class of Customers
(Excluding Sales to Other Utilities)
Class of Customer Duquesne Light All Electric Utilities*
Company**
Residential 26.6% 32.8%
Commercial 45.7% 30.2%
Industrial 27.0% 34.2%
Other 0.7% 02.8%
*Source: Edison Electric Institue
**Total Sales ot Ultimate Customers 12,122,000 mwh
Sales of Electricity to Customers
Customer operating revenues result from Duquesne's sales of electricity to
ultimate customers and are based on rates authorized by the PUC. These rates
are cost-based and are designed to recover Duquesne's energy and other operating
expenses and investment in utility assets and to provide a return on the
investment. In 1994, sales to Duquesne's 20 largest customers accounted for
14.6 percent of customer revenues. Sales to USX Corporation, Duquesne's largest
customer, accounted for 3.8 percent of total 1994 customer revenues. Total
kilowatt-hour (KWH) sales to ultimate customers in 1994 increased 2.3 percent in
2
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comparison with KWH sales to ultimate customers in 1993. Commercial and
industrial KWH sales increased 1.3 percent and 6.9 percent, respectively,
benefiting from the improving economy and a slight growth in the numbers of
customers. Industrial sales volume also increased as a result of Duquesne's
marketing efforts and fewer customer production facility outages. Compared to
1994 and 1992, the significantly hotter summer in 1993 resulted in higher
residential KWH sales volume.
Phase-in Deferrals
Phase-in deferred revenues represent the deferral and subsequent recovery of
revenues resulting from a $232 million rate increase granted in early 1988. The
PUC required Duquesne to phase this increase in during a six-year period, which
ended in April 1994.
Sales to Other Utilities
Short-term power sales to other utilities in 1994, 1993 and 1992 were
3,212,110 KWH, 2,820,920 KWH and 4,059,989 KWH, respectively. Fluctuations in
electricity sales to other utilities are related to Duquesne's customer energy
requirements, the energy market and transmission conditions and the availability
of Duquesne's generating stations. Short-term sales to other utilities are
regulated by FERC and are made at market rates. Revenues from sales to other
utilities were $58.3 million, $50.7 million and $72.4 million in 1994, 1993 and
1992, respectively. Because of reduced generating station availability,
Duquesne had fewer off-system sales in 1993 than in 1994 or 1992. Future levels
of off-system sales of electricity will be affected by the outcome of Duquesne's
FERC filings requesting firm transmission access. (See "Transmission Access"
discussion on page 13.)
Generally, Duquesne is permitted to recover (to the extent that such amounts
are not included in base rates) fuel and other energy costs from its customers
through an energy cost rate adjustment clause (ECR), subject toPUC review. This
revenue adjustment includes a credit to Duquesne's customers for profits from
short-term sales to other utilities. The credit to Duquesne's customers for
profits from short-term sales to other utilities was $16.6 million in 1994,
$12.1 million in 1993 and $19.1 million in 1992. (See "Energy Cost Rate
Adjustment Clause" discussion on page 6.)
Operating Expenses
Fuel and purchased power expense fluctuations result from changes in the
cost of fuel, the mix between coal and nuclear generation, the total KWHs sold
and generating station availability. Because of the ECR, changes in fuel and
purchased power cost normally do not impact earnings.
<TABLE>
<CAPTION>
Components of Change in Fuel and Purchased Power Expense from the Prior Year
------------------------------------------------------------------------------------------
1994 1993
(Amounts in Millions of Dollars)
<S> <C> <C>
------------------------------------------------------------------------------------------
Average unit cost of fuel $(3.4) $ (1.8)
Generation mix (5.5) 9.1
Generation volume 7.4 (13.4)
Purchased power 7.7 4.6
------------------------------------------------------------------------------------------
Total Energy Expense $(6.2) $ (1.5)
==========================================================================================
</TABLE>
The average unit cost of coal declined slightly in 1994, after remaining
relatively constant during 1993. Meanwhile, the average unit cost of nuclear
fuel has declined continually during the past three years.
Generation mix impacts fuel expense as Duquesne's nuclear fuel cost per KWH is
less than its fossil fuel cost per KWH. During 1993, compared to 1994 and 1992,
Duquesne had more scheduled nuclear station refueling outages, resulting in less
nuclear generation and more fuel expense.
3
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Generation volume during 1994 increased 3.4 percent compared to 1993 due to
fewer generating station outages. During 1993, generation decreased 5.6 percent
from 1992.
Purchased power volume increased in 1994 compared to 1993 because of the
timing of generating station outages. Purchased power volume increased in 1993
compared to 1992 primarily due to the performance of the Perry plant. (See
"Perry Unit 1" on page 8.)
Maintenance expense fluctuations primarily result from the timing of scheduled
generating station outages, the timing of scheduled transmission and
distribution line maintenance and the effect of storms on overhead lines and
transformers. Incremental maintenance expense incurred for scheduled refueling
outages at Duquesne's nuclear units is deferred for amortization over the period
(generally 18 months) between scheduled outages. During 1994 and 1993,
amortization of deferred nuclear refueling outage expense increased, reflecting
the higher costs of more recent refueling outages. Offsetting this increase in
1994 was a decrease in transmission and distribution line maintenance expense.
Also increasing maintenance expense in 1993 was Duquesne's change, as of January
1, 1993, in its method of accounting for maintenance costs during major fossil
generating station outages. Prior to 1993, maintenance costs incurred for
scheduled major outages at fossil generating stations were charged to expense as
the costs were incurred. Under the new accounting policy, Duquesne accrues,
over the period between outages, anticipated expenses for scheduled major fossil
station outages. (Maintenance costs incurred for non-major scheduled outages
and for forced outages continue to be charged to expense as the costs are
incurred.) This method was adopted to match more accurately the maintenance
costs with the revenue produced during the periods between scheduled major
fossil generating station outages.
Depreciation and amortization expense includes, in addition to depreciation of
plant and equipment, nuclear decommissioning accruals, amortization of
regulatory tax receivables and amortization of an extraordinary property loss.
Depreciation and amortization expense increased $6.4 million in 1994, compared
to the prior year due to increases in depreciable property and nuclear
decommissioning expense. The 1993 increase results from amortization of
regulatory tax receivables which began January 1, 1993, concurrent with the
adoption of Statement of Financial Accounting Standards No. 109 (SFAS No. 109).
During 1994, Duquesne completed an extensive review of its depreciation rates
and submitted an informational filing to thePUC. As a result of this study,
beginning in 1995 Duquesne's composite depreciation rate increased from 3.0
percent to 3.5 percent. It is anticipated that annual depreciation expense will
increase by approximately $25 million in 1995 compared to the 1994 level.
Duquesne is not currently seeking a rate increase to recover these additional
costs.
During 1994, the statutory Pennsylvania income tax rate was reduced from 12.25
percent to 9.99 percent; this reduction is to be phased in over four years.
This change resulted in a net decrease of $87.2 million in deferred tax
liabilities and a corresponding reduction recorded as a tax rate adjustment -
regulatory tax receivable.
Taxes other than income taxes were lower in 1993 compared to 1994 and 1992,
primarily as a result of a favorable resolution of certain property tax
assessments. In 1993, Duquesne recorded, on the basis of these revised
assessments, the expected refunds for overpayments in prior years.
Other Income and Deductions
Consistent with the conclusion of Duquesne's revenue phase-in plan, other
income decreased in 1994, in comparison with that for 1993 and 1992, as a result
of a decrease in carrying charges on deferred revenues.
Income taxes related to other income increased $12.5 million in 1994, in
comparison with those for 1993, because in 1993 Duquesne obtained a favorable
settlement (related to Duquesne's 1988 tax return and the consolidated 1989 tax
return) with the Internal Revenue Service.
4
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Construction
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During 1994, Duquesne spent approximately $94.3 million for construction.
Duquesne expended these amounts to improve and/or expand its production,
transmission and distribution systems. Construction programs of Duquesne focus
on the need to serve new customers, to provide for the replacement of utility
property and to modify facilities consistent with the most current environmental
and safety regulations. Duquesne estimates that it will spend approximately $80
million for construction annually in 1995, 1996 and 1997. These amounts exclude
AFC, nuclear fuel, expenditures for possible early replacement of steam
generators at the Beaver Valley Power Station and expenditures for the
refurbishment of the cold-reserved units. (See Notes F and L to Duquesne's
consolidated financial statements.) Duquesne currently has no plans for
construction of new base load generating plants and expects that funds generated
from operations will continue to be sufficient to finance a large part of its
capital needs.
Capital Resources and Liquidity
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Financing
Duquesne plans to meet its current obligations and debt maturities through
1999 with funds generated from operations and through new financings. At
December 31, 1994, Duquesne was in compliance with all of its debt covenants.
During 1993, Duquesne refinanced $734.2 million of long-term debt. In 1994,
Duquesne continued to reduce its cost of capital by refinancing and retiring
securities.
During 1994, all of the outstanding shares of $2.10 and $7.50 preference
stock were redeemed for approximately $37.7 million. Duquesne also retired $2.2
million of $7.20 preferred stock. InMay 1994, Duquesne filed a shelf
registration statement for the issuance of up to $150 million of Duquesne
CapitalL.P. Cumulative Monthly Income Preferred Securities. These preferred
securities have not been issued.
During 1994, Duquesne also issued $114.1 million of its pollution control
obligations to replace a like amount of higher cost pollution control
obligations. The new pollution control obligations bear variable interest rates
and mature October 1, 2029.
Short-Term Borrowings
Duquesne has an extendible revolving credit agreement with a group of banks
totaling $150 million. The current expiration date of this credit arrangement
is October 6, 1995. Interest rates can, in accordance with the option selected
at the time of each borrowing, be based on prime, Eurodollar or certificate of
deposit rates. Commitment fees are based on the unborrowed amount of the
commitments. The arrangement contains a two-year repayment period for any
amounts outstanding at the expiration of the revolving credit period.
During 1994 and 1993, the maximum short-term bank and commercial paper
borrowings outstanding were $25.6 million and $27 million; the average daily
short-term borrowings outstanding were $1.9 million and $1.6 million; and the
weighted average daily interest rates applied to such borrowings were 5.23
percent and 3.42 percent, respectively. At December 31, 1994, there were no
short-term borrowings. Short-term borrowings at December 31, 1993, were $11.0
million.
Interest Charges
Duquesne achieved a $9.1 million reduction in interest charges in 1994
through refinancing first mortgage bonds and certain tax exempt pollution
control notes. Duquesne also retired $39.9 million of preferred and preference
stock during 1994. Interest expense and dividends on preferred and preference
stock
5
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declined to $108 million in 1994 from $121 million in 1993 and $135 million in
1992. Interest expense is expected to continue to decline in 1995.
Sale of Accounts Receivable
Duquesne and an unaffiliated corporation have an agreement that entitles
Duquesne to sell and the corporation to purchase, on an ongoing basis, up to $50
million of accounts receivable. Duquesne had no receivables sold at December
31, 1994. The accounts receivable sales agreement, which expires in June 1995,
is one of many sources of funds available to Duquesne. Upon expiration of this
facility, Duquesne expects to extend the agreement or to replace the facility
with a similar one.
Nuclear Fuel Leasing
Duquesne Finances its acquisitions of nuclear fuel through a leasing
arrangement under which it may finance up to $75 million of nuclear fuel. As of
December 31, 1994, the amount of nuclear fuel financed by Duquesne under this
arrangement totaled approximately $52 million. Duquesne plans to continue
leasing nuclear fuel to fulfill its requirements at least through September
1996, the remaining term of the leasing arrangement.
Rate Matters
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Electric rates charged by Duquesne to its customers are regulated by the
PUC. Electric rates charged to the Borough of Pitcairn and to other electric
utilities are regulated by the FERC. These rates are designed to recover
Duquesne's operating expenses, investment in utility assets, and a return on
those investments. Sales to other utilities are made at market rates. (See
Note F to Duquesne's consolidated financial statements for additional discussion
of rate-related matters.) At this time, Duquesne has no pending base rate case
and has no immediate plans to file a base rate case.
Energy Cost Rate Adjustment Clause (ECR)
Through the ECR, Duquesne recovers (to the extent that such amounts are not
included in base rates) nuclear fuel, fossil fuel and purchased power expenses
and, also through the ECR, passes to its customers the profits from short-term
power sales to other utilities (collectively, ECR energy costs). Nuclear fuel
expense is recorded on the basis of the quantity of electric energy generated
and includes such costs as the fee, imposed by the United States Department of
Energy (DOE), for future disposal and ultimate storage and disposition of spent
nuclear fuel. Fossil fuel expense includes the costs of coal and fuel oil used
in the generation of electricity.
On Duquesne's statement of consolidated income, these energy cost recovery
revenues are included as a component of operating revenues. For ECR purposes,
Duquesne defers fuel and other energy expenses for recovery, or refunding, in
subsequent years. The deferrals reflect the difference between the amount that
Duquesne is currently collecting from customers and its actual ECR energy costs.
ThePUC annually reviews Duquesne's ECR energy costs for the fiscal year April
through March, compares them to previously projected ECR energy costs and
adjusts the ECRfor over- or under-recoveries and for two PUC-established coal
cost standards. (See Notes A and F to Duquesne's consolidated financial
statements.)
Over- or under-recoveries from customers are recorded as payable to, or
receivable from, customers. At December 31, 1994, $5.9 million was receivable
from customers and shown as other current assets. At December 31, 1993, $10.1
million was payable to customers and shown as deferred energy costs.
6
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Deferred Rate Synchronization Costs
In 1987, the PUC approved Duquesne's petition to defer initial operating and
other costs of Perry Unit 1 and Beaver Valley Unit 2. Duquesne deferred the
costs incurred from November 17, 1987, when the units went into commercial
operation, until March 25, 1988, when a rate order was issued. In its order, the
PUC postponed ruling on whether these costs would be recoverable from
ratepayers. At December 31, 1994, these costs totaled $51.1 million, net of
deferred fuel savings related to the two units. Duquesne is not earning a
return on the deferred costs. Duquesne believes that these costs are
recoverable. In 1990, the PUC permitted another Pennsylvania utility to recover
such costs.
Generating Units
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Joint Interests
Duquesne has various contracts with The Potomac Edison Company, Monongahela
Power Company, Ohio Edison Company, Pennsylvania Power Company, The Cleveland
Electric Illuminating Company (CEI) and The Toledo Edison Company including
provisions for coordinated maintenance responsibilities, limited and qualified
mutual back-up in the event of outages and certain capacity and energy
transactions.
Duquesne has an interest in the following nuclear plants jointly with the
following companies:
<TABLE>
<CAPTION>
Beaver Valley Perry
----------------------
Unit 1 Unit 2 Unit 1
------- ---------- -------
<S> <C> <C> <C>
Duquesne * 47.50% * 13.74%(1) 13.74%
Ohio Edison Company 35.00% 41.88% 30.00%
Pennsylvania Power Company 17.50% -0- 5.24%
CEI -0- 24.47% *31.11%
Toledo Edison Company -0- 19.91% 19.91%
*Denotes Operator
</TABLE>
(1) In 1987, Duquesne sold and leased back its 13.74 percent interest in Beaver
Valley Unit 2; the sale was exclusive of transmission and common facilities.
The total sales price of $537.9 million was the appraised value of Duquesne's
interest in the property. Duquesne subsequently leased back its interest in the
unit for a term of 29.5 years. The lease provides for semiannual payments and
is accounted for as an operating lease. Duquesne is responsible under the terms
of the lease for all costs of its interest in the unit. (See Note C to
Duquesne's consolidated financial statements.)
Duquesne has an interest in the following fossil plants jointly with the
following companies:
<TABLE>
<CAPTION>
Sammis Bruce Mansfield Eastlake Ft. Martin
-----------------------------
Unit 7 Unit 1 Unit 2 Unit 3 Unit 5 Unit 1
------- -------- ------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Duquesne 31.20% 29.30% 8.00% 13.74% 31.20% 50.00%
Ohio Edison Company * 48.00% 60.00% 39.30% 35.60% -0- -0-
Pennsylvania Power Company 20.80% * 4.20% * 6.80% 6.28% -0- -0-
CEI -0- 6.50% 28.60% 24.47% * 68.80% -0-
Toledo Edison Company -0- -0- 17.30% 19.91% -0- -0-
Potomac Edison Company -0- -0- -0- -0- -0- 25.00%
Monongahela Power Company -0- -0- -0- -0- -0- * 25.00%
*Denotes Operator
</TABLE>
Under the agreements governing the operation of these jointly owned
generating units, the day-to-day operating authority is assigned to a specific
company. CEI has such authority for Perry Unit 1 and Eastlake Unit 5, Ohio
Edison Company has authority for Sammis Unit 7, Pennsylvania Power Company has
authority for Bruce Mansfield Units 1, 2 and 3 and Monongahela Power Company
operates Ft. Martin Unit 1.
7
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Duquesne monitors activities in connection with all of these units. Duquesne
has day-to-day operating authority for Beaver Valley Units 1 and 2. All the
companies with a joint interest in these units are kept fully informed of
developments at these generating units.
Beaver Valley Power Station
In 1994, the Beaver Valley Power Station achieved the highest combined
(Units 1 and 2) capacity factor (87.7%) in the history of the station. Capacity
factor is a key production measure. It is the ratio of the power actually
generated by a facility to the facility's rated capacity during that period of
time. It is also a key indicator of how well the stations are operated based on
their design capabilities.
Perry Unit 1
Duquesne has a 13.74 percent ownership interest in Perry Unit 1, a nuclear
generating unit located in Ohio and operated by CEI. During 1993, Perry Unit 1
had an equivalent availability factor of 39 percent. This performance resulted
from several outages. As a result of the length of these outages, the PUC
imposed a penalty for increased incremental replacement power costs. The 1994
equivalent availability factor was 44 percent. This performance resulted from
an extended outage (190 days) for refueling and maintenance. From the end of
the outage in August 1994, through the balance of 1994, Perry operated at full
capacity except for short durations of reduced power for testing and minor on-
line maintenance activities.
CEI previously submitted to the Nuclear Regulatory Commission an action
plan, called the Perry Course of Action (PCA), designed by CEI to "correct
identified management, technical, and programmatic deficiencies" at the plant
over roughly a three-year period, and to"correct the downward trending
performance" of Perry. CEImanagement represents to Duquesne that the PCA is on
schedule and will be an effective program to ensure that Perry is in conformance
with industry standards for boiling water reactors. Based on actual costs and
estimates obtained from CEI, the total costs to bring the plant into compliance,
including the costs associated with implementing the PCA, are more than the cost
originally projected by CEI. Duquesne cannot predict the ultimate cost, timing
or effectiveness of the PCA, and is continuing to closely monitor the situation.
Property Held for Future Use
In 1986, the PUC approved Duquesne's request to remove the Phillips and most
of the Brunot Island (BI) power stations from service and place them in cold
reserve. Duquesne expects to recover its net investment in these plants through
future electricity sales. Phillips and BI represent licensed, certified, clean
sources of electricity that will be necessary to meet expanding opportunities in
the power markets. Duquesne believes that anticipated growth in peak demand for
electricity within its service territory will require additional peaking
generation. Duquesne looks to BI to meet this need. The Phillips power plant
is an important component in Duquesne's strategy to identify and serve
opportunities for providing bulk power service. With recent legislation
promoting wider transmission access to bulk power markets and with the
opportunity to package a sale of power from Phillips with the support of
Duquesne's system, the Phillips plant could be made a highly reliable, cost-
competitive alternative for most purchasers. In summary, Duquesne believes its
investment in these cold-reserved plants will be necessary in order to meet
future business needs. If business opportunities do not develop as expected,
Duquesne will consider the sale of these assets. In the event that market
demand, transmission access or rate recovery do not support the utilization or
sale of the plants, Duquesne may have to write off part or all of their costs.
At December 31, 1994, Duquesne's net investment in thePhillips and BI power
plants was $93.0 million and $42.0 million, respectively.
Employees
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At December 31, 1994, Duquesne had 3,754 employees, including 1,231
employees at the Duquesne-operated Beaver Valley Power Station. The
International Brotherhood of Electrical Workers represents 2,262 of Duquesne's
employees. The current collective bargaining agreement expires September 30,
1998.
8
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Electric Utility Operations
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Approximately 73 percent of the electric energy generated by Duquesne's
system during 1994 was produced by its coal-fired generating capacity and
approximately 27 percent by its nuclear generating capacity. Duquesne normally
experiences its peak loads in the summer. The 1994 customer system peak, the
highest system peak in Duquesne's history, of 2,535 megawatts occurred on June
16, 1994.
Duquesne's fossil plants operated at 85 percent availability in 1994 and 83
percent in 1993. Duquesne's nuclear plants operated at 75 percent availability
in 1994 compared to 63 percent in 1993. The timing of scheduled maintenance and
refueling outages, as well as the duration of forced outages, affect
availability of power plants.
The North American Electric Reliability Council, of which Duquesne is a
member, uses capacity margin to report generating capability as compared to
demand. Capacity margin is expressed as capacity less demand divided by
capacity. Although Duquesne also uses criteria other than capacity margin for
determining the need for installation of additional generating capability,
Duquesne's capacity margin in 1994 was 9.4 percent based on installed non-cold-
reserved generating capacity and internal peak load, including 93 megawatts of
interruptible load. Duquesne has ties with regional utilities which provide the
capability to import in excess of 4,000 megawatts of capacity to supplement
Duquesne's generation, as required.
Additional information relating to Duquesne's electric operations is set
forth on page 44 of DQE's Annual Report to Shareholders for the year ended
December 31, 1994. The information is incorporated here by reference.
Fossil Fuel
-------------------------------------------------------------------------------
Duquesne believes that sufficient coal for its coal-fired generating units
will be available from various sources to satisfy its requirements for the
foreseeable future. During 1994, approximately 2.6 million tons of coal were
consumed at Duquesne's two wholly owned coal-fired stations - Cheswick and
Elrama.
Duquesne owns Warwick Mine, an underground mine located on the Monongahela
River approximately 83 river miles from Pittsburgh. Warwick Mine has been
excluded from rate base since 1981. Duquesne temporarily idled the mine in June
1988 due to excess coal inventories. In 1990, Duquesne restarted the mine by an
agreement under which an unaffiliated company operates the mine until March 2000
and sells the coal produced. Production began in late 1990. The mine produced
1.1 million tons of coal in 1994. Warwick Mine coal reserves include both high
and low sulfur coal; the sulfur content averages in the mid-range at 1.7
percent -- 1.9 percent. More than 60 percent of the coal mined at Warwick Mine
currently is used by Duquesne. Duquesne receives a royalty on any sales of
coal to the open market. The Warwick Mine currently supplies less than
one-fifth of the coal used in the production of electricity at the plants
owned or jointly owned by Duquesne. Duquesne estimates that, at December 31,
1994, its economically recoverable coal reserves at Warwick Mine were 10.4
million tons. Costs at Warwick Mine and Duquesne's investment in the mine are
expected to be recovered through the cost of coal in the ECR. Recovery is
subject to the system-wide coal cost standard. Duquesne also has an
opportunity to earn a return on its investment in the mine through the cost of
coal during the period of the system-wide coal cost standard, including
extensions. At December 31, 1994, Duquesne's net investment in the mine was
$18.9 million. The estimated current liability, including final site
reclamation, mine water treatment and certain labor liabilities for mine
closing is $33.0 million and Duquesne has recorded a liability in the
consolidated balance sheet of approximately $12.8 million
toward these costs. (See Note F of Duquesne's consolidated financial statements
for a discussion of Duquesne's investment in Warwick Mine costs.)
During 1994, 56 percent of Duquesne's coal supplies were provided by
contracts, with the remainder satisfied through purchases on the spot market.
Duquesne had four long-term contracts in effect at December 31, 1994, which, in
combination with spot market purchases, are expected to furnish an adequate
future coal supply. Duquesne does not anticipate any difficulty in replacing or
renewing these contracts as they expire in
9
<PAGE>
future years ranging from 1995 through 2002. At December 31, 1994, Duquesne's
wholly owned and jointly owned generating units had on hand an average coal
supply of 51 days.
The PUC has established two market price coal cost standards. One applies
only to coal delivered at the Mansfield plant. The other, the system-wide coal
cost standard, applies to coal delivered to the remainder of Duquesne's system.
Both standards are updated monthly to reflect prevailing market prices of
similar coal during the month. The PUC has directed Duquesne to defer recovery
of the delivered cost of coal to the extent that such cost exceeds generally
prevailing market prices for similar coal, as determined by the PUC. The PUC
allows deferred amounts to be recovered from customers when the delivered costs
of coal fall below such PUC-determined prevailing market prices.
The system-wide coal cost standard may be extended by Duquesne through March
2000. The unrecovered cost of Mansfield coal was $7.3 million and the
unrecovered cost of the remainder of the system-wide coal was $3.4 million at
December 31, 1994. Duquesne estimates that all deferred coal costs will be
recovered. Duquesne's average cost per ton of coal consumed, including the cost
of delivery, during the past three years at generating units which it operates
or in which it has an ownership interest was as follows: 1994-$39.12; 1993-
$40.08 and 1992-$40.44. (See Note F to Duquesne's consolidated financial
statements for a discussion of the coal cost standards.) The cost of coal, which
falls within the market price limitations discussed in Note A of Duquesne's
consolidated financial statements, is recovered from Duquesne's customers
through the ECR discussed previously in "Rate Matters" on page 6.
Nuclear Fuel
-------------------------------------------------------------------------------
The cycle of production and utilization of nuclear fuel consists of (1)
mining and milling of uranium ore and processing the ore into uranium
concentrates, (2) conversion of uranium concentrates to uranium hexafluoride,
(3) enrichment of the uranium hexafluoride, (4) fabrication of fuel assemblies,
(5) utilization of the nuclear fuel in the generating station reactor and (6)
storing and disposal of spent fuel.
Adequate supplies of uranium and conversion services are under contract for
Duquesne's requirements for its jointly owned/leased nuclear units through 1997.
Enrichment services are supplied under a 1984 United States Enrichment
Corporation Utility Services Contract entered into for a period of 30 years by
the companies for their joint interests in Perry Unit 1 and Beaver Valley Units
1 and 2. Under the terms of this contract Duquesne is committed to 100 percent
of its enrichment needs through 1998 and 70 percent in 1999. Fuel fabrication
contracts are in place to supply reload requirements for the next two cycles for
Beaver Valley Unit 1, the next two cycles for Beaver Valley Unit 2 and the next
twenty cycles of Perry Unit 1. Duquesne will be required to make arrangements
for uranium supply and related services as existing commitments expire.
For joint interests in generating units (See "Generating Units" discussion
on page 7.), each company is responsible for financing its proportionate share
of the costs of nuclear fuel for each nuclear unit in which it has an ownership
interest. Duquesne has entered into a lease arrangement for the acquisition of
nuclear fuel pursuant to which Duquesne is permitted to finance up to $75
million. As of December 31, 1994, the cost of Duquesne's nuclear fuel financed
was $52 million. Duquesne's nuclear fuel costs, which are amortized to reflect
fuel consumed, are charged to fuel expense and are recovered through rates.
Duquesne estimates that, over the next three years, the amortization of nuclear
fuel consumed will exceed the expenditures for new fuel by approximately $13
million. The actual nuclear fuel costs to be financed and amortized during the
period 1995 through 1997 will be influenced by such factors as changes in
interest rates, lengths of the respective fuel cycles and changes in nuclear
material cost and services, the prices and availability of which are not known
at this time. Such costs may also be influenced by other events not presently
foreseen.
Duquesne's nuclear fuel costs related to Beaver Valley Unit 1, Beaver Valley
Unit 2 and Perry Unit 1 under the lease arrangement are charged to fuel expense
based on the quantity of energy generated. Nuclear fuel costs for these units
averaged .903, .918 and .975 cents per KWH in 1994, 1993 and 1992, inclusive of
charges associated with spent fuel, respectively. Duquesne is recovering from
its customers the costs associated with the ultimate disposal of spent fuel.
10
<PAGE>
Nuclear Decommissioning
-------------------------------------------------------------------------------
The PUCruled that recovery of the decommissioning costs for Beaver Valley
Unit 1 could begin in 1977, and that recovery for Beaver Valley Unit 2 and Perry
Unit 1 could begin in 1988. Duquesne expects to decommission Beaver Valley Unit
2 and Perry Unit 1 following the end of their operating lives, a date that
currently coincides with the expiration of each plant's operating license. Upon
expiration of the Beaver Valley Unit 1 operating license, the unit will be
placed in safe storage until the expiration of the Beaver Valley Unit 2
operating license, at which time the units may be decommissioned together.
Based upon site specific studies finalized in 1992 for Beaver Valley Unit 2,
and in 1994 for Beaver Valley Unit 1 and Perry Unit 1, Duquesne's share of the
total estimated decommissioning costs, including removal and decontamination
costs, currently being used to determine Duquesne's cost of service, are $122
million for Beaver Valley Unit 1, $35 million for Beaver Valley Unit 2, and $67
million for Perry Unit 1.
In conjunction with an August 18, 1994 PUC Accounting Order, Duquesne has
increased the annual contribution to its decommissioning trusts by $2 million to
bring the total annual funding to approximately $4 million per year. Duquesne
plans to continue making periodic reevaluations of estimated decommissioning
costs, to provide additional funding from time to time, and to seek regulatory
approval for recognition of these increased funding levels.
Environmental Matters
-------------------------------------------------------------------------------
The Comprehensive Environmental Response, Compensation and Liability Act of
1980 (Superfund) and the Superfund Amendments and Reauthorization Act of 1986
established a variety of informational and environmental action programs. The
United States Environmental Protection Agency (EPA) has informed Duquesne of its
involvement or potential involvement in three hazardous waste sites. If
Duquesne is ultimately determined to be a responsible party with respect to
these sites, it could be liable for all or a portion of the cleanup costs.
However, in each case, other solvent, potentially responsible parties that may
bear all or part of any liability are also involved. In addition, Duquesne
believes that available defenses, along with other factors (including overall
limited involvement and low estimated remediation costs for one site) will
limit any potential liability that Duquesne may have for cleanup costs.
Duquesne believes that it is adequately reserved for all known liabilities and
costs and, accordingly, that these matters will not have a materially adverse
effect on its financial position or results of operations.
In 1990, Congress approved amendments to the Clean Air Act. Among other
innovations, this legislation established the Emission Allowance Trading System.
These allowances are issued by the EPA to fossil-fired stations with generating
capability of more than 25 megawatts that were in existence as of the passage of
the 1990 amendments. Allowances are part of a market-based approach to SO2
reduction. Emission allowances can also be obtained through purchases on the
open market or directly from other sources. Excess allowances may be banked for
future use or sold on the open market to other parties for their use in
offsetting emissions.
The legislation requires significant additional reductions of SO2 and oxides
of nitrogen (NOX) by the year 2000. Duquesne continues to work with the
operators of its jointly owned stations to implement cost-effective compliance
strategies to meet these requirements. NOX reductions under Title IV of the
Clean Air Act were required at the Cheswick station and the work to achieve the
reductions was completed in 1993. The ozone attainment provisions of Title I of
the Clean Air Act amendments also required NOX reductions by 1995 at Duquesne's
Elrama plant and at the jointly owned Mansfield plant. Duquesne will achieve
such reductions with low NOX burner technology. Duquesne has 662 megawatts of
nuclear capacity currently, 1,187 megawatts of scrubbed capacity, including 300
megawatts at the currently cold-reserved Phillips plant, as well as 757
megawatts of capacity that meets the 1995 standards of the Clean Air Act
amendments through the use of low sulfur coal. Through the year 2000, Duquesne
is planning a combination of compliance methods that include fuel switching;
increased use of, and improvements in, scrubbed capacity; flue gas conditioning;
low NOX burner technology; and the purchase of emission allowances. Duquesne
currently estimates that additional capital costs to comply with Clean Air Act
requirements through the year 2000 will be approximately $20 million. This
estimate is subject to the finalization of federal and state regulations.
11
<PAGE>
Duquesne is closely monitoring other potential air quality programs and air
emission control requirements that could be imposed in the future, including
additional NOX control requirements that could be imposed on fossil fuel plants
by the Ozone Transport Commission and promulgation by the EPA of more stringent
ambient air quality and emission standards for SO2 particulates and other
components of coal combustion gases. As these potential programs are in various
stages of discussion and consideration, it is impossible to make reasonable
estimates of the potential costs and impacts, if any.
In 1992, the Pennsylvania Department of Environmental Resources (DER) issued
Residual Waste Management Regulations governing the generation and management of
non-hazardous waste. Duquesne is currently conducting tests and developing
compliance strategies. Capital compliance costs for these DER regulations are
estimated, on the basis of information currently available, at $5 million in
1995. The expected additional capital cost of compliance for these DER
regulations through 2000 is estimated, based on current information, to be
approximately $25 million; this estimate is subject to the results of continuing
ground water assessments and DER final approval of compliance plans.
Under the Nuclear Waste Policy Act of 1982, which establishes a policy for
handling and disposing of spent nuclear fuel and requires the establishment of a
final repository to accept spent fuel, contracts for jointly owned nuclear
plants have been entered into with the United States Department of Energy
(DOE)for permanent disposal of spent nuclear fuel and high-level radioactive
waste. The DOE has indicated that the repository will not be available for
acceptance of spent fuel before 2010. During 1994, Duquesne increased the
storage capacity at Beaver Valley Unit 1 by equipping the spent fuel pool with
high density fuel storage racks. On-site spent fuel storage capacities at
Beaver Valley Unit 1, Beaver Valley Unit 2 and Perry are now expected to be
sufficient until 2017, 2011, and 2009, respectively.
Nuclear reactor licensees in the United States are assessed annually for the
decontamination and decommissioning of DOE enrichment facilities. Assessments
are based on the amount of uranium enrichment services purchased by a utility
prior to enactment of the National Energy Policy Act of 1992 (energy act) and
are to be paid by such utilities over a 15-year period. At December 31, 1994,
Duquesne's liability for contributions is approximately $9.9 million.
Contributions, when made, are recovered through the ECR.
Duquesne is involved in various environmental matters. Duquesne believes
that such matters, in total, will not have a materially adverse effect on its
financial position or results of operations.
Outlook
-------------------------------------------------------------------------------
Competition
Regulatory developments in the electric utility industry are placing
increasing competitive pressures on electric utilities. The electric utility
industry is expected to continue to undergo significant changes for the
remainder of the decade. These changes most likely will include increasing
competition in the generation and sale of electricity, increasing energy flows
resulting from open transmission access and non-regulated generation and
transmission projects outside the traditional service areas. Duquesne, like the
industry in general, is continuing to assess the impact of these competitive
forces on its future operations.
The National Energy Policy Act of 1992 (energy act) was designed, among
other things, to foster competition. Among other provisions, the energy act
amends the Public Utility Holding Company Act of 1935 (1935 act) and the Federal
Power Act. Amendments to the 1935 act create a new class of independent power
producers known as Exempt Wholesale Generators (EWGs), which are exempt from the
corporate structure regulations of the 1935 act. EWGs, which may include
independent power producers as well as affiliates of electric utilities, do not
require Securities and Exchange Commission approval or regulation. In addition,
brokers and marketers, without owning or operating any generation or
transmission facilities, are being permitted to enter into the business of
buying and selling electric capacity and energy.
Amendments to the Federal Power Act create the potential for utilities and
other power producers to gain increased access to transmission systems of other
utilities in order to facilitate sales to other utilities. The amendments
permit the FERC to order utilities to transmit power over their lines for use by
other suppliers and to
12
<PAGE>
enlarge or construct additional transmission capacity to provide these services.
Duquesne is currently pursuing expanded transmission access under these
amendments. (See discussion in "Transmission Access" below.)
The PUC is currently conducting an investigation into electric power
competition. Duquesne has been advocating increased transmission access to the
wholesale power market as the necessary first step toward enabling our customers
to benefit from competition.
Emerging competition, federal deregulation of wholesale energy sales, and
prospective retail access initiatives require Duquesne to reexamine its approach
to doing business. Growth in energy sales, competitive rate pressures, and
Duquesne's commitment to provide reliable, quality service to its customers
influence short- and long-term corporate goals. Duquesne's current business
plan recognizes the need to encourage economic growth and stability in the
service territory and surrounding region. Duquesne's efforts continue to focus
on achievement of business growth through the application of marketing and
economic development programs to achieve energy-efficient growth in its sales of
utility services. Duquesne's rates for energy intensive industrial and
commercial customers are competitively priced and its rate structure allows some
flexibility in setting rates to attract new business. In addition, Duquesne
sponsors programs to help customers manage their electricity consumption and
control their costs.
Although management believes Duquesne's system is well positioned, as a
clean, low cost producer of electricity, to compete both within and outside of
its service territory, efforts continue to further reduce costs and increase
effectiveness and productivity. Management will aggressively address these
factors to position Duquesne to overcome the challenges they may create and take
advantage of the opportunities increased competition will bring.
Transmission Access
In March 1994, Duquesne submitted, pursuant to the Federal Power Act, a
"good faith" request for transmission service with the Allegheny Power System
(APS) andPennsylvania-New Jersey-Maryland Interconnection Association (PJM
Companies). The request is based on 20-year firm service with flexible delivery
points for 300 megawatts of transfer capability over the transmission network
that extends from Western Pennsylvania to the East Coast. Because of a lack of
progress on pricing and other issues, on August 5, and September 16, 1994,
Duquesne filed with the FERC applications for transmission service from the PJM
Companies and APS, respectively. The applications are authorized under Section
211 of the Federal Power Act, which requires electric utilities to provide firm
wholesale transmission service.
Retirement Plan Measurement Assumptions
Duquesne increased the discount rate used to determine the projected benefit
obligation on Duquesne's retirement plans at December 31, 1994, to 8.0 percent.
The assumed change in future compensation levels was also increased to reflect
current market and economic conditions.
The effects of these changes on Duquesne's retirement plan obligations are
reflected in the amounts shown inNote N to Duquesne's consolidated financial
statements. The resulting decrease in related expenses for subsequent years is
not expected to be material.
-------------------------------
13
<PAGE>
Information relating to the business of Duquesne and additional information
relating to Duquesne is set forth on pages 10 to 46 of DQE's Annual Report to
Shareholders for the year ended December 31, 1994. The information is
incorporated here by reference.
Executive Officers of the Registrant
-------------------------------------------------------------------------------
Set forth below are the names, ages as of March 1, 1995, positions and brief
accounts of the business experience during the past five years of the executive
officers of Duquesne.
<TABLE>
<CAPTION>
Name Age Office
---------------------------------------------------------- --- -------------------------------------------------------
<S> <C> <C>
Wesley W. von Schack 50 Chairman of the Board since September 1987 and
Chief Executive Officer since January 1986.
President from January 1986 to February 1995.
David D. Marshall 42 President and Chief Operating Officer since February
1995. Executive Vice President from February 1992
to February 1995, Assistant to the President from
October 1990 to January 1992 and Vice President-
Corporate Development from August 1987 to
October 1990.
Gary L. Schwass 49 Senior Vice President since February 1995 and Chief
Financial Officer since July 1989. Vice President-
Finance from May 1988 to February 1995 and Vice
President and Treasurer from August 1987 to May
1988.
Dianna L. Green 48 Senior Vice President - Administration since February
1995. Vice President-Administrative Services from
August 1988 to February 1995.
James E. Cross (a) 48 Senior Vice President - Nuclear since February 1995.
Roger D. Beck 58 Vice President - Marketing and Customer Services
since August 1986.
Gary R. Brandenberger 57 Vice President - Power Supply since August 1986.
William J. DeLeo 44 Vice President - Corporate Performance and Information
Services since January 1991. Vice President-Corporate
Planning and Management Information Services
from April 1989 to December 1990.
Donald J. Clayton 40 Treasurer since January 1995. Assistant Treasurer from
July 1989 to January 1995.
Raymond H. Panza 44 Controller and Principal Accounting Officer since
July 1990.
</TABLE>
(a) Mr. Cross was Vice President-Nuclear from September 1994 to February 1995
and served Portland General Electric as Vice President, Thermal Operations
Officer from May 1993 and Chief Nuclear to September 1994; Vice President
and Chief Nuclear Officer from December 1991 to May 1993; and Vice
President, Nuclear fromMay 1990 to December 1991.
14
<PAGE>
ITEM 2. PROPERTIES.
Duquesne's properties consist of electric generating stations, transmission
and distribution facilities and supplemental properties and appurtenances,
comprising as a whole an integrated electric utility system, located
substantially in Allegheny and Beaver counties in southwestern Pennsylvania.
Duquesne owns all or a portion of the following generating units except
Beaver Valley 2, which is leased.
<TABLE>
<CAPTION>
Duquesne's
Share of Net
Demonstrated Net Plant Output
Capability Year Ended
December 31, 1994 December 31, 1994
Name and Location Type (Megawatts) (Megawatt-hours)
--------------------------- ----- ----------------- -----------------
<S> <C> <C> <C>
Cheswick Coal 570 3,928,002
Springdale, Pa.
Fort Martin No. 1 (1) Coal 276 1,496,483
Maidsville, W.Va.
Elrama Coal 487 2,258,805
Elrama, Pa.
Sammis No. 7 (1) Coal 187 1,227,241
Stratton, Ohio
Eastlake No. 5 (1) Coal 186 928,056
Eastlake, Ohio
Beaver Valley No. 1 (1) Nuclear 385 2,627,465
Shippingport, Pa.
Beaver Valley No. 2 (1) Nuclear 113 979,667
Shippingport, Pa.
Perry No. 1 (1) Nuclear 164 631,823
North Perry, Ohio
Bruce Mansfield No. 1 (1) Coal 228 696,143
Shippingport, Pa.
Bruce Mansfield No. 2 (1) Coal 62 242,239
Shippingport, Pa.
Bruce Mansfield No. 3 (1) Coal 110 439,577
Shippingport, Pa.
Brunot Island Oil 66 2,467
----- ----------
Brunot Island, Pa.
Total 2,834 15,457,968
----------
Cold-reserved units:
Brunot Island Oil 240
Phillips Coal 300
-----
Total 3,374
-----
</TABLE>
(1) Amounts represent Duquesne's share of the unit which is owned by Duquesne in
common with one or more other electric utilities (or, in the case of Beaver
Valley Unit 2, leased by Duquesne).
Duquesne owns 24 transmission substations (including interests in common in
the step-up transformers at Fort Martin No. 1; Sammis No. 7; Eastlake No. 5;
Bruce Mansfield No. 1; Beaver Valley Unit 1; Beaver Valley Unit 2; Perry Unit 1;
Bruce Mansfield No. 2; and Bruce Mansfield No. 3) and 570 distribution
substations. Duquesne has 714 circuit-miles of transmission lines, comprised of
345,000, 138,000 and 69,000 volt lines. Street lighting and distribution
circuits of 23,000 volts and less include approximately 50,000 miles of lines
and cable.
15
<PAGE>
Duquesne owns the Warwick Mine, including 4,849 acres owned in fee of
unmined coal lands and mining rights, located on the Monongahela River in Greene
County, Pennsylvania, approximately 83 river miles from Pittsburgh. (See Item
1. "Fossil Fuel" discussion on page 9.)
Substantially all of Duquesne's properties are subject to a first mortgage
lien of the Trust Indenture dated as of August 1, 1947 securing Duquesne's first
mortgage bonds. In May 1992, Duquesne began issuing secured debt under a new
First Collateral Trust Indenture. This new indenture will ultimately replace
Duquesne's First Mortgage BondIndenture.
ITEM 3. LEGAL PROCEEDINGS.
Westinghouse Lawsuit
-------------------------------------------------------------------------------
Beaver Valley Unit 1 and Unit 2 are jointly owned/leased generating units.
Duquesne's percentage interests held in Beaver Valley Unit 1 and in Beaver
Valley Unit 2 are 47.5 percent and 13.74 percent, respectively. The remainder
of Beaver Valley Unit 1 is owned by Ohio Edison Company and by Pennsylvania
Power Company. The remaining interest in Beaver Valley Unit 2 is held by Ohio
Edison Company, The Cleveland Electric Illuminating Company (CEI) and The Toledo
Edison Company. Duquesne operates both units on behalf of the joint owners of
interests.
In 1991, the aforementioned owners of joint interests in Beaver Valley Unit
1 and Unit 2 filed suit against Westinghouse Electric Corporation (Westinghouse)
in the United States District Court for the Western District of Pennsylvania.
The suit alleges that six steam generators supplied by Westinghouse for the two
units contain serious defects -- in particular defects causing tube corrosion
and cracking. To date, twelve additional lawsuits have been brought by other
utility companies around the country against Westinghouse for similar problems
with Westinghouse steam generators.
The condition of the Beaver Valley Unit 1 and Unit 2 steam generators is
being monitored closely. Duquesne's steam generator maintenance costs have
increased as a result of these defects and are likely to continue increasing.
Replacement of the Beaver Valley Unit 1 steam generator defective components may
occur as early as 1997. Based on the experience of other utilities with similar
units that have replaced steam generators, replacement cost per unit is
estimated to be approximately $125 million.
A jury trial began September 12, 1994, in Federal District Court in Western
Pennsylvania. Pennsylvania Power Company, Ohio Edison Company, CEI, Toledo
Edison Company and Duquesne were joined in the litigation against Westinghouse.
On October 24, 1994, the Court dismissed four of the five claims against
Westinghouse, leaving only the fraud claim. On December 6, 1994, the jury
rendered a verdict in favor of Westinghouse on the fraud count. On January 5,
1995, the owners of joint interests in the Beaver Valley plants appealed the
decision to the United States Court of Appeals for the Third Circuit. Duquesne
cannot predict the final outcome of this litigation; however, Duquesne does not
believe that resolution will have a materially adverse effect on Duquesne's
financial position or results of operations.
Rate-Related and Environmental Litigation
-------------------------------------------------------------------------------
Proceedings involving Duquesne's rates are reported in Item 1. "Rate
Matters." Proceedings involving environmental matters are reported in Item 1.
"Environmental Matters."
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
16
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED SHARE-
HOLDER MATTERS.
Effective July 7, 1989, Duquesne Light Company became a wholly owned
subsidiary of DQE, the holding company formed as part of a shareholder-approved
restructuring. As a result of the restructuring, DQE common stock replaced all
outstanding shares of Duquesne Light Company common stock, except for ten shares
which DQE holds. As such, this item is not applicable to Duquesne Light Company
because all its common equity is held solely by DQE. During 1994, Duquesne
declared quarterly dividends on its common stock totaling $144 million for the
year.
ITEM 6. SELECTED FINANCIAL DATA.
Selected financial data for Duquesne Light Company for each year of the six-
year period ended December 31, 1994 are set forth on page 63. The financial
data is incorporated here by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDI-
TION AND RESULTS OF OPERATIONS.
Management's discussion and analysis of financial condition and results of
operations are set forth in Item 1. BUSINESS and on pages 11 through 19 of the
DQE Annual Report to Shareholders for the year ended December 31, 1994. The
discussion and analysis are incorporated here by reference.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA.
The Consolidated Balance Sheet of Duquesne Light Company and its Subsidiary
as of December 31, 1994 and 1993, and the related Statements of Consolidated
Income, Retained Earnings and Cash Flows for each of the three years in the
period ended December 31, 1994 together with the Independent Auditors' Report
dated January 31, 1995 are set forth here on pages 38 to 62. The financial
statements and report are incorporated here by reference. Quarterly financial
information is included on page 62 in Note O to Duquesne's consolidated
financial statements and is incorporated here by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information relating to the Directors of Duquesne Light Company is set forth
under the captions "Proposal No. 1 - Election of Directors", "Nominees for
Directors" and "Standing Directors" in the DQE definitive Proxy Statement, filed
with the Securities and Exchange Commission in connection with its Annual
Meeting of Stockholders to be held on April 19, 1995. The Proxy Statement is
incorporated here by reference. All Directors of DQE are also Directors of
Duquesne Light Company. Information relating to the executive officers of the
Registrant is set forth in Part I of this Report under the caption "Executive
Officers of the Registrant."
17
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
The information relating to executive compensation is set forth in Exhibit
99.1, filed as part of this Report. The information is incorporated here by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
DQE is the beneficial owner and holder of all shares of outstanding Common
Stock, $1 par value, of Duquesne Light, consisting of 10 shares as of February
16, 1995. Information relating to the ownership of equity securities of DQE and
Duquesne Light by directors and executive officers of Duquesne Light is set
forth in Exhibit 99.1, filed as part of this Report. The information is
incorporated here by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K.
(a)(1) The following financial statements are included on pages 38 to 62.
Independent Auditors' Report.
Statement of Consolidated Income for the Three Years Ended December
31, 1994.
Consolidated Balance Sheet, December 31, 1994 and 1993.
Statement of Consolidated Cash Flows for the Three Years Ended
December 31, 1994.
Statement of Consolidated Retained Earnings for the Three Years Ended
December 31, 1994.
Notes to Consolidated Financial Statements.
(a)(2) The following financial statement schedules and the related
Independent Auditors' Report (See page 38.) are filed here as a part of this
Report:
Schedules for the Three Years Ended December 31, 1994:
VIII - Valuation and Qualifying Accounts.
X - Supplementary Income Statement Information.
The remaining schedules are omitted because of the absence of the conditions
under which they are required or because the information called for is shown in
the financial statements or notes to the financial statements.
(a)(3) Exhibits relating to Duquesne Light Company filed as a part of this
Report are set forth in the Duquesne Light Company Exhibit List on pages 20 to
34, incorporated here by reference. Documents other than those designated as
being filed here are incorporated here by reference. Documents incorporated by
reference to a DQE Annual Report on Form 10-K, a Quarterly Report on Form 10-Q
or a Current Report on Form 8-K are at Securities and Exchange Commission File
No. 1-956.
18
<PAGE>
(b) Reports on Form 8-K filed during the twelve months ended December 31,
1994:
(1) August 16, 1994 - The following event was reported:
Item 5. Appointment of James E. Cross as Vice President of the
Nuclear Group, Senior Vice President and Chief Nuclear
Officer of Duquesne's Nuclear Power Division.
No financial statements were filed with this report.
(2) September 6, 1994 - The following event was reported:
Item 5. An update of the Westinghouse Lawsuit.
No financial statements were filed with this report.
(3) November 29, 1994 - The following event was reported:
Item 5. Contract between Duquesne and IBEW ratified.
December 6, 1994 - The following event was reported:
Item 5. An update of the Westinghouse Lawsuit.
No financial statements were filed with this report.
(c) Executive Compensation Plans and Arrangements
Deferred Compensation Plan for the Directors Exhibit 10.1 to the
of Duquesne Light Company, as amended to date. Form 10-K Annual
Report of DQE for the
year ended December
31, 1992.
Incentive Compensation Program for Certain Exhibit 10.2 to the
Executive Officers of Duquesne Light Company, Form 10-K Annual
as amended to date. Report of DQE for the
year ended December
31, 1992.
Description of Duquesne Light Company Pension Exhibit 10.3 to the
Service Supplement Program. Form 10-K Annual
Report of DQE for the
year ended December
31, 1992.
Duquesne Light Company Outside Directors' Exhibit 10.59 to the
Retirement Plan, as amended to date. Form 10-K Annual
Report of Duquesne
Light Company for the
year ended December
31, 1990.
Employment Agreement dated as of December 15, Exhibit 10.5 to the
1992 between DQE, Duquesne Light Company and Form 10-K Annual
Wesley W. von Schack. Report of DQE for the
year ended December
31, 1992.
Duquesne Light/DQE Charitable Giving Program. Exhibit 10.6 to the
Form 10-K Annual
Report of DQE for the
year ended December
31, 1992.
Duquesne Light Company Performance Incentive Exhibit 10.7 to the
Program. Form 10-K Annual
Report of DQE for the
year ended December
31, 1994,
incorporated here by
reference.
19
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
------- -------------------------------------------------------- ------------------------------
<S> <C> <C>
First Amendment dated as of October 25, 1994 Exhibit 10.8 to the Form 10-K
to Employment Agreement dated as of Annual Report of DQE for the
December 15, 1992 between DQE, Duquesne year ended December 31, 1994,
Light Company and Wesley W. von Schack. incorporated here by reference.
Employment Agreement dated as of August 30, Exhibit 10.9 to the Form 10-K
1994 between DQE, Duquesne Light Company Annual Report of DQE for the
and David D. Marshall. year ended December 31, 1994,
incorporated here by reference.
Employment Agreement dated as of August 30, Exhibit 10.10 to the Form 10-K
1994 between DQE, Duquesne Light Company Annual Report of DQE for the
and Gary L. Schwass. year ended December 31, 1994,
incorporated here by reference.
Employment Agreement dated as of August 30, Duquesne Light Company
1994 between Duquesne Light Company and Exhibit 10.68 to the Form 10-K
Dianna L. Green. Annual Report of DQE for the
year ended December 31, 1994,
incorporated here by reference.
DUQUESNE LIGHT COMPANY EXHIBITS
Exhibit Method of
No. Description Filing
------- ----------------------------------------------------- ------------------------------
3.1 Restated Articles of Duquesne Light Company, as Exhibit 3.1 to the Form 10-K
amended through December 19, 1991 and as currently Annual Report of Duquesne
in effect. Light Company for the year
ended December 31, 1991.
3.2 By-Laws of Duquesne Light Company, as amended Exhibit 3.2 to the Form 10-K
through December 19, 1991 and as currently in effect. Annual Report of Duquesne
Light Company for the year
ended December 31, 1991.
4.1 Trust Indenture dated as of August 1, 1947, securing Exhibit 4.3 to Registration
Duquesne Light Company's First Mortgage Bonds. Statement (Form S-1)
No. 2-11326.
4.2 Supplemental Trust Indentures supplementing the
Trust Indenture -
First through Tenth and an amendment to the Fifth. Exhibits 4.4 through 4.13 to
Registration Statement (Form
S-1) No. 2-11326.
Eleventh. Exhibit 4.3 to Registration
Statement (Form S-1)
No. 2-12309.
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
------- -------------------------------------------------------- ------------------------------
<S> <C> <C>
Twelfth. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Thirteenth. Exhibit 4.5 to Registration
Statement (Form S-1)
No. 2-13360.
Fourteenth and Fifteenth. Exhibits 4.6 and 4.7 to
Registration Statement (Form S-1)
No. 2-13596.
Sixteenth. Exhibit 4.8 to Registration
Statement (Form S-1)
No. 2-14704.
Seventeenth and Eighteenth. Exhibits 4.4 and 4.5 to
Registration Statement (Form S-1)
No. 2-16033.
Nineteenth through Twenty-Third. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Twenty-Fourth. Exhibit 2.2 to Registration
Statement (Form S-9)
No. 2-24412.
Twenty-Fifth. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Twenty-Sixth. Exhibit 2.2 to Registration
Statement (Form S-9)
No. 2-25887.
Twenty-Seventh. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Twenty-Eighth. Exhibit 2.2 to Registration
Statement (Form S-9)
No. 2-28042.
Twenty-Ninth. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Thirtieth. Exhibit 2.2 to Registration
Statement (Form S-9)
No. 2-30927.
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
------- -------------------------------------------------------- ------------------------------
<S> <C> <C>
Thirty-First and Thirty-Second. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Thirty-Third. Exhibit 2.4 to Registration
Statement (Form S-7)
No. 2-36333.
Thirty-Fourth and Thirty-Fifth. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Thirty-Sixth. Exhibit 2.4 to Registration
Statement (Form S-7)
No. 2-39375.
Thirty-Seventh. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Thirty-Eighth. Exhibit 2.4 to Registration
Statement (Form S-7)
No. 2-42154.
Thirty-Ninth through Forty-Fifth. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Forty-Sixth. Exhibit 2.3 to Registration
Statement (Form S-7)
No. 2-52874.
Forty-Seventh through Forty-Ninth. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Fiftieth. Exhibit 2.3 to Registration
Statement (Form S-7)
No. 2-58483.
Fifty-First through Fifty-Third. Exhibit 2.2 to Registration
Statement (Form S-7)
No. 2-63467.
Fifty-Fourth and Fifty-Fifth. Exhibit 2.2 to Registration
Statement (Form S-16)
No. 2-66258.
Fifty-Sixth. Exhibit 2.2 to Registration
Statement (Form S-16)
No. 2-68959.
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
------- -------------------------------------------------------- ------------------------------
<S> <C> <C>
Fifty-Seventh. Exhibit 4.1 to Registration
Statement (Form S-16)
No. 2-72522.
Fifty-Eighth and Fifty-Ninth. Exhibit 4.1 to Registration
Statement (Form S-16)
No. 2-76768.
Sixtieth and Sixty-First. Exhibit 4.1 to Registration
Statement (Form S-3)
No. 2-82139.
Sixty-Second and Sixty-Third. Exhibit 4.1 to Registration
Statement (Form S-3)
No. 2-87452.
Sixty-Fourth. Exhibit 4.1 to Registration
Statement (Form S-3)
No. 2-89719.
Sixty-Fifth through Sixty-Ninth. Exhibit 4.1 to Registration
Statement (Form S-3)
No. 33-1509.
Seventieth through Seventy-Seventh. Exhibit 4.1 to Registration
Statement (Form S-3)
No. 33-32026.
Seventy-Eighth through Eightieth. Exhibit 4.1 to Registration
Statement (Form S-3)
No. 33-46990.
Eighty-First. Exhibit 4.2 to Registration
Statement (Form S-3)
No. 33-46990.
Eighty-Second. Exhibit 4.1 to Registration
Statement (Form S-3)
No. 33-52782.
Eighty-Third and Eighty-Fourth. Exhibit 4.1 to Registration
Statement (Form S-3)
No. 33-63602.
Eighty-Fifth through Eighty-Eighth. Exhibit 4.2 to the Form 10-K
Annual Report of Duquesne Light
Company for the year ended
December 31, 1993.
Eighty-Ninth and Ninetieth Filed here.
4.3 Indenture dated March 1, 1960, relating to Duquesne Exhibit 4.3 to the Form 10-K
Light Company's 5% Sinking Fund Debentures. Annual Report of DQE for the
year ended December 31, 1989.
</TABLE>
23
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
--------- ------------------------------------------------------ ------------------------------
<S> <C> <C>
4.4 Indenture dated as of November 1, 1989 relating to the Exhibit 4.4 to the Form 10-K
issuance of Duquesne Light Company's unsecured Annual Report of DQE for the
notes. year ended December 31, 1989.
4.5 Indenture of Mortgage and Deed of Trust dated as of Exhibit 4.3 to Registration
April 1, 1992, securing Duquesne Light Company's Statement (Form S-3)
First Collateral Trust Bonds. No. 33-52782.
4.6 Supplemental Indentures supplementing the said
Indenture of Mortgage and Deed of Trust -
Supplemental Indenture No. 1. Exhibit 4.4 to Registration
Statement (Form S-3)
No. 33-52782.
Supplemental Indenture No. 2 through Supplemental Exhibit 4.4 to Registration
Indenture No. 4. Statement (Form S-3)
No. 33-63602.
Supplemental Indenture No. 5 through Supplemental Exhibit 4.6 to the Form 10-K
Indenture No. 7. Annual Report of Duquesne Light
Company for the year ended
December 31, 1993.
Supplemental Indenture No. 8 and Supplemental Filed here.
Indenture No. 9.
Agreements relating to Jointly Owned Generating Units:
10.1 Administration Agreement dated as of September 14, Exhibit 5.8 to Registration
1967. Statement (Form S-7)
No. 2-43106.
10.2 Transmission Facilities Agreement dated as Exhibit 5.9 to Registration
of September 14, 1967. Statement (Form S-7)
No. 2-43106.
10.3 Operating Agreement dated as of September 21, 1972 Exhibit 5.1 to Registration
for Eastlake Unit No. 5. Statement (Form S-7)
No. 2-48164.
10.4 Memorandum of Agreement dated as of July 1, 1982 re Exhibit 10.14 to the Form 10-K
reallocation of rights and liabilities of the Annual Report of Duquesne
companies under uranium supply contracts. Light Company for the year
ended December 31, 1987.
10.5 Operating Agreement dated August 5, 1982 as of Exhibit 10.17 to the Form 10-K
September 1, 1971 for Sammis Unit No. 7. Annual Report of Duquesne
Light Company for the year ended
December 31, 1988.
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
--------- ----------------------------------------------------- -------------------------------
<S> <C> <C>
10.6 Memorandum of Understanding dated as of March 31, Exhibit 10.19 to the Form 10-K
1985 re implementation of company-by-company Annual Report of DQE for the
management of uranium inventory and delivery. year ended December 31, 1989.
10.7 Restated Operating Agreement for Beaver Valley Unit Exhibit 10.23 to the Form 10-K
Nos. 1 and 2 dated September 15, 1987. Annual Report of Duquesne
Light Company for the year
ended December 31, 1987.
10.8 Operating Agreement for Perry Unit No. 1 dated Exhibit 10.24 to the Form 10-K
March 10, 1987. Annual Report of Duquesne
Light Company for the year
ended December 31, 1987.
10.9 Operating Agreement for Bruce Mansfield Units Nos. 1, Exhibit 10.25 to the Form 10-K
2 and 3 dated September 15, 1987 as of June 1, 1976. Annual Report of Duquesne Light
Company for the year ended
ended December 31, 1987.
10.10 Basic Operating Agreement, as amended January 1, Exhibit 10.10 to the Form 10-K
1993. Annual Report of Duquesne Light
Company for the year ended
December 31, 1993.
10.11 Amendment No. 1 dated December 23, 1993 to Exhibit 10.11 to the Form 10-K
Transmission Facilities Agreement (as of January 1, Annual Report of Duquesne Light
1993). Company for the year ended
December 31, 1993.
10.12 Microwave Sharing Agreement (as amended Exhibit 10.12 to the Form 10-K
January 1, 1993) dated December 23, 1993. Annual Report of Duquesne Light
Company for the year ended
December 31, 1993.
10.13 Agreement (as of September 1, 1980) dated Exhibit 10.13 to the Form 10-K
December 23, 1993 for termination or construction Annual Report of Duquesne Light
of certain agreements. Company for the year ended
December 31, 1993.
10.14 Fort Martin Construction and Operating Agreement Exhibit 10.14 to the Form 10-K
dated April 30, 1965. Annual Report of Duquesne Light
Company for the year ended
December 31, 1993.
10.15 Fort Martin Transmission Agreement dated Exhibit 10.15 to the Form 10-K
March 15, 1967. Annual Report of Duquesne Light
Company for the year ended
December 31, 1993.
10.16 Amendment of January 1, 1988 to Fort Martin Exhibit 10.16 to the Form 10-K
Transmission Agreement. Annual Report of Duquesne Light
Company for the year ended
December 31, 1993.
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
--------- ----------------------------------------------------- -------------------------------
<S> <C> <C>
Agreements relating to the Sale and Leaseback
of Beaver Valley Unit No. 2:
10.17 Order of the Pennsylvania Public Utility Commission Exhibit 28.2 to the Form 10-Q
dated September 25, 1987 regarding the application Quarterly Report of Duquesne
of the Duquesne Light Company under Section 1102(a)(3) Light Company for the quarter
of the Public Utility Code for approval in connection ended September 30, 1987.
with the sale and leaseback of its interest in Beaver
Valley Unit No. 2.
10.18 Order of the Pennsylvania Public Utility Commission Exhibit 10.28 to the Form 10-K
dated October 15, 1992 regarding the Securities Annual Report of Duquesne
Certificate of Duquesne Light Company for the Light Company for the year
assumption of contingent obligations under ended December 31, 1992.
financing agreements in connection with the
refunding of Collateralized Lease Bonds.
x10.19 Facility Lease dated as of September 15, 1987 between Exhibit (4)(c) to Registration
The First National Bank of Boston, as Owner Trustee Statement (Form S-3)
under a Trust Agreement dated as of September 15, 1987 No. 33-18144.
with the limited partnership Owner Participant named
therein, Lessor, and Duquesne Light Company, Lessee.
y10.20 Facility Lease dated as of September 15, 1987 between Exhibit (4)(d) to Registration
The First National Bank of Boston, as Owner Trustee Statement (Form S-3)
under a Trust Agreement dated as of September 15, No. 33-18144.
1987, with the corporate Owner Participant named
therein, Lessor, and Duquesne Light Company, Lessee.
x10.21 Amendment No. 1 dated as of December 1, 1987 to Exhibit 10.30 to the Form 10-K
Facility Lease dated as of September 15, 1987 between Annual Report of Duquesne
The First National Bank of Boston, as Owner Trustee Light Company for the year
under a Trust Agreement dated as of September 15, ended December 31, 1987.
1987 with the limited partnership Owner Participant
named therein, Lessor, and Duquesne Light Company,
Lessee.
y10.22 Amendment No. 1 dated as of December 1, 1987 to Exhibit 10.31 to the Form 10-K
Facility Lease dated as of September 15, 1987 between Annual Report of Duquesne
The First National Bank of Boston, as Owner Trustee Light Company for the year
under a Trust Agreement dated as of September 15, ended December 31, 1987.
1987 with the corporate Owner Participant named
therein, Lessor, and Duquesne Light Company, Lessee.
x10.23 Amendment No. 2 dated as of November 15, 1992 to Exhibit 10.33 to the Form 10-K
Facility Lease dated as of September 15, 1987 between Annual Report of Duquesne
The First National Bank of Boston, as Owner Trustee Light Company for the year
under a Trust Agreement dated as of September 15, ended December 31, 1992.
1987 with the limited partnership Owner Participant
named therein, Lessor, and Duquesne Light Company,
Lessee.
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
--------- ------------------------------------------------------ -------------------------------
<S> <C> <C>
y10.24 Amendment No. 2 dated as of November 15, 1992 to Exhibit 10.34 to the Form 10-K
Facility Lease dated as of September 15, 1987 between Annual Report of Duquesne
The First National Bank of Boston, as Owner Trustee Light Company for the year
under a Trust Agreement dated as of September 15, ended December 31, 1992.
1987 with the corporate Owner Participant named
therein, Lessor, and Duquesne Light Company, Lessee.
x10.25 Amendment No. 3 dated as of October 13, 1994 to Filed here.
Facility Lease dated as of September 15, 1987 between
The First National Bank of Boston, as Owner Trustee
under a Trust Agreement dated as of September 15, 1987
with the limited partnership Owner Participant named
therein, Lessor, and Duquesne Light Company, Lessee.
y10.26 Amendment No. 3 dated as of October 13, 1994 to Filed here.
Facility Lease dated as of September 15, 1987 between
The First National Bank of Boston, as Owner Trustee
under a Trust Agreement dated as of September 15, 1987
with the corporate Owner Participant named therein,
Lessor, and Duquesne Light Company, Lessee.
x10.27 Participation Agreement dated as of September 15, Exhibit (28)(a) to Registration
1987 among the limited partnership Owner Statement (Form S-3)
Participant named therein, the Original Loan No. 33-18144.
Participants listed in Schedule 1 thereto, as Original
Loan Participants, DQU Funding Corporation, as Funding
Corp, The First National Bank of Boston, as Owner
Trustee, Irving Trust Company, as Indenture Trustee and
Duquesne Light Company, as Lessee.
y10.28 Participation Agreement dated as of September 15, Exhibit (28)(b) to Registration
1987 among the corporate Owner Participant named Statement (Form S-3)
therein, the Original Loan Participants listed in No. 33-18144.
Schedule 1 thereto, as Original Loan Participants, DQU
Funding Corporation, as Funding Corp, The First
National Bank of Boston, as Owner Trustee, Irving
Trust Company, as Indenture Trustee and Duquesne
Light Company, as Lessee.
x10.29 Amendment No. 1 dated as of December 1, 1987 to Exhibit 10.34 to the Form 10-K
Participation Agreement dated as of September 15, Annual Report of Duquesne
1987 among the limited partnership Owner Participant Light Company for the year
named therein, the Original Loan Participants listed ended December 31, 1987.
therein, as Original Loan Participants, DQU
Funding Corporation, as Funding Corp, The First
National Bank of Boston, as Owner Trustee, Irving
Trust Company, as Indenture Trustee and Duquesne
Light Company, as Lessee.
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
--------- ------------------------------------------------------ -------------------------------
<S> <C> <C>
y10.30 Amendment No. 1 dated as of December 1, 1987 to Exhibit 10.35 to the Form 10-K
Participation Agreement dated as of September 15, Annual Report of Duquesne
1987 among the corporate Owner Participant named Light Company for the year
therein, the Original Loan Participants listed therein, ended December 31, 1987.
as Original Loan Participants, DQU Funding
Corporation, as Funding Corp, The First
National Bank of Boston, as Owner Trustee, Irving
Trust Company, as Indenture Trustee and Duquesne
Light Company, as Lessee.
x10.31 Amendment No. 2 dated as of March 1, 1988 to Exhibit (28)(c)(3) to
Participation Agreement dated as of September 15, Registration Statement
1987 among the limited partnership Owner Participant (Form S-3) No. 33-54648.
named therein, DQU Funding Corporation, as Funding
Corp, The First National Bank of Boston, as Owner
Trustee, Irving Trust Company, as Indenture Trustee and
Duquesne Light Company, as Lessee.
y10.32 Amendment No. 2 dated as of March 1, 1988 to Exhibit (28)(c)(4) to
Participation Agreement dated as of September 15, Registration Statement
1987 among the corporate Owner Participant named (Form S-3) No. 33-54648.
therein, DQU Funding Corporation, as Funding Corp,
The First National Bank of Boston, as Owner Trustee,
Irving Trust Company, as Indenture Trustee and Duquesne
Light Company, as Lessee.
x10.33 Amendment No. 3 dated as of November 15, 1992 to Exhibit 10.41 to the Form 10-K
Participation Agreement dated as of September 15, Annual Report of Duquesne
1987 among the limited partnership Owner Participant Light Company for the year
named therein, DQU Funding Corporation, as Funding ended December 31, 1992.
Corp, DQU II Funding Corporation, as New Funding
Corp, The First National Bank of Boston, as Owner
Trustee, The Bank of New York, as Indenture Trustee and
Duquesne Light Company, as Lessee.
y10.34 Amendment No. 3 dated as of November 15, 1992 to Exhibit 10.42 to the Form 10-K
Participation Agreement dated as of September 15, Annual Report of Duquesne
1987 among the corporate Owner Participant named Light Company for the year
therein, DQU Funding Corporation, as Funding Corp, ended December 31, 1992.
DQU II Funding Corporation, as New Funding Corp,
The First National Bank of Boston, as Owner Trustee, The
Bank of New York, as Indenture Trustee and Duquesne Light
Company, as Lessee.
x10.35 Amendment No. 4 dated as of October 13, 1994 to Filed here.
Participation Agreement dated as of September 15, 1987
among the limited partnership Owner Participant named
therein, DQU Funding Corporation, as Funding Corp,
DQU II Funding Corporation, as New Funding Corp,
The First National Bank of Boston, as Owner Trustee,
The Bank of New York, as Indenture Trustee and Duquesne
Light Company, as Lessee.
</TABLE>
28
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
--------- ------------------------------------------------------ -------------------------------
<S> <C> <C>
y10.36 Amendment No. 4 dated as of October 13, 1994 to Filed here.
Participation Agreement dated as of September 15, 1987
among the corporate Owner Participant named therein,
DQU Funding Corporation, as Funding Corp, DQU II
Funding Corporation, as New Funding Corp, The First
National Bank of Boston, as Owner Trustee, The Bank of
New York, as Indenture Trustee and Duquesne Light
Company, as Lessee.
z10.37 Ground Lease and Easement Agreement dated as of Exhibit (28)(e) to Registration
September 15, 1987 between Duquesne Light Company, Statement (Form S-3)
Ground Lessor and Grantor, and The First National Bank No. 33-18144.
of Boston, as Owner Trustee under a Trust Agreement
dated as of September 15, 1987 with the limited
partnership Owner Participant named therein, Tenant
and Grantee.
z10.38 Assignment, Assumption and Further Agreement dated as Exhibit (28)(f) to Registration
of September 15, 1987 among The First National Bank of Statement (Form S-3)
Boston, as Owner Trustee under a Trust Agreement dated No. 33-18144.
as of September 15, 1987 with the limited partnership
Owner Participant named therein, The Cleveland Electric
Illuminating Company, Duquesne Light Company, Ohio
Edison Company, Pennsylvania Power Company and The
Toledo Edison Company.
z10.39 Additional Support Agreement dated as of September 15, Exhibit (28)(g) to Registration
1987 between The First National Bank of Boston, as Statement (Form S-3)
Owner Trustee under a Trust Agreement dated as of No. 33-18144.
September 15, 1987 with the limited partnership Owner
Participant named therein, and Duquesne Light Company.
z10.40 Indenture, Bill of Sale, Instrument of Transfer and Exhibit (28)(h) to Registration
Severance Agreement dated as of October 2, 1987 Statement (Form S-3)
between Duquesne Light Company, Seller, and The No. 33-18144.
First National Bank of Boston, as Owner Trustee under
a Trust Agreement dated as of September 15, 1987 with
the limited partnership Owner Participant named therein,
Buyer.
z10.41 Tax Indemnification Agreement dated as of September 15, Exhibit 28.1 to the Form 8-K
1987 between the Owner Participant named therein and Current Report of Duquesne
Duquesne Light Company, as Lessee. Light Company dated
November 20, 1987.
z10.42 Amendment No. 1 dated as of November 15, 1992 to Exhibit 10.48 to the Form 10-K
Tax Indemnification Agreement dated as of September 15, Annual Report of Duquesne
1987 between the Owner Participant named therein and Light Company for the year
Duquesne Light Company, as Lessee. ended December 31, 1992.
z10.43 Amendment No. 2 dated as of October 13, 1994 to Tax Filed here.
Indemnification Agreement dated as of September 15,
1987 between the Owner Participant named therein and
Duquesne Light Company, as Lessee.
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
--------- -------------------------------------------------------- -------------------------------
<S> <C> <C>
z10.44 Extension Letter dated December 8, 1992 from Exhibit 10.49 to the Form 10-K
Duquesne Light Company, each Owner Participant, The Annual Report of Duquesne
First National Bank of Boston, the Lease Indenture Light Company for the year
Trustee, DQU Funding Corporation and DQU II ended December 31, 1992.
Funding Corporation addressed to the New Collateral
Trust Trustee extending their respective representations
and warranties and covenants set forth in each of the
Participation Agreements.
x10.45 Trust Indenture, Mortgage, Security Agreement and Exhibit (4)(g) to Registration
Assignment of Facility Lease dated as of September 15, Statement (Form S-3)
1987 between The First National Bank of Boston, as No. 33-18144.
Owner Trustee under a Trust Agreement dated as of
September 15, 1987 with the limited partnership Owner
Participant named therein, and Irving Trust Company,
as Indenture Trustee.
y10.46 Trust Indenture, Mortgage, Security Agreement and Exhibit (4)(h) to Registration
Assignment of Facility Lease dated as of September 15, Statement (Form S-3)
1987 between The First National Bank of Boston, as No. 33-18144.
Owner Trustee under a Trust Agreement dated as of
September 15, 1987 with the corporate Owner
Participant named therein, and Irving Trust Company,
as Indenture Trustee.
x10.47 Supplemental Indenture No. 1 dated as of December 1, Exhibit 10.45 to the Form 10-K
1987 to Trust Indenture, Mortgage, Security Agreement Annual Report of Duquesne
and Assignment of Facility Lease dated as of September Light Company for the year
15, 1987 between The First National Bank of Boston, ended December 31, 1987.
as Owner Trustee under a Trust Agreement dated as of
September 15, 1987 with the limited partnership Owner
Participant named therein, and Irving Trust Company,
as Indenture Trustee.
y10.48 Supplemental Indenture No. 1 dated as of December 1, Exhibit 10.46 to the Form 10-K
1987 to Trust Indenture, Mortgage, Security Agreement Annual Report of Duquesne
and Assignment of Facility Lease dated as of September Light Company for the year
15, 1987 between The First National Bank of Boston, as ended December 31, 1987.
Owner Trustee under a Trust Agreement dated as of
September 15, 1987 with the corporate Owner
Participant named therein, and Irving Trust Company,
as Indenture Trustee.
x10.49 Supplemental Indenture No. 2 dated as of November 15, Exhibit 10.54 to the Form 10-K
1992 to Trust Indenture, Mortgage, Security Agreement Annual Report of Duquesne
and Assignment of Facility Lease dated as of September Light Company for the year
15, 1987 between The First National Bank of Boston, as ended December 31, 1992.
Owner Trustee under a Trust Agreement dated as of
September 15, 1987 with the limited partnership Owner
Participant named therein, and The Bank of New York,
as Indenture Trustee.
</TABLE>
30
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
--------- ---------------------------------------------------------- ------------------------------
<S> <C> <C>
y10.50 Supplemental Indenture No. 2 dated as of November 15, Exhibit 10.55 to the Form 10-K
1992 to Trust Indenture, Mortgage, Security Agreement Annual Report of Duquesne
and Assignment of Facility Lease dated as of September 15, Light Company for the year
1987 between The First National Bank of Boston, as ended December 31, 1992.
Owner Trustee under a Trust Agreement dated as of
September 15, 1987 with the corporate Owner
Participant named therein, and The Bank of New York,
as Indenture Trustee.
10.51 Reimbursement Agreement dated as of October 1, 1994 Filed here.
among Duquesne Light Company, Swiss Bank
Corporation, New York Branch, as LOC Bank, Union
Bank, as Administrating Bank, Swiss Bank
Corporation, New York Branch, as Administrating Bank
and The Participating Banks Named Therein.
10.52 Collateral Trust Indenture dated as of November 15, Exhibit 10.58 to the Form 10-K
1992 among DQU II Funding Corporation, Duquesne Annual Report of Duquesne
Light Company and The Bank of New York, as Trustee. Light Company for the year
ended December 31, 1992.
10.53 First Supplemental Indenture dated as of November 15, Exhibit 10.59 to the Form 10-K
1992 to Collateral Trust Indenture dated as of Annual Report of Duquesne
November 15, 1992 among DQU II Funding Corporation, Light Company for the year
Duquesne Light Company and The Bank of New York, as ended December 31, 1992.
Trustee.
x10.54 Refinancing Agreement dated as of November 15, 1992 Exhibit 10.60 to the Form 10-K
among the limited partnership Owner Participant Annual Report of Duquesne
named therein, as Owner Participant, DQU Funding Light Company for the year
Corporation, as Funding Corp, DQUII Funding ended December 31, 1992.
Corporation, as New Funding Corp, The First
National Bank of Boston, as Owner Trustee, The Bank
of New York, as Indenture Trustee, The Bank of New
York, as Collateral Trust Trustee, The Bank of New York,
as New Collateral Trust Trustee, and Duquesne Light
Company, as Lessee.
y10.55 Refinancing Agreement dated as of November 15, 1992 Exhibit 10.61 to the Form 10-K
among the corporate Owner Participant named Annual Report of Duquesne
therein, as Owner Participant, DQU Funding Light Company for the year
Corporation, as Funding Corp, DQUII Funding ended December 31, 1992.
Corporation, as New Funding Corp, The First
National Bank of Boston, as Owner Trustee, The Bank
of New York, as Indenture Trustee, The Bank of New
York, as Collateral Trust Trustee, The Bank of New York,
as New Collateral Trust Trustee, and Duquesne Light
Company, as Lessee.
</TABLE>
31
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
--------- ---------------------------------------------------------- ------------------------------
<S> <C> <C>
x10.56 Addendum dated December 8, 1992 to Refinancing Exhibit 10.62 to the Form 10-K
Agreement dated as of November 15, 1992 among the Annual Report of Duquesne
limited partnership Owner Participant named therein, Light Company for the year
as Owner Participant, DQU Funding Corporation, as ended December 31, 1992.
Funding Corp, DQUII Funding Corporation, as New
Funding Corp, The First National Bank of Boston, as
Owner Trustee, The Bank of New York, as Indenture
Trustee, The Bank of New York, as Collateral Trust
Trustee, The Bank of New York, as New Collateral
Trust Trustee, and Duquesne Light Company, as
Lessee.
y10.57 Addendum dated December 8, 1992 to Refinancing Exhibit 10.63 to the Form 10-K
Agreement dated as of November 15, 1992 among the Annual Report of Duquesne
corporate Owner Participant named therein, as Light Company for the year
Owner Participant, DQU Funding Corporation, as ended December 31, 1992.
Funding Corp, DQUII Funding Corporation, as New
Funding Corp, The First National Bank of Boston, as
Owner Trustee, The Bank of New York, as Indenture
Trustee, The Bank of New York, as Collateral Trust
Trustee, The Bank of New York, as New Collateral
Trust Trustee, and Duquesne Light Company, as
Lessee.
Other Agreements:
*10.58 Deferred Compensation Plan for the Directors of Exhibit 10.1 to the Form 10-K
Duquesne Light Company, as amended to date. Annual Report of DQE for the
year ended December 31, 1992.
*10.59 Incentive Compensation Program for Certain Executive Exhibit 10.2 to the Form 10-K
Officers of Duquesne Light Company, as amended to Annual Report of DQE for the
date. year ended December 31, 1992.
*10.60 Description of Duquesne Light Company Pension Exhibit 10.3 to the Form 10-K
Service Supplement Program. Annual Report of DQE for the
year ended December 31, 1992.
*10.61 Duquesne Light Company Outside Directors' Exhibit 10.59 to the Form 10-K
Retirement Plan, as amended to date. Annual Report of Duquesne
Light Company for the year
ended December 31, 1990.
*10.62 Employment Agreement dated as of December 15, Exhibit 10.5 to the Form 10-K
1992 between DQE, Duquesne Light Company and Annual Report of DQE for the
Wesley W. von Schack. year ended December 31, 1992.
*10.63 Duquesne Light/DQE Charitable Giving Program. Exhibit 10.6 to the Form 10-K
Annual Report of DQE for the
year ended December 31, 1992.
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
No. Description Filing
--------- ---------------------------------------------------- ------------------------------
<S> <C> <C>
*10.64 Duquesne Light Company Performance Incentive Exhibit 10.7 to the Form 10-K
Program. Annual Report of DQE for the
year ended December 31, 1994,
incorporated here by reference.
*10.65 First Amendment dated as of October 25, 1994 to Exhibit 10.8 to the Form 10-K
Employment Agreement dated as of December 15, Annual Report of DQE for the
1992 between DQE, Duquesne Light Company and year ended December 31, 1994,
Wesley W. von Schack. incorporated here by reference.
*10.66 Employment Agreement dated as of August 30, 1994 Exhibit 10.9 to the Form 10-K
between DQE, Duquesne Light Company and Annual Report of DQE for the
David D. Marshall. year ended December 31, 1994,
incorporated here by reference.
*10.67 Employment Agreement dated as of August 30, 1994 Exhibit 10.10 to the Form 10-K
between DQE, Duquesne Light Company and Annual Report of DQE for the
Gary L. Schwass. year ended December 31, 1994,
incorporated here by reference.
*10.68 Employment Agreement dated as of August 30, 1994 Duquesne Light Company
between Duquesne Light Company and Dianna L. Exhibit 10.68 to the Form 10-K
Green. Annual Report of DQE for the
year ended December 31, 1994,
incorporated here by reference.
12.1 Calculation of Ratio of Earnings to Fixed Charges. Filed here.
21.1 Subsidiaries of registrant:
Duquesne has no significant subsidiaries.
23.1 Independent Auditors' Consent. Filed here.
27.1 Supplemental Data Schedule. Filed here.
99.1 Executive Compensation of Duquesne Light Company Filed here.
Executive Officers for 1994 and Security Ownership
of Duquesne Light Company Directors and
Executive Officers as of February 16, 1995.
99.2 DQE Annual Report to Shareholders for year ended Filed here.
December 31, 1994. The Report, except those portions
specifically incorporated by reference here, is furnished
for the information of the Securities and Exchange
Commission and is not to be deemed "filed" for any
purpose under the Securities Exchange Act of 1934 or
otherwise.
</TABLE>
--------
x An additional document, substantially identical in all material respects to
this Exhibit, has been entered into relating to one additional limited
partnership Owner Participant. Although the additional document may differ
in some respects (such as name of the Owner Participant, dollar amounts and
percentages), there are no material details in which the document differs
from this Exhibit.
33
<PAGE>
y Additional documents, substantially identical in all material respects to
this Exhibit, have been entered into relating to four additional corporate
Owner Participants. Although the additional documents may differ in some
respects (such as names of the Owner Participants, dollar amounts and
percentages), there are no material details in which the documents differ
from this Exhibit.
z Additional documents, substantially identical in all material respects to
this Exhibit, have been entered into relating to six additional Owner
Participants. Although the additional documents may differ in some respects
(such as names of the Owner Participants, dollar amounts and percentages),
there are no material details in which the documents differ from this
Exhibit.
* This document is required to be filed as an exhibit to this form under Item
14(c).
Copies of the exhibits listed above will be furnished, upon request, to
holders or beneficial owners of any class of DQE's stock as of February 16,
1995, subject to payment in advance of the cost of reproducing the exhibits
requested.
34
<PAGE>
SCHEDULE VIII
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1994, 1993 and 1992
(Thousands of Dollars)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
-------- -------- -------- -------- -------- --------
Additions
-----------------------------
Balance at Charged to Charged to Balance
Beginning Costs and Other at End
Description of Year Expenses Accounts Deductions of Year
----------- ------------ ---------------- ---------- ---------- --------
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1994
Reserve Deducted from the Asset
to which it applies:
Allowance for uncollectible accounts $13,282 $11,890 $3,837(A) $13,988(B) $15,021
------- ------- ------ ------- -------
Year Ended December 31, 1993
Reserve Deducted from the Asset
to which it applies:
Allowance for uncollectible accounts $ 7,707 $17,093 $2,925(A) $14,443(B) $13,282
------- ------- ------ ------- -------
Year Ended December 31, 1992
Reserve Deducted from the Asset
to which it applies:
Allowance for uncollectible accounts $30,898 $10,900 $2,101(A) $36,192(B) $ 7,707
------- ------- ------ ------- -------
</TABLE>
------
Notes: (A) Recovery of accounts previously written off.
(B) Accounts receivable written off.
35
<PAGE>
SCHEDULE X
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
For the Years Ended December 31, 1994, 1993 and 1992
(Thousands of Dollars)
<TABLE>
<CAPTION>
Column A Column B
----------- --------
Charged to Costs and Expenses
-------------------------------
Description 1994 1993 1992
----------- -------- ------- -------
<S> <C> <C> <C>
Maintenance $79,488 $80,292(A) $79,146
Amortization of extraordinary property losses 15,469 15,501 16,444
Taxes other than payroll and income taxes:
Gross receipts 35,852 34,650 34,498
Property 28,438 14,284(B) 31,120
Capital Stock 12,201 12,132 9,051
</TABLE>
------
Under the system of accounting followed by Duquesne, a portion of maintenance
expenses and of taxes other than payroll and income taxes represents amounts
charged to coal inventories. The inventory accounts are relieved and operation
expense charged as the coal is used.
(A) Duquesne changed, as of January 1, 1993, its method of accounting for
maintenance costs during scheduled major fossil station outages. Prior to
that time, maintenance costs incurred for scheduled major outages at fossil
stations were charged to expense as these costs were incurred. Under the
new accounting policy, Duquesne accrues, over the periods between outages,
anticipated expenses for scheduled major fossil station outages.
(Maintenance costs incurred for non-major scheduled outages and for forced
outages will continue to be charged to expense as such costs are
incurred.) This new method was adopted to match more accurately the
maintenance costs and the revenue produced during the periods between
scheduled major fossil station outages. The cumulative effect of $5.4
million (net of income taxes of $3.9 million) of the change on prior
years is reflected on the Statement of Consolidated Income for 1993 as
Accounting for maintenance costs - net.
(B) The 1993 decrease reflects a favorable resolution of property tax
assessments. In 1993, Duquesne recorded on the basis of this revised
assessment, the expected refunds of these overpayments related to prior
years.
36
<PAGE>
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
DUQUESNE LIGHT COMPANY
(Registrant)
Date: March 28, 1995 By: /s/ Wesley W. von Schack
----------------------------------
(Signature)
Wesley W. von Schack
Chairman of the Board
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
------------------------------- -------------------------------------- --------------
<S> <C> <C>
/s/ Wesley W. von Schack Chairman of the Board, Chief Executive March 28, 1995
------------------------------- Officer and Director
Wesley W. von Schack
/s/ Gary L. Schwass Senior Vice President and Chief March 28, 1995
------------------------------- Financial Officer
Gary L. Schwass
/s/ Raymond H. Panza Controller and Principal March 28, 1995
------------------------------- Accounting Officer
Raymond H. Panza
/s/ Daniel Berg Director March 28, 1995
-------------------------------
Daniel Berg
/s/ Doreen E. Boyce Director March 28, 1995
-------------------------------
Doreen E. Boyce
/s/ Robert P. Bozzone Director March 28, 1995
-------------------------------
Robert P. Bozzone
/s/ Sigo Falk Director March 28, 1995
-------------------------------
Sigo Falk
/s/ William H. Knoell Director March 28, 1995
-------------------------------
Willaim H. Knoell
/s/ G. Christian Lantzsch Director March 28, 1995
-------------------------------
G. Christian Lantzsch
/s/ Robert Mehrabian Director March 28, 1995
-------------------------------
Robert Mehrabian
Director March 28, 1995
-------------------------------
Thomas J. Murrin
/s/ Robert B. Pease Director March 28, 1995
-------------------------------
Robert B. Pease
/s/ Eric W. Springer Director March 28, 1995
-------------------------------
Eric W. Springer
</TABLE>
37
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Directors and Stockholder of Duquesne Light Company:
We have audited the accompanying consolidated balance sheets of Duquesne
Light Company and its subsidiary as of December 31, 1994 and 1993, and the
related consolidated statements of income, retained earnings, and cash flows for
each of the three years in the period ended December 31, 1994. Our audits also
included the financial statement schedules listed in Item 14. These Financial
statements and financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
Financial statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall Financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated Financial statements present fairly, in
all material respects, the Financial position of Duquesne Light Company and its
subsidiary as of December 31, 1994 and 1993, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1994 in conformity with generally accepted accounting principles. Also, in
our opinion, such financial statement schedules, when considered in relation to
the basic consolidated financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
As discussed in Note A to the consolidated financial statements,
effective January 1, 1993, the Company changed its method of accounting for
income taxes to conform with Statement of Financial Accounting Standards No.
109, and the Company changed its method of accounting for maintenance costs
during scheduled major fossil station outages.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
January 31, 1995
38
<PAGE>
GLOSSARY OF TERMS
Following are explanations of certain financial and operating terms used in our
report and unique in our business.
Allowance for Funds Used During Construction (AFC)
--------------------------------------------------
AFC is an amount recorded on the books of a utility during the period of
construction of utility assets. The amount represents the estimated cost of
both debt and equity used to finance the construction.
Construction Work In Progress (CWIP)
------------------------------------
This amount represents utility assets in the process of construction but not yet
placed in service. The amount is shown on the consolidated balance sheet as a
component of property, plant and equipment.
Deferred Energy Costs
---------------------
In conjunction with the Energy Cost Rate Adjustment Clause, the Company records
deferred energy costs to offset differences between actual energy costs and the
level of energy costs currently recovered from electric utility customers.
Demand
------
The amount of electricity delivered to consumers at any instant or averaged over
a period of time.
Energy Cost Rate Adjustment Clause (ECR)
----------------------------------------
The Company recovers through the ECR, to the extent that such amounts are not
included in base rates, the cost of nuclear fuel, fossil fuel and purchased
power costs and passes to its customers the profits from short-term power sales
to other utilities.
Equivalent Availability Factor
------------------------------
The percent of generating capacity available for service whether operated or
not.
Federal Energy Regulatory Commission (FERC)
-------------------------------------------
FERC is an independent five-member commission within the U.S. Department of
Energy. Among its many responsibilities, FERC sets rates and charges for the
wholesale transportation and sale of natural gas and electricity, and the
licensing of hydroelectric power projects.
Kilowatt (KW)
-------------
A kilowatt is a unit of power or capacity. A kilowatt hour (KWH) is a unit of
energy or kilowatts times the length of time the kilowatts are used. For
example, a 100-watt bulb has a demand of .1 KW and, if burned continuously,
will consume 1 KWH in ten hours. One thousand KWs is a megawatt (MW). One
thousand KWHs is a megawatt hour (MWH).
Nuclear Decommissioning Costs
-----------------------------
Decommissioning costs are expenses to be incurred in connection with the
entombment, decontamination, dismantlement, removal and disposal of the
structures, systems and components of a nuclear power plant that has permanently
ceased the production of electric energy.
Peak Demand
-----------
Peak demand is the amount of electricity required during periods of highest
usage. Peak periods fluctuate by season and generally occur in the morning hours
in winter and in late afternoon during the summer.
Pennsylvania Public Utility Commission (PUC)
--------------------------------------------
The Pennsylvania governmental body that regulates all utilities (electric, gas,
telephone, water, etc.), which is made up of five members nominated by the
governor and confirmed by the senate.
Regulatory Asset
----------------
Costs that the Company would otherwise have charged to expense which are
capitalized or deferred because these costs are currently being recovered or
because it is probable that the PUC and FERC will allow recovery of these costs
through the ratemaking process.
Retail Access
-------------
The ability of end-use consumers to individually contract for electrical energy
from competing generation suppliers.
Scrubbed Capacity
-----------------
Fossil fuel fired generating capacity equipped with sulfur dioxide (SO2)
emission reducing equipment.
39
<PAGE>
<TABLE>
<CAPTION>
DUQUESNE LIGHT COMPANY (Thousands of Dollars)
STATEMENT OF CONSOLIDATED INCOME Year Ended December 31,
------------------------------------------------------- ----------------------------------
1994 1993 1992
--------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues:
Sales of Electricity:
Customers $1,121,412 $1,192,381 $1,155,132
Phase-in deferrals (28,810) (100,315) (98,201)
Utilities 58,295 50,669 72,440
--------------------------------------------------------------------------------------------
Total Sales of Electricity 1,150,897 1,142,735 1,129,371
Other 29,387 35,044 31,909
--------------------------------------------------------------------------------------------
Total Operating Revenues 1,180,284 1,177,779 1,161,280
--------------------------------------------------------------------------------------------
Operating Expenses:
Fuel 222,190 223,699 229,757
Purchased power 21,715 14,032 9,474
Other operating 279,050 297,510 279,228
Maintenance 79,488 80,292 79,146
Depreciation and amortization 156,519 150,125 127,924
Taxes other than income taxes 86,982 72,160 85,368
Income taxes 7,246 94,075 96,253
Tax rate adjustment - regulatory tax receivable 87,200 -- --
--------------------------------------------------------------------------------------------
Total Operating Expenses 940,390 931,893 907,150
--------------------------------------------------------------------------------------------
Operating Income 239,894 245,886 254,130
--------------------------------------------------------------------------------------------
Other Income and (Deductions):
Allowance for equity funds used during construction 1,295 869 2,598
Long-term power sale write-off -- (15,225) --
Carrying charges on deferred revenues 30 1,801 15,145
Income taxes 6,549 19,033 (11,746)
Other -- net 735 2,563 12,496
--------------------------------------------------------------------------------------------
Total Other Income and (Deductions) 8,609 9,041 18,493
--------------------------------------------------------------------------------------------
Income Before Interest Charges 248,503 254,927 272,623
--------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 101,027 108,479 123,402
Other interest 1,095 2,387 1,749
Allowance for borrowed funds used during construction (1,068) (726) (2,296)
--------------------------------------------------------------------------------------------
Total Interest Charges 101,054 110,140 122,855
--------------------------------------------------------------------------------------------
Income Before Cumulative Effect on Prior Years of
Changes in Accounting Principles 147,449 144,787 149,768
Adoption of SFAS 109 - Income Taxes -- 8,000 --
Accounting for maintenance costs - net -- (5,425) --
--------------------------------------------------------------------------------------------
Net Income 147,449 147,362 149,768
Dividends on Preferred and Preference Stock 6,046 9,188 9,411
--------------------------------------------------------------------------------------------
Earnings for Common Stock $ 141,403 $ 138,174 $ 140,357
============================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
40
<PAGE>
<TABLE>
<CAPTION>
DUQUESNE LIGHT COMPANY (Thousands of Dollars)
CONSOLIDATED BALANCE SHEET As of December 31,
----------------------------------------------------------------------------------- ------------------------
ASSETS 1994 1993
--------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Property, Plant and Equipment:
Electric plant in service $ 4,196,690 $ 4,102,979
Construction work in progress 43,763 62,664
Property held under capital leases 161,775 177,800
Property held for future use 216,738 216,863
--------------------------------------------------------------------------------------------------------------
Total 4,618,966 4,560,306
Less accumulated depreciation and amortization (1,550,447) (1,436,358)
--------------------------------------------------------------------------------------------------------------
Property, Plant and Equipment -- Net 3,068,519 3,123,948
--------------------------------------------------------------------------------------------------------------
Other Property and Investments:
Investment in DQE Common Stock 43,057 29,998
Other property and investments 31,212 28,801
Current Assets:
Cash and temporary cash investments (at cost which approximates market) 15,904 --
Receivables:
Electric customer accounts receivable 96,157 107,342
Other utility receivables 26,008 28,807
Other receivables 25,171 25,156
Less: Allowance for uncollectible accounts (15,021) (13,282)
--------------------------------------------------------------------------------------------------------------
Receivables less allowance for uncollectible accounts 132,315 148,023
Less: Receivables sold -- (9,000)
--------------------------------------------------------------------------------------------------------------
Total Receivables 132,315 139,023
--------------------------------------------------------------------------------------------------------------
Materials and supplies (generally at average cost:)
Coal 30,484 26,793
Operating and construction 58,262 64,885
Other current assets 15,795 8,866
--------------------------------------------------------------------------------------------------------------
Total Current Assets 252,760 239,567
--------------------------------------------------------------------------------------------------------------
Other Non-current Assets:
Extraordinary property loss 22,394 35,781
Unamortized debt costs 103,454 104,076
Beaver Valley Unit 2 sale/leaseback premium 33,414 34,903
Deferred rate synchronization costs 51,149 51,149
Phase-in plan deferrals -- 28,621
Regulatory Tax Receivable 428,043 569,555
Deferred employee costs 31,012 32,408
Other regulatory assets 41,297 52,912
Other Non-current 43,556 56,384
--------------------------------------------------------------------------------------------------------------
Total Other Non-current Assets 754,319 965,789
--------------------------------------------------------------------------------------------------------------
Total Assets $ 4,149,867 $ 4,388,103
==============================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
41
<PAGE>
<TABLE>
<CAPTION>
DUQUESNE LIGHT COMPANY (Thousands of Dollars)
CONSOLIDATED BALANCE SHEET As of December 31,
------------------------------------------------------------------------------------- ----------------------
CAPITALIZATION AND LIABILITIES 1994 1993
-------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Capitalization:
Common stock (authorized -- 90,000,000 shares, issued and outstanding -- 10 shares) $ -- $ --
Capital surplus 823,193 805,755
Retained earnings 292,319 294,916
-------------------------------------------------------------------------------------------------------------
Total common stockholder's equity 1,115,512 1,100,671
-------------------------------------------------------------------------------------------------------------
Non-redeemable preferred stock 90,340 121,906
Redeemable preference stock -- 8,392
Non-redeemable preference stock 29,857 29,956
-------------------------------------------------------------------------------------------------------------
Total preferred and preference stock before deferred ESOP benefit
(involuntary liquidation values of $120,060 and $160,117 exceed
par by $43,882 and $81,585, respectively) 120,197 160,254
Deferred employee stock ownership plan (ESOP) benefit (24,852) (27,126)
-------------------------------------------------------------------------------------------------------------
Total preferred and preference stock 95,345 133,128
-------------------------------------------------------------------------------------------------------------
Senior secured debt (excluding Pollution Control Notes) 950,400 999,400
Other long-term debt 423,020 422,524
Unamortized debt discount and premium -- net (4,490) (5,219)
-------------------------------------------------------------------------------------------------------------
Total long-term debt 1,368,930 1,416,705
-------------------------------------------------------------------------------------------------------------
Total Capitalization 2,579,787 2,650,504
-------------------------------------------------------------------------------------------------------------
Obligations Under Capital Leases 41,106 55,733
-------------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable -- 10,991
Current maturities and sinking fund requirements 85,691 45,741
Accounts payable 88,585 112,401
Accrued taxes 47,444 49,345
Accrued interest 11,382 14,185
Dividends declared 35,469 36,436
Deferred energy costs -- 10,108
-------------------------------------------------------------------------------------------------------------
Total Current Liabilities 268,571 279,207
-------------------------------------------------------------------------------------------------------------
Non-current Liabilities:
Investment tax credits unamortized 123,591 129,574
Deferred income taxes-net 991,149 1,145,782
Other 145,663 127,303
-------------------------------------------------------------------------------------------------------------
Total Non-current Liabilities 1,260,403 1,402,659
-------------------------------------------------------------------------------------------------------------
Commitments and Contingencies
-------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $4,149,867 $4,388,103
=============================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
42
<PAGE>
<TABLE>
<CAPTION>
DUQUESNE LIGHT COMPANY (Thousands of Dollars)
STATEMENT OF CONSOLIDATED CASH FLOWS Year Ended December 31,
---------------------------------------------------------------- ---------------------------------
1994 1993 1992
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $ 147,449 $ 147,362 $ 149,768
Principal non-cash charges (credits) to net income:
Depreciation and amortization 156,519 150,125 127,924
Capital lease and nuclear fuel amortization 36,940 32,428 49,001
Deferred income taxes and investment tax credits -- net (29,705) (44,420) (10,896)
Allowance for equity funds used during construction (1,295) (869) (2,598)
Phase-in plan revenues and related carrying charges 28,621) 99,375 83,056
Changes in working capital other than cash (36,884) (96,799) 55,193
Other -- net 49,499 19,505 7,166
---------------------------------------------------------------------------------------------------
Net Cash Provided from Operating Activities 351,144 306,707 458,614
---------------------------------------------------------------------------------------------------
Cash Flows Used By Investing Activities:
Construction expenditures (94,315) (100,628) (112,409)
Purchase of DQE common stock -- -- (18,476)
Allowance for borrowed funds used during construction (1,068) (726) (2,296)
Other -- net (2,172) (12,317) (7,877)
---------------------------------------------------------------------------------------------------
Net Cash Used by Investing Activities (97,555) (113,671) (141,058)
---------------------------------------------------------------------------------------------------
Cash Flows Used In Financing Activities:
Sale of bonds 114,110 740,500 312,925
Increase (decrease) in notes payable (10,990) 10,990 --
Dividends on capital stock (151,059) (154,204) (151,404)
Reductions of long-term obligations:
Preferred and preference stock (39,958) (187) (24,158)
Long-term debt (114,835) (735,048) (394,951)
Other obligations (33,522) (27,751) (43,686)
Premium on reacquired debt (5,033) (31,702) (18,127)
Contribution from parent company -- -- 45,000
Beaver Valley Unit 2 sale/leaseback premium -- -- (36,371)
Other -- net 3,602 (1,790) (3,797)
---------------------------------------------------------------------------------------------------
Net Cash Used In Financing Activities (237,685) (199,192) (314,569)
---------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and temporary cash
investments 15,904 (6,156) 2,987
Cash and temporary cash investments at beginning of year -- 6,156 3,169
---------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of year $ 15,904 $ -- $ 6,156
===================================================================================================
</TABLE>
SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash paid during the year for:
Interest (net of amount capitalized) $ 102,944 $ 124,692 $ 126,014
---------------------------------------------------------------------------------------------------
Income taxes $ 111,614 $ 133,303 $ 112,859
---------------------------------------------------------------------------------------------------
Non-cash investing and financing activities:
Capital lease obligations recorded $ 16,909 $ 11,811 $ 17,089
Contribution of DQE common stock from parent company $ 19,531 $ -- $ --
===================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
43
<PAGE>
<TABLE>
<CAPTION>
DUQUESNE LIGHT COMPANY (Thousands of Dollars)
STATEMENT OF CONSOLIDATED RETAINED EARNINGS Year Ended December 31,
---------------------------------------------------------------- --------------------------------
1994 1993 1992
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1 $294,916 $300,742 $301,385
Net Income for the Year 147,449 147,362 149,768
--------------------------------------------------------------------------------------------------
Total 442,365 448,104 451,153
--------------------------------------------------------------------------------------------------
Cash dividends declared:
Preferred stock 4,592 4,740 4,906
Preference stock (net of tax benefit of ESOP dividend) 1,454 4,448 4,505
Common stock 144,000 144,000 141,000
--------------------------------------------------------------------------------------------------
Total Cash Dividends Declared 150,046 153,188 150,411
--------------------------------------------------------------------------------------------------
Balance, December 31 $292,319 $294,916 $300,742
==================================================================================================
</TABLE>
See Notes to Consolidated Financial Statements.
44
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A. Summary of
Significant
Accounting
Policies
Consolidation and Reclassifications
--------------------------------------------------------------------------------
The consolidated Financial statements include the accounts of Duquesne Light
Company (Duquesne) and its wholly owned subsidiary. All material intercompany
balances and transactions have been eliminated in the preparation of the
consolidated Financial statements.
The 1993 and 1992 financial statements have been reclassified to conform with
accounting presentations adopted during 1994.
Basis of Accounting
--------------------------------------------------------------------------------
Duquesne is subject to the accounting and reporting requirements of the
Securities and Exchange Commission (SEC). In addition, Duquesne's utility
operations are subject to the regulation of thePennsylvania Public Utility
Commission (PUC) and the Federal Energy Regulatory Commission (FERC). As a
result, the consolidated financial statements contain regulatory assets and
liabilities in accordance with Statement of Financial Accounting Standards No.
71, Accounting for the Effects of Certain Types of Regulation (SFAS No. 71) and
reflect the effects of the ratemaking process. Such effects concern mainly the
time at which various items enter into the determination of net income in
accordance with the principle of matching costs and revenues. (See Note F.)
Revenues
--------------------------------------------------------------------------------
Meters are read monthly and customers are billed on the same basis. Revenues are
recorded in the accounting periods for which they are billed, with the exception
of energy cost recovery revenues. (See following section on "Energy Cost Rate
Adjustment Clause.") Deferred revenues are associated with Duquesne's 1987 rate
case. (See Note F.)
Energy Cost Rate Adjustment Clause (ECR)
--------------------------------------------------------------------------------
Through the ECR, Duquesne recovers (to the extent that such amounts are not
included in base rates) nuclear fuel, fossil fuel and purchased power expenses
and, also through the ECR, passes to its customers the profits from short-term
power sales to other utilities (collectively, ECR energy costs). Nuclear fuel
expense is recorded on the basis of the quantity of electric energy generated
and includes such costs as the fee, imposed by the United States Department of
Energy (DOE), for future disposal and ultimate storage and disposition of spent
nuclear fuel. Fossil fuel expense includes the costs of coal, natural gas and
fuel oil used in the generation of electricity.
On Duquesne's Statement of Consolidated Income, these energy cost recovery
revenues are included as a component of operating revenues. For ECR purposes,
Duquesne defers fuel and other energy expenses for recovery, or refunding, in
subsequent years. The deferrals reflect the difference between the amount that
Duquesne is currently collecting from customers and its actual ECR energy costs.
ThePUC annually reviews Duquesne's ECR energy costs for the fiscal year April
through March, compares them to previously projected ECR energy costs and
adjusts the ECR for over- or under-recoveries and for two PUC-established coal
cost standards. (See Note F.)
Over- or under-recoveries from customers are recorded in Duquesne's Consolidated
Balance Sheet as payable to, or receivable from, customers. At December 31,
1994, $5.9 million was receivable from customers and shown as other current
assets. At December 31, 1993, $10.1 million was payable to customers and shown
as deferred energy costs.
Maintenance
--------------------------------------------------------------------------------
Incremental maintenance expense incurred for refueling outages at Duquesne's
nuclear units is deferred for amortization over the period (generally eighteen
months) between scheduled outages. Duquesne changed, as of January 1, 1993, its
method of accounting for maintenance costs during scheduled major fossil
generating station outages. Prior to that time, maintenance costs incurred for
scheduled major outages at fossil generating stations were charged to expense as
these costs were incurred. Under the new accounting policy, Duquesne accrues,
over the
45
<PAGE>
periods between outages, anticipated expenses for scheduled major fossil
generating station outages. (Maintenance costs incurred for non-major scheduled
outages and for forced outages continue to be charged to expense as such costs
are incurred.) This method was adopted to match more accurately the maintenance
costs and the revenue produced during the periods between scheduled major fossil
generating station outages.
The cumulative effect (approximately $5.4 million, net of income taxes of
approximately $3.9 million) of the change on prior years was included in net
income in 1993. The effect of the change in 1993 was to reduce income, before
the cumulative effect of changes in accounting principles, by approximately $2.4
million and to reduce net income, after the cumulative effect of changes in
accounting principles, by approximately $7.8 million.
Depreciation and Amortization
--------------------------------------------------------------------------------
Depreciation of property, plant and equipment, including plant-related
intangibles, is recorded on a straight-line basis over the estimated useful
lives of properties. Amortization of other intangibles is recorded on a
straight-line basis over a five-year period. Depreciation and amortization of
other properties are calculated on various bases.
Duquesne records decommissioning costs under the category of depreciation and
amortization expense and accrues a liability, equal to that amount, for nuclear
decommissioning expense. Such nuclear decommissioning funds are deposited in
external, segregated trust accounts. The funds are invested in a portfolio
consisting of municipal bonds, certificates of deposit, and U.S. government
securities. Trust fund earnings increase the fund balance and the recorded
liability. The market value of the aggregate trust fund balances at December 31,
1994, totaled $19.2 million. On Duquesne's consolidated balance sheet, the
decommissioning trusts have been reflected in other property and investments,
and the related liability has been recorded as other non-current liabilities.
(See "Nuclear Decommissioning" discussion in Note L.)
Income Taxes
--------------------------------------------------------------------------------
On January 1, 1993, Duquesne adopted Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes (SFAS No. 109). Implementation of SFAS No.
109 involved a change in accounting principle. The cumulative $8 million effect
on prior years was reported in 1993 as an increase in net income.
SFAS No. 109 requires that the liability method be used in computing deferred
taxes on all differences between book and tax bases of assets. These book tax
differences occur when events and transactions recognized for financial
reporting purposes are not recognized in the same period for tax purposes. SFAS
No. 109 also requires that a deferred tax liability or asset be adjusted in the
period of enactment for the effect of changes in tax laws or rates. During 1994
the statutory Pennsylvania income tax rate was reduced from 12.25 percent to
9.99 percent; this reduction is to be phased in over four years. This resulted
in a net decrease of $87.2 million in deferred tax liabilities and a
corresponding reduction in the regulatory receivable.
Duquesne recognizes a regulatory asset for the deferred tax liabilities that are
expected to be recovered from customers through rates. (See Notes F and K.)
With respect to the financial statement presentation of SFAS No. 109, Duquesne
reflects the amortization of the regulatory tax receivable resulting from
reversals of deferred taxes as depreciation and amortization expense. Changes in
the regulatory tax receivable as a result of a change in tax rates are reflected
in the statement of consolidated income on the tax rate adjustment - regulatory
tax receivable line. Reversals of accumulated deferred income taxes are included
in income tax expense.
When applied to reduce Duquesne's income tax liability, investment tax credits
related to utility property generally were deferred. Such credits are
subsequently reflected, over the lives of the related assets, as reductions to
tax expense.
46
<PAGE>
Property, Plant and Equipment
--------------------------------------------------------------------------------
The asset values of Duquesne's properties are stated at original construction
cost, which includes related payroll taxes, pensions, and other fringe benefits,
as well as administrative and general costs. Also included in original
construction cost is an allowance for funds used during construction (AFC),
which represents the estimated cost of debt and equity funds used to finance
construction. The amount of AFC that is capitalized will vary according to
changes in the cost of capital and in the level of construction work in progress
(CWIP). On a current basis, Duquesne does not realize cash from the allowance
for funds used during construction. Duquesne does realize cash, during the
service life of the plant, through increased revenues reflecting a higher rate
base (upon which a return is earned) and increased depreciation. The AFC rates
applied to CWIP were 9.0 percent in 1994, 9.6 percent in 1993, and 10.3 percent
in 1992.
Additions to, and replacements of, property units are charged to plant accounts.
Maintenance, repairs and replacement of minor items of property are recorded as
expenses when they are incurred. The costs of properties that are retired (plus
removal costs and less any salvage value) are charged to the accumulated
provision for depreciation.
Substantially all of Duquesne's properties are subject to first mortgage liens,
and to junior liens.
Temporary Cash Investments
--------------------------------------------------------------------------------
Temporary cash investments are short-term, highly liquid investments with
original maturities of three or fewer months. They are stated at market, which
approximates cost. Duquesne considers temporary cash investments to be cash
equivalents.
B. Property, Plant
and Equipment
Duquesne's net investment in property, plant and equipment at December 31, 1994
and 1993, was $3,068,519 and $3,123,948, respectively. Duquesne's total
investment in property, plant and equipment and the related accumulated
depreciation balances for the following major classes of property at December
31, 1994 and 1993 are as follows:
PP&E and Related Accumulated Depreciation at December 31,
<TABLE>
<CAPTION>
Total Investment in PP&E Accumulated Depreciation
------------------------ ------------------------
(Amounts in Thousands of Dollars)
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Production $2,325,586 $2,297,599 $ 801,203 $ 743,477
Transmission 294,882 294,390 105,258 98,675
Distribution 1,110,954 1,070,685 323,980 301,041
Property Held for Future Use 216,738 216,863 93,283 94,365
Property Held Under Capital
Leases 161,775 177,800 91,376 84,717
SFAS 109 150,000 150,000 9,828 3,032
Other 359,031 352,969 125,519 111,051
-------------------------------------------------------------------------------------
Total $4,618,966 $4,560,306 $1,550,447 $1,436,358
=====================================================================================
</TABLE>
47
<PAGE>
In addition to its wholly owned generating units, Duquesne, together with other
electric utilities, has an ownership or leasehold interest in certain jointly
owned units. Duquesne is required to pay its share of the construction and
operating costs of the units. Duquesne's share of the operating expenses of the
units is included in the statement of consolidated income.
<TABLE>
<CAPTION>
Generating Units at December 31, 1994
----------------------------------------------------------------------------------
Net
Percentage Utility Fuel
Unit Interest Megawatts Plant Source
(Millions of Dollars)
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cheswick 100.0 570 $00120.8 Coal
Elrama (a) 100.0 487 97.3 Coal
Ft. Martin 1 50.0 276 38.2 Coal
Eastlake 5 31.2 186 44.6 Coal
Sammis 7 31.2 187 54.4 Coal
Bruce Mansfield 1 (a) 29.3 228 69.1 Coal
Bruce Mansfield 2 (a) 8.0 62 18.0 Coal
Bruce Mansfield 3 (a) 13.74 110 48.9 Coal
Beaver Valley 1 (b) 47.5 385 253.5 Nuclear
Beaver Valley 2 (c)(d) 13.74 113 14.8 Nuclear
Beaver Valley Common Facilities 165.6
Perry 1 (e) 13.74 164 591.7 Nuclear
Brunot Island 100.0 66 7.5 Fuel Oil
----------------------------------------------------------------------------------
Total 2,834 1,524.4
Cold-reserved units:
Brunot Island 100.0 240 44.9 Fuel Oil
Phillips (a) 100.0 300 78.6 Coal
----------------------------------------------------------------------------------
Total Generating Units 3,374 $1,647.9
==================================================================================
</TABLE>
(a) The unit is equipped with flue gas desulfurization equipment.
(b) The NRC has granted a license to operate through January 2016.
(c) On October 2, 1987, the Company sold and leased back its 13.74 percent
interest in Beaver Valley Unit 2; the sale was exclusive of transmission
and common facilities. Amounts shown represent facilities not sold and
subsequent leasehold improvements.
(d) The NRC has granted a license to operate through May 2027.
(e) The NRC has granted a license to operate through March 2026.
Duquesne has a 13.74 percent ownership interest in Perry Unit 1, a nuclear
generating unit located in Ohio and operated by The Cleveland Electric
Illuminating Company (CEI). During 1993, the unit had an equivalent availability
factor of 39 percent. This performance resulted from several outages. As a
result of the length of these outages, the PUC imposed a penalty for incremental
replacement power costs. The 1994 equivalent availability factor was 44 percent.
This performance resulted from an extended outage (190 days) for refueling and
maintenance. From the end of the outage in August 1994 through the balance of
1994, Perry operated at full capacity except for short durations of reduced
power for testing and minor on-line maintenance activities.
In November 1993, CEI submitted to the Nuclear Regulatory Commission an action
plan, called the Perry Course of Action (PCA), designed by CEI to "correct
identified management, technical, and programmatic deficiencies" at the plant
over roughly a three-year period, and to "correct the downward trending
performance" of Perry. CEI management represents to Duquesne that the PCA is on
schedule and will be an effective program to insure that Perry is in conformance
with industry standards for boiling water reactors. Based on actual costs and
estimates obtained from CEI through January 1995, the total costs to bring the
plant into compliance, including the costs associated with implementing the PCA,
are more than the costs originally projected by CEI. Duquesne cannot predict the
ultimate cost, timing or effectiveness of the PCA, and is continuing to closely
monitor the situation.
C. Leases
Duquesne leases nuclear fuel, a portion of a nuclear generating plant, certain
office buildings, computer equipment and other property and equipment.
48
<PAGE>
<TABLE>
<CAPTION>
Capital Leases at December 31
--------------------------------------------------------------------
1994 1993
<S> <C> <C>
(Amounts in Thousands of Dollars)
--------------------------------------------------------------------
Nuclear fuel $139,763 $136,755
Electric plant 22,012 41,045
--------------------------------------------------------------------
Total 161,775 177,800
Less accumulated amortization (91,376) (84,717)
--------------------------------------------------------------------
Property Held Under Capital Leases -- Net (a) $070,399 $093,083
====================================================================
</TABLE>
(a) Includes $3,201 in 1994 and $3,492 in 1993 of capital leases with associated
obligations retired.
In 1987, Duquesne sold its 13.74 percent interest in Beaver Valley Unit 2; the
sale was exclusive of transmission and common facilities. The total sales price
of $537.9 million was the appraised value of Duquesne's interest in the
property. Duquesne leased back its interest in the unit for a term of 29.5
years. The lease provides for semiannual payments and is accounted for as an
operating lease. Duquesne is responsible under the terms of the lease for all
costs of its interest in the unit. In December 1992, Duquesne participated in
the refinancing of collateralized lease bonds to take advantage of lower
interest rates and reduce the annual lease payments. The bonds were originally
issued in 1987 for the purpose of partially financing the lease of Beaver Valley
Unit 2. In accordance with the Beaver Valley Unit 2 lease agreement, Duquesne
paid the premiums of approximately $36.4 million as a supplemental deferred rent
payment to the lessors. This amount was deferred and is being amortized over the
remaining lease term. At December 31, 1994, the deferred balance was
approximately $33.4 million.
Leased nuclear fuel is amortized as the fuel is burned. The amortization of all
other leased property is based on rental payments made. Payments for capital and
operating leases are charged to operating expenses on the statement of
consolidated income.
<TABLE>
<CAPTION>
Summary of Rental Payments
---------------------------------------------------------------
1994 1993 1992
<S> <C> <C> <C>
(Amounts in Thousands of Dollars)
---------------------------------------------------------------
Operating leases $56,437 $57,398 $ 64,986
Amortization of capital leases 33,596 28,758 43,119
Interest on capital leases 4,996 5,382 7,880
---------------------------------------------------------------
Total Rental Payments $95,029 $91,538 $115,985
===============================================================
</TABLE>
Future minimum lease payments for capital leases are related principally to the
estimated use of nuclear fuel financed through leasing arrangements and building
leases. Minimum payments for operating leases are related principally to Beaver
Valley Unit 2 and certain of the corporate offices.
49
<PAGE>
<TABLE>
<CAPTION>
Future Minimum Lease Payments
-----------------------------------------------------------------------------------------------------
Operating Leases Capital Leases
Year Ended December 31, (Amounts in Thousands of Dollars)
-----------------------------------------------------------------------------------------------------
<S> <C> <C>
1995 $ 54,552 $ 30,781
1996 54,532 15,305
1997 54,418 12,622
1998 54,293 6,078
1999 54,287 3,733
2000 and thereafter 948,143 23,736
-----------------------------------------------------------------------------------------------------
Total Minimum Lease Payments $1,220,225 92,255
-----------------------------------------------------------------------------------------------------
Less amount representing interest (25,065)
-----------------------------------------------------------------------------------------------------
Present value of minimum lease payments for capital leases $ 67,190 (a)
=====================================================================================================
</TABLE>
(a) Includes current obligations of $26.1 million at December 31, 1994.
Future payments due to Duquesne, as of December 31, 1994, under subleases of
certain corporate office space are approximately $1.2 million in 1995, $3.8
million in 1996 and $30 million thereafter.
D. Other Property
and Investments
At December 31, 1994 and 1993, the fair market value of Duquesne's investment in
DQE common stock was $43.1 million and $34.0 million, respectively. At December
31, 1994 and 1993, the cost of Duquesne's investment in DQE common stock was
$45.9 million and $30.0 million, respectively.
Duquesne's other investments are primarily in assets of a nuclear
decommissioning trust and marketable securities. In accordance with Statement of
Financial Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Securities (SFAS No. 115), these investments are classified as
available-for-sale and are stated at market value. The amounts of unrealized
holding gains at December 31, 1994 are not material.
E. Receivables
Duquesne and an unaffiliated corporation have an agreement that entitles
Duquesne to sell and the corporation to purchase, on an ongoing basis, up to $50
million of accounts receivable. Duquesne had no receivables sold at December
31, 1994. The accounts receivable sales agreement, which expires in June 1995,
is one of many sources of funds available to Duquesne. Upon expiration of this
facility, Duquesne expects to extend the agreement or to replace the facility
with a similar one.
F. Rate Matters
1987 Rate Case
--------------------------------------------------------------------------------
In March 1988, the PUC adopted a rate order that increased Duquesne's revenues
by $232 million annually. This rate increase was phased-in from April 1988
through April 1994. Deficiencies in current revenues which resulted from the
phase-in plan were included in the statement of consolidated income as phase-in
deferrals. Phase-in deferrals were recorded on the balance sheet as a
regulatory asset. As customers were billed for deficiencies related to prior
periods, this regulatory asset was reduced.
At this time, Duquesne has no pending base rate case and has no immediate plans
to file a base rate case.
50
<PAGE>
Deferred Rate Synchronization Costs
--------------------------------------------------------------------------------
In the 1987 Rate Case, the PUC approved Duquesne's petition to defer initial
operating and other costs of Perry Unit 1 and Beaver Valley Unit 2. Duquesne
deferred the costs incurred from November 17, 1987, when the units went into
commercial operation, until March 25, 1988, when a rate order was issued. In its
order, the PUC deferred ruling on whether these costs would be recoverable from
ratepayers. Duquesne is not earning a return on the deferred costs.
Duquesne believes that these deferred costs are recoverable. In 1990, the PUC
permitted another Pennsylvania utility to recover such costs.
Extraordinary Property Loss
--------------------------------------------------------------------------------
Duquesne abandoned its interest in the partially-constructed Perry Unit 2 in
1986 and subsequently disposed of its interest in 1992. In the 1987 Rate Case,
the PUC approved recovery, over a 10-year period, of Duquesne's original $155
million investment in Perry Unit 2. Duquesne is not earning a return on the as
yet unrecovered portion (approximately $23.9 million at December 31, 1994) of
its investment in the unit.
Deferred Coal Costs
--------------------------------------------------------------------------------
The PUC has established two market price coal cost standards for Duquesne's
interests in mines that supply coal to its generating stations. One applies only
to coal delivered at the Mansfield plant. The other, the system-wide coal cost
standard, applies to coal delivered to the remainder of Duquesne's system. Both
standards are updated monthly to reflect prevailing market prices for similar
coal. The PUC has directed Duquesne to defer recovery of the delivered cost of
coal to the extent that such cost exceeds generally prevailing market prices, as
determined by the PUC, for similar coal. The PUC allows deferred amounts to be
recovered from customers when the delivered costs of coal fall below such PUC-
determined prevailing market prices.
In 1990, the PUC approved a joint petition for settlement that clarified certain
aspects of the system-wide coal cost standard and gave Duquesne options to
extend the standard through March 2000. In December 1991, Duquesne exercised the
first of two options that extended the standard through March 1996. The
unrecovered cost of coal used at Mansfield amounted to $7.3 million and $7.4
million and the unrecovered cost of coal used throughout the system amounted to
$3.4 million and $8.8 million at December 31, 1994 and 1993, respectively.
Duquesne believes that all deferred coal costs will be recovered.
Warwick Mine Costs
--------------------------------------------------------------------------------
The 1990 joint petition for settlement (see preceding section on deferred coal
costs) also recognized costs at Duquesne's Warwick Mine, which had been on
standby since 1988, and allowed for recovery of such costs, including the costs
of ultimately closing the mine. In 1990, Duquesne entered into an agreement
under which an unaffiliated company will operate the mine until March 2000 and
sell the coal produced. Production began in late 1990. The mine reached a full
production rate in early 1991. The Warwick Mine coal reserves include both high
and low sulfur coal; Duquesne's contract is for medium to high sulfur (1.3
percent-2.5 percent) coal. More than 60 percent of the coal mined at Warwick
currently is used by Duquesne. Duquesne receives a royalty on sales of Warwick
coal in the open market. In the past year, the Warwick Mine supplied slightly
less than one-fifth of the coal used in the production of electricity at
Duquesne's wholly owned and jointly owned plants.
Costs at the Warwick Mine and Duquesne's investment in the mine are expected to
be recovered through the cost of coal in the ECR. Recovery is subject to the
system-wide coal cost standard. Duquesne also has an opportunity to earn a
return on its investment in the mine through the cost of coal during the period
of the system-wide coal cost standard, including extensions. At December 31,
1994, Duquesne's net investment in the mine was $18.9 million. The estimated
liability, including final site reclamation, mine water treatment and certain
labor liabilities, for mine closing is $33 million and Duquesne has recorded a
liability in the consolidated balance sheet of approximately $12.8 million
toward these costs.
51
<PAGE>
Property Held for Future Use
--------------------------------------------------------------------------------
In 1986, the PUC approved Duquesne's request to remove the Phillips and most of
the Brunot Island (BI) power stations from service and place them in cold
reserve. Duquesne expects to recover its net investment in these plants through
future electricity sales. Phillips and BI represent licensed, certified, clean
sources of electricity that will be necessary to meet expanding opportunities in
the bulk power markets. Duquesne believes that anticipated growth in peak load
demand for electricity within its service territory will require additional
peaking generation. Duquesne looks to BI to meet this need. The Phillips power
plant is an important component in Duquesne's strategy to identify and serve
opportunities for providing bulk power service. With recent legislation
promoting wider transmission access to bulk power markets and with the
opportunity to package a sale of power from Phillips with the support of
Duquesne's system, the Phillips plant could be made a highly reliable, cost-
competitive alternative for most purchasers. In summary, the Company believes
its investment in these cold-reserved plants will be necessary in order to meet
future business needs. If business opportunities do not develop as expected,
Duquesne will consider the sale of these assets. In the event that market
demand, transmission access or rate recovery do not support the utilization or
sale of the plants, Duquesne may have to write off part or all of their costs.
At December 31, 1994, the Company's net investment in Phillips and BI was $93.0
million and $42.0 million, respectively.
G. Common Stock
and Capital
Surplus
Common Stock and Capital Surplus
--------------------------------------------------------------------------------
In July 1989, Duquesne became a wholly owned subsidiary of DQE, the holding
company formed as part of a shareholder-approved restructuring. As a result of
the restructuring, DQE common stock replaced all outstanding shares of Duquesne
common stock, except for ten shares which DQE holds.
DQE or its predecessor, Duquesne, has continuously paid dividends on common
stock since 1953. Dividends may be paid on DQE common stock to the extent
permitted by law and as declared by its board of directors. However, in
Duquesne's Restated Articles of incorporation, provisions relating to preferred
and preference stock may restrict the payment of Duquesne's common dividends. No
dividends or distributions may be made on Duquesne's common stock if Duquesne
has not paid dividends or sinking fund obligations on its preferred or
preference stock. Further, the aggregate amount of Duquesne's common stock
dividend payments or distributions may not exceed certain percentages of net
income if the ratio of common stockholder's equity to total capitalization is
less than specified percentages. As all of Duquesne's common stock is owned by
DQE, to the extent that Duquesne cannot pay common dividends, DQEmay not be able
to pay dividends to its common stockholders. No part of the retained earnings of
Duquesne was restricted at December 31, 1994.
<TABLE>
<CAPTION>
----------------------------------------------------------------------
Capital Surplus 1994 1993 1992
Year Ended December 31, (Amounts in Thousands of Dollars)
----------------------------------------------------------------------
<S> <C> <C> <C>
Capital Surplus $ -- $ -- $ --
Premium on common stock 823,886 807,593 808,707
Capital stock expense (693) (1,838) (1,840)
----------------------------------------------------------------------
Total Capital Surplus $823,193 $805,755 $806,867
======================================================================
</TABLE>
H. Preferred and
Preference Stock
Holders of Duquesne's preferred stock are entitled to cumulative quarterly
dividends. If four quarterly dividends on any series of preferred stock are in
arrears, holders of the preferred stock are entitled to elect a majority of
Duquesne's board of directors until all dividends have been paid. At December
31, 1994, Duquesne had made all preferred stock dividend payments.
Holders of Duquesne's preference stock are entitled to receive cumulative
quarterly dividends if dividends on all series of preferred stock are paid. If
six quarterly dividends on any series of preference stock are in arrears,
holders of the preference stock are entitled to elect two of Duquesne's
directors until all dividends have been paid. At December 31, 1994, the Company
had made all dividend payments.
52
<PAGE>
Outstanding preferred and preference stock is generally callable, on notice of
not less than thirty days, at stated prices plus accrued dividends. On January
14, 1994, Duquesne called for redemption all of its outstanding shares of $2.10
and $7.50 preference stock. None of the remaining preferred or preference stock
issues has mandatory purchase requirements.
<TABLE>
<CAPTION>
Preferred and Preference Stock at December 31
------------------------------------------------------------------------------------------------------
(Shares and Amounts in Thousands)
---------------------------------------------------------
1994 1993 1992
Call Price --------------------------------------------------------
Per Share Shares Amount Shares Amount Shares Amount
<S> <C> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------
Preferred Stock Series: (a)
3.75% (b) (c) $ 51.00 148 $ 7,407 148 $ 7,407 148 $ 7,407
4.00% (b) (c) 51.50 550 27,486 550 27,486 550 27,486
4.10% (b) (c) 51.75 120 6,012 120 6,012 120 6,012
4.15% (b) (c) 51.73 132 6,643 132 6,643 132 6,643
4.20% (b) (c) 51.71 100 5,021 100 5,021 100 5,021
$2.10 (b) (c) 51.84 159 8,039 159 8,039 159 8,039
$7.20 (c) (d) 101.00 298 29,732 319 31,915 319 31,915
------------------------------------------------------------------------------------------------------
Total Preferred Stock 1,507 90,340 1,528 92,523 1,528 92,523
------------------------------------------------------------------------------------------------------
Preference Stock Series: (f)
$2.10 (c) (g) -- -- -- 1,175 29,383 1,175 29,383
$7.50 (d) (e) -- -- -- 84 8,392 86 8,579
Plan Series A (c) (h) 37.46 841 29,857 844 29,956 845 29,995
------------------------------------------------------------------------------------------------------
Total Preference Stock 841 29,857 2,103 67,731 2,106 67,957
------------------------------------------------------------------------------------------------------
Deferred ESOP benefit (24,852) (27,126) (28,471)
------------------------------------------------------------------------------------------------------
Total Preferred and
Preference Stock $ 95,345 $133,128 $132,009
======================================================================================================
</TABLE>
(a) Preferred stock: 4,000,000 authorized shares; $50 par value; cumulative
(b) $50 per share involuntary liquidation value
(c) Non-redeemable
(d) $100 per share involuntary liquidation value
(e) Redeemable
(f) Preference stock: 8,000,000 authorized shares; $1 par value; cumulative
(g) $25 per share involuntary liquidation value
(h) $35.50 per share involuntary liquidation value
In December 1991, Duquesne established an Employee Stock Ownership Plan (ESOP)
to provide matching contributions for a 401(k) Retirement Savings Plan for
Management Employees. (See Note N.) Duquesne issued and sold 845,070 shares of
preference stock, plan series A to the trustee of the ESOP. As consideration for
the stock, Duquesne received a note valued at $30 million from the trustee. The
preference stock has an annual dividend rate of $2.80 per share, and each share
of the preference stock is exchangeable for one share of DQE common stock. At
December 31, 1994, $24.9 million of preference stock issued in connection with
the establishment of the ESOP had been offset, for financial statement purposes,
by the recognition of a deferred ESOP benefit. Dividends on the preference stock
and cash contributions from Duquesne are used to repay the ESOP note. Duquesne
made cash contributions of approximately $2.3 million for 1994, $2.1 million for
1993, and $4.9 million for 1992. These cash contributions were the difference
between the ESOP debt service and the amount of dividends on ESOP shares
(approximately $2.4 million in 1994, $2.3 million in 1993 and $2.5 million in
1992). As shares of preference stock are allocated to the accounts of
participants in the ESOP, Duquesne recognizes compensation expense, and the
amount of the deferred compensation benefit is amortized. Duquesne recognized
compensation expense related to the 401(k) plan of $1.8 million in 1994, $1.7
million in 1993, and $1.5 million in 1992.
53
<PAGE>
I. Long-Term Debt
During 1992, Duquesne began issuing secured debt under a new first collateral
trust indenture. This indenture will ultimately replace Duquesne's 1947 first
mortgage bond indenture. First collateral trust bonds totaling $695 million with
an average interest rate of 6.58 percent were issued in 1993.
The pollution control notes arise from the sale of bonds by public authorities
for the purposes of financing construction of pollution control facilities at
Duquesne's plants or refunding previously issued bonds.
Duquesne is obligated to pay the principal and interest on the bonds. For
certain of the pollution control notes, there is an annual commitment fee for an
irrevocable letter of credit.
Under certain circumstances, the letter of credit is available for the payment
of interest on, or redemption of, a portion of the notes. In late 1994,
pollution control notes totaling $114.1 million with an average interest rate of
10.34 percent were refinanced at lower adjustable interest rates.
<TABLE>
<CAPTION>
Long-Term Debt at December 31
-----------------------------------------------------------------------------------
Principal Outstanding
Interest (Amounts In Thousands of Dollars)
Rate Maturity 1994) 1993
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First collateral trust bonds (a) 4.75%-8.75% 1996-2025 $ 950,400 $ 950,400
First mortgage bonds (b) 8.25% 1995 -- 49,000
Pollution control notes (c) (d) 2003-2030 417,051 416,266
Sinking fund debentures (e) 5% 2010 5,817 6,042
Miscellaneous 152 216
Less unamortized debt discount
and premium -- net (4,490) (5,219)
-----------------------------------------------------------------------------------
Total Long-Term Debt $1,368,930 $1,416,705
===================================================================================
</TABLE>
(a) Excludes $9.6 million related to sinking fund requirements on the underlying
first mortgage bonds.
(b) Excludes $49.0 million related to a current maturity on June 1, 1995.
(c) Excludes $0.9 million related to sinking fund requirements on the underlying
first mortgage bonds.
(d) The pollution control notes have adjustable interest rates. The interest
rates at year-end averaged 4.3% in 1994 and 2.6% in 1993.
(e) As of January 1995, the sinking fund requirement for 1995 had been met and
the requirements for 1996 had been partially satisfied.
At December 31, 1994, sinking fund requirements and maturities of long-term debt
outstanding for the next five years were: $10.5 million and $49.1 million in
1995; $11.0 million and $50.1 million in 1996; $10.7 million and $50.0 million
in 1997; $9.9 million and $75.0 million in 1998; and $9.9 million and $75.0
million in 1999.
Sinking fund requirements relate primarily to the first mortgage bonds and may
be satisfied by cash or the certification of property additions equal to 166-2/3
percent of the bonds required to be redeemed. During 1994, annual sinking fund
requirements of $.5 million were satisfied by cash and $10.9 million by
certification of property additions.
Total interest costs incurred were $110.7 million in 1994, $118.1 million in
1993 and $133.9 million in 1992. Of these amounts, $2.0 million in 1994, $2.0
million in 1993 and $4.7 million in 1992 were capitalized as AFC. Debt discount
or premium and related issuance expenses are amortized over the lives of the
applicable issues.
In 1992, Duquesne was involved in the issuance of $419.0 million of
collateralized lease bonds, which were originally issued by an unaffiliated
corporation for the purpose of partially financing the lease of Beaver Valley
Unit 2. Duquesne is also associated with a letter of credit securing the
lessors' equity interest in the unit and certain tax benefits. During 1994,
Duquesne's Beaver Valley Unit 2 lease arrangement was amended to reflect an
increase in federal income tax rates. At the same time, the associated letter of
credit securing the lessor's equity interest in the unit was increased from $188
million to $194 million and the term of the letter of credit was
54
<PAGE>
extended to 1999. If certain specified events occur, the letter of credit could
be drawn down by the owners, the leases could terminate and the bonds would
become direct obligations of Duquesne.
At December 31, 1994 and 1993, Duquesne was in compliance with all of its debt
covenants.
At December 31, 1994, the fair value of Duquesne's long-term debt, including
current maturities and sinking fund requirements, estimated on the basis of
quoted market prices for the same or similar issues or current rates offered to
Duquesne for debt of the same remaining maturities, was $1,344.7 million. The
principal amount included in Duquesne's balance sheet is $1,433.0 million.
J. Short-Term
Borrowing and
Revolving Credit
Arrangements
Duquesne has an extendible revolving credit agreement with a group of banks
totaling $150 million. The current expiration date of this credit arrangement
is October 6, 1995. Interest rates can, in accordance with the option selected
at the time of each borrowing, be based on prime, Eurodollar or certificate of
deposit rates. Commitment fees are based on the unborrowed amount of the
commitments. The arrangement contains a two-year repayment period for any
amounts outstanding at the expiration of the revolving credit period.
During 1994 and 1993, the maximum short-term bank and commercial paper
borrowings outstanding were $25.6 million and $27 million; the average daily
short-term borrowings outstanding were $1.9 million and $1.6 million; and the
weighted average daily interest rates applied to such borrowings were 5.23
percent and 3.42 percent, respectively. At December 31, 1994, there were no
short-term borrowings. Short-term borrowings at December 31, 1993, were $11.0
million.
K. Income Taxes
Since DQE's formation in 1989, Duquesne has filed consolidated federal income
tax returns with its parent and other companies in the affiliated group.
Duquesne's federal income tax returns have been audited by the Internal Revenue
Service and closed for the tax years through 1989.
Returns filed for the tax years 1990 to date remain subject to IRS review.
Duquesne does not believe that final settlement of the federal income tax
returns for these years will have a materially adverse effect on its financial
position or results of operations. The effects of the 1993 adoption of SFAS No.
109 are discussed in Note A. Implementation of the standard involved a change in
accounting principle. The cumulative effect of $8 million on prior years was
reported in 1993 as an increase in net income. The SFAS No. 109 impact on 1993
income before cumulative effect of changes in accounting principles is
immaterial.
<TABLE>
<CAPTION>
Deferred Tax Liabilities
---------------------------------------------------------------------------------------------
1994 1993
(Amounts in Thousands of Dollars)
---------------------------------------------------------------------------------------------
<S> <C> <C>
At December 31, deferred tax assets (liabilities) were:
Investment tax credits unamortized $ 43,257 $ 45,351
Gain on sale/leaseback of Beaver Valley Unit 2 64,124 67,119
Other 63,058 57,690
---------------------------------------------------------------------------------------------
Deferred tax assets 170,439 170,160
---------------------------------------------------------------------------------------------
Property depreciation (780,726) (855,560)
Regulatory asset (149,815) (199,344)
Loss on reacquired debt unamortized (38,066) (40,933)
Other (192,981) (220,105)
---------------------------------------------------------------------------------------------
Deferred tax liabilities (1,161,588) (1,315,942)
---------------------------------------------------------------------------------------------
Net Deferred Tax Liabilities $ (991,149) $(1,145,782)
=============================================================================================
</TABLE>
55
<PAGE>
<TABLE>
<CAPTION>
Income Taxes
--------------------------------------------------------------------------------
1994 1993 1992
(Amounts in Thousands of Dollars)
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Included in operating expenses:
Currently payable: Federal $ 90,335 $100,521 $ 80,850
State 33,071 37,718 27,797
Deferred -- net: Federal (15,787) (29,758) (3,208)
State (7,797) (9,007) (3,750)
Investment tax credits deferred -- net (5,376) (5,399) (5,436)
--------------------------------------------------------------------------------
Total Included in Operating Expenses $ 94,446 94,075 96,253
--------------------------------------------------------------------------------
Included in other income and deductions:
Currently payable: Federal $ (6,139) (17,557) 7,265
State 335 (1,220) 2,983
Deferred -- net: Federal (99) 251 1,654
State (39) 100 377
Investment tax credits (607) (607) (533)
--------------------------------------------------------------------------------
Total Included in Other Income and Deductions (6,549) (19,033) 11,746
--------------------------------------------------------------------------------
Total Income Tax Expense $ 87,897 $ 75,042 $107,999
================================================================================
</TABLE>
Total income taxes differ from the amount computed by applying the statutory
federal income tax rate to income before income taxes and before the cumulative
effect of changes in accounting principles.
<TABLE>
<CAPTION>
Income Tax Expense Reconciliation
-------------------------------------------------------------------------------------------
1994 1993 1992
(Amounts in Thousands of Dollars)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed federal income tax at statutory rate $ 82,371 $ 76,940 $ 87,641
Increase (decrease) in taxes resulting from:
Tax audit settlement -- (15,000) --
Excess of book over tax depreciation 1,737 906 3,830
State income taxes, net of federal income tax benefit 16,621 17,934 18,089
Amortization of deferred investment tax credits (5,983) (6,006) (5,969)
Revenue requirement adjustment to regulatory taxes (12,178) -- --
Other -- net 5,329 268 4,408
-------------------------------------------------------------------------------------------
Total Income Tax Expense $ 87,897 $ 75,042 $107,999
===========================================================================================
</TABLE>
<TABLE>
<CAPTION>
Sources of Deferred Tax Expense
-------------------------------------------------------------------------------------------
1992
(Amounts in Thousands of Dollars)
-------------------------------------------------------------------------------------------
<S> <C>
Sources of income taxes deferred and the related tax effects were:
Excess of tax depreciation $ 16,611
Deferred revenues recorded/(recovered) for book purposes (30,702)
Allowance for uncollectible accounts 9,760
Fuel costs (10,820)
Loss on early retirement of debt 20,999
Other -- net (10,775)
-------------------------------------------------------------------------------------------
Total Deferred Income Tax (Benefit) $ (4,927)
===========================================================================================
</TABLE>
56
<PAGE>
L. Commitments and
Contingencies
Construction
--------------------------------------------------------------------------------
Duquesne estimates that it will spend approximately $80 million annually on
construction during 1995, 1996 and 1997. These amounts exclude AFC, nuclear
fuel, expenditures for possible early replacement of steam generators at the
Beaver Valley Station (See "Nuclear Litigation" discussion on page 59.) and
expenditures for the refurbishment of the cold-reserved units. (See "Property
Held For Future Use" discussion on page 53.)
Nuclear-Related Matters
--------------------------------------------------------------------------------
Duquesne operates two nuclear units and has an ownership interest in a third.
The operation of a nuclear facility involves special risks, potential
liabilities and specific regulatory and safety requirements. Specific
information about risk management and potential liabilities is discussed below.
Nuclear Decommissioning. The PUC ruled that recovery of the decommissioning
costs for Beaver Valley Unit 1 could begin in 1977, and that recovery for Beaver
Valley Unit 2 and Perry Unit 1 could begin in 1988. Duquesne expects to
decommission Beaver Valley Unit 2 and Perry Unit 1 following the end of their
operating lives, a date that currently coincides with the expiration of each
plant's operating license. Upon expiration of the Beaver Valley Unit 1 operating
license, the unit will be placed in safe storage until the expiration of the
Beaver Valley Unit 2 operating license, at which time the units may be
decommissioned together.
Based upon site specific studies finalized in 1992 for Beaver Valley Unit 2, and
in 1994 for Beaver Valley Unit 1 and Perry Unit 1, Duquesne's share of the total
estimated decommissioning costs, including removal and decontamination costs,
currently being used to determine Duquesne's cost of service, are $122 million
for Beaver Valley Unit 1, $35 million for Beaver Valley Unit 2, and $67 million
for Perry Unit 1.
In conjunction with an August 18, 1994 PUC Accounting Order, Duquesne has
increased the annual contribution to its decommissioning trusts by approximately
$2 million to bring the total annual funding to approximately $4 million per
year. Duquesne plans to continue making periodic reevaluations of estimated
decommissioning costs, to provide additional funding from time to time, and to
seek regulatory approval for recognition of these increased funding levels.
Nuclear Insurance. All of the companies with an interest in the Beaver Valley
Power Station maintain the maximum available nuclear insurance for the $5.9
billion total investment in Beaver Valley Units 1 and 2. The insurance program
provides $2.8 billion for property damage, decommissioning, and decontamination
liabilities. Similar property insurance is held by the joint owners of the Perry
plant for their $5.5 billion total investment in Perry Unit 1. Duquesne would be
responsible for its share of any damages in excess of insurance coverage. In
addition, if the property damage reserves of Nuclear Electric Insurance Limited
(NEIL), an industry mutual, are inadequate to cover claims arising from an
incident at any United States nuclear site covered by that insurer, Duquesne
could be assessed retrospective premiums totaling a maximum of $6.5 million.
The Price-Anderson Amendments to the Atomic Energy Act limit public liability
from a single incident at a nuclear plant to $8.9 billion. Duquesne has
purchased $200 million of insurance, the maximum amount available, which
provides the first level of financial protection.
Additional protection of $8.3 billion would be provided by an assessment of up
to $75.5 million per incident on each nuclear unit in the United States.
Duquesne's maximum total assessment, $56.6 million, which is based upon its
ownership or leasehold interests in three nuclear generating stations, would be
limited to a maximum of $7.5 million per incident per year. A further surcharge
of 5 percent could be levied if the total amount of public claims exceeded the
funds provided under the assessment program. Additionally, a state premium tax
(typically 3 percent) would be charged on the assessment and surcharge. Finally,
the United States Congress could impose other revenue-raising measures on the
nuclear industry if funds prove insufficient to pay claims.
57
<PAGE>
Duquesne carries extra expense insurance; coverage includes the incremental cost
of any replacement power purchased (in addition to costs that would have been
incurred had the units been operating) and other incidental expense after the
occurrence of certain types of accidents at its nuclear units. The amounts of
the coverage are 100 percent of the estimated extra expense per week during the
52-week period starting 21 weeks after an accident and 80 percent of such
estimate per week for the following 104 weeks. The amount and duration of actual
extra expense could substantially exceed insurance coverage.
Nuclear Litigation. In 1991, Pennsylvania Power Company, Ohio Edison Company,
Cleveland Electric Illuminating Company, Toledo Edison Company and Duquesne were
joined in the litigation against Westinghouse Electric Corporation
(Westinghouse) in the United States District Court for the Western District of
Pennsylvania. In the suit, the owners allege that six steam generators supplied
by Westinghouse for Beaver Valley Units 1 and 2 contain serious design defects--
in particular defects causing tube corrosion and cracking.
Steam generator maintenance costs have increased as a result of these defects
and are likely to continue increasing. The condition of the steam generators is
being monitored closely. Replacement of the Beaver Valley Unit 1 steam generator
defective components may occur as early as 1997. Based upon other utilities with
similar units who have replaced steam generators, replacement cost per unit is
estimated to be approximately $125 million. To date, twelve additional lawsuits
have been brought by other utility companies around the country against
Westinghouse for similar problems with Westinghouse steam generators.
A jury trial began September 12, 1994 in Federal District Court in Western
Pennsylvania. On October 24, 1994, the Court dismissed four of the five claims
against Westinghouse, leaving only the fraud claim. On December 6, 1994, the
jury rendered a verdict in favor of Westinghouse on the fraud count. On January
5, 1995, the owners of the Beaver Valley plant appealed the decision to the
United States Court of Appeals for the Third Circuit. Duquesne cannot predict
the outcome of this litigation; however, the Company does not believe that
resolution will have a materially adverse effect on its financial position or
results of operations. The Company's percentage interests (ownership and
leasehold) in Beaver Valley Unit 1 and in Beaver Valley Unit 2 are 47.5 percent
and 13.74 percent, respectively. The remainder of Beaver Valley Unit 1 is owned
by Ohio Edison Company and Pennsylvania Power Company.
The remaining interest in Beaver Valley Unit 2 is held by Ohio Edison Company,
Cleveland Electric Illuminating Company and Toledo Edison Company. Duquesne
operates both units on behalf of these owners.
Spent Nuclear Fuel Disposal. Under the Nuclear Waste Policy Act of 1982, which
establishes a policy for handling and disposing of spent nuclear fuel and
requires the establishment of a final repository to accept spent fuel, contracts
for jointly owned nuclear plants have been entered into with the DOE for
permanent disposal of spent nuclear fuel and high-level radio-active waste. The
DOE has indicated that the repository will not be available for acceptance of
spent fuel before 2010. Existing on-site spent fuel storage capacities at Beaver
Valley Unit 1, Beaver Valley Unit 2 and Perry are expected to be sufficient
until 2017, 2011, and 2009, respectively. During 1994, Duquesne increased the
storage capacity at Beaver Valley Unit 1 by equipping the spent fuel pool with
high density fuel storage racks.
Uranium Enrichment Decontamination and Decommissioning Fund. Nuclear reactor
licensees in the United States are assessed annually for the decontamination and
decommissioning of DOE enrichment facilities. Assessments are based on the
amount of uranium a utility had processed for enrichment prior to enactment of
the National Energy Policy Act of 1992 (energy act) and are to be paid by such
utilities over a 15-year period. At December 31, 1994, Duquesne's liability for
contributions is approximately $9.9 million. Contributions, when made, are
recovered through the ECR.
Guarantees
--------------------------------------------------------------------------------
Duquesne and the other co-owners have guaranteed certain debt and lease
obligations related to a coal supply contract for the Bruce Mansfield plant. At
December 31, 1994, Duquesne's share of these guarantees was $30.3 million. The
prices paid for the coal by the companies under this
58
<PAGE>
contract are expected to be sufficient to meet debt and lease obligations to be
satisfied in the year 2000. (See Note F.) The minimum future payments to be made
by Duquesne solely in relation to these obligations are $6.6 million in 1995,
$6.2 million in 1996, $5.9 million in 1997, $5.6 million in 1998, $5.3 million
in 1999, and $4.2 million in 2000. Duquesne's total payments for coal purchased
under the contract were $23.3 million in 1994, $26.5 million in 1993, and $25.2
million in 1992.
Residual Waste Management Regulations
--------------------------------------------------------------------------------
In 1992, the Pennsylvania Department of Environmental Resources (DER) issued
Residual Waste Management Regulations governing the generation and management of
non-hazardous waste. Duquesne is currently conducting tests and developing
compliance strategies. Capital compliance costs are estimated, on the basis of
information currently available, at $5 million in 1995. The expected additional
capital cost of compliance through 2000 is estimated, based on current
information, to be approximately $25 million; this estimate is subject to the
results of continuing ground water assessments and DER final approval of
compliance plans.
Other
--------------------------------------------------------------------------------
Duquesne is involved in various other legal proceedings and environmental
matters. Duquesne believes that such proceedings and matters, in total, will not
have a materially adverse effect on its Financial position or results of
operations.
M. Changes in
Working
Capital
<TABLE>
<CAPTION>
Changes in Working Capital Other Than Cash
-----------------------------------------------------------------------------
1994 1993 1992
(Amounts in Thousands of Dollars)
-----------------------------------------------------------------------------
<S> <C> <C> <C>
Accounts Receivable $ 6,708 $(87,671) $64,571
Materials and supplies 2,932 13,635 (4,151)
Other current assets (6,929) 3,636 7,131
Accounts payable (23,816) (6,022) (8,573)
Other current liabilities (15,779) (20,377) (3,785)
-----------------------------------------------------------------------------
Total $(36,884) $(96,799) $55,193
=============================================================================
</TABLE>
N. Employee
Benefits
Retirement Plans
--------------------------------------------------------------------------------
Duquesne maintains retirement plans to provide pensions for all full-time
employees. Upon retirement, an employee receives a monthly pension based on his
or her length of service and compensation. The cost of funding the pension plan
is determined by the unit credit actuarial cost method. Duquesne's policy is to
record this cost as an expense and to fund the pension plans by an amount that
is at least equal to the minimum funding requirements of the Employee Retirement
Income Security Act (ERISA) but not to exceed the maximum tax deductible amount
for the year. Pension costs charged to expense or construction were $8.9 million
for 1994, $9.8 million for 1993 and $11.4 million for 1992.
59
<PAGE>
<TABLE>
<CAPTION>
Funded Status of the Retirement Plans and Amounts Recognized on the Consolidated
Balance Sheet at December 31
-----------------------------------------------------------------------------------------------------------------
1994 1993
(Amounts in Thousands of Dollars)
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefits rendered to date:
Vested benefits $314,933 $321,249
Non-vested benefits 17,282 16,826
-----------------------------------------------------------------------------------------------------------------
Accumulated benefit obligations based on
compensation to date 332,215 338,075
Additional benefits based on estimated future salary levels 59,318 74,718
-----------------------------------------------------------------------------------------------------------------
Projected benefit obligation 391,533 412,793
Fair market value of plan assets 412,724 434,384
-----------------------------------------------------------------------------------------------------------------
Projected benefit obligation under plan assets $ 21,191 $ 21,591
=================================================================================================================
Unrecognized net gain $95,691 $80,411
Unrecognized prior service cost (30,365) (21,449)
Unrecognized net transition liability (17,477) (19,289)
Net pension liability per balance sheet (26,658) (18,082)
-----------------------------------------------------------------------------------------------------------------
Total $ 21,191 $ 21,591
=================================================================================================================
Assumed rate of return on plan assets 8.00% 8.00%
-----------------------------------------------------------------------------------------------------------------
Discount rate used to determine projected benefit
obligation 8.00% 7.00%
-----------------------------------------------------------------------------------------------------------------
Assumed change in compensation levels 5.50% 5.25%
-----------------------------------------------------------------------------------------------------------------
</TABLE>
Pension assets consist primarily of common stocks, United States obligations
and corporate debt securities.
<TABLE>
<CAPTION>
Components of Net Pension Cost
------------------------------------------------------------------------------------------------------------------
1994 1993 1992
(Amounts in Thousands of Dollars)
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost (Benefits earned during the year) $ 12,482 $ 11,657 $ 11,397
Interest on projected benefit obligation 28,221 27,423 26,390
Return on plan assets 1,967 (41,725) (26,736)
Net amortization and deferrals (33,783) 12,454 325
------------------------------------------------------------------------------------------------------------------
Net Pension Cost $ 8,887 $ 9,809 $ 11,376
==================================================================================================================
</TABLE>
Retirement Savings Plan and Other Benefit Options
--------------------------------------------------------------------------------
Duquesne sponsors separate 401(k) retirement plans for its union-represented,
International Brotherhood of Electrical Workers (IBEW), employees and its
management employees.
The 401(k) Retirement Savings Plan for Management Employees provides that
Duquesne will match employee contributions to a 401(k) account up to a maximum
of 6 percent of his or her eligible salary. Duquesne match consists of a $.25
base match per eligible contribution dollar and an additional $.25 incentive
match per eligible contribution dollar, if Board-approved targets are achieved.
The 1994 incentive target was accomplished. Duquesne is funding its matching
contributions to the 401(k) Retirement Savings Plan for Management Employees
with payments to an ESOP established in December 1991. (See Note H.)
The 401(k) Retirement Savings Plan for IBEW Represented Employees provides that
beginning in 1995, the Company will match employee contributions to a 401(k)
account up to a maximum of 4 percent of his or her eligible salary. Duquesne
match consists of a $.25 base match per eligible contribution dollar and an
additional $.25 incentive match per eligible contribution dollar, if certain
Non-Occupational Illness and Injury targets are met.
60
<PAGE>
DQE's shareholders have approved a long-term incentive plan through which
Duquesne may grant management employees options to purchase, during the years
1987 through 2003, up to a total of five million shares of DQE common stock at
prices equal to the fair market value of such stock on the dates the options
were granted. At December 31, 1994, approximately 2.3 million of these shares
were available for future grants.
As of December 31, 1994, 1993 and 1992, respectively, active grants totaled
1,412,000; 1,175,000; and 848,000 shares. Exercise prices of these options
ranged from $12.3125 to $34.625 at December 31, 1994 and December 31, 1993 and
from $12.3125 to $28.75 at December 31, 1992. Expiration dates of these grants
ranged from 1997 to 2004 at December 31, 1994; from 1997 to 2003 at December 31,
1993; and from 1997 to 2002 at December 31, 1992. As of December 31, 1994, 1993
and 1992, respectively, stock appreciation rights (SARs) had been granted in
connection with 793,000; 795,000; and 623,000 of the options outstanding. During
1994, 836,000 SARs were exercised; 226,000 options were exercised at prices
ranging from $12.3125 to $28.375; and 187,000 options lapsed. During 1993,
748,000 SARs were exercised; 151,000 options were exercised at prices ranging
from $12.3125 to $28.375; and 152,000 options lapsed. During 1992, 108,000 SARs
were exercised; 50,000 options were exercised at prices ranging from $12.3125 to
$26.375; and 59,000 options lapsed. Of the active grants at December 31, 1994,
1993 and 1992, respectively, 612,000; 578,000; and 232,000 were not exercisable.
Other Postretirement Benefits
--------------------------------------------------------------------------------
In addition to pension benefits, Duquesne provides certain health care benefits
and life insurance for some retired employees. Substantially all of Duquesne's
full-time employees may, upon attaining the age of 55 and meeting certain
service requirements, become eligible for the same benefits available to retired
employees. Participating retirees make contributions, which are adjusted
annually, to the health care plan. The life insurance plan is non-contributory.
Company-provided health care benefits terminate when covered individuals become
eligible for Medicare benefits or reach age 65, whichever comes first. Duquesne
funds actual expenditures for obligations under the plans on a "pay-as-you-go
basis." Duquesne has the right to modify or terminate the plans.
As of January 1, 1993, Duquesne adopted Statement of Financial Accounting
Standards No. 106, Employers' Accounting for Postretirement Benefits Other Than
Pensions, which requires the actuarially determined costs of the aforementioned
postretirement benefits to be accrued over the period from the date of hire
until the date the employee becomes fully eligible for benefits. Duquesne has
adopted the new standard prospectively and has elected to amortize the
transition liability over 20 years.
<TABLE>
<CAPTION>
Components of Postretirement Cost
----------------------------------------------------------------------------------------------
1994 1993
(Amounts in Thousands of Dollars)
----------------------------------------------------------------------------------------------
<S> <C> <C>
Service cost (Benefits earned during the period) $1,631 $1,779
Interest cost on accumulated benefit obligation 2,294 2,497
Amortization of the transition obligation over twenty years 1,700 1,700
----------------------------------------------------------------------------------------------
Total Postretirement Cost $5,625 $5,976
==============================================================================================
</TABLE>
The accumulated postretirement benefit obligation comprises the present value of
the estimated future benefits payable to current retirees and a pro rata portion
of estimated benefits payable to active employees after retirement.
61
<PAGE>
<TABLE>
<CAPTION>
Funded Status of Postretirement Plan and Amounts Recognized on the Consolidated
Balance Sheet at December 31
-------------------------------------------------------------------------------------------------
1994 1993
(Amounts in Thousands of Dollars)
-------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefits:
Retirees $ 6,292 $ 4,830
Fully eligible active plan participants 3,074 3,482
Other active plan participants 20,543 24,170
-------------------------------------------------------------------------------------------------
Accumulated postretirement benefit obligation 29,909 32,482
Fair market value of plan assets -- --
-------------------------------------------------------------------------------------------------
Accumulated benefit obligation in excess of plan assets $(29,909) $(32,482)
=================================================================================================
Unrecognized net gain (loss) $ 9,481 $ (122)
Unrecognized prior service cost -- 4,383
Unrecognized net transition liability (30,598) (32,296)
Postretirement liability per balance sheet (8,792) (4,447)
-------------------------------------------------------------------------------------------------
Total $(29,909) $(32,482)
=================================================================================================
Discount rate used to determine projected benefit obligation 8.00% 7.00%
-------------------------------------------------------------------------------------------------
Health care cost trend rates:
For year beginning January 1 8.60% 10.50%
Ultimate rate 6.50% 5.50%
Year ultimate rate is reached 1999 1999
-------------------------------------------------------------------------------------------------
Effect of a one percent increase in health care cost trend rates:
On accumulated projected benefit obligation $ 3,137 $ 4,000
On aggregate of annual service and interest costs $ 465 $ 600
-------------------------------------------------------------------------------------------------
</TABLE>
O. Quarterly
Financial
Information
(Unaudited)
<TABLE>
<CAPTION>
Summary of Selected Quarterly Financial Data (thousands of dollars)
----------------------------------------------------------------------------------------------------
[The quarterly data reflect seasonal weather variations in the Company's service territory.]
----------------------------------------------------------------------------------------------------
1994 First Quarter Second Quarter Third Quarter Fourth Quarter
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Revenues $295,868 $281,670 $324,428 $278,318
Operating Income 61,094 53,983 73,556 51,261
Net Income 35,492 30,557 44,876 36,524
----------------------------------------------------------------------------------------------------
1993 (a)(b)
----------------------------------------------------------------------------------------------------
Operating Revenues $283,713 $280,596 $327,769 $285,701
Operating Income 58,537 60,618 66,339 60,392
Income Before Cumulative Effect
on Prior Years of Changes in
Accounting Principles 32,788 34,570 48,478 28,951
Net Income 35,363 34,570 48,478 28,951
====================================================================================================
</TABLE>
(a) Fourth quarter 1993 results included the effects of a $15.2 million charge
for the write-off of Duquesne's investment in an abandoned transmission
line project and a $14.6 million reduction of taxes other than income as a
result of a favorable resolution of tax assessments.
(b) Restated to conform with presentations adopted during 1994.
62
<PAGE>
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
-------------------------------------------------------------------------------------------------------------
Amounts in Thousands of Dollars 1994 1993 1992 1991 1990 1989
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT ITEMS
Total operating revenues $1,180,284 $1,177,779 $1,161,280 $1,199,650 $1,131,005 $1,118,583
Operating income $ 239,894 $ 245,886 $ 254,130 $ 265,672 $ 266,402 $ 269,506
Net income $ 147,449 $ 147,362 $ 149,768 $ 143,133 $ 135,456 $ 129,437
Earnings for common stock $ 141,403 $ 138,174 $ 140,357 $ 132,332 $ 121,410 $ 112,644
-------------------------------------------------------------------------------------------------------------
BALANCE SHEET ITEMS
Property, plant and equipment-net $3,068,519 $3,123,948 $3,018,641 $3,037,454 $3,042,920 $3,056,367
Total assets $4,149,867 $4,388,103 $3,718,092 $3,802,626 $3,794,313 $3,822,656
-------------------------------------------------------------------------------------------------------------
Capitalization:
Common stockholder's equity $1,115,512 $1,100,671 $1,107,609 $1,064,104 $1,035,059 $1,033,826
Non-redeemable preferred and
preference stock 95,345 124,736 123,430 121,906 151,346 154,030
Redeemable preferred and preference
stock -- 8,392 8,579 15,437 37,747 65,961
Long-term debt 1,368,930 1,416,705 1,413,001 1,420,726 1,501,295 1,540,329
-------------------------------------------------------------------------------------------------------------
Total capitalization $2,579,787 $2,650,504 $2,652,619 $2,622,173 $2,725,447 $2,794,146
=============================================================================================================
</TABLE>
63
<PAGE>
EXHIBIT 4.2(i)
CONFORMED COPY
================================================================================
EIGHTY-NINTH
SUPPLEMENTAL TRUST INDENTURE
between
DUQUESNE LIGHT COMPANY
(a Pennsylvania corporation)
and
MELLON BANK, N.A., Trustee
-------------------
Dated September 19, 1994
-------------------
Subjecting additional property to the lien of the
Trust Indenture dated as of August 1, 1947
================================================================================
<PAGE>
EIGHTY-NINTH
SUPPLEMENTAL TRUST INDENTURE
Made this 19th day of September, 1994, by and between DUQUESNE LIGHT
COMPANY, a corporation organized and existing under and by virtue of the laws of
the Commonwealth of Pennsylvania, having its principal office in the City of
Pittsburgh in said Commonwealth of Pennsylvania (hereinafter sometimes called
the "Company"), party of the first part,
A
N
D
MELLON BANK, N.A., successor by merger to Mellon National Bank and Trust
Company, a national banking association, having its principal corporate trust
office in the City of Pittsburgh in the Commonwealth of Pennsylvania, as Trustee
(hereinafter sometimes called the "Trustee"), party of the second part.
WHEREAS, the Company has heretofore executed and delivered to Mellon Bank,
N.A., as Trustee, a certain Trust Indenture (hereinafter called the "Original
Indenture") dated as of August 1, 1947 securing its First Mortgage Bonds; and
WHEREAS, the Original Indenture has been recorded in the Recorders' Offices
of the various counties of Pennsylvania as follows:
In Allegheny County in Mortgage Book Vol. 2897, page 4;
In Beaver County in Mortgage Book Vol. 430, page 1;
In Greene County in Mortgage Book Vol. 125, page 1;
In Washington County in Mortgage Book Vol. 332, page 1; and
In Westmoreland County in Mortgage Book Vol. 692, page 2;
has been filed in the Prothonotary's Office in each of said Counties; and has
also been recorded in the Office of the Clerk of County Commission of Monongalia
County, West Virginia, in Deed of Trust Book Vol. 321, page 327, the Office of
the Clerk of County Commission of Hancock County, West Virginia, in Deed of
Trust Book Vol. 176, page 1, the Recorder's Office of Belmont County, Ohio, in
Mortgage Book Vol. 437, page 109, the Recorder's Office of Columbiana County,
Ohio, in Mortgage Book Vol. 1542, page 25, the Recorder's Office of Jefferson
County, Ohio, in Mortgage Book Vol. 405, page 1, the Recorder's Office of Lake
County, Ohio, in Mortgage Book Vol. 821, page 1, and the Recorder's Office of
Monroe County, Ohio, in Mortgage Book Vol. 89, page 1; and
WHEREAS, in and by Sections 8.09 and 20.03 of the said Trust Indenture,
provision is made for the giving by the said Company of supplemental indentures
supplemental to the said recited Trust Indenture for certain purposes,
including, inter alia, to make subject to the lien of the Trust Indenture
property acquired subsequent to the date thereof; and
-1-
<PAGE>
WHEREAS, the Company has acquired certain additional properties which it
desires to subject to the lien of said Trust Indenture by an Eighty-Ninth
Supplemental Trust Indenture;
NOW, THEREFORE, THIS EIGHTY-NINTH SUPPLEMENTAL TRUST INDENTURE WITNESSETH
that Duquesne Light Company, in consideration of the premises and of the
purchase and acceptance of bonds issued under the provisions of the Trust
Indenture given by the Company to Mellon National Bank and Trust Company (now
Mellon Bank, N.A.), Trustee, dated as of August 1, 1947, by the holders thereof,
and of One Dollar ($1.00) to it paid by the Trustee at or before the sealing and
delivery of this Eighty-Ninth Supplemental Trust Indenture, and in order to
secure the payment both of the principal of and interest on all bonds of the
Company at any time outstanding under said Trust Indenture according to their
tenor and effect, and the performance of and compliance with the covenants and
conditions in said Trust Indenture contained, grants, bargains, sells, warrants,
releases, conveys, assigns, transfers, mortgages, pledges, sets over and
confirms unto Mellon Bank, N.A., as Trustee under the said Trust Indenture, and
to its respective successors in said trust forever, all property, real, personal
and mixed, now owned or hereafter acquired or to be acquired by the Company and
wheresoever situated (except as excepted from the lien of the Trust Indenture
and this Eighty-Ninth Supplemental Trust Indenture by the provisions thereof and
hereof), subject to the rights reserved by the Company in and by various
provisions of said Trust Indenture and this Eighty-Ninth Supplemental Trust
Indenture, including (without in any wise limiting or impairing by the
enumeration of the same the scope and intent of the foregoing or of any general
description contained in this Eighty- Ninth Supplemental Trust Indenture) all
lands, rights of way, roads, all powerhouses, buildings and other structures,
and all offices, buildings and contents thereof; all machinery, engines,
boilers, dynamos, electrical machinery, regulators, meters, transformers,
generators, motors, electrical and mechanical appliances, conduits, cables,
water or other pipes, pole and transmission lines, poles, wires, crossarms,
insulators, substations and superstructures, generating, distributing and
transmitting equipment, tools, implements, apparatus and supplies, and coal in
place and interests in coal; whether appertaining to any existing or future
system of the Company or otherwise and including all other property now used or
provided for use or hereafter acquired for use, in the construction, repair,
maintenance and operation of such systems, both those now owned and those which
may hereafter be acquired by the Company; all municipal or other grants, rights,
permits, consents, franchises, privileges, easements, licenses, ordinances,
rights of way, liberties and immunities of the Company, howsoever conferred or
acquired and whether now owned or hereafter acquired; and all leases,
leaseholds, power contracts, street lighting contracts and other rights with
respect to the construction, maintenance, repair and operation of any systems
now owned or hereafter acquired by the Company, and any additions
-2-
<PAGE>
thereto or extensions thereof; parts or parcels of such property being more
specifically described as follows:
I
All of the following described property situate in the County of Beaver
and Commonwealth of Pennsylvania, the deeds herein recited being recorded
in the Recorder's Office of said County, and reference being made thereto
for a more particular description of said property, viz:
1. Undivided 17.01% interest as tenant in common with
Pennsylvania Power Company, The Cleveland Electric Illuminating
Company, Ohio Edison Company and The Toledo Edison Company in a
parcel of land situate in the Township of Greene. Conveyed by Kevin
H. Reed and Becky A. Reed, husband and wife, to Duquesne Light
Company, et al. Deed dated November 23, 1993. Deed Book Volume
1556, page 0056. Tax parcel I.D. Nos. 62-180-0143.000 and 62-180-
0143.001. (Bruce Mansfield Power Station)
2. Undivided 17.01% interest as tenant in common with
Pennsylvania Power Company, The Cleveland Electric Illuminating
Company, Ohio Edison Company and The Toledo Edison Company in a
parcel of land situate in the Township of Greene. Conveyed by Pete
G. Kohl and Cynthia L. Kohl, husband and wife, to Duquesne Light
Company, et al. Deed dated December 21, 1993. Deed Book Volume
1557, page 0546. Tax parcel I.D. Nos. 62-009-0132.000 and 62-180-
0132.000. (Bruce Mansfield Power Station)
3. Undivided 17.01% interest as tenant in common with
Pennsylvania Power Company, The Cleveland Electric Illuminating
Company, Ohio Edison Company and The Toledo Edison Company in a
parcel of land situate in the Township of Greene. Conveyed by Kendig
C. Laughlin and Martha Jane Laughlin, husband and wife, to Duquesne
Light Company, et al. Deed dated December 22, 1993. Deed Book
Volume 1557, page 0647. Tax parcel I.D. Nos. 62-180-131.002, 62-180-
140.000 and 62-180-141.000. (Bruce Mansfield Power Station)
-3-
<PAGE>
4. Undivided 17.01% interest as tenant in common with
Pennsylvania Power Company, The Cleveland Electric Illuminating
Company, Ohio Edison Company and The Toledo Edison Company in a
parcel of land situate in the Township of Greene. Conveyed by Dravo
Basic Materials Company, Inc., an Alabama Corporation, to Duquesne
Light Company, et al. Deed dated February 14, 1994. Deed Book
Volume 1578, page 0802. Tax parcel I.D. No. 62-170-0107.000. (Bruce
Mansfield Power Station)
5. Undivided 17.01% interest as tenant in common with
Pennsylvania Power Company, The Cleveland Electric Illuminating
Company, Ohio Edison Company and The Toledo Edison Company in a
parcel of land situate in the Township of Greene. Conveyed by Daniel
J. Rhodes and Debbie L. Rhodes, husband and wife, to Duquesne Light
Company, et al. Deed dated February 22, 1994. Deed Book Volume
1581, page 0072. Tax parcel I.D. No. 62-180-0136.000. (Bruce
Mansfield Power Station)
6. Undivided 17.01% interest as tenant in common with
Pennsylvania Power Company, The Cleveland Electric Illuminating
Company, Ohio Edison Company and The Toledo Edison Company in a
parcel of land situate in the Township of Greene. Conveyed by Ralph
E. Hampe and Fannie M. Hampe, husband and wife, to Duquesne Light
Company, et al. Deed dated May 19, 1994. Deed Book Volume 1593,
page 0773. Tax parcel I.D. No. 62-180-138.000. (Bruce Mansfield
Power Station)
7. Undivided 17.01% interest as tenant in common with
Pennsylvania Power Company, The Cleveland Electric Illuminating
Company, Ohio Edison Company and The Toledo Edison Company in a
parcel of land situate in the Township of Greene. Conveyed by Jason
E. Kastler, unmarried, and Alice B. Kastler, unmarried, to Duquesne
Light Company, et al. Deed dated May 26, 1994. Deed Book Volume
1596, page 0443. Tax parcel I.D. No. 62-180-145. (Bruce Mansfield
Power Station)
-4-
<PAGE>
TOGETHER with all and singular the tenements, hereditaments and
appurtenances belonging or in any wise appertaining to the aforesaid property or
any part thereof, with the reversion and reversions, remainder and remainders,
tolls, rents and revenues, issues, income, product and profits thereof, and all
the estate, right, title, interest and claim whatsoever, at law as well as in
equity, which the Company now has or may hereafter acquire in and to the
aforesaid property and franchises and every part and parcel thereof except as
hereinafter excepted or excluded from the lien hereof, and of the above recited
Trust Indenture.
There are hereby excepted from the lien of this Eighty- Ninth Supplemental
Trust Indenture, whether now owned or hereafter acquired by the Company,
anything herein contained to the contrary notwithstanding, all those certain
items of property of the classes specifically excepted from the lien of the
above recited Trust Indenture by the terms thereof.
TO HAVE AND TO HOLD ALL said properties, real, personal and mixed,
mortgaged, pledged or conveyed by the Company as aforesaid, or intended so to
be, unto the Trustee and its successors and assigns, FOREVER; subject, however,
to permissible encumbrances, as defined in the above recited Trust Indenture,
and to all of the other terms, conditions, covenants, uses, trusts and
defeasances incorporated in the said recited Trust Indenture dated as of August
1, 1947.
The parties hereto shall have, possess and enjoy the same rights, powers,
duties and privileges as affecting the property hereby conveyed as they have
under said recited Trust Indenture insofar as the same may be applicable hereto,
with the same force and effect as though the terms, conditions, covenants and
defeasances of said recited Trust Indenture had been embodied herein.
This Eighty-Ninth Supplemental Trust Indenture is duly executed and
delivered in accordance with resolutions of the Board of Directors of the
Company adopted at a meeting held on August 30, 1994.
-5-
<PAGE>
IN WITNESS WHEREOF, the party of the first part has caused its corporate
name to be subscribed and this Eighty-Ninth Supplemental Trust Indenture to be
signed by its Chairman of the Board, President and Chief Executive Officer or a
Vice President, and its corporate seal to be hereunto affixed and attested by
its Secretary or an Assistant Secretary, for and in its behalf, and the party of
the second part, to evidence its acceptance of the additional trust hereby
created, has caused its corporate name to be subscribed and this Eighty-Ninth
Supplemental Trust Indenture to be signed by its Vice President or an Assistant
Vice President, and its corporate seal to be hereunto affixed and attested by
its Authorized Officer, for and in its behalf, all done as of the day and year
first above written.
DUQUESNE LIGHT COMPANY
[Seal] By: /s/ Gary L. Schwass
-----------------------------
Vice President-Finance
and Chief Financial Officer
Attest:
/s/ Joan S. Senchyshyn
------------------------------
Assistant Secretary
MELLON BANK, N.A.
[Seal] By: /s/ M. J. Richards
-----------------------------
Assistant Vice President
Attest:
/s/ D. M. Babich
------------------------------
Authorized Officer
-6-
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF ALLEGHENY )
On this 19th day of September, 1994 before me, the subscriber, a notary
public in and for said Commonwealth and County, personally appeared Gary L.
Schwass, who acknowledged himself to be Vice President-Finance and Chief
Financial Officer of Duquesne Light Company, a corporation, and that he as such
Vice President-Finance and Chief Financial Officer, being authorized to do so,
executed the foregoing instrument for the purposes therein contained by signing
the name of the corporation by himself as Vice President-Finance and Chief
Financial Officer.
IN WITNESS WHEREOF I hereunto set my hand and official seal.
/s/ Joanne E. Kirin
------------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF ALLEGHENY )
On this 19th day of September, 1994 before me, the subscriber, a notary
public in and for said Commonwealth and County, personally appeared M. J.
Richards, who acknowledged herself to be Assistant Vice President of Mellon
Bank, N.A., a national banking association, and that she as such Assistant Vice
President, being authorized to do so, executed the foregoing instrument for the
purposes therein contained by signing the name of the corporation by herself as
Assistant Vice President.
IN WITNESS WHEREOF I hereunto set my hand and official seal.
/s/ Nancy A. Fletcher
------------------------------
Notary Public
-7-
<PAGE>
CERTIFICATE OF PRECISE RESIDENCE
I hereby certify that the precise residence of Mellon Bank, N.A. is One
Mellon Bank Center, Second Ward, Pittsburgh, Allegheny County, Pennsylvania.
/s/ D. M. Babich
-----------------------------------------
Authorized Signatory of Mellon Bank, N.A.
September 19, 1994
-8-
<PAGE>
RECORDING INFORMATION
Allegheny County, Pennsylvania
Office of Recorder of Deeds
Recorded September 22, 1994
Mortgage Book Volume 14478, page 460
Beaver County, Pennsylvania
Office of Recorder of Deeds
Recorded September 22, 1994
Mortgage Book Volume 1340, page 368
Greene County, Pennsylvania
Office of Recorder of Deeds
Recorded September 23, 1994
Record Book Volume 134, page 35
Washington County, Pennsylvania
Office of Recorder of Deeds
Recorded September 23, 1994
Mortgage Book Volume 2175, page 356
Westmoreland County, Pennsylvania
Office of Recorder of Deeds
Recorded September 23, 1994
Mortgage Book Volume 3463, page 528
Belmont County, Ohio
Office of Recorder
Received September 22, 1994
Recorded September 23, 1994
Mortgage Book Volume 625, page 827
Columbiana County, Ohio
Officer of Recorder
Recorded September 22, 1994
Official Records Volume 448, page 180
Jefferson County, Ohio
Office of Recorder
Received September 22, 1994
Recorded September 23, 1994
Official Records Volume 146, page 369
Lake County, Ohio
Office of Recorder
Recorded September 23, 1994
Official Records Volume 1051, page 1110
-9-
<PAGE>
Monroe County, Ohio
Office of Recorder
Received September 22, 1994
Recorded September 22, 1994
Official Records Volume 8, page 696
Hancock County, West Virginia
Office of Clerk of County Commission
Recorded September 22, 1994
Deed of Trust Book 321, page 357
Monongalia County, West Virginia
Office of Clerk of County Commission
Recorded September 23, 1994
Deed of Trust Book 760, page 171
-10-
<PAGE>
EXHIBIT 4.2 (ii)
================================================================================
NINETIETH
SUPPLEMENTAL TRUST INDENTURE
between
DUQUESNE LIGHT COMPANY
(a Pennsylvania corporation)
and
MELLON BANK, N.A., Trustee
----------
Dated as of October 1, 1994
----------
Supplemental to
Trust Indenture dated as of August 1, 1947
----------
Providing for $75,500,000
First Mortgage Bonds, Pollution Control Collateral Series H
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Parties...................................................... 1
Recitals..................................................... 1
Form of First Mortgage Bond,
Pollution Control Collateral Series H...................... 2
Granting Clauses............................................. 5
</TABLE>
ARTICLE I.
FORM AND EXECUTION OF FIRST MORTGAGE BONDS,
POLLUTION CONTROL COLLATERAL SERIES H
<TABLE>
<CAPTION>
<S> <C>
Section 1.01 -- Terms of bonds............................... 6
Section 1.02 -- Redemption of bonds.......................... 7
Section 1.03 -- Redemption of bonds
for Sinking Fund............................. 7
Section 1.04 -- Mandatory Redemption......................... 7
Section 1.05 -- 1992 Mortgage; Credit against
payment obligation........................... 7
Section 1.06 -- Transfer of bonds;
restriction on transfer...................... 7
Section 1.07 -- Interchangeability of bonds.................. 8
Section 1.08 -- No charge for transfer or exchange
of bonds, except taxes and
governmental charges......................... 8
Section 1.09 -- Reservation of numbers for
purposes of redemption....................... 8
</TABLE>
ARTICLE II.
MISCELLANEOUS
<TABLE>
<CAPTION>
<S> <C>
Section 2.01 -- Fixing of record date........................ 8
Section 2.02 -- Recitals not made by Trustee; no
representations made by Trustee.............. 8
Section 2.03 -- Construction in connection with
and as part of the Indenture................. 8
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 2.04 -- (a) Trust Indenture Act
requirements control..................... 9
(b) Severability of provisions .............. 9
Section 2.05 -- Successors and assigns....................... 9
Section 2.06 -- Provision for execution in counterparts;
Table of Contents and descriptive
headings of Articles not to affect
meaning...................................... 9
Section 2.07 -- Appointment of attorneys-in-fact............. 9
Execution.................................................... 10
Acknowledgments.............................................. 11
Certificate of Precise Residence............................. 12
</TABLE>
<PAGE>
NINETIETH
SUPPLEMENTAL TRUST INDENTURE
DATED as of the first day of October, 1994, although executed and delivered
on the date of the latest acknowledgment at the end hereof, made by and between
DUQUESNE LIGHT COMPANY, a corporation organized and existing under and by virtue
of the laws of the Commonwealth of Pennsylvania, having its principal office in
the City of Pittsburgh in said Commonwealth of Pennsylvania (hereinafter called
the "Company"), party of the first part, and MELLON BANK, N.A., successor by
merger to Mellon National Bank and Trust Company, a national banking
association, having its principal corporate trust office in the City of
Pittsburgh in the Commonwealth of Pennsylvania, as Trustee (hereinafter
sometimes called the "Trustee"), party of the second part.
WHEREAS, the Company has heretofore executed and delivered to Mellon Bank,
N.A., as Trustee, a certain Trust Indenture (hereinafter called the "Original
Indenture") dated as of August 1, 1947 securing its First Mortgage Bonds; and
WHEREAS, the Original Indenture has been recorded in the Recorders' Offices
of the various counties of Pennsylvania as follows:
In Allegheny County in Mortgage Book Vol. 2897, page 4;
In Beaver County in Mortgage Book Vol. 430, page 1;
In Greene County in Mortgage Book Vol. 125, page 1;
In Washington County in Mortgage Book Vol. 332, page 1; and
In Westmoreland County in Mortgage Book Vol. 692, page 2;
has been filed in the Prothonotary's Office in each of said Counties; and has
also been recorded in the Office of the Clerk of County Commission of Monongalia
County, West Virginia, in Deed of Trust Book Vol. 321, page 327, the Office of
the Clerk of County Commission of Hancock County, West Virginia, in Deed of
Trust Book Vol. 176, page 1, the Recorder's Office of Belmont County, Ohio, in
Mortgage Book Vol. 437, page 109, the Recorder's Office of Columbiana County,
Ohio, in Mortgage Book Vol. 1542, page 25, the Recorder's Office of Jefferson
County, Ohio, in Mortgage Book Vol. 405, page 1, the Recorder's Office of Lake
County, Ohio, in Mortgage Book Vol. 821, page 1, and the Recorder's Office of
Monroe County, Ohio, in Mortgage Book Vol. 89, page 1; and
WHEREAS, since the execution of the Original Indenture, the Company has
executed and delivered to Mellon Bank, N.A., as Trustee, eighty-nine
supplemental trust indentures and an amendment to one thereof, all for the
purposes recited therein and as permitted by the Original Indenture; and
WHEREAS, for convenience of reference the Original Indenture and all
indentures supplemental thereto heretofore or hereafter executed, including this
Ninetieth Supplemental Trust Indenture, are sometimes hereinafter collectively
called the "Indenture"; and
WHEREAS, the Company has caused the Original Indenture and the aforesaid
eighty-nine supplemental trust indentures to be recorded
<PAGE>
and filed, and has caused financing statements and continuation statements under
the Uniform Commercial Code to be filed, all in such manner and in such places
as are required by law to make effective and maintain the lien intended to be
created by the Indenture; and
WHEREAS, there have been issued under the Original Indenture and certain of
the indentures supplemental thereto heretofore executed forty-six series of
First Mortgage Bonds, of which $1,141,035,000 aggregate principal amount was
outstanding as of the date hereof; and
WHEREAS, the Company desires to provide for the issuance under the
Indenture of a new series of bonds secured thereby in an aggregate principal
amount not to exceed $75,500,000 to be designated as "First Mortgage Bonds,
Pollution Control Collateral Series H", said new series to be hereinafter
sometimes called the "Forty-Seventh Series," the bonds of said series to be
issued as registered bonds without coupons in the denominations of $1,000 and
any integral multiple of $1,000 that the Company may execute and deliver, and
the bonds of said series to be substantially in the form and of the tenor
following, to wit:
[FORM OF BOND OF THE FORTY-SEVENTH SERIES]
THIS BOND IS NOT TRANSFERABLE EXCEPT TO A SUCCESSOR TRUSTEE UNDER THE
INDENTURE OF MORTGAGE AND DEED OF TRUST, DATED AS OF APRIL 1, 1992, AS
SUPPLEMENTED, BETWEEN DUQUESNE LIGHT COMPANY AND MELLON BANK, N.A., TRUSTEE.
DUQUESNE LIGHT COMPANY
(Incorporated under the laws of the
Commonwealth of Pennsylvania)
FIRST MORTGAGE BOND, POLLUTION CONTROL COLLATERAL SERIES H
No. $
ORIGINAL ISSUE DATE: STATED MATURITY DATE:
DUQUESNE LIGHT COMPANY, a corporation organized and existing under and by
virtue of the laws of the Commonwealth of Pennsylvania (hereinafter called the
"Company"), for value received, hereby promises to pay to ____________ or
registered assigns the sum of _________________ Dollars in lawful money of the
United States of America on the Stated Maturity Date specified above. This bond
shall not bear interest except that, if the Company should default in the
payment of the principal hereof, this bond shall bear interest at the rate of
five percent per annum until the Company's obligation with respect to the
payment of such principal shall be discharged as provided in the Indenture
hereinafter mentioned. Principal of and interest, if any, on this bond shall be
payable upon presentation hereof at the office or agency of the Company in
<PAGE>
Pittsburgh, Pennsylvania or at such other office or agency as may be designated
for such purpose by the Company from time to time.
Any payment by the Company under its Indenture of Mortgage and Deed of
Trust, dated as of April 1, 1992, as supplemented (the "1992 Mortgage"), to
Mellon Bank, N.A., as trustee, of the principal of or interest, if any, on
securities which shall have been authenticated and delivered under the 1992
Mortgage on the basis of the issuance and delivery to such trustee of this bond
(other than by the application of the proceeds of a payment in respect of this
bond) shall, to the extent thereof, be deemed to satisfy and discharge the
obligation of the Company, if any, to make a payment of principal of or interest
on this bond, as the case may be, which is then due.
This bond is one of a duly authorized issue of bonds of the Company, known
as its First Mortgage Bonds, unlimited in aggregate principal amount, of the
series and designation indicated above, which issue of bonds consists, or may
consist, of several series of varying denominations, dates and tenors, all
issued and to be issued under and equally secured (except insofar as a sinking
fund, or similar fund, established in accordance with the provisions of the
Indenture may afford additional security for the bonds of any specific series)
by a Trust Indenture dated as of August 1, 1947 executed by the Company to
Mellon Bank, N.A., formerly Mellon National Bank and Trust Company (herein
called the "Trustee"), as Trustee, as heretofore supplemented and amended (said
Trust Indenture as supplemented and amended being herein called the
"Indenture"), to which Indenture reference is hereby made for a description of
the property mortgaged and pledged, the nature and extent of the security, the
rights of the holders of the bonds as to such security, and the terms and
conditions upon which the bonds may be issued under the Indenture and are
secured. The principal hereof may be declared or may become due on the
conditions, in the manner and at the time set forth in the Indenture, upon the
happening of a completed default as provided in the Indenture. The Indenture
provides that such declaration may in certain events be waived by the holders of
a majority in principal amount of the bonds outstanding.
With the consent of the Company and to the extent permitted by and as
provided in the Indenture, the rights and obligations of the Company and/or of
the holders of the bonds and/or the terms and provisions of the Indenture and/or
of any instruments supplemental thereto may be modified or altered by the
affirmative vote of the holders of at least seventy percent in principal amount
of the bonds then outstanding under the Indenture and any instruments
supplemental thereto (excluding bonds disqualified from voting by reason of the
interest of the Company or of certain related persons therein as provided in the
Indenture), and by the affirmative vote of at least seventy percent in principal
amount of the bonds of any series entitled to vote then outstanding under the
Indenture and any instruments supplemental thereto (excluding bonds disqualified
from voting as aforesaid) and affected by such modification or alteration, in
case one or more but less than all of the series of bonds then outstanding are
so affected; provided that no such modification or alteration shall permit the
extension of the
<PAGE>
maturity of the principal of this bond or the reduction in the rate of interest
hereon or any other modification in the terms of payment of such principal or
interest or the taking of certain other action as more fully set forth in the
Indenture, without the consent of the holder hereof.
The Company, the Trustee and any paying agent may deem and treat the person
in whose name this bond is registered as the absolute owner hereof for the
purpose of receiving payment of or on account of the principal hereof and
interest hereon and for all other purposes and shall not be affected by any
notice to the contrary.
In the manner and with the effect provided in the Indenture, this bond may,
in whole at any time, or in part from time to time prior to maturity, be
redeemed by the Company with funds derived from any source by payment at the
office or agency of the Company in Pittsburgh, Pennsylvania or at such other
office or agency of the Company as shall be designated from time to time, at a
redemption price equal to 100% of the principal amount of this bond to be
redeemed.
This bond is entitled to the benefits of, and is subject to call for
redemption for, the Sinking Fund, upon the notice, in the manner, and with the
effect provided in the Indenture by payment of the principal amount hereof.
All bonds of this series shall be redeemed, at a redemption price equal to
100% of the principal amount thereof, if, and at such time as, the securities
which shall have been authenticated and delivered under the 1992 Mortgage on the
basis of the issuance and delivery to the trustee thereunder of the bonds of
this series shall have become subject to mandatory redemption. The holder of
this bond, by its acceptance hereof, consents and agrees that no notice of such
redemption shall be required to be given.
This bond shall initially be issued in the name of Mellon Bank, N.A.,
trustee under the 1992 Mortgage, and is not transferable except to any successor
trustee under the 1992 Mortgage. Any such transfer shall be made as prescribed
in the Indenture by the registered holder hereof in person, or by such holder's
duly authorized attorney, at the office or agency of the Company in Pittsburgh,
Pennsylvania or at such other office or agency of the Company as shall be
designated from time to time, upon surrender and cancellation of this bond, and
thereupon a new bond or bonds of the same series and of authorized denominations
for a like aggregate principal amount, and having the same Original Issue Date
and Stated Maturity Date, will be issued to the transferee in exchange herefor
as provided in the Indenture. Bonds of this series are interchangeable as to
denominations in the manner and upon the conditions prescribed in the Indenture.
No charge shall be made to any holder of any bond of this series for any
transfer or exchange of bonds except for any tax or taxes or other governmental
charge required to be paid in connection therewith.
<PAGE>
No recourse shall be had for the payment of principal of or interest, if
any, on this bond, or any part thereof, or of any claim based hereon or in
respect hereof or of the Indenture, against any incorporator or any past,
present or future stockholder, officer or director of the Company or of any
predecessor or successor corporation, either directly or through the Company, or
through any such predecessor or successor corporation, or through any receiver
or a trustee in bankruptcy, whether by virtue of any constitution, statute or
rule of law or by the enforcement of any assessment or penalty or otherwise, all
such liability being, by the acceptance hereof and as part of the consideration
for the issue hereof, expressly waived and released, as more fully provided in
the Indenture.
This bond shall not be valid or become obligatory for any purpose unless
and until Mellon Bank, N.A., as Trustee under the Indenture, or its successor
thereunder, shall have signed the certificate of authentication endorsed hereon.
IN WITNESS WHEREOF, DUQUESNE LIGHT COMPANY has caused this bond to be
signed in its name with the facsimile signature of its Chairman of the Board,
President and Chief Executive Officer, and its corporate seal, or a facsimile
thereof, to be hereto affixed and attested with the facsimile signature of its
Secretary.
Dated _______________
DUQUESNE LIGHT COMPANY
[Seal] By ___________________________
Attest:
___________________
Secretary
[END OF FORM OF BOND]
<PAGE>
WHEREAS, Sections 2.01, 4.01 and 20.03 of the Original Indenture provide in
substance that the Company and the Trustee may enter into indentures
supplemental thereto for the purposes, among others, of creating and setting
forth the particulars of any new series of bonds and of providing the terms and
conditions of the issue of the bonds of any series not expressly provided for in
the Original Indenture; and
WHEREAS, the execution and delivery of this Ninetieth Supplemental Trust
Indenture have been duly authorized by a resolution adopted by the Board of
Directors of the Company; and
WHEREAS, all things necessary to make said $75,500,000 aggregate principal
amount of said bonds of the Forty-Seventh Series, when duly executed by the
Company and authenticated and delivered by the Trustee (or a duly appointed
authenticating agent) and issued, the valid, binding and legal obligations of
the Company entitled to the benefits and security of the Indenture and to make
this Ninetieth Supplemental Trust Indenture a valid, binding and legal
instrument in accordance with its terms have been done and performed, and the
issue of said Bonds, as herein provided, has been in all respects duly
authorized;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
Duquesne Light Company, intending to be legally bound hereby, in
consideration of the premises and of One Dollar to it duly paid by the Trustee
at or before the issuance and delivery of these presents, the receipt whereof is
hereby acknowledged, and of the purchase and acceptance from time to time of
said bonds of the Forty-Seventh Series by the holders thereof, and in order to
declare the conditions and terms upon and subject to which the bonds of said
series are to be issued and secured, and in order to create the bonds of said
series and further to secure the payment of the principal of, and premium, if
any, and interest on all bonds of the Company at any time outstanding under the
Indenture according to their tenor and effect and the performance of and
compliance with the covenants and conditions in the Indenture contained, has
executed and delivered this Ninetieth Supplemental Trust Indenture and hereby
grants, bargains, sells, warrants, releases, conveys, assigns, transfers,
mortgages, pledges, sets over and confirms unto Mellon Bank, N.A., as Trustee
under the Indenture, and to its respective successors in said trust, forever,
all property, real, personal and mixed, now owned or hereafter acquired or to be
acquired by the Company and wheresoever situated (except as excepted from the
lien of the Indenture by the provisions thereof), subject to the rights reserved
by the Company in and by various provisions of the Indenture, including (without
in anywise limiting or impairing by the enumeration of the same the scope and
intent of the foregoing or of any general description contained in the
Indenture) all lands, rights of way, roads, all powerhouses, buildings and other
structures, and all offices, buildings and the contents thereof; all machinery,
engines, boilers, dynamos, electrical machinery, regulators, meters,
transformers, generators, motors, electrical and mechanical appliances,
conduits, cables, water or other pipes, pole and
<PAGE>
transmission lines, poles, wires, cross-arms, insulators, substations and
superstructures, generating, distributing and transmitting equipment, tools,
implements, apparatus and supplies and coal in place and interests in coal;
whether appertaining to any existing or future system of the Company or
otherwise and including all other property now used or provided for use or
hereafter acquired for use, in the construction, repair, maintenance and
operation of such systems, both those now owned and those which may hereafter be
acquired by the Company; all municipal or other grants, rights, permits,
consents, franchises, privileges, easements, licenses, ordinances, rights of
way, liberties and immunities of the Company, howsoever conferred or acquired
and whether now owned or hereafter acquired; and all leases, leaseholds, power
contracts, street lighting contracts and other rights with respect to the
construction, maintenance, repair and operation of any systems now owned or
hereafter acquired by the Company, and any additions thereto or extensions
thereof;
TOGETHER WITH all and singular the tenements, hereditaments and
appurtenances belonging or in anywise appertaining to the aforesaid property or
any part thereof, with the reversion and reversions, remainder and remainders,
tolls, rents and revenues, issues, income, product and profits thereof and all
the estate, right, title, interest and claim whatsoever, at law as well as in
equity, which the Company now has or may hereafter acquire in and to the
aforesaid property and every part and parcel thereof except as excepted or
excluded from the lien of the Indenture;
THERE BEING HEREBY EXCEPTED from the lien of the Indenture, whether now
owned or hereafter acquired by the Company, anything herein contained to the
contrary notwithstanding, all those certain items of property of the classes
specifically excepted from the lien of the Original Indenture by the terms
thereof;
TO HAVE AND TO HOLD all properties, real, personal and mixed, mortgaged,
pledged or conveyed by the Company as aforesaid, or intended so to be, unto the
Trustee and its successors and assigns, FOREVER; subject, however, to
permissible encumbrances, as defined in the Original Indenture, and to all the
other terms, conditions, covenants, uses, trusts and defeasances incorporated in
the Indenture.
The parties hereto shall have, possess and enjoy the same rights, powers,
duties and privileges as affecting the property hereby conveyed as they have
under the Original Indenture insofar as the same may be applicable hereto, with
the same force and effect as though the terms, conditions, and defeasances of
the Original Indenture had been embodied herein.
IT IS HEREBY COVENANTED, DECLARED AND AGREED by the Company and the
Trustee, and its successors in the trust under the Indenture, for the benefit of
those who hold or shall hold the bonds, or any of them, issued or to be issued
thereunder, as follows:
ARTICLE I
<PAGE>
FORM AND EXECUTION OF FIRST MORTGAGE BONDS,
POLLUTION CONTROL COLLATERAL SERIES H
SECTION 1.01. There is hereby created, for issuance under the Indenture
and to be secured thereby, a series of bonds, designated "First Mortgage Bonds,
Pollution Control Collateral Series H." Each bond of such series shall bear the
descriptive title "First Mortgage Bond, Pollution Control Collateral Series H,"
and the form thereof shall be substantially of the tenor and purport
hereinbefore recited. The bonds of the Forty-Seventh Series shall be issued
from time to time in an aggregate principal amount of $75,500,000, excluding any
bonds of the Forty-Seventh Series which may be authenticated in exchange for or
in lieu of or in substitution for or on transfer of other bonds of such series
pursuant to the provisions of the Indenture, and shall be issued as registered
bonds without coupons in denominations of $1,000 and integral multiples thereof.
The bonds of the Forty-Seventh Series shall mature on October 1, 2029 and shall
not bear interest except as provided in Article XIII of the Original Indenture.
The principal of and interest, if any, on each bond of the Forty-Seventh Series
shall be payable at the office or agency of the Company in Pittsburgh,
Pennsylvania or at such other office or agency of the Company as shall be
designated from time to time, in lawful money of the United States of America.
Each bond of the Forty-Seventh Series shall be dated as of its Original
Issue Date. The term "Original Issue Date" as used in this Section 1.01 shall
mean the date of the first authentication and delivery hereunder of such bonds.
SECTION 1.02. Each bond of the Forty-Seventh Series shall be redeemable at
the option of the Company in whole at any time, or in part from time to time,
prior to maturity, at a redemption price equal to 100.00% of the principal
amount thereof to be redeemed, by payment at the office or agency of the Company
in Pittsburgh, Pennsylvania, or at such other office or agency of the Company as
shall be designated from time to time. Any such redemption shall be made upon
not less than 30 days' previous notice to be given in the manner provided in
Section 10.02 of the Original Indenture.
SECTION 1.03. The bonds of the Forty-Seventh Series shall be redeemable on
October 1 of each year commencing one year after the date of issuance of the
first bonds of said series for the Sinking Fund for bonds of said series
provided for in Article XII of the Original Indenture, upon not less than 30
days' previous notice of redemption to be given in the manner provided in
Section 10.02 of the Original Indenture, at the principal amount thereof.
SECTION 1.04. All bonds of the Forty-Seventh Series shall be redeemed, at
a redemption price equal to 100% of the principal amount thereof, if, and at
such time as, the securities which shall have been authenticated and delivered
under the 1992 Mortgage (as hereinafter defined) on the basis of the issuance
and delivery to the 1992 Mortgage Trustee (as hereinafter defined) of the bonds
of the Forty-Seventh Series shall have become subject to mandatory redemption.
No notice of such redemption shall be required to be given.
<PAGE>
SECTION 1.05. The bonds of the Forty-Seventh Series shall be issued and
delivered to Mellon Bank, N.A., as trustee under the Indenture of Mortgage and
Deed of Trust, dated as of April 1, 1992, as supplemented (the "1992 Mortgage"),
of the Company to such trustee (the "1992 Mortgage Trustee"), as the basis for
the authentication and delivery under the 1992 Mortgage of a series of
securities. As provided in the 1992 Mortgage, the bonds of the Forty-Seventh
Series will be registered in the name of the 1992 Mortgage Trustee or its
nominee and will be owned and held by the 1992 Mortgage Trustee, subject to the
provisions of the 1992 Mortgage, for the benefit of the holders of all
securities from time to time outstanding under the 1992 Mortgage, and the
Company shall have no interest therein.
Any payment by the Company under the 1992 Mortgage of the principal of or
interest, if any, on the securities which shall have been authenticated and
delivered under the 1992 Mortgage on the basis of the issuance and delivery to
the 1992 Mortgage Trustee of bonds of the Forty-Seventh Series (other than by
the application of the proceeds of a payment in respect of such bonds) shall, to
the extent thereof, be deemed to satisfy and discharge the obligation of the
Company, if any, to make a payment of principal of or interest on such bonds, as
the case may be, which is then due.
The Trustee may conclusively presume that the obligation of the Company to
pay the principal of the bonds of the Forty-Seventh Series as the same shall
become due and payable shall have been fully satisfied and discharged unless and
until it shall have received a written notice from the 1992 Mortgage Trustee,
signed by an authorized officer thereof, stating that the principal of specified
bonds of the Forty-Seventh Series has become due and payable and has not been
fully paid, and specifying the amount of funds required to make such payment.
SECTION 1.06. The bonds of the Forty-Seventh Series shall not be
transferable, except to any successor trustee under said 1992 Mortgage. Any
such transfer shall be made by the registered holder thereof, in person or by a
duly authorized attorney, at the office or agency of the Company in Pittsburgh,
Pennsylvania, or at such other office or agency of the Company as shall be
designated from time to time, upon surrender and cancellation of such bonds, and
thereupon a new bond or bonds of said series and of authorized denominations for
a like aggregate principal amount and having the same Original Issue Date,
Stated Maturity Date and other terms and conditions will be issued to the
transferee in exchange therefor. New bonds issued upon any such transfer shall
be so dated and shall carry such rights to any interest accrued and unpaid that
neither gain nor loss in interest shall result from such transfer.
SECTION 1.07. The registered holder of any bond or bonds of the Forty-
Seventh Series at his option may surrender the same at the office or agency of
the Company in Pittsburgh, Pennsylvania, or at such other office or agency of
the Company as shall be designated from time to time, for cancellation in
exchange for another or other bonds of the said series of authorized
denominations, but of the same aggregate principal amount and
<PAGE>
having the same Original Issue Date, Stated Maturity Date and other terms and
conditions and being so dated and carrying such rights to any interest accrued
and unpaid that neither gain nor loss in interest shall result from such
exchange. Thereupon, the Company shall execute and deliver to the Trustee, and
the Trustee shall authenticate and deliver such other bond or bonds to such
registered holder either at its office or at said office or agency of the
Company.
SECTION 1.08. No charge shall be made to any registered holder of any bond
of the Forty-Seventh Series for any exchange or transfer of bonds of said series
except that in case of any exchange or transfer the Company may make a charge
therefor sufficient to reimburse it for any tax or taxes or other governmental
charge required to be paid in connection therewith.
SECTION 1.09. For the purpose only of complying with the Original
Indenture (particularly Sections 10.02 and 12.02(b) thereof) in connection with
the redemption of bonds of the Forty-Seventh Series, for each $1,000 principal
amount of bonds authenticated and delivered hereunder there shall be assigned a
number in such manner and at such time as the Trustee may deem appropriate.
Portions of the principal amount less than the entire principal amount of a bond
of the Forty-Seventh Series of a denomination larger than $1,000 may be redeemed
only in integral multiples of $1,000.
ARTICLE II
MISCELLANEOUS
SECTION 2.01. The holders of the bonds of the Forty-Seventh Series shall
be deemed to have consented and agreed that the Company may, but shall not be
obligated to, fix a record date for the purpose of determining the holders of
the bonds of the Forty-Seventh Series entitled to consent to any amendment or
supplement to the Indenture or the waiver of any provision thereof or any act to
be performed thereunder. If a record date is fixed, those persons who were
holders at such record date (or their duly designated proxies), and only those
persons, shall be entitled to consent to such amendment, supplement or waiver or
to revoke any consent previously given, whether or not such persons continue to
be holders after such record date. No such consent shall be valid or effective
for more than 90 days after such record date.
SECTION 2.02. The recitals of fact herein and in the bonds (except the
Trustee's Certificate) shall be taken as statements of the Company and shall not
be construed as made or warranted by the Trustee. The Trustee makes no
representations as to the value of any of the property subjected to the lien of
the Indenture, or any part thereof, or as to the title of the Company thereto,
or as to the security afforded thereby and hereby, or as to the validity of this
Ninetieth Supplemental Trust Indenture or of the bonds of the Forty-Seventh
Series (except the Trustee's Certificate), and the Trustee shall incur no
responsibility in respect of such matters.
<PAGE>
SECTION 2.03. This Ninetieth Supplemental Trust Indenture shall be
construed in connection with and as part of the Indenture.
SECTION 2.04. (a) If any provision of this Ninetieth Supplemental Trust
Indenture limits, qualifies, or conflicts with another provision of the
Indenture required to be included in indentures qualified under the Trust
Indenture Act of 1939 (as in force at the date of this Ninetieth Supplemental
Trust Indenture) by any of the provisions of Sections 310 to 317, inclusive, of
said Act, such required provision shall control.
(b) In case any one or more of the provisions contained in this Ninetieth
Supplemental Trust Indenture or in the bonds issued hereunder should be invalid,
illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected, impaired, prejudiced or disturbed thereby.
SECTION 2.05. Whenever in this Ninetieth Supplemental Trust Indenture
either of the parties hereto is named or referred to, this shall be deemed to
include the successors or assigns of such party, and all the covenants and
agreements in this Ninetieth Supplemental Trust Indenture contained by or on
behalf of the Company or by or on behalf of the Trustee shall bind and inure to
the benefit of the respective successors and assigns of such parties, whether so
expressed or not.
SECTION 2.06. This Ninetieth Supplemental Trust Indenture may be
simultaneously executed in several counterparts, and all said counterparts
executed and delivered, each as an original, shall constitute but one and the
same instrument.
The Table of Contents and the descriptive headings of the several Articles
of this Ninetieth Supplemental Trust Indenture were formulated, used and
inserted herein for convenience only and shall not be deemed to affect the
meaning or construction of any of the provisions hereof.
SECTION 2.07. Duquesne Light Company does hereby constitute and appoint
Diane S. Eismont to be its attorney for it and in its name and as and for its
corporate deed to acknowledge this Ninetieth Supplemental Trust Indenture before
any person having authority by law to take such acknowledgment.
Mellon Bank, N.A. does hereby constitute and appoint D.M. Babich to be its
attorney-in-fact for it and in its name and as and for its corporate deed to
acknowledge this Ninetieth Supplemental Trust Indenture before any person having
authority by law to take such acknowledgment.
<PAGE>
In Witness Whereof, the party of the first part has caused its corporate
name to be subscribed and this Ninetieth Supplemental Trust Indenture to be
signed by its Chairman of the Board, President and Chief Executive Officer or a
Vice President, and its corporate seal to be hereunto affixed and attested by
its Secretary or an Assistant Secretary, for and on its behalf, and the party of
the second part, to evidence its acceptance of the trust hereby created, has
caused its corporate name to be subscribed, and this Ninetieth Supplemental
Trust Indenture to be signed by its President, a Vice President or an Assistant
Vice President and its corporate seal to be hereunto affixed and attested by its
authorized officer, for and in its behalf, all done as of the first day of
October, 1994.
DUQUESNE LIGHT COMPANY
[Seal] By: /s/ Gary L. Schwass
--------------------------
Vice President Finance
and Chief Financial Officer
Attest:
/s/ Diane S. Eismont
------------------------
Secretary
MELLON BANK, N.A.
[Seal] By: /s/ J. H. McAnulty
----------------------
Vice President
Attest:
/s/ D.M. Babich
---------------------
Authorized Officer
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF ALLEGHENY )
On this 20th day of October, 1994 before me, the subscriber, a notary
public in and for said Commonwealth and County, personally appeared Diane S.
Eismont, the attorney-in-fact named in the foregoing Ninetieth Supplemental
Trust Indenture, and by virtue and in pursuance of the authority therein
conferred upon her acknowledged the said Ninetieth Supplemental Trust Indenture
to be the act and deed of the said Duquesne Light Company and that she desired
the same to be recorded as such.
WITNESS my hand and notarial seal the day and year aforesaid.
/s/ Joanne E. Kirin
-----------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF ALLEGHENY )
On this 20th day of October, 1994 before me, the subscriber, a notary
public in and for said Commonwealth and County, personally appeared D.M. Babich,
the attorney-in-fact named in the foregoing Ninetieth Supplemental Trust
Indenture, and by virtue and in pursuance of the authority therein conferred
upon him acknowledged the said Ninetieth Supplemental Trust Indenture to be the
act and deed of the said Mellon Bank, N.A., and that he desired the same to be
recorded as such.
WITNESS my hand and notarial seal the day and year aforesaid.
Erin Rebecca Beile
-----------------------------
Notary Public
<PAGE>
CERTIFICATE OF PRECISE RESIDENCE
I hereby certify that the precise residence of Mellon Bank, N.A. is One
Mellon Bank Center, Second Ward, Pittsburgh, Allegheny County, Pennsylvania.
/s/ D.M. Babich
------------------------------
Authorized Signatory of
Mellon Bank, N.A.
October 20, 1994
<PAGE>
RECORDING INFORMATION
Allegheny County, Pennsylvania
Office of Recorder of Deeds
Recorded October 20, 1994
Mortgage Book Volume 14536, page 560
Beaver County, Pennsylvania
Office of Recorder of Deeds
Recorded October 20, 1994
Mortgage Book Volume 1344, page 67
Greene County, Pennsylvania
Office of Recorder of Deeds
Recorded October 21, 1994
Record Book Volume 135, page 1
Washington County, Pennsylvania
Office of Recorder of Deeds
Recorded October 21, 1994
Mortgage Book Volume 2606, page 554
Westmoreland County, Pennsylvania
Office of Recorder of Deeds
Recorded October 21, 1994
Mortgage Book Volume 3478, page 640
Belmont County, Ohio
Office of Recorder
Received October 24, 1994
Recorded October 25, 1994
Mortgage Book Volume 627, page 228
Columbiana County, Ohio
Office of Recorder
Recorded October 24, 1994
Official Records Volume 452, page 231
Jefferson County, Ohio
Office of Recorder
Received October 24, 1994
Recorded October 25, 1994
Official Records Volume 149, page 84
Lake County, Ohio
Office of Recorder
Recorded October 21, 1994
Official Records Volume 1059, page 1207
<PAGE>
Monroe County, Ohio
Office of Recorder
Received October 24, 1994
Recorded October 24, 1994
Official Records Volume 9, page 283
Hancock County, West Virginia
Office of Clerk of County Commission
Recorded October 24, 1994
Deed of Trust Book 321, page 286
Monongalia County, West Virginia
Office of Clerk of County Commission
Recorded October 21, 1994
Deed of Trust Book 762, page 643
<PAGE>
EXHIBIT 4.6(i)
[CONFORMED]
--------------------------------------------------------------------------------
DUQUESNE LIGHT COMPANY
TO
MELLON BANK, N.A.
Trustee
---------------------
Supplemental Indenture No. 8
Dated March 21, 1994
Supplemental to the Indenture of Mortgage
and Deed of Trust dated as of April 1, 1992
Subjecting additional property to the lien of the
Indenture dated as of April 1, 1992
--------------------------------------------------------------------------------
<PAGE>
SUPPLEMENTAL INDENTURE No. 8, dated March 21, 1994, between DUQUESNE LIGHT
COMPANY, a corporation duly organized and existing under the laws of the
Commonwealth of Pennsylvania (hereinafter sometimes called the "Company"), and
MELLON BANK, N.A., a national banking association organized and existing under
the laws of the United States of America, trustee (hereinafter sometimes called
the "Trustee"), under the Indenture of Mortgage and Deed of Trust, dated as of
April 1, 1992 (hereinafter called the "Original Indenture"), this Supplemental
Indenture No. 8 being supplemental thereto. The Original Indenture and any and
all indentures and instruments supplemental thereto are hereinafter sometimes
collectively called the "Mortgage."
Recitals of the Company
The Original Indenture was authorized, executed and delivered by the
Company to provide for the issuance from time to time of its Securities (such
term and all other capitalized terms used herein without definition having the
meanings assigned to them in the Original Indenture), to be issued in one or
more series as contemplated therein, and to provide security for the payment of
the principal of and premium, if any, and interest, if any, on the Securities.
The Original Indenture has been recorded in the Recorders' Offices of the
various counties of Pennsylvania as follows:
In Allegheny County in Mortgage Book Vol. 12068, page 8;
In Beaver County in Mortgage Book Vol. 1208, page 520;
In Greene County in Mortgage Book Vol. 100, page 174;
In Washington County in Mortgage Book Vol. 1873, page 1;
In Westmoreland County in Mortgage Book Vol. 2862, page 221;
and has also been recorded in the Office of the Clerk of County Commission of
Monongalia County, West Virginia, in Deed of Trust Book Vol. 672, page 129, the
Office of the Clerk of County Commission of Hancock County, West Virginia, in
Deed of Trust Book Vol. 293, page 46, the Recorder's Office of Belmont County,
Ohio, in Mortgage Book Vol. 586, page 273, the Recorder's Office of Columbiana
County, Ohio, in Mortgage Book Vol. 318, page 289, the Recorder's Office of
Jefferson County, Ohio, in Mortgage Book Vol. 65, page 675, the Recorder's
Office of Lake County, Ohio, in Mortgage Book Vol. 711, page 217, and the
Recorder's Office of Monroe County, Ohio, in Mortgage Book Vol. 129, page 301.
Section 1401 of the Original Indenture provides that the Company and the
Trustee may enter into one or more supplemental indentures for the purpose,
among others, of subjecting additional property to the Lien of the Mortgage.
<PAGE>
The Company has acquired additional properties which it desires to subject
to the Lien of the Mortgage by this Supplemental Indenture No. 8.
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE NO. 8 WITNESSETH, that, in
consideration of the premises and of the purchase of the Securities by the
Holders thereof, and in order to secure the payment of the principal of and
premium, if any, and interest, if any, on all Securities from time to time
Outstanding and the performance of the covenants contained therein and in the
Mortgage and to declare the terms and conditions on which such Securities are
secured, the Company grants, bargains, sells, releases, conveys, assigns,
transfers, mortgages, pledges, sets over and confirms to the Trustee, and grants
to the Trustee a security interest in, the following:
Granting Clause First
All right, title and interest of the Company in and to property (other than
Excepted Property), real, personal and mixed and wherever situated, in any case
used or to be used in or in connection with the generation, purchase,
transmission, distribution or sale by the Company of electric energy (whether or
not such use is the sole use of such property), including without limitation (a)
all land and interests in land described in Schedule A hereto; (b) all other
lands, easements, servitudes, licenses, permits, rights of way and other rights
and interests in or relating to real property or the occupancy or use of the
same; (c) all plants, generators, turbines, engines, boilers, fuel handling and
transportation facilities, air and water pollution control and sewage and solid
waste disposal facilities and other machinery and facilities for the generation
of electric energy; (d) all switchyards, lines, towers, substations,
transformers and other machinery and facilities for the transmission of electric
energy; (e) all lines, poles, conduits, conductors, meters, regulators and other
machinery and facilities for the distribution of electric energy; (f) all
buildings, offices, warehouses and other structures; and (g) all pipes, cables,
insulators, ducts, tools, computers and other data processing and/or storage
equipment and other equipment, apparatus and facilities and all other property,
of whatever kind and nature, ancillary to or otherwise used or to be used in
conjunction with any or all of the foregoing or otherwise, directly or
indirectly, in furtherance of the generation, purchase, transmission,
distribution or sale by the Company of electric energy;
Granting Clause Second
Subject to the applicable exceptions permitted by Section 810, Section 1303
and Section 1305 of the Original Indenture, all property (other than Excepted
Property) of the kind and nature described in Granting Clause First which may be
hereafter
-2-
<PAGE>
acquired by the Company, it being the intention of the Company that all such
property acquired by the Company after the date of the execution and delivery of
this Supplemental Indenture No. 8 shall be as fully embraced within and
subjected to the Lien hereof as if such property were owned by the Company as of
the date of the execution and delivery of this Supplemental Indenture No. 8;
Granting Clause Fourth
All other property of whatever kind and nature subjected or intended to be
subjected to the Lien of the Mortgage by any of the terms and provisions
thereof;
Excepted Property
Expressly excepting and excluding, however, from the Lien and operation of
the Mortgage all Excepted Property of the Company, whether now owned or
hereafter acquired;
TO HAVE AND TO HOLD all such property, real, personal and mixed, unto the
Trustee forever;
SUBJECT, HOWEVER, to Permitted Liens and to Liens which have been granted
by the Company to other Persons prior to the date of the execution and delivery
of the Original Indenture (including, but not limited to, the Lien of the DLC
1947 Mortgage), and subject also, as to any property acquired by the Company
after the date of execution and delivery of the Original Indenture, to vendors'
Liens, purchase money mortgages and other Liens thereon at the time of the
acquisition thereof (including, but not limited to, the Lien of any Class "A"
Mortgage), it being understood that with respect to any of such property which
was at the date of execution and delivery of the Original Indenture or
thereafter became or hereafter becomes subject to the Lien of any Class "A"
Mortgage, the Lien of the Mortgage shall at all times be junior and subordinate
to the Lien of such Class "A" Mortgage;
IN TRUST, NEVERTHELESS, for the equal and proportionate benefit and
security of the Holders from time to time of all Outstanding Securities without
any priority of any such Security over any other such Security;
PROVIDED, HOWEVER, that if, after the right, title and interest of the
Trustee in and to the Mortgaged Property shall have ceased, terminated and
become void in accordance with Article Nine of the Original Indenture, the
principal of and premium, if any, and interest, if any, on the Securities shall
have been paid to the Holders thereof, or shall have been paid to the Company
pursuant to Section 603 of the Original Indenture, then and in that case the
Mortgage and the estate and rights thereby granted shall cease, terminate and be
void, and
-3-
<PAGE>
the Trustee shall cancel and discharge the Mortgage and execute and deliver to
the Company such instruments as the Company shall require to evidence the
discharge thereof; otherwise the Mortgage shall be and remain in full force and
effect; and
THE PARTIES HEREBY FURTHER COVENANT AND AGREE that this Supplemental
Indenture No. 8 is a supplement to the Mortgage. As supplemented by this
Supplemental Indenture No. 8, the Mortgage is in all respects ratified, approved
and confirmed, and the Mortgage and this Supplemental Indenture No. 8 shall
together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have caused this Supplemental Indenture No.
8 to be duly executed, and their respective corporate seals to be affixed and
attested, all as of the day and year first above written.
DUQUESNE LIGHT COMPANY
By: /s/ Gary L. Schwass
------------------------------
Gary L. Schwass
Vice President-Finance
and Chief Financial Officer
Attest:
/s/ Diane S. Eismont
--------------------------------
Secretary
MELLON BANK, N.A., Trustee
By: /s/ J. H. McAnulty
------------------------------
J. H. McAnulty
Vice President
Attest:
/s/ D. M. Babich
--------------------------------
Authorized Officer
-4-
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF ALLEGHENY )
On the 21st day of March, 1994, before me personally came Gary L.
Schwass, to me known, who, being by me duly sworn, did depose and say that he is
the Vice President-Finance and Chief Financial Officer of Duquesne Light
Company, the corporation described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by authority of
the Board of Directors of said corporation, and that he signed his name thereto
by like authority.
/s/ Joanne E. Kirin
-----------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF ALLEGHENY )
On the 21st day of March, 1994, before me personally came J. H.
McAnulty, to me known, who, being by me duly sworn, did depose and say that he
is a Vice President of Mellon Bank, N.A., the national banking association
described in and which executed the foregoing instrument; that he knows the seal
of said national banking association; that the seal affixed to said instrument
is the seal of said national banking association; that it was so affixed by
authority of the Board of Directors of said national banking association, and
that he signed his name thereto by like authority.
/s/ Michael E. Puskar
-----------------------------
Notary Public
-5-
<PAGE>
CERTIFICATE OF PRECISE RESIDENCE
I hereby certify that the precise residence of Mellon Bank, N.A., is
One Mellon Bank Center, Second Ward, Pittsburgh, Allegheny County, Pennsylvania.
/s/ D. M. Babich
--------------------------------------------
Authorized Signatory of Mellon Bank, N.A.
March 21, 1994
-6-
<PAGE>
RECORDING INFORMATION
Allegheny County, Pennsylvania
Office of Recorder of Deeds
Recorded March 24, 1994
Mortgage Book Volume 14028, page 391
Beaver County, Pennsylvania
Office of Recorder of Deeds
Recorded March 24, 1994
Mortgage Book Volume 1311, page 359
Greene County, Pennsylvania
Office of Recorder of Deeds
Recorded March 23, 1994
Mortgage Book Volume 126, page 328
Washington County, Pennsylvania
Office of Recorder of Deeds
Recorded March 23, 1994
Mortgage Book Volume 2111, page 337
Westmoreland County, Pennsylvania
Office of Recorder of Deeds
Recorded March 23, 1994
Mortgage Book Volume 3346, page 520
Belmont County, Ohio
Office of Recorder
Received March 23, 1994
Recorded March 24, 1994
Mortgage Book Volume 615, page 886
Columbiana County, Ohio
Office of Recorder
Recorded March 24, 1994
Mortgage Book Volume 420, page 476
Jefferson County, Ohio
Office of Recorder
Received March 23, 1994
Recorded March 24, 1994
Mortgage Book Volume 129, page 919
-7-
<PAGE>
Lake County, Ohio
Office of Recorder
Recorded March 24, 1994
Mortgage Book Volume 985, page 1218
Monroe County, Ohio
Office of Recorder
Received March 23, 1994
Recorded March 23, 1994
Mortgage Book Volume 4, page 88
Hancock County, West Virginia
Office of Clerk of County Commission
Recorded March 24, 1994
Deed of Trust Book 315, page 491
Monongalia County, West Virginia
Office of Clerk of County Commission
Recorded March 23, 1994
Deed of Trust Book 739, page 581
-8-
<PAGE>
SCHEDULE A
I
All of the following described property situate in the County of Beaver and
Commonwealth of Pennsylvania, the deeds herein recited being recorded in the
Recorder's Office of said County, and reference being made thereto for a more
particular description of said property, viz:
Undivided 17.01% interest as tenant in common with The Cleveland
Electric Illuminating Company, Ohio Edison Company, Pennsylvania Power
Company and The Toledo Edison Company in all that certain lot or piece
of property situate in the Township of Greene, Beaver County,
Pennsylvania. Conveyed by Kevin H. Reed, et al., to Duquesne Light
Company, et al. Deed dated November 23, 1993. Deed Book Volume 1556,
page 056 in the Beaver County Recorder's Office. Tax Parcel I.D. No.
62-180-0143-001. (Adjacent Property).
Undivided 17.01% interest as tenant in common with The Cleveland
Electric Illuminating Company, Ohio Edison Company, Pennsylvania Power
Company and The Toledo Edison Company in all that certain lot or piece
of property situate in the Township of Greene, Beaver County,
Pennsylvania. Conveyed by Kendig C. Laughlin, et ux., to Duquesne
Light Company, et al. Deed dated December 22, 1993. Deed Book Volume
1557, page 647 in the Beaver County Recorder's Office. Tax Parcel I.D.
Nos. 62-180-0140-000 and 62-180-0141-000. (Adjacent Property).
Undivided 17.01% interest as tenant in common with The Cleveland
Electric Illuminating Company, Ohio Edison Company, Pennsylvania Power
Company and The Toledo Edison Company in all that certain lot or piece
of property situate in the Township of Greene, Beaver County,
Pennsylvania. Conveyed by Pete G. Kohl, et ux., to Duquesne Light
Company, et al. Deed dated December 21, 1993. Deed Book Volume 1557,
page 546 in the Beaver County Recorder's Office. Tax Parcel I.D. Nos.
62-180-0132-000 and 62-180-0132-001. (Adjacent Property).
A-1
<PAGE>
EXHIBIT 4.6 (ii)
==============================================================================
DUQUESNE LIGHT COMPANY
TO
MELLON BANK, N.A.
TRUSTEE
_____________________
SUPPLEMENTAL INDENTURE NO. 9
Dated as of October 1, 1994
Supplemental to the Indenture of Mortgage
and Deed of Trust dated as of April 1, 1992
Establishing a series of Securities designated
First Collateral Trust Bonds, Pollution Control Series H,
limited in aggregate principal amount to $75,500,000
==============================================================================
<PAGE>
SUPPLEMENTAL INDENTURE NO. 9, dated as of October 1, 1994, between DUQUESNE
LIGHT COMPANY, a corporation duly organized and existing under the laws of the
Commonwealth of Pennsylvania (hereinafter sometimes called the "Company"), and
MELLON BANK, N.A., a national banking association organized and existing under
the laws of the United States of America, trustee (hereinafter sometimes called
the "Trustee"), under the Indenture of Mortgage and Deed of Trust, dated as of
April 1, 1992 (hereinafter called the "Original Indenture"), this Supplemental
Indenture No. 9 being supplemental thereto. The Original Indenture and any and
all indentures and instruments supplemental thereto are hereinafter sometimes
collectively called the "Mortgage."
RECITALS OF THE COMPANY
The Original Indenture was authorized, executed and delivered by the
Company to provide for the issuance from time to time of its Securities (such
term and all other capitalized terms used herein without definition having the
meanings assigned to them in the Original Indenture), to be issued in one or
more series as contemplated therein, and to provide security for the payment of
the principal of and premium, if any, and interest, if any, on the Securities.
The Original Indenture has been recorded in the Recorders' Offices of
the various counties of Pennsylvania as follows:
In Allegheny County in Mortgage Book Vol. 12068, page 8;
In Beaver County in Mortgage Book Vol. 1208, page 520;
In Greene County in Mortgage Book Vol. 100, page 174;
In Washington County in Mortgage Book Vol. 1873, page 1;
In Westmoreland County in Mortgage Book Vol. 2862, page 221;
and has also been recorded in the Office of the Clerk of County Commission of
Monongalia County, West Virginia, in Deed of Trust Book Vol. 672, page 129, the
Office of the Clerk of County Commission of Hancock County, West Virginia, in
Deed of Trust Book Vol. 293, page 46, the Recorder's Office of Belmont County,
Ohio, in Mortgage Book Vol. 586, page 273, the Recorder's Office of Columbiana
County, Ohio, in Mortgage Book Vol. 318, page 289, the Recorder's Office of
Jefferson County, Ohio, in Mortgage Book Vol. 65, page 675, the Recorder's
Office of Lake County, Ohio, in Mortgage Book Vol. 711, page 217, and the
Recorder's Office of Monroe County, Ohio, in Mortgage Book Vol. 129, page 301.
The Company has heretofore executed and delivered to Mellon Bank, N.A., as
Trustee, Supplemental Indentures for the purposes recited therein and for the
purpose of creating series of Securities as set forth in Schedule A hereto.
<PAGE>
The Company desires to establish a series of Securities to be designated
"First Collateral Trust Bonds, Pollution Control Series H" to be limited in
aggregate principal amount (except as contemplated in Section 301(b) of the
Original Indenture) to $75,500,000, such series of Securities to be hereinafter
sometimes called "Series No. 7."
The Company has duly authorized the execution and delivery of this
Supplemental Indenture No. 9 to establish the Securities of Series No. 7 and has
duly authorized the issuance of such Securities; and all acts necessary to make
this Supplemental Indenture No. 9 a valid agreement of the Company, and to make
the Securities of Series No. 7 valid obligations of the Company, have been
performed.
NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE NO. 9 WITNESSETH, that, in
consideration of the premises and of the purchase of the Securities by the
Holders thereof, and in order to secure the payment of the principal of and
premium, if any, and interest, if any, on all Securities from time to time
Outstanding and the performance of the covenants contained therein and in the
Mortgage and to declare the terms and conditions on which such Securities are
secured, the Company hereby grants, bargains, sells, releases, conveys, assigns,
transfers, mortgages, pledges, sets over and confirms to the Trustee, and grants
to the Trustee a security interest in, the following:
GRANTING CLAUSE FIRST
All right, title and interest of the Company in and to property (other than
Excepted Property), real, personal and mixed and wherever situated, in any case
used or to be used in or in connection with the generation, purchase,
transmission, distribution or sale by the Company of electric energy (whether or
not such use is the sole use of such property), including without limitation (a)
all land and interests in land described in Schedule B hereto; (b) all lands,
easements, servitudes, licenses, permits, rights of way and other rights and
interests in or relating to real property or the occupancy or use of the same;
(c) all plants, generators, turbines, engines, boilers, fuel handling and
transportation facilities, air and water pollution control and sewage and solid
waste disposal facilities and other machinery and facilities for the generation
of electric energy; (d) all switchyards, lines, towers, substations,
transformers and other machinery and facilities for the transmission of electric
energy; (e) all lines, poles, conduits, conductors, meters, regulators and other
machinery and facilities for the distribution of electric energy; (f) all
buildings, offices, warehouses and other structures; and (g) all pipes, cables,
insulators, ducts, tools, computers and other data processing and/or storage
equipment and other equipment, apparatus and facilities and all other property,
of whatever kind and nature, ancillary to or otherwise used or to be used in
conjunction with any or all of the foregoing or otherwise, directly or
indirectly, in furtherance of the
<PAGE>
generation, purchase, transmission, distribution or sale by the Company of
electric energy;
GRANTING CLAUSE SECOND
Subject to the applicable exceptions permitted by Section 810, Section 1303
and Section 1305 of the Original Indenture, all property (other than Excepted
Property) of the kind and nature described in Granting Clause First which may be
hereafter acquired by the Company, it being the intention of the Company that
all such property acquired by the Company after the date of the execution and
delivery of this Supplemental Indenture No. 9 shall be as fully embraced within
and subjected to the Lien hereof as if such property were owned by the Company
as of the date of the execution and delivery of this Supplemental Indenture No.
9;
GRANTING CLAUSE FOURTH
All other property of whatever kind and nature subjected or intended to be
subjected to the Lien of the Mortgage by any of the terms and provisions
thereof;
EXCEPTED PROPERTY
Expressly excepting and excluding, however, from the Lien and operation of
the Mortgage all Excepted Property of the Company, whether now owned or
hereafter acquired;
TO HAVE AND TO HOLD all such property, real, personal and mixed, unto the
Trustee forever;
SUBJECT, HOWEVER, to Permitted Liens and to Liens which have been granted
by the Company to other Persons prior to the date of the execution and delivery
of the Original Indenture (including, but not limited to, the Lien of the DLC
1947 Mortgage), and subject also, as to any property acquired by the Company
after the date of execution and delivery of the Original Indenture, to vendors'
Liens, purchase money mortgages and other Liens thereon at the time of the
acquisition thereof (including, but not limited to, the Lien of any Class "A"
Mortgage), it being understood that with respect to any of such property which
was at the date of execution and delivery of the Original Indenture or
thereafter became or hereafter becomes subject to the Lien of any Class "A"
Mortgage, the Lien of the Mortgage shall at all times be junior and subordinate
to the Lien of such Class "A" Mortgage;
IN TRUST, NEVERTHELESS, for the equal and proportionate benefit and
security of the Holders from time to time of all Outstanding Securities without
any priority of any such Security over any other such Security;
PROVIDED, HOWEVER, that if, after the right, title and interest of the
Trustee in and to the Mortgaged Property shall have
<PAGE>
ceased, terminated and become void in accordance with Article Nine of the
Original Indenture, the principal of and premium, if any, and interest, if any,
on the Securities shall have been paid to the Holders thereof, or shall have
been paid to the Company pursuant to Section 603 of the Original Indenture, then
and in that case the Mortgage and the estate and rights thereby granted shall
cease, terminate and be void, and the Trustee shall cancel and discharge the
Mortgage and execute and deliver to the Company such instruments as the Company
shall require to evidence the discharge thereof; otherwise the Mortgage shall be
and remain in full force and effect; and
THE PARTIES HEREBY FURTHER COVENANT AND AGREE as follows:
ARTICLE ONE
SEVENTH SERIES OF SECURITIES
There is hereby created a series of Securities designated "First Collateral
Trust Bonds, Pollution Control Series H" and limited in aggregate principal
amount (except as contemplated in Section 301(b) of the Original Indenture) to
$75,500,000. The form and terms of the Securities of Series No. 7 shall be
established in an Officer's Certificate.
ARTICLE TWO
MISCELLANEOUS PROVISIONS
This Supplemental Indenture No. 9 is a supplement to the Mortgage. As
supplemented by this Supplemental Indenture No. 9, the Mortgage is in all
respects ratified, approved and confirmed, and the Mortgage and this
Supplemental Indenture No. 9 shall together constitute one and the same
instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Supplemental
Indenture No. 9 to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
DUQUESNE LIGHT COMPANY
[Seal] By: /s/ Gary L. Schwass
----------------------------
Vice President Finance
and Chief Financial Officer
Attest:
/s/ Diane S. Eismont
------------------------
Secretary
MELLON BANK, N.A., Trustee
By: /s/ J. H. McAnulty
------------------------
[Seal] Vice President
Attest:
/s/ D.M. Babich
--------------------
Authorized Officer
<PAGE>
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF ALLEGHENY )
On the 20th day of October, 1994, before me personally came Gary L.
Schwass, to me known, who, being by me duly sworn, did depose and say that he is
the Vice President Finance and Chief Financial Officer of Duquesne Light
Company, the corporation described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by authority of
the Board of Directors of said corporation, and that he signed his name thereto
by like authority.
/s/ Joanne E. Kirin
--------------------------
Notary Public
COMMONWEALTH OF PENNSYLVANIA )
) ss.:
COUNTY OF ALLEGHENY )
On the 20th day of October, 1994, before me personally came J. H.
McAnulty, to me known, who, being by me duly sworn, did depose and say that he
is a Vice President of Mellon Bank, N.A., the national banking association
described in and which executed the foregoing instrument; that he knows the seal
of said national banking association; that the seal affixed to said instrument
is the seal of said national banking association; that it was so affixed by
authority of the Board of Directors of said national banking association, and
that he signed his name thereto by like authority.
/s/ Erin Rebecca Beile
-------------------------------
Notary Public
<PAGE>
CERTIFICATE OF PRECISE RESIDENCE
I hereby certify that the precise residence of Mellon Bank, N.A., is
One Mellon Bank Center, Second Ward, Pittsburgh, Allegheny County, Pennsylvania.
/s/ D.M. Babich
------------------------------
Authorized Signatory
of Mellon Bank, N.A.
October 20, 1994
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Supplemental Securities of Series
Indenture No. Dated as of Series No. Designation
-------------- ----------- ---------- -----------
<S> <C> <C> <C>
1 April 1, 1992 1 Secured Medium-
Term Notes,
Series B
2 October 1, 1992 2 First
Collateral
Trust Bonds,
Series C
3 December 1, 1992 3 First
Collateral
Trust Bonds,
P o l l u t i o n
Control
Series D
4 March 30, 1993 None None
5 June 1, 1993 4 First
Collateral
Trust Bonds,
Series E
6 June 1, 1993 5 First
Collateral
Trust Bonds,
P o l l u t i o n
Control
Series F
7 August 1, 1993 6 First
Collateral
Trust Bonds,
P o l l u t i o n
Control
Series G
8 March 21, 1994 None None
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Principal Amount
Supplemental
Indenture No. Authorized Issued1 Outstanding1
------------- ---------- ---------- ------------
<S> <C> <C> <C>
1 $400,000,000 $400,000,000 $400,000,000
2 $400,000,000 $360,000,000 $360,000,000
3 $47,925,000 $47,925,000 $47,925,000
4 None None None
5 $300,000,000 $200,000,000 $200,000,000
6 $25,000,000 $25,000,000 $25,000,000
7 $20,500,000 $20,500,000 $20,500,000
8 None None None
</TABLE>
--------------------
1 As of October 1, 1994.
<PAGE>
SCHEDULE B
I
All of the following described property situate in the County of Beaver and
Commonwealth of Pennsylvania, the deeds herein recited being recorded in the
Recorder's Office of said County, and reference being made thereto for a more
particular description of said property, viz:
Undivided 17.01% interest as tenant in common with Pennsylvania Power
Company, The Cleveland Electric Illuminating Company, Ohio Edison Company
and The Toledo Edison Company in a parcel of land situate in the Township
of Greene. Conveyed by Dravo Basic Materials Company, Inc., an Alabama
corporation, to Duquesne Light Company, et al. Deed dated February 14,
1994. Deed Book Volume 1578, page 0802. Tax parcel I.D. No. 62-170-
0107.000. (Bruce Mansfield Power Station)
Undivided 17.01% interest as tenant in common with Pennsylvania Power
Company, The Cleveland Electric Illuminating Company, Ohio Edison Company
and The Toledo Edison Company in a parcel of land situate in the Township
of Greene. Conveyed by Daniel J. Rhodes and Debbie L. Rhodes, husband and
wife, to Duquesne Light Company, et al. Deed dated February 22, 1994.
Deed Book Volume 1581, page 0072. Tax parcel I.D. No. 62-180-0136.000.
(Bruce Mansfield Power Station)
Undivided 17.01% interest as tenant in common with Pennsylvania Power
Company, The Cleveland Electric Illuminating Company, Ohio Edison Company
and The Toledo Edison Company in a parcel of land situate in the Township
of Greene. Conveyed by Ralph E. Hampe and Fannie M. Hampe, husband and
wife, to Duquesne Light Company, et al. Deed dated May 19, 1994. Deed
Book Volume 1593, page 0773. Tax parcel I.D. No. 62-180-138.000. (Bruce
Mansfield Power Station)
Undivided 17.01% interest as tenant in common with Pennsylvania Power
Company, The Cleveland Electric Illuminating Company, Ohio Edison Company
and The Toledo Edison Company in a parcel of land situate in the Township
of Greene. Conveyed by Jason E. Kastler, unmarried, and Alice B. Kastler,
unmarried, to Duquesne Light Company, et al. Deed dated May 26, 1994.
Deed Book Volume 1596, page 0443. Tax parcel I.D. No. 62-180-145. (Bruce
Mansfield Power Station)
<PAGE>
RECORDING INFORMATION
Allegheny County, Pennsylvania
Office of Recorder of Deeds
Recorded October 20, 1994
Mortgage Book Volume 14536, page 550
Beaver County, Pennsylvania
Office of Recorder of Deeds
Recorded October 20, 1994
Mortgage Book Volume 1344, page 82
Greene County, Pennsylvania
Office of Recorder of Deeds
Recorded October 21, 1994
Record Book Volume 135, page 16
Washington County, Pennsylvania
Office of Recorder of Deeds
Recorded October 21, 1994
Mortgage Book Volume 2606, page 569
Westmoreland County, Pennsylvania
Office of Recorder of Deeds
Recorded October 21, 1994
Mortgage Book Volume 3479, page 001
Belmont County, Ohio
Office of Recorder
Received October 24, 1994
Recorded October 25, 1994
Mortgage Book Volume 627, page 243
Columbiana County, Ohio
Office of Recorder
Recorded October 24, 1994
Official Records Volume 452, page 222
Jefferson County, Ohio
Office of Recorder
Received October 24, 1994
Recorded October 25, 1994
Official Records Volume 149, page 99
Lake County, Ohio
Office of Recorder
Recorded October 21, 1994
Official Records Volume 1059, page 1223
<PAGE>
Monroe County, Ohio
Office of Recorder
Received October 24, 1994
Recorded October 24, 1994
Official Records Volume 9, page 298
Hancock County, West Virginia
Office of Clerk of County Commission
Recorded October 24, 1994
Deed of Trust Book 322, page 301
Monongalia County, West Virginia
Office of Clerk of County Commission
Recorded October 21, 1994
Deed of Trust Book 762, page 634
<PAGE>
EXHIBIT 10.25
CERTAIN RIGHTS OF THE LESSOR UNDER THE FACILITY LEASE AS AMENDED BY THIS
AMENDMENT NO. 3 THERETO HAVE BEEN ASSIGNED TO, AND ARE SUBJECT TO A SECURITY
INTEREST IN FAVOR OF, THE BANK OF NEW YORK, AS INDENTURE TRUSTEE UNDER A TRUST
INDENTURE, MORTGAGE, SECURITY AGREEMENT AND ASSIGNMENT OF FACILITY LEASE, DATED
AS OF SEPTEMBER 15, 1987, AS AMENDED. THIS AMENDMENT NO. 3 HAS BEEN EXECUTED IN
SEVERAL COUNTERPARTS. ONLY THE COUNTERPART MARKED "ORIGINAL" AND CONTAINING THE
RECEIPT THEREFOR BY THE INDENTURE TRUSTEE SHALL BE THE ORIGINAL COUNTERPART. SEE
SECTION 3(C) OF THIS AMENDMENT NO. 3 FOR INFORMATION CONCERNING THE RIGHTS OF
HOLDERS OF VARIOUS COUNTERPARTS HEREOF.
THIS COUNTERPART IS NOT THE ORIGINAL COUNTERPART.
================================================================================
AMENDMENT NO. 3
dated as of October 13, 1994
to
FACILITY LEASE
dated as of September 15, 1987
between
THE FIRST NATIONAL BANK OF BOSTON
not in its individual capacity but solely
as Owner Trustee under a Trust Agreement,
dated as of September 15, 1987, with
Beaver Valley Two Tau Limited Partnership,
Lessor
and
DUQUESNE LIGHT COMPANY,
Lessee
================================================================================
Original Facility Lease Recorded
on October 2, 1987 in Miscellaneous
Book Volume 1318, Page 406 in the Office of
the Recorder of Deeds, Beaver County,Pennsylvania.
Amendment No. 1 to Facility Lease Recorded
on December 22, 1987 in Miscellaneous Book
Volume 1325, Page 344 in the Office of the
Recorder of Deeds, Beaver County, Pennsylvania.
Amendment No. 2 to Facility Lease Recorded
on December 29, 1992 in Miscellaneous Book
Volume 1519, Page 075 in the Office of the
Recorder of Deeds, Beaver County, Pennsylvania.
================================================================================
<PAGE>
AMENDMENT NO. 3, dated as of October 13, 1994 ("Amendment No. 3"), to
the Facility Lease, dated as of September 15, 1987, as amended to the date
hereof (as so amended, the "Facility Lease"), between THE FIRST NATIONAL BANK OF
BOSTON, a national banking association, not in its individual capacity but
solely as Owner Trustee under a Trust Agreement, dated as of September 15, 1987,
as amended to the date hereof, with Beaver Valley Two Tau Limited Partnership
(the "Lessor"), and DUQUESNE LIGHT COMPANY, a Pennsylvania corporation (the
"Lessee").
W I T N E S S E T H :
-------------------
WHEREAS, the Lessee and the Lessor have heretofore entered into a
Facility Lease, providing for the lease by the Lessor to the Lessee of the
Undivided Interest (such term and other capitalized terms used herein without
definition being defined as provided in Section 1);
WHEREAS, Section 3(d) of the Facility Lease provides for an adjustment
to Basic Rent and to the schedules of Casualty Values, Special Casualty Values,
Modified Special Casualty Values and Special Termination Values in order to
preserve Net Economic Return in the event there is any change in the Code which
results in the marginal Federal income tax rate applicable to corporations
differing from the rate assumed to be applicable in the Pricing Assumptions as
in effect on the Closing Date; and
WHEREAS, by reason of the enactment of the Omnibus Budget
Reconciliation Act of 1993 (Pub. L. No. 103-66) ("Budget Reconciliation Act")
the marginal Federal income tax rate applicable to corporations increased from
34 percent to 35 percent for tax years beginning on or after January 1, 1993
and, as a result, the Lessor wishes to document amendments to the schedules of
Basic Rent, Casualty Values, Special Casualty Values, Modified Special Casualty
Values and Special Termination Values pursuant to Sections 3(d) and 3(f) of the
Facility Lease.
NOW, THEREFORE, intending to be legally bound hereby, in consideration
of the premises and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS.
-----------
For purposes hereof, capitalized terms used herein or in the recitals
and not otherwise defined herein or in the recitals shall have the meanings
assigned to such terms in Appendix A to the Facility Lease.
<PAGE>
SECTION 2. AMENDMENTS TO FACILITY LEASE.
-----------------------------
(a) Schedules
---------
(1) Schedule 1 to the Facility Lease entitled "Basic Rent
Payments" is deleted in its entirety and is hereby replaced with Schedule 1
hereto.
(2) Schedule 2 to the Facility Lease entitled "Schedule of
Casualty Values" is deleted in its entirety and is hereby replaced with Schedule
2 hereto.
(3) Schedule 3 to the Facility Lease entitled "Schedule of
Special Casualty Values" is deleted in its entirety and is hereby replaced with
Schedule 3 hereto.
(4) Schedule 4 to the Facility Lease entitled "Schedule of
Modified Special Casualty Values" is deleted in its entirety and is hereby
replaced with Schedule 4 hereto.
(5) Schedule 5 to the Facility Lease entitled "Schedule of
Special Termination Values" is deleted in its entirety and is hereby replaced
with Schedule 5 hereto.
(b) Definitions. Appendix A of the Facility Lease is amended as
-----------
set forth in Amendment No. 4 to the Participation Agreement dated as of the date
hereof among the Owner Participant, Lessee, Owner Trustee, Indenture Trustee,
Funding Corporation and New Funding Corporation ("Amendment No. 4 to
------------------
Participation Agreement") in respect of Appendix A thereto.
-----------------------
SECTION 3. Miscellaneous.
-------------
(a) Dating; References. Although this Amendment No. 3 is dated as of
------------------
the date first above written for convenience, the actual dates of execution
hereof by the parties hereto are respectively the dates set forth under the
signatures hereto, and this Amendment No. 3 shall be effective as of the
Effective Date (as defined in Amendment No. 4 to Participation Agreement). This
Amendment No. 3 amends and modifies the Facility Lease and is to be read with
and form part of the Facility Lease. On and after the Effective Date, any
reference in any Transaction Document to the Facility Lease shall be deemed to
refer to the Facility Lease, as amended through and including the date hereof.
(b) Governing Law. This Amendment No. 3 shall be governed by, and be
-------------
construed in accordance with, the law of the State of New York, provided,
however, that all matters relating to the creation of the leasehold estate
hereunder and the exercise of remedies with respect to such leasehold estate
shall be governed
-2-
<PAGE>
by, and be construed in accordance with, the law of the Commonwealth of
Pennsylvania.
(c) Original Counterpart. The single executed original of this
--------------------
Amendment No. 3 marked "THIS COUNTERPART IS THE ORIGINAL COUNTERPART" and
containing the receipt of the Indenture Trustee thereon shall be the "Original"
of this Amendment No. 3. No security interest in this Amendment No. 3 may be
created or continued through the transfer or possession of any counterpart other
than the "Original".
(d) Full Force and Effect. As amended hereby, the Facility Lease
---------------------
remains in full force and effect in accordance with its terms.
(e) Amendments in Writing. The terms of this Amendment No. 3 may not
---------------------
be waived, altered, modified, amended, supplemented or terminated in any manner
whatsoever except in accordance with the terms of the Transaction Documents and
by written instrument signed by the Lessor and the Lessee.
(f) Counterpart Execution. This Amendment No. 3 may be executed in
---------------------
any number of counterparts and by each of the parties hereto or thereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
(g) Non-Waiver or Amendment. The agreements contained in this
-----------------------
Amendment No. 3 shall not, except as expressly provided in this Amendment No. 3,
operate as a waiver of any right, power or remedy of any party under any of the
Transaction Document nor constitute, except as expressly provided in this
Amendment No. 3, a waiver of any provision of any Transaction Document.
-3-
<PAGE>
IN WITNESS WHEREOF, intending to be legally bound, each of the parties
hereto has caused this Amendment No. 3 to Facility Lease to be duly executed by
an officer thereunto duly authorized.
THE FIRST NATIONAL BANK OF
BOSTON, not in its
individual capacity but
solely as Owner Trustee
under a Trust Agreement,
dated as of September 15,
1987, with Beaver Valley
Two Tau Limited
Partnership
By:/s/ J. E. Mogavero
--------------------------
Date: October 13, 1994
----------------
DUQUESNE LIGHT COMPANY
By:/s/ James D. Mitchell
-----------------------
Date: October 13, 1994
----------------
<PAGE>
STATE OF NEW YORK
COUNTY OF NEW YORK
BEFORE ME, a Notary Public in and for said County and State the above-
named DUQUESNE LIGHT COMPANY, by James D. Mitchell, its Treasurer, who
acknowledged that he did sign the foregoing instrument on behalf of said
Corporation by authority of its Board of Directors and that the same is the free
act and deed of said Corporation and his free act and deed individually and as
such officer.
IN TESTIMONY WHEREOF, I have hereunto set my, hand and official seal
at New York, New York this 13th day of October, 1994.
/s/ Christine Dionne
-------------------------------------
Notary Public
My Commission Expires March 2, 1996
COMMONWEALTH OF MASSACHUSETTS )
) ss.:
COUNTY OF SUFFOLK )
BEFORE ME, a Notary Public in and for said County and State,
personally appeared the above-named THE FIRST NATIONAL BANK OF BOSTON, by its
Authorized Officer, who acknowledged that he did sign the foregoing instrument
on behalf of said national banking association by authority of its Board of
Directors and that the same is the free act and deed of said national banking
association and his free act and deed individually and as such officer.
IN TESTIMONY WHEREOF, I have of hereunto set my hand and official seal
at Canton, Massachusetts this 7th day of October, 1994.
/s/ Shawn P. George
-------------------------------------------------
Notary Public
My Commission Expires September 2, 1999
<PAGE>
SCHEDULE 1
Tau
---
Schedule of Basic
Rent Payments
-----------------
<TABLE>
<CAPTION>
Date Payment Amount
---- ------- ------
<S> <C> <C>
June 1, 1988 1 5.02553936
December 1, 1988 2 5.02553936
June 1, 1989 3 5.02553936
December 1, 1989 4 5.02553936
June 1, 1990 5 5.02553936
December 1, 1990 6 5.02553936
June 1, 1991 7 5.02553936
December 1, 1991 8 5.02553936
June 1, 1992 9 5.02553936
December 1, 1992 10 5.02553936
June 1, 1993 11 4.82726810
December 1, 1993 12 3.42643435
June 1, 1994 13 4.82726810
December 1, 1994 14 3.59363953
June 1, 1995 15 3.41928577
December 1, 1995 16 5.00162186
June 1, 1996 17 3.36138926
December 1, 1996 18 5.05951837
June 1, 1997 19 3.30000190
December 1, 1997 20 5.12090574
June 1, 1998 21 3.23419708
December 1, 1998 22 5.18671056
June 1, 1999 23 3.49234030
December 1, 1999 24 4.92856734
June 1, 2000 25 3.07462077
December 1, 2000 26 3.34628687
June 1, 2001 27 3.42956230
December 1, 2001 28 4.99134534
June 1, 2002 29 3.39003384
December 1, 2002 30 5.03087480
June 1, 2003 31 3.63808558
December 1, 2003 32 6.65163505
June 1, 2004 33 3.61596432
December 1, 2004 34 6.67375631
June 1, 2005 35 3.52944245
December 1,2005 36 6.76027818
June 1, 2006 37 3.43970996
December 1, 2006 38 6.85001067
June 1, 2007 39 3.34753321
December 1, 2007 40 6.94218742
June 1, 2008 41 3.35573031
December 1, 2008 42 6.93399032
June 1, 2009 43 7.47605296
December 1, 2009 44 2.81366767
June 1, 2010 45 7.61239942
December 1, 2010 46 2.67732121
June 1, 2011 47 7.71845622
December 1, 2011 48 2.57126441
June 1, 2012 49 9.20318915
December 1, 2012 50 1.08653148
June 1, 2013 51 9.54003666
December 1, 2013 52 0.74968397
June 1, 2014 53 9.93980701
December 1, 2014 54 0.34991362
June 1, 2015 55 10.28972063
December 1, 2015 56 0.00000000
June 1, 2016 57 9.92465933
December 1, 2016 58 0.36506130
June 1, 2017 59 5.14486032
----------
Totals 283.49821393
</TABLE>
<PAGE>
SCHEDULE 2
Schedule of
Casualty Values
---------------
<TABLE>
<S> <C>
October 13, 1994 120.36756238
December 1, 1994 120.37759389
June 1, 1995 120.90263655
December 1, 1995 119.74762800
June 1, 1996 120.08923082
December 1, 1996 118.62627170
June 1, 1997 118.80439919
December 1, 1997 117.16703392
June 1, 1998 117.35614793
December 1, 1998 115.59849327
June 1, 1999 115.47060127
December 1, 1999 113.90069995
June 1, 2000 114.11386166
December 1, 2000 112.06183258
June 1, 2001 111.85002620
December 1, 2001 110.08294484
June 1, 2002 109.85451846
December 1, 2002 107.99236004
June 1, 2003 107.46137722
December 1, 2003 103.92635798
June 1, 2004 103.30276811
December 1, 2004 99.62871886
June 1, 2005 98.97037729
December 1, 2005 95.08901766
June 1, 2006 94.39240812
December 1, 2006 90.29376106
June 1, 2007 89.55426743
December 1, 2007 85.22888082
June 1, 2008 84.34039250
December 1, 2008 79.88371128
June 1, 2009 74.73408454
December 1, 2009 74.07009595
June 1, 2010 68.62131112
December 1, 2010 67.92057247
June 1, 2011 62.19402524
December 1, 2011 61.42028750
June 1, 2012 54.03025480
December 1, 2012 54.49220860
June 1, 2013 46.62629964
December 1, 2013 47.29563522
June 1, 2014 38.92082107
December 1, 2014 39.91868005
June 1, 2015 31.15043931
December 1, 2015 32.36960887
June 1, 2016 23.85585162
December 1, 2016 24.25931266
June 1, 2017 20.00000000
</TABLE>
<PAGE>
SCHEDULE 3
Schedule of Special
Casualty Values
-------------------
<TABLE>
<S> <C>
October 13, 1994 117.78710714
December 1, 1994 117.77645630
June 1, 1995 118.22248288
December 1, 1995 116.98605793
June 1, 1996 117.24377113
December 1, 1996 115.69437403
June 1, 1997 115.78343778
December 1, 1997 114.05430322
June 1, 1998 114.14886023
December 1, 1998 112.29377615
June 1, 1999 112.06549508
December 1, 1999 110.39215511
June 1, 2000 110.49873597
December 1, 2000 108.33688838
June 1, 2001 108.01192746
December 1, 2001 106.12825422
June 1, 2002 105.77969419
December 1, 2002 103.79375276
June 1, 2003 103.13522671
December 1, 2003 99.46878979
June 1, 2004 98.70979010
December 1, 2004 94.89621762
June 1, 2005 94.09411445
December 1, 2005 90.06462610
June 1, 2006 89.21538806
December 1, 2006 84.95947602
June 1, 2007 84.05794009
December 1, 2007 79.56558875
June 1, 2008 78.50506373
December 1, 2008 73.87111975
June 1, 2009 68.53884545
December 1, 2009 67.68666093
June 1, 2010 62.04396324
December 1, 2010 61.14342115
June 1, 2011 55.21100093
December 1, 2011 54.22513631
June 1, 2012 46.61653284
December 1, 2012 46.85327623
June 1, 2013 38.75531553
December 1, 2013 39.18555021
June 1, 2014 30.56437189
Decembers 1, 2014 31.30838274
June 1, 2015 22.27858262
December 1, 2015 23.22824727
June 1, 2016 14.43679822
December 1, 2016 14.55413188
June 1, 2017 10.00000000
</TABLE>
<PAGE>
SCHEDULE 4
Schedule of Modified
Special Casualty Values
-----------------------
<TABLE>
<S> <C>
October 13, 1994 35.33179726
December 1, 1994 35.34505212
June 1, 1995 35.70919251
December 1, 1995 35.97368725
June 1, 1996 36.14531970
December 1, 1996 36.20761373
June 1, 1997 36.20761373
December 1, 1997 36.20761373
June 1, 1998 36.20703687
December 1, 1998 36.20703687
June 1, 1999 36.20547569
December 1, 1999 36.20547569
June 1, 2000 36.20267314
December 1, 2000 36.20267314
June 1, 2001 36.04194446
December 1, 2001 35.60346237
June 1, 2002 35.22630762
December 1, 2002 34.75742513
June 1, 2003 34.35496137
December 1, 2003 33.57065625
June 1, 2004 32.85479521
December 1, 2004 31.95949148
June 1, 2005 31.20225149
December 1, 2005 30.25547016
June 1, 2006 29.45504576
December 1, 2006 28.45216945
June 1, 2007 27.60598990
December 1, 2007 26.54132803
June 1, 2008 25.64444806
December 1, 2008 24.41150135
June 1, 2009 23.35198698
December 1, 2009 22.10779615
June 1, 2010 21.06991736
December 1, 2010 19.77447759
June 1, 2011 18.67731942
December 1, 2011 17.26998584
June 1, 2012 16.07473633
December 1, 2012 14.59591579
June 1, 2013 14.71940853
December 1, 2013 13.84135093
June 1, 2014 14.16393146
December 1, 2014 14.65409421
June 1, 2015 15.30254171
December 1, 2015 14.08688567
June 1, 2016 14.94240416
December 1, 2016 5.21401239
June 1, 2017 5.14486031
</TABLE>
<PAGE>
SCHEDULE 5
Schedule of Special
Termination Values
-------------------
<TABLE>
<S> <C>
October 13, 1994 121.65779000
December 1, 1994 121.67816268
June 1, 1995 122.24271339
December 1, 1995 121.12841303
June 1, 1996 121.51196066
December 1, 1996 120.09222053
June 1, 1997 120.31487990
December 1, 1997 118.72339927
June 1, 1998 118.95979178
December 1, 1998 117.25085183
June 1, 1999 117.17315437
December 1, 1999 115.65497237
June 1, 2000 115.92142451
December 1, 2000 113.92430469
June 1, 2001 113.76907557
December 1, 2001 112.06029014
June 1, 2002 111.89193059
December 1, 2002 110.09166368
June 1, 2003 109.62445247
December 1, 2003 106.15514207
June 1, 2004 105.59925711
December 1, 2004 101.99496948
June 1, 2005 101.40850871
December 1, 2005 97.60121344
June 1, 2006 96.98091815
December 1, 2006 92.96090358
June 1, 2007 92.30243109
December 1, 2007 88.06052686
June 1, 2008 87.25805689
December 1, 2008 82.89000705
June 1, 2009 77.83170408
December 1, 2009 77.26181346
June 1, 2010 71.90998506
December 1, 2010 71.30914813
June 1, 2011 65.68553739
December 1, 2011 65.01786310
June 1, 2012 57.73711578
December 1, 2012 58.31167478
June 1, 2013 50.56179169
December 1, 2013 51.35067772
June 1, 2014 43.09904567
December 1, 2014 44.22382870
June 1, 2015 35.58636765
December 1, 2015 36.94028967
June 1, 2016 28.56537832
December 1, 2016 29.11190305
June 1, 2017 25.00000000
</TABLE>
<PAGE>
EXHIBIT 10.26
CERTAIN RIGHTS OF THE LESSOR UNDER THE FACILITY LEASE AS AMENDED BY THIS
AMENDMENT NO. 3 THERETO HAVE BEEN ASSIGNED TO, AND ARE SUBJECT TO A SECURITY
INTEREST IN FAVOR OF, THE BANK OF NEW YORK, AS INDENTURE TRUSTEE UNDER A TRUST
INDENTURE, MORTGAGE, SECURITY AGREEMENT AND ASSIGNMENT OF FACILITY LEASE, DATED
AS OF SEPTEMBER 15, 1987, AS AMENDED. THIS AMENDMENT NO. 3 HAS BEEN EXECUTED IN
SEVERAL COUNTERPARTS. ONLY THE COUNTERPART MARKED "ORIGINAL" AND CONTAINING THE
RECEIPT THEREFOR BY THE INDENTURE TRUSTEE SHALL BE THE ORIGINAL COUNTERPART.
SEE SECTION 3(C) OF THIS AMENDMENT NO. 3 FOR INFORMATION CONCERNING THE RIGHTS
OF HOLDERS OF VARIOUS COUNTERPARTS HEREOF.
THIS COUNTERPART IS NOT THE ORIGINAL COUNTERPART.
================================================================================
AMENDMENT NO. 3
dated as of October 13, 1994
to
FACILITY LEASE
dated as of September 15, 1987
between
THE FIRST NATIONAL BANK OF BOSTON
not in its individual capacity but solely
as Owner Trustee under a Trust Agreement,
dated as of September 15, 1987, with
Beaver Valley Leasing Corporation,
Lessor
and
DUQUESNE LIGHT COMPANY,
Lessee
================================================================================
Original Facility Lease Recorded
on October 2, 1987 in Miscellaneous
Book Volume 1318, Page 807 in the Office of
the Recorder of Deeds, Beaver County, Pennsylvania.
Amendment No. 1 to Facility Lease Recorded
on December 22, 1987 in Miscellaneous Book
Volume 1325, Page 241 in the Office of the
Recorder of Deeds, Beaver County, Pennsylvania.
Amendment No. 2 to Facility Lease Recorded
on December 29, 1992 in Miscellaneous Book
Volume 1519, Page 015 in the Office of the
Recorder of Deeds, Beaver County, Pennsylvania.
================================================================================
<PAGE>
AMENDMENT NO. 3, dated as of October 13, 1994 ("Amendment No. 3"), to
the Facility Lease, dated as of September 15, 1987, as amended to the date
hereof (as so amended, the "Facility Lease"), between THE FIRST NATIONAL BANK OF
BOSTON, a national banking association, not in its individual capacity but
solely as Owner Trustee under a Trust Agreement, dated as of September 15, 1987,
as amended to the date hereof, with Beaver Valley Leasing Corporation (the
"Lessor"), and DUQUESNE LIGHT COMPANY, a Pennsylvania corporation (the
"Lessee").
W I T N E S S E T H :
-------------------
WHEREAS, the Lessee and the Lessor have heretofore entered into the
Facility Lease, providing for the lease by the Lessor to the Lessee of the
Undivided Interest (such term and other capitalized terms used herein without
definition being defined as provided in Section 1);
WHEREAS, Section 3(d) of the Facility Lease provides for an adjustment
to Basic Rent and to the schedules of Casualty Values, Special Casualty Values,
Modified Special Casualty Values and Special Termination Values in order to
preserve Net Economic Return in the event there is any change in the Code which
results in the marginal Federal income tax rate applicable to corporations
differing from the rate assumed to be applicable in the Pricing Assumptions as
in effect on the Closing Date; and
WHEREAS, by reason of the enactment of the Omnibus Budget
Reconciliation Act of 1993 (Pub. L. No. 103-66) ("Budget Reconciliation Act")
the marginal Federal income tax rate applicable to corporations increased from
34 percent to 35 percent for tax years beginning on or after January 1, 1993
and, as a result, the Lessor wishes to document amendments to the schedules of
Basic Rent, Casualty Values, Special Casualty Values, Modified Special Casualty
Values and Special Termination Values pursuant to Sections 3(d) and 3(f) of the
Facility Lease.
NOW, THEREFORE, intending to be legally bound hereby, in consideration
of the premises and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS.
-----------
For purposes hereof, capitalized terms used herein or in the recitals
and not otherwise defined herein or in the recitals shall have the meanings
assigned to such terms in Appendix A to the Facility Lease.
<PAGE>
SECTION 2. AMENDMENTS TO FACILITY LEASE.
-----------------------------
(a) Schedules
---------
(1) Schedule 1 to the Facility Lease entitled "Basic Rent
Payments" is deleted in its entirety and is hereby replaced with Schedule 1
hereto.
(2) Schedule 2 to the Facility Lease entitled "Schedule of
Casualty Values" is deleted in its entirety and is hereby replaced with Schedule
2 hereto.
(3) Schedule 3 to the Facility Lease entitled "Schedule of
Special Casualty Values" is deleted in its entirety and is hereby replaced with
Schedule 3 hereto.
(4) Schedule 4 to the Facility Lease entitled "Schedule of
Modified Special Casualty Values" is deleted in its entirety and is hereby
replaced with Schedule 4 hereto.
(5) Schedule 5 to the Facility Lease entitled "Schedule of
Special Termination Values" is deleted in its entirety and is hereby replaced
with Schedule 5 hereto.
(b) Definitions. Appendix A of the Facility Lease is amended as
-----------
set forth in Amendment No. 4 to the Participation Agreement dated as of the date
hereof among the Owner Participant, Lessee, Owner Trustee, Indenture Trustee,
Funding Corporation and New Funding Corporation ("Amendment No. 4 to
------------------
Participation Agreement") in respect of Appendix A thereto.
-----------------------
SECTION 3. MISCELLANEOUS.
--------------
(a) Dating; References. Although this Amendment No. 3 is dated
------------------
as of the date first above written for convenience, the actual dates of
execution hereof by the parties hereto are respectively the dates set forth
under the signatures hereto, and this Amendment No. 3 shall be effective as of
the Effective Date (as defined in Amendment No. 4 to Participation Agreement).
This Amendment No. 3 amends and modifies the Facility Lease and is to be read
with and form part of the Facility Lease. On and after the Effective Date, any
reference in any Transaction Document to the Facility Lease shall be deemed to
refer to the Facility Lease, as amended through and including the date hereof.
(b) Governing Law. This Amendment No. 3 shall be governed by,
-------------
and be construed in accordance with, the law of the State of New York, provided,
however, that all matters relating to the creation of the leasehold estate
hereunder and the exercise of remedies with respect to such leasehold estate
shall be governed
-2-
<PAGE>
by, and be construed in accordance with, the law of the Commonwealth of
Pennsylvania.
(c) Original Counterpart. The single executed original of this
--------------------
Amendment No. 3 marked "THIS COUNTERPART IS THE ORIGINAL COUNTERPART" and
containing the receipt of the Indenture Trustee thereon shall be the "Original"
of this Amendment No. 3. No security interest in this Amendment No. 3 may be
created or continued through the transfer or possession of any counterpart other
than the "Original".
(d) Full Force and Effect. As amended hereby, the Facility Lease
---------------------
remains in full force and effect in accordance with its terms.
(e) Amendments in Writing. The terms of this Amendment No. 3 may
---------------------
not be waived, altered, modified, amended, supplemented or terminated in any
manner whatsoever except in accordance with the terms of the Transaction
Documents and by written instrument signed by the Lessor and the Lessee.
(f) Counterpart Execution. This Amendment No. 3 may be executed
---------------------
in any number of counterparts and by each of the parties hereto or thereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
(g) Non-Waiver or Amendment. The agreements contained in this
-----------------------
Amendment No. 3 shall not, except as expressly provided in this Amendment No. 3,
operate as a waiver of any right, power or remedy of any party under any of the
Transaction Document nor constitute, except as expressly provided in this
Amendment No. 3, a waiver of any provision of any Transaction Document.
-3-
<PAGE>
IN WITNESS WHEREOF, intending to be legally bound, each of the parties
hereto has caused this Amendment No. 3 to Facility Lease to be duly executed by
an officer thereunto duly authorized.
THE FIRST NATIONAL BANK OF BOSTON,
not in its individual capacity but
solely as Owner Trustee under a
Trust Agreement, dated as of
September 15, 1987, with Beaver
Valley Leasing Corporation
By:/s/ J. E. Mogavero
-------------------------------
Date: October 13, 1994
----------------
DUQUESNE LIGHT COMPANY
By:/s/ James D. Mitchell
-------------------------------
Date: October 13, 1994
----------------
<PAGE>
STATE OF NEW YORK
COUNTY OF NEW YORK
BEFORE ME, a Notary Public in and for said County and State the above-
named DUQUESNE LIGHT COMPANY, by James D. Mitchell, its Treasurer, who
acknowledged that he did sign the foregoing instrument on behalf of said
Corporation by authority of its Board of Directors and that the same is the free
act and deed of said Corporation and his free act and deed individually and as
such officer.
IN TESTIMONY WHEREOF, I have hereunto set my, hand and official seal
at New York, New York this 13th day of October, 1994.
/s/ Christine Dionne
----------------------------------
Notary Public
My Commission Expires March 2, 1996
COMMONWEALTH OF MASSACHUSETTS )
) ss.:
COUNTY OF SUFFOLK )
BEFORE ME, a Notary Public in and for said County and State,
personally appeared the above-named THE FIRST NATIONAL BANK OF BOSTON, by its
Authorized Officer, who acknowledged that he did sign the foregoing instrument
on behalf of said national banking association by authority of its Board of
Directors and that the same is the free act and deed of said national banking
association and his free act and deed individually and as such officer.
IN TESTIMONY WHEREOF, I have of hereunto set my hand and official seal
at Canton, Massachusetts this 7th day of October, 1994.
/s/ Shawn P. George
------------------------------------
Notary Public
My Commission Expires September 2, 1999
<PAGE>
SCHEDULE 1
TO
AMENDMENT NO. 3
SCHEDULE OF BASIC RENT PAYMENTS
<TABLE>
<CAPTION>
Percentage of Percentage of
------------- -------------
Date Facility Cost Date Facility Cost
---- ------------- ---- -------------
<S> <C> <C> <C>
Dec 1 1994 5.1199875 Jun 1 2006 3.3570617
Jun 1 1995 3.5053096 Dec 1 2006 7.2953856
Dec 1 1995 5.2112071 Jun 1 2007 3.4409569
Jun 1 1996 3.4436627 Dec 1 2007 7.2114903
Dec 1 1996 5.2728540 Jun 1 2008 3.3357568
Jun 1 1997 3.3775375 Dec 1 2008 7.3166905
Dec 1 1997 5.3389792 Jun 1 2009 3.2246831
Jun 1 1998 4.9260058 Dec 1 2009 7.4277642
Dec 1 1998 3.7905109 Jun 1 2010 3.1075352
Jun 1 1999 3.2245847 Dec 1 2010 7.5449120
Dec 1 1999 5.4919320 Jun 1 2011 2.9830819
Jun 1 2000 3.3387602 Dec 1 2011 7.6693654
Dec 1 2000 5.3777565 Jun 1 2012 2.8399244
Jun 1 2001 3.4459205 Dec 1 2012 7.8125228
Dec 1 2001 5.2705962 Jun 1 2013 2.2287249
June 1 2002 3.4019072 Dec 1 2013 8.4237223
Dec 1 2002 5.3146095 Jun 1 2014 3.9199504
Jun 1 2003 3.6488740 Dec 1 2014 6.7324968
Dec 1 2003 7.0035732 Jun 1 2015 9.0108822
Jun 1 2004 3.5547828 Dec 1 2015 1.6415650
Dec 1 2004 7.0976644 Jun 1 2016 0.0000000
Jun 1 2005 3.4558209 Dec 1 2016 10.6524473
Dec 1 2005 7.1966264 Jun 1 2017 5.3262236
</TABLE>
(I.D. O.P. B.V. LEASING)
<PAGE>
SCHEDULE 2
TO
AMENDMENT NO. 3
SCHEDULE OF CASUALTY VALUES
<TABLE>
<CAPTION>
Percentage of Percentage of
------------- -------------
Date Facility Cost Date Facility Cost
---- ------------- ---- -------------
<S> <C> <C> <C>
Oct 13 1994 124.42764 Jun 1 2006 95.81973
Dec 1 1994 124.10360 Dec 1 2006 91.31490
Jun 1 1995 124.54975 Jun 1 2007 90.52093
Dec 1 1995 123.16252 Dec 1 2007 85.95030
Jun 1 1996 123.37676 Jun 1 2008 85.11083
Dec 1 1996 121.71991 Dec 1 2008 80.28445
Jun 1 1997 121.89756 Jun 1 2009 79.39698
Dec 1 1997 120.11922 Dec 1 2009 74.30063
Jun 1 1998 118.68862 Jun 1 2010 73.36238
Dec 1 1998 118.34078 Dec 1 2010 67.98119
Jun 1 1999 118.54131 Jun 1 2011 66.99009
Dec 1 1999 116.48066 Dec 1 2011 61.30748
Jun 1 2000 116.48184 Jun 1 2012 60.27231
Dec 1 2000 114.45921 Dec 1 2012 54.26004
Jun 1 2001 114.30305 Jun 1 2013 53.63491
Dec 1 2001 112.32471 Dec 1 2013 46.82857
Jun 1 2002 112.15213 Jun 1 2014 44.42865
Dec 1 2002 110.06954 Dec 1 2014 39.27236
Jun 1 2003 109.58837 Jun 1 2015 31.86504
Dec 1 2003 105.75888 Dec 1 2015 31.77157
Jun 1 2004 105.24990 Jun 1 2016 33.29564
Dec 1 2004 101.20535 Dec 1 2016 24.35821
Jun 1 2005 100.66665 Jun 1 2017 20.00000
Dec 1 2005 96.39547
</TABLE>
(I.D. O.P. B.V. LEASING)
<PAGE>
SCHEDULE 3
TO
AMENDMENT NO. 3
SCHEDULE OF SPECIAL CASUALTY VALUES
<TABLE>
<CAPTION>
Percentage of Percentage of
------------- -------------
Date Facility Cost Date Facility Cost
---- ------------- ---- -------------
<S> <C> <C> <C>
Oct 13 1994 121.89041 Jun 1 2006 90.68503
Dec 1 1994 121.54577 Dec 1 2006 86.02225
Jun 1 1995 121.91324 Jun 1 2007 85.06546
Dec 1 1995 120.44490 Dec 1 2007 80.32702
Jun 1 1996 120.57555 Jun 1 2008 79.31456
Dec 1 1996 118.83253 Dec 1 2008 74.30988
Jun 1 1997 118.92135 Jun 1 2009 73.23861
Dec 1 1997 117.05146 Dec 1 2009 67.95283
Jun 1 1998 115.52649 Jun 1 2010 66.81930
Dec 1 1998 115.08137 Dec 1 2010 61.23683
Jun 1 1999 115.18163 Jun 1 2011 60.03827
Dec 1 1999 113.01764 Dec 1 2011 54.14180
Jun 1 2000 112.91228 Jun 1 2012 52.88620
Dec 1 2000 110.77985 Dec 1 2012 46.64672
Jun 1 2001 110.51051 Jun 1 2013 45.78738
Dec 1 2001 108.41549 Dec 1 2013 38.73964
Jun 1 2002 108.12267 Jun 1 2014 36.09089
Dec 1 2002 105.91612 Dec 1 2014 30.67812
Jun 1 2003 105.30718 Jun 1 2015 23.00642
Dec 1 2003 101.34599 Dec 1 2015 22.64043
Jun 1 2004 100.70126 Jun 1 2016 23.88362
Dec 1 2004 96.51679 Dec 1 2016 14.65665
Jun 1 2005 95.83386 Jun 1 2017 10.00000
Dec 1 2005 91.41401
</TABLE>
(I.D. O.P. B.V. LEASING)
<PAGE>
SCHEDULE 4
TO
AMENDMENT NO. 3
SCHEDULE OF MODIFIED SPECIAL CASUALTY VALUES
<TABLE>
<CAPTION>
Percentage of Percentage of
------------- -------------
Date Facility Cost Date Facility Cost
---- ------------- ---- -------------
<S> <C> <C> <C>
Oct 13 1994 37.15701 Jun 1 2006 29.96401
Dec 1 1994 37.20499 Dec 1 2006 29.08160
Jun 1 1995 37.49279 Jun 1 2007 28.20211
Dec 1 1995 37.64924 Dec 1 2007 27.06637
Jun 1 1996 37.69570 Jun 1 2008 26.13931
Dec 1 1996 37.69570 Dec 1 2008 24.93726
Jun 1 1997 37.69570 Jun 1 2009 23.95647
Dec 1 1997 37.69570 Dec 1 2009 22.68432
Jun 1 1998 37.69492 Jun 1 2010 21.64692
Dec 1 1998 37.69492 Dec 1 2010 20.30055
Jun 1 1999 37.69358 Jun 1 2011 19.20286
Dec 1 1999 37.69358 Dec 1 2011 17.77883
Jun 1 2000 37.69370 Jun 1 2012 16.61791
Dec 1 2000 37.49045 Dec 1 2012 15.12381
Jun 1 2001 37.03472 Jun 1 2013 13.90366
Dec 1 2001 36.64772 Dec 1 2013 12.80951
Jun 1 2002 36.16654 Jun 1 2014 13.02605
Dec 1 2002 35.74874 Dec 1 2014 13.44866
Jun 1 2003 35.23000 Jun 1 2015 14.14779
Dec 1 2003 34.49181 Dec 1 2015 15.15086
Jun 1 2004 33.57352 Jun 1 2016 14.47159
Dec 1 2004 32.79201 Dec 1 2016 15.60754
Jun 1 2005 31.81998 Jun 1 2017 5.32622
Dec 1 2005 30.99227
</TABLE>
(I.D. O.P. B.V. LEASING)
<PAGE>
SCHEDULE 5
TO
AMENDMENT NO. 3
SCHEDULE OF SPECIAL TERMINATION VALUES
<TABLE>
<CAPTION>
Percentage of Percentage of
------------- -------------
Date Facility Cost Date Facility Cost
---- ------------- ---- -------------
<S> <C> <C> <C>
Oct 13 1994 125.69626 Jun 1 2006 98.38707
Dec 1 1994 125.38252 Dec 1 2006 93.96123
Jun 1 1995 125.86800 Jun 1 2007 93.24866
Dec 1 1995 124.52132 Dec 1 2007 88.76194
Jun 1 1996 124.77737 Jun 1 2008 88.00897
Dec 1 1996 123.16361 Dec 1 2008 83.27174
Jun 1 1997 123.38566 Jun 1 2009 82.47616
Dec 1 1997 121.65310 Dec 1 2009 77.47454
Jun 1 1998 120.26969 Jun 1 2010 76.63392
Dec 1 1998 119.97048 Dec 1 2010 71.35337
Jun 1 1999 120.22114 Jun 1 2011 70.46601
Dec 1 1999 118.21217 Dec 1 2011 64.89032
Jun 1 2000 118.26661 Jun 1 2012 63.96536
Dec 1 2000 116.29889 Dec 1 2012 58.06670
Jun 1 2001 116.19932 Jun 1 2013 57.55867
Dec 1 2001 114.27931 Dec 1 2013 50.87303
Jun 1 2002 114.16687 Jun 1 2014 48.59753
Dec 1 2002 112.14625 Dec 1 2014 43.56949
Jun 1 2003 111.72897 Jun 1 2015 36.29436
Dec 1 2003 107.96532 Dec 1 2015 36.33713
Jun 1 2004 107.52421 Jun 1 2016 38.00166
Dec 1 2004 103.54964 Dec 1 2016 29.20899
Jun 1 2005 103.08304 Jun 1 2017 25.00000
Dec 1 2005 98.88620
</TABLE>
(I.D. O.P. B.V. LEASING)
<PAGE>
Exhibit 10.35
================================================================================
AMENDMENT NO. 4
dated as of October 13, 1994
to
PARTICIPATION AGREEMENT
dated as of September 15, 1987
among
BEAVER VALLEY TWO TAU LIMITED PARTNERSHIP,
as Owner Participant
DQU FUNDING CORPORATION,
as Funding Corp
DQU II FUNDING CORPORATION,
as New Funding Corp
THE FIRST NATIONAL BANK OF BOSTON,
in its individual capacity and as Owner Trustee
under a Trust Agreement,
dated as of September 15, 1987, with the
Owner Participant, as Owner Trustee
THE BANK OF NEW YORK,
in its individual capacity and as Indenture Trustee
under a Trust Indenture, Mortgage, Security Agreement
and Assignment of Facility Lease, dated as of
September 15, 1987,
with the Owner Trustee, as Indenture Trustee
and
DUQUESNE LIGHT COMPANY,
as Lessee
================================================================================
Sale and Leaseback of an Undivided Interest in
Beaver Valley Power Station Unit 2
================================================================================
<PAGE>
AMENDMENT NO. 4, dated as of October 13, 1994 (this "Amendment No. 4")
to the Participation Agreement, dated as of September 15, 1987, among BEAVER
VALLEY TWO TAU LIMITED PARTNERSHIP (the "Owner Participant"), DQU FUNDING
CORPORATION, a Delaware corporation ("Funding Corp"), DQU II FUNDING
CORPORATION, a Delaware corporation ("New Funding Corp"), THE FIRST NATIONAL
BANK OF BOSTON, a national banking association, in its individual capacity and
as Owner Trustee (the "Owner Trustee") under a Trust Agreement, dated as of
September 15, 1987, with the Owner Participant, THE BANK OF NEW YORK (formerly
IRVING TRUST COMPANY), a New York banking corporation, in its individual
capacity and as Indenture Trustee (the "Indenture Trustee") under a Trust
Indenture, Mortgage, Security Agreement and Assignment of Facility Lease, dated
as of September 15, 1987, with the Owner Trustee, and DUQUESNE LIGHT COMPANY, a
Pennsylvania corporation (the "Lessee").
W I T N E S S E T H :
-------------------
WHEREAS, the Owner Participant, the Original Loan Participants (such
term and other capitalized terms used herein without definition being defined as
provided in Section 1), Funding Corp, the Owner Trustee, the Indenture Trustee
and the Lessee have previously entered into a Participation Agreement, dated as
of September 15, 1987, as heretofore amended (such Participation Agreement, as
so amended, being hereinafter referred to as the "Participation Agreement");
WHEREAS, Section 3(d) of the Facility Lease provides for adjustments
to Basic Rent and schedules of Casualty Values, Special Casualty Values,
Modified Special Casualty Values and Special Termination Values if there is a
change in the Code which results in the marginal federal income tax rate
applicable to corporations differing from the rate assumed to be applicable in
the Pricing Assumptions as in effect on the Closing Date;
WHEREAS, by reason of the enactment of the Omnibus Budget
Reconciliation Act of 1993 (Pub. L. No. 103-66) the marginal Federal income tax
rate applicable to corporations increased from 34 percent to 35 percent for tax
years beginning on or after January 1, 1993;
WHEREAS, the Owner Trustee and the Lessee intend to execute Amendment
No. 3 to the Facility Lease dated as of the date hereof ("Lease Amendment No.
3"), to amend the schedules thereof;
WHEREAS, Funding Corp desires to cease to be a party to the
Participation Agreement;
WHEREAS, Section 2(e) of the Participation Agreement provides that,
subject to the satisfaction of the conditions set forth in Sections 2(d) and
11(c) of the Participation Agreement, the Owner Trustee and the Lessee in
connection with any Tax Rate
<PAGE>
Adjustment, shall reoptimize the amortization schedules for the Notes in
accordance with, and in the manner contemplated by, Section 3(f) of the Facility
Lease subject to the constraints set forth in Section 2(e) of the Participation
Agreement, Section 3.12 of the Indenture and Section 2(b) of Supplemental
Indenture No. 2 to the Indenture;
WHEREAS, the Indenture Trustee, in connection with the adjustment to
the schedules of principal amortization attached to the Outstanding Fixed Rate
Notes, has agreed to waive the 60 day notice requirement under Section 2(b) of
Supplemental Indenture No. 2, dated as of November 15, 1992, to the Indenture
and accept a 45 day notice period in lieu thereof; and
WHEREAS, the parties hereto desire to amend the Pricing Assumptions in
the manner hereinafter set forth and reoptimize the amortization schedules for
the Notes as a result of a Tax Rate Adjustment.
NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS.
-----------
Except as otherwise defined herein and in the recitals, capitalized
terms used herein shall have the respective meanings set forth in Appendix A to
the Participation Agreement.
SECTION 2. REOPTIMIZATION.
--------------
Subject to Sections 2(d) and 11(c) of the Participation Agreement, on
the Effective Date (as hereinafter defined) the Lessor and the Lessee shall
reoptimize the amortization schedules for the Notes in accordance with and in
the manner contemplated by Section 3(f) of the Facility Lease, Section 3.12 of
the Indenture and Section 2(b) of the Supplemental Indenture No. 2 thereto, and
Section 2(e) of the Participation Agreement.
SECTION 3. Implementation.
--------------
(a) Forms. The form of Lease Amendment No. 3 is attached hereto
-----
as Exhibit A and the reoptimized amortization schedules for the Outstanding
Fixed Rate Notes are attached hereto as Exhibit C.
(b) Request by the Owner Participant. In accordance with Section
--------------------------------
2.01 of the Trust Agreement, subject to the satisfaction of the conditions set
forth in Section 2(d) and 11(c) of the Participation Agreement (it being the
agreement of the
-2-
<PAGE>
parties hereto that the transactions contemplated hereby do not constitute a
refunding pursuant to Section 2(d) of the Participation Agreement), the Owner
Participant hereby directs that the Owner Trustee (i) execute and deliver this
Amendment No. 4 and Lease Amendment No. 3 (collectively, the "1994 Amendments"),
(ii) execute and deliver all other agreements, instruments and certificates
contemplated by the 1994 Amendments, and (iii) instruct the Indenture Trustee to
(x) consent to Lease Amendment No. 3 and (y) attach the reoptimized amortization
schedules (attached hereto as Exhibit C for the Outstanding Fixed Rate Notes in
replacement for the existing amortization schedules to such Fixed Rate Notes.
(c) Instruction and Consent. In accordance with Section 10.2(ii)
-----------------------
of the Indenture, the Lessee and Owner Trustee hereby instruct the Indenture
Trustee to consent to Lease Amendment No. 3 and the Indenture Trustee so
consents.
(d) Consent of Lessee. In accordance with Section 8(b)(2) of the
-----------------
Participation Agreement, the Lessee hereby consents to the revised amortization
schedules attached to the respective Outstanding Fixed Rate Notes in connection
with the Tax Rate Adjustment.
Section 4. Amendments.
----------
(a) Schedule 5 to the Participation Agreement is hereby amended
and replaced in its entirety collectively with Schedules 1A, 1B and 1C hereto.
(b) The parties agree that Funding Corp shall cease to be a
party to the Participation Agreement and shall have no further rights or
obligations thereunder. The Participation Agreement is hereby amended generally
so that all references to Funding Corp shall be deemed to refer to New Funding
Corp and/or such other entity as may participate in the funding or refunding of
the Notes to the extent that such references relate to the rights, obligations
or interest of Funding Corporation subsequent to the Effective Date.
(c) The definition of Funding Corp or Funding Corporation in
Appendix A to the Participation Agreement is amended in its entirety to read as
follows:
"Funding Corp or Funding Corporation shall
mean New Funding Corp and/or such other
entity as may participate in the funding or
refunding of any Notes."
-3-
<PAGE>
(d) Section 18(iv) is hereby amended by inserting at the end
thereof before the semicolon after the phrase "Attention: President" the
following phrase:
"and if to New Funding Corporation at:
c/o J H Management Corporation
1 International Place
Boston, Massachusetts 02110
Attention: Lannhi Tran."
Section 5. Conditions to Effectiveness.
---------------------------
This Amendment No. 4 shall become effective as of the Effective Date
(as hereinafter defined) if: (i) it shall have been duly executed and delivered
by all of the parties hereto and all of the conditions set forth below in this
Section 5 shall have been satisfied or waived, which satisfaction or waiver by
each of the parties hereto shall be deemed to be evidenced by the due execution
and delivery of this Amendment No. 4 by each such party (the date of the due
execution and delivery by the last of the parties to so execute and deliver this
Amendment No. 4 shall be defined as the "Effective Date"); (ii) each of Lease
Amendment No. 3 and Amendment No. 2 to the Tax Indemnification Agreement dated
as of the date hereof between the Owner Participant and the Lessee ("Amendment
No. 2 to TIA") shall have been duly executed and delivered by each of the
parties thereto; (iii) a replacement Letter of Credit shall have been issued in
favor of the Owner Participant having Maximum Drawing Amounts (as defined in the
Letter of Credit) corresponding to the Modified Special Casualty Values, as
adjusted on the Effective Date hereof; (iv) the Owner Participant shall have
received opinions from Lessee's Special Counsel, Lessee's NRC Counsel and such
other opinions as the Owner Participant shall reasonably request and all such
opinions shall be in form and substance reasonably satisfactory to the Owner
Participant, and (v) subject to the satisfaction of any and all other conditions
set forth in Sections 2(d) and 11(c) of the Participation Agreement (it being
the agreement of the parties hereto that the transactions contemplated hereby do
not constitute a refunding pursuant to Section 2(d) of the Participation
Agreement).
Section 6. Supplemental Rent Payment and Expenses
--------------------------------------
(a) Supplemental Rent Payment. On October 13, 1994 (the
-------------------------
"Adjustment Closing Date"), the Lessee shall pay, as Supplemental Rent and on
behalf of the Owner Trustee, the following costs and expenses (the "Adjustment
Transaction Expenses") in an amount equal to $31,000.00:
-4-
<PAGE>
(i) the costs and expenses of the Owner Participant (including,
but not limited to, Owner Participant's computer lease analysis expenses,
out-of- pocket expenses and the legal fees and disbursements of the Owner
Participant's Special Counsel, including counsel for each partner of the Owner
Participant), and the Owner Participant's out-of-pocket expenses and fees and
disbursements of any financial advisors employed by it as well as fees and
expenses (including, but not limited to, all computer lease analysis and travel
related costs) of the Owner Trustee, the Owner Trustee's Counsel, the Indenture
Trustee, the Indenture Trustee's Counsel, the Collateral Trust Trustee, the
Collateral Trust Trustee's counsel, Special Counsel for Funding Corp, and
Special Counsel for New Funding Corp, if any, in each case for their services
rendered in connection with the negotiation, execution and delivery of this
Amendment No. 4, Lease Amendment No. 3, and Amendment No. 2 to TIA and all other
agreements, documents or instruments prepared in connection therewith and all
fees, taxes, expenses and disbursements incurred by them in connection with the
transactions contemplated hereby or thereby; and
(ii) all stenographic, printing, reproduction, and other out-of-
pocket expenses (other than investment banking or brokerage fees) incurred in
connection with the execution and delivery of this Amendment No. 4, Lease
Amendment No. 3 and Amendment No. 2 to TIA and all other agreements, documents
or instruments prepared in connection therewith.
(b) Lessee's Obligation. Notwithstanding Section 6(a) hereof or
-------------------
anything in Section 14 of the Participation Agreement to the contrary (i) in the
event the transactions contemplated by this Amendment No. 4 shall not be
consummated for any reason, the Lessee shall pay or cause to be paid, and shall
indemnify and hold harmless Funding Corp, New Funding Corp, the Indenture
Trustee, the Owner Trustee, the Collateral Trust Trustee and the Owner
Participant in respect of all Adjustment Transaction Expenses and (ii) in any
event, the Lessee shall pay or cause to be paid directly (and not as
Supplemental Rent) that portion of the Adjustment Transaction Expenses that
exceeds the Adjustment Transaction Expenses payable on behalf of the Owner
Trustee pursuant to clause (a) above and shall indemnify and hold the Lessor and
Owner Participant harmless for any such amount.
-5-
<PAGE>
Section 7. Recordations and Filings.
------------------------
The Lessee agrees that it has caused, or will cause, to be made the
recordations and filings set forth in Schedule 2 hereto and that such filings
and recordations are all the recordations and filings that are necessary in
order to preserve, protect and perfect the Owner Trustee's rights and interests
under the Facility Lease, as amended to the date hereof, and the first and prior
security interest of the Indenture Trustee in the Lease Indenture Estate under
the Indenture, as amended.
Section 8. Miscellaneous.
-------------
(a) Execution. This Amendment No. 4 may be executed in any number of
---------
counterparts and by the different parties hereto on separate counterparts, each
of which, when so executed and delivered, shall be an original, but all such
counterparts shall together constitute but one and the same instrument. Although
this Amendment No. 4 is dated as of the date first above written for
convenience, the actual dates of execution hereof by the parties hereto are
respectively the dates set forth under the signatures hereto, and this Amendment
No. 4 shall not be effective until the Effective Date. This Amendment No. 4
amends and modifies the Participation Agreement and is to be read with and form
part of the Participation Agreement. On and from the Effective Date, any
reference in any Transaction Document to the Participation Agreement shall be
deemed to refer to the Participation Agreement as amended through and including
the date hereof.
(b) Governing Law. This Amendment No. 4 has been negotiated and
-------------
delivered in the State of New York and shall be governed by, and be construed in
accordance with, the law of the State of New York.
(c) Non-Waiver or Amendment. The agreements contained in
-----------------------
this Amendment No. 4 shall not, except as expressly provided in this
Amendment, operate as a waiver of any right, power or remedy of any
party under any Transaction Document, nor constitute, except as expressly
provided in this Amendment No. 4, a waiver of any provision of any Transaction
Document.
(d) Responsibility for Recitals. The recitals contained herein shall
---------------------------
not be taken as the statements of the Indenture Trustee and it shall assume no
responsibility for the correctness of same.
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused this Amendment
No. 4 to the Participation Agreement to be duly executed by their respective
officers thereunto duly authorized as of the dates set forth below.
BEAVER VALLEY TWO TAU LIMITED PARTNERSHIP
by Beaver Valley Two Tau, Inc., General
Partner
By:/s/ Arthur S. Penn
--------------------------------------
Title: President
Date: October 13, 1994
DQU FUNDING CORPORATION
By:/s/ Mark Ferrucci
--------------------------------------
Title: President
Date: October 13, 1994
DQU II FUNDING CORPORATION
By:/s/ Lannhi Tran
--------------------------------------
Title: Vice President
Date: October 13, 1994
THE FIRST NATIONAL BANK OF BOSTON, in
its individual capacity and as Owner
Trustee
By:/s/ J. E. Mogavero
--------------------------------------
Title: Authorized Officer
Date: October 13, 1994
THE BANK OF NEW YORK, in its individual
capacity and as Indenture Trustee
By:/s/ Mary Jane Morrissey
--------------------------------------
Title: Assistant Vice President
Date: October 13, 1994
DUQUESNE LIGHT COMPANY
By:/s/ James D. Mitchell
--------------------------------------
Title: Treasurer
Date: October 13, 1994
<PAGE>
EXHIBIT A TO AMENDMENT NO. 4
TO PARTICIPATION AGREEMENT
CERTAIN RIGHTS OF THE LESSOR UNDER THE FACILITY LEASE AS AMENDED BY THIS
AMENDMENT NO. 3 THERETO HAVE BEEN ASSIGNED TO, AND ARE SUBJECT TO A SECURITY
INTEREST IN FAVOR OF, THE BANK OF NEW YORK, AS INDENTURE TRUSTEE UNDER A TRUST
INDENTURE, MORTGAGE, SECURITY AGREEMENT AND ASSIGNMENT OF FACILITY LEASE, DATED
AS OF SEPTEMBER 15, 1987, AS AMENDED. THIS AMENDMENT NO. 3 HAS BEEN EXECUTED IN
SEVERAL COUNTERPARTS. ONLY THE COUNTERPART MARKED "ORIGINAL" AND CONTAINING THE
RECEIPT THEREFOR BY THE INDENTURE TRUSTEE SHALL BE THE ORIGINAL COUNTERPART. SEE
SECTION 3(c) OF THIS AMENDMENT NO. 3 FOR INFORMATION CONCERNING THE RIGHTS OF
HOLDERS OF VARIOUS COUNTERPARTS HEREOF.
THIS COUNTERPART IS NOT THE ORIGINAL COUNTERPART.
================================================================================
AMENDMENT NO. 3
dated as of October 13, 1994
to
FACILITY LEASE
dated as of September 15, 1987
between
THE FIRST NATIONAL BANK OF BOSTON
not in its individual capacity but solely
as Owner Trustee under a Trust Agreement,
dated as of September 15, 1987, with
Beaver Valley Two Tau Limited Partnership,
Lessor
and
DUQUESNE LIGHT COMPANY,
Lessee
================================================================================
Original Facility Lease Recorded
on October 2, 1987 in Miscellaneous
Book Volume 1318, Page 406 in the Office of
the Recorder of Deeds, Beaver County, Pennsylvania.
Amendment No. 1 to Facility Lease Recorded
on December 22, 1987 in Miscellaneous Book
Volume 1325, Page 344 in the Office of the
Recorder of Deeds, Beaver County, Pennsylvania.
Amendment No. 2 to Facility Lease Recorded
on December 29, 1992 in Miscellaneous Book
Volume 1519, Page 075 in the Office of the
Recorder of Deeds, Beaver County, Pennsylvania.
================================================================================
<PAGE>
AMENDMENT NO. 3, dated as of October 13, 1994 ("Amendment No. 3"), to
the Facility Lease, dated as of September 15, 1987, as amended to the date
hereof (as so amended, the "Facility Lease"), between THE FIRST NATIONAL BANK OF
BOSTON, a national banking association, not in its individual capacity but
solely as Owner Trustee under a Trust Agreement, dated as of September 15, 1987,
as amended to the date hereof, with Beaver Valley Two Tau Limited Partnership
(the "Lessor"), and DUQUESNE LIGHT COMPANY, a Pennsylvania corporation (the
"Lessee") .
W I T N E S S E T H :
-------------------
WHEREAS, the Lessee and the Lessor have heretofore entered into a
Facility Lease, providing for the lease by the Lessor to the Lessee of the
Undivided Interest (such term and other capitalized terms used herein without
definition being defined as provided in Section 1);
WHEREAS, Section 3(d) of the Facility Lease provides for an adjustment
to Basic Rent and to the schedules of Casualty Values, Special Casualty Values,
Modified Special Casualty Values and Special Termination Values in order to
preserve Net Economic Return in the event there is any change in the Code which
results in the marginal Federal income tax rate applicable to corporations
differing from the rate assumed to be applicable in the Pricing Assumptions as
in effect on the Closing Date; and
WHEREAS, by reason of the enactment of the Omnibus Budget
Reconciliation Act of 1993 (Pub. L. No. 103-66) ("Budget Reconciliation Act")
the marginal Federal income tax rate applicable to corporations increased from
34 percent to 35 percent for tax years beginning on or after January 1, 1993
and, as a result, the Lessor wishes to document amendments to the schedules of
Basic Rent, Casualty Values, Special Casualty Values, Modified Special Casualty
Values and Special Termination Values pursuant to Sections 3(d) and 3(f) of the
Facility Lease.
NOW, THEREFORE, intending to be legally bound hereby, in consideration
of the premises and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Definitions.
-----------
For purposes hereof, capitalized terms used herein or in the recitals
and not otherwise defined herein or in the recitals shall have the meanings
assigned to such terms in Appendix A to the Facility Lease.
<PAGE>
SECTION 2. Amendments to Facility Lease.
----------------------------
(a) Schedules
---------
(1) Schedule 1 to the Facility Lease entitled "Basic Rent
Payments" is deleted in its entirety and is hereby replaced with Schedule 1
hereto.
(2) Schedule 2 to the Facility Lease entitled "Schedule of
Casualty Values" is deleted in its entirety and is hereby replaced with Schedule
2 hereto.
(3) Schedule 3 to the Facility Lease entitled "Schedule of
Special Casualty Values" is deleted in its entirety and is hereby replaced with
Schedule 3 hereto.
(4) Schedule 4 to the Facility Lease entitled "Schedule of
Modified Special Casualty Values" is deleted in its entirety and is hereby
replaced with Schedule 4 hereto.
(5) Schedule 5 to the Facility Lease entitled "Schedule of
Special Termination Values" is deleted in its entirety and is hereby replaced
with Schedule 5 hereto.
(b) Definitions. Appendix A of the Facility Lease is amended as
-----------
set forth in Amendment No. 4 to the Participation Agreement dated as of the date
hereof among the Owner Participant, Lessee, Owner Trustee, Indenture Trustee,
Funding Corporation and New Funding Corporation ("Amendment No. 4 to
------------------
Participation Agreement") in respect of Appendix A thereto.
-----------------------
SECTION 3. Miscellaneous.
-------------
(a) Dating; References. Although this Amendment No. 3 is dated
------------------
as of the date first above written for convenience, the actual dates of
execution hereof by the parties hereto are respectively the dates set forth
under the signatures hereto, and this Amendment No. 3 shall be effective as of
the Effective Date (as defined in Amendment No. 4 to Participation Agreement).
This Amendment No. 3 amends and modifies the Facility Lease and is to be read
with and form part of the Facility Lease. On and after the Effective Date, any
reference in any Transaction Document to the Facility Lease shall be deemed to
refer to the Facility Lease, as amended through and including the date hereof.
(b) Governing Law. This Amendment No. 3 shall be governed by,
-------------
and be construed in accordance with, the law of the State of New York, provided,
however, that all matters relating to the creation of the leasehold estate
hereunder and the exercise of remedies with respect to such leasehold estate
shall be governed
-2-
<PAGE>
by, and be construed in accordance with, the law of the Commonwealth of
Pennsylvania.
(c) Original Counterpart. The single executed original of this
--------------------
Amendment No. 3 marked "THIS COUNTERPART IS THE ORIGINAL COUNTERPART" and
containing the receipt of the Indenture Trustee thereon shall be the "Original"
of this Amendment No. 3. No security interest in this Amendment No. 3 may be
created or continued through the transfer or possession of any counterpart other
than the "Original".
(d) Full Force and Effect. As amended hereby, the Facility Lease
---------------------
remains in full force and effect in accordance with its terms.
(e) Amendments in Writing. The terms of this
---------------------
Amendment No. 3 may not be waived, altered, modified, amended, supplemented or
terminated in any manner whatsoever except in accordance with the terms of the
Transaction Documents and by written instrument signed by the Lessor and the
Lessee.
(f) Counterpart Execution. This Amendment No. 3 may be executed
---------------------
in any number of counterparts and by each of the parties hereto or thereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
(g) Non-Waiver or Amendment. The agreements contained in this
-----------------------
Amendment No. 3 shall not, except as expressly provided in this Amendment No. 3,
operate as a waiver of any right, power or remedy of any party under any of the
Transaction Document nor constitute, except as expressly provided in this
Amendment No. 3, a waiver of any provision of any Transaction Document.
-3-
<PAGE>
IN WITNESS WHEREOF, intending to be legally bound, each of the parties
hereto has caused this Amendment No. 3 to Facility Lease to be duly executed by
an officer thereunto duly authorized.
THE FIRST NATIONAL BANK OF
BOSTON, not in its
individual capacity but
solely as Owner Trustee
under a Trust Agreement,
dated as of September 15,
1987, with Beaver Valley
Two Tau Limited Partnership
By: ______________________
Date: ______________, 1994
DUQUESNE LIGHT COMPANY
By: ______________________
Date: ______________, 1994
<PAGE>
STATE OF NEW YORK
COUNTY OF NEW YORK
BEFORE ME, a Notary Public in and for said County and State the above-
named DUQUESNE LIGHT COMPANY, _____________________________, its __________, who
acknowledged that he did sign the foregoing instrument on behalf of said
Corporation by authority of its Board of Directors and that the same is the free
act and deed of said Corporation and his free act and deed individually and as
such officer.
IN TESTIMONY WHEREOF, I have hereunto set my, hand and official seal
at New York, New York this _______ day of ____________, 1994.
-----------------------
Notary Public
My Commission Expires ___________
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
BEFORE ME, a Notary Public in and for said County and State,personally
appeared the above-named THE FIRST NATIONAL BANK OF BOSTON, by its Authorized
Officer, who acknowledged that he did sign the foregoing instrument on behalf of
said national banking association by authority of its Board of Directors and
that the same is the free act and deed of said national banking association and
his free act and deed individually and as such officer.
IN TESTIMONY WHEREOF, I have of hereunto set my hand and official seal
at New York, New York this _________ day of ______________, 1994.
__________________________________
Notary Public
My Commission Expires __________________
<PAGE>
SCHEDULE 1
Tau
---
Schedule of Basic
Rent Payments
-----------------
<TABLE>
<CAPTION>
Date Payment Amount
---- ------- ------
<S> <C> <C>
June 1, 1988 1 5.02553936
December 1, 1988 2 5.02553936
June 1, 1989 3 5.02553936
December 1, 1989 4 5.02553936
June 1, 1990 5 5.02553936
December 1, 1990 6 5.02553936
June 1, 1991 7 5.02553936
December 1, 1991 8 5.02553936
June 1, 1992 9 5.02553936
December 1, 1992 10 5.02553936
June 1, 1993 11 4.82726810
December 1, 1993 12 3.42643435
June 1, 1994 13 4.82726810
December 1, 1994 14 3.59363953
June 1, 1995 15 3.41928577
December 1, 1995 16 5.00162186
June 1, 1996 17 3.36138926
December 1, 1996 18 5.05951837
June 1, 1997 19 3.30000190
December 1, 1997 20 5.12090574
June 1, 1998 21 3.23419708
December 1, 199 22 5.18671056
June 1, 1999 23 3.49234030
December 1, 199 24 4.92856734
June 1, 2000 25 3.07462077
December 1,2000 26 3.34628687
June 1, 201 27 3.42956230
December , 2001 28 4.99134534
June 1, 002 29 3.39003384
December 1, 2002 30 5.03087480
June 1 2003 31 3.63808558
December 1, 2003 32 6.65163505
June 1, 2004 33 3.61596432
December 1, 2004 34 6.67375631
June 1, 2005 35 3.52944245
December 1,2005 36 6.76027818
June 1, 2006 37 3.43970996
December 1, 2006 38 6.85001067
June 1, 2007 39 3.34753321
December 1, 2007 40 6.94218742
June 1, 2008 41 3.35573031
December 1, 2008 42 6.93399032
June 1, 2009 43 7.47605296
December 1, 2009 44 2.81366767
June 1, 2010 45 7.61239942
December 1, 2010 46 2.67732121
June 1, 2011 47 7.71845622
December 1, 2011 48 2.57126441
June 1, 2012 49 9.20318915
December 1, 2012 50 1.08653148
June 1, 2013 51 9.54003666
December 1, 2013 52 0.74968397
June 1, 2014 53 9.93980701
December 1, 2014 54 0.34991362
June 1, 2015 55 10.28972063
December 1, 2015 56 0.00000000
June 1, 2016 57 9.92465933
December 1, 2016 58 0.36506130
June 1, 2017 59 5.14486032
------------
Totals 283.49821393
</TABLE>
<PAGE>
SCHEDULE 2
Schedule of
Casualty Values
---------------
<TABLE>
<S> <C>
October 13, 1994 120.36756238
December 1, 1994 120.37759389
June 1, 1995 120.90263655
December 1, 1995 119.74762800
June 1, 1996 120.08923082
December 1, 1996 118.62627170
June 1, 1997 118.80439919
December 1, 1997 117.16703392
June 1, 1998 117.35614793
December 1, 1998 115.59849327
June 1, 1999 115.47060127
December 1, 1999 113.90069995
June 1, 2000 114.11386166
December 1, 2000 112.06183258
June 1, 2001 111.85002620
December 1, 2001 110.08294484
June 1, 2002 109.85451846
December 1, 2002 107.99236004
June 1, 2003 107.46137722
December 1, 2003 103.92635798
June 1, 2004 103.30276811
December 1, 2004 99.62871886
June 1, 2005 98.97037729
December 1, 2005 95.08901766
June 1, 2006 94.39240812
December 1, 2006 90.29376106
June 1, 2007 89.55426743
December 1, 2007 85.22888082
June 1, 2008 84.34039250
December 1, 2008 79.88371128
June 1, 2009 74.73408454
December 1, 2009 74.07009595
June 1, 2010 68.62131112
December 1, 2010 67.92057247
June 1, 2011 62.19402524
December 1, 2011 61.42028750
June 1, 2012 54.03025480
December 1, 2012 54.49220860
June 1, 2013 46.62629964
December 1, 2013 47.29563522
June 1, 2014 38.92082107
December 1, 2014 39.91868005
June 1, 2015 31.15043931
December 1, 2015 32.36960887
June 1, 2016 23.85585162
December 1, 2016 24.25931266
June 1, 2017 20.00000000
</TABLE>
<PAGE>
SCHEDULE 3
Schedule of Special
Casualty Values
--------------------
<TABLE>
<CAPTION>
<S> <C>
October 13, 1994 117.78710714
December 1, 1994 117.77645630
June 1, 1995 118.22248288
December 1, 1995 116.98605793
June 1, 1996 117.24377113
December 1, 1996 115.69437403
June 1, 1997 115.78343778
December 1, 1997 114.05430322
June 1, 1998 114.14886023
December 1, 1998 112.29377615
June 1, 1999 112.06549508
December 1, 1999 110.39215511
June 1, 2000 110.49873597
December 1, 2000 108.33688838
June 1, 2001 108.01192746
December 1, 2001 106.12825422
June 1, 2002 105.77969419
December 1, 2002 103.79375276
June 1, 2003 103.13522671
December 1, 2003 99.46878979
June 1, 2004 98.70979010
December 1, 2004 94.89621762
June 1, 2005 94.09411445
December 1, 2005 90.06462610
June 1, 2006 89.21538806
December 1, 2006 84.95947602
June 1, 2007 84.05794009
December 1, 2007 79.56558875
June 1, 2008 78.50506373
December 1, 2008 73.87111975
June 1, 2009 68.53884545
December 1, 2009 67.68666093
June 1, 2010 62.04396324
December 1, 2010 61.14342115
June 1, 2011 55.21100093
December 1, 2011 54.22513631
June 1, 2012 46.61653284
December 1, 2012 46.85327623
June 1, 2013 38.75531553
December 1, 2013 39.18555021
June 1, 2014 30.56437189
Decembers 1, 2014 31.30838274
June 1, 2015 22.27858262
December 1, 2015 23.22824727
June 1, 2016 14.43679822
December 1, 2016 14.55413188
June 1, 2017 10.00000000
</TABLE>
<PAGE>
SCHEDULE 4
Schedule of Modified
Special Casualty Values
------------------------
<TABLE>
<S> <C>
October 13, 1994 35.33179726
December 1, 1994 35.34505212
June 1, 1995 35.70919251
December 1, 1995 35.97368725
June 1, 1996 36.14531970
December 1, 1996 36.20761373
June 1, 1997 36.20761373
December 1, 1997 36.20761373
June 1, 1998 36.20703687
December 1, 1998 36.20703687
June 1, 1999 36.20547569
December 1, 1999 36.20547569
June 1, 2000 36.20267314
December 1, 2000 36.20267314
June 1, 2001 36.04194446
December 1, 2001 35.60346237
June 1, 2002 35.22630762
December 1, 2002 34.75742513
June 1, 2003 34.35496137
December 1, 2003 33.57065625
June 1, 2004 32.85479521
December 1, 2004 31.95949148
June 1, 2005 31.20225149
December 1, 2005 30.25547016
June 1, 2006 29.45504576
December 1, 2006 28.45216945
June 1, 2007 27.60598990
December 1, 2007 26.54132803
June 1, 2008 25.64444806
December 1, 2008 24.41150135
June 1, 2009 23.35198698
December 1, 2009 22.10779615
June 1, 2010 21.06991736
December 1, 2010 19.77447759
June 1, 2011 18.67731942
December 1, 2011 17.26998584
June 1, 2012 16.07473633
December 1, 2012 14.59591579
June 1, 2013 14.71940853
December 1, 2013 13.84135093
June 1, 2014 14.16393146
December 1, 2014 14.65409421
June 1, 2015 15.30254171
December 1, 2015 14.08688567
June 1, 2016 14.94240416
December 1, 2016 5.21401239
June 1, 2017 5.14486031
</TABLE>
<PAGE>
SCHEDULE 5
Schedule of Special
Termination Values
------------------
<TABLE>
<S> <C>
October 13, 1994 121.65779000
December 1, 1994 121.67816268
June 1, 1995 122.24271339
December 1, 1995 121.12841303
June 1, 1996 121.51196066
December 1, 1996 120.09222053
June 1, 1997 120.31487990
December 1, 1997 118.72339927
June 1, 1998 118.95979178
December 1, 1998 117.25085183
June 1, 1999 117.17315437
December 1, 1999 115.65497237
June 1, 2000 115.92142451
December 1, 2000 113.92430469
June 1, 2001 113.76907557
December 1, 2001 112.06029014
June 1, 2002 111.89193059
December 1, 2002 110.09166368
June 1, 2003 109.62445247
December 1, 2003 106.15514207
June 1, 2004 105.59925711
December 1, 2004 101.99496948
June 1, 2005 101.40850871
December 1, 2005 97.60121344
June 1, 2006 96.98091815
December 1, 2006 92.96090358
June 1, 2007 92.30243109
December 1, 2007 88.06052686
June 1, 2008 87.25805689
December 1, 2008 82.89000705
June 1, 2009 77.83170408
December 1, 2009 77.26181346
June 1, 2010 71.90998506
December 1, 2010 71.30914813
June 1, 2011 65.68553739
December 1, 2011 65.01786310
June 1, 2012 57.73711578
December 1, 2012 58.31167478
June 1, 2013 50.56179169
December 1, 2013 51.35067772
June 1, 2014 43.09904567
December 1, 2014 44.22382870
June 1, 2015 35.58636765
December 1, 2015 36.94028967
June 1, 2016 28.56537832
December 1, 2016 29.11190305
June 1, 2017 25.00000000
</TABLE>
<PAGE>
EXHIBIT B
TO AMENDMENT NO. 4 TO
PARTICIPATION AGREEMENT
-----------------------
[INTENTIONALLY OMITTED]
<PAGE>
EXHIBIT C
SCHEDULE 1 TO AMENDMENT
TO THE NEW FIXED RATE NOTE NO. 4 TO
(DUE JUNE 1, 1999) PARTICIPATION AGREEMENT
Schedule of Principal Amortization
<TABLE>
<CAPTION>
Debt
Date Drawndown Service Interest Principal Balance
---- --------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C>
December 8, 1992 1,726,600.00 1,726.000.00
June 1, 1993 59,968.43 59,968.43 0.00 1,726.000.00
December 1, 1993 62,394.90 62,394.90 0.00 1,726.000.00
June 1, 1994 62,394.90 62,394.90 0.00 1,726.000.00
December 1, 1994 62,394.90 62,394.90 0.00 1,726.000.00
June 1, 1995 62,394.90 62,394.90 0.00 1,726.000.00
December 1, 1995 412,394.90 62,394.90 350.000.00 1,376.000.00
June 1, 1996 49,742.40 49.742.40 0.00 1,376.000.00
December 1, 1996 452,742.40 49.742.40 403,000.00 973,000.00
June 1, 1997 35,173.95 35,173.95 0.00 973,000.00
December 1, 1997 467,173.95 35,173.95 432,000.00 541,000.00
June 1, 1998 19,557.15 19,557.15 0.00 541,000.00
December 1, 1998 482,557.15 19,557.15 463,000.00 78.000.00
June 1, 1999 80,819.70 2,819.70 78,000.00 0.00
December 1, 1999 0.00 0.00 0.00 0.00
June 1, 2000 0.00 0.00 0.00 0.00
December 1, 2000 0.00 0.00 0.00 0.00
June 1, 2001 0.00 0.00 0.00 0.00
December 1, 2001 0.00 0.00 0.00 0.00
June 1, 2002 0.00 0.00 0.00 0.00
December 1, 2002 0.00 0.00 0.00 0.00
June 1, 2003 0.00 0.00 0.00 0.00
December 1, 2003 0.00 0.00 0.00 0.00
June 1, 2004 0.00 0.00 0.00 0.00
December 1, 2004 0.00 0.00 0.00 0.00
June 1, 2005 0.00 0.00 0.00 0.00
December 1, 2005 0.00 0.00 0.00 0.00
June 1, 2006 0.00 0.00 0.00 0.00
December 1, 2006 0.00 0.00 0.00 0.00
June 1, 2007 0.00 0.00 0.00 0.00
December 1, 2007 0.00 0.00 0.00 0.00
June 1, 2008 0.00 0.00 0.00 0.00
December 1, 2008 0.00 0.00 0.00 0.00
June 1, 2009 0.00 0.00 0.00 0.00
December 1, 2009 0.00 0.00 0.00 0.00
June 1, 2010 0.00 0.00 0.00 0.00
December 1, 2010 0.00 0.00 0.00 0.00
June 1, 2011 0.00 0.00 0.00 0.00
December 1, 2011 0.00 0.00 0.00 0.00
June 1, 2012 0.00 0.00 0.00 0.00
December 1, 2012 0.00 0.00 0.00 0.00
June 1, 2013 0.00 0.00 0.00 0.00
December 1, 2013 0.00 0.00 0.00 0.00
June 1, 2014 0.00 0.00 0.00 0.00
December 1, 2014 0.00 0.00 0.00 0.00
June 1, 2015 0.00 0.00 0.00 0.00
December 1, 2015 0.00 0.00 0.00 0.00
June 1, 2016 0.00 0.00 0.00 0.00
December 1, 2016 0.00 0.00 0.00 0.00
June 1, 2017 0.00 0.00 0.00 0.00
--------------- --------- --------- ----------
Totals 1,726,000.00 2,309,709.63 583,709.63 1,726,000.00
</TABLE>
C-1
<PAGE>
SCHEDULE 1
TO THE NEW FIXED RATE NOTE
(DUE JUNE 1, 2015)
Schedule of Principal Amortization
<TABLE>
<CAPTION>
Debt
Date Drawndown Service Interest Principal Balance
---- --------- ------- -------- --------- -------
<S> <C> <C> <C> <C> <C>
December 8, 1992 7,259,000.00
June 1,1993 721,570.02 721,570.02 0.00 17,259,000.00
December 1, 1993 750,766.50 750,766.50 0.00 17,259,000.00
June 1, 1994 750,766.50 750,766.50 0.00 17,259,000.00
December 1, 1994 789,766.50 750,766.50 39,000.00 17,220,000.00
June 1, 1995 749,070.00 749,070.00 0.00 17,220,000.00
December 1, 1995 774,070.00 749,070.00 25,000.00 17,195,000.00
June 1, 1996 747,982.50 747,982.50 0.00 17,195,000.00
December 1, 1996 747,982.50 747,982.50 0.00 17,195,000.00
June 1, 1997 747,982.50 747,982.50 0.00 17,195,000.00
December 1, 1997 747,982.50 747,982.50 0.00 17,195,000.00
June 1, 1998 747,982.50 747,982.50 0.00 17,195,000.00
December 1, 1998 747,982.50 747,982.50 0.00 17,195,000.00
June 1, 1999 747,982.50 747,982.50 0.00 17,195,000.00
December 1, 1999 1,168,982.50 747,982.50 421,000.00 16,774,000.00
June 1, 2000 729,669.00 729,669.00 0.00 16,774,000.00
December 1, 2000 1,228,669.00 729,669.00 499,000.00 16,275,000.00
June 1, 2001 707,962.50 707,962.50 0.00 16,275,000.00
December 1, 2001 1,092,962.50 707,962.50 385,000.00 15,890,000.00
June 1, 2002 691,215.00 691,215.00 0.00 15,890,000.00
December 1, 2002 1,095,215.00 691,215.00 404,000.00 15,486,000.00
June 1, 2003 673,641.00 673,641.00 0.00 15,486,000.00
December 1, 2003 1,404,641.00 673,641.00 731,000.00 14,755,000.00
June 1,2004 641,842.50 641,842.50 0.00 14,755,000.00
December 1, 2004 1,399,814.50 641,842.50 758,000.00 13,997,000.00
June 1, 2005 608,869,50 608,869.50 0.00 13,197,000.00
December 1, 2005 1,409,869.50 608,869.50 801,000.00 13,196,000.00
June 1, 2006 574,026.00 574,026.00 0.00 13,196,000.00
December 1, 2006 1,420,026.00 574,026.00 864,000.00 12,350,000.00
June 1, 2007 537,225.00 537,225.00 0.00 12,350,000.00
December 1, 2007 1,429,225.00 537,225.00 892,000.00 11,458,000.00
June 1, 2008 498,423.00 498,423.00 0.00 11,458,000.00
December 1, 2008 1,388,423.00 498,423.00 890,000,00 10,568,000.00
June 1, 2009 1,473,708,00 459,708.00 1,014,000.00 9,554,000.00
December 1, 2009 415,599.00 415,599.00 0.00 9,554,000.00
June 1, 2010 1,493,599.00 415,599.00 1,078,000.00 8,476,000.00
December 1 2010 368,706.00 368,706.00 0.00 8,476,000.00
June 1, 2011 1,491,706.00 368,706.00 1,123,000.00 7,353,000.00
December 1, 2011 319,855.50 319,855.50 0.00 7,353,000.00
June 1, 2012 1,826,855.50 319,855.50 1,507,000.00 5,846,000.00
December 1, 2012 254,301.00 254,301.00 0.00 5,846,000.00
June 1,2013 2,010,301.00 254,301.00 1,756,000.00 4,090,000.00
December 1, 2013 177,915.00 177,915.00 0.00 4,090,000.00
June 1, 2014 2,358,915.00 177,915.00 2,181,000.00 1,909,000.00
December 1, 2014 83,041.50 83,041.50 0.00 1,909,000.00
June 1, 2015 1,992,041.50 83,041.50 1,909,000.00 0.00
December 1, 2015 0.00 0.00 0.00 0.00
June 1, 2016 0.00 0.00 0.00 0.00
December 1, 2016 0.00 0.00 0.00 0.00
June 1, 2017 0.00 0.00 0.00 0.00
----------------- ------------ ------------ ------------
Totals 7,259,000.00 42,739.160.52 25,480,160.52 17,259.000.00
</TABLE>
C-2
<PAGE>
SCHEDULE 1A
TO AMENDMENT NO. 4 TO
PARTICIPATION AGREEMENT
-----------------------
SCHEDULE 5 TO PARTICIPATION AGREEMENT
DUQUESNE LIGHT COMPANY BEAVER VALLEY UNIT 2
COLLATERALIZED LEASE BONDS -- PRICING ASSUMPTIONS
FROM CLOSING DATE UP TO AND INCLUDING DECEMBER 7, 1992
------------------------------------------------------
Basic Rent, Casualty Value, Special Casualty Value, Modified Special
Casualty Value and Special Termination Value as set forth in the Facility Lease,
as originally executed, have been computed on the basis of the following pricing
assumptions:
1. Investment Percentage: 20.0 percent
2. Debt Percentage: 80.0 percent
3. Interest Rate on Notes: 12.0 percent per annum
4. Federal ACRS Deductions: 10-year public utility property
deductions on the basis of 100.0
percent of Facility cost.
5. Investment Tax Credit: 0.0 percent of Facility Cost.
6. Owner Participant's Tax Year-End: December 31
7. Closing Date: October 2, 1987
8. Transaction Expenses: 1.5 percent of Facility Cost paid
on October 2, 1987 by the Owner
Participant in addition to its
Investment (amortized on a
straight-line basis during the
Base Lease Term).
9. Basic Rent Payment Date: June 1 and December 1 of each
year (rent payable in arrears).
<PAGE>
PAGE 2 TO
SCHEDULE 1A
TO AMENDMENT NO. 4 TO
PARTICIPATION AGREEMENT
-----------------------
DUQUESNE LIGHT COMPANY BEAVER VALLEY UNIT 2
COLLATERALIZED LEASE BONDS -- PRICING ASSUMPTIONS
FROM CLOSING DATE UP TO AND INCLUDING DECEMBER 7, 1992 (CONTINUED)
------------------------------------------------------------------
10. First Basic Rent Payment Date: June 1, 1988
11. Last Basic Rent Payment Date: June 1, 2017
12. Interim Rent Payment Date: December 1, 1987
13. Rent Structure: Semi-annual Arrears
14. Owner Participant's Marginal
Federal Tax Rates: 39.95068 percent in 1987; 34
percent thereafter.
15. Owner Participant's Marginal State
Tax Rate: 0 percent
16. State and City Deductions: None.
17. First Estimated Tax Payment Date: December 15, 1987
18. Owner Participant's Short First
Tax Year: Commences October 2, 1987
19. Tax Accounting Method: Accrual
20. Amortization of Notes: See Amortization Schedule in
Notes.
21. Undivided Interest Percentage: 0.6061814 percent of Unit 2.
22. Facility Cost: $23,732,000
23. Purchase Price: 100 percent of Facility Cost.
Note: Interim Rent was calculated assumiung a Closing Date of October 2,
1987.
<PAGE>
SCHEDULE 1B
TO AMENDMENT NO. 4 TO
PARTICIPATION AGREEMENT
-----------------------
DUQUESNE LIGHT COMPANY BEAVER VALLEY UNIT 2
COLLATERALIZED LEASE BONDS -- ADDITIONAL PRICING ASSUMPTIONS
BEGINNING DECEMBER 8, 1992, AS ADJUSTED FOR REFINANCING,
UP TO AND INCLUDING October 12, 1994
------------------------------------
Basic Rent, Casualty Value, Special Casualty Value, Modified
Special Casualty Value and Special Termination Value as set forth in the
Facility Lease, as amended by Amendment No. 2 thereto, have been computed on the
basis of the following additional pricing assumptions:
24. Refinancing Closing Date: December 8, 1992
25. Redemption Date: December 8, 1992
26. Interest Rates on New Fixed
Rate Notes:
Series Due 1999: 7.23%
Series Due 2016: 8.70%
27. Amortization of New Fixed
Rate Notes: See Amortization Schedule in New
Fixed Rate Notes.
28. Amount of New Fixed Rate Notes:
Series Due 1999: $1,726,000
Series Due 2016: $17,259,000
29. INTENTIONALLY OMITTED
<PAGE>
PAGE 2 TO
SCHEDULE 1B
TO AMENDMENT NO. 4
TO PARTICIPATION AGREEMENT
--------------------------
DUQUESNE LIGHT COMPANY BEAVER VALLEY UNIT 2 COLLATERALIZED
LEASE BONDS -- ADDITIONAL PRICING ASSUMPTIONS BEGINNING
DECEMBER 8, 1992, AS ADJUSTED FOR REFINANCING, UP TO AND
INCLUDING OCTOBER 12, 1994 (CONTINUED)
--------------------------------------
30. Notes to be Redeemed on 12/8/92: $18,736,000
31. Additional Equity Investment: $359,206
32. Refinancing Transaction
Expenses: 0.875 percent of Facility Cost paid on the
Refinancing Closing Date by funds provided
to the Owner Trustee (amortized on a
stright-line basis during the remaining
lease term which shall begin on the
Refinancing Closing Date and end on the
last Basic Rent Payment Date).
33. Transaction Expense
Percentage: 4.4118 percent
34. Supplemental Rent Payment on
the Refinancing Closing Date: $1,228,024 as calculated with reference to
Section 2(g) of the Refinancing Agreement
(Supplemental Rent of $1,184,824 plus
accrued interest on Fixed Rate Notes of
$43,200).
<PAGE>
SCHEDULE 1C
TO AMENDMENT NO. 4
TO PARTICIPATION AGREEMENT
--------------------------
DUQUESNE LIGHT COMPANY BEAVER VALLEY UNIT 2
COLLATERALIZED LEASE BONDS -- ADDITIONAL PRICING
ASSUMPTIONS BEGINNING OCTOBER 13, 1994
--------------------------------------
Basic Rent, Casualty Value, Speacial Casualty Value, Modified
Special Casualty Value and Special Termination Value as set forth in the
Facility Lease, as amended by Amendment No. 3 thereto, have been computed on the
basis of the following additional pricing assumptions:
35. Adjustment Transaction
Expenses: $31,000.00 paid on the Tax Rate
Adjustment Closing Date pursuant to
Section 6(a) of the Amendment No. 4 to
Participation Agreement by the Lessee on
behalf of the Owner Trustee (amortized
by the Owner Trustee on a straight-line
basis during the remaining Base Lease
Term).
36. Owner Participant's
Marginal Federal Tax Rates. 39.95068 percent in 1987; 34 percent in
1988, 1989, 1990, 1991 and 1992; 35
percent thereafter.
37. Reoptimized Amortization
of Notes: See Amortization Schedules in Exhibit C
to Amendment No. 4 to Participation
Agreement.
38. Tax Rate Adjustment
Closing Date: October 13, 1994
<PAGE>
SCHEDULE 2
TO AMENDMENT NO. 4 TO
PARTICIPATION AGREEMENT
-----------------------
RECORDATIONS AND FILINGS
------------------------
Filing of Amendment No. 3 to Facility Lease in the Office of the
Recorder of Deeds, Beaver County, Pennsylvania.
<PAGE>
PAYCORP
EXHIBIT 10.36
================================================================================
AMENDMENT NO. 4
dated as of October 13, 1994
to
PARTICIPATION AGREEMENT
dated as of September 15, 1987
among
BEAVER VALLEY LEASING CORPORATION,
as Owner Participant
DQU FUNDING CORPORATION,
as Funding Corp
DQU II FUNDING CORPORATION,
as New Funding Corp
THE FIRST NATIONAL BANK OF BOSTON,
in its individual capacity and as Owner Trustee
under a Trust Agreement,
dated as of September 15, 1987, with the
Owner Participant, as Owner Trustee
THE BANK OF NEW YORK,
in its individual capacity and as Indenture Trustee
under a Trust Indenture, Mortgage, Security Agreement
and Assignment of Facility Lease, dated as of
September 15, 1987,
with the Owner Trustee, as Indenture Trustee
and
DUQUESNE LIGHT COMPANY,
as Lessee
================================================================================
Sale and Leaseback of an Undivided Interest in
Beaver Valley Power Station Unit 2
================================================================================
<PAGE>
AMENDMENT NO. 4, dated as of October 13, 1994 (this "Amendment No. 4")
to the Participation Agreement, dated as of September 15, 1987, among BEAVER
VALLEY LEASING CORPORATION (the "Owner Participant"), DQU FUNDING CORPORATION, a
Delaware corporation ("Funding Corp"), DQU II FUNDING CORPORATION, a Delaware
corporation ("New Funding Corp"), THE FIRST NATIONAL BANK OF BOSTON, a national
banking association, in its individual capacity and as Owner Trustee (the "Owner
Trustee") under a Trust Agreement, dated as of September 15, 1987, with the
Owner Participant, THE BANK OF NEW YORK (formerly IRVING TRUST COMPANY), a New
York banking corporation, in its individual capacity and as Indenture Trustee
(the "Indenture Trustee") under a Trust Indenture, Mortgage, Security Agreement
and Assignment of Facility Lease, dated as of September 15, 1987, with the Owner
Trustee, and DUQUESNE LIGHT COMPANY, a Pennsylvania corporation (the "Lessee").
W I T N E S S E T H :
-------------------
WHEREAS, the Owner Participant, the Original Loan Participants (such
term and other capitalized terms used herein without definition being defined as
provided in Section 1), Funding Corp, the Owner Trustee, the Indenture Trustee
and the Lessee have previously entered into a Participation Agreement, dated as
of September 15, 1987, as heretofore amended (such Participation Agreement, as
so amended, being hereinafter referred to as the "Participation Agreement");
WHEREAS, Section 3(d) of the Facility Lease provides for adjustments
to Basic Rent and schedules of Casualty Values, Special Casualty Values,
Modified Special Casualty Values and Special Termination Values if there is a
change in the Code which results in the marginal federal income tax rate
applicable to corporations differing from the rate assumed to be applicable in
the Pricing Assumptions as in effect on the Closing Date;
WHEREAS, by reason of the enactment of the Omnibus Budget
Reconciliation Act of 1993 (Pub. L. No. 103-66) the marginal Federal income tax
rate applicable to corporations increased from 34 percent to 35 percent for tax
years beginning on or after January 1, 1993;
WHEREAS, the Owner Trustee and the Lessee intend to execute Amendment
No. 3 to the Facility Lease dated as of the date hereof ("Lease Amendment No.
3"), to amend the schedules thereof;
<PAGE>
WHEREAS, Funding Corp desires to cease to be a party to the
Participation Agreement;
WHEREAS, Section 2(e) of the Participation Agreement provides that,
subject to the satisfaction of the conditions set forth in Sections 2(d) and
11(c) of the Participation Agreement, the Owner Trustee and the Lessee in
connection with any Tax Rate Adjustment, shall reoptimize the amortization
schedules for the Notes in accordance with, and in the manner contemplated by,
Section 3(f) of the Facility Lease subject to the constraints set forth in
Section 2(e) of the Participation Agreement, Section 3.12 of the Indenture and
Section 2(b) of Supplemental Indenture No. 2 to the Indenture;
WHEREAS, the Indenture Trustee, in connection with the adjustment to
the schedules of principal amortization attached to the Outstanding Fixed Rate
Notes, has agreed to waive the 60 day notice requirement under Section 2(b) of
Supplemental Indenture No. 2, dated as of November 15, 1992, to the Indenture
and accept a 45 day notice period in lieu thereof; and
WHEREAS, the parties hereto desire to amend the Pricing Assumptions in
the manner hereinafter set forth and reoptimize the amortization schedules for
the Notes as a result of a Tax Rate Adjustment.
NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1. DEFINITIONS.
-----------
Except as otherwise defined herein and in the recitals, capitalized
terms used herein shall have the respective meanings set forth in Appendix A to
the Participation Agreement.
SECTION 2. REOPTIMIZATION.
--------------
Subject to Sections 2(d) and 11(c) of the Participation Agreement, on
the Effective Date (as hereinafter defined) the Lessor and the Lessee shall
reoptimize the amortization schedules for the Notes in accordance with and in
the manner contemplated by Section 3(f) of the Facility Lease, Section 3.12 of
the Indenture and Section 2(b) of the Supplemental Indenture No. 2 thereto, and
Section 2(e) of the Participation Agreement.
-2-
<PAGE>
SECTION 3. Implementation.
--------------
(a) Forms. The form of Lease Amendment No. 3 is attached hereto as
-----
Exhibit A and the reoptimized amortization schedules for the Outstanding Fixed
Rate Notes are attached hereto as Exhibit C.
(b) Request by the Owner Participant. In accordance with Section 2.01
--------------------------------
of the Trust Agreement, subject to the satisfaction of the conditions set forth
in Section 2(d) and 11(c) of the Participation Agreement (it being the agreement
of the parties hereto that the transactions contemplated hereby do not
constitute a refunding pursuant to Section 2(d) of the Participation Agreement),
the Owner Participant hereby directs that the Owner Trustee (i) execute and
deliver this Amendment No. 4 and Lease Amendment No. 3 (collectively, the "1994
Amendments"), (ii) execute and deliver all other agreements, instruments and
certificates contemplated by the 1994 Amendments, and (iii) instruct the
Indenture Trustee to (x) consent to Lease Amendment No. 3 and (y) attach the
reoptimized amortization schedules (attached hereto as Exhibit C) for the
Outstanding Fixed Rate Notes in replacement for the existing amortization
schedules to such Fixed Rate Notes.
(c) Instruction and Consent. In accordance with Section 10.2(ii) of
-----------------------
the Indenture, the Lessee and Owner Trustee hereby instruct the Indenture
Trustee to consent to Lease Amendment No. 3 and the Indenture Trustee so
consents.
(d) Consent of Lessee. In accordance with Section 8(b)(2) of the
-----------------
Participation Agreement, the Lessee hereby consents to the revised amortization
schedules attached to the respective Outstanding Fixed Rate Notes in connection
with the Tax Rate Adjustment.
Section 4. Amendments.
----------
(a) Schedule 5 to the Participation Agreement is hereby amended and
replaced in its entirety with Schedule 1 hereto.
-3-
<PAGE>
(b) The parties agree that Funding Corp shall cease to be a party to
the Participation Agreement and shall have no further rights or obligations
thereunder. The Participation Agreement is hereby amended generally so that all
references to Funding Corp shall be deemed to refer to New Funding Corp and/or
such other entity as may participate in the funding or refunding of the Notes to
the extent that such references relate to the rights, obligations or interest of
Funding Corporation subsequent to the Effective Date.
(c) The definition of Funding Corp or Funding Corporation in Appendix
A to the Participation Agreement is amended in its entirety to read as follows:
"Funding Corp or Funding Corporation shall mean
New Funding Corp and/or such other entity as may
participate in the funding or refunding of any Notes."
(d) Section 18(iv) is hereby amended by inserting at the end thereof
before the semicolon after the phrase "Attention: President" the following
phrase:
"and if to New Funding Corporation at:
c/o J H Management Corporation
1 International Place
Boston, Massachusetts 02110
Attention: Lannhi Tran."
Section 5. Conditions to Effectiveness.
---------------------------
This Amendment No. 4 shall become effective as of the Effective Date
(as hereinafter defined) if: (i) it shall have been duly executed and delivered
by all of the parties hereto and all of the conditions set forth below in this
Section 5 shall have been satisfied or waived, which satisfaction or waiver by
each of the parties hereto shall be deemed to be evidenced by the due execution
and delivery of this Amendment No. 4 by each such party (the date of the due
execution and delivery by the last of the parties to so execute and deliver this
Amendment No. 4 shall be defined as the "Effective Date"); (ii) each of Lease
Amendment No. 3 and Amendment No. 2 to the Tax Indemnification Agreement dated
as of the date hereof between the Owner Participant and the Lessee ("Amendment
No. 2 to TIA") shall have been duly executed and delivered by each of
-4-
<PAGE>
the parties thereto; (iii) a replacement Letter of Credit shall have been issued
in favor of the Owner Participant having Maximum Drawing Amounts (as defined in
the Letter of Credit) corresponding to the Modified Special Casualty Values, as
adjusted on the Effective Date hereof; (iv) the Owner Participant shall have
received opinions from Lessee's Special Counsel, Lessee's NRC Counsel and such
other opinions as the Owner Participant shall reasonably request and all such
opinions shall be in form and substance reasonably satisfactory to the Owner
Participant, and (v) subject to the satisfaction of any and all other conditions
set forth in Sections 2(d) and 11(c) of the Participation Agreement (it being
the agreement of the parties hereto that the transactions contemplated hereby do
not constitute a refunding pursuant to Section 2(d) of the Participation
Agreement).
Section 6. Supplemental Rent Payment and Expenses
--------------------------------------
(a) Supplemental Rent Payment. On October 13, 1994 (the "Adjustment
-------------------------
Closing Date"), the Lessee shall pay, as Supplemental Rent and on behalf of the
Owner Trustee, the following costs and expenses (the "Adjustment Transaction
Expenses") in an amount equal to $35,200.00:
(i) the costs and expenses of the Owner Participant
(including, but not limited to, Owner Participant's computer lease analysis
expenses, out-of-pocket expenses and the legal fees and disbursements of the
Owner Participant's Special Counsel) and the Owner Participant's out-of-pocket
expenses and fees and disbursements of any financial advisors employed by it as
well as fees and expenses (including, but not limited to, all computer lease
analysis and travel related costs) of the Owner Trustee, the Owner Trustee's
Counsel, the Indenture Trustee, the Indenture Trustee's Counsel, the Collateral
Trust Trustee, the Collateral Trust Trustee's counsel, Special Counsel for
Funding Corp, and Special Counsel for New Funding Corp, if any, in each case for
their services rendered in connection with the negotiation, execution and
delivery of this Amendment No. 4, Lease Amendment No. 3, and Amendment No. 2 to
TIA and all other agreements, documents or instruments prepared in connection
therewith and all fees, taxes, expenses and disbursements incurred by them in
connection with the transactions contemplated hereby or thereby; and
(ii) all stenographic, printing, reproduction, and other out-of-
pocket expenses (other than investment banking or brokerage fees) incurred in
connection with the execution and
-5-
<PAGE>
delivery of this Amendment No. 4, Lease Amendment No. 3 and Amendment No. 2 to
TIA and all other agreements, documents or instruments prepared in connection
therewith.
(b) Lessee's Obligation. Notwithstanding Section 6(a) hereof or
-------------------
anything in Section 14 of the Participation Agreement to the contrary (i) in the
event the transactions contemplated by this Amendment No. 4 shall not be
consummated for any reason, the Lessee shall pay or cause to be paid, and shall
indemnify and hold harmless Funding Corp, New Funding Corp, the Indenture
Trustee, the Owner Trustee, the Collateral Trust Trustee and the Owner
Participant in respect of all Adjustment Transaction Expenses and (ii) in any
event, the Lessee shall pay or cause to be paid directly (and not as
Supplemental Rent) that portion of the Adjustment Transaction Expenses that
exceeds the Adjustment Transaction Expenses payable on behalf of the Owner
Trustee pursuant to clause (a) above and shall indemnify and hold the Lessor and
Owner Participant harmless for any such amount.
Section 7. Recordations and Filings.
------------------------
The Lessee agrees that it has caused, or will cause, to be made the
recordations and filings set forth in Schedule 2 hereto and that such filings
and recordations are all the recordations and filings that are necessary in
order to preserve, protect and perfect the Owner Trustee's rights and interests
under the Facility Lease, as amended to the date hereof, and the first and prior
security interest of the Indenture Trustee in the Lease Indenture Estate under
the Indenture, as amended.
Section 8. Miscellaneous.
-------------
(a) Execution. This Amendment No. 4 may be executed in any number of
---------
counterparts and by the different parties hereto on separate counterparts, each
of which, when so executed and delivered, shall be an original, but all such
counterparts shall together constitute but one and the same instrument. Although
this Amendment No. 4 is dated as of the date first above written for
convenience, the actual dates of execution hereof by the parties hereto are
respectively the dates set forth under the signatures hereto, and this Amendment
No. 4 shall not be effective until the Effective Date. This Amendment No. 4
amends and modifies the Participation Agreement and is to be read with and form
part of the Participation Agreement. On and from the Effective Date, any
reference in any Transaction Document to the Participation Agreement shall be
deemed to refer to the Participation Agreement as amended through and including
the date hereof.
-6-
<PAGE>
(b) Governing Law. This Amendment No. 4 has been negotiated and
-------------
delivered in the State of New York and shall be governed by, and be construed in
accordance with, the law of the State of New York.
(c) Non-Waiver or Amendment. The agreements contained in this
-----------------------
Amendment No. 4 shall not, except as expressly provided in this Amendment,
operate as a waiver of any right, power or remedy of any party under any
Transaction Document, nor constitute, except as expressly provided in this
Amendment No. 4, a waiver of any provision of any Transaction Document.
(d) Responsibility for Recitals. The recitals contained herein shall
---------------------------
not be taken as the statements of the Indenture Trustee and it shall assume no
responsibility for the correctness of same.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have each caused
this Amendment No. 4 to the Participation Agreement to be duly executed
by their respective officers thereunto duly authorized as of the dates
set forth below.
BEAVER VALLEY LEASING CORPORATION
By:/s/ A. A. Foleoier
-----------------------------------------
Title:
Date: October 13, 1994
DQU FUNDING CORPORATION
By:/s/ Mark Ferrucci
-----------------------------------------
Title: President
Date: October 13, 1994
DQU II FUNDING CORPORATION
By:/s/ Lannhi Tran
-----------------------------------------
Title: Vice President
Date: October 13, 1994
THE FIRST NATIONAL BANK OF BOSTON, in its
individual capacity and as Owner Trustee
By:/s/ J. E. Mogavero
-----------------------------------------
Title: Authorized Officer
Date: October 13, 1994
THE BANK OF NEW YORK, in its individual
capacity and as Indenture Trustee
By:/s/ Mary Jane Morrissey
-----------------------------------------
Title: Assistant Vice President
Date: October 13, 1994
DUQUESNE LIGHT COMPANY
By:/s/ James D. Mitchell
-----------------------------------------
Title: Treasurer
Date: October 13, 1994
<PAGE>
EXHIBIT A TO AMENDMENT NO. 4
TO PARTICIPATION AGREEMENT
CERTAIN RIGHTS OF THE LESSOR UNDER THE FACILITY LEASE AS AMENDED BY THIS
AMENDMENT NO. 3 THERETO HAVE BEEN ASSIGNED TO, AND ARE SUBJECT TO A SECURITY
INTEREST IN FAVOR OF, THE BANK OF NEW YORK, AS INDENTURE TRUSTEE UNDER A TRUST
INDENTURE, MORTGAGE, SECURITY AGREEMENT AND ASSIGNMENT OF FACILITY LEASE, DATED
AS OF SEPTEMBER 15, 1987, AS AMENDED. THIS AMENDMENT NO. 3 HAS BEEN EXECUTED IN
SEVERAL COUNTERPARTS. ONLY THE COUNTERPART MARKED "ORIGINAL" AND CONTAINING THE
RECEIPT THEREFOR BY THE INDENTURE TRUSTEE SHALL BE THE ORIGINAL COUNTERPART.
SEE SECTION 3(c) OF THIS AMENDMENT NO. 3 FOR INFORMATION CONCERNING THE RIGHTS
OF HOLDERS OF VARIOUS COUNTERPARTS HEREOF.
THIS COUNTERPART IS NOT THE ORIGINAL COUNTERPART.
AMENDMENT NO. 3
dated as of October 13, 1994
to
FACILITY LEASE
dated as of September 15, 1987
between
THE FIRST NATIONAL BANK OF BOSTON
not in its individual capacity but solely
as Owner Trustee under a Trust Agreement,
dated as of September 15, 1987, with
Beaver Valley Leasing Corporation,
Lessor
and
DUQUESNE LIGHT COMPANY,
Lessee
Original Facility Lease Recorded
on October 2, 1987 in Miscellaneous
Book Volume 1318, Page 807 in the Office of
the Recorder of Deeds, Beaver County, Pennsylvania.
Amendment No. 1 to Facility Lease Recorded
on December 22, 1987 in Miscellaneous Book
Volume 1325, Page 241 in the Office of the
Recorder of Deeds, Beaver County, Pennsylvania.
Amendment No. 2 to Facility Lease Recorded
on December 29, 1992 in Miscellaneous Book
Volume 1519, Page 015 in the Office of the
Recorder of Deeds, Beaver County, Pennsylvania.
<PAGE>
AMENDMENT NO. 3, dated as of October 13, 1994 ("Amendment No. 3"), to
the Facility Lease, dated as of September 15, 1987, as amended to the date
hereof (as so amended, the "Facility Lease"), between THE FIRST NATIONAL BANK OF
BOSTON, a national banking association, not in its individual capacity but
solely as Owner Trustee under a Trust Agreement, dated as of September 15, 1987,
as amended to the date hereof, with Beaver Valley Leasing Corporation (the
"Lessor"), and DUQUESNE LIGHT COMPANY, a Pennsylvania corporation (the
"Lessee").
W I T N E S S E T H :
- - - - - - - - - -
WHEREAS, the Lessee and the Lessor have heretofore entered into the
Facility Lease, providing for the lease by the Lessor to the Lessee of the
Undivided Interest (such term and other capitalized terms used herein without
definition being defined as provided in Section 1);
WHEREAS, Section 3(d) of the Facility Lease provides for an adjustment
to Basic Rent and to the schedules of Casualty Values, Special Casualty Values,
Modified Special Casualty Values and Special Termination Values in order to
preserve Net Economic Return in the event there is any change in the Code which
results in the marginal Federal income tax rate applicable to corporations
differing from the rate assumed to be applicable in the Pricing Assumptions as
in effect on the Closing Date; and
WHEREAS, by reason of the enactment of the Omnibus Budget
Reconciliation Act of 1993 (Pub. L. No. 103-66) ("Budget Reconciliation Act")
the marginal Federal income tax rate applicable to corporations increased from
34 percent to 35 percent for tax years beginning on or after January 1, 1993
and, as a result, the Lessor wishes to document amendments to the schedules of
Basic Rent, Casualty Values, Special Casualty Values, Modified Special Casualty
Values and Special Termination Values pursuant to Sections 3(d) and 3(f) of the
Facility Lease.
NOW, THEREFORE, intending to be legally bound hereby, in consideration
of the premises and of other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. Definitions.
-----------
For purposes hereof, capitalized terms used herein or in the recitals
and not otherwise defined herein or in the recitals shall have the meanings
assigned to such terms in Appendix A to the Facility Lease.
<PAGE>
SECTION 2. Amendments to Facility Lease.
----------------------------
(a) Schedules
---------
(1) Schedule 1 to the Facility Lease entitled "Basic Rent
Payments" is deleted in its entirety and is hereby replaced with Schedule 1
hereto.
(2) Schedule 2 to the Facility Lease entitled "Schedule of
Casualty Values" is deleted in its entirety and is hereby replaced with Schedule
2 hereto.
(3) Schedule 3 to the Facility Lease entitled "Schedule of
Special Casualty Values" is deleted in its entirety and is hereby replaced with
Schedule 3 hereto.
(4) Schedule 4 to the Facility Lease entitled "Schedule of
Modified Special Casualty Values" is deleted in its entirety and is hereby
replaced with Schedule 4 hereto.
(5) Schedule 5 to the Facility Lease entitled "Schedule of
Special Termination Values" is deleted in its entirety and is hereby replaced
with Schedule 5 hereto.
(b) Definitions. Appendix A of the Facility Lease is amended as
-----------
set forth in Amendment No. 4 to the Participation Agreement dated as of the date
hereof among the Owner Participant, Lessee, Owner Trustee, Indenture Trustee,
Funding Corporation and New Funding Corporation ("Amendment No. 4 to
------------------
Participation Agreement") in respect of Appendix A thereto.
-----------------------
SECTION 3. Miscellaneous.
-------------
(a) Dating; References. Although this Amendment No. 3 is dated
------------------
as of the date first above written for convenience, the actual dates of
execution hereof by the parties hereto are respectively the dates set forth
under the signatures hereto, and this Amendment No. 3 shall be effective as of
the Effective Date (as defined in Amendment No. 4 to Participation Agreement).
This Amendment No. 3 amends and modifies the Facility Lease and is to be read
with and form part of the Facility Lease. On and after the Effective Date, any
reference in any Transaction Document to the Facility Lease shall be deemed to
refer to the Facility Lease, as amended through and including the date hereof.
-2-
<PAGE>
(b) Governing Law. This Amendment No. 3 shall be governed by,
-------------
and be construed in accordance with, the law of the State of New York, provided,
however, that all matters relating to the creation of the leasehold estate
hereunder and the exercise of remedies with respect to such leasehold estate
shall be governed by, and be construed in accordance with, the law of the
Commonwealth of Pennsylvania.
(c) Original Counterpart. The single executed original of this
--------------------
Amendment No. 3 marked "THIS COUNTERPART IS THE ORIGINAL COUNTERPART" and
containing the receipt of the Indenture Trustee thereon shall be the "Original"
of this Amendment No. 3. No security interest in this Amendment No. 3 may be
created or continued through the transfer or possession of any counterpart other
than the "Original".
(d) Full Force and Effect. As amended hereby, the Facility Lease
---------------------
remains in full force and effect in accordance with its terms.
(e) Amendments in Writing. The terms of this Amendment No. 3 may
---------------------
not be waived, altered, modified, amended, supplemented or terminated in any
manner whatsoever except in accordance with the terms of the Transaction
Documents and by written instrument signed by the Lessor and the Lessee.
(f) Counterpart Execution. This Amendment No. 3 may be executed
---------------------
in any number of counterparts and by each of the parties hereto or thereto in
separate counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
(g) Non-Waiver or Amendment. The agreements contained in this
-----------------------
Amendment No. 3 shall not, except as expressly provided in this Amendment No. 3,
operate as a waiver of any right, power or remedy of any party under any of the
Transaction Document nor constitute, except as expressly provided in this
Amendment No. 3, a waiver of any provision of any Transaction Document.
-3-
<PAGE>
IN WITNESS WHEREOF, intending to be legally bound, each of the parties
hereto has caused this Amendment No. 3 to Facility Lease to be duly executed by
an officer thereunto duly authorized.
THE FIRST NATIONAL BANK OF BOSTON,
not in its individual capacity but
solely as Owner Trustee under a
Trust Agreement, dated as of
September 15, 1987, with Beaver
Valley Leasing Corporation
By:_______________________________
Date:___________________, 1994
DUQUESNE LIGHT COMPANY
By:________________________________
Date:___________________, 1994
<PAGE>
STATE OF NEW YORK
COUNTY OF NEW YORK
BEFORE ME, a Notary Public in and for said County and State the above-
named DUQUESNE LIGHT COMPANY, by __________________, its __________________, who
acknowledged that he did sign the foregoing instrument on behalf of said
Corporation by authority of its Board of Directors and that the same is the free
act and deed of said Corporation and his free act and deed individually and as
such officer.
IN TESTIMONY WHEREOF, I have hereunto set my, hand and official seal
at New York, New York this _____ day of __________________, 1994.
________________________________
Notary Public
My Commission Expires __________________
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
BEFORE ME, a Notary Public in and for said County and State,
personally appeared the above-named THE FIRST NATIONAL BANK OF BOSTON, by its
Authorized Officer, who acknowledged that he did sign the foregoing instrument
on behalf of said national banking association by authority of its Board of
Directors and that the same is the free act and deed of said national banking
association and his free act and deed individually and as such officer.
IN TESTIMONY WHEREOF, I have of hereunto set my hand and official seal
at New York, New York this _______ day of ______________________, 1994.
______________________________________
Notary Public
My Commission Expires _____________________
<PAGE>
SCHEDULE 1
TO
AMENDMENT NO. 3
SCHEDULE OF BASIC RENT PAYMENTS
<TABLE>
<CAPTION>
Percentage of Percentage of
------------- -------------
Date Facility Cost Date Facility Cost
---- ------------- ---- -------------
<S> <C> <C> <C>
Dec 1 1994 5.1199875 Jun 1 2006 3.3570617
Jun 1 1995 3.5053096 Dec 1 2006 7.2953856
Dec 1 1995 5.2112071 Jun 1 2007 3.4409569
Jun 1 1996 3.4436627 Dec 1 2007 7.2114903
Dec 1 1996 5.2728540 Jun 1 2008 3.3357568
Jun 1 1997 3.3775375 Dec 1 2008 7.3166905
Dec 1 1997 5.3389792 Jun 1 2009 3.2246831
Jun 1 1998 4.9260058 Dec 1 2009 7.4277642
Dec 1 1998 3.7905109 Jun 1 2010 3.1075352
Jun 1 1999 3.2245847 Dec 1 2010 7.5449120
Dec 1 1999 5.4919320 Jun 1 2011 2.9830819
Jun 1 2000 3.3387602 Dec 1 2011 7.6693654
Dec 1 2000 5.3777565 Jun 1 2012 2.8399244
Jun 1 2001 3.4459205 Dec 1 2012 7.8125228
Dec 1 2001 5.2705962 Jun 1 2013 2.2287249
Jun 1 2002 3.4019072 Dec 1 2013 8.4237223
Dec 1 2002 5.3146095 Jun 1 2014 3.9199504
Jun 1 2003 3.6488740 Dec 1 2014 6.7324968
Dec 1 2003 7.0035732 Jun 1 2015 9.0108822
Jun 1 2004 3.5547828 Dec 1 2015 1.6415650
Dec 1 2004 7.0976644 Jun 1 2016 0.0000000
Jun 1 2005 3.4558209 Dec 1 2016 10.6524473
Dec 1 2005 7.1966264 Jun 1 2017 5.3262236
</TABLE>
(I.D. O.P. B.V. LEASING)
<PAGE>
SCHEDULE 2
TO
AMENDMENT NO. 3
SCHEDULE OF CASUALTY VALUES
<TABLE>
<CAPTION>
Percentage of Percentage of
------------- -------------
Date Facility Cost Date Facility Cost
---- ------------- ---- -------------
<S> <C> <C> <C>
Oct 13 1994 124.42764 Jun 1 2006 95.81973
Dec 1 1994 124.10360 Dec 1 2006 91.31490
Jun 1 1995 124.54975 Jun 1 2007 90.52093
Dec 1 1995 123.16252 Dec 1 2007 85.95030
Jun 1 1996 123.37676 Jun 1 2008 85.11083
Dec 1 1996 121.71991 Dec 1 2008 80.28445
Jun 1 1997 121.89756 Jun 1 2009 79.39698
Dec 1 1997 120.11922 Dec 1 2009 74.30063
Jun 1 1998 118.68862 Jun 1 2010 73.36238
Dec 1 1998 118.34078 Dec 1 2010 67.98119
Jun 1 1999 118.54131 Jun 1 2011 66.99009
Dec 1 1999 116.48066 Dec 1 2011 61.30748
Jun 1 2000 116.48184 Jun 1 2012 60.27231
Dec 1 2000 114.45921 Dec 1 2012 54.26004
Jun 1 2001 114.30305 Jun 1 2013 53.63491
Dec 1 2001 112.32471 Dec 1 2013 46.82857
Jun 1 2002 112.15213 Jun 1 2014 44.42865
Dec 1 2002 110.06954 Dec 1 2014 39.27236
Jun 1 2003 109.58837 Jun 1 2015 31.86504
Dec 1 2003 105.75888 Dec 1 2015 31.77157
Jun 1 2004 105.24990 Jun 1 2016 33.29564
Dec 1 2004 101.20535 Dec 1 2016 24.35821
Jun 1 2005 100.66665 Jun 1 2017 20.00000
Dec 1 2005 96.39547
</TABLE>
(I.D. O.P. B.V. LEASING)
<PAGE>
SCHEDULE 3
TO
AMENDMENT NO. 3
SCHEDULE OF SPECIAL CASUALTY VALUES
<TABLE>
<CAPTION>
Percentage of Percentage of
------------- -------------
Date Facility Cost Date Facility Cost
---- ------------- ---- -------------
<S> <C> <C> <C>
Oct 13 1994 121.89041 Jun 1 2006 90.68503
Dec 1 1994 121.54577 Dec 1 2006 86.02225
Jun 1 1995 121.91324 Jun 1 2007 85.06546
Dec 1 1995 120.44490 Dec 1 2007 80.32702
Jun 1 1996 120.57555 Jun 1 2008 79.31456
Dec 1 1996 118.83253 Dec 1 2008 74.30988
Jun 1 1997 118.92135 Jun 1 2009 73.23861
Dec 1 1997 117.05146 Dec 1 2009 67.95283
Jun 1 1998 115.52649 Jun 1 2010 66.81930
Dec 1 1998 115.08137 Dec 1 2010 61.23683
Jun 1 1999 115.18163 Jun 1 2011 60.03827
Dec 1 1999 113.01764 Dec 1 2011 54.14180
Jun 1 2000 112.91228 Jun 1 2012 52.88620
Dec 1 2000 110.77985 Dec 1 2012 46.64672
Jun 1 2001 110.51051 Jun 1 2013 45.78738
Dec 1 2001 108.41549 Dec 1 2013 38.73964
Jun 1 2002 108.12267 Jun 1 2014 36.09089
Dec 1 2002 105.91612 Dec 1 2014 30.67812
Jun 1 2003 105.30718 Jun 1 2015 23.00642
Dec 1 2003 101.34599 Dec 1 2015 22.64043
Jun 1 2004 100.70126 Jun 1 2016 23.88362
Dec 1 2004 96.51679 Dec 1 2016 14.65665
Jun 1 2005 95.83386 Jun 1 2017 10.00000
Dec 1 2005 91.41401
</TABLE>
(I.D. O.P. B.V. LEASING)
<PAGE>
SCHEDULE 4
TO
AMENDMENT NO. 3
SCHEDULE OF MODIFIED SPECIAL CASUALTY VALUES
<TABLE>
<CAPTION>
Percentage of Percentage of
------------- -------------
Date Facility Cost Date Facility Cost
---- ------------- ---- -------------
<S> <C> <C> <C>
Oct 13 1994 37.15701 Jun 1 2006 29.96401
Dec 1 1994 37.20499 Dec 1 2006 29.08160
Jun 1 1995 37.49279 Jun 1 2007 28.20211
Dec 1 1995 37.64924 Dec 1 2007 27.06637
Jun 1 1996 37.69570 Jun 1 2008 26.13931
Dec 1 1996 37.69570 Dec 1 2008 24.93726
Jun 1 1997 37.69570 Jun 1 2009 23.95647
Dec 1 1997 37.69570 Dec 1 2009 22.68432
Jun 1 1998 37.69492 Jun 1 2010 21.64692
Dec 1 1998 37.69492 Dec 1 2010 20.30055
Jun 1 1999 37.69358 Jun 1 2011 19.20286
Dec 1 1999 37.69358 Dec 1 2011 17.77883
Jun 1 2000 37.69370 Jun 1 2012 16.61791
Dec 1 2000 37.49045 Dec 1 2012 15.12381
Jun 1 2001 37.03472 Jun 1 2013 13.90366
Dec 1 2001 36.64772 Dec 1 2013 12.80951
Jun 1 2002 36.16654 Jun 1 2014 13.02605
Dec 1 2002 35.74874 Dec 1 2014 13.44866
Jun 1 2003 35.23000 Jun 1 2015 14.14779
Dec 1 2003 34.49181 Dec 1 2015 15.15086
Jun 1 2004 33.57352 Jun 1 2016 14.47159
Dec 1 2004 32.79201 Dec 1 2016 15.60754
Jun 1 2005 31.81998 Jun 1 2017 5.32622
Dec 1 2005 30.99227
</TABLE>
(I.D. O.P. B.V. LEASING)
<PAGE>
SCHEDULE 5
TO
AMENDMENT NO. 3
SCHEDULE OF SPECIAL TERMINATION VALUES
<TABLE>
<CAPTION>
Percentage of Percentage of
------------- -------------
Date Facility Cost Date Facility Cost
---- ------------- ---- -------------
<S> <C> <C> <C>
Oct 13 1994 125.69626 Jun 1 2006 98.38707
Dec 1 1994 125.38252 Dec 1 2006 93.96123
Jun 1 1995 125.86800 Jun 1 2007 93.24866
Dec 1 1995 124.52132 Dec 1 2007 88.76194
Jun 1 1996 124.77737 Jun 1 2008 88.00897
Dec 1 1996 123.16361 Dec 1 2008 83.27174
Jun 1 1997 123.38566 Jun 1 2009 82.47616
Dec 1 1997 121.65310 Dec 1 2009 77.47454
Jun 1 1998 120.26969 Jun 1 2010 76.63392
Dec 1 1998 119.97048 Dec 1 2010 71.35337
Jun 1 1999 120.22114 Jun 1 2011 70.46601
Dec 1 1999 118.21217 Dec 1 2011 64.89032
Jun 1 2000 118.26661 Jun 1 2012 63.96536
Dec 1 2000 116.29889 Dec 1 2012 58.06670
Jun 1 2001 116.19932 Jun 1 2013 57.55867
Dec 1 2001 114.27931 Dec 1 2013 50.87303
Jun 1 2002 114.16687 Jun 1 2014 48.59753
Dec 1 2002 112.14625 Dec 1 2014 43.56949
Jun 1 2003 111.72897 Jun 1 2015 36.29436
Dec 1 2003 107.96532 Dec 1 2015 36.33713
Jun 1 2004 107.52421 Jun 1 2016 38.00166
Dec 1 2004 103.54964 Dec 1 2016 29.20899
Jun 1 2005 103.08304 Jun 1 2017 25.00000
Dec 1 2005 98.88620
</TABLE>
(I.D. O.P. B.V. LEASING)
<PAGE>
EXHIBIT B
TO AMENDMENT NO. 4 TO
PARTICIPATION AGREEMENT
-----------------------
[INTENTIONALLY OMITTED]
<PAGE>
<TABLE>
EXHIBIT C
TO AMENDMENT NO.4
TO SCHEDULE 1
PARTICIPATION AGREEMENT TO THE NEW FIXED RATE NOTE
(DUE DECEMBER 1, 1999)
SCHEDULE OF PRINCIPAL AMORTIZATION
<CAPTION>
Date Draw Down Debt Service Interest Principal Balance
---- --------- ------------ -------- --------- -------
<S> <C> <C> <C> <C> <C>
Dec 8 1992 0 5,867,000.00 0.00 0.00 0.00 5,867,000.00
Jun 1 1993 1 0.00 203,844.03 203,844.03 0.00 5,867,000.00
Dec 1 1993 2 0.00 212,092.05 212,092.05 0.00 5,867,000.00
Jun 1 1994 3 0.00 212,092.05 212,092.05 0.00 5,867,000.00
Dec 1 1994 4 0.00 451,092.05 212,092.05 239,000.00 5,628,000.00
Jun 1 1995 5 0.00 203,452.20 203,452.20 0.00 5,628,000.00
Dec 1 1995 6 0.00 1,552,452.20 203,452.20 1,349,000.00 4,279,000.00
Jun 1 1996 7 0.00 154,685.85 154,685.85 0.00 4,279,000.00
Dec 1 1996 8 0.00 1,601,685.85 154,685.85 1,447,000.00 2,832,000.00
Jun 1 1997 9 0.00 102,376.80 102,376.80 0.00 2,832,000.00
Dec 1 1997 10 0.00 1,653,376.80 102,376.80 1,551,000.00 1,281,000.00
Jun 1 1998 11 0.00 1,327,308.15 46,308.15 1,281,000.00 0.00
Dec 1 1998 12 0.00 0.00 0.00 0.00 0.00
Jun 1 1999 13 0.00 0.00 0.00 0.00 0.00
Dec 1 1999 14 0.00 0.00 0.00 0.00 0.00
Jun 1 2000 15 0.00 0.00 0.00 0.00 0.00
Dec 1 2000 16 0.00 0.00 0.00 0.00 0.00
Jun 1 2001 17 0.00 0.00 0.00 0.00 0.00
Dec 1 2001 18 0.00 0.00 0.00 0.00 0.00
Jun 1 2002 19 0.00 0.00 0.00 0.00 0.00
Dec 1 2002 20 0.00 0.00 0.00 0.00 0.00
Jun 1 2003 21 0.00 0.00 0.00 0.00 0.00
Dec 1 2003 22 0.00 0.00 0.00 0.00 0.00
Jun 1 2004 23 0.00 0.00 0.00 0.00 0.00
Dec 1 2004 24 0.00 0.00 0.00 0.00 0.00
Jun 1 2005 25 0.00 0.00 0.00 0.00 0.00
Dec 1 2005 26 0.00 0.00 0.00 0.00 0.00
Jun 1 2006 27 0.00 0.00 0.00 0.00 0.00
Dec 1 2006 28 0.00 0.00 0.00 0.00 0.00
Jun 1 2007 29 0.00 0.00 0.00 0.00 0.00
Dec 1 2007 30 0.00 0.00 0.00 0.00 0.00
Jun 1 2008 31 0.00 0.00 0.00 0.00 0.00
Dec 1 2008 32 0.00 0.00 0.00 0.00 0.00
Jun 1 2009 33 0.00 0.00 0.00 0.00 0.00
Dec 1 2009 34 0.00 0.00 0.00 0.00 0.00
Jun 1 2010 35 0.00 0.00 0.00 0.00 0.00
Dec 1 2010 36 0.00 0.00 0.00 0.00 0.00
Jun 1 2011 37 0.00 0.00 0.00 0.00 0.00
Dec 1 2011 38 0.00 0.00 0.00 0.00 0.00
Jun 1 2012 39 0.00 0.00 0.00 0.00 0.00
Dec 1 2012 40 0.00 0.00 0.00 0.00 0.00
Jun 1 2013 41 0.00 0.00 0.00 0.00 0.00
Dec 1 2013 42 0.00 0.00 0.00 0.00 0.00
Jun 1 2014 43 0.00 0.00 0.00 0.00 0.00
Dec 1 2014 44 0.00 0.00 0.00 0.00 0.00
Jun 1 2015 45 0.00 0.00 0.00 0.00 0.00
Dec 1 2015 46 0.00 0.00 0.00 0.00 0.00
Jun 1 2016 47 0.00 0.00 0.00 0.00 0.00
Dec 1 2016 48 0.00 0.00 0.00 0.00 0.00
Jun 1 2017 49 0.00 0.00 0.00 0.00 0.00
------------------- ---------- ------------ ------------
5,867,000.00 7,674,458.03 1,807,458.03 5,867,000.00
Weighted Average Life calculated as of December 8, 1992:
New Fixed Rate Note = 4.261 years
Equivale = 4.158 years (I.D. O.P. B.V. LEASING)
</TABLE>
C-1
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 1
TO THE NEW FIXED RATE NOTE
(DUE JUNE I, 2016)
SCHEDULE OF PRINCIPAL AMORTIZATION
Date Draw Down Debt Service Interest Principal Balance
---- --------- ------------ -------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Dec 8 199 0 60,054,000.00 0.00 0.00 0.00 60,054,000.00
Jun 1 1993 1 0.00 2,510,757.65 2,510,757.65 0.00 60,054,000.00
Dec 1 1993 2 0.00 2,612,349.00 2,612,349.00 0.00 60,054,000.00
Jun 1 1994 3 0.00 2,612,349.00 2,612,349.00 0.00 60,054,000.00
Dec 1 1994 4 0.00 3,598,349.00 2,612,349.00 86,000.00 59,068,000.00
Jun 1 1995 5 0.00 2,569,458.00 2,569,458.00 0.00 59,068,000.00
Dec 1 1995 6 0.00 2,569,458.00 2,569,458.00 0.00 59,068,000.00
Jun 1 1996 7 0.00 2,569,458.00 2,569,458.00 0.00 59,068,000.00
Dec 1 1996 8 0.00 2,569,458.00 2,569,458.00 0.00 59,068,000.00
Jun 1 1997 9 0.00 2,569,458.00 2,569,458.00 0.00 59,068,000.00
Dec 1 1997 10 0.00 2,569,458.00 2,569,458.00 0.00 59,068,000.00
Jun 1 1998 11 0.00 2,569,458.00 2,569,458.00 0.00 59,068,000.00
Dec 1 1998 12 0.00 2,997,458.00 2,569,458.00 28,000.00 58,640,000.00
Jun 1 1999 13 0.00 2,550,840.00 2,550,840.00 0.00 58,640,000.00
Dec 1 1999 14 0.00 4,343,840.00 2,550,840.00 93,000.00 56,847,000.00
Jun 1 2000 15 0.00 2,472,844.50 2,472,844.50 0.00 56,847,000.00
Dec 1 2000 16 0.00 3,881,844.50 2,472,844.50 1,409,000.00 55,438,000.00
Jun 1 2001 17 0.00 2,411,553.00 2,411,553.00 0.00 55,438,000.00
Dec 1 2001 18 0.00 3,776,553.00 2,411,553.00 1,365,000.00 54,073,000.00
Jun 1 2002 19 0.00 2,352,175.50 2,352,175.50 0.00 54,073,000.00
Dec 1 2002 20 0.00 3,780,175.50 2,352,175.50 28,000.00 52,645,000.00
Jun 1 2003 21 0.00 2,290,057.50 2,290,057.50 0.00 52,645,000.00
Dec 1 2003 22 0.00 4,800,057.50 2,290,057.50 2,510,000.00 50,135,000.00
Jun 1 2004 23 0.00 2,180,872.50 2,180,872.50 0.00 50,135,000.00
Dec 1 2004 24 0.00 4,831,872.50 2,180,872.50 2,651,000.00 47,484,000.00
Jun 1 2005 25 0.00 2,065,554.00 2,065,554.00 0.00 47,484,000.00
Dec 1 2005 26 0.00 4,865,554.00 2,065,554.00 2,800,000.00 44,684,000.00
Jun 1 2006 27 0.00 1,943,754.00 1,943,754.00 0.00 44,684,000.00
Dec 1 2006 28 0.00 5,047,754.00 1,943,754.00 3,104,000.00 41,580,000.00
Jun 1 2007 29 0.00 1,808,730.00 1,808,730.00 0.00 41,580,000.00
Dec 1 2007 30 0.00 4,942,730.00 1,808,730.00 3,134,000.00 38,446,000.00
Jun 1 2008 31 0.00 1,672,401.00 1,672,401.00 0.00 38,446,000.00
Dec 1 2008 32 0.00 4,982,401.00 1,672,401.00 3,310,000.00 35,136,000.00
Jun 1 2009 33 0.00 1,528,416.00 1,528,416.00 0.00 35,136,000.00
Dec 1 2009 34 0.00 5,024,416.00 1,528,416.00 3,496,000.00 31,640,000.00
Jun 1 2010 35 0.00 1,376,340.00 1,376,340.00 0.00 31,640,000.00
Dec 1 2010 36 0.00 5,068,340.00 1,376,340.00 3,692,000.00 27,948,000.00
Jun 1 2011 37 0.00 1,215,738.00 1,215,738.00 0.00 27,948,000.00
Dec 1 2011 38 0.00 5,115,738.00 1,215,738.00 3,900,000.00 24,048,000.00
Jun 1 2012 39 0.00 1,046,088.00 1,046,088.00 0.00 24,048,000.00
Dec 1 2012 40 0.00 5,183,088.00 1,046,088.00 4,137,000.00 19,911,000.00
Jun 1 2013 41 0.00 866,128.50 866,128.50 0.00 19,911,000.00
Dec 1 2013 42 0.00 6,641,128.50 866,128.50 5,775,000.00 14,136,000.00
Jun 1 2014 43 0.00 3,100,916.00 614,916.00 2,486,000.00 11,650,000.00
Dec 1 2014 44 0.00 5,325,775.00 506,775.00 4,819,000.00 6,831,000.00
Jun 1 2015 45 0.00 7,128,148.50 297,148.50 6,831,000.00 0.00
Dec 1 2015 46 0.00 0.00 0.00 0.00 0.00
Jun 1 2016 47 0.00 0.00 0.00 0.00 0.00
Dec 1 2016 48 0.00 0.00 0.00 0.00 0.00
Jun 1 2017 49 0.00 0.00 0.00 0.00 0.00
----------------- -------------- ------------ -----------
60,054,000.00 147,939,293.15 87,885,293.15 60,054,000.00
Weighted Average Life calculated as of December 8, 1992:
New Fixed Rate Note = 16.821 years
Equivale = 18.301 years (I.D. O.P. B.V. LEASING)
</TABLE>
C-2
<PAGE>
SCHEDULE 1
TO AMENDMENT NO. 4 TO
PARTICIPATION AGREEMENT
-----------------------
SCHEDULE 5 TO PARTICIPATION AGREEMENT
PRICING ASSUMPTIONS PRIOR TO TAX RATE ADJUSTMENT
------------------------------------------------
Basic Rent, Casualty Value, Special Casualty Value, Modified Special
Casualty Value and Special Termination Value as set forth in the Facility Lease,
as amended by Amendment No. 2 thereto, have been computed on the basis of the
following pricing assumptions:
1. Investment Amount on 10/2/87: $15,821,200
2. Additional Equity
Investment on 12/8/92: $1,199,318
3. Notes to be Redeemed
on 12/1/92: Principal Amount Interest
---------------- --------
Due 1999: $5,588,000 10.90%
Due 2016: $57,193,000 11.95%
4. New Fixed Rate Notes: Principal Amount Interest
---------------- --------
Due 1998: $5,867,000 7.23%
Due 2015: $60,054,000 8.70%
5. INTENTIONALLY OMITTED
6. Federal ACRS Deductions: 10-year public utility property deductions
on the basis of 100.0 percent of Facility
Cost.
7. Investment Tax Credit: 0.0 percent of Facility Cost.
8. Owner Participant's Tax
Year-End: December 31
9. Refinancing Closing Date: December 8, 1992
10. Refinancing Transaction
Expenses: $692,178* (Calculated as 0.875 percent of
Facility Cost and paid on the Refinancing
Closing Date amortized on a straight-line
basis during the remaining Base Lease
Term).
_________________________
* Adjusted to reflect the estimate as of the Refinancing Closing Date.
<PAGE>
PAGE 2 TO
SCHEDULE 1
TO AMENDMENT NO. 4 TO
PARTICIPATION AGREEMENT
-----------------------
PRICING ASSUMPTIONS
PRIOR TO TAX RATE ADJUSTMENT (CONTINUED)
----------------------------------------
11. Call Premium on
Old Bonds: $5,309,162.50 (to be fully deducted
for Federal Income Tax Purposes in
1992).
12. Basic Rent Payment Date: June 1 and December 1 of each year
(rent p
13. Last Basic Rent Payment Date: June 1, 2017
14. First Basic Rent Payment
Date After Refinancing: June 1, 1993
15. Supplemental Rent Payment
made on December 1, 1992: $1,622,022
16. Rent Structure: Semi-annual in Arrears
17. Owner Participant's Marginal
Federal Tax Rates: 39.95068 percent in 1987; 34 percent
thereafter.
18. First Estimated Tax Payment
Date Subsequent to Refinancing: December 1992
19. Tax Accounting Method: Accrual
20. Amortization of Refinancing
Notes: See Schedule of Principal
Amortization to the Fixed Rate Notes
in Notes.
21. Undivided Interest Percentage: 2.0205875 percent of Unit 2.
22. Facility Cost: $79,106,000
23. Purchase Price: 100 percent of Facility Cost.
<PAGE>
<PAGE>
SCHEDULE 1
TO AMENDMENT NO. 4 TO
PARTICIPATION AGREEMENT
-----------------------
ADDITIONAL PRICING ASSUMPTIONS WHICH APPLY
ON AND AFTER THE TAX RATE ADJUSTMENT CLOSING DATE
-------------------------------------------------
Basic Rent, Casualty Value, Special Casualty Value, Modified Special
Casualty Value and Special Termination Value as set forth in the Facility Lease,
as amended by Amendment No. 3 thereto, have been computed on the basis of the
following additional pricing assumptions:
24. Reoptimized Amortization of
New Fixed Rate Notes: In accordance with Amortization
Schedules in Exhibit C to Amendment
No. 4 to Participation Agreement .
25. Adjustment Transaction
Expenses: $35,200.00 paid on Tax Rate
Adjustment Closing Date pursuant to
Section 6(a) of Amendment No. 4 to
Participation Agreement by the
lessee on behalf of the Owner
Trustee (amortized by the Owner
Trustee on straight-line basis
during the remaining Base Lease
Term).
26. Owner Participant's
Marginal Federal Tax Rates: 39.95068 percent in 1987; 34
percent in 1988, 1989, 1990, 1991
and 1992; 35 percent thereafter.
27. Tax Rate Adjustment Closing
Date: October 13, 1994
<PAGE>
SCHEDULE 2
TO AMENDMENT NO. 4 TO
PARTICIPATION AGREEMENT
-----------------------
RECORDATIONS AND FILINGS
------------------------
Filing of Amendment No. 3 to Facility Lease in the Office of the
Recorder of Deeds, Beaver County, Pennsylvania.
<PAGE>
EXHIBIT 10.43
================================================================================
AMENDMENT NO. 2
dated as of October 13, 1994
to
TAX INDEMNIFICATION AGREEMENT
dated as of September 15, 1987
between
BEAVER VALLEY LEASING CORPORATION,
as Owner Participant
and
DUQUESNE LIGHT COMPANY,
as Lessee
================================================================================
Sale and Leaseback of an Undivided Interest in
Beaver Valley Power Station Unit No. 2
================================================================================
<PAGE>
AMENDMENT NO. 2 dated as of October 13, 1994, to the Tax
Indemnification Agreement dated as of September 15, 1987, between Beaver Valley
Leasing Corporation (the "Owner Participant") and Duquesne Light Company (the
"Lessee"), as amended.
WITNESSETH:
WHEREAS, the Owner Participant and the Lessee have entered into the
Participation Agreement (such term and other capitalized terms used herein
without definition being defined as provided in Section 1);
WHEREAS, the Lessor and the Lessee have entered into the Facility
Lease providing for the lease by the Lessor to the Lessee of the Undivided
Interest;
WHEREAS, the Owner Participant and the Lessee have heretofore entered
into a Tax Indemnification Agreement dated as of September 15, 1987 (the "Tax
Indemnification Agreement"), as amended by Amendment No. 1 thereto dated as of
November 15, 1992, setting forth the rights and obligations of the Owner
Participant and the Lessee with respect to those items of income, gain, loss,
deduction and credit with respect to the Undivided Interest as are provided to
an owner of property;
WHEREAS, pursuant to Section 3(d) of the Facility Lease, the Schedules
of Basic Rent, Casualty Values, Special Casualty Values, Special Modified
Casualty Values, and Special Termination Values are being modified as a result
of the increase in the marginal Federal income tax rate applicable to
corporations to 35 percent from 34 percent by reason of the enactment of the
Omnibus Budget Reconciliation Act of 1993 (Pub. L. No. 103-66) and, in
connection with such modifications, the Lessee and the Owner Participant desire
to amend the Tax Indemnification Agreement in certain respects.
NOW, THEREFORE, in consideration of the premises and of other good and
valuable consideration, receipt of which is hereby acknowledged, the parties
hereto agree as follows:
SECTION 1. Definitions.
-----------
Except as otherwise defined herein, capitalized terms used herein
shall have the respective meanings set forth in Appendix A to the Participation
Agreement, as amended.
SECTION 2. Amendments.
----------
(a) Section 1(a)(8) of the Tax Indemnification Agreement is amended by
deleting such paragraph in its entirety and replacing it with the following new
paragraph (8):
-2-
<PAGE>
The Owner Participant will be allowed current deductions for
amortization of all of the following amounts (the "Amortization
Deductions"): (i) an amount equal to the Transaction Expenses
(other than any Transaction Expenses payable to the Owner
Participant or an Affiliate that are not includible in the
recipient's gross income) to the extent payable by the Owner
Participant pursuant to Section 14 of the Participation Agreement
computed on a straight-line basis over the Basic Lease Term, (ii)
an amount equal to the Refinancing Transaction Expenses (as
defined in the Refinancing Agreement) to the extent payable by
the Owner Trustee (other than any Refinancing Transaction
Expenses that are not includible in the Owner Participant's gross
income) pursuant to Section 8 of the Refinancing Agreement
computed on a straight-line basis over the period commencing on
the Redemption Date and ending on the last day of the Basic Lease
Term and (iii) an amount equal to $35,200 of Adjustment
Transaction Expenses (as defined in Section 6(a) of Amendment No.
4 to Participation Agreement dated the date hereof) payable on
behalf of the Owner Trustee (other than any Adjustment
Transaction Expenses that are not includible in the Owner
Participant's gross income) pursuant to Section 6(a) of Amendment
No. 4 to Participation Agreement dated the date hereof, computed
on a straight-line basis over the period commencing on the
Adjustment Closing Date (as defined in Amendment No. 4 to
Participation Agreement dated the date hereof) and ending on the
last day of the Basic Lease Term; and the Owner Participant will
be entitled to take the Amortization Deductions into account in
computing the consolidated income tax liability of the Group
under the Tax Law.
(b) Section 1(a)(12) of the Tax Indemnification Agreement is amended
by adding the following after clause (h), and before the period:
"and (i) Supplemental Rent in the amount of $35,200 payable under
Section 6(a) of Amendment No. 4 to Participation Agreement dated
the date hereof".
(c) Effective on and as of January 1, 1993, Section 1(a)(13) of the
Tax Indemnification Agreement is amended by deleting such paragraph in its
entirety and replacing it with the following new paragraph:
-3-
<PAGE>
"The Owner Participant's marginal federal rate of income tax is
39.950685% for its taxable year ending December 31, 1987, 34% for
each taxable year thereafter up to and including its taxable year
ending December 31, 1992, and 35% for each taxable year
thereafter, in each case without giving effect to any credits
against tax, and such marginal rates will be applicable to each
item of income and deduction contemplated by this Section 1(a)."
(d) Sections 1(b)(8) and 2(b)(1) of the Tax Indemnification Agreement
are amended by replacing "Sections 1(a)(12)(a)-(h)" with "Sections 1(a)(12)(a)-
(i)" in each place it appears.
(e) Section 2(b)(1) of the Tax Indemnification Agreement is amended
by deleting the word "and" as it appears at the end of clause (xiv) thereof and
adding the following clause (xv) at the end of said Section 2(b)(1):
"or (xv) any adjustment to Basic Rent or any schedule pursuant to
Section 3(d) of the Facility Lease, and"
(f) Section 20 is amended by adding after "otherwise" and before the
period, the following:
"and any adjustment to Basic Rent or any schedule pursuant to
Section 3(d) of the Facility Lease."
SECTION 3. Miscellaneous.
-------------
(a) EXECUTION. This Amendment No. 2 may be executed in any number of
counterparts and by the different parties hereto on separate counterparts, each
of which, when so executed and delivered, shall be an original, but all such
counterparts shall together constitute but one and the same instrument.
Although this Amendment No. 2 is dated as of the date first above written for
convenience, the actual dates of execution hereof by the parties hereto are
respectively the dates set forth under the signatures hereto, and this Amendment
No. 2 shall be effective on the latest of such dates.
(b) GOVERNING LAW. This Amendment No. 2 has been negotiated and
delivered in the State of New York and shall be governed by, and be construed in
accordance with, the law of the State of New York.
-4-
<PAGE>
IN WITNESS WHEREOF, intending to be legally bound, each of the parties
hereto has caused this Amendment No. 2 to Tax Indemnification Agreement to be
duly executed by an officer thereunto duly authorized.
DUQUESNE LIGHT COMPANY
By: /s/ James D. Mitchell
___________________________
Name: James D. Mitchell
Title: Treasurer
Date: October 13, 1994
BEAVER VALLEY LEASING
CORPORATION
By:____________________________
Name:
Title:
Date:
<PAGE>
IN WITNESS WHEREOF, intending to be legally bound, each of the parties
hereto has caused this Amendment No. 2 to Tax Indemnification Agreement to be
duly executed by an officer thereunto duly authorized.
DUQUESNE LIGHT COMPANY
By:____________________________
Name:
Title:
Date:
BEAVER VALLEY LEASING
CORPORATION
By: /s/ Arthur Folsom, Jr.
___________________________
Name: Arthur Folsom, Jr.
Title: Senior Vice President
Date: October 13, 1994
<PAGE>
EXHIBIT 10.51
[EXECUTION COPY]
================================================================================
--------------
REIMBURSEMENT AGREEMENT
--------------
Dated as of October 1, 1994
AMONG
DUQUESNE LIGHT COMPANY,
SWISS BANK CORPORATION,
NEW YORK BRANCH,
as LOC Bank
UNION BANK,
as Administrating Bank
SWISS BANK CORPORATION,
NEW YORK BRANCH,
as Administrating Bank
AND
THE PARTICIPATING BANKS NAMED HEREIN
================================================================================
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Section Page
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<C> <S> <C>
1. Definitions ................................................. 2
2. Reimbursement and Advances
(a) Reimbursement on Demand................................. 17
(b) Reimbursement Upon the Occurrence 17
of Certain Events....................................... 17
(c) Advances................................................ 18
(d) Application of Payments................................. 20
(e) Interest on Advances.................................... 21
(f) Conversion of Advances.................................. 22
(g) Other Terms Relating to the Making
and Conversion of Advances.............................. 23
(h) Repayment of Advances................................... 24
(i) Prepayment of Advances.................................. 25
(j) Default Interest........................................ 25
(k) Evidence of Indebtedness................................ 25
3. Fees......................................................... 25
4. Change in Circumstances; Yield Protection.................... 26
5. Participations............................................... 31
6. Payments..................................................... 39
7. Issuance of the Letters of Credit; Conditions
Precedent to Issuance and Advances........................... 40
8. Adjustment of Maximum Drawing Amounts and
Maximum Available Credit Amounts; Terms of
Drawing...................................................... 45
9. Obligations Absolute......................................... 45
10. Representations and Warranties............................... 46
(a) Corporate Existence and Power........................... 46
(b) Corporate Authorization................................. 47
(c) No Violation, Etc....................................... 47
(d) Governmental Actions.................................... 47
(e) Execution and Delivery.................................. 49
(f) Litigation.............................................. 49
(g) Material Adverse Change................................. 50
(h) ERISA................................................... 50
(i) Tax Returns............................................. 51
(j) Facility Leases......................................... 51
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Section Page
------- ----
<C> <S> <C>
11. Affirmative Covenants........................................ 51
(a) Preservation of Corporate
Existence, Etc........................................ 51
(b) Compliance with Laws, Etc.............................. 52
(c) Maintenance of Insurance, Etc.......................... 52
(d) Visitation Rights...................................... 53
(e) Keeping of Books....................................... 53
(f) Maintenance of Properties.............................. 53
(g) Reporting Requirements................................. 53
(h) Maintenance of Equity.................................. 56
(i) Cash Coverage Ratio.................................... 56
(j) Consolidated Net Worth................................. 56
(k) Line of Credit......................................... 56
(l) Bond Ratings........................................... 57
12. Negative Covenants........................................... 57
(a) Compliance With ERISA.................................. 57
(b) Assignment or Amendment of
Transaction Documents, Financing
Documents or Refinancing Documents..................... 57
13. Reimbursement Events of Default.............................. 57
14. Amendments and Waivers....................................... 60
15. Notices...................................................... 61
16. No Waiver; Remedies.......................................... 61
17. Right of Setoff.............................................. 62
18. Continuing Obligation........................................ 63
19. Extension of Letters of Credit............................... 63
20. Limited Liability of the Banks............................... 64
21. Costs, Expenses and Taxes.................................... 65
22. Indemnification.............................................. 66
23. Sales of Participations...................................... 67
24. Administrating Banks......................................... 68
25. Severability................................................. 70
26. Governing Law................................................ 71
27. Relations of Parties......................................... 71
28. Headings and Table of Contents............................... 71
29. Counterparts and Effectiveness............................... 71
</TABLE>
-ii-
<PAGE>
SCHEDULE 1 Beneficiaries and Amounts of Letters of Credit to be Issued
SCHEDULE 2 Participation Percentages
SCHEDULE 3 Applicable Lending Offices
EXHIBIT A Form of Irrevocable Transferable Letter of Credit Issued to Owner
Participants that are not Limited Partnerships
Exhibit 1 to Exhibit A
Exhibit 2 to Exhibit A
Exhibit 3 to Exhibit A
Exhibit 4 to Exhibit A
Exhibit 5 to Exhibit A
Exhibit 6 to Exhibit A
Exhibit 7 to Exhibit A
Schedule I to Exhibit A
Schedule II to Exhibit A
Schedule III to Exhibit A
Schedule IV to Exhibit A
EXHIBIT B Form of Irrevocable Transferable Letter of Credit Issued to Owner
Participants that are Limited Partnerships
Exhibit 1 to Exhibit B
Exhibit 2 to Exhibit B
Exhibit 3 to Exhibit B
Exhibit 4 to Exhibit B
Exhibit 5 to Exhibit B
Exhibit 6 to Exhibit B
Exhibit 7 to Exhibit B
Exhibit 8 to Exhibit B
Exhibit 9 to Exhibit B
Exhibit 10 to Exhibit B
Exhibit 11 to Exhibit B
Exhibit 12 to Exhibit B
Exhibit 13 to Exhibit B
-iii-
<PAGE>
Exhibit 14 to Exhibit B
Schedule I to Exhibit B
Schedule II to Exhibit B
Schedule III to Exhibit B
Schedule IV to Exhibit B
EXHIBIT C Form of Notice of Drawing
EXHIBIT D Form of Opinion of Chief Counsel for the Company
EXHIBIT E Form of Opinion of Special New York Counsel for the Company
EXHIBIT F Form of Opinion of Special Nuclear Regulatory Commission Counsel for
the Company
EXHIBIT G Form of Opinion of Special New York Counsel for the LOC Bank and the
Administrating Banks
EXHIBIT H Form of Opinion of Swiss Counsel for the LOC Bank
EXHIBIT I Form of Assignment Agreement
-iv-
<PAGE>
REIMBURSEMENT AGREEMENT
REIMBURSEMENT AGREEMENT, dated as of October 1, 1994, among DUQUESNE LIGHT
COMPANY, a Pennsylvania corporation (the "COMPANY"); SWISS BANK CORPORATION, NEW
YORK BRANCH ("SWISS BANK CORPORATION"), as the issuing bank (the "LOC BANK");
UNION BANK, a California banking corporation, and SWISS BANK CORPORATION, as the
administrating banks (each, an "ADMINISTRATING BANK" and, collectively, the
"ADMINISTRATING BANKS", with any reference to "UNION BANK" or "SWISS BANK
CORPORATION" (except as otherwise required) being in its capacity as an
Administrating Bank); and the banks listed on the signature pages hereof under
the heading "Participating Banks" (each, a "PARTICIPATING BANK" and,
collectively, the "PARTICIPATING BANKS").
WHEREAS the Company has entered into seven Participation Agreements dated
as of September 15, 1987, each among (i) the Company, (ii) The First National
Bank of Boston, for itself and as Owner Trustee (the "OWNER TRUSTEE"), (iii) the
Original Loan Participants, (iv) Funding Corp., (v) The Bank of New York
(successor to Irving Trust Company), for itself and as Indenture Trustee, and
(vi) one of Beaver Valley Two Omega Limited Partnership, Beaver Valley Two Tau
Limited Partnership, Mission Funding Gamma Investment Company (successor to
Associated Southern Investment Company), Beaver Valley Leasing Corporation, Palo
Verde Leasing Corporation, PNC Commercial Corp. and Resources Capital Financing
Corporation (successor to Public Service Resources Corporation), as applicable,
as Owner Participant (each, an "OWNER PARTICIPANT" and, collectively, the "OWNER
PARTICIPANTS"), and each relating to the acquisition of an undivided interest in
Beaver Valley Power Station Unit No. 2, located in Shippingport Borough, Beaver
County, Pennsylvania ("UNIT 2"), through a trust for the benefit of each such
Owner Participant, as amended by Amendment No. 1, dated as of December 1, 1987,
Amendment No. 2, dated as of March 1, 1988, Amendment No. 3, dated as of
November 15, 1992, and Amendment No. 4, dated as of September 1, 1994 (each
Participation Agreement as so amended, a "PARTICIPATION AGREEMENT" and,
collectively, the "PARTICIPATION AGREEMENTS"), which interest has been leased to
the Company pursuant to a Facility Lease, dated as of September 15, 1987,
between the Owner Trustee and the Company and for the benefit of such Owner
Participant, as amended by Amendment No. 1, dated as of December 1, 1987,
Amendment No. 2, dated as of November 15, 1992, and Amendment No. 3, dated as of
September 1, 1994 (each such Facility Lease, as so amended, a "FACILITY LEASE"
and, collectively, the "FACILITY LEASES");
WHEREAS certain Owner Participants are limited partnerships comprised of
one or more general partners (each a "GENERAL PARTNER") and one limited partner
(a "LIMITED PARTNER");
<PAGE>
2
WHEREAS on August 4, 1992, Swiss Bank Corporation issued letters of credit
(the "OLD LETTERS OF CREDIT") to the Owner Participants on the terms and subject
to the conditions set forth in the Reimbursement Agreement, dated as of July 15,
1992 (the "OLD REIMBURSEMENT AGREEMENT"), among the Company, the LOC Bank, the
Administrating Banks and certain other parties; and
WHEREAS the Company has requested that the LOC Bank issue (i) to each
Owner Participant that is not a limited partnership an irrevocable letter of
credit substantially in the form of Exhibit A hereto (an "OP LETTER OF CREDIT")
and (ii) to each Owner Participant that is a limited partnership an irrevocable
letter of credit substantially in the form of Exhibit B hereto (an "LP LETTER OF
CREDIT"), to replace the Old Letters of Credit;
NOW, THEREFORE, the LOC Bank, the Administrating Banks, the Participating
Banks and the Company hereby agree as follows:
SECTION 1. DEFINITIONS.
(a) Capitalized terms used herein and not otherwise defined herein have
the respective meanings assigned thereto in Appendix A to the Participation
Agreements. The following terms, as used herein, have the following respective
meanings:
"ACTUAL INTEREST EXPENSE" has the meaning set forth in Section 11(i)
hereof.
"ADMINISTRATING BANKS" has the meaning set forth in the first
paragraph of this Agreement.
"ADVANCE" means any DLE Initial Advance, DLE Term Advance, EOD Term
Advance or EOL Advance, and "ADVANCES" means DLE Initial Advances, DLE
Term Advances, EOD Term Advances and EOL Advances collectively.
"AGREEMENT" means this Reimbursement Agreement, as the same may from
time to time be amended, supplemented or modified in accordance with its
terms.
"APPLICABLE LENDING OFFICE" means, with respect to each Participating
Bank, (i)(A) such Participating Bank's "Domestic Lending Office" in the
case of a Reference Rate Advance and (B) such Participating Bank's
"Eurodollar Lending Office" in the case of a Eurodollar Rate Advance, in
each case as specified opposite such
<PAGE>
3
Participating Bank's name on Schedule 3 hereto (in the case of a
Participating Bank initially party to this Agreement) or in the Assignment
Agreement pursuant to which such Participating Bank became a Participating
Bank (in the case of any other Participating Bank), or (ii) such other
office or affiliate of such Participating Bank as such Participating Bank
may from time to time specify to the Company and the Administrating Banks.
"ASSIGNMENT AGREEMENT" means an assignment and acceptance agreement
entered into by a Participating Bank and a financial institution, and
accepted by the Administrating Banks, in substantially the form of Exhibit
I hereto.
"BANK" means the LOC Bank or any Participating Bank.
"BORROWING" means a borrowing consisting of Advances of the same Type
and Interest Period made on the same day by the Participating Banks,
ratably in accordance with their respective Participation Percentages. A
Borrowing may be referred to herein as being a "TYPE" of Borrowing,
corresponding to the Type of Advances comprising such Borrowing. For
purposes of this Agreement, all Advances made as, or Converted to, the
same Type and Interest Period on the same day shall be deemed a single
Borrowing until repaid or next Converted.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day
on which commercial banks in Los Angeles, California, New York, New York,
Pittsburgh, Pennsylvania or Boston, Massachusetts are authorized or
required by law to close, and, if the applicable Business Day relates to
any Eurodollar Rate Advance, is a day on which dealings are carried on in
the London interbank market.
"CASH COVERAGE RATIO" has the meaning set forth in Section 11(i)
hereof.
"CODE" means the United States Internal Revenue Code of 1986, as
amended, and the applicable regulations thereunder.
"COMPANY" has the meaning set forth in the first paragraph of this
Agreement.
"CONSOLIDATED CAPITALIZATION" means the consolidated common
shareholders' equity and preference and preferred stock of the
<PAGE>
4
Company and its Subsidiaries and all Indebtedness of the Company and its
Subsidiaries.
"CONSOLIDATED COMMON EQUITY" means the consolidated common
stockholders' equity and nonredeemable preference and preferred stock of
the Company and its Subsidiaries (in each case as determined on the basis
of the accounting principles used in the preparation of the most recent
balance sheet of the Company delivered pursuant to Section 10(b)(1)(i)(A)
of the Participation Agreements), but excluding Disqualified Intangible
Assets.
"CONSOLIDATED NET WORTH" means, as at any date of determination, the
sum of the common stock plus redeemable and nonredeemable preferred and
preference stock plus additional paid-in capital plus retained earnings
(or minus accumulated deficit) of the Company and its Subsidiaries on a
consolidated basis.
"CONTROLLED GROUP" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated)
under common control that, together with the Company, are treated as a
single employer under Section 414(b) or 414(c) of the Code.
"CONVERSION", "CONVERT" or "CONVERTED" each refers to a conversion of
Advances pursuant to Section 2(f) hereof, including, but not limited to
any selection of a longer or shorter Interest Period to be applicable to
such Advances or any conversion of an Advance as described in Section
2(f)(iv) hereof.
"DATE OF EARLY TERMINATION" with respect to a Letter of Credit has
the meaning set forth in such Letter of Credit.
"DATE OF ISSUANCE" has the meaning set forth in Section 7(a) hereof.
"DEEMED LOSS EVENT" has the meaning assigned to that term in Appendix A to
the Participation Agreements.
"DEFAULTING PARTICIPATING BANK" has the meaning set forth in Section
5(b) hereof.
"DEFAULT RATE" means a fluctuating interest rate equal at all times
to 2% per annum above the Reference Rate in effect from time to time.
<PAGE>
5
"DESIGNATED GENERAL PARTNER" with respect to an Owner Participant
that is a limited partnership means the General Partner of such Owner
Participant specified as the Designated General Partner in the LP Letter
of Credit issued to such Owner Participant.
"DISQUALIFIED INTANGIBLE ASSETS" means Intangible Assets in respect
of which (a) no offsetting accounting entry has been made to a liability
account, (b) there is no existing order of the PPUC allowing such assets
to be recovered in rates and (c) there exists no prior and continuing
practice of the PPUC relating to similar assets on the basis of which the
Company reasonably expects that such assets will be recovered in rates;
provided that, notwithstanding the foregoing, in the case of Intangible
Assets in respect of which there does exist such a practice, such assets
shall constitute Disqualified Intangible Assets to the extent that such
assets exceed 1% of the consolidated assets of the Company and its
Subsidiaries.
"DLE INITIAL ADVANCE" has the meaning assigned to that term in
Section 2(c)(iii) hereof, and refers to a Reference Rate Advance or a
Eurodollar Rate Advance (each of which shall be a "TYPE" of DLE Initial
Advance). The Type of a DLE Initial Advance may change from time to time
when such DLE Initial Advance is Converted. For purposes of this
Agreement, all DLE Initial Advances of a Participating Bank (or portions
thereof) made as, or Converted to, the same Type and Interest Period on
the same day shall be deemed a single DLE Initial Advance by such
Participating Bank until repaid or next Converted.
"DLE INITIAL ADVANCE REPAYMENT DATE" has the meaning assigned to that
term in Section 2(b)(iv) hereof.
"DLE TERM ADVANCE" has the meaning assigned to that term in Section
2(c)(iv) hereof, and refers to a Reference Rate Advance or a Eurodollar
Rate Advance (each of which shall be a "TYPE" of DLE Term Advance). The
Type of a DLE Term Advance may change from time to time when such DLE Term
Advance is Converted. For purposes of this Agreement, all DLE Term
Advances of a Participating Bank (or portions thereof) made as, or
Converted to, the same Type and Interest Period on the same day shall be
deemed a single DLE Term Advance by such Participating Bank until repaid
or next Converted.
"EOD TERM ADVANCE" has the meaning assigned to that term in Section
2(c)(i) hereof, and refers to a Reference Rate Advance or
<PAGE>
6
a Eurodollar Rate Advance (each of which shall be a "TYPE" of EOD Term
Advance). The Type of an EOD Term Advance may change from time to time
when such EOD Term Advance is Converted. For purposes of this Agreement,
all EOD Term Advances of a Participating Bank (or portions thereof) made
as, or Converted to, the same Type and Interest Period on the same day
shall be deemed a single EOD Term Advance by such Participating Bank until
repaid or next Converted.
"EOD PAYMENT" has the meaning assigned to that term in Section
2(c)(i) hereof.
"EOD REIMBURSEMENT DATE" has the meaning assigned to that term in
Section 2(b)(ii) hereof.
"EOL ADVANCE" has the meaning assigned to that term in Section
2(c)(ii) hereof, and refers to a Reference Rate Advance or a Eurodollar
Rate Advance (each of which shall be a "TYPE" of EOL Advance). The Type
of an EOL Advance may change from time to time when such EOL Advance is
Converted. For purposes of this Agreement, all EOL Advances of a
Participating Bank (or portions thereof) made as, or Converted to, the
same Type and Interest Period on the same day shall be deemed a single EOL
Advance by such Participating Bank until repaid or next Converted.
"EOL ADVANCE REPAYMENT DATE" has the meaning assigned to that term in
Section 2(b)(iii) hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"EUROCURRENCY LIABILITIES" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as
in effect from time to time.
"EURODOLLAR APPLICABLE MARGIN" means, with respect to any drawing
under a Letter of Credit and any Eurodollar Rate Advance subsequently made
by the Participating Banks in order to reimburse such drawing (including
any Advances resulting from the subsequent Conversion of such Eurodollar
Rate Advance), (i) for the period commencing on the date of such drawing
to and including the 90th day following such date, 0.625% per annum
(provided, however, that such percentage shall be increased to 0.90% per
annum in the event that, and at all times during which, the First Mortgage
Bonds are
<PAGE>
7
rated below Baa3 and BBB- (or the then current equivalents) by both
Moody's and S&P, respectively (or, in the event that Moody's and S&P shall
cease to be in the business of issuing ratings of debt, such other
nationally recognized rating agency mutually acceptable to the Required
Banks and the Company), with such increase to be effective on the first
date on which both such ratings shall have been issued by Moody's and S&P
(or such other rating agency)), (ii) for the period following such 90th
day to and including the 180th day following such date, 1.0% per annum,
and (iii) for the period following such 180th day until the date that such
Advance is due and payable, 1.50% per annum.
"EURODOLLAR RATE" means for any Interest Period for any Eurodollar
Rate Advances comprising part of the same Borrowing, an interest rate per
annum equal at all times during such Interest Period to the sum of:
(i) the average (rounded upward to the nearest whole multiple
of 1/16 of 1% per annum, if such average is not such a multiple) of
the rate per annum at which deposits in United States dollars are
offered by the principal office of each of the Reference Banks in
London, England to prime banks in the London interbank market at
11:00 A.M. (London time) two Business Days before the first day of
such Interest Period in an amount substantially equal to such
Reference Bank's Eurodollar Rate Advance made as part of such
Borrowing and for a period equal to such Interest Period, plus
(ii) the Eurodollar Applicable Margin in effect from time to
time during such Interest Period.
The Eurodollar Rate for the Interest Period for each Eurodollar Rate
Advance made as part of the same Borrowing shall be determined by Union
Bank on the basis of applicable rates furnished to and received by Union
Bank from the Reference Banks two Business Days before the first day of
such Interest Period, subject, however, to the provisions of Sections
2(g)(iii), 4(h) and 4(i).
"EURODOLLAR RATE ADVANCE" means an Advance in respect of which the
Company has selected in accordance with Section 2(e)(iii) hereof interest
to be computed on the basis of the Eurodollar Rate.
"EURODOLLAR RESERVE PERCENTAGE" of any Participating Bank for each
Interest Period for each Eurodollar Rate Advance means the
<PAGE>
8
reserve percentage applicable during such Interest Period (or if more than
one such percentage shall be so applicable, the daily average of such
percentages for those days in such Interest Period during which any such
percentage shall be so applicable) under Regulation D or other regulations
issued from time to time by the Board of Governors of the Federal Reserve
System (or any successor) for determining the maximum reserve requirement
(including, without limitation, any emergency, supplemental or other
marginal reserve requirement, without benefit of or credit for proration,
exemptions or offsets) for such Participating Bank with respect to
liabilities or assets consisting of or including Eurocurrency Liabilities
having a term equal to such Interest Period.
"EVENT OF DEFAULT" means, unless otherwise specified, an event
defined as an Event of Default in any of the Participation Agreements.
"EVENT OF LOSS" has the meaning assigned to that term in Appendix A
to the Participation Agreements.
"FACILITY LEASES" has the meaning set forth in the first recital
clause of this Agreement.
"FED FUNDS RATE" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to the weighted average of
the rates on overnight Federal funds transactions with members of the
Federal Reserve System arranged by Federal funds brokers, as published for
such day (or, if such day is not a Business Day, for the next preceding
Business Day) by the Federal Reserve Bank of New York, or, if such rate is
not so published for any day which is a Business Day, the average of the
quotations for such day on such transactions received by Union Bank from
three Federal funds brokers of recognized standing selected by Union Bank.
"FEE LETTER" has the meaning assigned to that term in Section 3(b)
hereof.
"FINAL MATURITY DATE" means the date occurring 180 days after the
Stated Expiration Date.
"FINANCING DOCUMENTS" means, unless otherwise specified, all
documents defined in any of the Participation Agreements as Financing
Documents.
<PAGE>
9
"FIRST MORTGAGE BONDS" means mortgage bonds at any time issued by the
Company pursuant to (i) the Trust Indenture dated as of August 1, 1947
between the Company and Mellon National Bank and Trust Company (now Mellon
Bank N.A.), as trustee (the "TRUSTEE"), as presently amended and
supplemented and as such Trust Indenture may be further amended or
otherwise modified or supplemented from time to time, (ii) the Indenture
of Mortgage and Deed of Trust dated as of April 1, 1992 of the Company to
Mellon Bank, N.A., as presently amended and supplemented and as such
Indenture may be further amended or otherwise modified or supplemented
from time to time, or (iii) any other indenture providing for a first
mortgage lien on any substantial part of the Company's real property.
"FIXED ASSETS" means at any time total net plant including
construction work in progress, as reported by the Company on its most
recent consolidated balance sheet.
"GENERAL PARTNER" with respect to an Owner Participant that is a
limited partnership has the meaning set forth in the second recital clause
of this Agreement.
"INDEBTEDNESS" of any Person means at any date, without duplication,
all (i) indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services, (ii) obligations under leases that
shall be, in accordance with generally accepted accounting principles,
recorded as capital leases in respect of which such Person is liable as
lessee, (iii) obligations of such Person under direct or indirect
guaranties in respect of, and obligations (contingent or otherwise) to
purchase or otherwise acquire, or otherwise to assure a creditor against
loss in respect of, indebtedness or obligations of others of the kinds
referred to in clauses (i) and (ii) above, (iv) liabilities in respect of
unfunded vested benefits under Plans and (v) withdrawal liability incurred
under ERISA by such Person or any of its Affiliates to any Multiemployer
Plan.
"INDENTURE" has the meaning assigned to that term in Appendix A to
the Participation Agreements.
"INDENTURE EVENT OF DEFAULT" has the meaning assigned to that term in
Appendix A to the Participation Agreements.
<PAGE>
10
"INTANGIBLE ASSETS" means the consolidated intangible assets of the
Company and its Subsidiaries determined on the basis of the accounting
principles used in the preparation of the most recent balance sheet of the
Company delivered pursuant to Section 10(b)(1)(i)(A) of the Participation
Agreements.
"INTEREST PERIOD" has the meaning assigned to that term in Section
2(e)(ii) hereof.
"LETTER OF CREDIT" means an OP Letter of Credit or an LP Letter of
Credit.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such
asset. For the purposes of this Agreement, the Company or any Subsidiary
shall be deemed to own subject to a Lien any asset that it has acquired or
holds subject to the interest of a vendor or lessor under any conditional
sale agreement, capital lease or other title-retention agreement relating
to such asset.
"LIMITED PARTNER" with respect to an Owner Participant that is a
limited partnership has the meaning set forth in the second recital clause
of this Agreement.
"LOC BANK" has the meaning set forth in the first paragraph of this
Agreement.
"LP LETTER OF CREDIT" has the meaning set forth in the fourth recital
clause of this Agreement.
"MAXIMUM AVAILABLE CREDIT AMOUNT" with respect to a Letter of Credit
means, at any date, the Maximum Available Credit Amount as defined in such
Letter of Credit.
"MAXIMUM CREDIT AMOUNT" with respect to a Letter of Credit means, at
any date, the Maximum Credit Amount as defined in such Letter of Credit.
"MAXIMUM DRAWING AMOUNT" with respect to a Letter of Credit means, at
any date, the Maximum Drawing Amount as defined in such Letter of Credit.
"MOODY'S" means Moody's Investors Service, Inc., or any successor
thereof.
<PAGE>
11
"MULTIEMPLOYER PLAN" means a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA.
"NONFINANCIAL EVENT OF DEFAULT" means an Event of Default pursuant to
Section 15(iii), (iv), (v), (viii), (x) or (xii) of the Facility Leases,
excluding, however, any Event of Default pursuant to Section 15(iv),
(viii) or (xii) of the Facility Leases that results from (A) any failure
of the Company to pay any amount when due or (B) any other failure or
default by the Company that, in the opinion of the Required Banks, was
caused by or is indicative of material financial difficulties of the
Company.
"NONPERFORMING PARTICIPATING BANK" has the meaning set forth in
Section 5(j) hereof.
"NOTES" has the meaning assigned to that term in Appendix A to the
Participation Agreements.
"NOTICE OF DRAWING" means a notice substantially in the form of
Exhibit C hereto.
"OLD REIMBURSEMENT AGREEMENT" has the meaning set forth in the third
recital clause of this Agreement.
"OP LETTER OF CREDIT" has the meaning set forth in the fourth recital
clause of this Agreement.
"OUTSTANDING" has the meaning assigned to that term in Appendix A to
the Participation Agreements.
"OWNER PARTICIPANT" has the meaning set forth in the first recital
clause of this Agreement.
"OWNER TRUSTEE" has the meaning set forth in the first recital clause
of this Agreement.
"PARTICIPANT" has the meaning set forth in Section 23(a) hereof.
"PARTICIPATING BANKS" means (i) the banks whose names are listed on
the signature pages hereof under the heading "Participating Banks" (other
than any such bank all of the rights and obligations under this Agreement
of which have been assigned to one or more financial institutions pursuant
to Section 5(j) or Section 23 hereof or
<PAGE>
12
deemed purchased by the LOC Bank in accordance with Section 5(b) hereof
and such purchase shall be continuing), (ii) the LOC Bank, if and so long
as such deemed purchase shall have occurred and be continuing and (iii)
any financial institution that becomes a party hereto pursuant to Section
5(j) or Section 23 hereof.
"PARTICIPATION AGREEMENTS" has the meaning set forth in the first
recital clause of this Agreement.
"PARTICIPATION PERCENTAGE" means (i) with respect to a Participating
Bank initially a party hereto, the percentage set forth opposite such
Participating Bank's name on Schedule 2 hereto, except as provided in
clauses (iii) and (iv) below, (ii) with respect to a Participating Bank
that became a party hereto by operation of Section 5(j) or Section 23
hereof, the percentage interest assumed by such assignee Participating
Bank as set forth in the Assignment Agreement, except as provided in
clauses (iii) and (iv) below, (iii) with respect to any Participating Bank
from which the LOC Bank shall have been deemed to have purchased a
participation in accordance with Section 5(j) hereof, 0%, (iv) with
respect to any Participating Bank described in clauses (i) and (ii) above,
that assigns a percentage of its interests in accordance with Section 5(j)
or Section 23 hereof, its participation percentage as reduced by the
percentage interest so assigned and (v) with respect to the LOC Bank, if
and so long as it is a Participating Bank, a percentage equal to the
aggregate participation percentages of all Defaulting Participating Banks
existing immediately prior to such Defaulting Participating Banks' payment
default.
"PARTICIPATION TRANSFER DATE" has the meaning set forth in Section
5(b) hereof.
"PARTICIPATION TRANSFER PERIOD" has the meaning set forth in Section
5(b) hereof.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"PERSON" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
estate, unincorporated association, joint venture or other entity, or a
government or any political subdivision or agency thereof.
<PAGE>
13
"PLAN" means at any time an employee pension benefit plan covered by
Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code that is either (i) maintained by a member of the
Controlled Group for employees of a member of the Controlled Group or (ii)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to
which a member of the Controlled Group is then making or accruing an
obligation to make contributions or has within the preceding five plan
years made contributions.
"PPUC" means the Pennsylvania Public Utility Commission, or any
successor agency.
"REFERENCE BANKS" means Swiss Bank Corporation and Union Bank, or any
additional or substitute Participating Banks as may be selected from time
to time to act as Reference Banks hereunder by the Administrating Banks,
the Required Banks and the Company.
"REFERENCE RATE" means a fluctuating interest rate per annum equal at
all times to the highest of: (i) the rate of interest announced publicly
by Union Bank in Los Angeles, California, from time to time, as the Union
Bank Reference Rate; (ii) 1/2 of one percent per annum above the latest
three-week moving average of secondary market morning offering rates in
the United States for three-month certificates of deposit of major United
States money market banks, such three-week moving average being determined
weekly by Union Bank on the basis of such rates reported by certificate of
deposit dealers to and published by the Federal Reserve Bank of New York
or, if such publication shall be suspended or terminated, on the basis of
quotations for such rates received by Union Bank from three New York
certificate of deposit dealers of recognized standing selected by Union
Bank, in either case adjusted to the nearest 1/4 of one percent or, if
there is no nearest 1/4 of one percent, to the next higher 1/4 of one
percent; and (iii) 1/2 of one percent per annum above the Fed Funds Rate.
Each change in the Reference Rate shall take effect concurrently with any
change in such rate referred to in clause (i) above, moving average, or
Fed Funds Rate.
"REFERENCE RATE ADVANCE" means an Advance in respect of which the
Company has selected in accordance with Section 2(e)(i) hereof, or this
Agreement otherwise provides for, interest to be computed on the basis of
the Reference Rate.
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14
"REFINANCING DOCUMENTS" means, unless otherwise specified, all
documents defined in any of the Participation Agreements as Refinancing
Documents.
"REIMBURSEMENT DEFAULT" means any event or condition that constitutes
a Reimbursement Event of Default or that with the giving of notice or the
lapse of time or both would, unless cured or waived, become a
Reimbursement Event of Default.
"REIMBURSEMENT EVENT OF DEFAULT" has the meaning set forth in Section 13
hereof.
"REQUIRED BANKS" means at any time Participating Banks whose
aggregate Participation Percentages are equal to at least 66-2/3% at such
time.
"S&P" means Standard & Poor's Ratings Group or any successor thereof.
"STATED EXPIRATION DATE" means October 2, 1999 or such later date to
which the Stated Expiration Date is extended in accordance with Section 19
hereof.
"SUBSIDIARY" means any corporation or other entity of which
securities or other ownership interests having ordinary voting power to
elect a majority of the Board of Directors or other persons performing
similar functions are at the time directly or indirectly owned by the
Company or one or more Subsidiaries, or by the Company and one or more
Subsidiaries.
"TAX" and "TAXES" have the meanings set forth in Section 4(d) hereof.
"TERMINATION DATE" with respect to a Letter of Credit means the
earliest of (i) in the case of an OP Letter of Credit, (A) 9:05 a.m., New
York City time, on the Date of Early Termination applicable to such Letter
of Credit, (B) 3:00 p.m., New York City time, on the date on which the
Owner Participant to which such Letter of Credit is issued surrenders such
Letter of Credit for cancellation to the LOC Bank as provided therein, (C)
3:00 p.m., New York City time, on the date on which the LOC Bank pays an
OP Final Draw (as defined in such Letter of Credit) and (D) 3:00 p.m., New
York City time, on either (1) the Stated Expiration Date or (2) if a draft
and certificate all in strict conformity with the terms
<PAGE>
15
and conditions of such Letter of Credit are presented after 9:05 a.m., New
York City time, but prior to 3:00 p.m., New York City time, on the Stated
Expiration Date, the Business Day next succeeding the Stated Expiration
Date, or, (ii) in the case of an LP Letter of Credit, (A) 9:05 a.m., New
York City time, on the Date of Early Termination applicable to such Letter
of Credit, (B) 3:00 p.m., New York City time, on the date on which the
Designated General Partner of such Owner Participant surrenders (on behalf
of itself, such Owner Participant and the Limited Partner of such Owner
Participant) such Letter of Credit for cancellation to the LOC Bank as
provided therein, (C) 3:00 p.m., New York City time, on the date on which
the LOC Bank pays an OP Final Draw (as defined in such Letter of Credit),
(D) if the LOC Bank pays a GP Draw (as defined in such Letter of Credit)
and an LP Draw (as defined in such Letter of Credit), 3:00 p.m., New York
City time, on the date on which the LOC Bank pays the second of such draws
and (E) 3:00 p.m., New York City time, on either (1) the Stated Expiration
Date or (2) if a draft and certificate all in strict conformity with the
terms and conditions of such Letter of Credit are presented after 9:05
a.m., New York City time, but prior to 3:00 p.m., New York City time, on
the Stated Expiration Date, the Business Day next succeeding the Stated
Expiration Date.
"TERMINATION EVENT" means (i) a "reportable event" as described in
Section 4043 of ERISA and the regulations issued thereunder (other than a
"reportable event" not subject to the provision for 30-day notice to the
PBGC under such regulations) or (ii) the withdrawal of the Company or any
member of the Controlled Group from a Plan during a plan year in which it
was a "substantial employer" as defined in Section 4001(a)(2) of ERISA or
(iii) the filing of a notice of intent to terminate a Plan or the
treatment of a Plan amendment as a termination under Section 4041 of ERISA
or (iv) the institution of proceedings to terminate a Plan by the PBGC or
(v) any other event or condition that might constitute grounds under
Section 4042 of ERISA for the termination of, or the appointment of a
trustee to administer, any Plan.
"TRANSACTION DOCUMENTS" means, unless otherwise specified, all
documents defined in any of the Participation Agreements as Transaction
Documents, as such documents may be amended from time to time.
"TRANSFERRED AMOUNT" has the meaning set forth in Section 5(b)
hereof.
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16
"TYPE" has the meaning assigned to such term in the definitions of
"DLE INITIAL ADVANCE", "DLE TERM ADVANCE", "EOD TERM ADVANCE", "EOL
ADVANCE" and "BORROWING" herein.
"UNFUNDED VESTED LIABILITIES" means, with respect to any Plan at any
time, the amount (if any) by which (i) the present value of all vested
nonforfeitable benefits under such Plan exceeds (ii) the fair market value
of all Plan assets allocable to such benefits, all determined as of the
then most recent valuation date for such Plan, but only to the extent that
such excess represents a potential liability of a member of the Controlled
Group to the PBGC or the Plan under Title IV of ERISA.
"UNIT 2" has the meaning specified in the first recital clause of
this Agreement.
(b) Unless otherwise specified herein, all accounting terms used herein
shall be interpreted, all accounting determinations hereunder shall be made and
all financial statements required to be delivered hereunder shall be prepared in
accordance with generally accepted accounting principles as in effect from time
to time, applied on a basis consistent (except for changes concurred in by the
Company's independent public accountants) with the most recent audited
consolidated financial statements of the Company and its Subsidiaries delivered
to the Banks.
(c) In this Agreement, the singular includes the plural and the plural
the singular; words importing any gender include the other genders; references
to statutes are to be construed as including all statutory provisions
consolidating, amending or replacing the statute referred to; references to
"writing" include printing, typing, lithography and other means of reproducing
words in a tangible, visible form; references to agreements and other
contractual instruments shall be deemed to include all subsequent amendments and
other modifications to such instruments, but only to the extent such amendments
and other modifications are not prohibited by the terms of this Agreement; and
references to Persons include their respective permitted successors and assigns.
(d) In the computation of periods of time under this Agreement any period
of a specified number of days shall be computed by including the first day
occurring during such period and excluding the last such day. In the case of a
period of time "from" a specified date "to" or "until" a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding".
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17
SECTION 2. REIMBURSEMENT AND ADVANCES.
(a) REIMBURSEMENT ON DEMAND. Subject to the provisions of subsections
(b), (c) and (e), below, the Company hereby agrees to pay (whether with the
proceeds of Advances made pursuant to subsection (c), below, or otherwise) to
the LOC Bank on demand (i) on and after each date on which the LOC Bank shall
pay any amount under a Letter of Credit pursuant to any draft, but only after so
paid by the LOC Bank, a sum equal to such amount so paid (which sum shall
constitute a demand loan from the LOC Bank to the Company from the date of such
payment by the LOC Bank until so paid by the Company), plus (ii) if the Company
does not pay the LOC Bank such sum in full by 1:00 p.m., New York City time, on
the same Business Day on which the LOC Bank shall have made such payment,
interest on any amount remaining unpaid by the Company to the LOC Bank under
clause (i), above, from the date on which the LOC Bank shall have paid such
amount under such Letter of Credit until payment in full, at a fluctuating
interest rate per annum in effect from time to time equal to the Reference Rate
in effect from time to time.
(b) REIMBURSEMENT UPON THE OCCURRENCE OF CERTAIN EVENTS. The Company
shall reimburse the LOC Bank for each payment made by the LOC Bank under a
Letter of Credit in accordance with the following paragraphs (i), (ii), (iii)
and (iv):
(i) REIMBURSEMENT DEFAULTS. Subject to paragraph (ii), below, if,
on the date of any payment by the LOC Bank of a drawing under a Letter of
Credit, a Reimbursement Default has occurred and is continuing, the
Company shall pay to the LOC Bank not later than 1:00 p.m., New York City
time, on or prior to the fifth day following the Business Day on which the
LOC Bank shall make such payment a sum equal to the amount so paid under
such Letter of Credit, together with all accrued interest thereon pursuant
to subsection (a)(ii), above.
(ii) EVENTS OF DEFAULT. If, on the date of any payment by the LOC
Bank of a drawing under a Letter of Credit, an Event of Default has
occurred and is continuing, the Company shall reimburse the LOC Bank
(whether with the proceeds of Advances made pursuant to subsection (c)(i),
below, or otherwise) not later than 1:00 p.m., New York City time, on or
prior to the tenth day following the Business Day on which the LOC Bank
shall make such payment (the "EOD REIMBURSEMENT DATE") a sum equal to the
amount so paid under such Letter of Credit, together with all accrued
interest thereon pursuant to subsection (a)(ii), above.
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18
(iii) EVENTS OF LOSS. Subject to paragraphs (i) and (ii), above,
if, on the date of any payment by the LOC Bank of a drawing under a Letter
of Credit, an Event of Loss has occurred and is continuing, the Company
shall pay to the LOC Bank not later than 1:00 p.m., New York City time, on
or prior to the earlier to occur of (A) the 90th day following the
Business Day on which the LOC Bank shall make such payment and (B) the
Stated Expiration Date (such earlier date referred to herein as the "EOL
ADVANCE REPAYMENT DATE"), a sum equal to the amount so paid under such
Letter of Credit, together with all accrued interest thereon pursuant to
subsection (e), below.
(iv) DEEMED LOSS EVENTS AND OTHER CIRCUMSTANCES. Subject to
paragraphs (i), (ii) and (iii), above, if, on the date of any payment by
the LOC Bank of a drawing under a Letter of Credit, (A) a Deemed Loss
Event has occurred and is continuing or (B) any other event or
circumstance (other than a Reimbursement Default, an Event of Default or
an Event of Loss) giving rise to such drawing has occurred, the Company
shall reimburse the LOC Bank (whether with the proceeds of Advances made
pursuant to subsection (c)(iv), below, or otherwise) not later than 1:00
p.m., New York City time, on or prior to the 90th day following the
Business Day on which the LOC Bank shall make such payment (the "DLE
INITIAL ADVANCE REPAYMENT DATE") a sum equal to the amount so paid under
such Letter of Credit, together with all accrued interest thereon pursuant
to subsection (e), below.
(c) ADVANCES. Each Participating Bank agrees to make Advances for the
account of the Company from time to time upon the terms and subject to the
conditions set forth below:
(i) EOD TERM ADVANCES. If the LOC Bank shall make any payment
under a Letter of Credit under the circumstances set forth in subsection
(b)(ii), above (such payment referred to herein as an "EOD PAYMENT"),
then, subject to the satisfaction of the conditions precedent set forth in
Section 7(b) hereof on and as of the EOD Reimbursement Date, each
Participating Bank shall be obligated to make, and each Participating
Bank's payment made to the LOC Bank pursuant to Section 5 hereof in
respect of such EOD Payment shall be deemed to constitute, an advance made
for the account of the Company by such Participating Bank on such EOD
Reimbursement Date (each such advance being an "EOD TERM ADVANCE" made by
such Participating Bank and, collectively, the "EOD TERM ADVANCES"). Each
such EOD Term Advance shall be
<PAGE>
19
made as a Reference Rate Advance, shall bear interest at the Reference
Rate and shall be entitled to be Converted in accordance with subsection
(f), below. The Company shall repay the unpaid principal amount of each
EOD Term Advance in accordance with subsection (h)(i), below, and may
prepay EOD Term Advances in accordance with subsection (i), below .
(ii) EOL ADVANCES. If the LOC Bank shall make any payment under a
Letter of Credit under the circumstances set forth in subsection (b)(iii),
above (such payment referred to herein as an "EOL PAYMENT"), then each
Participating Bank shall be obligated to make, and each Participating
Bank's payment made to the LOC Bank pursuant to Section 5 hereof in
respect of such EOL Payment shall be deemed to constitute, an advance made
for the account of the Company by such Participating Bank on the date of
such payment (each such advance being an "EOL ADVANCE" made by such
Participating Bank and, collectively, the "EOL ADVANCES"). Each such EOL
Advance shall be made as a Reference Rate Advance, shall bear interest at
the Reference Rate and shall be entitled to be Converted in accordance
with subsection (f), below. The Company shall repay the unpaid principal
amount of each EOL Advance in accordance with subsection (h)(ii), below,
and may prepay EOL Advances in accordance with subsection (i), below.
(iii) DLE INITIAL ADVANCES. If the LOC Bank shall make any payment
under a Letter of Credit under the circumstances set forth in subsection
(b)(iv), above (such payment referred to herein as an "DLE PAYMENT"), then
each Participating Bank shall be obligated to make, and each Participating
Bank's payment made to the LOC Bank pursuant to Section 5 hereof in
respect of such DLE Payment shall be deemed to constitute, an advance made
for the account of the Company by such Participating Bank on the date of
such payment (each such advance being a "DLE INITIAL ADVANCE" made by such
Participating Bank and, collectively, the "DLE INITIAL ADVANCES"). Each
such DLE Initial Advance shall be made as a Reference Rate Advance, shall
bear interest at the Reference Rate and shall be entitled to be Converted
in accordance with subsection (f), below. The Company shall repay the
unpaid principal amount of each DLE Initial Advance in accordance with
subsection (h)(iii), below. The Company may repay the principal amount of
any DLE Initial Advance with (and to the extent of) the proceeds of a DLE
Term Advance made pursuant to paragraph (iv), below, and may prepay DLE
Initial Advances in accordance with subsection (i), below.
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20
(iv) DLE TERM ADVANCES. If the LOC Bank shall make any DLE Payment,
then, subject to the satisfaction of the conditions precedent set forth in
Section 7(c) hereof on and as of the DLE Initial Advance Repayment Date,
each Participating Bank agrees to make one or more advances for the
account of the Company (each such advance being a "DLE TERM ADVANCE" made
by such Participating Bank and, collectively, the "DLE TERM ADVANCES") on
the DLE Initial Advance Repayment Date in an aggregate principal amount
equal to the amount of such Participating Bank's DLE Initial Advances
maturing on such DLE Initial Advance Repayment Date. All DLE Term Advances
comprising a single Borrowing shall be made upon written notice given by
the Company to Union Bank not later than 10:00 a.m. (Los Angeles time) (A)
in the case of a Borrowing comprised of Reference Rate Advances, on the
Business Day of such proposed Borrowing and (B) in the case of a Borrowing
comprised of Eurodollar Rate Advances, three Business Days prior to the
date of such proposed Borrowing. Union Bank shall notify each
Participating Bank of the contents of such notice promptly after receipt
thereof. Each such notice shall specify therein the following information:
(1) the date on which such Borrowing is to be made (which date shall be
the DLE Initial Advance Repayment Date), (2) the principal amount of DLE
Term Advances comprising such Borrowing, (3) the Type of Borrowing and (4)
the duration of the initial Interest Period, if applicable, proposed to
apply to the DLE Term Advances comprising such Borrowing. The proceeds of
each Participating Bank's DLE Term Advances shall be applied solely to the
repayment of the DLE Initial Advances made by such Participating Bank and
shall in no event be made available to the Company. The Company shall
repay the unpaid principal amount of each DLE Term Advance in accordance
with subsection (h)(iv), below, and may prepay DLE Term Advances in
accordance with subsection (i), below.
(d) APPLICATION OF PAYMENTS. Any payment made by the Company pursuant to
subsection (b), above, of less than all amounts owed to the LOC Bank pursuant
thereto shall be applied first to interest owed pursuant thereto and second to
the amount of the unreimbursed drawings under the Letters of Credit; provided,
however, that if, at the time of any payment made by the Company pursuant to
subsection (b), above, there shall be amounts due from the Company pursuant to
subsection (b), above, with respect to more than one Letter of Credit, such
payment shall be applied to all such Letters of Credit pro rata (in the above-
mentioned order of priority) in accordance with the proportion that the
aggregate amount due from the Company pursuant to subsection (b), above, with
respect to each such Letter of Credit bears to
<PAGE>
21
the aggregate amount due from the Company pursuant to subsection (b), above,
with respect to all such Letters of Credit.
(e) INTEREST ON ADVANCES. The Company shall pay interest on the unpaid
principal amount of each Advance from the date of such Advance until such
principal amount is paid in full at the applicable rate set forth below:
(i) REFERENCE RATE. Except to the extent that the Company shall
elect to pay interest on any Advance for any Interest Period pursuant to
paragraph (iii), below, the Company shall pay interest on each Advance
from the date thereof until the date such Advance is due, at a fluctuating
interest rate per annum in effect from time to time equal to the Reference
Rate in effect from time to time. The Company shall pay interest on each
Advance bearing interest in accordance with this subsection monthly in
arrears on the first day of each calendar month, on the date of Conversion
of any Reference Rate Advance to a Eurodollar Rate Advance, including any
such Advance made pursuant to subsection (b), above, and on the Final
Maturity Date or the earlier date for repayment of such Advance.
(ii) INTEREST PERIODS. Subject to the other requirements of this
subsection (e), the Company may from time to time elect to have the
interest on all Advances comprising part of the same Borrowing determined
and payable for a specified period (an "INTEREST PERIOD" for such
Advances) in accordance with paragraph (iii), below. The first day of an
Interest Period for such Advances shall be the date such Advance is most
recently Converted, which shall be a Business Day. All Interest Periods
shall end on or prior to the Final Maturity Date. Any Interest Period for
an Advance that would otherwise end after the Final Maturity Date or
earlier date for the repayment of such Advance shall be deemed to end on
the Final Maturity Date or such earlier repayment date, as the case may
be.
(iii) EURODOLLAR RATE. Subject to the requirements of this
subsection (e) and subsection (f), below, the Company may from time to
time elect to have any Advances comprising part of the same Borrowing
Converted to Eurodollar Rate Advances. The Interest Period applicable to
such Eurodollar Rate Advances shall be of one, two, three or six whole
months' duration, as the Company shall select in its notice delivered to
Union Bank pursuant to subsection (f), below. If the Company shall have
made such election, the Company shall pay interest on such
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22
Eurodollar Rate Advances at the Eurodollar Rate, for the applicable
Interest Period for such Eurodollar Rate Advances, which interest shall be
payable on the last day of such Interest Period except, to the extent such
Interest Period is of six whole months' duration, interest shall also be
payable with respect to such Interest Period on the three whole month
anniversary of the commencement of such Interest Period, and, in any case,
on the date for repayment or prepayment for such Eurodollar Rate Advances.
Any Interest Period pertaining to Eurodollar Rate Advances that begins on
the last Business Day of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month at the end of such
Interest Period) (A) shall end on the last Business Day of a calendar
month and (B) with respect to any such Interest Period of six whole
months' duration, interest not payable on the last day of an Interest
Period shall also be payable on the last Business Day of a calendar month.
(iv) INTEREST RATE DETERMINATIONS. Union Bank shall give prompt
notice to the Company and the Participating Banks of the Eurodollar Rate
determined from time to time by Union Bank to be applicable to each
Eurodollar Rate Advance.
(f) CONVERSION OF ADVANCES. The Company may elect to Convert one or more
Advances of any Type to one or more Advances of the same or any other Type on
the following terms and subject to the following conditions:
(i) Each Conversion shall be made as to all Advances comprising a
single Borrowing upon written notice given by the Company to Union Bank
not later than 10:00 a.m. (Los Angeles time) on the third Business Day
prior to the date of the proposed Conversion. Union Bank shall notify each
Participating Bank of the contents of such notice promptly after receipt
thereof. Each such notice shall specify therein the following information:
(A) the date of such proposed Conversion (which in the case of Eurodollar
Rate Advances shall be the last day of the Interest Period then applicable
to such Advances to be Converted), (B) the Type of, and Interest Period,
if any, applicable to the Advances proposed to be Converted, (C) the
aggregate principal amount of Advances proposed to be Converted, and (D)
the Type of Advances to which such Advances are proposed to be Converted
and the Interest Period, if any, to be applicable thereto.
(ii) During the continuance of a Reimbursement Default (other than
a Reimbursement Event of Default), the right of the Company to Convert
Advances to Eurodollar Rate Advances shall be suspended, and all
Eurodollar Rate Advances then outstanding
<PAGE>
23
shall be Converted to Reference Rate Advances on the last day of the
Interest Period then in effect, if, on such day, a Reimbursement Default
(other than a Reimbursement Event of Default) shall be continuing.
(iii) During the continuance of a Reimbursement Event of Default,
the right of the Company to Convert Advances to Eurodollar Rate Advances
shall be suspended, and upon the occurrence of a Reimbursement Event of
Default, all Eurodollar Rate Advances then outstanding shall immediately,
without further act by the Company, be Converted to Reference Rate
Advances.
(iv) If no notice of Conversion is received by Union Bank as
provided in paragraph (i), above, with respect to any outstanding
Eurodollar Rate Advances on or before the third Business Day prior to the
last day of the Interest Period then in effect for such Eurodollar Rate
Advances, Union Bank shall treat such absence of notice as a deemed notice
of Conversion providing for such Advances to be Converted to Reference
Rate Advances on the last day of such Interest Period.
(g) OTHER TERMS RELATING TO THE MAKING AND CONVERSION OF ADVANCES. (i)
Notwithstanding anything in subsections (c), (e) and (f), above, to the
contrary:
(A) at no time shall more than seven different Borrowings be
outstanding hereunder; and
(B) each Borrowing consisting of Eurodollar Rate Advances
shall be in the aggregate principal amount of at least $1,000,000.
(ii) Each notice of Conversion pursuant to subsection (f), above,
shall be irrevocable and binding on the Company.
(iii) Each Reference Bank agrees to furnish to Union Bank timely
information for the purpose of determining the Eurodollar Rate for each
Interest Period. If any one or more of the Reference Banks shall not
furnish such timely information to Union Bank for the purpose of
determining any such interest rate, Union Bank shall determine such
interest rate on the basis of timely information furnished by the
remaining Reference Banks.
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24
(h) REPAYMENT OF ADVANCES. (i) The unpaid principal amount of each EOD
Term Advance, together with all accrued and unpaid interest thereon, shall be
due and payable and repaid in full by the Company on the earliest to occur of
(A) the date 364 days from the date of making such EOD Term Advance, (B) the
date that any Outstanding Notes are declared to be immediately due and payable
pursuant to the terms of the Indenture, (C) upon the occurrence of a
Reimbursement Event of Default (other than any Reimbursement Event of Default
that has occurred solely as a result of the existence of the Event of Default
that gave rise to the applicable EOD Payment), the date two Business Days after
the date on which demand for repayment thereof is made by the Required Banks or
by the Administrating Banks (or either of them) acting on behalf of the Required
Banks and (D) the Final Maturity Date.
(ii) The unpaid principal amount of each EOL Advance, together with
all accrued and unpaid interest thereon, shall be due and payable and
repaid in full by the Company on the earlier to occur of (A) the EOL
Advance Repayment Date and (B) upon the occurrence of a Reimbursement
Event of Default, an Event of Default (other than a Nonfinancial Event of
Default) or an Indenture Event of Default, the date two Business Days
after the date on which demand for repayment thereof is made by the
Required Banks or by the Administrating Banks (or either of them) acting
on behalf of the Required Banks.
(iii) The unpaid principal amount of each DLE Initial Advance,
together with all accrued and unpaid interest thereon, shall be due and
payable and repaid in full by the Company on the earlier to occur of (A)
the DLE Initial Advance Repayment Date and (B) upon the occurrence of a
Reimbursement Event of Default, an Event of Default (other than a
Nonfinancial Event of Default) or an Indenture Event of Default, the date
two Business Days after the date on which demand for repayment thereof is
made by the Required Banks or by the Administrating Banks (or either of
them) acting on behalf of the Required Banks.
(iv) The unpaid principal amount of each DLE Term Advance, together
with all accrued and unpaid interest thereon, shall be due and payable and
repaid in full by the Company on the earliest to occur of (A) the date 270
days from the date of making such DLE Term Advance, (B) upon the
occurrence of a Reimbursement Event of Default, an Event of Default (other
than a Nonfinancial Event of Default) or an Indenture Event of Default,
the date two Business Days after the date on which demand for
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25
repayment thereof is made by the Required Banks or by the Administrating
Banks (or either of them) acting on behalf of the Required Banks and (C)
the Final Maturity Date.
(i) PREPAYMENT OF ADVANCES. (i) The Company shall have no right to
prepay any principal amount of any Advances except in accordance with paragraph
(ii), below.
(ii) The Company may, (A) upon at least two Business Days' notice
to Union Bank, in the case of any Eurodollar Rate Advance, and (B) upon at
least one Business Day's notice to Union Bank, in the case of any
Reference Rate Advance, in each case stating the proposed date and
aggregate principal amount of the prepayment and the specific Borrowing(s)
to be prepaid, and if such notice is given, the Company shall, prepay, in
whole or ratably in part, together with accrued interest to the date of
such prepayment on the principal amount prepaid and any amounts due
pursuant to Section 4(c) hereof, the outstanding principal amount of all
Advances comprising the same Borrowing, in each case as the Company shall
designate in such notice; provided, however, that each partial prepayment
shall be in an aggregate principal amount not less than $1,000,000, or, if
less, the aggregate principal amount of all Advances then outstanding.
(j) DEFAULT INTEREST. Any amounts payable by the Company hereunder that
are not paid when due shall (to the fullest extent permitted by law) bear
interest, from the date when due until paid in full, at the Default Rate,
payable on demand.
(k) EVIDENCE OF INDEBTEDNESS. The LOC Bank and each Participating Bank
shall maintain, in accordance with their usual practice, an account or accounts
evidencing the indebtedness of the Company resulting from each drawing under a
Letter of Credit (in the case of the LOC Bank) and from each Advance (in the
case of each Participating Bank) made from time to time hereunder and the
amounts of principal and interest payable and paid from time to time hereunder.
SECTION 3. FEES. (a) The Company agrees to pay Union Bank, for the
account of each Participating Bank, a participation fee (the "PARTICIPATION
FEE"), with respect to each OP Letter of Credit and LP Letter of Credit, equal
to the product of (i) 0.58% per annum, (ii) such Participating Bank's
Participation Percentage and (iii) the Maximum Credit Amount applicable to such
Letters of Credit, in each case from and including the Date of Issuance thereof
to but excluding the Termination Date of such Letters of Credit,
<PAGE>
26
payable quarterly in arrears on the first day of each March, June, September and
December, commencing December 1, 1994; provided, however, that the percentage
set forth in clause (i), above, shall be decreased to 0.53% in the event that,
and at all times during which, the First Mortgage Bonds are rated A3 and A- (or
the then current equivalents) or higher by both Moody's and S&P, respectively
(or, in the event that Moody's or S&P shall cease to be in the business of
issuing ratings of debt, such other nationally recognized rating agency mutually
acceptable to the Required Banks and the Company), to be effective on the first
date on which both such ratings shall have been issued by Moody's and S&P (or
such other rating agency); and provided further, however, that the percentage
set forth in clause (i), above, shall be increased to 0.88% in the event that,
and at all times during which, the First Mortgage Bonds are rated below Baa3 and
BBB- (or the then current equivalents) by both Moody's and S&P, respectively
(or, in the event that Moody's or S&P shall cease to be in the business of
issuing ratings of debt, such other nationally recognized rating agency mutually
acceptable to the Required Banks and the Company), to be effective on the first
date on which both such ratings shall have been issued by Moody's and S&P (or
such other rating agency). Upon receipt from the Company of fees payable in
accordance with the provisions of this subsection (a), Union Bank agrees to pay,
to the account of each Participating Bank as soon as practicable but in no event
later than the next succeeding Business Day and in accordance with Section 6(a)
hereof, the fees paid to it for the account of such Participating Bank pursuant
to this subsection (a).
(b) In addition to the fees provided for in subsection (a), above, the
Company shall pay to Union Bank, for the account of each Participating Bank,
such other fees as are provided for in that certain letter agreement between the
Company and Union Bank (the "FEE LETTER") entered into separately herefrom and
dated the Date of Issuance.
(c) The Company agrees to pay to the LOC Bank, the Administrating Banks
and the Participating Banks, for their respective accounts, fees, in such
amounts and payable at such times, as shall be agreed in writing by or among
themselves.
SECTION 4. CHANGE IN CIRCUMSTANCES; YIELD PROTECTION.
(a) CHANGE IN CIRCUMSTANCES. If, after the date hereof, any Bank shall
have determined that the adoption of any Applicable Law, any change therein or
any change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by such Bank with any request or directive
(whether or not having the force of law) of any such
<PAGE>
27
authority, central bank or comparable agency, shall (i) impose, modify or deem
applicable any reserve, special deposit, insurance assessment, capital adequacy
or similar requirement (including, without limitation, any such requirement
imposed by the Board of Governors of the Federal Reserve System) against letters
of credit (or participatory interests therein) issued by, or assets held by,
Advances made by, or deposits in or for the account of, the LOC Bank or any
Participating Bank or any holding company of any thereof or (ii) impose on the
LOC Bank or any Participating Bank any other condition regarding this Agreement,
the Letters of Credit or participating interests therein or the Advances or
(iii) change the basis of taxation of payments to any Participating Bank of the
principal of or interest on any Eurodollar Rate Advance made by such
Participating Bank or any fees or other amounts payable hereunder (other than
changes in respect of taxes imposed on the overall net income of such
Participating Bank, or its Applicable Lending Office, by any jurisdiction in
which the Participating Bank has an office or by any political subdivision or
taxing authority therein) and the result of any event referred to in clause (i),
(ii) or (iii) of this subsection (a) shall be (A) to increase the cost to the
LOC Bank and/or any Participating Bank and/or any holding company thereof of
issuing or maintaining any of the Letters of Credit or commitments or
participatory interests therein or agreeing to make, making or maintaining the
Advances or (B) to reduce the LOC Bank's or any Participating Bank's return on
capital with respect thereto to a level below that which the LOC Bank or such
Participating Bank could have achieved but for such adoption, change or
compliance (taking into consideration the LOC Bank's or such Participating
Bank's, as the case may be, policies with respect to capital adequacy) by an
amount deemed by the LOC Bank or such Participating Bank, as the case may be, to
be material (which increase in cost pursuant to clause (A), above, or reduction
of return pursuant to clause (B), above, shall be calculated in accordance with
the LOC Bank's or any Participating Bank's, as the case may be, reasonable
allocation of the aggregate of such cost increases or capital resulting from
such events), then, within 15 days after demand by the LOC Bank or such
Participating Bank, as the case may be, the Company shall pay to the LOC Bank or
such Participating Bank, as the case may be, all additional amounts that are
necessary to compensate the LOC Bank or such Participating Bank, as the case may
be, for such increase in cost or reduction of return incurred by the LOC Bank or
such Participating Bank, as the case may be. Each of the LOC Bank and the
Participating Banks agree that it shall designate a different Applicable Lending
Office if such designation will avoid the need for, or reduce the amount of,
such increased costs or reduction of return and will not, in the sole opinion of
the LOC Bank or such Participating Bank, as the case may be, cause the LOC Bank
or such Participating Bank, as the case may be, to suffer any economic loss or
legal or regulatory disadvantage.
<PAGE>
28
(b) EURODOLLAR RESERVES. The Company shall pay to each Participating
Bank upon demand, so long as such Participating Bank shall be required under
regulations of the Board of Governors of the Federal Reserve System to maintain
reserves with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities, additional interest on the unpaid principal amount of
such Participating Bank's portion of each Eurodollar Rate Advance, from the date
of such Advance until such principal amount is paid in full, at an interest rate
per annum equal at all times to the remainder obtained by subtracting (i) the
rate described in clause (i) of the definition of "Eurodollar Rate" for the
Interest Period for such Advance from (ii) the rate obtained by dividing such
rate by a percentage equal to 100% minus the Eurodollar Reserve Percentage of
such Participating Bank for such Interest Period. Such additional interest shall
be determined by such Participating Bank and notified to the Company and the
Administrating Banks.
(c) BREAKAGE INDEMNITY. The Company shall indemnify each Participating
Bank against any loss, cost or reasonable expense which such Participating Bank
may sustain or incur as a consequence of (i) any failure by the Company to
Convert any Advance hereunder after irrevocable notice of Conversion has been
given pursuant to Section 2(f) hereof, (ii) any payment, prepayment or
Conversion of a Eurodollar Rate Advance required or permitted by any other
provision of this Agreement (other than pursuant to subsection (h), below) or
otherwise made or deemed made on a date other than the last day of the Interest
Period applicable thereto, (iii) any default in payment or prepayment of the
principal amount of any Advance or any part thereof or interest accrued thereon,
as and when due and payable (at the due date thereof, by irrevocable notice of
prepayment or otherwise) or (iv) any Conversion pursuant to Section 2(f)(iii)
caused by the occurrence of any Reimbursement Event of Default. Such loss, cost
or reasonable expense shall include an amount equal to the excess, if any, as
reasonably determined by such Participating Bank, of (A) its cost of obtaining
the funds for the Advance being paid, prepaid or Converted (based on the
Eurodollar Rate) for the period from the date of such payment, prepayment or
Conversion to the last day of the Interest Period for such Advance over (B) the
amount of interest (as reasonably determined by such Participating Bank) that
would be realized by such Participating Bank in reemploying the funds so paid,
prepaid or Converted for such period or Interest Period, as the case may be. For
purposes of this subsection (c), it shall be presumed that each Participating
Bank shall have funded each such Advance with a fixed-rate instrument bearing
the rates and maturities designated in the determination of the applicable
interest rate for such Advance.
(d) TAXES. All payments made by the Company to the LOC Bank, Union Bank
or any other Bank under this Agreement shall be made free and
<PAGE>
29
clear of, and without reduction for or on account of, any stamp or other taxes,
levies, imposts, duties, charges, fees, deductions, withholdings, restrictions
or conditions of any nature whatsoever hereafter imposed, levied, collected,
withheld or assessed by any country (or by any political subdivision or taxing
authority thereof or therein), except for franchise taxes and changes in the
rate of tax on the overall net income of the LOC Bank, Union Bank and the other
Banks (such nonexcluded taxes being called "TAX" or "TAXES"). If any Taxes are
required to be withheld from any amounts payable by the Company to the LOC Bank,
Union Bank or any other Bank, the amounts so payable shall be increased to the
extent necessary to yield to the LOC Bank, Union Bank or such other Bank, as the
case may be (after payment of all Taxes), interest or any other amounts payable
hereunder at the rates or in the amounts specified in this Agreement; provided
that the Company shall not be obligated to pay such amounts for the benefit of
the LOC Bank, Union Bank or any other Bank with respect to any period in which
the LOC Bank, Union Bank or such other Bank, as the case may be, has failed (x)
to file any form or certificate that it was entitled to file that would have
exempted the LOC Bank, Union Bank or such other Bank, as the case may be, from
such Taxes or (y) to take other action that would entitle the LOC Bank, Union
Bank or such other Bank, as the case may be, to an exemption from such Taxes, if
such action would not, in the reasonable judgment of the LOC Bank, Union Bank or
such other Bank, as the case may be, be otherwise disadvantageous to it.
Whenever any Tax is payable by the Company, as promptly as possible thereafter
the Company shall send the LOC Bank, Union Bank or any other Bank, as the case
may be, a receipt or other evidence of payment thereof.
(e) BASIS FOR CLAIMS FOR COMPENSATION. No law, rule or regulation in the
form in which it is in effect on the date hereof, but excluding changes in the
interpretation or administration thereof after the date hereof, or Tax to which
the LOC Bank, Union Bank or any other Bank is subject on the date hereof, shall
be used as the basis of a claim for compensation pursuant to subsections (a) and
(d), above, by the LOC Bank, Union Bank or such other Bank, as the case may be.
(f) PARTICIPATING BANKS AND PARTICIPANTS. The Company agrees that each
Participant shall have the same rights and obligations under this Section 4 with
respect to its respective participation to the same extent as if such
Participant were named instead of the LOC Bank in this Section 4.
Notwithstanding the foregoing, any payment to be made by the Company to a
Participating Bank or a Participant pursuant to subsection (a), above, shall be
paid to Union Bank for the account of such Participating Bank or Participant, as
the case may be.
<PAGE>
30
(g) NOTICES. A certificate as to the nature of any occurrence giving
rise to, and the calculation of, compensation to, and a statement setting forth
in reasonable detail the method by which such compensation has been calculated
by, the LOC Bank, Union Bank, a Participating Bank or a Participant pursuant to
subsection (a), (b), (c) or (d) of this Section 4 shall be submitted by the LOC
Bank, Union Bank, such Participating Bank or such Participant, as the case may
be, to the Company (together with notification to Union Bank of the amount of
such compensation). Such certificate shall be conclusive (absent demonstrable
error) as to the amount thereof. Each such certificate shall identify the LOC
Bank, Union Bank, such Participating Bank or such Participant, as the case may
be, as the party concerned. Upon the reasonable request of the Company, the LOC
Bank, Union Bank, such Participating Bank or such Participant, as the case may
be, shall provide the Company an estimate of the total additional compensation
that would be payable to the LOC Bank, Union Bank, such Participating Bank or
such Participant, as the case may be, on an annual basis.
(h) CHANGE IN LEGALITY. Notwithstanding any other provision herein, if
the adoption of or any change in any law or regulation or in the interpretation
or administration thereof by any governmental authority charged with the
administration or interpretation thereof shall make it unlawful for any
Participating Bank to make or maintain any Eurodollar Rate Advance or to give
effect to its obligations as contemplated hereby with respect to any Eurodollar
Rate Advance, then, by written notice to the Company and Union Bank, such
Participating Bank may:
(i) declare that Eurodollar Rate Advances shall not thereafter be
made by such Participating Bank hereunder, whereupon the right of the
Company to select Eurodollar Rate Advances for any Advance or Conversion
shall be forthwith suspended until such Participating Bank shall withdraw
such notice as provided below or shall cease to be a Participating Bank
hereunder; and
(ii) require that all outstanding Eurodollar Rate Advances be
Converted to Reference Rate Advances, in which event all Eurodollar Rate
Advances shall be automatically Converted to Reference Rate Advances as of
the effective date of such notice as provided below.
Upon receipt of any such notice, Union Bank shall promptly notify the
Participating Banks thereof. Promptly upon becoming aware that the circumstances
that caused such Participating Bank to deliver such notice no longer exist, such
Participating Bank shall deliver notice thereof to the Company and Union Bank
withdrawing such prior notice (but the failure to
<PAGE>
31
do so shall impose no liability upon such Participating Bank). Promptly upon
receipt of such withdrawing notice from such Participating Bank, Union Bank
shall deliver notice thereof to the Company and the Participating Banks and such
suspension shall terminate. Prior to any Participating Bank giving notice to the
Company under this subsection (h), such Participating Bank shall use reasonable
efforts to change the jurisdiction of its Applicable Lending Office, if such
change would avoid such unlawfulness and would not, in the sole determination of
such Participating Bank, be otherwise disadvantageous to such Participating
Bank. Any notice to the Company by any Participating Bank shall be effective as
to each Eurodollar Rate Advance on the last day of the Interest Period currently
applicable to such Eurodollar Rate Advance; provided that if such notice shall
state that the maintenance of such Advance until such last day would be
unlawful, such notice shall be effective as to each Eurodollar Rate Advance of
such Participating Bank (but not the other Participating Banks) on the date of
receipt by the Company and Union Bank.
(i) MARKET RATE DISRUPTIONS. If, (i) Union Bank determines that an
adequate basis does not exist for the determination of the Eurodollar Rate for
Eurodollar Rate Advances or (ii) if the Required Banks shall notify Union Bank
that the Eurodollar Rate shall not adequately reflect the cost to such Required
Banks of making, funding or maintaining their respective Eurodollar Rate
Advances, the right of the Company to select or receive or Convert into such
Type of Advances shall be forthwith suspended until Union Bank shall notify the
Company and the Participating Banks that the circumstances causing such
suspension no longer exist, and until such notification from Union Bank, each
request for or Conversion into such Type of Advance hereunder shall be deemed to
be a request for or Conversion into Reference Rate Advances.
SECTION 5. PARTICIPATIONS.
(a) By the issuance of a Letter of Credit and without any further action
on the part of the LOC Bank or any Participating Bank in respect thereof, the
LOC Bank shall hereby be deemed to have granted to each Participating Bank, and
each Participating Bank shall hereby be deemed to have acquired from the LOC
Bank, an undivided interest and participation in such Letter of Credit
(including any letter of credit issued by the LOC Bank in substitution or
exchange for such Letter of Credit pursuant to the terms thereof), and in the
LOC Bank's rights and obligations with respect thereto, equal to such
Participating Bank's Participation Percentage of the Maximum Credit Amount of
such Letter of Credit, effective upon the issuance of such Letter of Credit. In
consideration and in furtherance of the foregoing, each Participating Bank
hereby absolutely and unconditionally agrees to pay to the LOC Bank, in
accordance with this Section 5, such
<PAGE>
32
Participating Bank's Participation Percentage of each payment made by the LOC
Bank of a draft under each Letter of Credit. Upon receipt of a draft and
certificate under a Letter of Credit on any Business Day, the LOC Bank shall
give telephonic notice to the Company no later than 10:00 a.m., New York City
time, and, if the Company has not reimbursed the LOC Bank on or prior to 1:00
p.m., New York City time, on the day upon which the LOC Bank has made payment
with respect thereto, to each Participating Bank no later than 2:30 p.m., New
York City time, with respect to any draft and certificate received before 9:05
a.m., New York City time, on the same Business Day, and, with respect to any
draft and certificate received at or after 9:05 a.m., New York City time, on the
next succeeding Business Day (to be followed in either case by delivery by telex
or telecopy of a Notice of Drawing), of the amount of the payment to be made by
the LOC Bank pursuant to such draft and certificate and, with respect to each
Participating Bank, the dollar amount of such Participating Bank's Participation
Percentage thereof. If such telephonic notice is received by a Participating
Bank after 2:30 p.m., New York City time, on any Business Day, such notice shall
be deemed to have been received on the next succeeding Business Day. With
respect to each Participating Bank, promptly upon receipt of such telephonic
notice from the LOC Bank but in any event no later than the same Business Day on
which such telephonic notice was received, or deemed to have been received, from
the LOC Bank, such Participating Bank shall pay to the LOC Bank an amount equal
to the product of (A) such Participating Bank's Participation Percentage and (B)
the amount of the payment made or to be made by the LOC Bank on such draft;
provided, however, that, with respect to the payment of any draw on a Letter of
Credit, the LOC Bank shall not require such Participating Bank to pay (exclusive
of interest) an amount greater than the product of (x) such Participating Bank's
Participation Percentage and (y) the lesser of (1) the Maximum Available Credit
Amount of such Letter of Credit immediately prior to adjustment for payment by
the LOC Bank of such draw and (2) the Maximum Drawing Amount of such Letter of
Credit immediately prior to adjustment of the Maximum Drawing Amount of such
Letter of Credit for payment by the LOC Bank of such draw. If payment of the
amount due pursuant to the preceding sentence from a Participating Bank is
received by the LOC Bank after the Business Day on which it is due, such
Participating Bank agrees to pay to the LOC Bank, along with its payment of the
amount due pursuant to the preceding sentence, interest on such amount at a rate
per annum equal to (i) for the period from and including the Business Day such
payment is due to but excluding the next succeeding Business Day, the Fed Funds
Rate and (ii) for the period from and including the Business Day next succeeding
the Business Day such payment is due to but excluding the Business Day on which
such amount is paid in full, the Default Rate. The LOC Bank agrees to give
prompt telephonic notice (confirmed in writing) to a Participating Bank if the
LOC
<PAGE>
33
Bank does not receive the payment required by this subsection (a) from such
Participating Bank on the Business Day on which such payment was due from such
Participating Bank.
(b) Upon receipt of a payment from the Company pursuant to Section 2
hereof, the LOC Bank shall promptly transfer to each Participating Bank such
Participating Bank's pro rata share (determined in accordance with such
Participating Bank's Participation Percentage) of such payment based on such
Participating Bank's pro rata share (determined as aforesaid) of amounts paid
pursuant to subsection (a) above, and not previously transferred by the LOC Bank
pursuant to this subsection (b); provided, however, that, if a Participating
Bank shall fail to pay to the LOC Bank any amount required by subsection (a),
above, on the Business Day following the date on which such payment was due from
such Participating Bank and the Company shall not have reimbursed the LOC Bank
for such amount pursuant to Section 2 hereof (such unreimbursed amount being
hereinafter referred to as a "TRANSFERRED AMOUNT"), the LOC Bank shall be deemed
to have purchased, on such following Business Day (a "PARTICIPATION TRANSFER
DATE") from such Participating Bank (a "DEFAULTING PARTICIPATING BANK"), a
participation in such Transferred Amount and shall be entitled, for the period
from and including the Participation Transfer Date to the earlier of (i) the
date on which the Company shall have reimbursed the LOC Bank for such
Transferred Amount and (ii) the date on which such Participating Bank shall have
reimbursed the LOC Bank for such Transferred Amount (the "PARTICIPATION TRANSFER
PERIOD"), to the rights, privileges and obligations (including, without
limitation, the obligation to make Advances pursuant to Section 2(c) hereof) of
a "Participating Bank" under this Agreement with a Participation Percentage
equal to the Participation Percentage of such Defaulting Participating Bank; and
provided further, however, that, if at any time after the occurrence of a
Participation Transfer Date with respect to any Participating Bank and prior to
the reimbursement by such Participating Bank of the LOC Bank with respect to the
related Transferred Amount pursuant to subsection (a), above, (i) the LOC Bank
shall receive any payment from the Company pursuant to Section 2 hereof, the LOC
Bank shall not be obligated to pay any amounts to such Participating Bank, and
the LOC Bank shall retain such amounts (including, without limitation, interest
payments due from the Company pursuant to Section 2 hereof) for its own account
as a Participating Bank or (ii) an Administrating Bank shall receive any payment
from the Company for the account of such Defaulting Participating Bank pursuant
to Section 3 or 21(b) hereof, such Administrating Bank shall not pay any such
amounts to such Defaulting Participating Bank but shall pay any such amounts to
the LOC Bank and the LOC Bank shall retain such amounts for its own account as a
Participating Bank; provided that all such amounts shall be applied in
satisfaction of the unpaid amounts (including, without limitation, interest
<PAGE>
34
payments due from such Participating Bank pursuant to subsection (a), above) due
from such Participating Bank with respect to such Transferred Amount.
(c) All payments due to the Participating Banks from the LOC Bank
pursuant to subsection (b), above, shall be made to the Participating Banks if,
as, and to the extent possible, when the LOC Bank receives payments in respect
of drawings under the Letters of Credit or Advances pursuant to Section 2
hereof, and in the same funds in which such amounts are received; provided that,
if any Participating Bank to which the LOC Bank is required to transfer any such
payment (or any portion thereof) pursuant to subsection (b), above, does not
receive such payment (or portion thereof) on the same Business Day on which the
LOC Bank received such payment from the Company (which payment, if received by
the LOC Bank after 1:00 p.m., New York City time, on any Business Day shall be
deemed, for the purposes of this proviso, to have been received on the next
succeeding Business Day), the LOC Bank agrees to pay to such Participating Bank,
along with its payment of the portion of such payment due to such Participating
Bank, interest on such amount at a rate per annum equal to (i) for the period
from and including such Business Day of receipt by the LOC Bank to but excluding
the next succeeding Business Day, the Fed Funds Rate and (ii) for the period
from and including the Business Day next succeeding such Business Day of receipt
by the LOC Bank to but excluding the Business Day such amount is paid in full,
the Default Rate. The provisions of this subsection (c) and subsection (b),
above, shall not affect or impair any of the obligations under this Agreement of
any Defaulting Participating Bank to the LOC Bank.
(d) If, in connection with any case or other proceeding seeking
liquidation, reorganization or other relief with respect to the Company or its
debts under any bankruptcy, insolvency or other similar law now or hereafter in
effect, or for any other reason whatsoever, the LOC Bank shall be required to
return to the Company or to a trustee, receiver, liquidator, custodian or other
similar official all or any portion of payments or interest paid to a
Participating Bank pursuant to subsections (b) and (c), above (a "RETURNED
PAYMENT"), each Participating Bank shall, upon demand of the LOC Bank, forthwith
return to the LOC Bank any amounts transferred to such Participating Bank by the
LOC Bank in respect thereof pursuant to subsections (b) and (c), above, plus
such Participating Bank's pro rata share (determined in accordance with such
Participating Bank's Participation Percentage) of any interest that the LOC Bank
is required to pay to such trustee, receiver, liquidator, custodian or other
similar officer with respect to any Returned Payment.
(e) The LOC Bank will exercise and give the same care and attention to
the Letters of Credit as it gives to its other letters of credit and
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35
similar obligations, and each Participating Bank agrees that the LOC Bank's
liability to each Participating Bank shall be (i) to distribute promptly, as and
when received by the LOC Bank and in accordance with the provisions of
subsections (b) and (c), above, such Participating Bank's pro rata share
(determined in accordance with such Participating Bank's Participation
Percentage) of any payments to the LOC Bank by the Company pursuant to Section 2
hereof in respect of drawings under the Letters of Credit or Advances, (ii) to
exercise or refrain from exercising any right or to take or to refrain from
taking any action under this Agreement or any Letter of Credit as may be
directed in writing by the Required Banks or the Administrating Banks or either
of them acting on behalf of the Required Banks, except to the extent required by
the terms hereof or thereof or by applicable law and (iii) as otherwise
expressly set forth herein. The LOC Bank shall not be liable for any action
taken or omitted at the request or with the approval of the Required Banks or
the Administrating Banks or either of them acting on behalf of the Required
Banks or for the nonperformance of the obligations of any other party under this
Agreement, any Letter of Credit, any of the Transaction Documents, any of the
Financing Documents, any of the Refinancing Documents or any other document
contemplated hereby or thereby. Without in any way limiting any of the
foregoing, the LOC Bank may rely upon the advice of the Administrating Banks
with respect to any of the LOC Bank's obligations under this Agreement or any
Letter of Credit, upon the advice of counsel and of independent public
accountants and other experts selected by it and upon any written communication
or telephone conversation that it believes to be genuine or to have been signed,
sent or made by the proper person and shall not be required to make any inquiry
concerning the performance by the Company, the Owner Trustee, any Owner
Participant, any General Partner, any Designated General Partner, any Limited
Partner or any other Person of any of its obligations and liabilities under or
in respect of this Agreement, the Letters of Credit, the Transaction Documents,
the Financing Documents, the Refinancing Documents or any other documents
contemplated hereby or thereby. The LOC Bank shall not have any obligation to
make any claim, or assert any Lien, upon any property held by the LOC Bank or
assert any offset thereagainst in satisfaction of all or part of the obligations
of the Company hereunder; provided that the LOC Bank shall, if so directed by
the Required Banks or the Administrating Banks or either of them acting on
behalf of and with the consent of the Required Banks, have an obligation to make
a claim, or assert a Lien, upon property held by the LOC Bank in connection with
this Agreement or assert an offset thereagainst. The LOC Bank may accept
deposits from, make loans or otherwise extend credit to, and generally engage in
any kind of banking or trust business with the Company or any of its Affiliates,
or any other Person, and receive payment on such loans or extensions of credit
and otherwise act with respect thereto freely and without accountability in the
same manner as
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36
if this Agreement and the transactions contemplated hereby were not in effect.
Without limiting any of the foregoing, the LOC Bank agrees that (x) it will not
give notice of a Date of Early Termination under a Letter of Credit without a
writing executed by the Required Banks or executed by the Administrating Banks
or either of them on behalf of and with the consent of the Required Banks
directing it to give such notice (which writing shall specify the Date of Early
Termination to be given in such notice) and (y) if a Reimbursement Event of
Default has occurred and is continuing, upon receipt of such a writing, it will
give such notice as provided in such Letter of Credit.
(f) The LOC Bank makes no representation or warranty and shall have no
responsibility with respect to: (i) the genuineness, legality, validity, binding
effect or enforceability of this Agreement, any of the Transaction Documents,
any of the Financing Documents, any of the Refinancing Documents or any other
documents contemplated hereby or thereby; (ii) the truthfulness, accuracy or
performance of any of the representations, warranties or agreements contained in
this Agreement, any of the Transaction Documents, any of the Financing
Documents, any of the Refinancing Documents or any other documents contemplated
hereby or thereby; (iii) the collectibility of any amounts due under this
Agreement; (iv) the financial condition of the Company or of any other Person;
or (v) any act or omission of any Owner Participant, any General Partner, any
Designated General Partner or any Limited Partner with respect to its use of any
Letter of Credit or the proceeds of any drawing under any Letter of Credit.
Each Participating Bank acknowledges and agrees that such Participating Bank has
been, and will continue to be, solely responsible for making its own independent
appraisal of and investigation into the financial condition, affairs, status and
nature of the Company and for making its own credit decision in taking or not
taking any action, including, without limitation, entering into this Agreement.
(g) To the extent that the LOC Bank is not reimbursed and indemnified by
the Company under Section 20, Section 21 or Section 22 hereof, each
Participating Bank agrees to reimburse and indemnify the LOC Bank on demand, pro
rata in accordance with such Participating Bank's Participation Percentage, from
and against any and all liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever that may be imposed on, incurred by or asserted against the
LOC Bank, in any way relating to or arising out of any Letter of Credit, this
Agreement, any Financing Document, any Refinancing Document, any Transaction
Document or any other document contemplated hereby or thereby, or any action
taken or omitted by the LOC Bank under or in connection with this Agreement, any
Letter of Credit, any Financing Document, any Refinancing Document, any
Transaction
<PAGE>
37
Document or any other document contemplated hereby or thereby; provided,
however, that such Participating Bank shall not be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from the LOC Bank's gross
negligence or willful misconduct or from the LOC Bank's failure to refrain from
exercising or to exercise any right or to refrain from taking or to take any
action under this Agreement or the Letters of Credit, as directed in writing by
the Required Banks or by the Administrating Banks or either of them acting on
behalf of and with the consent of the Required Banks (unless such refrain from
exercising such right or action, such exercise or such taking was required by
the terms hereof or thereof or by applicable law); and provided further,
however, that such Participating Bank shall not be liable to the LOC Bank or any
other Participating Bank for the failure of the Company to reimburse the LOC
Bank or any other Participating Bank for any drawing made under a Letter of
Credit or any Advance with respect to which such Participating Bank has paid the
LOC Bank such Participating Bank's pro rata share (determined in accordance with
such Participating Bank's Participation Percentage), or for the Company's
failure to pay interest thereon. Each Participating Bank's obligations under
this subsection (g) shall survive the payment in full of all amounts payable by
such Participating Bank under subsection (a), above, and the termination of this
Agreement and the Letters of Credit. Nothing in this subsection (g) is intended
to limit any Participating Bank's reimbursement obligation contained in
subsection (a), above.
(h) Each Participating Bank agrees that it will promptly (i) notify Swiss
Bank Corporation of any occurrence giving rise to a right to compensation to
such Participating Bank pursuant to Section 4 hereof and (ii) submit to Swiss
Bank Corporation a certificate detailing such occurrence giving rise thereto and
the calculation of the amount of compensation with respect thereto. Swiss Bank
Corporation agrees to present promptly such certificate to the Company in
accordance with Section 4 hereof.
(i) Each Participating Bank acknowledges and agrees that, except as
otherwise specifically provided herein, (i) its obligation to acquire a
participation in the LOC Bank's liability in respect of the Letters of Credit
and (ii) its obligation to make the payments specified herein, and the right of
the LOC Bank to receive the same, in the manner specified herein, are absolute,
unconditional and irrevocable and shall not be affected by any circumstances
whatsoever, including, without limitation, (A) the occurrence and continuance of
any Event of Default under any of the Facility Leases or any Reimbursement
Default or Reimbursement Event of Default hereunder or any breach or default by
the Company, either Administrating Bank or any Participating Bank hereunder; (B)
any lack of validity or enforceability of this
<PAGE>
38
Agreement, any Letter of Credit, any of the Transaction Documents, any of the
Financing Documents or any of the Refinancing Documents; (C) the existence of
any claim, setoff, defense or other right which the Company may have at any time
against any Owner Participant, any General Partner, any Designated General
Partner, any Limited Partner or the Owner Trustee (or any Person for whom any of
the foregoing may be acting, including, without limitation, any General Partner
or Limited Partner of any Owner Participant), the LOC Bank, either
Administrating Bank, any Participating Bank or any other person or entity,
whether in connection with this Agreement, the Transaction Documents, the
Financing Documents, the Refinancing Documents or any other documents
contemplated hereby or thereby or any unrelated transactions; provided that
nothing herein shall prevent the assertion of any such claim by separate suit or
compulsory counterclaim; (D) any amendment or waiver of or consent to any
departure from all or any of the Letters of Credit, this Agreement, any of the
Transaction Documents, any of the Financing Documents or any of the Refinancing
Documents; (E) any statement or any document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect; (F) payment
by the LOC Bank under any Letter of Credit against presentation of a draft or
certificate that does not comply with the terms of such Letter of Credit, so
long as such payment is not the consequence of the LOC Bank's gross negligence
or willful misconduct in determining whether documents presented under a Letter
of Credit comply with the terms thereof; or (G) any other circumstance or
happening whatsoever, whether or not similar to any of the foregoing.
(j) In furtherance and not in limitation of any other provision hereof,
in the event that (i) a Participating Bank shall become a Defaulting
Participating Bank, (ii) a decree or order of a court, agency or supervisory
authority having jurisdiction in the premises for the appointment of a
conservator or receiver or liquidator in any insolvency proceeding, readjustment
of debt, marshalling of assets and liabilities or similar proceeding of a
Participating Bank or of all or substantially all of its property, or for the
winding up or liquidation of its affairs, shall have been entered, or a
Participating Bank shall consent to the appointment of a conservator or receiver
or liquidator in any insolvency, readjustment of debt, marshalling of assets and
liabilities or similar proceeding of such Participating Bank or of all or
substantially all of its property, or a Participating Bank shall file a petition
to take advantage of any applicable insolvency or reorganization statute or
voluntarily generally suspend payment of its obligations or (iii) the rating by
either Moody's or S&P of the long-term unsecured debt obligations or
certificates of deposit of (A) any Participating Bank (other than Union Bank and
The First National Bank of Boston) shall fall below A- or the then current
equivalent thereof or (B) The First National Bank of Boston shall fall
<PAGE>
39
below BBB or the then current equivalent thereof (any Participating Bank as
described in clause (i), (ii) or (iii), above, being referred to herein as a
"NONPERFORMING PARTICIPATING BANK"), then the LOC Bank may find one or more
financial institutions to assume the obligations hereunder of such Nonperforming
Participating Bank (each a "SUBSTITUTING PARTICIPATING BANK") pursuant to one or
more Assignment Agreements, and, when such Assignment Agreement(s) have been
accepted by Union Bank, each Substituting Participating Bank shall succeed to
all or a portion, as applicable, of the rights, privileges and obligations of
such Nonperforming Participating Bank hereunder and such Substituting
Participating Bank shall become a "Participating Bank" for purposes of this
Agreement; provided, however, that if at the time a Substituting Participating
Bank succeeds to the rights, privileges and obligations of a Nonperforming
Participating Bank such Nonperforming Participating Bank has an interest in
outstanding drawings or Advances, the Substituting Participating Bank shall have
purchased such interest, or a portion of such interest equal to the portion of
the Nonperforming Participating Bank's interest hereunder purchased by such
Substituting Participating Bank, of the Nonperforming Participating Bank at
market value; and provided further, however, that such succession of each such
Substituting Participating Bank shall be subject to the prior written consent of
the Company (which shall not be unreasonably withheld or delayed).
SECTION 6. PAYMENTS.
(a) All payments by the Company or the Participating Banks to the LOC
Bank or Union Bank pursuant to this Agreement shall be made in lawful currency
of the United States and in immediately available funds to the LOC Bank's
account referred to on the signature pages hereof, or to Union Bank's account
referred to on the signature pages hereof, as the case may be, or to such other
account in the United States as the LOC Bank or Union Bank shall notify the
Company and each Participating Bank in writing. All payments by the LOC Bank or
Union Bank to a Participating Bank shall be made in lawful currency of the
United States and in immediately available funds to the account of such
Participating Bank set forth below the name of such Participating Bank on the
signature pages hereof or in the Assignment Agreement pursuant to which such
Participating Bank became a party hereto in accordance with Section 5(j) or
23(b) hereof, or at such other account in the United States as to which any
Participating Bank shall notify the LOC Bank or Union Bank in writing. All
reimbursements of drawings under the Letters of Credit, all repayments and
prepayments of Advances and all payments of interest with respect thereto shall
be made by the Company to the LOC Bank for the account of the LOC Bank and/or
the Participating Banks, as the case may be.
<PAGE>
40
(b) Whenever any payment under this Agreement shall be due on a day that
is not a Business Day, the date for payment thereof shall be extended to the
next succeeding Business Day, and any interest payable thereon shall be payable
for such extended time at the specified rate. Any payment from the Company
hereunder that is received after 1:00 p.m., New York City time, on any Business
Day shall be deemed to have been received on the next succeeding Business Day.
(c) Interest payable under Section 2(a), 2(e)(i), 2(j), 5(a) or 5(c)
hereof and the fees payable under Section 3 hereof shall be computed on the
basis of a year of 365 or 366 days (as applicable) and paid for the actual
number of days elapsed (including the first day but excluding the last day).
Interest payable under Section 2(e)(iii) hereof shall be computed on the basis
of a year of 360 days and paid for the actual number of days elapsed (including
the first day but excluding the last day).
(d) Except as otherwise expressly provided in Section 3, 4 or 5 hereof,
all payments hereunder from the Company to the Participating Banks, from the LOC
Bank or Union Bank to the Participating Banks, from the Participating Banks to
the LOC Bank and from the Participating Banks to an Administrating Bank shall be
made pro rata among the Participating Banks in accordance with the Participation
Percentages of such Participating Banks.
SECTION 7. ISSUANCE OF THE LETTERS OF CREDIT; CONDITIONS PRECEDENT TO
ISSUANCE AND ADVANCES.
(a) CONDITIONS PRECEDENT TO ISSUANCE. Subject to the satisfaction of the
conditions precedent set forth in paragraphs (i), (ii), (iii) and (iv) of this
Section 7(a), the LOC Bank shall issue the OP Letters of Credit and the LP
Letters of Credit, for the account of the Company, to the beneficiaries in the
amounts set forth in Schedule 1 hereto (such date on which such Letters of
Credit are issued being herein referred to as the "DATE OF ISSUANCE" of such OP
Letters of Credit and such LP Letters of Credit). All of the OP Letters of
Credit and LP Letters of Credit shall be issued simultaneously. Each OP Letter
of Credit and each LP Letter of Credit shall be effective on the Date of
Issuance of such OP Letter of Credit or LP Letter of Credit and shall expire on
the Termination Date applicable to such Letter of Credit.
(i) As a condition precedent to the issuance of each Letter of
Credit, the LOC Bank, each Administrating Bank and each other Bank shall
have received on or before the Date of Issuance of the Letters of Credit
the following, each dated such date, in form and substance satisfactory to
the LOC Bank, each Administrating Bank and the Required Banks:
<PAGE>
41
(A) an opinion of Larry R. Crayne, Chief Counsel for the
Company, substantially in the form of Exhibit D hereto;
(B) an opinion of Mudge Rose Guthrie Alexander & Ferdon,
special New York counsel for the Company, substantially in the form
of Exhibit E hereto;
(C) an opinion of Shaw, Pittman, Potts & Trowbridge, special
Nuclear Regulatory Commission counsel for the Company, substantially
in the form of Exhibit F hereto;
(D) copies of the resolutions of the Board of Directors, or a
committee thereof, of the Company authorizing the execution, delivery
and performance by the Company of this Agreement, each of the
Transaction Documents, Financing Documents and Refinancing Documents
to which the Company is a party and the Collateral Trust Indenture,
certified by the Secretary or an Assistant Secretary of the Company
(which certificate shall state that such resolutions are in full
force and effect on the Date of Issuance of the Letters of Credit);
(E) copies, certified by a duly authorized officer of the
Company, of all approvals, authorizations, orders or consents of, or
notices to or registrations with, any governmental body or agency
required for the Company to execute, deliver and perform its
obligations under this Agreement and of all such approvals,
authorizations, orders, consents, notices or registrations required
to be obtained or made prior to the Date of Issuance of the Letters
of Credit in connection with the transactions contemplated by any of
the Transaction Documents or any of the Financing Documents or
Refinancing Documents to which the Company is a party;
(F) a certificate of the Secretary or an Assistant Secretary
of the Company certifying the names and true signatures of the
officers of the Company authorized to sign this Agreement and the
other documents to be delivered by the Company hereunder and a
certificate of one of such officers of the Company certifying the
name and true signature of such Secretary or Assistant Secretary;
<PAGE>
42
(G) a copy of the operating license issued by the Nuclear
Regulatory Commission in respect of Unit 2, certified by a duly
authorized officer of the Company;
(H) such other documents, instruments, opinions, approvals
(and, if requested by the LOC Bank or any other Bank, certified
duplicates of executed copies thereof) as the LOC Bank or any other
Bank may reasonably request in writing;
(I) an opinion of King & Spalding, special New York counsel
for the LOC Bank and the Administrating Banks, in substantially the
form of Exhibit G hereto;
(J) an opinion of Oskar Morikofer, Swiss counsel for the LOC
Bank, in substantially the form of Exhibit H hereto;
(K) the Fee Letter, duly executed by the Company; and
(L) evidence that the letters of credit issued under the Old
Reimbursement Agreement shall have been, or will be contemporaneously
with the issuance of such Letters of Credit, cancelled and any fees
and other amounts due and payable under the Old Reimbursement
Agreement by the Company shall have been paid.
(ii) The following statements shall be true and correct on the Date
of Issuance of the Letters of Credit, and the LOC Bank, each Administrating
Bank and each other Bank shall have received on such Date of Issuance a
certificate signed by a duly authorized officer of the Company, dated such
Date of Issuance, stating that:
(A) the representations and warranties contained in Section
10 hereof are correct on and as of such Date of Issuance as though
made on and as of such date;
(B) no Reimbursement Default shall have occurred and be
continuing and no Reimbursement Default shall result from the
issuance of the Letters of Credit; and
(C) no Event of Loss, Event of Default or Indenture Event of
Default has occurred and the Company has not
<PAGE>
43
received notice from any Lessor or any Owner Participant of the
occurrence of any Deemed Loss Event.
(iii) On or before the Date of Issuance of the Letters of Credit:
(A) each of the Transaction Documents, Financing Documents
and Refinancing Documents shall have been duly authorized and
executed by the respective parties thereto and shall be in full force
and effect;
(B) the LOC Bank and each Administrating Bank shall have
received copies of each of the Transaction Documents, Financing
Documents and Refinancing Documents each of which shall be in form
and substance satisfactory to the LOC Bank, the Administrating Banks
and the other Banks; and
(C) the Company shall have duly paid all amounts due and
payable on or before the Date of Issuance under Section 3 hereof.
(iv) On the Date of Issuance of the Letters of Credit, the full
power operating license issued for Unit 2 by the Nuclear Regulatory
Commission shall be in full force and effect.
(b) CONDITIONS PRECEDENT TO EOD TERM ADVANCES. The obligation of each
Participating Bank to make any EOD Term Advance shall be subject to the
conditions precedent that, on the date of such EOD Term Advance, the following
statements shall be true and Union Bank shall have received a certificate of a
duly authorized officer of the Company, dated the date of such EOD Term Advance
and in sufficient copies for each Participating Bank, stating that:
(i) the representations and warranties contained in Section 10 of
this Agreement are true and correct in all material respects on and as of
the date of such EOD Term Advance, before and after giving effect to such
EOD Term Advance and to the application of the proceeds therefrom, as
though made on and as of such date, excluding, however, any such
representation and warranty (other than those contained in subsections (f)
and (g) of Section 10 hereof) that is untrue solely as a result of the
existence of the Event of Default that gave rise to the EOD Payment
corresponding to such EOD Term Advance;
<PAGE>
44
(ii) no event has occurred and is continuing, or would result from
such Advance, that constitutes a Reimbursement Default, other than any
Reimbursement Default that has occurred and is continuing solely as a
result of the existence of the Event of Default that gave rise to the EOD
Payment corresponding to such EOD Term Advance;
(iii) the Event of Default that gave rise to the EOD Payment
corresponding to such EOD Term Advance is a Nonfinancial Event of Default,
and no Event of Default (other than one or more Nonfinancial Events of
Default) has occurred and is continuing or would result from such Advance;
(iv) no portion of the Notes has been declared to be due and
payable prior to the scheduled maturity thereof; and
(v) none of the loan agreements or credit facilities of the
Company (other than this Agreement), and no agreements or instruments
evidencing Indebtedness of the Company, (A) include indebtedness arising
under the Facility Leases in the definition of "Debt" or "Indebtedness"
(or any analogous defined terms) thereunder or (B) would cross-default to,
or otherwise be deemed to be in default by virtue of the existence of, an
Event of Default.
(c) CONDITIONS PRECEDENT TO DLE TERM ADVANCES. The obligation of each
Participating Bank to make any DLE Term Advance shall be subject to the
conditions precedent that, on the date of such DLE Term Advance, the following
statements shall be true and Union Bank shall have received a certificate of a
duly authorized officer of the Company, dated the date of such DLE Term Advance
and in sufficient copies for each Participating Bank, stating that:
(i) the representations and warranties contained in Section 10 of
this Agreement are true and correct in all material respects on and as of
the date of such DLE Term Advance, before and after giving effect to such
DLE Term Advance and to the application of the proceeds therefrom, as
though made on and as of such date;
(ii) no event has occurred and is continuing, or would result from
such Advance, that constitutes an Event of Default or a Reimbursement
Default;
(iii) the Undivided Interests have been irrevocably transferred to
the Company pursuant to the terms of the
<PAGE>
45
Participation Agreements and the Facility Leases, and the Owner Trustee
and the Owner Participants have no further rights or obligations with
respect to Unit 2 or under the Transaction Documents, the Financing
Documents or the Refinancing Documents (other than certain indemnification
and similar rights that survive the transfer of the Undivided Interests);
(iv) the Company has assumed all obligations and liabilities of the
Owner Trustee under the Indentures and the Notes pursuant to Section
3.9(b) of the Indentures; and
(v) none of the loan agreements or credit facilities of the
Company (other than this Agreement), and no agreements or instruments
evidencing Indebtedness of the Company, (A) include indebtedness arising
under the Facility Leases in the definition of "Debt" or "Indebtedness"
(or any analogous defined terms) thereunder or (B) would cross-default to,
or otherwise be deemed to be in default by virtue of the existence of, an
Event of Default.
(d) RELIANCE ON CERTIFICATES. The Administrating Banks, the LOC Bank and
the Participating Banks shall be entitled to rely conclusively upon the
certificates delivered from time to time by officers of the Company and the
other parties to the Transaction Documents as to the names, incumbency,
authority and signatures of the respective persons named therein until such time
as the Administrating Banks may receive a replacement certificate, in form
acceptable to the Administrating Banks, from an officer of such Person
identified to the Administrating Banks as having authority to deliver such
certificate, setting forth the names and true signatures of the officers and
other representatives of such Person thereafter authorized to act on behalf of
such Person.
SECTION 8. ADJUSTMENT OF MAXIMUM DRAWING AMOUNTS AND MAXIMUM AVAILABLE
CREDIT AMOUNTS; TERMS OF DRAWING. The Maximum Drawing Amount and Maximum
Available Credit Amount applicable to a given Letter of Credit shall be subject
to modification as specified in such Letter of Credit, and drawings under each
Letter of Credit shall be subject to the other terms and conditions set forth in
such Letter of Credit.
SECTION 9. OBLIGATIONS ABSOLUTE. The payment obligations of the Company
under this Agreement shall be absolute, unconditional and irrevocable and shall
be performed strictly in accordance with the terms of this Agreement, under all
circumstances whatsoever, including, without limitation, the following
circumstances:
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46
(a) any lack of validity or enforceability of any Letter of Credit, this
Agreement, any of the Transaction Documents, any of the Financing Documents or
any of the Refinancing Documents;
(b) any amendment or waiver of or any consent to departure from all or
any of the Letters of Credit, this Agreement, any of the Transaction Documents,
any of the Financing Documents or any of the Refinancing Documents;
(c) the existence of any claim, setoff, defense or other right that the
Company may have at any time against any of the Owner Participants or the Owner
Trustee (or any Person for whom any of the foregoing may be acting including,
without limitation, any General Partner or Limited Partner of any Owner
Participant), the LOC Bank, either Administrating Bank, any Participating Bank
or any other person or entity, whether in connection with this Agreement, the
Transaction Documents, the Financing Documents, the Refinancing Documents or any
other documents contemplated hereby or thereby or any unrelated transactions;
provided that nothing herein shall prevent the assertion of any such claim by
separate suit or compulsory counterclaim;
(d) any statement or any other document presented under any Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any respect
or any statement therein being untrue or inaccurate in any respect whatsoever;
(e) payment by the LOC Bank under any Letter of Credit against
presentation of a draft or certificate that does not comply with the terms of
such Letter of Credit, so long as such payment is not the consequence of the LOC
Bank's gross negligence or willful misconduct in determining whether documents
presented under a Letter of Credit comply with the terms thereof; or
(f) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing.
SECTION 10. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants as follows:
(a) CORPORATE EXISTENCE AND POWER. The Company is a corporation
presently subsisting under the laws of the Commonwealth of Pennsylvania, is duly
qualified to do business as a foreign corporation in and is in good standing
under the laws of each jurisdiction in which the ownership of its properties or
the conduct of its business make such qualification necessary
<PAGE>
47
and has all corporate powers and all material governmental licenses,
authorizations, consents and approvals required to carry on its business as now
conducted.
(b) CORPORATE AUTHORIZATION. The execution, delivery and performance by
the Company of this Agreement and each Transaction Document, Financing Document
(except, for purposes hereof, the Underwriting Agreement) and Refinancing
Document to which it is a party have been duly authorized by all necessary
corporate action on the part of the Company and do not, and will not, require
the consent or approval of the Company's shareholders or any trustee or holder
of any Indebtedness or other obligation of the Company, other than (i) the
Mortgage Release and (ii) such other consents and approvals as have been or, on
or before the relevant Refunding Date or Releveraging Date, as the case may be,
in the case of any Refunding Loan or Releveraging Loan, will have been, duly
obtained, given or accomplished.
(c) NO VIOLATION, ETC. Neither the execution, delivery or performance by
the Company of this Agreement or any Transaction Document, Financing Document or
Refinancing Document to which it is a party, nor the consummation by the Company
of the transactions contemplated hereby or thereby, nor compliance by the
Company with the provisions hereof or thereof, conflicts or will conflict with,
or results or will result in a breach or contravention of any of the provisions
of, the charter documents or bylaws of the Company, any Applicable Law or any
indenture, mortgage, lease or, except with respect to those contracts (none of
which contracts are material to the conduct of the Company's business or its
ability to perform its obligations hereunder) listed on Schedule 1 to the Bill
of Sale, other agreement or instrument to which the Company or any Affiliate of
the Company is a party or by which the property of the Company or any Affiliate
of the Company is bound, or results or will result in the creation or imposition
of any Lien (other than Permitted Liens) upon any property of the Company or any
Affiliate of the Company. There is no provision of the charter documents or
bylaws of the Company, any Applicable Law (other than as disclosed in the
reports referred to in subsection (f), below) or any such indenture, mortgage,
lease or other agreement or instrument that materially adversely affects, or in
the future is likely (so far as the Company can now foresee) to materially
adversely affect, the business, operations, affairs, condition, properties or
assets of the Company, or its ability to perform its obligations under this
Agreement or any Transaction Document, Financing Document or Refinancing
Document to which it is a party.
(d) GOVERNMENTAL ACTIONS. No Governmental Action is or will be required
in connection with the execution, delivery or performance by the
<PAGE>
48
Company of, or the consummation by the Company of the transactions contemplated
by, this Agreement or any Transaction Document, Financing Document or
Refinancing Document, except such Governmental Actions (i) as have been, on or
before the date hereof in the case of this Agreement and the Transaction
Documents, Financing Documents and Refinancing Documents, or will have been, on
or before any Refunding Date or Releveraging Date, as the case may be, in the
case of any Refunding Loan or Releveraging Loan, duly obtained, given or
accomplished, with true copies thereof delivered to the LOC Bank and the
Administrating Banks, (ii) as may be required under existing Applicable Law to
be obtained, given or accomplished from time to time after the date hereof in
connection with the maintenance, use, possession or operation of Unit 2, the
property purported to be covered by the Ground Lease or otherwise with respect
to Unit 2 or such property and the Company's or the Operating Agent's
involvement therewith and that are, for Unit 2, routine in nature and that the
Company has no reason to believe will not be timely obtained, and (iii) as may
be required under Applicable Law not now in effect. No Governmental Action
(except Governmental Action applicable to the LOC Bank, any Administrating Bank,
any other Bank, any Owner Participant, any Original Loan Participant, the
Indenture Trustee, the Owner Trustee or Funding Corp. as a result of activities
of such Person or any of its Affiliates not contemplated by this Agreement, the
Transaction Documents, the Financing Documents or the Refinancing Documents and
Governmental Action applicable to such parties other than under Pennsylvania or
Federal law) is or will be required (a) in connection with the participation by
the LOC Bank or any Administrating Bank or other Bank in the consummation of the
transactions contemplated by this Agreement, or in connection with the
participation by the Owner Trustee, the Indenture Trustee, any Owner Participant
or any Original Loan Participant in the consummation of the transactions
contemplated by the Transaction Documents, the Financing Documents and the
Refinancing Documents or (b) to be obtained by any of such Persons during the
term of the Facility Lease with respect to Unit 2 or the property purported to
be covered by the Ground Lease, except such Governmental Actions (i) as have
been, on or before the date hereof in the case of this Agreement, the
Transaction Documents, the Financing Documents and the Refinancing Documents, or
will have been, on or before the relevant Refunding Date or Releveraging Date,
as the case may be, in the case of any Refunding Loan or Releveraging Loan, duly
obtained, given or accomplished, (ii) as may be required by Applicable Law not
now in effect, (iii) as may be required in consequence of any transfer of
ownership of the Undivided Interest by the Owner Trustee, (iv) as would be
required by Applicable Law upon termination or expiration of any Facility Lease
in connection with taking possession of an interest in Unit 2 or such property,
(v) as may be required by Applicable Law if, after termination or expiration
<PAGE>
49
of the Facility Lease, the Company or any other Person shall provide
Transmission Services for the Owner Trustee or if the Company shall cease to be
agent for the Owner Trustee as provided under the Assignment and Assumption
Agreement or (vi) as may be required in consequence of any exercise of remedies
or other rights by any such Person in connection with taking possession of an
interest in Unit 2 or the property purported to be covered by the Ground Lease.
The execution, delivery and performance by the Company of, the consummation by
the Company of the transactions contemplated by, and the compliance by the
Company with the terms and provisions of, this Agreement, the Participation
Agreements and the other Transaction Documents, Financing Documents and
Refinancing Documents to which the Company is a party have been duly authorized
by the orders, dated September 25, 1987 and July 9, 1992, in each case issued by
the PPUC (collectively, the "PPUC ORDERS"); the PPUC Orders are in full force
and effect; all terms and conditions contained in the PPUC Orders required to be
satisfied on or prior to the date hereof have been duly satisfied and performed;
there has been no stay or suspension of any of the PPUC Orders by any court
having jurisdiction with respect thereto; no suit, action or proceeding is
pending or, to the knowledge of the Company, threatened in which an appeal from
any of the PPUC Orders or any review of either thereof is being sought; and no
such suit, action or proceeding that may be commenced after the execution and
delivery of the Transaction Documents, the Financing Documents, the Refinancing
Documents and this Agreement, and no breach of or other failure by the Company
to perform any of the provisions of the PPUC Orders, could affect the validity
or legality of the execution, delivery or performance by the Company of this
Agreement or the Transaction Documents, Financing Documents and Refinancing
Documents to which it is a party or the enforceability thereof.
(e) EXECUTION AND DELIVERY. This Agreement and the Transaction
Documents, Financing Documents and Refinancing Documents to which the Company is
a party have been duly executed and delivered by the Company, and this Agreement
and each such Transaction Document, Financing Document and Refinancing Document
are the legal, valid and binding obligations of the Company enforceable in
accordance with their respective terms, subject, however, to the application by
a court of general principles of equity and to the effect of any applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors' rights generally.
(f) LITIGATION. Except as disclosed in the Company's December 31, 1993
Annual Report on Form 10-K, its June 30, 1994 Quarterly Report on Form 10-Q and
its Current Reports on Form 8-K dated August 16, 1994 and September 6, 1994,
there is no pending or threatened action or proceeding affecting the Company or
any of its Subsidiaries before any court,
<PAGE>
50
governmental agency or arbitrator that has a reasonable possibility of having a
material adverse effect on the financial condition, business, properties,
operations or prospects of the Company, or the Company and its Subsidiaries
taken as a whole, or on the ability of the Company to perform its obligations
under this Agreement or any Transaction Document, Financing Document or
Refinancing Document to which the Company is or is to become a party.
(g) MATERIAL ADVERSE CHANGE. The consolidated balance sheets of the
Company and its Subsidiaries as at December 31, 1993 and the related
consolidated statements of income, common stockholders' equity, and cash flows
of the Company and its Subsidiaries for each of the fiscal years in the three-
year period then ended, together with the notes accompanying such financial
statements, all as certified by Deloitte & Touche, independent public
accountants, and the unaudited consolidated balance sheet of the Company and its
Subsidiaries as at June 30, 1994 and the related unaudited consolidated
statements of income and cash flows of the Company and its Subsidiaries for the
six-month period then ended, copies of which have been furnished to the LOC Bank
and to each Bank, present fairly the consolidated financial position of the
Company and its Subsidiaries as at such dates and the consolidated results of
the operations of the Company and its Subsidiaries for the periods ended on such
dates, in accordance with generally accepted accounting principles consistently
applied, and since June 30, 1994 there has been no material adverse change in
the Company's consolidated financial condition, business, properties, operations
or prospects, except as disclosed in the Company's June 30, 1994 Quarterly
Report on Form 10-Q and its Current Reports on Form 8-K dated August 16, 1994
and September 6, 1994 (it being understood that (i) a material adverse change
shall not be deemed to have occurred solely as a result of a drawing or drawings
under the Letters of Credit and (ii) the event or events giving rise to such
drawing or drawings and the financial and other consequences thereof may or may
not constitute a material adverse change).
(h) ERISA.
(i) No Termination Event has occurred or is reasonably expected to
occur with respect to any Plan.
(ii) Schedule B (Actuarial Information) to the most recent annual
report (Form 5500 Series) with respect to each Plan, copies of which have
been filed with the Internal Revenue Service and furnished to the LOC Bank
and the Administrating Banks, is complete and accurate and fairly presents
the funding status of such Plan, and since the date of such Schedule B
there has been no material adverse change in such funding status.
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51
(iii) Neither the Company nor any member of the Controlled Group has
incurred or reasonably expects to incur any withdrawal liability under
ERISA to any Multiemployer Plan.
(i) TAX RETURNS. The Company has filed all Federal, state, local and
foreign, if any, tax returns required to be filed thereby, has paid all Taxes
shown to be due and payable on such returns and has paid all other Taxes in
respect of the Company's interests in Unit 2, the property purported to be
covered by the Ground Lease and the Beaver Valley Station Site that are payable
by the Company to the extent the same have become due and payable and before
they have become delinquent, except for (i) any Taxes the amount, applicability
or validity of which may be in dispute and that are currently being contested in
good faith by appropriate proceedings and with respect to which the Company has
set aside on its books reserves (segregated to the extent required by generally
accepted accounting principles) deemed by it to be adequate and (ii) any Taxes
relating to the Beaver Valley Station in respect of which the Operating Agent
has not given notice to the Lessee that the same are due and payable. The
Federal income tax returns of the Company have been audited by the IRS for
taxable years through 1989.
(j) FACILITY LEASES. The intent of the Company with respect to the
Undivided Interest (as defined in each Facility Lease) under each Facility Lease
is that (i) to the extent permitted by Applicable Law, the Undivided Interest
and every portion thereof is severed, and shall be and remain severed, from the
land constituting the Beaver Valley Station Site (as defined in each Facility
Lease) and (ii) the Undivided Interest shall constitute personal property to the
maximum extent permitted by Applicable Law.
SECTION 11. AFFIRMATIVE COVENANTS. The Company agrees that during the
term of this Agreement it will:
(a) PRESERVATION OF CORPORATE EXISTENCE, ETC. Preserve and maintain its
corporate existence in the Commonwealth of Pennsylvania (or maintain its
existence in such other form or under such other laws as shall be permitted by
the covenant incorporated herein (as so incorporated) by the second proviso to
this subsection (a)) and its status as a public utility regulated by the PPUC
and/or the Federal Energy Regulatory Commission, and qualify and remain
qualified to do business in the Commonwealth of Pennsylvania and as a foreign
corporation in each other jurisdiction where the failure to so qualify would
materially and adversely affect the business or financial condition of the
Company or its ability to perform its obligations under this Agreement or any
Transaction Document, Financing Document or Refinancing Document to which it is
a party; and (ii) preserve, renew and keep in full force and effect its material
franchises; provided that the Company's failure to maintain
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52
any such franchise shall be permitted (A) if such failure is a consequence of or
in connection with any conveyance or transfer permitted by the penultimate
paragraph of the covenant incorporated herein (as so incorporated) by the second
proviso to this subsection (a), or (B) if and to the extent that the Company's
Chief Financial Officer shall certify in writing to the LOC Bank and the
Administrating Banks, at least 45 days before discontinuance of any such
franchise, that such discontinuance would not have a material adverse effect
upon the Company's ability to meet its obligations under this Agreement or any
of the Transaction Documents, Financing Documents or Refinancing Documents to
which it is a party; and provided further that (y) the covenant contained in
Section 10(b)(3)(ii) of each Participation Agreement, in its form as of
September 15, 1987 (and without regard to any subsequent amendment of such
Section, unless approved in writing by the Required Banks), is hereby
incorporated by reference herein as if set forth herein in full, except that
each reference in such covenant to approval by, delivery to, consent by or the
satisfaction of the Owner Participant, or of the Owner Participant and one or
more other Persons, shall be deemed to refer instead to approval by, delivery
to, consent by or the satisfaction of, as the case may be, the Required Banks
and (z) the words "Reimbursement Agreement, the" shall be deemed to have been
inserted between the words "this" and "Participation" in clause (b) of such
Section.
(b) COMPLIANCE WITH LAWS, ETC. Comply, and cause each of its
Subsidiaries to comply, in all material respects with all applicable laws,
rules, regulations and orders of any Governmental Authority, the noncompliance
with which would materially and adversely affect the business or condition of
the Company and its Subsidiaries, taken as a whole, or the Company's ability to
perform its obligations under this Agreement or any of the Transaction
Documents, Financing Documents or Refinancing Documents to which it is a party,
such compliance to include, without limitation, paying before the same become
delinquent all material taxes, assessments and governmental charges imposed upon
it or upon its property, except to the extent compliance with any of the
foregoing is then being contested in good faith.
(c) MAINTENANCE OF INSURANCE, ETC. Maintain insurance with responsible
and reputable insurance companies or associations or through its own program of
self-insurance in such amounts and covering such risks as is usually carried by
companies engaged in similar businesses and owning similar properties in the
same general areas in which the Company operates and furnish to the LOC Bank and
the Administrating Banks, within a reasonable time after written request
therefor, such information as to the insurance carried as the LOC Bank or either
Administrating Bank may reasonably request.
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53
(d) VISITATION RIGHTS. At any reasonable time and from time to time as
the LOC Bank or any Administrating Bank or other Bank may reasonably request,
permit the LOC Bank or such Administrating Bank or other Bank or any employees,
authorized agents or representatives thereof to examine and make copies of and
abstracts from the records and books of account of, and visit the properties of,
the Company and any of its Subsidiaries, and to discuss the affairs, finances
and accounts of the Company and any of its Subsidiaries with any of their
respective officers or directors; provided, however, that the Company reserves
the right to restrict access to any of its generating facilities and to prohibit
the copying of such records in accordance with the requirements of Applicable
Law and reasonably adopted procedures relating to safety and security. The LOC
Bank, each Administrating Bank and each other Bank agree to use reasonable
efforts to ensure that any information concerning the Company or any of its
Subsidiaries obtained by the LOC Bank or such Administrating Bank or other Bank
pursuant to this Section that is not contained in a report or other document
filed with the Securities and Exchange Commission, distributed by the Company to
its security holders or otherwise generally available to the public, will, to
the extent permitted by law and except as may be required by valid subpoena or
in the normal course of the LOC Bank's or such Administrating Bank's or other
Bank's business operations (which shall include such Bank's sharing of its
liability under the Letters of Credit with other banks), be treated
confidentially by the LOC Bank or such Administrating Bank or other Bank and
will not be distributed or otherwise made available by the LOC Bank or such
Administrating Bank or other Bank to any person, other than the LOC Bank's or
such Administrating Bank's or other Bank's employees, authorized agents or
representatives.
(e) KEEPING OF BOOKS. Keep, and cause each Subsidiary to keep, proper
books of record and account in which entries shall be made of all financial
transactions and the assets and business of the Company and each Subsidiary in
accordance with generally accepted accounting principles.
(f) MAINTENANCE OF PROPERTIES. Maintain and preserve, and cause each
Subsidiary to maintain and preserve, all of its properties that are used or that
are useful in the conduct of its business in good working order and condition,
ordinary wear and tear excepted, it being understood that this covenant relates
only to the good working order and condition of such properties (other than
properties in cold reserve and the Warwick Coal Mine) and shall not be construed
as a covenant of the Company or any Subsidiary not to dispose of such properties
by sale, lease, transfer or otherwise.
(g) REPORTING REQUIREMENTS. Furnish to the Administrating Banks, with
sufficient copies for the LOC Bank and each other Bank, the following:
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54
(i) promptly after the occurrence of each Reimbursement Default,
Event of Default and Indenture Event of Default, the statement of an
authorized officer of the Company setting forth details of such
Reimbursement Default, Event of Default or Indenture Event of Default, as
the case may be, and the action that the Company has taken or proposes to
take with respect thereto;
(ii) as soon as available and in any event within 60 days after the
close of each of the first three quarters in each fiscal year of the
Company, a consolidated balance sheet of the Company and its Subsidiaries
as of the end of such quarter and the related consolidated statements of
income and cash flows of the Company and its Subsidiaries for the period
commencing at the end of the previous fiscal year and ending with the end
of such quarter, fairly presenting the financial condition of the Company
and its Subsidiaries as at such date and the results of operations of the
Company and its Subsidiaries for such period and setting forth in each
case in comparative form the corresponding figures for the corresponding
period of the preceding fiscal year, all in reasonable detail and duly
certified (subject to year-end audit adjustments) by the Chief Financial
Officer, the Controller, the Treasurer or an Assistant Treasurer of the
Company as having been prepared in accordance with generally accepted
accounting principles consistently applied;
(iii) as soon as available and in any event within 120 days after
the end of each fiscal year of the Company, a copy of the annual report
for such year for the Company and its Subsidiaries, containing financial
statements for such year certified by Deloitte & Touche or other
independent public accountants acceptable to the LOC Bank and the
Participating Banks;
(iv) concurrently with the delivery of the financial statements
specified in clauses (ii) and (iii) above, a certificate of the Chief
Financial Officer, the Controller, the Treasurer or an Assistant Treasurer
of the Company (A) stating whether he has any knowledge of the occurrence
at any time prior to the date of such certificate of any Reimbursement
Default, Event of Default or Indenture Event of Default not theretofore
reported pursuant to the provisions of clause (i) of this subsection (g)
or of the occurrence at any time prior to such date of any such event,
except events theretofore reported pursuant to the provisions of clause
(i) of this subsection (g) and remedied, and, if so, stating the facts
with respect thereto, and (B) setting forth in a true and correct manner
the calculation of the ratios and amounts contemplated by subsections (h),
(i) and (j)
<PAGE>
55
below, as of the date of the most recent financial statements accompanying
such certificate, to show the Company's compliance with or the status of
the financial covenants contained in such Sections;
(v) promptly after the sending or filing thereof, copies of all
reports that the Company sends to any of its security holders, and copies
of all reports on Form 10-K, Form 10-Q or Form 8-K that the Company or any
Subsidiary files with the Securities and Exchange Commission;
(vi) as soon as possible and in any event (A) within 30 days after
the Company or any member of the Controlled Group knows or has reason to
know that any Termination Event described in clause (i) of the definition
of Termination Event with respect to any Plan has occurred and (B) within
10 days after the Company or any member of the Controlled Group knows or
has reason to know that any other Termination Event with respect to any
Plan has occurred, a statement of the Chief Financial Officer of the
Company describing such Termination Event and the action, if any, that the
Company or such member of the Controlled Group proposes to take with
respect thereto;
(vii) promptly and in any event within two Business Days after
receipt thereof by the Company or any member of the Controlled Group from
the PBGC, copies of each notice received by the Company or any such member
of the Controlled Group of the PBGC's intention to terminate any Plan or
to have a trustee appointed to administer any Plan;
(viii) promptly and in any event within 30 days after the filing
thereof with the Internal Revenue Service, copies of each Schedule B
(Actuarial Information) to the annual report (Form 5500 Series) with
respect to each Plan;
(ix) promptly and in any event within five Business Days after
receipt thereof by the Company or any member of the Controlled Group from
a Multiemployer Plan sponsor, a copy of each notice received by the
Company or any member of the Controlled Group concerning the imposition or
amount of withdrawal liability pursuant to Section 4202 of ERISA;
(x) such other information respecting the condition or operations,
financial or otherwise, of the Company or any of its
<PAGE>
56
Subsidiaries, including, without limitation, copies of all reports and
registration statements that the Company or any Subsidiary files with the
Securities and Exchange Commission or any national securities exchange, as
the LOC Bank, either Administrating Bank or any other Bank may from time
to time reasonably request; and
(xi) promptly and in any event within five Business Days after
either Moody's or S&P has changed its rating of any of the First Mortgage
Bonds, notice of such rating change.
(h) MAINTENANCE OF EQUITY. Maintain at all times Consolidated Common
Equity of not less than 31%, or if the Company should effect a corporate
reorganization at its own initiative, 26%, of Consolidated Capitalization.
(i) CASH COVERAGE RATIO. Maintain with respect to each twelve-month
period ending on the last day of each fiscal quarter (determined as of the last
day of such fiscal quarter) a Cash Coverage Ratio of at least 1.5 to 1. "CASH
COVERAGE RATIO", with respect to any such period shall mean the ratio of (i) the
sum of (A) consolidated net income of the Company for such period plus (or
minus) (B) all extraordinary items deducted (or added) in determining said net
income plus (C) all income taxes deducted in determining said net income plus
(D) total interest charges of the Company and its Subsidiaries deducted in
determining said net income, excluding allowance for borrowed funds used during
construction (such interest charges with such exclusion being referred to as
"ACTUAL INTEREST EXPENSE") plus (E) depreciation minus (F) allowance for equity
and borrowed funds used during construction and other noncash items described in
Financial Accounting Standards Board Statement No. 90 to (ii) Actual Interest
Expense for such period.
(j) CONSOLIDATED NET WORTH. Maintain at all times Consolidated Net
Worth of not less than $825,000,000.
(k) LINE OF CREDIT. Perform and observe all material terms and provisions
to be performed and observed by the Company under the Credit Facility (as
defined below) and use its best efforts to maintain in full force and effect at
all times such Credit Facility; the Company shall not amend, modify or
supplement (or consent to any amendment, modification or supplementation of)
such Credit Facility in a manner that would reduce the rights or entitlements of
the Company thereunder in any material way. For purposes of this subsection (k),
"CREDIT FACILITY" shall mean the Revolving Credit Agreement, dated October 7,
1994, among the Company, the banks named therein and Mellon Bank, N.A. and The
First National Bank of
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57
Chicago, as Co-Agents, or any other credit facility containing usual and
customary terms and conditions for facilities similar in nature to such
Revolving Credit Agreement and with an aggregate principal amount of not less
than $125,000,000.
(l) BOND RATINGS. Use its best efforts to ensure that the First Mortgage
Bonds are rated at all times by Moody's and S&P.
SECTION 12. NEGATIVE COVENANTS. The Company agrees that, during the term
of this Agreement, it will not:
(a) COMPLIANCE WITH ERISA. (i) Take any action, or permit to exist any
event or condition, that would result in a Termination Event causing any
material liability to the PBGC or to any trustee under Section 4042 or Section
4049 of ERISA, (ii) engage in, or, with respect to any single-employer Plan,
permit any person to engage in, any "prohibited transaction" (as defined in
Section 406 of ERISA or Section 4975 of the Code) involving any Plan that would
subject the Company or any Subsidiary to any material tax, penalty or other
liability, (iii) incur or suffer to exist any material "accumulated funding
deficiency" (as defined in Section 412 of the Code), whether or not waived,
involving any single-employer Plan or (iv) with respect to any single-employer
Plan, permit to exist any event or condition that presents a material risk of
incurring a material liability to the PBGC or to any trustee under Section 4042
or Section 4049 of ERISA; or
(b) ASSIGNMENT OR AMENDMENT OF TRANSACTION DOCUMENTS, FINANCING DOCUMENTS
OR REFINANCING DOCUMENTS. (i) Enter into any assignment of the Company's
obligations under this Agreement or any of the Transaction Documents (except in
connection with any transaction permitted by the covenant incorporated by
reference in Section 11(a) hereof (as so incorporated) or as contemplated herein
or therein), Financing Documents or Refinancing Documents, without obtaining the
express prior written consent of the Required Banks or (ii) enter into any
amendment or modification of any of the Transaction Documents, Financing
Documents or Refinancing Documents which would affect the rights of the Banks
hereunder unless it shall have given the Banks prior notice thereof and, if such
amendment or modification, in the reasonable opinion of the Required Banks,
would materially and adversely affect the Banks' rights and interest hereunder
or the ability of the Company to perform its obligations hereunder, unless the
Required Banks shall have given their prior written consent.
SECTION 13. REIMBURSEMENT EVENTS OF DEFAULT. The following events shall be
"REIMBURSEMENT EVENTS OF DEFAULT" hereunder unless waived by the Required Banks
pursuant to Section 14 hereof:
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58
(a) the Company shall fail to pay when due any amount payable under
Section 2 hereof or fail to pay within 5 Business Days after becoming due any
amount payable under Section 3 hereof; or
(b) the Company shall fail to make, or cause to be made, one or more
payments specified in Section 15(i) of any of the Facility Leases equal to or
exceeding $1,000,000 in the aggregate within the period specified in that
Section for such payment or payments; or
(c) the Company shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by subsection
(a), above) for 30 days after written notice thereof has been given to the
Company by the LOC Bank or any Administrating Bank or other Bank; or
(d) any representation, warranty, certification or statement made by the
Company in this Agreement or in any certificate, financial statement or other
document delivered pursuant to this Agreement shall prove to have been incorrect
or misleading in any material respect when made; or
(e) any material provision of this Agreement shall at any time for any
reason cease to be valid and binding upon the Company, or shall be declared to
be null and void, or the validity or enforceability thereof shall be contested
by the Company or any governmental agency or authority, or the Company shall
deny that it has any or further liability or obligation under this Agreement; or
(f) the Company or any Subsidiary shall fail to make any payment on any
Indebtedness, or to make any payment of any interest or premium thereon, when
due (whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise) and such failure shall continue after the applicable grace period, if
any, specified in any agreement or instrument relating to such Indebtedness, or
any other default under any agreement or instrument relating to any
Indebtedness, or any other event, shall occur and shall continue after the
applicable grace period, if any, specified in such agreement or instrument, if
the effect of such failure, default or event is to accelerate, or to permit the
acceleration of (other than by a special mandatory redemption provision in
connection with pollution control or similar tax-exempt bonds unrelated to any
default or event of default with respect thereto), the maturity of any
Indebtedness the aggregate principal amount of which is greater than
$25,000,000, or any Indebtedness the aggregate principal amount of which is
greater than $25,000,000 shall be declared due and payable, or required to be
prepaid (other than by a special mandatory redemption provision in connection
with pollution control or similar
<PAGE>
59
tax-exempt bonds unrelated to any default or event of default with respect
thereto or a regularly scheduled required prepayment) prior to the stated
maturity thereof; or
(g) the Company or any Subsidiary shall (i) apply for or consent to the
appointment of a receiver, trustee, liquidator or custodian or the like of
itself or of all or any substantial part of its property, (ii) admit in writing
its inability to pay its debts generally as they become due, (iii) make a
general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt
or insolvent or (v) commence a voluntary case under the Federal bankruptcy laws
of the United States of America or file a voluntary petition or answer seeking
reorganization, an arrangement with creditors or any order for relief or seeking
to take advantage of any insolvency law or file an answer admitting the material
allegations of a petition filed against it in any bankruptcy, reorganization or
insolvency proceeding; or corporate action shall be taken by it for the purpose
of effecting any of the foregoing, or if, without the application, approval or
consent of the Company, a proceeding shall be instituted in any court of
competent jurisdiction seeking in respect of the Company an adjudication in
bankruptcy, reorganization, dissolution, winding up or liquidation, a
composition or arrangement with creditors, a readjustment of debts, the
appointment of a trustee, receiver, liquidator or custodian or the like of the
Company or of all or any substantial part of its assets, or other like relief in
respect thereof under any bankruptcy or insolvency law and if such proceeding is
being contested by the Company in good faith, the same shall continue
undismissed, or pending and unstayed, for any period of 60 consecutive days; or
(h) any judgment or order for the payment of money exceeding any
applicable insurance coverage by more than $25,000,000 shall be rendered against
the Company or any Subsidiary and either (i) enforcement proceedings shall have
been commenced by any creditor upon such judgment or order or (ii) there shall
be any period of 10 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect; or
(i) any Termination Event with respect to a Plan shall have occurred,
and, 30 days after notice thereof shall have been given to the Company by the
LOC Bank or any Administrating Bank or other Bank, (i) such Termination Event
(if correctable) shall not have been corrected and (ii) the then Unfunded Vested
Liabilities of such Plan exceed $5,000,000 (or, in the case of a Termination
Event involving the withdrawal of a "substantial employer", (as defined in
Section 4001(a)(2) of ERISA), the withdrawing employer's proportionate share of
such excess shall exceed such amount), or the Company or any member of the
Controlled Group as employer under a
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60
Multiemployer Plan shall have made a complete or partial withdrawal from such
Multiemployer Plan and the Plan sponsor of such Multiemployer Plan shall have
notified such withdrawing employer that such employer has incurred a withdrawal
liability in an annual amount exceeding $5,000,000; or
(j) any change in Applicable Law or any Governmental Action (including,
but not limited to, the revocation or modification of any Governmental Action
previously secured) shall occur that has the effect of making the transactions
contemplated by this Agreement or the Transaction Documents unauthorized,
illegal or otherwise contrary to Applicable Law; or
(k) any event specified in Section 15(vi), (vii) or (ix) of any of the
Facility Leases shall occur.
If a Reimbursement Event of Default occurs and is continuing, the Required Banks
may, in their sole discretion, by notice to the Company and the Owner
Participants, (A) cause the LOC Bank to terminate all of the Letters of Credit
as provided therein and (B) declare the Advances and all other principal amounts
outstanding hereunder, all interest thereon and all other amounts payable
hereunder to be due and payable within two Business Days after demand therefor
by the Required Banks to the Company, whereupon the Advances and all other
principal amounts outstanding hereunder, all such interest and all such other
amounts shall become and be forthwith due and payable at such time, without
presentment, demand, protest or further notice of any kind, all of which are
hereby expressly waived by the Company; provided, however, that in the event of
the occurrence of any Reimbursement Event of Default described in subsection
(g), above, with respect to the Company, (1) the obligations of the
Participating Banks to make Advances shall automatically be terminated, and (2)
the Advances and all other principal amounts outstanding hereunder, all interest
accrued and unpaid thereon and all other amounts payable hereunder shall
automatically become due and payable, without presentment, demand, protest or
any notice of any kind, all of which are hereby expressly waived by the Company.
SECTION 14. AMENDMENTS AND WAIVERS. Subject to Section 23 hereof, neither
this Agreement nor any provision hereof may be waived, amended or modified
except pursuant to an agreement or agreements in writing entered into by the
Company and the Required Banks; provided, however, that no such agreement shall
(a) change the Maximum Credit Amount with respect to any Letter of Credit (other
than any reduction in such Maximum Credit Amount in accordance with the
provisions of such Letter of Credit), extend or advance the Termination Dates of
the Letters of Credit or the dates for the reimbursement of drawings under the
Letters of Credit or for the repayment of Advances, or for the payment of
interest on such drawings or Advances,
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61
or reduce the rate of interest on any unreimbursed drawings or Advances, (b)
change the Participation Percentage of any Bank or the fees provided for in
Section 3(a) hereof, (c) waive, modify or eliminate any of the conditions
specified in Section 7(b) or 7(c), (d) reduce the principal of, or interest on,
the Advances, any amount reimbursable on demand pursuant to Section 2(a), or any
fees or other amounts payable hereunder, or (e) amend or modify the provisions
of this Section 14, Section 4 hereof, Section 5(b) hereof, Section 6(d) hereof,
Section 17 hereof, Section 19 hereof, Section 21 hereof, Section 22 hereof or
Section 23 hereof or the definition of "Required Banks," in each case without
the prior written consent of the LOC Bank and each Participating Bank; and
provided further that no such agreement shall amend, modify or otherwise affect
the rights or duties of the LOC Bank hereunder, or change the fees provided for
in Section 3(c) hereof, without the prior written consent of the LOC Bank, or
amend, modify or otherwise affect the rights or duties of the Administrating
Banks hereunder without the prior written consent of the Administrating Banks.
The Administrating Banks and each Bank shall be bound by any modification or
amendment authorized by this Section 14, and any consent by any Participating
Bank pursuant to this Section 14 shall bind any successor Participating Bank or
any Participant acquiring a participation from it whether or not such successor
Participating Bank or such Participant has received actual notice thereof.
SECTION 15. NOTICES. All notices, requests and other communications to
any party hereunder shall be in writing (including telex, telecopy or other
facsimile transmission and with confirmation of receipt in the case of telecopy
or other facsimile transmission) and shall be given to such party, addressed to
it, at its address or telex or telecopy number set forth below the name of such
party on the signature pages hereof or in the Assignment Agreement pursuant to
which any financial institution became a party hereto in accordance with Section
5(j) or 23(b) hereof or such other address or telex or telecopy number as such
party may hereafter specify for that purpose by notice to the other parties.
Each such notice, request or communication shall be effective (i) if given by
telex, when such telex is transmitted to the telex number specified below and
the appropriate answerback is received, (ii) if given by mail, upon receipt but
not later than 5 days after such communication is deposited in the mails with
first-class postage prepaid, addressed as aforesaid, or (iii) if given by any
other means, when delivered at the address for notices described above.
SECTION 16. NO WAIVER; REMEDIES. No failure on the part of the LOC Bank
or any Administrating Bank or other Bank to exercise, and no delay in
exercising, any power or right hereunder for any period of time shall operate as
a waiver thereof, nor shall any single or partial exercise of any such right or
power preclude any other or further exercise thereof or the
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62
exercise of any other right. The rights and remedies herein provided to the LOC
Bank, the Administrating Banks and the other Banks are cumulative and not
exclusive of any other rights or remedies that the LOC Bank or any
Administrating Bank or other Bank may otherwise have. No waiver of any provision
of this Agreement or consent to any departure by the Company herefrom shall in
any event be effective unless the same shall be authorized as provided in
Section 14 above, and then such waiver or consent shall be effective only in the
specific instance and for the purpose for which given. No notice to or demand on
the Company in any case shall entitle the Company to any other or further notice
or demand in similar or other circumstances.
SECTION 17. RIGHT OF SETOFF.
(a) If a Reimbursement Event of Default shall have occurred and be
continuing, the LOC Bank and each other Bank is hereby authorized at any time
and from time to time, to the fullest extent permitted by law, to set off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held and other indebtedness at any time owing by the LOC Bank
or such other Bank to or for the credit or the account of the Company against
any and all obligations of the Company now or hereafter existing under this
Agreement, irrespective of whether or not the LOC Bank or such other Bank shall
have made any demand under this Agreement and although such obligations may be
unmatured. The LOC Bank and each other Bank agree to notify the Company
promptly after any such setoff and application made thereby, but the failure to
give such notice shall not affect the validity of such setoff and application.
The rights of the LOC Bank and each other Bank under this Section are in
addition to other rights and remedies (including, without limitation, other
rights of setoff) that the LOC Bank or such other Bank may have.
(b) Each Participating Bank agrees that if it shall, through the exercise
of a right of banker's lien, setoff or counterclaim against the Company,
including, but not limited to, a secured claim under Section 506 of Title 11 of
the United States Code or other security or interest arising from, or in lieu
of, such secured claim, received by such Participating Bank under any applicable
bankruptcy, insolvency or other similar law or otherwise, obtain payment
(voluntary or involuntary) in respect of amounts paid by it pursuant to Section
5(a) as a result of which the unreimbursed portion of Section 5(a) payments made
by it shall be proportionately less (determined in accordance with each
Participating Bank's Participation Percentage) than the unreimbursed portion of
Section 5(a) payments made by any other Participating Bank, it shall be deemed
to have simultaneously purchased from such other Participating Bank a
participation in the unreimbursed portion of Section 5(a) payments made by such
other Participating Bank, so that the
<PAGE>
63
aggregate unreimbursed portion of Section 5(a) payments made by it and
participations in the unreimbursed portion of Section 5(a) payments made by each
other Participating Bank and held by it shall be in the same proportion
(determined in accordance with each Participating Bank's Participation
Percentage) to the aggregate unreimbursed portion of Section 5(a) payments made
by all Participating Banks as the principal amount of the unreimbursed portion
of Section 5(a) payments made by it prior to such exercise of banker's lien,
setoff or counterclaim was to the unreimbursed portion of all Section 5(a)
payments made by all Participating Banks prior to such exercise of banker's
lien, setoff or counterclaim; provided, however, that, if any such purchase
shall be made pursuant to this Section 17(b) and the payment giving rise thereto
shall thereafter be recovered, such purchase shall be rescinded to the extent of
such recovery and the purchase price restored. The Company expressly consents to
the foregoing arrangements and agrees that any Participating Bank holding a
participation in an unreimbursed portion of a Section 5(a) payment deemed to
have been so purchased may exercise any and all rights of banker's lien, setoff
or counterclaim with respect to any and all moneys owing by the Company to such
Participating Bank as fully as if such Participating Bank held an unreimbursed
portion of a Section 5(a) payment in the amount of such participation.
SECTION 18. CONTINUING OBLIGATION. The obligations of the Company under
this Agreement shall continue until the later of (i) the Termination Date of the
last outstanding Letter of Credit and (ii) the date upon which all amounts due
and owing to the LOC Bank, the Administrating Banks and the other Banks
hereunder (including, without limitation, all Advances, interest thereon, fees
and expenses) shall have been paid in full and shall (A) be binding upon the
Company and its successors and assigns and (B) inure to the benefit of and be
enforceable by the LOC Bank, each Administrating Bank and each other Bank, and
their successors, transferees and assigns; provided, however, that the Company
may not assign all or any part of this Agreement without the prior written
consent of the LOC Bank and the other Banks.
SECTION 19. EXTENSION OF LETTERS OF CREDIT. At least 6 months but not
more than 12 months before October 2, 1999, the Company may request the LOC Bank
and the Participating Banks, by giving written notice of such request to the
Administrating Banks, to extend the Stated Expiration Date of any Letter of
Credit, specifying the terms and conditions, including fees, to be applicable to
such extension. The Administrating Banks shall promptly notify the LOC Bank and
each Participating Bank of such request, and, no later than 90 days from the
date on which the Administrating Banks shall have received notice from the
Company pursuant to the preceding sentence, the Administrating Banks shall
notify the Company of the consent or nonconsent to such extension request. No
extension shall be effective without
<PAGE>
64
the consent of the LOC Bank and all of the Participating Banks. The consent of
the LOC Bank and all of the Participating Banks shall be conditional upon the
preparation, execution and delivery of legal documentation in form and substance
satisfactory to the LOC Bank and all of the Participating Banks and their
counsel incorporating substantially the terms and conditions contained in the
extension request as the same may be modified by agreement among the Company and
the Banks.
SECTION 20. LIMITED LIABILITY OF THE BANKS. As between the Company, on
the one hand, and the LOC Bank, the other Banks and the Administrating Banks, on
the other hand, the Company assumes all risks of the acts or omissions of the
Owner Participants, the General Partners, the Designated General Partners and
the Limited Partners with respect to their use of the Letters of Credit. None
of the LOC Bank, the Administrating Banks, the other Banks or any of their
officers or directors shall be liable or responsible for: (a) the use that may
be made of the Letters of Credit or for any acts or omissions of the Owner
Participants, the General Partners, the Designated General Partners or the
Limited Partners in connection therewith; (b) the validity, sufficiency or
genuineness of documents, or of any endorsements thereon, even if such documents
should in fact prove to be in any or all respects invalid, insufficient,
fraudulent or forged; (c) payment by the LOC Bank against presentation of
documents that do not comply with the terms of the appropriate Letter of Credit,
including failure of any documents to bear any reference or adequate reference
to the appropriate Letter of Credit; or (d) any other circumstances whatsoever
in making or failing to make payment under any Letter of Credit, except only
that the Company and the Participating Banks shall have a claim against the LOC
Bank, and the LOC Bank shall be liable to the Company and the Participating
Banks to the extent, but only to the extent, of any direct, as opposed to
consequential, damages suffered by the Company or the Participating Banks, as
the case may be, that the Company or the Participating Banks, as the case may
be, prove were caused by (i) the LOC Bank's willful misconduct or gross
negligence in determining whether documents presented under a Letter of Credit
comply with the terms thereof or (ii) the LOC Bank's willful failure to pay
under a Letter of Credit after the presentation to it by the appropriate Owner
Participant, Designated General Partner or Limited Partner, as the case may be,
of a draft and certificate strictly complying with the terms and conditions of
such Letter of Credit. In furtherance and not in limitation of the foregoing,
the LOC Bank may accept documents that appear on their face to be in order,
without responsibility for further investigation, regardless of any notice or
information to the contrary. Nothing in this Section 20 is intended to limit the
Company's reimbursement and repayment obligations contained in Section 2 hereof
or any Participating Bank's reimbursement obligation contained in Section 5(a)
hereof. Without prejudice to the survival of any
<PAGE>
65
other obligation of the Company hereunder, the obligations of the Company
contained in this Section 20 shall survive the payment in full of amounts
payable by the Company under Section 2 hereof and by the Participating Banks
under Section 5(a) hereof, termination of the Letters of Credit, reimbursement
to the LOC Bank of any payments or disbursements under the Letters of Credit and
termination of this Agreement.
SECTION 21. COSTS, EXPENSES AND TAXES. The Company agrees to pay not
later than 30 days after demand therefor, (i) whether or not the transactions
contemplated herein are consummated, all reasonable costs and expenses of the
Administrating Banks and the LOC Bank in connection with the preparation,
review, execution, delivery, filing, recording and administration of this
Agreement, the Letters of Credit, the Transaction Documents, the Financing
Documents, the Refinancing Documents and any other documents that may be
delivered in connection herewith or therewith, including, without limitation,
the reasonable fees and out-of-pocket expenses of respective counsel for the
Administrating Banks and the LOC Bank with respect thereto and with respect to
advising and representing the Administrating Banks and the LOC Bank with respect
to their rights and responsibilities under, or any waiver, amendment or
enforcement of (including, without limitation, in the case of any default or
prospective default), this Agreement, the Letters of Credit, the Transaction
Documents, the Financing Documents, the Refinancing Documents or any other
documents that may be delivered in connection herewith or therewith, or any
action or proceeding relating to a court order, injunction or other process or
decree restraining or seeking to restrain the LOC Bank from paying any amount
under any Letter of Credit and (ii) all reasonable fees and out-of-pocket
expenses of respective counsel for each Participating Bank in connection with
the enforcement (whether through negotiations, legal proceedings or otherwise)
of this Agreement in the event of the occurrence of any event set forth in
Section 13(g) hereof. In addition, the Company shall pay any and all stamp and
other taxes and fees payable or determined to be payable in connection with the
execution, delivery, filing and recording of this Agreement, the Letters of
Credit, the Transaction Documents, the Financing Documents, the Refinancing
Documents and such other documents and agrees to hold the Administrating Banks
and the LOC Bank harmless from and against any and all liabilities with respect
to or resulting from any delay in paying or omission to pay such taxes and fees;
provided that the Administrating Banks and the LOC Bank agree to notify the
Company promptly of any such taxes and fees that are incurred thereby. Without
prejudice to the survival of any other obligation of the Company hereunder, the
obligations of the Company contained in this Section 21 shall survive the
payment in full of amounts payable by the Company under Section 2 hereof and by
the Participating Banks under Section 5(a) hereof, termination of the
<PAGE>
66
Letters of Credit, reimbursement to the LOC Bank of any payments or
disbursements under the Letters of Credit and termination of this Agreement.
SECTION 22. INDEMNIFICATION. The Company hereby agrees to indemnify and
hold harmless the LOC Bank, each Administrating Bank and each other Bank from
and against any and all claims, damages, losses, liabilities, costs or expenses
whatsoever that the LOC Bank or such Administrating Bank or other Bank may incur
(or that may be claimed against the LOC Bank or such Administrating Bank or
other Bank by any Person whatsoever) (a) by reason of any inaccuracy in any
material respect, or untrue statement or alleged untrue statement of any
material fact contained or incorporated by reference in any offering document
distributed by or on behalf of the Company in connection with obtaining
purchasers of the Company's undivided interest in Unit 2, or in any supplement
or amendment to either thereof, or the omission or alleged omission to state
therein a material fact necessary to make such statements, in the light of the
circumstances under which they are or were made, not misleading; (b) by reason
of or in connection with the execution, delivery and performance of this
Agreement, the Transaction Documents, the Financing Documents or the Refinancing
Documents, or any transaction contemplated hereby or thereby; or (c) by reason
of or in connection with the execution and delivery or transfer of, or payment
or failure to make lawful payment under, any Letter of Credit; provided that the
Company shall not be required to indemnify the LOC Bank or any Administrating
Bank or other Bank for any claims, damages, losses, liabilities, costs or
expenses to the extent, but only to the extent, caused by the willful misconduct
or gross negligence of the LOC Bank in determining whether a draft or
certificate presented under a Letter of Credit complied with the terms of such
Letter of Credit or the LOC Bank's willful failure to make lawful payment under
a Letter of Credit after the presentation to it by the appropriate Owner
Participant, Designated General Partner or Limited Partner, as the case may be,
of a draft and certificate strictly complying with the terms and conditions of
such Letter of Credit. Notwithstanding the generality of the foregoing, the
failure by the LOC Bank to make payment under an LP Letter of Credit after
presentation to it by the appropriate Owner Participant, Designated General
Partner or Limited Partner, as the case may be, of a draft and a certificate
strictly in conformance with the terms and conditions of such LP Letter of
Credit, shall not constitute the gross negligence or willful misconduct of the
LOC Bank if such failure to make payment under any such draft is the result of
the strict compliance by the LOC Bank with the provisions set forth in the
eighth paragraph of such LP Letter of Credit. Nothing in this Section 22 is
intended to limit the Company's reimbursement and repayment obligations
contained in Section 2 hereof or any Participating Bank's reimbursement
obligation contained in Section 5(a) hereof. Without prejudice to the survival
of any
<PAGE>
67
other obligation of the Company hereunder, the indemnities and obligations of
the Company contained in this Section 22 shall survive the payment in full of
amounts payable by the Company under Section 2 hereof and by the Participating
Banks under Section 5(a) hereof, termination of the Letters of Credit,
reimbursement to the LOC Bank of any payments or disbursements under the Letters
of Credit, termination of this Agreement and, with respect to any Participating
Bank, such Participating Bank's becoming a Nonperforming Participating Bank.
SECTION 23. SALES OF PARTICIPATIONS AND ASSIGNMENTS.
(a) Without the consent of the LOC Bank, the Administrating Banks, the
Company or any other Participating Bank, each Participating Bank may grant
participations in its participation in the Letters of Credit (each Person to
which a participation is granted being called a "PARTICIPANT"); provided,
however, that (i) such Participating Bank's obligations under this Agreement
shall remain unchanged; (ii) such Participating Bank shall remain solely
responsible to the other parties hereto for the performance of such obligations;
(iii) the Company, the Administrating Banks, the LOC Bank and the other Banks
shall continue to deal solely and directly with such Participating Bank in
connection with such Participating Bank's rights and obligations under this
Agreement; and (iv) any Participant of such Participating Bank shall not be
entitled to require such Participating Bank to take or omit to take any action
hereunder, except any action (A) extending the Termination Dates of the Letters
of Credit or the dates for reimbursement of drawings under the Letters of Credit
or for repayment of Advances, or for the payment of interest thereon, or (B)
reducing the rate of interest on any unreimbursed drawings or Advances or the
fees provided for in Section 3(a) hereof. If, at the time of a grant of a
participation pursuant to this subsection (a), the proposed Participant is
subject to Taxes that would result in a claim for compensation pursuant to
Section 4(d) hereof materially greater than that to which the Participating Bank
granting such participation is entitled, such grant shall be subject to the
consent of the Company (which consent shall not be unreasonably withheld).
(b) With the prior written consent of the LOC Bank and the Company (which
consent in the case of the Company shall not be unreasonably withheld or delayed
and, in the case of an assignment to another Participating Bank or to an
Affiliate of a Participating Bank, shall not be required), any Participating
Bank may assign all or a portion (but in no event less than $5,000,000) of its
obligations hereunder to one or more financial institutions, and,
notwithstanding the provisions of Section 14 hereof, upon the execution of an
Assignment Agreement by such Participating Bank and such financial institution,
the delivery of such Assignment Agreement to
<PAGE>
68
Union Bank (together with a processing fee of $2,000) and the acceptance of such
Assignment Agreement by Union Bank, such financial institution shall become a
"Participating Bank" for purposes of this Agreement and shall be entitled to the
rights, privileges and obligations of a Participating Bank hereunder, and such
assigning Participating Bank shall be released from its obligations with respect
to the portion of its participation so assigned.
(c) The Company shall be permitted to replace any Participating Bank that
requests reimbursement for amounts owing pursuant to Section 4(a) with a
replacement bank or other financial institution; provided that (i) such
replacement does not conflict with any applicable law, (ii) no Reimbursement
Default shall have occurred and be continuing at the time of such replacement,
(iii) prior to the date of replacement, the replacement bank or institution
shall purchase, at par, all amounts owing to such replaced Participating Bank,
(iv) the replacement bank or institution, if not already a Participating Bank,
and the terms and conditions of such replacement, shall be acceptable to the
Administrating Banks and the LOC Bank in their sole and absolute discretion, (v)
the replaced Participating Bank shall be obligated to make such replacement in
accordance with the provisions of subsection (b), above, (vi) until such time as
such replacement shall be consummated, the Company shall pay all additional
amounts (if any) required pursuant to Section 4(a), and (vii) any such
replacement shall not be deemed to be a waiver of any rights which the Company,
the Administrating Banks, the LOC Bank or any other Participating Bank may have
against the replaced Participating Bank.
SECTION 24. ADMINISTRATING BANKS.
(a) In order to expedite the various transactions contemplated by this
Agreement, Union Bank and Swiss Bank Corporation are hereby appointed to act as
Administrating Banks on behalf of the LOC Bank and the Participating Banks. The
LOC Bank and each Participating Bank hereby authorize and direct the
Administrating Banks and each of them to take such action on behalf of the LOC
Bank and such Participating Bank under the terms and provisions of this
Agreement and to exercise such powers hereunder as are specifically delegated to
or required of the Administrating Banks or either of them by the terms and
provisions hereof, together with such powers as are reasonably incidental
thereto. The Administrating Banks and each of them are hereby expressly
authorized on behalf of the LOC Bank and the Participating Banks, in accordance
with the terms hereof and without hereby limiting any other express or implied
authority, (i) to receive on behalf of the LOC Bank and each of the
Participating Banks any payment of fees due to the LOC Bank or the Participating
Banks hereunder and all other amounts accrued hereunder paid to the
Administrating Banks or either of
<PAGE>
69
them for the accounts of the LOC Bank and the Participating Banks, and promptly
to distribute to the LOC Bank and to each Participating Bank its proper share of
all payments so received; (ii) to give notice within a reasonable time on behalf
of each of the Participating Banks to the Company of any Reimbursement Event of
Default specified in this Agreement of which the Administrating Banks or either
of them has actual knowledge acquired in connection with its capacity as an
Administrating Bank hereunder; and (iii) to distribute to the LOC Bank and each
Participating Bank copies of all notices, agreements and other material as
provided for in this Agreement as received by the Administrating Banks or either
of them.
(b) Neither Administrating Bank nor any of its directors, officers,
employees or agents shall be liable as such for any action taken or omitted by
any of them hereunder except for its or his own gross negligence or willful
misconduct, or be responsible for any statement, warranty or representation
herein or the contents of any document delivered in connection herewith or be
required to ascertain or to make any inquiry concerning the performance or
observance by the Company of any of the terms, conditions, covenants or
agreements of this Agreement. The Administrating Banks shall not be responsible
to the Banks for the due execution, genuineness, validity, enforceability or
effectiveness of this Agreement, the Letters of Credit or any other instrument
to which reference is made herein. The Administrating Banks shall in all cases
be fully protected in acting, or refraining from acting, in accordance with
written instructions signed by the Required Banks, and, except as otherwise
specifically provided herein, such instructions and any action taken or failure
to act pursuant thereto shall be binding on all the Participating Banks. The
Administrating Banks shall, in the absence of knowledge to the contrary, be
entitled to rely on any paper or document believed thereby to be genuine and
correct and to have been signed or sent by the proper Person or Persons.
Neither Administrating Bank nor any of such bank's directors, officers,
employees or agents shall have any responsibility to the Company or the LOC Bank
on account of the failure or delay in performance or breach by any Bank of any
of its obligations hereunder or to any Participating Bank on account of the
failure of or delay in performance or breach by any other Participating Bank,
the LOC Bank or the Company of any of their respective obligations hereunder or
in connection herewith. The Administrating Banks may execute any and all duties
hereunder by or through agents or employees and shall be entitled to advice of
legal counsel selected by them with respect to all matters arising hereunder and
shall not be liable for any action taken or suffered in good faith in accordance
with the advice of such counsel.
(c) With respect to its Participation Percentage hereunder, each
Administrating Bank, in its individual capacity and not as an Administrating
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70
Bank, shall have the same rights and powers hereunder and under any other
agreement executed in connection herewith as any other Participating Bank and
may exercise the same as though it were not an Administrating Bank, and each
Administrating Bank and its Affiliates may accept deposits from, lend money to
and generally engage in any kind of business with, the Company, any Subsidiary
or any other Affiliate thereof as if it were not an Administrating Bank.
(d) Each Participating Bank agrees (i) to reimburse each Administrating
Bank in the amount of such Participating Bank's pro rata share (determined in
accordance with such Participating Bank's Participation Percentage) of any
expenses incurred for the benefit of the Participating Banks by such
Administrating Bank, including fees and expenses of counsel and compensation of
agents and employees paid for services rendered on behalf of the Participating
Banks, not reimbursed by the Company and (ii) to indemnify and hold harmless
each Administrating Bank and any of its directors, officers, employees or
agents, on demand, in the amount of its pro rata share (determined as
aforesaid), from and against any and all liabilities, obligations, losses,
damages, penalties, actions, judgments, suits, costs, expenses or disbursements
of any kind or nature whatsoever that may be imposed on, incurred by or asserted
against it in its capacity as an Administrating Bank in any way relating to or
arising out of this Agreement or any action taken or omitted by it or any of
them under this Agreement, to the extent not reimbursed by the Company, provided
that no Participating Bank shall be liable to an Administrating Bank for any
portion of such liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements resulting from the gross
negligence or willful misconduct of such Administrating Bank or any of its
directors, officers, employees or agents.
(e) Each Participating Bank acknowledges that it has, independently and
without reliance upon the LOC Bank, the Administrating Banks or any other
Participating Bank and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Participating Bank also acknowledges that it will,
independently and without reliance upon the LOC Bank, the Administrating Banks
or any other Participating Bank and based on such documents and information as
it shall deem appropriate at the time, continue to make its own decisions in
taking or not taking action under or based upon this Agreement, any related
agreement or any document furnished hereunder.
SECTION 25. SEVERABILITY. Any provision of this Agreement that is
prohibited, unenforceable or not authorized in any jurisdiction shall, as to
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71
such jurisdiction, be ineffective to the extent of such prohibition,
unenforceability or nonauthorization without invalidating the remaining
provisions hereof or affecting the validity, enforceability or legality of such
provision in any other jurisdiction. The parties shall endeavor in good-faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions, the economic effect of which comes as close as possible to
that of the invalid, illegal or unenforceable provisions.
SECTION 26. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York. The Company,
the Administrating Banks, the LOC Bank and the other Banks each (i) irrevocably
submits to the jurisdiction of any New York State court or Federal court sitting
in New York City in any action arising out of this Agreement or the Letters of
Credit, (ii) agrees that all claims in such action may be decided in such court,
(iii) waives, to the fullest extent it may effectively do so, the defense of an
inconvenient forum and (iv) consents to the service of process by mail. A
final, non-appealable judgment in any such action shall be conclusive and may be
enforced in other jurisdictions. Nothing herein shall affect the right of any
party to serve legal process in any manner permitted by law or affect its right
to bring any action in any other court.
SECTION 27. RELATIONS OF PARTIES. No term, provision or requirement of
this Agreement or any Letter of Credit, whether express or implied, shall (i) be
construed to create a partnership, association or other arrangement by or under
which the LOC Bank, the Administrating Banks or the other Banks shall be liable
for any obligation of the Company under any Transaction Document, Financing
Document or Refinancing Document, (ii) entitle any party thereto to a right of
reimbursement or contribution from the LOC Bank, the Administrating Banks or the
other Banks with respect thereto or (iii) secure, in any way, the claim of a
party thereunder. In addition, the Company acknowledges and agrees that the
relationship created under this Agreement between the Company on the one hand,
and the LOC Bank and the other Banks, on the other hand, is a debtor/creditor
relationship, separate and distinct from the relationship between or among the
Company and the Owner Trustee, any Owner Participant, any General Partner, any
Designated General Partner, any Limited Partner and/or any other Person.
SECTION 28. HEADINGS AND TABLE OF CONTENTS. Section headings in, and the
Table of Contents of this Agreement are included herein for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose.
SECTION 29. COUNTERPARTS AND EFFECTIVENESS. (a) This Agreement may be
executed in any number of counterparts, each of which when so
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72
executed and delivered shall be deemed an original, and all such counterparts
together shall constitute one and the same instrument.
(b) Although this Agreement is dated as of the date first above written
for convenience, this Agreement shall be effective on, and shall not be binding
upon any of the parties hereto until, the Date of Issuance.
<PAGE>
RA-1
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers or attorneys-in-fact
thereunto duly authorized as of the date first above written.
DUQUESNE LIGHT COMPANY
By: /s/ James D. Mitchell
-------------------------------------
Title: Treasurer
Address for Notice:
-------------------
Duquesne Light Company
One Oxford Centre
301 Grant Street
Pittsburgh, Pennsylvania 15279
Telephone: (412) 393-4131
Telecopy: (412) 393-6571
Attention: James D. Mitchell
Treasurer
<PAGE>
RA-2
SWISS BANK CORPORATION,
NEW YORK BRANCH,
as LOC Bank
By /s/ Jennifer L. Match
--------------------------------
Title: Jennifer L. Match
Director
Merchant Banking
By /s/ Marcia Burkey
--------------------------
Title: DIRECTOR
Address for Notice:
-------------------
Swiss Bank Corporation,
San Francisco Branch
101 California Street, Suite 1700
San Francisco, California 94111-5884
Telephone: (415) 774-3362
Telecopy: (415) 989-7570
Attention: Ms. Marcia Burkey
with a copy to:
---------------
Swiss Bank Corporation,
New York Branch
222 Broadway
2nd Floor
New York, New York 10038
Telephone: (212) 514-3480
Telecopy: (212) 574-3748
Attention: Ms. Yvonne Rubin,
Client Services
Account for Payments:
---------------------
Swiss Bank Corporation,
New York Branch
222 Broadway
2nd Floor
New York, New York 10038
Telephone: (212) 574-4642
Telecopy: (212) 574-3748
Attention: Ms. Yvonne Rubin,
Client Services
Re: Duquesne Light Company
ABA #: 799/Fedwire No.026007993
<PAGE>
RA-3
UNION BANK,
as Administrating Bank
By /s/ John M. Edmonston
----------------------
Title: V.P.
Address for Notice:
-------------------
Union Bank
445 South Figueroa Street
Los Angeles, California 90071
Telephone: (213) 236-5809
Telex: 188612
Telecopy: (213) 236-4096
Attention: John Edmonston
Energy Capital Services
Account for Payments:
---------------------
Union Bank
1980 Saturn Street
Monterey Park, California 91754
Telephone: (213) 720-2679
Telex: 188612
Telecopy: (213) 724-6198
Attention: 192 Note Center
Re: Duquesne Light Company
ABA #: 122000496
<PAGE>
RA-4
SWISS BANK CORPORATION,
NEW YORK BRANCH,
as Administrating Bank
By /s/ Jennifer L. Match
---------------------------
Title: Jennifer L. Match
Director
Merchant Banking
By /s/ Marcia Burkey
---------------------------
Title: Director
Address for Notice:
------------------
Swiss Bank Corporation,
San Francisco Branch
101 California Street, Suite 1700
San Francisco, California 94111-5884
Telephone: (415) 774-3362
Telecopy: (415 989-7570
Attention: Ms. Marcia Burkey
with a copy to:
--------------
Swiss Bank Corporation,
New York Branch
222 Broadway
2nd Floor
New York, New York 10038
Telephone: (212) 574-3480
Telecopy: (212) 574-3748
Attention: Ms. Yvonne Rubin,
Client Services
Accounts for Payments:
----------------------
Swiss Bank Corporation,
New York Branch
222 Broadway
2nd Floor
New York, New York 10038
Telephone: (212) 574-4642
Telecopy: (212) 574-3748
Attention: Ms. Yvonne Rubin,
Client Services
Re: Duquesne Light Company
ABA #: 799/Fedwire No. 026007993
<PAGE>
RA-5
PARTICIPATING BANKS
BARCLAYS BANK PLC
By /s/ Valerie A. Cline
-------------------------------
Name: VALERIE A. CLINE
Title: DIRECTOR
Address for Notice:
-------------------
Barclays Bank PLC
222 Broadway, 11th floor
New York, New York 10038
Telephone: (212) 412-6942
Telecopy: (212) 412-7511
Attention: Valerie Cline
Utility Finance Group
Account for Payments:
---------------------
Barclays Bank PLC
222 Broadway, 12th floor
New York, New York 10038
Re: Duquesne Light Company - SBLC
ABA #: 026002574
Account Name: CLAD - Control Account
Acct. #: 050019104
<PAGE>
RA-6
CANADIAN IMPERIAL BANK OF COMMERCE
By /s/ Joel W. Peterson
-------------------------------
Name: Joel W. Peterson
Title: Authorized Signatory
Address for Notice:
-------------------
Canadian Imperial Bank of Commerce
200 West Madison, Suite 2300
Chicago, Illinois 60606
Telephone: (312) 855-3213
Telecopy: (312) 750-0927
Attention: Margaret E. McTigue
Vice President/Utilities Group
with a copy to:
---------------
Canadian Imperial Bank of Commerce
Two Paces West
2727 Paces Ferry Road, Suite 1200
Atlanta, Georgia 30339
Telephone: (404) 319-4836
Telex: 54-2413
Telecopy: (404) 319-4950
Attention: Clare Coyne
Senior Associate
Account for Payments:
---------------------
Morgan Guaranty Trust Company
of New York
60 Wall Street
New York, New York 10260
ABA #: 021-000-238
For account of: CIBC, New York Agency
Account No: 630-00-480
Reference: Duquesne Light Company
Attention: The Atlanta Agency
Account No: 0701610
<PAGE>
RA-7
CREDIT LYONNAIS,
NEW YORK BRANCH
By /s/ Robert Ivosevich
-------------------------------
Name: Robert Ivosevich
Title: Senior Vice President
Address for Notice:
-------------------
Credit Lyonnais
New York Branch
1301 Avenue of the Americas
New York, New York 10019
Telephone: (212) 261-7335
Telecopy: (212) 459-3179
Attention: Mr. Alex Averbukh
Account for Payments:
---------------------
Credit Lyonnais
New York Branch
1301 Avenue of the Americas
New York, New York 10019
Telephone: (212) 261-7315
Telecopy: (212) 459-3179
Attention: Loan Servicing
Account Name: Credit Lyonnais New York
in favor of Credit Lyonnais
Cayman Islands
Re: Duquesne Light Company
ABA #: 026008073
<PAGE>
RA-8
CREDIT SUISSE
By /s/ Christopher Eldin
-------------------------------
Name: CHRISTOPHER ELDIN
Title: Member of Senior Management
By /s/ Andrea Shkane
-------------------------------
Name: ANDREA SHKANE
Title: ASSOCIATE
Address for Notice:
-------------------
Credit Suisse
Tower 49
12 East 49th Street
New York, New York 10017
Telephone: (212) 238-5352
Telecopy: (212) 238-5389
Attention: Christopher J. Eldin
Account for Payments:
---------------------
Credit Suisse
Loan Department Clearing Account
Account No.: 904996-02
New York, New York
ABA #: 026009179
Reference: Duquesne Light Company
<PAGE>
RA-9
THE FUJI BANK, LIMITED
By /s/ Yoshihiko Shiotsugu
-------------------------------
Name: Yoshihiko Shiotsugu
Title: Vice President & Manager
Address for Notice:
-------------------
The Fuji Bank, Limited
Two World Trade Center
New York, New York 10048
Telephone: (212) 898-2059
Telex: 232440
Telecopy: (212) 912-0516
Attention: Chris Reid
Corporate Finance
Account for Payments:
---------------------
The Fuji Bank, Limited
Two World Trade Center
New York, New York 10048
Telephone: (212) 898-2059
Telex: 232440
Telecopy: (212) 912-0516
Attention: Chris Reid
Corporate Finance
Reference: Duquesne
ABA #: CHIPS ABA No: 970
CHIPS UID No: 279368
Attention: 515011U1
<PAGE>
RA-10
SOCIETE GENERALE
By /s/ Gordon Eadon
-------------------------------
Name: GORDON EADON
Title: VICE PRESIDENT
Address for Notice:
-------------------
Societe Generale
1221 Avenue of the Americas
New York, New York 10020
Telephone: (212) 830-6853
Telecopy: (212) 278-7430
Attention: Mr. Gordon R. Eadon
Account for Payments:
---------------------
Societe Generale
New York, New York
ABA No.: 026004226
Account No.: 9016112
Reference: Duquesne Light Company
<PAGE>
RA-11
SWISS BANK CORPORATION,
NEW YORK BRANCH
By /s/ Jennifer L. Match
-------------------------------
Title: Jennifer L. Match
Director
Merchant Banking
By /s/ Marcia Burkey
-------------------------------
Title: Director
Address for Notice:
-------------------
Swiss Bank Corporation,
San Francisco Branch
101 California Street, Suite 1700
San Francisco, California 94111-5884
Telephone: (415) 774-3362
Telecopy: (415) 989-7570
Attention: Ms. Marcia Burkey
with a copy to:
---------------
Swiss Bank Corporation,
New York Branch
222 Broadway
2nd Floor
New York, New York 10038
Telephone: (212) 574-3480
Telecopy: (212) 574-3748
Attention: Ms. Yvonne Rubin,
Client Services
Account for Payments:
---------------------
Swiss Bank Corporation,
New York Branch
222 Broadway
2nd Floor
New York, New York 10038
Telephone: (212) 574-4642
Telecopy: (212) 574-3748
Attention: Ms. Yvonne Rubin,
Client Services
Re: Duquesne Light Company
ABA #: 799/Fedwire No. 026007993
<PAGE>
RA-12
THE FIRST NATIONAL BANK OF BOSTON
By /s/ Frank T. Smith, Jr.
-------------------------------
Name: Frank T. Smith, Jr.
Title: Director
Address for Notice:
-------------------
The First National Bank of Boston
100 Federal Street
Mail Stop 01-08-02
Boston, Massachusetts 02110
Telephone: (617) 434-5455
Telecopy: (617) 434-3652
Attention: Deborah Dobbins
Account for Payments:
---------------------
The First National Bank of Boston
100 Rustcraft Road
Dedham, Massachusetts 02026
Account Name: Commercial Loan Services
Account No. CLN# 015-7716
ABA #: 011000390
Reference: Duquesne Light
CLN#015-7716
Attention: Deborah Williams
<PAGE>
RA-13
TORONTO DOMINION (TEXAS), INC.
By /s/ Warren Finlay
-------------------------------
Name: WARREN FINLAY
Title: VICE PRESIDENT
Address for Notice:
-------------------
The Toronto-Dominion Bank
31 West 52nd Street
New York, New York 10019-6101
Telephone: (212) 468-0793
Telecopy: (212) 262-1929
Attention: Heather Shea
Account for Payments:
---------------------
The Toronto-Dominion Bank
Account Name: TD Cayman
Account No. 215-9251
ABA #: 026 003 243
Reference: Duquesne
<PAGE>
RA-14
UNION BANK
By /s/ John M. Edmonston
-------------------------------
Name: John M. Edmonston
Title: Vice President
Address for Notice:
-------------------
Union Bank
445 South Figueroa Street
Los Angeles, California 90071
Telephone: (213) 236-5809
Telex: 188612
Telecopy: (213) 236-4096
Attention: John Edmonston
Energy Capital Services
Account for Payments:
---------------------------------
Union Bank
1980 Saturn Street
Monterey Park, California 91754
Telephone: (213) 720-2679
Telex: 188612
Telecopy: (213) 724-6198
Attention: 192 Note Center
Re: Duquesne Light Company
ABA #: 122000496
<PAGE>
RA-15
UNION BANK OF SWITZERLAND,
NEW YORK BRANCH
By /s/ Robert W. Casey, Jr.
-------------------------------
Name: Robert W. Casey, Jr.
Title: VP
By /s/ Laurent Chaix
-------------------------------
Name: Laurent Chaix
Title: Assistant Vice President
Address for Notice:
-------------------
Union Bank of Switzerland,
New York Branch
299 Park Avenue
New York, New York 10171
Telephone: (212) 821-3329
Telex: 620 317 ubs uw
Telecopy: (212) 821-3383
Attention: Robert W. Casey
Account for Payments:
---------------------
Union Bank of Switzerland,
New York Branch
299 Park Avenue
New York, New York 10171
ABA #: 026008439
Reference: Duquesne Light Company
<PAGE>
SCHEDULE 1
BENEFICIARIES AND AMOUNTS OF LETTERS
OF CREDIT TO BE ISSUED
(AGGREGATE MAXIMUM CREDIT AMOUNT $194,382,106)
OP LETTERS OF CREDIT
Beneficiaries:
Mission Funding Gamma
(the "Owner Participant")
c/o Mission First Financial
18101 Von Karman Avenue, Suite 800
Irvine, California 92715-1046
Attention: Manager of Finance
Maximum Credit Amount: $39,430,847
Initial Maximum Drawing Amounts:
<TABLE>
<CAPTION>
Applicable Period Maximum Drawing Amount
----------------- ----------------------
<S> <C>
From the Date of Issuance $38,884,754
to and including December 1, 1994
From December 2, 1994 $39,215,733
to and including June 1, 1995
From June 2, 1995 $39,370,906
to and including December 1, 1995
From December 2, 1995 $39,430,847
to and including June 1, 1996
From June 2, 1996 $39,430,452
to and including December 1, 1996
</TABLE>
<PAGE>
2
<TABLE>
<CAPTION>
Applicable Period Maximum Drawing Amount
----------------- ----------------------
<S> <C>
From December 2, 1996 $39,426,216
to and including June 1, 1997
From June 2, 1997 $39,426,216
to and including December 1, 1997
From December 2, 1997 $39,422,041
to and including June 1, 1998
From June 2, 1998 $39,422,041
to and including December 1, 1998
From December 2, 1998 $39,418,156
to and including June 1, 1999
From June 2, 1999 $39,418,156
to and including October 2, 1999
</TABLE>
<PAGE>
Beneficiary:
Palo Verde Leasing Corporation
(the "Owner Participant")
One First National Plaza, Suite 0502
Chicago, Illinois 60670
Attention: Mr. William Kusack
Maximum Credit Amount: $46,090,650
Initial Maximum Drawing Amounts:
<TABLE>
<CAPTION>
Applicable Period Maximum Drawing Amount
----------------- ----------------------
<S> <C>
From the Date of Issuance $45,660,077
to and including December 1, 1994
From December 2, 1994 $45,971,896
to and including June 1, 1995
From June 2, 1995 $46,087,631
to and including December 1, 1995
From December 2, 1995 $46,090,650
to and including June 1, 1996
From June 2, 1996 $46,090,650
to and including December 1, 1996
From December 2, 1996 $46,090,375
to and including June 1, 1997
From June 2, 1997 $46,090,375
to and including December 1, 1997
From December 2, 1997 $46,089,631
to and including June 1, 1998
From June 2, 1998 $46,089,631
to and including December 1, 1998
</TABLE>
<PAGE>
2
<TABLE>
<CAPTION>
Applicable Period Maximum Drawing Amount
----------------- ----------------------
<S> <C>
From December 2, 1998 $46,089,631
to and including June 1, 1999
From June 2, 1999 $46,089,631
to and including October 2, 1999
</TABLE>
<PAGE>
Beneficiary:
Beaver Valley Leasing Corporation
(the "Owner Participant")
c/o Mellon Financial Services
Room 151-4444
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Attention: Ms. Mary E. Shancey
Maximum Credit Amount: $29,819,560
Initial Maximum Drawing Amounts:
<TABLE>
<CAPTION>
Applicable Period Maximum Drawing Amount
----------------- ----------------------
<S> <C>
From the Date of Issuance $29,431,379
to and including December 1, 1994
From December 2, 1994 $29,659,046
to and including June 1, 1995
From June 2, 1995 $29,782,808
to and including December 1, 1995
From December 2, 1995 $29,819,560
to and including June 1, 1996
From June 2, 1996 $29,819,560
to and including December 1, 1996
From December 2, 1996 $29,819,560
to and including June 1, 1997
From June 2, 1997 $29,819,560
to and including December 1, 1997
From December 2, 1997 $29,818,943
to and including June 1, 1998
</TABLE>
<PAGE>
2
<TABLE>
<CAPTION>
Applicable Period Maximum Drawing Amount
----------------- ----------------------
<S> <C>
From June 2, 1998 $29,818,943
to and including December 1, 1998
From December 2, 1998 $29,817,883
to and including June 1, 1999
From June 2, 1999 $29,817,883
to and including October 2, 1999
</TABLE>
<PAGE>
Beneficiary:
Resources Capital Financing Corporation
(the "Owner Participant")
The Legal Center
One Riverfront Plaza, 9th Floor
Newark, New Jersey 07102
Attention: Eileen A. Moran, Chairman of the Board
Maximum Credit Amount: $29,444,686
Initial Maximum Drawing Amounts:
<TABLE>
<CAPTION>
Applicable Period Maximum Drawing Amount
----------------- ----------------------
<S> <C>
From the Date of Issuance $28,858,084
to and including December 1, 1994
From December 2, 1994 $29,078,587
to and including June 1, 1995
From June 2, 1995 $29,296,033
to and including December 1, 1995
From December 2, 1995 $29,424,660
to and including June 1, 1996
From June 2, 1996 $29,444,686
to and including December 1, 1996
From December 2, 1996 $29,443,706
to and including June 1, 1997
From June 2, 1997 $29,443,706
to and including December 1, 1997
From December 2, 1997 $29,442,530
to and including June 1, 1998
</TABLE>
<PAGE>
2
<TABLE>
<CAPTION>
Applicable Period Maximum Drawing Amount
----------------- ----------------------
<S> <C>
From June 2, 1998 $29,347,620
to and including December 1, 1998
From December 2, 1998 $29,200,839
to and including June 1, 1999
From June 2, 1999 $29,239,247
to and including October 2, 1999
</TABLE>
<PAGE>
Beneficiary:
PNC Commercial Corp.
c/o PNC Leasing Corp.
Two PNC Plaza, 13th Floor
620 Liberty Avenue
Pittsburgh, Pennsylvania 15265
Attention: Ms. Karen Kirsch, Vice President
Maximum Credit Amount: $26,693,876
Initial Maximum Drawing Amounts:
<TABLE>
<CAPTION>
Applicable Period Maximum Drawing Amount
----------------- ----------------------
<S> <C>
From the Date of Issuance $26,120,994
to and including December 1, 1994
From December 2, 1994 $26,395,791
to and including June 1, 1995
From June 2, 1995 $26,579,301
to and including December 1, 1995
From December 2, 1995 $26,680,121
to and including June 1, 1996
From June 2, 1996 $26,690,652
to and including December 1, 1996
From December 2, 1996 $26,690,029
to and including June 1, 1997
From June 2, 1997 $26,690,029
to and including December 1, 1997
From December 2, 1997 $26,690,029
to and including June 1, 1998
</TABLE>
<PAGE>
2
<TABLE>
<CAPTION>
Applicable Period Maximum Drawing Amount
----------------- ----------------------
<S> <C>
From June 2, 1998 $26,693,876
to and including December 1, 1998
From December 2, 1998 $26,302,052
to and including June 1, 1999
From June 2, 1999 $26,176,144
to and including October 2, 1999
</TABLE>
<PAGE>
LP LETTERS OF CREDIT
Beneficiaries:
Beaver Valley Two Omega Limited Partnership
(the "Owner Participant")
c/o Dechert, Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
Attention: Judson J. Wambold, Esq.
Beaver Valley Two Omega, Inc.
individually and as a general partner
of the Owner Participant
(the "Designated General Partner")
c/o Dechert, Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
Attention: Judson J. Wambold, Esq.
NationsBanc Leasing Corporation
(f/k/a Sovran Leasing Corporation)
the Limited Partner of the
Owner Participant
(the "Limited Partner")
100 North Tryon Street
NC1007-12-01
Charlotte, North Carolina 28255
Attention: Ms. Rhonda Shafer
Maximum Credit Amount: $14,309,696
<PAGE>
2
Initial Maximum Drawing Amounts:
<TABLE>
<CAPTION>
Applicable Period Maximum Drawing Amount
----------------- ----------------------
<S> <C>
From the Date of Issuance $13,971,852
to and including December 1, 1994
From December 2, 1994 $14,115,851
to and including June 1, 1995
From June 2, 1995 $14,219,241
to and including December 1, 1995
From December 2, 1995 $14,286,296
to and including June 1, 1996
From June 2, 1996 $14,309,696
to and including December 1, 1996
From December 2, 1996 $14,309,477
to and including June 1, 1997
From June 2, 1997 $14,309,477
to and including December 1, 1997
From December 2, 1997 $14,308,746
to and including June 1, 1998
From June 2, 1998 $14,308,746
to and including December 1, 1998
From December 2, 1998 $14,308,030
to and including June 1, 1999
From June 2, 1999 $14,308,030
to and including October 2, 1999
</TABLE>
<PAGE>
Beneficiaries:
Beaver Valley Two Tau Limited Partnership
(the "Owner Participant")
c/o Dechert, Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
Attention: Judson J. Wambold, Esq.
Beaver Valley Two Tau, Inc
individually and as a general partner
of the Owner Participant
(the "Designated General Partner")
c/o Dechert, Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
Attention: Judson J. Wambold, Esq.
NationsBanc Leasing Corporation
(f/k/a Commerce Union Bank)
the Limited Partner of the
Owner Participant
(the "Limited Partner")
100 North Tryon Street
NC1007-12-01
Charlotte, North Carolina 28255
Attention: Ms. Rhonda Shafer
Maximum Credit Amount: $8,592,791
<PAGE>
2
Initial Maximum Drawing Amounts:
<TABLE>
<CAPTION>
Applicable Period Maximum Drawing Amount
----------------- ----------------------
<S> <C>
From the Date of Issuance $8,388,088
to and including December 1, 1994
From December 2, 1994 $8,474,506
to and including June 1, 1995
From June 2, 1995 $8,537,275
to and including December 1, 1995
From December 2, 1995 $8,578,007
to and including June 1, 1996
From June 2, 1996 $8,592,791
to and including December 1, 1996
From December 2, 1996 $8,592,791
to and including June 1, 1997
From June 2, 1997 $8,592,791
to and including December 1, 1997
From December 2, 1997 $8,592,654
to and including June 1, 1998
From June 2, 1998 $8,592,654
to and including December 1, 1998
From December 2, 1998 $8,592,283
to and including June 1, 1999
From June 2, 1999 $8,592,283
to and including October 2, 1999
</TABLE>
<PAGE>
SCHEDULE 3
to the Reimbursement Agreement,
dated as of October 1, 1994
among Duquesne Light Company,
Swiss Bank Corporation, New York Branch,
as LOC Bank and as Administrating Bank,
Union Bank, as Administrating Bank,
and the Participating Banks named therein
<TABLE>
<CAPTION>
Name of Bank Domestic Lending Office Eurodollar Lending Office
------------ ----------------------- -------------------------
<S> <C> <C>
Barclays Bank PLC 222 Broadway, 11th Floor 222 Broadway, 11th Floor
New York, NY 10038 New York, NY 10038
Telephone: (212) 412-6942 Telephone: (212) 412-6942
Telecopy: (212) 412-7511 Telecopy: (212) 412-7511
Attn: Ms. Valerie Cline Attn: Ms. Valerie Cline
Canadian Imperial Bank of 200 West Madison Two Paces West
Commerce Suite 2300 2727 Paces Ferry Road
Chicago, IL 60606 Suite 1200
Telephone: (312) 855-3213 Atlanta, Georgia 30339
Telecopy: (312) 750-0927 Telephone: (404) 319-4836
Attention: Telecopy: (404) 319-4950
Ms. Margaret E. McTigue Attn: Ms. Clare Coyne
Credit Lyonnais, 1301 Avenue of the 1301 Avenue of the
New York Branch Americas Americas
New York, NY 10019 New York, NY 10019
Telephone: (212) 261-7335 Telephone: (212) 261-7335
Telecopy: (212) 459-3179 Telecopy: (212) 459-3179
Attention: Attention:
Mr. Alex Averbukh Mr. Alex Averbukh
Credit Suisse Tower 49 Tower 49
12 East 49th Street 12 East 49th Street
New York, NY 10017 New York, NY 10017
Telephone: (212) 238-5352 Telephone: (212) 238-5352
Telecopy: (212) 238-5389 Telecopy: (212) 238-5389
Attention: Attention:
Mr. Christopher J. Eldin Mr. Christopher J. Eldin
The First National Bank of 100 Federal Street 100 Federal Street
Boston Mail Stop 01-08-02 Mail Stop 01-08-02
Boston, MA 02110 Boston, MA 02110
Telephone: (617) 434-5455 Telephone: (617) 434-5455
Telecopy: (617) 434-3652 Telecopy: (617) 434-3652
Attention: Attention:
Ms. Deborah Dobbins Ms. Deborah Dobbins
</TABLE>
<PAGE>
2
<TABLE>
<CAPTION>
Name of Bank Domestic Lending Office Eurodollar Lending Office
------------ ----------------------- -------------------------
<S> <C> <C>
The Fuji Bank, Limited Two World Trade Center Two World Trade Center
New York, NY 10048 New York, NY 10048
Telephone: (212) 898-2059 Telephone: (212) 898-2059
Telecopy: (212) 912-0516 Telecopy: (212) 912-0516
Attn: Mr. Chris Reid Attn: Mr. Chris Reid
Societe Generale 1221 Avenue of the 1221 Avenue of the
Americas Americas
New York, NY 10020 New York, NY 10020
Telephone: (212) 830-6853 Telephone: (212) 830-6853
Telecopy: (212) 278-7430 Telecopy: (212) 278-7430
Attention: Attention:
Mr. Gordon R. Eadon Mr. Gordon R. Eadon
Swiss Bank Corporation, Swiss Bank Corporation, Swiss Bank Corporation,
New York Branch New York Branch New York Branch
222 Broadway, 2nd Floor 222 Broadway, 2nd Floor
New York, NY 10038 New York, NY 10038
Telephone: (212) 574-3480 Telephone: (212) 574-3480
Telecopy: (212) 574-3748 Telecopy: (212) 574-3748
Attention: Attention:
Ms. Yvonne Rubin Ms. Yvonne Rubin
Toronto Dominion (Texas), 31 West 52nd Street 31 West 52nd Street
Inc. New York, NY 10019-6101 New York, NY 10019-6101
Telephone: (212) 468-0793 Telephone: (212) 468-0793
Telecopy: (212) 262-1929 Telecopy: (212) 262-1929
Attn: Ms. Heather Shea Attn: Ms. Heather Shea
Union Bank 445 South Figueroa St. 445 South Figueroa St.
Los Angeles, CA 90071 Los Angeles, CA 90071
Telephone: (213) 236-5809 Telephone: (213) 236-5809
Telecopy: (213) 236-4096 Telecopy: (213) 236-4096
Attention: Attention:
Mr. John Edmonston Mr. John Edmonston
Union Bank of Switzerland, 299 Park Avenue 299 Park Avenue
New York Branch New York, NY 10171 New York, NY 10171
Telephone: (212) 821-3329 Telephone: (212) 821-3329
Telecopy: (212) 821-3383 Telecopy: (212) 821-3383
Attention: Attention:
Mr. Robert W. Casey Mr. Robert W. Casey
</TABLE>
<PAGE>
EXHIBIT A
IRREVOCABLE TRANSFERABLE LETTER OF CREDIT
No. [ ]
[Date of Issuance]
[Owner Participant]
[Address]
(the "Owner Participant")
Attention: [ ]
Dear Sirs:
1. We hereby establish, at the request of Duquesne Light Company (the
"Company"), in your favor, our Irrevocable Transferable Letter of Credit No.
[ ] (the "Letter of Credit"), in an amount not to exceed $[ ]
(as such amount may be reduced pursuant to the terms hereof, the "Maximum Credit
Amount"), effective immediately and expiring on the earliest of (i) 9:05 a.m.,
New York City time, on the Date of Early Termination (as hereinafter defined),
(ii) 3:00 p.m., New York City time, on the date on which the Owner Participant
surrenders the Letter of Credit to the Bank with a notice in the form of Exhibit
7 to the Letter of Credit, (iii) 3:00 p.m., New York City time, on the date on
which the Bank pays an OP Final Draw (as hereinafter defined), and (iv) 3:00
p.m., New York City time on either (A) October 2, 1999 or (B) if a draft and
certificate, all in strict conformity with the terms and conditions of the
Letter of Credit, are presented after 9:05 a.m. but prior to 3:00 p.m., New York
City time, on October 2, 1999, the Business Day next succeeding October 2, 1999
(the "Termination Date"). Capitalized terms used herein and in Schedules II, III
and IV, and Exhibits 1, 2, 3, 4, 5, 6 and 7 hereto, shall have the meanings set
forth in Schedule I hereto. This Letter of Credit is issued in connection with
the leasing of an undivided interest in Beaver Valley Power Station Unit No. 2
to the Company pursuant to a Facility Lease dated as of September 15, 1987, as
amended by Amendment No. 1 dated as of December 1, 1987, Amendment No. 2 dated
as of November 15, 1992, and Amendment No. 3 dated as of October 13, 1994 (as so
amended, the "Facility Lease"), between the Company and The First National Bank
of Boston, as Owner Trustee under a trust agreement with you.
<PAGE>
2
2. The Maximum Credit Amount and the Maximum Drawing Amounts may be
reduced at any time and from time to time upon receipt by us at the address for
presentation of documents set forth below of a copy of the instrument effecting
such reductions, signed by the Company and by you in the form of Exhibit 1
hereto (a "Reduction Certificate"). Upon receipt of such certificate, the
Maximum Credit Amount shall be automatically and permanently reduced by the
amount specified as the Reduction Amount in such Reduction Certificate (the
"Reduction Amount") and, if requested in such Certificate, the Maximum Drawing
Amounts shall be automatically and permanently reduced as specified in such
Reduction Certificate.
3. We hereby irrevocably authorize you to draw on us, in accordance with
the terms and conditions hereinafter set forth, an amount not in excess of the
least of (x) the Maximum Drawing Amount applicable to the date of such drawing
(the "Date of Drawing"), as modified in accordance with the next paragraph, (y)
the Maximum Available Credit Amount, as modified in accordance with the next
paragraph and (z) in the case of an OP Partial Draw (as hereinafter defined),
the Partial Drawing Amount.
4. The Maximum Drawing Amounts and the Maximum Available Credit Amount
shall be modified from time to time as follows:
(a) upon receipt by us of a Reduction Certificate, (i) the Maximum
Available Credit Amount shall be permanently reduced by the Reduction Amount set
forth in such Reduction Certificate and (ii) if requested in such Certificate,
the Maximum Drawing Amounts shall be permanently reduced as specified in such
Reduction Certificate; provided, that, in no event shall any Maximum Drawing
Amount (after giving effect to any such reduction) exceed the Maximum Available
Credit Amount (after giving effect to such reduction);
(b) upon payment by us of each OP Partial Draw under the Letter of
Credit, (i) the Maximum Drawing Amount applicable to each Date of Drawing
subsequent to such payment shall be automatically reduced by an amount equal to
the amount of the drawing so paid and (ii) the Maximum Available Credit Amount
shall be automatically reduced by an amount equal to the amount of the drawing
so paid;
(c) upon the application by us of amounts paid by the Company pursuant
to Section 2(b)(ii) of the Reimbursement Agreement to reimburse any OP Partial
Draw hereunder (as such application is allocated in accordance with Section 2(d)
of the Reimbursement Agreement), (i) the Maximum Drawing Amount applicable to
each Date of Drawing subsequent to such application shall be automatically
increased by the amount of such
<PAGE>
3
payment(s) allocated as a reimbursement of drawings hereunder and (ii) the
Maximum Available Credit Amount shall be automatically increased by the amount
of such payment(s) allocated as a reimbursement of drawings hereunder; provided,
however, that the Maximum Available Credit Amount shall never exceed the Maximum
Credit Amount;
(d) upon the payment by us of any OP Final Draw under the Letter of
Credit, (i) the Maximum Drawing Amount applicable to each Date of Drawing
subsequent to such payment shall be automatically reduced to zero and (ii) the
Maximum Available Credit Amount shall be automatically reduced to zero, and all
such amounts, in each case, shall not be reinstated; and
(e) if adjustments are made to Modified Special Casualty Values,
corresponding adjustments shall be made to the Maximum Drawing Amounts shown in
Schedule II (as theretofore reduced pursuant to clause (a) or (b) above and, if
applicable, reinstated pursuant to clause (c) above); provided that adjustments
pursuant to this clause (e) shall be effective automatically upon receipt by us
of a notice from you in the form of Exhibit 2 hereto; and provided, further that
in no event shall any Maximum Drawing Amount, as adjusted, exceed the Maximum
Credit Amount.
5. Upon return of this Letter of Credit, together with a notice in the
form of Exhibit 2 hereto, we will promptly initial and attach to this Letter of
Credit a revised Schedule II reflecting the adjustments contained in such notice
and return this Letter of Credit to you with such revised Schedule attached.
6. Upon the application by us of amounts paid by the Company pursuant to
Section 2(b)(ii) of the Reimbursement Agreement to reimburse any OP Partial Draw
hereunder, we will give you prompt (and in any event within three Business Days
of such application) written notice of such application and the amount thereof.
Such notice shall be given in accordance with the provisions set forth in the
eighth paragraph of this Letter of Credit.
7. Funds under this Letter of Credit are available to you, either (a)
against presentation on or prior to the Termination Date, and provided there has
not been an OP Final Draw and provided a written notice indicating the Date of
Early Termination (as hereinafter defined) has not been delivered to you, of (i)
your draft in the form of Exhibit 3 attached hereto and (ii) a completed
certificate signed by you in the form of Exhibit 4 attached hereto (an "OP
Partial Draw") or (b) against presentation on or prior to the Termination Date,
of (i) your draft in the form of Exhibit 3 attached hereto and (ii) a completed
certificate signed by you in the form of Exhibit 5
<PAGE>
4
attached hereto (an "OP Final Draw"). Such draft and certificate shall be dated
the date of presentation and shall be presented at our office located at 222
Broadway, 2nd Floor, New York, New York 10038, Attention: Documentary Department
(or at any other office in New York City which may be designated by us by
written notice given in the manner set forth in the next paragraph delivered to
you at least 15 days prior to the applicable Date of Drawing). We agree that,
so long as this Letter of Credit is in effect, we will maintain an office in New
York City where such presentation may be made. If we receive such draft and
certificate at such office, all in strict conformity with the terms and
conditions of this Letter of Credit, prior to 9:05 a.m., New York City time, on
any Business Day, we will effect payment of the draft at or before noon, New
York City time, on the same Business Day. If we receive such draft and
certificate at such office, all in strict conformity with the terms and
conditions of this Letter of Credit, at or after 9:05 a.m., New York City time,
on any Business Day, we will effect payment of the draft at or before noon, New
York City time, on the next Business Day. Upon receipt of a draft and
certificate which are not in strict conformity with the terms and conditions of
this Letter of Credit, we will promptly (and in any event within three Business
Days of such receipt) notify you of such nonconformity and the reason therefor;
provided that our failure to so notify you of such nonconformity or the reason
therefor shall not amend, modify, extend or otherwise affect your rights
hereunder and shall not create any additional rights hereunder; and provided
further that, notwithstanding the generality of the foregoing, any such failure
shall not have the effect of extending the time during which you may draw
hereunder or converting such nonconforming draft and certificate into a draft
and certificate in strict conformity with the terms and conditions of this
Letter of Credit. Payment due to you under this Letter of Credit, as provided
above, shall be made by wire transfer of federal funds to your account specified
in the draft presented in connection with such OP Final Draw or OP Partial Draw.
8. Notwithstanding any other provision of this Letter of Credit, we
shall have the right, upon the occurrence of any of the events listed in
Schedule III hereto, to terminate this Letter of Credit by delivering to you a
written notice indicating the date of such termination (the "Date of Early
Termination"); provided that, on or before the Date of Early Termination, you
will have the right to draw once an amount not in excess of the lesser of (i)
the Maximum Available Credit Amount and (ii) the Maximum Drawing Amount, in
accordance with the procedures described herein; and provided, further, that,
upon delivery of such written notice to you indicating the Date of Early
Termination, your right to make an OP Partial Draw hereunder shall automatically
terminate. The written notice referred to in the preceding sentence shall be
given by telex or facsimile transmission to you at the address specified in
Schedule IV hereto (or to such other address or telex or facsimile
<PAGE>
5
number designated by you by written notice delivered to us at least 15 days
prior to the notice of early termination) and shall be effective upon receipt of
the appropriate answerback or confirmation of the facsimile transmission. We
will also forward a copy of such notice by overnight delivery service to the
address set forth in Schedule IV hereto (or to such other address as aforesaid).
The Date of Early Termination specified in such written notice shall be:
(a) in the case of events specified in paragraphs A and G of Schedule
III, not earlier than ten days after such notice is given, and
(b) in the case of all other events specified in Schedule III, not
earlier than 30 days after such notice is given.
9. Except as set forth below, this Letter of Credit shall be governed by
the Uniform Customs and Practice for Documentary Credits, 1993 Revision
(revision effective January 1, 1994), International Chamber of Commerce
Publication No. 500, as amended, supplemented, revised or restated, and, as to
matters not covered therein, be governed by the laws of the State of New York,
including without limitation the Uniform Commercial Code as in effect in such
State. Communications with respect to this Letter of Credit shall be in writing
(including telecopy) and shall be addressed to us at 222 Broadway, 2nd Floor,
New York, New York 10038, Attention: Documentary Department, and shall
specifically refer to the number of this Letter of Credit.
10. Notwithstanding Article 54 of the Uniform Customs and Practice for
Documentary Credits referred to above, this Letter of Credit may be transferred
and assigned in its entirety (but not in part) more than once. Upon receipt by
us at the address for presentation of documents set forth above of a copy of the
instrument effecting such transfer and assignment, signed by the transferor and
by the transferee, in the form of Exhibit 6 hereto then, in such case, we will,
upon surrender of this Letter of Credit, issue an irrevocable transferable
letter of credit in the name of the transferee and providing for notices to be
sent to the transferee at the address set forth therein and in all other
respects identical to this Letter of Credit and the transferee, instead of the
transferor, shall, without necessity of further act, be entitled to all the
benefits of, and rights under, this Letter of Credit in the transferor's place.
11. Any drawing under this Letter of Credit will be paid from the general
funds of the Bank and not directly or indirectly from funds or collateral
deposited with or for the account of the Bank by the Company, or pledged with or
for the account of the Bank by the Company, and the Bank
<PAGE>
6
will seek reimbursement for payments made pursuant to a drawing under this
Letter of Credit only after such payments have been made.
12. This Letter of Credit (including Schedules I, II, III and IV, and
Exhibits 1, 2, 3, 4, 5, 6 and 7 hereto) sets forth in full our undertaking, and
such undertaking shall not in any way be modified, amended, amplified or limited
by reference to any documents, instrument or agreement referred to herein,
except only Schedules I, II, III and IV, and Exhibits 1, 2, 3, 4, 5, 6 and 7
hereto and the notices referred to herein; and any such reference shall not be
deemed to incorporate herein by reference any document, instrument or agreement
except as set forth above.
Very truly yours,
SWISS BANK CORPORATION,
acting through its New York Branch
By:
-----------------------------------
Title:
By:
-----------------------------------
Title:
<PAGE>
EXHIBIT 1
to Exhibit A
REDUCTION CERTIFICATE
(paragraph 2)
[Date]
Swiss Bank Corporation,
New York Branch
222 Broadway
2nd Floor
New York, New York 10038
Attention: Documentary Department
Dear Sirs:
Reference is made to that certain Irrevocable Transferable Letter of
Credit bearing Letter of Credit No.__________________ dated [Date of Issuance]
(the "Letter of Credit"), which has been established by you in favor of [name of
Owner Participant] (the "Owner Participant").
We hereby request that the Maximum Credit Amount be reduced by
$________________________ (the "Reduction Amount").
[We hereby request that the Maximum Drawing Amounts be reduced to the
amounts set forth in Appendix A hereto.]*
Capitalized terms used herein and not otherwise defined herein shall have
the meanings given to them in the Letter of Credit.
DUQUESNE LIGHT COMPANY
By:
-----------------------------------
Title:
--------------------------------
[OWNER PARTICIPANT]
By:
-----------------------------------
[Name and Title of Authorized
Representative of Owner Participant]
---------------
* To be included if the Maximum Credit Amount as reduced by the Reduction
Amount is less than the highest Maximum Drawing Amount (set forth in Schedule II
to the Letter of Credit) for any day occurring after the date of this
Certificate.
<PAGE>
EXHIBIT 2
to Exhibit A
NOTICE REQUESTING ADJUSTMENTS
TO MAXIMUM DRAWING AMOUNTS
(paragraph 4(e))
[Date]
Swiss Bank Corporation,
New York Branch
222 Broadway
2nd Floor
New York, New York 10038
Attention: Documentary Department
Dear Sirs:
Reference is made to that certain Irrevocable Transferable Letter of
Credit bearing Letter of Credit No.____________________ dated [Date of Issuance]
(the "Letter of Credit"), which has been established by you in favor of [name of
Owner Participant] (the "Owner Participant").
The undersigned, a duly authorized representative of the Owner
Participant, hereby certifies that Modified Special Casualty Values have been
adjusted in accordance with the provisions of the Transaction Documents and the
amounts shown on Schedule II to the Letter of Credit should be modified, in
accordance with the terms of clause (e) of the fourth paragraph of the Letter of
Credit, to the amounts shown in Appendix A hereto.
The Letter of Credit is returned herewith and we request that you initial
and return the Letter of Credit with the revised Schedule II attached.
Capitalized terms used herein and not otherwise defined herein shall have
the meanings given to them in the Letter of Credit.
[OWNER PARTICIPANT]
By:
-----------------------------------
[Name and Title of Authorized
Representative of Owner Participant]
<PAGE>
EXHIBIT 3
to Exhibit A
DRAFT
(paragraph 7)
[Place]
[Date]
ON [Business Day of presentation if presented before 9:05 a.m., New York City
time; next Business Day if presented at or after 9:05 a.m.]
PAY TO U.S. $[not to exceed least of
(i) Maximum Available Credit
[Name of beneficiary] Amount, (ii) Maximum Drawing
Amount and (iii) in the case of
an OP Partial Draw, the Partial
Drawing Amount] DOLLARS,
[Insert wire instructions]
FOR VALUE RECEIVED AND CHARGE TO ACCOUNT OF LETTER OF CREDIT
NO.__________________ OF
Swiss Bank Corporation,
New York Branch
222 Broadway
2nd Floor
New York, New York 10038
[OWNER PARTICIPANT]
By:
-----------------------------------
[Name and Title of Authorized
Representative of Owner Participant]
<PAGE>
EXHIBIT 4
to Exhibit A
CERTIFICATE FOR AN OP PARTIAL DRAW
(paragraph 7)
The undersigned, a duly authorized representative of [name of Owner
Participant] (the "Owner Participant"), as beneficiary under that certain
Irrevocable Transferable Letter of Credit No._____________ dated [Date of
Issuance], established by Swiss Bank Corporation, New York Branch, as LOC Bank
(the "LOC Bank"), and issued pursuant to that certain Reimbursement Agreement,
dated as of October 1, 1994 (the "Reimbursement Agreement"), among Duquesne
Light Company (the "Company"), the LOC Bank, Union Bank and Swiss Bank
Corporation, New York Branch, as Administrating Banks, and the banks named
therein as Participating Banks (the "Letter of Credit"), hereby certifies as
follows:
1. A Partial Drawing Event has occurred and is continuing.
2. The amount of the accompanying draft does not exceed the least of (a)
the Maximum Available Credit Amount, as determined in accordance with the terms
of the Letter of Credit, (b) the Maximum Drawing Amount available under the
Letter of Credit on the date hereof, as determined in accordance with the terms
of the Letter of Credit and (c) the Partial Drawing Amount.
Capitalized terms used herein and not otherwise defined herein shall have
the meanings given to them in the Letter of Credit.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
__________________, 19__.
[OWNER PARTICIPANT]
By:
-----------------------------------
[Name and Title of Authorized
Representative of Owner Participant]
<PAGE>
EXHIBIT 5
to Exhibit A
CERTIFICATE FOR AN OP FINAL DRAW
(paragraph 7)
The undersigned, a duly authorized representative of [name of Owner
Participant] (the "Owner Participant"), as beneficiary under that certain
Irrevocable Transferable Letter of Credit No.______________ dated [Date of
Issuance], established by Swiss Bank Corporation, New York Branch, as LOC Bank
(the "LOC Bank"), and issued pursuant to that certain Reimbursement Agreement,
dated as of October 1, 1994 (the "Reimbursement Agreement"), among Duquesne
Light Company (the "Company"), the LOC Bank, Union Bank and Swiss Bank
Corporation, New York Branch, as Administrating Banks, and the banks named
therein as Participating Banks (the "Letter of Credit"), hereby certifies as
follows:
1. [Insert one of the following: A Deemed Loss Event has occurred and is
continuing./ An Event of Loss has occurred and is continuing./ An Event of
Default has occurred and is continuing./ An FL Special Purchase Event has
occurred and the FL Special Purchase Price has not been paid./ A PA Special
Purchase Event has occurred and the PA Special Purchase Price has not been paid.
Notice has been given by the LOC Bank of a Date of Early Termination and such
Date of Early Termination is on or after the date hereof.]
2. The LOC Bank has not heretofore paid an OP Final Draw under the
Letter of Credit.
3. The amount of the accompanying draft does not exceed the lesser of
(i) the Maximum Available Credit Amount and (ii) the Maximum Drawing Amount
available under the Letter of Credit on the date hereof, each as determined in
accordance with the terms of the Letter of Credit.
Capitalized terms used herein and not otherwise defined herein shall have
the meanings given to them in the Letter of Credit and Schedule I thereto.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
_______________, 19__.
[OWNER PARTICIPANT]
By:
-------------------------------------
[Name and Title of Authorized
Representative of Owner Participant]
<PAGE>
EXHIBIT 6
to Exhibit A
NOTICE OF TRANSFER AND ASSIGNMENT
(paragraph 10)
[Date]
Swiss Bank Corporation,
New York Branch
222 Broadway
2nd Floor
New York, New York 10038
Attention: Documentary Department
Dear Sirs:
Reference is made to the certain Irrevocable Transferable Letter of Credit
bearing Letter of Credit No. ___________________ dated [Date of Issuance] (the
"Letter of Credit"), which has been established by you in favor of [name of
Owner Participant] (the "Transferor").
The Transferor has transferred and assigned (and hereby confirms to you
the said transfer and assignment) all of its rights in and under the Letter of
Credit to [name of Transferee] (the "Transferee") and confirms that the
Transferor no longer has any rights under or interest in the Letter of Credit.
The Letter of Credit is returned herewith, and we request that you issue
an irrevocable transferable letter of credit in the name of the Transferee and
providing for notices to be sent to the Transferee at the address set forth
below and in all other respects identical to the Letter of Credit.
The Transferee hereby certifies that it is a duly authorized transferee
under the terms of the Letter of Credit and is accordingly entitled, upon
presentation of the drafts and certificates called for therein, to receive
<PAGE>
2
payment thereunder. Notices under the Letter of Credit should be sent to us as
follows: [Name], [Address], [Telex Number] [Answerback], Attention:
[NAME OF TRANSFEROR]
By:
-------------------------------------
[Name and Title of Authorized
Representative of Transferor]
[NAME OF TRANSFEREE]
By:
-------------------------------------
[Name and Title of Authorized
Representative of Transferee]
<PAGE>
EXHIBIT 7
to Exhibit A
NOTICE OF SURRENDER AND REQUEST FOR
CANCELLATION OF LETTER OF CREDIT
("Termination Date" - Schedule I)
[Date]
Swiss Bank Corporation,
New York Branch
222 Broadway
2nd Floor
New York, New York 10038
Attention: Documentary Department
Dear Sirs:
Reference is made to that certain Irrevocable Transferable Letter of
Credit bearing Letter of Credit No.________________ dated [Date of Issuance]
(the "Letter of Credit"), which has been established by you in favor of [name of
Owner Participant] (the "Owner Participant").
The undersigned, a duly authorized representative of the Owner
Participant, hereby surrenders the Letter of Credit for immediate cancellation.
The Letter of Credit is enclosed herewith, and we request that you cancel the
Letter of Credit as of the date hereof.
Capitalized terms used herein and not otherwise defined herein shall have
the meanings given to them in the Letter of Credit.
[OWNER PARTICIPANT]
By:
-------------------------------------
[Name and Title of Authorized
Representative of Owner Participant]
<PAGE>
SCHEDULE I
to Exhibit A
The following terms shall have the following meanings for the purposes of
the Letter of Credit and the Schedules and Exhibits thereto. Terms defined in
the Letter of Credit shall have the meanings given to them therein. Terms
defined by reference to the Participation Agreement shall have the meanings
assigned to them therein from time to time unless otherwise stated.
"Administrating Banks" has the meaning assigned to it in the Reimbursement
Agreement.
"Applicable Law" has the meaning assigned to it in the Participation
Agreement.
"Bank" means Swiss Bank Corporation, New York Branch.
"Basic Rent" has the meaning assigned to it in the Participation
Agreement.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in Los Angeles, California or New York, New York are
authorized or required by law to close.
"Code" means the United States Internal Revenue Code of 1986, as amended
from time to time, and the applicable regulations thereunder.
"Controlled Group" means all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
which, together with the Company, are treated as a single employer under Section
414(b) or 414(c) of the Code.
"Date of Issuance" means October ___, 1994.
"Deemed Loss Event" has the meaning specified in the Participation
Agreement as in effect on the Date of Issuance.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
<PAGE>
2
"Event of Default" has the meaning assigned to it in the Facility Lease as
in effect on the Date of Issuance.
"Event of Loss" has the meaning specified in the Participation Agreement
as in effect on the Date of Issuance.
"Facility Leases" has the meaning specified in the Reimbursement
Agreement.
"FL Special Purchase Event" means the receipt by the Owner Participant
from the Company of an offer to purchase pursuant to the second proviso of
Section 15(x) of the Facility Lease as in effect on the Date of Issuance.
"FL Special Purchase Price" means the purchase consideration payable
pursuant to the second proviso of Section 15(x) of the Facility Lease as in
effect on the Date of Issuance.
"Funding Corp" has the meaning assigned to it in the Participation
Agreement.
"Governmental Action" has the meaning assigned to it in the Participation
Agreement.
"Indebtedness" of any Person means, at any date, without duplication, all
(i) indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, (ii) obligations under leases that shall be, in
accordance with generally accepted accounting principles, recorded as capital
leases in respect of which such Person is liable as lessee, (iii) obligations of
such Person under direct or indirect guaranties in respect of, and obligations
(contingent or otherwise) to purchase or otherwise acquire, or otherwise to
assure a creditor against loss in respect of, indebtedness or obligations of
others of the kinds referred to in clauses (i) and (ii) above, (iv) liabilities
in respect of unfunded vested benefits under Plans, and (v) withdrawal liability
incurred under ERISA by such Person or any of its affiliates to any
Multiemployer Plan.
"Maximum Available Credit Amount" shall mean an amount equal to the
initial Maximum Credit Amount, as such amount may be modified from time to time
in accordance with the fourth paragraph of the Letter of Credit.
"Maximum Drawing Amount" means, with respect to a Date of Drawing, the
amount shown opposite the period including such Date of Drawing in the Table of
Maximum Drawing Amounts attached as Schedule
<PAGE>
3
II to the Letter of Credit, as such amounts may be modified from time to time in
accordance with the fourth paragraph of the Letter of Credit (collectively, the
"Maximum Drawing Amounts").
"Modified Special Casualty Value" has the meaning assigned to it in the
Participation Agreement.
"Multiemployer Plan" means a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA.
"Partial Drawing Amount" means, with respect to any Partial Drawing Event,
an amount not exceeding the amount of the Basic Rent due and unpaid upon which
such Partial Drawing Event is based.
"Partial Drawing Event" means an Event of Default under Section 15(i)(y)
of the Facility Lease relating to nonpayment of Basic Rent.
"Participation Agreement" means the Participation Agreement dated as of
September 15, 1987, among the Owner Participant, the banks named therein as
Original Loan Participants, Funding Corp, The First National Bank of Boston as
Owner Trustee, The Bank of New York (as successor to Irving Trust Company) as
Indenture Trustee and the Company, as amended by Amendment No. 1 dated as of
December 1, 1987, Amendment No. 2 dated as of March 1, 1988, Amendment No. 3
dated as of November 15, 1992, and Amendment No. 4 dated as of October 13, 1994.
"Participating Banks" has the meaning assigned to it in the Reimbursement
Agreement.
"PA Special Purchase Event" means the receipt by the Owner Participant
from the Company of notice of its intent to purchase pursuant to paragraph three
of Section 10(b)(3)(ix) of the Participation Agreement as in effect on Date of
Issuance.
"PA Special Purchase Price" means the purchase consideration payable
pursuant to paragraph three of Section 10(b)(3)(ix) of the Participation
Agreement as in effect on the Date of Issuance.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
<PAGE>
4
"Plan" means at any time an employee pension benefit plan covered by Title
IV of ERISA or subject to the minimum funding standards under Section 412 of the
Code that is either (i) maintained by a member of the Controlled Group for
employees of a member of the Controlled Group or (ii) maintained pursuant to a
collective bargaining agreement or any other arrangement under which more than
one employer makes contributions and to which a member of the Controlled Group
is then making or accruing an obligation to make contributions or has within the
preceding five plan years made contributions.
"Reimbursement Agreement" means the Reimbursement Agreement, dated as of
October 1, 1994, among the Company, the Bank, as LOC Bank, Union Bank and the
Bank, as Administrating Banks, and the banks named therein as Participating
Banks, as the same may from time to time be amended, supplemented or modified in
accordance with its terms.
"Subsidiary" means any corporation or other entity of which securities or
other ownership interests having ordinary voting power to elect a majority of
the Board of Directors or other persons performing similar functions are at the
time directly or indirectly owned by the Company or one or more Subsidiaries, or
by the Company and one or more Subsidiaries.
"Termination Event" means (i) a "reportable event" as described in Section
4043 of ERISA and the regulations issued thereunder (other than a "reportable
event" not subject to the provision for 30-day notice to the PBGC under such
regulations), or (ii) the withdrawal of the Company or any member of the
Controlled Group from a Plan during a plan year in which it was a "substantial
employer" as defined in Section 4001(a)(2) of ERISA, or (iii) the filing of a
notice of intent to terminate a Plan or the treatment of a Plan amendment as a
termination under Section 4041 of ERISA, or (iv) the institution of proceedings
to terminate a Plan by the PBGC, or (v) any other event or condition that might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Plan.
"Transaction Documents" has the meaning specified in the Reimbursement
Agreement.
"Unfunded Vested Liabilities" means, with respect to any Plan at any time,
the amount (if any) by which (i) the present value of all vested nonforfeitable
benefits under such Plan exceeds (ii) the fair market value of all Plan assets
allocable to such benefits, all determined as of the then most recent valuation
date for such Plan, but only to the extent that such excess
<PAGE>
5
represents a potential liability of a member of the Controlled Group to the PBGC
or the Plan under Title IV of ERISA.
"Unit 2" has the meaning assigned to it in the Participation
Agreement.
<PAGE>
SCHEDULE II
to Exhibit A
TABLE OF MAXIMUM DRAWING AMOUNTS
Maximum
Drawing
Applicable Period Amount
----------------- ---------------
From _____________
to and including _____________
From ________________
to and including _____________
From ________________
to and including _____________
From ________________
to and including _____________
From ________________
to and including _____________
From ________________
to and including _____________
From ________________
to and including _____________
<PAGE>
SCHEDULE III
to Exhibit A
The Bank shall have the right upon the occurrence of any of the events
listed below to terminate the Letter of Credit in accordance with the terms of
the Letter of Credit:
(A) the Company shall fail to pay when due any amount payable under
Section 2 of the Reimbursement Agreement or fail to pay within 5 Business Days
after becoming due any amount payable under Section 3 of the Reimbursement
Agreement; or
(B) the Company shall fail to make, or cause to be made, one or more
payments specified in Section 15(i) of any of the Facility Leases equal to or
exceeding $1,000,000 in the aggregate within the period specified in that
Section for such payment or payments; or
(C) the Company shall fail to observe or perform any covenant or agreement
contained in the Reimbursement Agreement (other than those covered by clause (A)
above) for 30 days after written notice thereof has been given to the Company by
the Bank, either Administrating Bank or any Participating Bank; or
(D) any representation, warranty, certification or statement made by the
Company in the Reimbursement Agreement or in any certificate, financial
statement or other document delivered pursuant to the Reimbursement Agreement
shall prove to have been incorrect or misleading in any material respect when
made; or
(E) any material provision of the Reimbursement Agreement shall at any
time for any reason cease to be valid and binding upon the Company, or shall be
declared to be null and void, or the validity or enforceability thereof shall be
contested by the Company or any governmental agency or authority, or the Company
shall deny that it has any or further liability or obligation under the
Reimbursement Agreement; or
(F) the Company or any Subsidiary shall fail to make any payment on any
Indebtedness, or to make any payment of any interest or premium thereon, when
due (whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise) and such failure shall continue after the applicable grace period, if
any, specified in any agreement or instrument relating to such Indebtedness, or
any other default under any agreement or
<PAGE>
2
instrument relating to any Indebtedness, or any other event, shall occur and
shall continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such failure, default or event is to
accelerate, or to permit the acceleration of (other than by a special mandatory
redemption provision in connection with pollution control or similar tax-exempt
bonds unrelated to any default or event of default with respect thereto), the
maturity of any Indebtedness the aggregate principal amount of which is greater
than $25,000,000, or any Indebtedness the aggregate principal amount of which is
greater than $25,000,000 shall be declared due and payable, or required to be
prepaid (other than by a special mandatory redemption provision in connection
with pollution control or similar tax-exempt bonds unrelated to any default or
event of default with respect thereto or a regularly scheduled required
prepayment) prior to the stated maturity thereof; or
(G) the Company or any Subsidiary shall (i) apply for or consent to the
appointment of a receiver, trustee, liquidator or custodian or the like of
itself or of all or any substantial part of its property, (ii) admit in writing
its inability to pay its debts generally as they become due, (iii) make a
general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt
or insolvent, or (v) commence a voluntary case under the Federal bankruptcy laws
of the United States of America or file a voluntary petition or answer seeking
reorganization, an arrangement with creditors or any order for relief or seeking
to take advantage of any insolvency law or file an answer admitting the material
allegations of a petition filed against it in any bankruptcy, reorganization or
insolvency proceeding; or corporate action shall be taken by it for the purpose
of effecting any of the foregoing, or if, without the application, approval or
consent of the Company, a proceeding shall be instituted in any court of
competent jurisdiction seeking in respect of the Company an adjudication in
bankruptcy, reorganization, dissolution, winding up or liquidation, a
composition or arrangement with creditors, a readjustment of debts, the
appointment of a trustee, receiver, liquidator or custodian or the like of the
Company or of all or any substantial part of its assets, or other like relief in
respect thereof under any bankruptcy or insolvency law and if such proceeding is
being contested by the Company in good faith, the same shall continue
undismissed, or pending and unstayed, for any period of sixty (60) consecutive
days; or
(H) any judgment or order for the payment of money exceeding any
applicable insurance coverage by more than $25,000,000 shall be rendered against
the Company or any Subsidiary and either (i) enforcement proceedings shall have
been commenced by any creditor upon such judgment or order or (ii) there shall
be any period of ten consecutive days during which
<PAGE>
3
a stay of enforcement of such judgment or order, by reason of a pending appeal
or otherwise, shall not be in effect; or
(I) any Termination Event with respect to a Plan shall have occurred, and,
30 days after notice thereof shall have been given to the Company by the Bank,
either Administrating Bank or any Participating Bank, (i) such Termination Event
(if correctable) shall not have been corrected and (ii) the then Unfunded Vested
Liabilities of such Plan exceed $5,000,000 (or, in the case of a Termination
Event involving the withdrawal of a "substantial employer" (as defined in
Section 4001(a)(2) of ERISA), the withdrawing employer's proportionate share of
such excess shall exceed such amount), or the Company or any member of the
Controlled Group as employer under a Multiemployer Plan shall have made a
complete or partial withdrawal from such Multiemployer Plan and the Plan sponsor
of such Multiemployer Plan shall have notified such withdrawing employer that
such employer has incurred a withdrawal liability in an annual amount exceeding
$5,000,000; or
(J) any change in Applicable Law or any Governmental Action (including,
but not limited to, the revocation or modification of any Governmental Action
previously secured) shall occur that has the effect of making the transactions
contemplated by the Reimbursement Agreement or the Transaction Documents
unauthorized, illegal or otherwise contrary to Applicable Law; or
(K) any event specified in Sections 15(vi), (vii) or (ix) of any of the
Facility Leases shall occur.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings given to them in the Letter of Credit.
<PAGE>
SCHEDULE IV
to Exhibit A
[Name of Owner Participant]
[Address]
Telex:______________________________
Answerback:_________________________
Telecopy:___________________________
Attention:__________________________
<PAGE>
EXHIBIT B
IRREVOCABLE TRANSFERABLE LETTER OF CREDIT
No.[ ]
[Date of Issuance]
[Owner Participant]
(the "Owner Participant")
[Address]
Attention: [ ]
[Designated General Partner],
individually and as a general
partner of [Owner Participant]
(the "Designated General Partner")
[Address]
Attention: [ ]
[Limited Partner], the limited
partner of the Owner Participant
(the "Limited Partner")
[Address]
Attention: [ ]
Dear Sirs:
1. We hereby establish, at the request of Duquesne Light Company (the
"Company"), in your favor, our Irrevocable Transferable Letter of Credit No.
[ ] (the "Letter of Credit"), in an amount not to exceed $[ ] (as such
amount may be reduced pursuant to the terms hereof, the "Maximum Credit
Amount"), effective immediately and expiring on the earliest of (i) 9:05 a.m.,
New York City time, on the Date of Early Termination (as hereinafter defined),
(ii) 3:00 p.m., New York City time, on the date on which the Designated General
Partner, on behalf of itself, the Owner Participant and the Limited Partner,
surrenders the Letter of Credit for cancellation to the Bank with a notice in
the form of Exhibit 14 to the Letter of Credit, (iii) 3:00 p.m., New York City
time, on the date on which the Bank pays an OP Final Draw (as hereinafter
defined), (iv) if the Bank pays a GP Draw (as
<PAGE>
2
hereinafter defined) and an LP Draw (as hereinafter defined), 3:00 p.m., New
York City time, on the date on which the Bank pays the second of such draws and
(v) 3:00 p.m., New York City time, on either (A) October 2, 1999 or (B) if a
draft and certificate, all in strict conformity with the terms and conditions of
the Letter of Credit, are presented after 9:05 a.m. but prior to 3:00 p.m., New
York City time, on October 2, 1999, the Business Day next succeeding October 2,
1999 (the "Termination Date"). Capitalized terms used herein and in Schedules
II, III and IV and Exhibits 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13 and 14
hereto shall have the meanings set forth in Schedule I hereto. This Letter of
Credit is issued in connection with the leasing of an undivided interest in
Beaver Valley Power Station Unit No. 2 to the Company pursuant to a Facility
Lease dated as of September 15, 1987, as amended by Amendment No. 1 dated as of
December 1, 1987, Amendment No. 2 dated as of November 15, 1992, and Amendment
No. 3 dated as of October 13, 1994 (as so amended, the "Facility Lease") between
the Company and The First National Bank of Boston, as Owner Trustee under a
trust agreement with the Owner Participant.
2. The Maximum Credit Amount and the Maximum Drawing Amounts may be
reduced at any time and from time to time upon receipt by us at the address for
presentation of documents set forth below of a copy of the instrument effecting
such reductions, signed by the Company and by each of you in the form of Exhibit
1 hereto (a "Reduction Certificate"). Upon receipt of such certificate, the
Maximum Credit Amount shall be automatically and permanently reduced by the
amount specified as the Reduction Amount in such Reduction Certificate (the
"Reduction Amount") and, if requested in such Certificate, the Maximum Drawing
Amounts shall be automatically and permanently reduced as specified in such
Reduction Certificate.
3. We hereby irrevocably authorize (a) the Designated General Partner,
on behalf of the Owner Participant, to draw on us, in accordance with the terms
and conditions hereinafter set forth for an OP Draw (as hereinafter defined), an
amount not in excess of the least of (i) the Maximum Drawing Amount applicable
to the date of such drawing (the "Date of Drawing"), as modified from time to
time in accordance with the next paragraph, (ii) the Maximum Available Credit
Amount, as modified in accordance with the next paragraph and (iii) in the case
of an OP Partial Draw (as hereinafter defined), the Partial Drawing Amount, (b)
the Limited Partner, for its own account, to draw on us, in accordance with the
terms and conditions hereinafter set forth for an LP Draw, an amount not in
excess of the lesser of (i) the LP Drawing Amount on the Date of Drawing and
(ii) the LP Credit Amount, as modified in accordance with the next paragraph,
and (c) the Designated General Partner, for its own account and on behalf of
<PAGE>
3
each other General Partner, to draw on us, in accordance with the terms and
conditions hereinafter set forth for a GP Draw, an amount not in excess of the
lesser of (i) the GP Drawing Amount on the Date of Drawing and (ii) the GP
Credit Amount, as modified in accordance with the next paragraph.
4. The Maximum Credit Amount, Maximum Drawing Amounts, the Maximum
Available Credit Amount, the GP Credit Amount and the LP Credit Amount shall be
modified from time to time as follows:
(a) upon receipt by us of a Reduction Certificate, (i) the Maximum
Available Credit Amount shall be permanently reduced by the Reduction
Amount set forth in such Reduction Certificate, (ii) if requested in such
Certificate, (A) the Maximum Drawing Amounts shall be permanently reduced
as specified in such Reduction Certificate, (B) the GP Credit Amount shall
be permanently reduced as specified in such Reduction Certificate and (C)
the LP Credit Amount shall be permanently reduced as set forth in such
Reduction Certificate; provided, however, that in no event shall (1) any
Maximum Drawing Amount (after giving effect to any such reduction) exceed
the Maximum Available Credit Amount (after giving effect to such
reduction); or (2) the aggregate of the GP Credit Amount and the LP Credit
Amount (in each case after giving effect to any such reduction) exceed the
Maximum Available Credit Amount (after giving effect to such reduction);
(b) upon payment by us of (i) each OP Partial Draw, GP Draw and LP
Draw under the Letter of Credit, (A) the Maximum Drawing Amount applicable
to each Date of Drawing subsequent to such payment shall be automatically
reduced by an amount equal to the amount of the drawing so paid and (B)
the Maximum Available Credit Amount shall be automatically reduced by an
amount equal to the amount of the drawing so paid, (ii) an OP Partial
Draw, (A) the GP Credit Amount shall be automatically reduced by an amount
equal to the product of (x) the GP Percentage and (y) the amount of the
drawing so paid and (B) the LP Credit Amount shall be automatically
reduced by an amount equal to the product of (x) the LP Percentage and (y)
the amount of the drawing so paid, (iii) a GP Draw, (A) the GP Credit
Amount shall be automatically reduced to zero and (B) the Maximum Credit
Amount shall be automatically reduced by the amount of such GP Draw so
paid and shall not be reinstated and (iv) an LP Draw, (A) the LP Credit
Amount shall be automatically reduced to zero and (B) the Maximum Credit
Amount shall be automatically reduced by the amount of such LP Draw so
paid and shall not be reinstated;
<PAGE>
4
(c) upon the application by us of amounts paid by the Company
pursuant to Section 2(b)(ii) of the Reimbursement Agreement to reimburse
any OP Partial Draw hereunder (as such application is allocated in
accordance with Section 2(d) of the Reimbursement Agreement), (i) the
Maximum Drawing Amount applicable to each Date of Drawing subsequent to
such application shall be automatically increased by the amount of such
payment(s) allocated as a reimbursement of drawings hereunder, (ii) the
Maximum Available Credit Amount shall be automatically increased by the
amount of such payment(s) allocated as a reimbursement of drawings
hereunder and (iii) the GP Credit Amount and the LP Credit Amount shall be
automatically increased, in the aggregate, by the amount of such payments
allocated as a reimbursement of drawings hereunder, with such amount being
distributed pro rata between the GP Credit Amount and the LP Credit Amount
in accordance with the GP Percentage and the LP Percentage; provided,
however, that the Maximum Available Credit Amount shall never exceed the
Maximum Credit Amount, the GP Credit Amount shall never exceed the product
of (x) the GP Percentage and (y) the Maximum Credit Amount and the LP
Credit Amount shall never exceed the product of (x) the LP Percentage and
(y) the Maximum Credit Amount;
(d) upon payment by us of an OP Final Draw under the Letter of
Credit, (i) the Maximum Drawing Amount applicable to each Date of Drawing
subsequent to such payment shall be automatically reduced to zero, (ii)
the Maximum Available Credit Amount shall be automatically reduced to zero
and (iii) each of the GP Credit Amount and the LP Credit Amount shall be
automatically reduced to zero, and all such amounts, in each case, shall
not be reinstated; and
(e) if adjustments are made to Modified Special Casualty Values,
corresponding adjustments shall be made to the Maximum Drawing Amounts
shown in Schedule II and to the GP Credit Amount and the LP Credit Amount
(as theretofore reduced pursuant to clause (a) or (b) above and, if
applicable, reinstated pursuant to clause (c) above); provided that
adjustments pursuant to this clause (e) shall be effective automatically
upon receipt by us of a notice from each of you in the form of Exhibit 2
hereto; and provided further that in no event shall (i) any Maximum
Drawing Amount, as adjusted, exceed the Maximum Available Credit Amount or
(ii) the aggregate of the GP Credit Amount and the LP Credit Amount, as
adjusted, exceed the Maximum Available Credit Amount, as adjusted.
<PAGE>
5
5. Upon return of this Letter of Credit together with a notice in the
form of Exhibit 2 hereto, we will promptly initial and attach to this Letter of
Credit a revised Schedule II reflecting the adjustments contained in such notice
and return this Letter of Credit to you with such revised Schedule attached.
6. Upon the application by us of amounts paid by the Company pursuant to
Section 2(b)(ii) of the Reimbursement Agreement to reimburse any OP Partial Draw
hereunder, we will give each of you prompt (and in any event within three
Business Days of such application) written notice of such application and the
amount thereof. Such notice shall be given in accordance with the provisions
set forth in the eleventh paragraph of this Letter of Credit.
7. Funds under this Letter of Credit are available to you as follows:
(1) to the Owner Participant, either (a) against presentation on or
prior to the Termination Date, and provided there has not been an OP Final
Draw, an LP Draw or a GP Draw and provided a written notice indicating the
Date of Early Termination (as hereinafter defined) has not been delivered
to the Owner Participant, of (i) a draft of the Designated General
Partner, on behalf of the Owner Participant, in the form of Exhibit 3
attached hereto and (ii) a completed certificate signed by the Designated
General Partner in the form of Exhibit 4 hereto (an "OP Partial Draw") or
(b) against presentation on or prior to the Termination Date, and provided
there has not been an LP Draw or a GP Draw, of (i) a draft of the
Designated General Partner, on behalf of the Owner Participant, in the
form of Exhibit 5 attached hereto and (ii) a completed certificate signed
by the Designated General Partner, on behalf of the Owner Participant, in
the form of Exhibit 6 hereto (an "OP Final Draw") (each of an OP Partial
Draw and an OP Final Draw are sometimes referred to herein as an "OP
Draw");
(2) to the Limited Partner for its own account, against presentation
on or prior to the Termination Date, and provided there has not been an OP
Final Draw, of (a) a draft of the Limited Partner in the form of Exhibit 7
attached hereto and (b) a completed certificate signed by the Limited
Partner in the form of Exhibit 8 hereto (an "LP Draw"); and
(3) to the Designated General Partner for its own account and on
behalf of each other General Partner, against presentation on
<PAGE>
6
or prior to the Termination Date, and provided there has not been an OP
Final Draw, of (a) a draft of the Designated General Partner in the form
of Exhibit 9 attached hereto and (b) a completed certificate signed by the
Designated General Partner in the form of Exhibit 10 hereto (a "GP Draw").
Each such draft and certificate shall be dated the date of presentation and
shall be presented at our office located at 222 Broadway, 2nd Floor, New York,
New York 10038, Attention: Documentary Department (or at any other office in New
York City which may be designated by us by written notice (given in the manner
set forth in the eleventh paragraph hereof) delivered to you at least 15 days
prior to the applicable Date of Drawing). We agree that, so long as this Letter
of Credit is in effect, we will maintain an office in New York City, where such
presentation may be made. If we receive such draft and certificate at such
office, all in strict conformity with the terms and conditions of this Letter of
Credit, prior to 9:05 a.m., New York City time, on any Business Day, we will
effect payment of the draft at or before noon, New York City time, on the same
Business Day. If we receive such draft and certificate at such office, all in
strict conformity with the terms and conditions of this Letter of Credit, at or
after 9:05 a.m., New York City time, on any Business Day, we will effect payment
of the draft at or before noon, New York City time, on the next Business Day.
Upon receipt of a draft and certificate which are not in strict conformity with
the terms and conditions of this Letter of Credit, we will promptly (and in any
event within three Business Days of such receipt) notify the Owner Participant,
Designated General Partner or Limited Partner on whose behalf such nonconforming
draft and certificate were presented of such nonconformity and the reason
therefor; provided that our failure to so notify such Owner Participant,
Designated General Partner or Limited Partner, as the case may be, of such
nonconformity and the reason therefor shall not amend, modify, extend or
otherwise affect the rights of such Owner Participant, Designated General
Partner or Limited Partner, as applicable, hereunder and shall not create any
additional rights hereunder; and provided, further that, notwithstanding the
generality of the foregoing, any such failure shall not have the effect of
extending the time during which such Owner Participant, Designated General
Partner or Limited Partner or any of them may draw hereunder or converting such
nonconforming draft and certificate into a draft and certificate in strict
conformity with the terms and conditions of this Letter of Credit.
8. Notwithstanding the generality of the foregoing and the undertakings
set forth in the preceding paragraph, (a) upon receipt of (i) a draft and
certificate at such office for an OP Final Draw and (ii) a draft and certificate
at such office for any or all of (A) an LP Draw, (B) a GP Draw or (C) an OP
Partial Draw, all to be honored on the same Business Day in
<PAGE>
7
accordance with the terms set forth above, we will pay only the OP Final Draw
and this Letter of Credit will terminate, in accordance with its terms, upon
such payment, and (b) upon receipt of (i) a draft and certificate at such office
for an OP Partial Draw and (ii) a draft and certificate at such office for
either or both of (A) an LP Draw or (B) a GP Draw, all to be honored on the same
Business Day in accordance with the terms set forth above, we will pay only such
LP Draw and/or GP Draw, as the case may be.
9. Payments pursuant to an OP Partial Draw or an OP Final Draw will be
made partially to the Designated General Partner for its own account and the
account of each other General Partner and partially to the Limited Partner (in
the amounts specified in the draft presented in connection with such OP Partial
Draw or OP Final Draw, as applicable); payment pursuant to a GP Draw will be
made to the Designated General Partner, for its own account and the account of
each other General Partner; and payments pursuant to an LP Draw will be made to
the Limited Partner. As to each of you, payment due to you under this Letter of
Credit, as provided above, shall be made by wire transfer of federal funds to
your account specified in the draft presented in connection with such OP Partial
Draw, OP Final Draw, GP Draw or LP Draw, as applicable.
10. Upon payment of an LP Draw, we will give prompt (and in any event
within three Business Days of such payment) written notice of such payment to
the Designated General Partner, and upon payment of a GP Draw or an OP Draw, we
will give prompt (and in any event within three Business Days of such payment)
written notice of such payment to the Limited Partner.
11. Notwithstanding any other provision of this Letter of Credit, we
shall have the right, upon the occurrence of any of the events listed in
Schedule III hereto, to terminate this Letter of Credit by delivering to each of
you a written notice indicating the date of such termination (the "Date of Early
Termination"); provided that on or before the Date of Early Termination (a) if
there shall not have been a drawing pursuant to (b) or (c) below, the Designated
General Partner, on behalf of the Owner Participant, will have the right to draw
once, as an OP Final Draw, an amount not in excess of the lesser of (i) the
Maximum Available Credit Amount and (ii) the Maximum Drawing Amount, (b) if
there shall not have been a drawing pursuant to (a) above and without regard to
whether there shall have been a drawing pursuant to (c) below, the Limited
Partner, for its own account, will have the right to draw once, as an LP Draw,
an amount not in excess of the lesser of (i) the LP Credit Amount and (ii) the
LP Drawing Amount, and (c) if there shall not have been a drawing pursuant to
(a) above and without regard to whether there shall have been a drawing pursuant
to (b) above, the
<PAGE>
8
Designated General Partner, for its own account and the account of each other
General Partner, will have the right to draw once, as a GP Draw, an amount not
in excess of the lesser of (i) the GP Credit Amount and (ii) the GP Drawing
Amount, in each case in accordance with the procedures described herein; and
provided further, that upon the delivery of such written notice indicating the
Date of Early Termination to the Owner Participant, the right of the Designated
General Partner to make an OP Partial Draw hereunder shall automatically
terminate. The written notices referred to in the preceding sentence shall be
given by telex or facsimile transmission to you at the addresses specified in
Schedule IV hereto (or to such other addresses or telex or facsimile numbers
designated by any of you by written notice delivered to us at least 15 days
prior to the notice of early termination) and shall be effective upon receipt of
the appropriate answerback or confirmation of the facsimile transmission. we
will also forward a copy of such notice by overnight delivery service to the
addresses set forth in Schedule IV hereto (or to such other address as
aforesaid). The Date of Early Termination specified in such written notice
shall be:
(a) in the case of events specified in paragraphs A and G of Schedule
III, not earlier than ten days after such notice is given; and
(b) in the case of all other events specified in Schedule III, not
earlier than 30 days after such notice is given.
12. Except as set forth below, this Letter of Credit shall be governed by
the Uniform Customs and Practice for Documentary Credits, 1993 Revision
(revision effective January 1, 1994), International Chamber of Commerce
Publication No. 500, as amended, supplemented, revised or restated, and, as to
matters not covered therein, be governed by the laws of the State of New York,
including without limitation the Uniform Commercial Code as in effect in such
State. Communications with respect to this Letter of Credit shall be in writing
(including telecopy) and shall be addressed to us at 222 Broadway, 2nd Floor,
New York, New York 10038, Attention: Documentary Department, and shall
specifically refer to the number of this Letter of Credit.
13. Notwithstanding Article 54 of the Uniform Customs and Practice for
Documentary Credits referred to above, this Letter of Credit may be transferred
and assigned by any beneficiary in its entirety (but not in part) as to such
beneficiary's interest hereunder more than once. Upon receipt by us at the
address for presentation of documents set forth above of a copy of the
instrument effecting either such transfer and assignment, signed by the
transferor and by the transferee, in the case of a transfer by the Owner
<PAGE>
9
Participant, in the form of Exhibit 11 hereto, and in the case of a transfer by
the Designated General Partner, in the form of Exhibit 12 hereto, and in the
case of a transfer by the Limited Partner, in the form of Exhibit 13 hereto,
then, in such case, we will, upon surrender of this Letter of Credit, issue an
irrevocable transferable letter of credit in the names of the transferee and
each of you who is not such a transferor and providing for notices to be sent to
such transferee at the address set forth therein and in all other respects
identical to this Letter of Credit, and the transferee, instead of the
transferor, shall, without necessity of further act, be entitled to all the
benefits of, and rights under, this Letter of Credit in the transferor's place.
14. Any drawing under this Letter of Credit will be paid from the general
funds of the Bank and not directly or indirectly from funds or collateral
deposited with or for the account of the Bank by the Company, or pledged with or
for the account of the Bank by the Company, and the Bank will seek reimbursement
for payments made pursuant to a drawing under this Letter of Credit only after
such payments have been made.
15. This Letter of Credit (including Schedules I, II, III and IV, and
Exhibits 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13 and 14 hereto) sets forth in
full our undertaking, and such undertaking shall not in any way be modified,
amended, amplified or limited by reference to any document, instrument or
agreement referred to herein, except only Schedules I, II, III and IV and
Exhibits 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13 and 14 hereto and the notices
referred to herein; and any such reference shall not be deemed to incorporate
herein by reference any document, instrument or agreement except as set forth
above.
Very truly yours,
SWISS BANK CORPORATION,
acting through its New York Branch
By:
----------------------------------------
Title:
By:
----------------------------------------
Title:
<PAGE>
EXHIBIT 1
to Exhibit B
REDUCTION CERTIFICATE
(paragraph 2)
[Date]
Swiss Bank Corporation,
New York Branch
222 Broadway
2nd Floor
New York, New York 10038
Attention: Documentary Department
Dear Sirs:
Reference is made to that certain Irrevocable Transferable Letter of
Credit bearing Letter of Credit No. ___________________ dated [Date of Issuance]
(the "Letter of Credit"), which has been established by you in favor of [name of
Owner Participant] (the "Owner Participant"), [name of Designated General
Partner] (the "Designated General Partner") and [name of Limited Partner] (the
"Limited Partner").
We hereby request that the Maximum Credit Amount be reduced by $[ ]
(the "Reduction Amount").
[We hereby request that (i) the Maximum Drawing Amounts be reduced to the
amounts set forth in Appendix A hereto, (ii) the GP Credit Amount be reduced to
$____________ and (iii) the LP Credit Amount be reduced to $____________.]*
* To be included if the Maximum Credit Amount as reduced by the Reduction
Amount is less than the highest Maximum Drawing Amount (set forth in Schedule
II to the Letter of Credit) for any day occurring after the date of this
Certificate.
<PAGE>
2
Capitalized terms used herein and not otherwise defined herein shall have
the meanings given to them in the Letter of Credit.
DUQUESNE LIGHT COMPANY
By:
----------------------------------
Title:
-------------------------------
[OWNER PARTICIPANT]
By: [DESIGNATED GENERAL PARTNER],
as Designated General Partner
By:
----------------------------------
[Name and Title of Authorized
Representative of Designated General
Partner]
ACKNOWLEDGED AND
AGREED TO:
[DESIGNATED GENERAL PARTNER]
By:
----------------------------------------
[Name and Title of Authorized
Representative of Designated
General Partner]
[LIMITED PARTNER]
By:
---------------------------------------
[Name and Title of Authorized
Representative of Limited Partner]
<PAGE>
EXHIBIT 2
to Exhibit B
NOTICE REQUESTING ADJUSTMENTS
TO MAXIMUM DRAWING AMOUNTS
(paragraph 4(e))
[Date]
Swiss Bank Corporation,
New York Branch
222 Broadway
2nd Floor
New York, New York 10038
Attention: Documentary Department
Dear Sirs:
Reference is made to that certain Irrevocable Transferable Letter of
Credit bearing Letter of Credit No._____________ dated [Date of Issuance] (the
"Letter of Credit"), which has been established by you in favor of [name of
Owner Participant), [name of Designated General Partner] (the "Designated
General Partner") and [name of Limited Partner] (the "Limited Partner").
The undersigned, a duly authorized representative of the Designated
General Partner, hereby certifies that (i) Modified Special Casualty Values have
been adjusted in accordance with the provisions of the Transaction Documents and
the amounts shown on Schedule II to the Letter of Credit should be modified, in
accordance with the terms of clause (e) of the fourth paragraph of the Letter of
Credit, to the amounts shown in Appendix A hereto, (ii) the GP Credit Amount
should be $______________ and (iii) the LP Credit Amount should be
$________________.
The Letter of Credit is returned herewith and we request that you initial
and return the Letter of Credit with the revised Schedule II attached.
<PAGE>
2
Capitalized terms used herein and not otherwise defined herein shall have
the meanings given to them in the Letter of Credit.
[OWNER PARTICIPANT]
By: [DESIGNATED GENERAL PARTNER],
as Designated General Partner
By:
------------------------------------
[Name and Title of Authorized
Representative of Designated General
Partner]
ACKNOWLEDGED AND
AGREED TO:
[DESIGNATED GENERAL PARTNER]
By:
--------------------------------------
[Name and Title of Authorized
Representative of Designated
General Partner]
[LIMITED PARTNER]
By:
--------------------------------------
[Name and Title of Authorized
Representative of Designated
General Partner]
<PAGE>
EXHIBIT 3
to Exhibit B
DRAFT FOR AN OP PARTIAL DRAW
(paragraph 7(1))
[Place]
[Date]
ON [Business Day of presentation if presented before 9:05 a.m., New York City
time; next Business Day if presented at or after 9:05 a.m.]
1) PAY TO U.S. $[not to exceed the least
of (i) GP Credit Amount and
[Name of Designated (ii) GP Drawing Amount and
General Partner] (iii) the product of
(A) the GP Percentage and
(B) the Partial Drawing
Amount] DOLLARS,
[Insert wire instructions]
2) PAY TO U.S. $[not to exceed the least
of (i) LP Credit Amount and
[Name of Limited (ii) LP Drawing Amount and
Partner] (iii) the product of
(A) the LP Percentage and
(B) the Partial Drawing
Amount] DOLLARS,
[Insert wire instructions]
<PAGE>
2
FOR VALUE RECEIVED AND CHARGE TO ACCOUNT OF LETTER OF CREDIT NO._____________OF
Swiss Bank Corporation,
New York Branch
222 Broadway
2nd Floor
New York, New York 10038
[OWNER PARTICIPANT]
By: [DESIGNATED GENERAL PARTNER],
as Designated General Partner
By:
-------------------------------------
[Name and Title of Authorized
Representative of Designated
General Partner]
<PAGE>
EXHIBIT 4
to Exhibit B
CERTIFICATE FOR AN OP PARTIAL DRAW
(paragraph 7(1))
The undersigned, a duly authorized representative of [name of Designated
General Partner] (the "Designated General Partner"), a general partner of [name
of Owner Participant] (the "Owner Participant"), as one of the beneficiaries
under that certain Irrevocable Transferable Letter of Credit
No.______________________________ dated [Date of Issuance], established by Swiss
Bank Corporation, New York Branch, as LOC Bank (the "LOC Bank"), and issued
pursuant to that certain Reimbursement Agreement, dated as of October 1, 1994
(the "Reimbursement Agreement"), among Duquesne Light Company (the "Company"),
the LOC Bank, Union Bank and Swiss Bank Corporation, New York Branch, as
Administrating Banks, and the banks named therein as Participating Banks (the
"Letter of Credit"), hereby certifies as follows:
1. A Partial Drawing Event has occurred and is continuing.
2. The aggregate amount of the accompanying draft does not exceed the
least of (a) the Maximum Available Credit Amount, as determined in accordance
with the terms of the Letter of Credit, (b) the Maximum Drawing Amount available
under the Letter of Credit on the date hereof, as determined in accordance with
the terms of the Letter of Credit and (c) the Partial Drawing Amount.
Capitalized terms used herein and not otherwise defined herein shall have
the meanings given to them in the Letter of Credit.
IN WITNESS WHEREOF, each of the undersigned has executed this Certificate
as of ____________, 19__.
[OWNER PARTICIPANT]
By: [DESIGNATED GENERAL PARTNER],
as Designated General Partner
By:
---------------------------------------------------
[Name and Title of Authorized Representative
of Designated General Partner]
<PAGE>
EXHIBIT 5
to Exhibit B
DRAFT FOR AN OP FINAL DRAW
(paragraph 7(1))
[Place]
[Date]
ON [Business Day of presentation if presented before 9:05 a.m., New York City
time; next Business Day if presented at or after 9:05 a.m.]
1) PAY TO U.S. $[not to exceed lesser of (i) GP
[Name of Designated Credit Amount and (ii) GP General
Partner] Drawing Amount] DOLLARS,
[Insert wire instructions]
2) PAY TO U.S. $[not to exceed lesser of (i) LP
[Name of Limited Credit Amount and (ii) LP Drawing
Partner] Amount] DOLLARS,
[Insert wire instructions]
FOR VALUE RECEIVED AND CHARGE TO ACCOUNT OF LETTER OF CREDIT
NO.____________________________ OF
Swiss Bank Corporation,
New York Branch
222 Broadway
2nd Floor
New York, New York 10038
[OWNER PARTICIPANT]
By: [DESIGNATED GENERAL PARTNER],
as Designated General Partner
By:
----------------------------------
[Name and Title of Authorized
Representative of Designated
General Partner]
<PAGE>
EXHIBIT 6
to Exhibit B
CERTIFICATE FOR AN OP FINAL DRAW
(paragraph 7(1))
The undersigned, a duly authorized representative (as indicated below) of
[name of Designated General Partner] (the "Designated General Partner") a
general partner of [name of Owner Participant] (the "Owner Participant"), as one
of the beneficiaries under that certain Irrevocable Transferable Letter of
Credit No.__________________ dated [the Date of Issuance], established by Swiss
Bank Corporation, New York Branch, as LOC Bank (the "LOC Bank"), and issued
pursuant to that certain Reimbursement Agreement, dated as of October 1, 1994
(the "Reimbursement Agreement"), among Duquesne Light Company (the "Company"),
the LOC Bank, Union Bank and Swiss Bank Corporation, New York Branch, as
Administrating Banks, and the banks named therein as Participating Banks (the
"Letter of Credit"), hereby certifies as follows:
1. [Insert one of the following: A Deemed Loss Event has occurred and is
continuing./ An Event of Loss has occurred and is continuing./ A Special Lease
Event has occurred and is continuing./ An FL Special Purchase Event has occurred
and the FL Special Purchase Price has not been paid./ A PA Special Purchase
Event has occurred and the PA Special Purchase Price has not been paid./ Notice
has been given by the LOC Bank of a Date of Early Termination and such Date of
Early Termination is on or after the date hereof.]
2. The LOC Bank has not heretofore paid an OP Final Draw or a GP Draw
under the Letter of Credit. To the best knowledge of the undersigned, the LOC
Bank has not heretofore paid a LP Draw under the Letter of Credit.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings given to them in the Letter of Credit and Schedule I thereto.
<PAGE>
2
IN WITNESS WHEREOF, each of the undersigned has executed this Certificate
as of ____________, 19__.
[OWNER PARTICIPANT]
By: [DESIGNATED GENERAL PARTNER],
as Designated General Partner
By:
--------------------------------
[Name and Title of Authorized Representative
of Designated General Partner]
<PAGE>
EXHIBIT 7
to Exhibit B
DRAFT FOR AN LP DRAW
(paragraph 7(2))
[Place]
[Date]
ON [Business Day of presentation if presented before 9:05 a.m., New York City
time; next Business Day if presented at or after 9:05 a.m.]
PAY TO U.S. $[not to exceed lesser of
[Name of beneficiary] (i) LP Credit Amount and
(ii) LP Drawing Amount] DOLLARS,
[Insert wire instructions]
FOR VALUE RECEIVED AND CHARGE TO ACCOUNT OF
LETTER OF CREDIT NO.____________________ OF
Swiss Bank Corporation,
New York Branch
222 Broadway
2nd Floor
New York, New York 10038
[LIMITED PARTNER]
By:
-------------------------------------
[Name and Title of Authorized
Representative of Limited Partner]
<PAGE>
EXHIBIT 8
to Exhibit B
CERTIFICATE FOR AN LP DRAW
(paragraph 7(2))
The undersigned, a duly authorized representative of [name of Limited
Partner] (the "Limited Partner"), as beneficiary under that certain Irrevocable
Transferable Letter of Credit No._____________ dated [Date of Issuance],
established by Swiss Bank Corporation, New York Branch, as LOC Bank (the "LOC
Bank"), and issued pursuant to that certain Reimbursement Agreement, dated as of
October 1, 1994 (the "Reimbursement Agreement"), among Duquesne Light Company
(the "Company"), the LOC Bank, Union Bank and Swiss Bank Corporation, New York
Branch, as Administrating Banks, and the banks named therein as Participating
Banks (the "Letter of Credit"), hereby certifies as follows:
1. [Insert one of the following: An LP Deemed Loss Event has occurred and
is continuing./ An LP Event of Loss has occurred and is continuing./ A Special
Lease Event has occurred and is continuing./ Notice has been given by the LOC
Bank of a Date of Early Termination and such Date of Early Termination is on or
after the date hereof.]
2. The LOC Bank has not heretofore paid an LP Draw under the Letter of
Credit.
Capitalized terms used herein and not otherwise defined herein shall have
the meanings given to them in the Letter of Credit and Schedule I thereto.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
_____________, 19__.
[LIMITED PARTNER]
By:
-------------------------------------
[Name and Title of Authorized
Representative of Limited Partner]
<PAGE>
EXHIBIT 9
to Exhibit B
DRAFT FOR A GP DRAW
(paragraph 7(3))
[Place]
[Date]
ON [Business Day of presentation if presented before 9:05 a.m., New York City
time; next Business Day if presented at or after 9:05 a.m.]
PAY TO U.S. $[not to exceed lesser of
[Name of beneficiary] (i) GP Credit Amount and (ii) GP
Drawing Amount] DOLLARS,
[Insert wire instructions]
FOR VALUE RECEIVED AND CHARGE TO ACCOUNT OF LETTER OF CREDIT NO.___________ OF
Swiss Bank Corporation,
New York Branch
222 Broadway
2nd Floor
New York, New York 10038
[DESIGNATED GENERAL PARTNER]
By:
-------------------------------------
[Name and Title of Authorized
Representative of Designated
General Partner]
<PAGE>
EXHIBIT 10
to Exhibit B
CERTIFICATE FOR A GP DRAW
(paragraph 7(3))
The undersigned, a duly authorized representative of [name of Designated
General Partner] (the "Designated General Partner"), as a beneficiary under that
certain Irrevocable Transferable Letter of Credit No. _________ dated [Date of
Issuance], established by Swiss Bank Corporation, New York Branch, as LOC Bank
(the "LOC Bank"), and issued pursuant to that certain Reimbursement Agreement,
dated as of October 1, 1994 (the "Reimbursement Agreement"), among Duquesne
Light Company (the "Company"), the LOC Bank, Union Bank and Swiss Bank
Corporation, New York Branch, as Administrating Banks, and the banks named
therein as Participating Banks (the "Letter of Credit"), hereby certifies as
follows:
1. [Insert one of the following: A GP Deemed Loss Event has occurred and
is continuing./ A GP Event of Loss has occurred and is continuing./ A Special
Lease Event has occurred and is continuing./ Notice has been given by the LOC
Bank of a Date of Early Termination and such Date of Early Termination is on or
after the date hereof.]
2. The LOC Bank has not heretofore paid a GP Draw under the Letter of
Credit.
Capitalized terms used herein and not otherwise defined herein shall have
the meanings given to them in the Letter of Credit and Schedule I thereto.
IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
____________, 19__.
[DESIGNATED GENERAL PARTNER]
By:
-------------------------------------
[Name and Title of Authorized
Representative of Designated Partner]
<PAGE>
EXHIBIT 11
to Exhibit B
NOTICE OF TRANSFER AND ASSIGNMENT
(OWNER PARTICIPANT)
(paragraph 13)
[Date]
Swiss Bank Corporation,
New York Branch
222 Broadway
2nd Floor
New York, New York 10038
Attention: Documentary Department
Dear Sirs:
Reference is made to the certain Irrevocable Transferable Letter of Credit
bearing Letter of Credit No._________ dated (Date of Issuance), which has been
established by you in favor of [name of Owner Participant], a [ ] limited
partnership (the "Owner Participant"), [name of Designated General Partner], a
general partner of the Owner Participant and [name of Limited Partner], a
limited partner of the Owner Participant (together, the "Transferors") (the
"Letter of Credit").
The Transferors have transferred and assigned (and hereby confirm to you
the said transfer and assignment) all of their rights in and under the Letter of
Credit to [New Owner Participant], a [ ] limited partnership (the
"Successor Owner Participant"), [name of New Designated General Partner], a
general partner of the Successor Owner Participant and [name of New Limited
Partner], a limited partner of the Successor Owner Participant (together the
"Transferees") and confirms that the Transferors no longer have any rights under
or interest in the Letter of Credit.
The Letter of Credit is returned herewith and we request that you issue an
irrevocable transferable letter of credit in the name of the Transferees and
providing for notices to be sent to the Transferees at the address set forth
below and in all other respects identical to the Letter of Credit.
Each transferee hereby certifies that it is a duly authorized transferee
under the terms of the Letter of Credit and is accordingly entitled, upon
<PAGE>
2
presentation of the drafts and certificates called for therein, to receive
payment thereunder. Notices under the Letter of Credit should be sent to us as
follows: [Name of New Designated General Partner], [Address], [Telex Number]
[Answerback], Attention:_________________; [Name of New Limited Partner],
[Address], [Telex Number] [Answerback], Attention:____________.
[NAME OF OWNER PARTICIPANT
TRANSFEROR]
By:
[Name and Title of Authorized
Representative of Transferor]
[NAME OF DESIGNATED GENERAL
PARTNER TRANSFEROR]
By:
--------------------------------------
[Name and Title of Authorized
Representative of Transferor]
[NAME OF LIMITED PARTNER
TRANSFEROR]
By:
--------------------------------------
[Name and Title of Authorized
Representative of Transferor]
[NAME OF OWNER PARTICIPANT
TRANSFEREE]
By:
--------------------------------------
[Name and Title of Authorized
Representative of Transferee]
<PAGE>
3
[NAME OF DESIGNATED GENERAL
PARTNER TRANSFEREE]
By:
--------------------------------------
[Name and Title of Authorized
Representative of Transferee]
[NAME OF LIMITED PARTNER
TRANSFEREE]
By:
--------------------------------------
[Name and Title of Authorized
Representative of Transferee]
<PAGE>
EXHIBIT 12
to Exhibit B
NOTICE OF TRANSFER AND ASSIGNMENT
(DESIGNATED GENERAL PARTNER)
(paragraph 13)
[Date]
Swiss Bank Corporation,
New York Branch
222 Broadway
2nd Floor
New York, New York 10038
Attention: Documentary Department
Dear Sirs:
Reference is made to the certain Irrevocable Transferable Letter of Credit
bearing Letter of Credit No.___________ dated [Date of Issuance], which has been
established by you in favor of [name of Owner Participant], a [ ] limited
partnership (the "Owner Participant"), [name of Designated General Partner] (the
"Transferor"), a general partner of the owner Participant and [name of Limited
Partner], a limited partner of the Owner Participant (the "Letter of Credit").
The Transferor has transferred and assigned (and hereby confirms to you the
said transfer and assignment) all of its rights in and under the Letter of
Credit to [name of New Designated General Partner] (the "Transferee") and
confirms that the Transferor no longer has any rights under or interest in the
Letter of Credit.
The Letter of Credit is returned herewith and we request that you issue an
irrevocable transferable letter of credit in the name of the Transferee and
providing for notices to be sent to the Transferee at the address set forth
below and in all other respects identical to the Letter of Credit.
The Transferee hereby certifies that it is a duly authorized transferee
under the terms of the Letter of Credit and is accordingly entitled, upon
presentation of the drafts and certificates called for therein, to receive
<PAGE>
2
payment thereunder. Notices under the Letter of Credit should be sent to us as
follows: [Name], [Address], [Telex Number] [Answerback], Attention:
[NAME OF DESIGNATED GENERAL
PARTNER TRANSFEROR]
By:
--------------------------------------
[Name and Title of Authorized
Representative of Transferor]
[NAME OF DESIGNATED GENERAL
PARTNER TRANSFEREE]
By:
--------------------------------------
[Name and Title of Authorized
Representative of Transferee]
<PAGE>
EXHIBIT 13
to Exhibit B
NOTICE OF TRANSFER AND ASSIGNMENT
(LIMITED PARTNER)
(paragraph 13)
[Date]
Swiss Bank Corporation,
New York Branch
222 Broadway
2nd Floor
New York, New York 10038
Attention: Documentary Department
Dear Sirs:
Reference is made to the certain Irrevocable Transferable Letter of Credit
bearing Letter of Credit No._________________ dated [Date of Issuance], which
has been established by you in favor of [name of Owner Participant), a [
] limited partnership (the "Owner Participant"), [name of Designated General
Partner], a general partner of the Owner Participant and [name of Limited
Partner] (the "Transferor"), a limited partner of the Owner Participant (the
"Letter of Credit").
The Transferor has transferred and assigned (and hereby confirms to you the
said transfer and assignment) all of its rights in and under the Letter of
Credit to [name of New Limited Partner] (the "Transferee") and confirms that the
Transferor no longer has any rights under or interest in the Letter of Credit.
The Letter of Credit is returned herewith and we request that you issue an
irrevocable transferable letter of credit in the name of the Transferee and
providing for notices to be sent to the Transferee at the address set forth
below and in all other respects identical to the Letter of Credit.
The Transferee hereby certifies that it is a duly authorized transferee
under the terms of the Letter of Credit and is accordingly entitled, upon
presentation of the drafts and certificates called for therein, to receive
<PAGE>
2
payment thereunder. Notices under the Letter of Credit should be sent to us as
follows: [Name], [Address], [Telex Number] [Answerback], Attention:
[NAME OF LIMITED PARTNER
TRANSFEROR]
By:
--------------------------------------
[Name and Title of Authorized
Representative of Transferor]
[NAME OF LIMITED PARTNER
TRANSFEREE]
By:
--------------------------------------
[Name and Title of Authorized
Representative of Transferee]
<PAGE>
EXHIBIT 14
to Exhibit B
NOTICE OF SURRENDER AND REQUEST FOR
CANCELLATION OF LETTER OF CREDIT
("Termination Date" - Schedule I)
[Date]
Swiss Bank Corporation,
New York Branch
222 Broadway
2nd Floor
New York, New York 10038
Attention: Documentary Department
Dear Sirs:
Reference is made to that certain Irrevocable Transferable Letter of Credit
bearing Letter of Credit No._________ dated [Date of Issuance], which has been
established by you in favor of [name of Owner Participant], [name of Designated
General Partner] (the "Designated General Partner") and [name of Limited
Partner] (the "Limited Partner").
The undersigned, a duly authorized representative of the Designated General
Partner, hereby surrenders the Letter of Credit for immediate cancellation on
behalf of itself, the Owner Participant and the Limited Partner.
The Letter of Credit is enclosed herewith and we request that you cancel
the Letter of Credit as of the date hereof.
<PAGE>
2
Capitalized terms used herein and not otherwise defined herein shall have
the meanings given to them in the Letter of Credit.
[OWNER PARTICIPANT]
By: [DESIGNATED GENERAL PARTNER],
as Designated General Partner
By:
--------------------------------------
[Name and Title of Authorized
Representative of Designated General
Partner]
ACKNOWLEDGED AND
AGREED TO:
[DESIGNATED GENERAL PARTNER]
By:
----------------------------------------
[Name and Title of Authorized
Representative of Designated
General Partner]
[LIMITED PARTNER]
By:
----------------------------------------
[Name and Title of Authorized
Representative of Limited Partner]
<PAGE>
SCHEDULE I
to Exhibit B
The following terms shall have the following meanings for purposes of the
Letter of Credit and the Schedules and Exhibits thereto. Terms defined in the
Letter of Credit shall have the meanings given to them therein. Terms defined
by reference to the Participation Agreement shall have the meanings assigned to
them therein from time to time unless otherwise stated.
"Administrating Banks" has the meaning assigned to it in the
Reimbursement Agreement.
"Applicable Law" has the meaning assigned to it in the Participation
Agreement.
"Bank" means Swiss Bank Corporation, New York Branch.
"Basic Rent" has the meaning assigned to it in the Participation
Agreement.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in Los Angeles, California or New York, New York are
authorized by law to close.
"Code" means the United States Internal Revenue Code of 1986, as
amended from time to time, and the applicable regulations thereunder.
"Controlled Group" means all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated)
under common control that, together with the Company, are treated as a
single employer under Section 414(b) or 414(c) of the Code.
"Date of Issuance" means October ___, 1994.
"Deemed Loss Event" has the meaning specified in the Participation
Agreement as in effect on the Date of Issuance.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
<PAGE>
2
"Event of Default" has the meaning specified in the Facility Lease as
in effect on the Date of Issuance.
"Event of Loss" has the meaning specified in the Participation
Agreement as in effect on the Date of Issuance.
"Facility Leases" has the meaning specified in the Reimbursement
Agreement.
"FL Special Purchase Event" means the receipt by the Owner Participant
from the Company of an offer to purchase pursuant to the second proviso of
Section 15(x) of the Facility Lease as in effect on the Date of Issuance.
"FL Special Purchase Price" means the consideration payable pursuant to
the second proviso of Section 15(x) of the Facility Lease as in effect on
the Date of Issuance.
"Funding Corp" has the meaning assigned to it in the Participation
Agreement'.
"Governmental Action" has the meaning assigned to it in the
Participation Agreement.
"GP Credit Amount" shall mean an amount equal to $[________], as the
same may be modified in accordance with the fourth paragraph of the Letter
of Credit.
"GP Deemed Loss Event" means (i) a Deemed Loss Event or (ii) an event
or circumstance that would constitute a Deemed Loss Event, assuming for this
purpose that the definition of Deemed Loss Event were modified such that
each determination, judgment, opinion or similar action required to be made
by the Owner Participant (and, to the extent contemplated by said
definition, its counsel or experts) would be made by the Designated General
Partner (and, to such extent, its counsel or experts).
"GP Drawing Amount" shall mean, on any Date of Drawing, an amount equal
to (a) the product of (x) the GP Percentage and (y) the sum of (m) the
Maximum Drawing Amount applicable to such Date of Drawing plus (n) the
aggregate of all reductions theretofore made to the Maximum Drawing Amount
pursuant to clause (b) of the fourth paragraph of the Letter of Credit minus
(b) the aggregate amount of drawings theretofore made pursuant to a GP Draw
minus (c) the
<PAGE>
3
product of (x) the GP Percentage and (y) the aggregate amount of drawings
theretofore made pursuant to an OP Draw.
"GP Event of Loss" means (i) an Event of Loss or (ii) an event or
circumstance that would constitute an Event of Loss, assuming for this
purpose that the definition of Event of Loss were modified such that each
determination, judgment, opinion or similar action required to be made by
the Owner Participant (and, to the extent contemplated by said definition,
its counsel or experts) would be made by the Designated General Partner
(and, to such extent, its counsel or experts).
"GP Percentage" shall mean 1.00%.
"Indebtedness" of any Person means, at any date, without duplication,
all (i) indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services, (ii) obligations under leases that
shall be, in accordance with generally accepted accounting principles,
recorded as capital leases in respect of which such Person is liable as
lessee, (iii) obligations of such Person under direct or indirect guaranties
in respect of, and obligations (contingent or otherwise) to purchase or
otherwise acquire, or otherwise to assure a creditor against loss in respect
of, indebtedness or obligations of others of the kinds referred to in
clauses (i) and (ii) above, (iv) liabilities in respect of unfunded vested
benefits under Plans, and (v) withdrawal liability incurred under ERISA by
such Person or any of its affiliates to any Multiemployer Plan.
"LP Credit Amount" shall mean an amount equal to $[________], as the
same may be modified in accordance with the fourth paragraph of the Letter
of Credit.
"LP Deemed Loss Event" means (i) a Deemed Loss Event or (ii) an event
or circumstance that would constitute a Deemed Loss Event (as defined either
in the Participation Agreement as then in effect or in the Participation
Agreement as in effect on the Date of Issuance, and without regard to any
amendments or waivers thereof), assuming for this purpose that the
definition of Deemed Loss Event were modified such that each determination,
judgment, opinion or similar action required to be made by the owner
Participant (and, to the extent contemplated by said definition, its counsel
or experts) would be made by the Limited Partner (and, to such extent, its
counsel or experts).
<PAGE>
4
"LP Drawing Amount" shall mean, on any Date of Drawing, an amount equal
to (a) the product of (x) the LP Percentage and (y) the sum of (m) the
Maximum Drawing Amount applicable to such Date of Drawing plus (n) the
aggregate of all reductions theretofore made to the Maximum Drawing Amount
pursuant to clause (b) of the fourth paragraph of the Letter of Credit minus
(b) the aggregate amount of drawings theretofore made pursuant to a LP Draw
minus (c) the product of (x) the LP Percentage and (y) the aggregate amount
of drawings theretofore made pursuant to an OP Draw.
"LP Event of Loss" means (i) an Event of Loss or (ii) an event or
circumstance that would constitute an Event of Loss (as defined either in
the Participation Agreement as then in effect or as defined in the
Participation Agreement, as in effect on the Date of Issuance, and without
regard to any amendments or waivers thereof), assuming for this purpose that
the definition of Event of Loss were modified such that each determination,
judgement, opinion or similar action required to be made by the Owner
Participant (and, to the extent contemplated by said definition, its counsel
or experts) would be made by the Limited Partner (and, to such extent, its
counsel or experts).
"LP Percentage" shall mean 99.00%.
"Maximum Available Credit Amount" shall mean an amount equal to the
initial Maximum Credit Amount, as such amount may be modified from time to
time in accordance with the fourth paragraph of the Letter of Credit.
"Maximum Drawing Amount" means, with respect to a Date of Drawing, the
amount shown opposite the period including such Date of Drawing in the Table
of Maximum Drawing Amounts attached as Schedule II to the Letter of Credit,
as such amounts may be modified from time to time in accordance with the
fourth paragraph of the Letter of Credit (collectively, the "Maximum Drawing
Amounts").
"Modified Special Casualty Value" has the meaning assigned to it in the
Participation Agreement.
"Multiemployer Plan" means a multiemployer plan as defined in Section
4001(a)(3) of ERISA.
"Partial Drawing Amount" means, with respect to any Partial Drawing
Event, an amount not exceeding the amount of the Basic Rent due and unpaid
upon which such Partial Drawing Event is based.
<PAGE>
5
"Partial Drawing Event" means an Event of Default under Section 15(i)(y) of
the Facility Lease relating to nonpayment of Basic Rent.
"Participation Agreement" means the Participation Agreement dated as of
September 15, 1987, among the Owner Participant, the banks named therein as
Original Loan Participants, Funding Corp, The First National Bank of Boston
as Owner Trustee, The Bank of New York (as successor to Irving Trust
Company) as Indenture Trustee and the Company, as amended by Amendment No. 1
dated as of December 1, 1987, Amendment No. 2 dated as of March 1, 1988,
Amendment No. 3 dated as of November 15, 1992, and Amendment No. 4 dated as
of October 13, 1994.
"Participating Banks" has the meaning assigned to it in the
Reimbursement Agreement.
"PA Special Purchase Event" means the receipt by the owner Participant
from the Company of notice of its intent to purchase pursuant to paragraph
three of Section 10(b)(3)(ix) of the Participation Agreement as in effect on
the Date of Issuance.
"PA Special Purchase Price" means the purchase consideration payable
pursuant to paragraph three of Section 10(b)(3)(ix) of the Participation
Agreement as in effect on the Date of Issuance.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan covered by
Title IV of ERISA or subject to the minimum funding standards under Section
412 of the Code that is either (i) maintained by a member of the Controlled
Group for employees of a member of the Controlled Group or (ii) maintained
pursuant to a collective bargaining agreement or any other arrangement under
which more than one employer makes contributions and to which a member of
the Controlled Group is then making or accruing an obligation to make
contributions or has within the preceding five plan years made
contributions.
<PAGE>
6
"Reimbursement Agreement" means the Reimbursement Agreement, dated as
of October 1, 1994, among the Company, the Bank, as LOC Bank, Union Bank and
the Bank, as Administrating Banks, and the banks named therein as
Participating Banks, as the same may from time to time be amended,
supplemented or modified in accordance with its terms.
"Special Lease Event" means (i) in the case of an OP Final Draw, an
Event of Default, (ii) in the case of an LP Draw, (a) an Event of Default
specified in Section 15(i), 15(iii), 15(iv) (with respect to Section
10(b)(3)(viii) or 10(b)(3)(ix) of the Participation Agreement (either as
then in effect or as in effect on the Date of Issuance, and without regard
to any amendments or waivers thereof), assuming for this purpose that such
Section 15(iv) were modified such that the notice referred to therein could
be given by the Limited Partner), 15(vi) or 15(x) of the Facility Lease
(either as then in effect or as in effect on the Date of Issuance, and
without regard to any amendments or waivers thereof) or (b) the occurrence
of a GP Draw and (iii) in the case of a GP Draw, (a) an Event of Default or
(b) the occurrence of an LP Draw.
"Subsidiary" means any corporation or other entity of which securities
or other ownership interests having ordinary voting power to elect a
majority of the Board of Directors or other persons performing similar
functions are at the time directly or indirectly owned by the Company or one
or more Subsidiaries, or by the Company and one or more Subsidiaries.
"Termination Event" means (i) a "reportable event" as described in
Section 4043 of ERISA and the regulations issued thereunder (other than a
"reportable event" not subject to the provision for 30-day notice to the
PBGC under such regulations), or (ii) the withdrawal of the Company or any
member of the Controlled Group from a Plan during a plan year in which it
was a "substantial employer" as defined in Section 4001(a)(2) of ERISA, or
(iii) the filing of a notice of intent to terminate a Plan or the treatment
of a Plan amendment as a termination under Section 4041 of ERISA, or (iv)
the institution of proceedings to terminate a Plan by the PBGC, or (v) any
other event or condition that might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer,
any Plan.
"Transaction Documents" has the meaning specified in the Reimbursement
Agreement.
<PAGE>
7
"Unfunded Vested Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the present value of all vested
nonforfeitable benefits under such Plan exceeds (ii) the fair market value
of all Plan assets allocable to such benefits, all determined as of the then
most recent valuation date for such Plan, but only to the extent that such
excess represents a potential liability of a member of the Controlled Group
to the PBGC or the Plan under Title Iv of ERISA.
"Unit 2" has the meaning assigned to it in the Participation
Agreement.
<PAGE>
SCHEDULE II
to Exhibit B
TABLE OF MAXIMUM DRAWING AMOUNTS
Maximum Drawing
Applicable Period Amount
----------------- ---------------
From ____________ $______________
to and including _____________
From ___________ $______________
to and including _____________
From ____________ $______________
to and including _____________
From ___________ $______________
to and including _____________
From ____________ $______________
to and including _____________
<PAGE>
SCHEDULE III
to Exhibit B
The Bank shall have the right upon the occurrence of any of the events
listed below to terminate the Letter of Credit in accordance with the terms of
the Letter of Credit:
(A) the Company shall fail to pay when due any amount payable under
Section 2 of the Reimbursement Agreement or fail to pay within 5 Business Days
after becoming due any amount payable under Section 3 of the Reimbursement
Agreement; or
(B) the Company shall fail to make, or cause to be made, one or more
payments specified in Section 15(i) of any of the Facility Leases equal to or
exceeding $1,000,000 in the aggregate within the period specified in that
Section for such payment or payments; or
(C) the Company shall fail to observe or perform any covenant or agreement
contained in the Reimbursement Agreement (other than those covered by clause (A)
above) for 30 days after written notice thereof has been given to the Company by
the Bank, either Administrating Bank or any Participating Bank; or
(D) any representation, warranty, certification or statement made by the
Company in the Reimbursement Agreement or in any certificate, financial
statement or other document delivered pursuant to the Reimbursement Agreement
shall prove to have been incorrect or misleading in any material respect when
made; or
(E) any material provision of the Reimbursement Agreement shall at any
time for any reason cease to be valid and binding upon the Company, or shall be
declared to be null and void, or the validity or enforceability thereof shall be
contested by the Company or any governmental agency or authority, or the Company
shall deny that it has any or further liability or obligation under the
Reimbursement Agreement; or
(F) the Company or any Subsidiary shall fail to make any payment on any
Indebtedness, or to make any payment of any interest or premium thereon, when
due (whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise) and such failure shall continue after the applicable grace period, if
any, specified in any agreement or instrument relating to such Indebtedness, or
any other default under any agreement or instrument relating to any
Indebtedness, or any other event, shall occur and
<PAGE>
2
shall continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such failure, default or event is to
accelerate, or to permit the acceleration of (other than by a special mandatory
redemption provision in connection with pollution control or similar tax-exempt
bonds unrelated to any default or event of default with respect thereto), the
maturity of any Indebtedness the aggregate principal amount of which is greater
than $25,000,000, or any Indebtedness the aggregate principal amount of which is
greater than $25,000,000 shall be declared due and payable, or required to be
prepaid (other than by a special mandatory redemption provision in connection
with pollution control or similar tax-exempt bonds unrelated to any default or
event of default with respect thereto or a regularly scheduled required
prepayment) prior to the stated maturity thereof; or
(G) the Company or any Subsidiary shall (i) apply for or consent to the
appointment of a receiver, trustee, liquidator or custodian or the like of
itself or of all or any substantial part of its property, (ii) admit in writing
its inability to pay its debts generally as they become due, (iii) make a
general assignment for the benefit of creditors, (iv) be adjudicated a bankrupt
or insolvent, or (v) commence a voluntary case under the Federal Bankruptcy Laws
of the United States of America or file a voluntary petition or answer seeking
reorganization, an arrangement with creditors or any order for relief or seeking
to take advantage of any insolvency law or file an answer admitting the material
allegations of a petition filed against it in any bankruptcy, reorganization or
insolvency proceeding; or corporate action shall be taken by it for the purpose
of effecting any of the foregoing, or if, without the application, approval or
consent of the Company, a proceeding shall be instituted in any court of
competent Jurisdiction seeking in respect of the Company an adjudication in
bankruptcy, reorganization, dissolution, winding up or liquidation, a
composition or arrangement with creditors, a readjustment of debts, the
appointment of a trustee, receiver, liquidator or custodian or the like of the
Company or of all or any substantial part of its assets, or other like relief in
respect thereof under any bankruptcy or insolvency law and if such proceeding is
being contested by the Company in good faith, the same shall continue
undismissed, or pending and unstayed, for any period of sixty (60) consecutive
days; or
(H) any judgment or order for the payment of money exceeding any
applicable insurance coverage by more than $25,000,000 shall be rendered against
the Company or any Subsidiary and either (i) enforcement proceedings shall have
been commenced by any creditor upon such judgment or order or (ii) there shall
be any period of ten consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect; or
<PAGE>
3
(I) any Termination Event with respect to a Plan shall have occurred, and,
30 days after notice thereof shall have been given to the Company by the Bank,
either Administrating Bank or any Participating Bank, (i) such Termination Event
(if correctable) shall not have been corrected and (ii) the then Unfunded Vested
Liabilities of such Plan exceed $5,000,000 (or, in the case of a Termination
Event involving the withdrawal of a "substantial employer" (as defined in
Section 4001(a)(2) of ERISA), the withdrawing employer's proportionate share of
such excess shall exceed such amount), or the Company or any member of the
Controlled Group as employer under a Multiemployer Plan shall have made a
complete or partial withdrawal from such Multiemployer Plan and the Plan sponsor
of such Multiemployer Plan shall have notified such withdrawing employer that
such employer has incurred a withdrawal liability in an annual amount exceeding
$5,000,000; or
(J) any change in Applicable Law or any Governmental Action (including,
but not limited to, the revocation or modification of any Governmental Action
previously secured) shall occur which has the effect of making the transactions
contemplated by the Reimbursement Agreement or the Transaction Documents
unauthorized, illegal or otherwise contrary to Applicable Law; or
(K) any event specified in Sections 15(vi), (vii) or (ix) of any of the
Facility Leases shall occur.
Capitalized terms used herein and not otherwise defined herein shall have the
meanings given to them in the Letter of Credit.
<PAGE>
SCHEDULE IV
to Exhibit B
Address for Notice
Name Address Telex Telecopy Answerback
---- ------- ----- -------- ----------
<PAGE>
EXHIBIT C
NOTICE OF DRAWING
[Company/Participating Bank]
[Address]
Ladies and Gentlemen:
Reference is made to that certain Irrevocable Transferable Letter of
Credit bearing Letter of Credit No.___________ dated _________________, which
has been established by us in favor of [insert name(s) of beneficiaries].
We have received (i) a draft for payment of U.S.$_____________ on [insert
date to be paid] and (ii) a Certificate for [an OP Partial Draw/an OP Final
Draw/an LP Draw/a GP Draw/a Final Draw] from [insert name of beneficiary
presenting draft and certificate], both in conformity with the terms and
conditions of the Letter of Credit.
We have paid such draft in the amount of U.S.$_______________.
[Insert the following in the case of notice to a Participating Bank: Your
pro rata share of such drawing (based upon your Participation Percentage) is
$_____________.]
Capitalized terms used herein and not otherwise defined herein shall have
the meanings given to them in the Letter of Credit.
SWISS BANK CORPORATION,
NEW YORK BRANCH
By:
-----------------------
Title:
--------------------
<PAGE>
EXHIBIT D
FORM OF OPINION OF CHIEF COUNSEL OF THE COMPANY
[Date of Issuance of the
Letters of Credit]
To each of the Participating Banks
parties to the Reimbursement Agreement
referred to below, to Swiss Bank Corporation,
New York Branch, as LOC Bank, and to Union
Bank and Swiss Bank Corporation, New York
Branch, as Administrating Banks
Duquesne Light Company
Ladies and Gentlemen:
I am Chief Counsel of Duquesne Light Company, a Pennsylvania corporation
(the "Company"), and I, or other attorneys under my supervision, have
represented it in connection with the transactions contemplated by the
Reimbursement Agreement, dated as of October 1, 1994 (the "Reimbursement
Agreement"), among the Company and yourselves. All capitalized terms used and
not otherwise defined herein shall have the meanings set forth in the
Reimbursement Agreement. This opinion is being delivered pursuant to Section
7(a)(i)(A) of the Reimbursement Agreement.
As Chief Counsel I, or other attorneys under my supervision, have examined
originals or copies, certified or otherwise identified to our satisfaction, of
the Reimbursement Agreement; the Transaction Documents, Financing Documents and
Refinancing Documents entered into to date; the Restated Articles of
Incorporation and By-Laws of the Company and its Affiliates; Securities
Certificate No. S-870270 (the "Securities Certificate") of the Company filed
with the PPUC seeking approval of (i) the Company's assumption of contingent
obligations under the Initial Series Notes, (ii) its assumption of contingent
obligations under the Notes relating to the Bonds, (iii) its obligation to
reimburse any amounts drawn under the Initial Letter of Credit and (iv) to the
extent that it constitutes an "evidence of indebtedness" under Section 1901(b)
of the Pennsylvania Public Utility Code,
<PAGE>
2
the Company's absolute and unconditional obligation to pay rent and other
amounts under the Facilities Leases; Application No. A-110150F002 (the
"Application") filed with the PPUC seeking approval, under Section 1102(a)(3) of
the Pennsylvania Public Utility Code, of (i) the transfer by sale or lease by
the Company to the Owner Trustees of undivided interests in and easements over
the Beaver Valley Station Site, (ii) the transfer by sale by the Company to the
Owner Trustees of the Undivided Interests, (iii) the acquisition by the Company
by leaseback from the Owner Trustees of the undivided interests in and easements
over the Beaver Valley Station Site and of the Undivided Interests and (iv) the
transfer of such rights in parts of the Company's undivided interest in the
Beaver Valley Station Site not constituting Unit 2 as may be necessary to enable
the Owner Trustees to realize the residual value of their interests; Securities
Certificate No. S-920240 captioned "Securities Certificate of Duquesne Light
Company in respect of Substitute Letters of Credit and a new Reimbursement
Agreement in connection with the sale and leaseback of interests in Beaver
Valley Unit No. 2" (the "1992 Securities Certificate"), filed with the PPUC; the
Order of the PPUC adopted and entered on September 25, 1987 registering the
Securities Certificate (the "Securities Order"); the Order of the PPUC adopted
and entered on September 25, 1987 approving the Application (the "Application
Order"); the Order of the PPUC adopted and entered on July 9, 1992 (the "1992
PPUC Order"; the 1992 PPUC Order, the Securities Order and the Application Order
are referred to herein collectively as the "PPUC Orders"); and such other
agreements, records and documents, and such matters of law, as I have deemed
necessary or advisable for the purpose of rendering the opinions set forth
herein.
In rendering the opinions hereinafter expressed, I have relied as to
factual matters on the representations in the Reimbursement Agreement, the
Collateral Trust Indenture and the Transaction Documents and I have further
assumed that:
A. Each party other than the Company (an "Other Party") to the
Reimbursement Agreement, the Collateral Trust Indenture, the Transaction
Documents and the Refinancing Documents is duly organized and validly existing
in good standing under the laws of the jurisdiction of its organization and has
the power and authority to enter into and perform its obligations under the
Reimbursement Agreement, the Collateral Trust Indenture and the Transaction
Documents and Refinancing Documents to which it is a party.
B. The execution, delivery and performance by each Other Party to the
Reimbursement Agreement, the Collateral Trust Indenture, the Transaction
Documents and the Refinancing Documents has been duly authorized by all
necessary action by such Other Party. Each of the
<PAGE>
3
Reimbursement Agreement, the Collateral Trust Indenture, the Transaction
Documents and the Refinancing Documents has been duly executed and delivered by
each Other Party thereto and to the extent the same is governed by the laws of
any state or other jurisdiction, other than the Commonwealth of Pennsylvania,
constitutes the legal, valid and binding obligation of each Other Party thereto,
enforceable against such Other Party in accordance with its terms.
C. Each Other Party has, during its negotiations with the Company of the
terms of the Reimbursement Agreement, the Collateral Trust Indenture and the
Transaction Documents and Refinancing Documents to which it is a party, acted in
good faith and in a commercially reasonable manner and not made any intentional
misrepresentations to the Company nor failed to disclose to the Company any
material facts.
D. Each Other Party will, in enforcing its remedies and in fulfilling
its responsibilities under the Reimbursement Agreement, the Collateral Trust
Indenture and the Transaction Documents and Refinancing Documents to which it is
a party, (i) act in good faith and in a commercially reasonable manner, (ii) not
make any misrepresentations to the Company, (iii) not fail to disclose to the
Company any material facts, (iv) not exercise control over the affairs of the
Company and (v) not interfere with the Company's contractual relations with
third Persons.
E. The express terms of the Reimbursement Agreement, the Collateral
Trust Indenture, the Transaction Documents and the Refinancing Documents have
not been, and will not be, amended, supplemented or deleted by a course of
conduct or dealing between any Other Party and the Company.
F. No Other Party to the Reimbursement Agreement, the Collateral Trust
Indenture, any Transaction Document or any Refinancing Document is subject to
any order, judgment, writ, decree or ruling of any court, arbitration board or
other administrative tribunal which prohibits the execution and delivery or the
performance by such Other Party of the Reimbursement Agreement, the Collateral
Trust Indenture or the Transaction Document or Refinancing Document to which it
is a party.
Based on the foregoing, I am of the opinion that:
(1) The Company is a corporation presently subsisting under the laws of
the Commonwealth of Pennsylvania and has the corporate power and authority to
carry on its business as presently conducted, to own or hold under lease its
properties and to enter into and perform its obligations under
<PAGE>
4
the Reimbursement Agreement, the Collateral Trust Indenture and each Transaction
Document and Refinancing Document to which it is a party. The Company has not
failed to qualify to do business or to be in good standing in any other
jurisdiction where the failure so to qualify or be in good standing would
materially and adversely affect the financial condition of the Company or its
ability to perform any of its obligations under the Reimbursement Agreement, the
Collateral Trust Indenture or the Transaction Documents or Refinancing Documents
to which it is a party.
(2) The execution, delivery and performance by the Company of the
Reimbursement Agreement, the Collateral Trust Indenture and each Transaction
Document and Refinancing Document to which it is a party, the consummation by
the Company of the transactions contemplated thereby and the compliance by the
Company with the terms and provisions thereof have been duly authorized by all
necessary corporate action on the part of the Company, and neither such
execution, delivery and performance nor such consummation and compliance
requires the consent or approval of the shareholders of the Company or of any
trustee or holder of any Indebtedness of the Company, other than such consents
and approvals as have been or, on or before the relevant Refunding Date in the
case of any Refunding Loan, will have been duly obtained, given or accomplished.
(3) The Reimbursement Agreement, the Collateral Trust Indenture and the
Transaction Documents and Refinancing Documents to which the Company is a party
have been duly executed and delivered by the Company. To the extent that a
Pennsylvania court were to apply the substantive laws of the Commonwealth of
Pennsylvania to the Reimbursement Agreement, the Collateral Trust Indenture or
any Transaction Document or Refinancing Document to which the Company is a
party, the Reimbursement Agreement, the Collateral Trust Indenture or such
Transaction Document or Refinancing Document, as the case may be, would under
such laws constitute the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or similar laws affecting
creditors' rights generally and by applicable laws and legal and equitable
principles which may affect certain of the remedies provided therein, which laws
and principles do not in my opinion make the remedies provided therein
inadequate for the realization of the substantive benefits and security provided
thereby.
(4) The execution, delivery and performance by the Company of the
Reimbursement Agreement, the Collateral Trust Indenture and the Transaction
Documents and Refinancing Documents to which it is a party, the consummation by
the Company of the transactions contemplated thereby
<PAGE>
5
and compliance by the Company with the provisions thereof do not conflict with,
or result in a breach or contravention of any of the provisions of, the Restated
Articles of Incorporation or By-Laws of the Company or any Affiliate of the
Company, any Applicable Law, or any indenture, mortgage, lease or other material
agreement or instrument known to me (after due inquiry) to which the Company or
any Affiliate of the Company is a party or by which the property of the Company
or any Affiliate of the Company is bound, or result in the creation or
imposition of any Lien (other than Permitted Liens) upon any property of the
Company or any Affiliate of the Company.
(5) No Governmental Action under any Pennsylvania law:
(a) was required with respect to the execution and delivery of the
Collateral Trust Indenture, each Transaction Document to which the Company
is a party, each Refinancing Document to which the Company is a party,
Amendment No. 1 to the Participation Agreements dated as of December 1,
1987, Amendment No. 2 to the Participation Agreements dated as of March 1,
1988, Amendment No. 3 to the Participation Agreements dated as of November
15, 1992, Amendment No. 4 to the Participation Agreements dated as of
October 13, 1994, Amendment No. 1 to Facility Leases dated as of December
1, 1987, Amendment No. 2 to Facility Leases dated as November 15, 1992,
Amendment No. 3 to Facility Leases dated as of October 13, 1994, or the
First Supplemental Indenture to Collateral Trust Indenture dated as of
November 15, 1992, or
(b) is required in connection with the execution and delivery by the
Company of the Reimbursement Agreement or in connection with the
performance by the Company of, or the consummation by the Company of the
transactions contemplated by the Reimbursement Agreement, the Collateral
Trust Indenture (as amended or supplemented prior to the date hereof as
set forth above) or any Transaction Document or Refinancing Document to
which the Company is a party (as amended or supplemented prior to the date
hereof as set forth above),
except such Pennsylvania Governmental Actions (i) as have been, on or before the
date hereof in the case of the Reimbursement Agreement, the Collateral Trust
Indenture and such Transaction Documents and Refinancing Documents, or will have
been, on or before the relevant Refunding Date or Releveraging Date, as the case
may be, in the case of any Refunding Loan or Releveraging Loan, duly obtained,
given or accomplished, with true copies thereof delivered to the LOC Bank and
the Administrating Banks, (ii) as may
<PAGE>
6
be required under existing Pennsylvania law to be obtained, given or
accomplished from time to time after the date hereof in connection with the
maintenance, use, possession or operation of Unit 2, the property purported to
be covered by the Ground Lease or otherwise with respect to Unit 2 or such
property and the Company's or the Operating Agent's involvement therewith and
that are, for Unit 2, routine in nature and which I have no reason to believe
will not be timely obtained and (iii) as may be required under Pennsylvania law
not now in effect.
(6) The execution, delivery and performance by the Company of, the
consummation by the Company of the transactions contemplated by, and compliance
by the Company with the terms and provisions of, the Reimbursement Agreement,
the Collateral Trust Indenture and the Transaction Documents and Refinancing
Documents to which it is a party have been duly authorized by the PPUC Orders;
each of the PPUC Orders is in full force and effect on the date hereof without
amendment or modification; there has been no stay or suspension of any PPUC
Order by any court having jurisdiction with respect thereto; no suit, action or
proceeding is pending or, to my knowledge, threatened in which an appeal from
any PPUC Order or any review thereof is being sought; and reversal or
modification of any PPUC Order will not impair or divest any estate or interest
of any Other Party acquired under the Reimbursement Agreement, the Collateral
Trust Indenture or any of the Transaction Documents or Refinancing Documents to
which the Company is a party.
(7) Except as disclosed in the Company's December 31, 1993 Annual Report
on Form 10-K, its June 30, 1994 Quarterly Report on Form 10-Q and its Current
Reports on Form 8-K dated August 16, 1994 and September 6, 1994, there is no
pending or, to the best of my knowledge, threatened action or proceeding
affecting the Company or any of its Affiliates before any court, governmental
agency or arbitrator having jurisdiction which questions the validity or
enforceability of the Reimbursement Agreement, the Collateral Trust Indenture or
any Transaction Document or Refinancing Document to which it is a party or which
(individually or in the aggregate) if decided adversely to the Company would
have a material adverse effect on the business or financial condition of the
Company or would materially and adversely affect the ability of the Company to
perform its obligations under the Reimbursement Agreement, the Collateral Trust
Indenture or any Transaction Document or Refinancing Document to which it is a
party.
(8) None of the Administrating Banks or the Banks will be or become,
solely by reason of the activities contemplated by the Reimbursement Agreement,
the Collateral Trust Indenture, the Transaction Documents or the Refinancing
Documents, prior to the expiration or termination of the Facility
<PAGE>
7
Leases, subject to regulation as a "public utility" under Title 66 of the
Pennsylvania Consolidated Statutes by the PPUC or any other Governmental
Authority in Pennsylvania having jurisdiction over public utilities or public
utility holding companies.
I am a member of the Bar of the Commonwealth of Pennsylvania and, as such,
do not hold myself out as an expert in the laws of any jurisdiction other than
the Commonwealth of Pennsylvania. This opinion is limited to matters set forth
herein and no opinion may be inferred or implied beyond the matters expressly
stated herein.
This opinion is being rendered solely for the benefit of the addressees
hereof in connection with the transactions contemplated by the Reimbursement
Agreement. No such Person may rely on this opinion for any other purpose, no
other Person may rely on this opinion for any purpose and this opinion may not
be referred to or quoted in any document, report or financial statement of, or
filed with or delivered to, any Person, without the express written consent of
the undersigned.
Yours truly,
Larry R. Crayne
Chief Counsel
<PAGE>
EXHIBIT E
FORM OF OPINION OF SPECIAL COUNSEL FOR THE COMPANY
[Date of Issuance of the
Letters of Credit]
To each of the Participating Banks
parties to the Reimbursement Agreement
referred to below, to Swiss Bank Corporation,
New York Branch, as LOC Bank, and to Union
Bank and Swiss Bank Corporation, New York
Branch, as Administrating Banks
Duquesne Light Company
Ladies and Gentlemen:
We have acted as special counsel for Duquesne Light Company, a
Pennsylvania corporation (the "Company"), in connection with the execution and
delivery by the Company of the Reimbursement Agreement, dated as of October 1,
1994 (the "Reimbursement Agreement"), among the Company and yourselves. All
capitalized terms used herein and not otherwise defined herein shall have the
meanings set forth in the Reimbursement Agreement. This Opinion is being
delivered pursuant to Section 7(a)(i)(B) of the Reimbursement Agreement.
As such counsel we have examined originals or copies, certified or
otherwise identified to our satisfaction, of the Reimbursement Agreement, the
Collateral Trust Indenture, the Transaction Documents, the Refinancing Documents
and such corporate records, agreements and other instruments, certificates,
opinions, correspondence with public officials, certificates of officers,
management personnel and representatives of the Company, and such other
documents as we have deemed necessary or desirable for the purpose of rendering
the opinions set forth herein.
Based on the foregoing, and subject to the qualifications set forth below,
we are of the opinion that:
<PAGE>
2
1. The Reimbursement Agreement, the Collateral Trust Indenture and the
Transaction Documents and Refinancing Documents to which the Company is a party
have been duly executed and delivered by the Company and, assuming the due
authorization, execution and delivery thereof by the other parties thereto, the
Reimbursement Agreement, the Collateral Trust Indenture and the Transaction
Documents and Refinancing Documents to which the Company is a party constitute
the legal, valid and binding obligations of the Company, enforceable against the
Company in accordance with their respective terms.
2. Neither the execution, delivery or performance by the Company of the
Reimbursement Agreement, the Collateral Trust Indenture or any Transaction
Document or Refinancing Document to which it is a party, nor the consummation by
the Company of the transactions contemplated thereby, nor compliance by the
Company with the provisions thereof, conflicts with, or results in a breach or
contravention of any of the provisions of, the Restated Articles of
Incorporation or By-laws of the Company, or any Applicable Law.
3. No Governmental Action under any law:
(a) was required with respect to the execution and delivery of the
Collateral Trust Indenture, each Transaction Document to which the Company
is a party, each Refinancing Document to which the Company is a party,
Amendment No. 1 to the Participation Agreements dated as of December 1,
1987, Amendment No. 2 to the Participation Agreements dated as of March 1,
1988, Amendment No. 3 to the Participation Agreements dated as of November
15, 1992, Amendment No. 4 to the Participation Agreements dated as of
October 13, 1994, Amendment No. 1 to Facility Leases dated as of December
1, 1987, Amendment No. 2 to Facility Leases dated as November 15, 1992,
Amendment No. 3 to Facility Leases dated as of October 13, 1994, or the
First Supplemental Indenture to Collateral Trust Indenture dated as of
November 15, 1992, or
(b) is required in connection with the execution and delivery by the
Company of the Reimbursement Agreement or in connection with the
performance by the Company of, or the consummation by the Company of the
transactions contemplated by the Reimbursement Agreement, the Collateral
Trust Indenture (as amended or supplemented prior to the date hereof as
set forth above) or any Transaction Document or Refinancing Document to
which the Company is a party (as amended or supplemented prior to the date
hereof as set forth above),
<PAGE>
3
except such Governmental Actions (i) as have been duly obtained, given or
accomplished, (ii) as are routine in nature and not yet required and that cannot
be obtained, or are not normally applied for, prior to the time they are
required, (iii) as may be required to be obtained, given or accomplished from
time to time in connection with the maintenance, use, possession, operation or
improvement of Unit 2 or otherwise with respect to Unit 2 and the Company's or
the Operating Agent's involvement therewith, (iv) as may be required in
consequence of any transfer of ownership of any Note or Bond by the Holder
thereof, the beneficial interest in the Trust by the Owner Participant, or the
Undivided Interest by the Owner Trustee, (v) as may be required in consequence
of the issuance, sale or exchange and delivery of any Bonds or other obligations
under and pursuant to any Collateral Trust Indenture, (vi) as may be required by
existing Applicable Law on and after termination or expiration of the Facility
Leases, or (vii) as may be required under any Applicable Law not now in effect.
No Governmental Action is or will be required solely by virtue of the
participation by the Administrating Banks, the LOC Bank or any Participating
Bank in the consummation of the transactions contemplated by the Reimbursement
Agreement to take place on the date hereof except such Governmental Actions (i)
as have been duly obtained, given or accomplished, (ii) as may be required by
Applicable Law not now in effect, or (iii) as may be required in consequence of
any transfer or assignment by either Administrating Bank, the LOC Bank or any
Participating Bank of its rights under the Reimbursement Agreement, including,
without limitation, any grant of a participation in such rights.
4. Neither the LOC Bank, either Administrating Bank nor any
Participating Bank will be or become, solely by reason of its entering into the
Reimbursement Agreement, subject to regulation as an electric utility company,
an electric utility, a public utility company or corporation, a public utility,
a holding company, a public utility holding company, an electric corporation, or
a utility company or corporation by any public utility commission or other
regulatory body, authority or group (including, without limitation, the SEC and
the FERC).
5. The Company is not an "investment company", or a company "controlled"
by an "investment company", within the meaning of the Investment Company Act.
The opinions set forth above are subject to the qualifications that (i)
enforceability of the Reimbursement Agreement, the Collateral Trust Indenture,
the Transaction Documents and the Refinancing Documents in accordance with their
respective terms may be limited by bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar laws affecting enforcement of
creditors' rights generally, as well as
<PAGE>
4
general principles of equity and the availability of equitable remedies, and
(ii) certain laws and judicial decisions may affect the enforceability of
certain rights and remedies provided in the Transaction Documents. With respect
to the latter qualification, however, we are of the opinion that none of such
laws now in effect and none of such judicial decisions make the rights and
remedies provided in the Transaction Documents, taken as a whole, inadequate for
the realization of the intended benefits of the Transaction Documents. In
addition, to the extent that the provisions of Section 22 of the Reimbursement
Agreement or any indemnification agreement of the Company under any Transaction
Document or Refinancing Document purport to indemnify any Person in respect of
Federal or state securities laws, we are not passing upon the enforceability
thereof.
Each opinion expressed herein is limited to the law of the State of New
York and the Federal law of the United States of America and each reference
herein to any Governmental Actions refers solely to Federal or New York
Governmental Actions; however, we express no opinion as to any matter relating
to the Atomic Energy Act, the Nuclear Waste Act or any Applicable Law concerning
the regulation of banks.
Very truly yours,
<PAGE>
EXHIBIT F
FORM OF OPINION OF SPECIAL NUCLEAR REGULATORY
COMMISSION COUNSEL FOR THE COMPANY
[Date of Issuance of the
Letters of Credit]
To each of the Participating Banks
parties to the Reimbursement Agreement
referred to below, to Swiss Bank Corporation,
New York Branch, as LOC Bank, and to Union
Bank and Swiss Bank Corporation, New York
Branch, as Administrating Banks
Duquesne Light Company
Ladies and Gentlemen:
We have acted as Special Nuclear Regulatory Commission Counsel for
Duquesne Light Company (the "Company") in connection with the transactions
contemplated by the Participation Agreements, dated as of September 15, 1987, as
amended by Amendment No. 1 dated as of December 1, 1987, Amendment No. 2 dated
as of March 1, 1988, Amendment No. 3 dated as of November 15, 1992, and
Amendment No. 4 dated as of October 13, 1994 (as so amended, the "Participation
Agreements"), among the Owner Participants, the Company and the other parties
identified in the Participation Agreements, and in connection with the
transactions contemplated by the Reimbursement Agreement, dated as of October 1,
1994 (the "Reimbursement Agreement"), among the Company and yourselves. All
capitalized terms used herein and not otherwise defined herein shall have the
meanings set forth in the Reimbursement Agreement. This opinion is being
delivered pursuant to Section 7(a)(i)(C) of the Reimbursement Agreement.
<PAGE>
2
We have been requested to give our opinion with respect to five related
issues: (1) whether Amendment No. 1 to Facility Operating License No. NPF-73
for the Beaver Valley Power Station, Unit No. 2 (the "Amendment"), issued by the
Nuclear Regulatory Commission ("NRC" or the "Commission") on September 23, 1987
and supplemented by NRC letter dated September 28, 1987, which authorized the
Company to proceed with the proposed transactions, is valid and binding and
constitutes final and unappealable NRC action; (2) whether any other action by,
or filing with, the NRC is required in connection with the execution, delivery
and performance of the Reimbursement Agreement; (3) whether any further NRC
action is necessary to maintain the non-licensee status of the LOC Bank, the
Administrating Banks and the Participating Banks; (4) whether the LOC Bank, the
Administrating Banks or the Participating Banks have any licensing or reporting
obligations during the Lease Term under any nuclear-related statute or
regulation; and (5) whether the Price-Anderson Act, 42 U.S.C. (S) 2210, protects
the LOC Bank, the Administrating Banks and the Participating Banks against
liability with respect to any "nuclear incident" (as defined by the Act) and
whether the Act imposes any financial obligations on the LOC Bank, the
Administrating Banks or the Participating Banks.
In reaching the opinions on these issues set forth below, we have reviewed
and relied upon the Order issued by the NRC on December 12, 1985, in the Palo
Verde docket,/1/ the SECY-85-367 NRC staff document to which the NRC Order
refers, and the Amendment. We also have reviewed the BVPS Operating Agreement,
and the Company's application to the NRC for approval of the transactions and
the various materials submitted in support of that application. Finally, we
have reviewed the relevant Transaction Documents, in particular the
Participation Agreements, Appendix A thereto (Definition of Terms), and the
Facility Leases between each Owner Trustee and the Company, and also the draft
Reimbursement Agreement transmitted to us on [_________ ___], 1994. We have
assumed for purposes of our opinion that the final version of the Reimbursement
Agreement will not differ materially from the draft version.
1. Validity and Effect of the Amendment
In accordance with NRC practice and regulation, the Amendment was issued
by the NRC's staff without an order from the Commission specifically authorizing
the amendment. Except for certain special situations not applicable here,
amendments to NRC nuclear facility operating licenses
-------------------
/1/ Arizona Public Service Co. (Palo Verde Generating Station, Unit 1), CLI-85-
17, 22 N.R.C. 875 (1985).
<PAGE>
3
can be, and usually are, issued by the NRC staff, through delegation of
authority from the Commission without the requirement for such a specific
Commission order. See 10 C.F.R. (S) 1.43 (1988). See also 42 U.S.C. (S) 5843(b)
(1982). Thus the Amendment is valid and binding unless and until it is removed
or changed by the NRC.
The Amendment constituted the NRC's final disposition in the matter of the
Company's application for a license amendment authorizing the transactions. The
Administrative Orders Review Act, 28 U.S.C. (S) 2344, permits "any party
aggrieved" by a final order/2/ to petition for review in the appropriate U.S.
Court of Appeals within sixty days of the order's entry. Since no person filed
such a petition for review with respect to the Amendment within the sixty-day
period, which is jurisdictional, the Amendment is no longer susceptible to
judicial review.
Section 2.206 of the NRC Rules of Practice (10 C.F.R. (S) 2.206) provides
that "[a]ny person may file a request for [the appropriate NRC office] to
institute a proceeding pursuant to (S) 2.202 to modify, suspend or revoke a
license, or for such other action as may be appropriate." This provision would
permit any person to request the NRC staff to reconsider and suspend, revoke or
modify the license or any provisions thereof, including the Amendment. We are
unaware of the existence of any such request, or of any existing facts or
occurrences that would make such a request likely. No person sought to contest
the issuance of the Amendment or to request a hearing on the Amendment, and we
are unaware of any opposition to its issuance.
Similarly, Section 2.202 and 2.204 of the Rules of Practice (10 C.F.R.
(S)(S) 2.202 and 2.204) authorize the NRC to take action of its own accord to
modify, suspend or revoke a license by issuing an order to show cause or an
amendment on notice to the licensee that the licensee may demand a hearing with
respect to the order or amendment. We are unaware of any initiative by the NRC
to take any such action, or of any existing facts or occurrences that would make
such action likely.
2. Other Required Licensing Actions.
The Amendment authorized the licensee to enter into the transactions in
accordance with representations made in the application for the Amendment, which
application included the submittal of a draft
---------------------
/2/ The Administrative Procedure Act defines "order" as a final disposition of
an agency in a matter including licensing. 5 U.S.C. (S) 551(6).
<PAGE>
4
Participation Agreement containing a provision on Financial Support describing
the issuance of letters of credit and the terms of the reimbursement agreement.
In the absence of a specific statement in the Amendment to the contrary, no
further action of the NRC is required in connection with the execution and
delivery of the Reimbursement Agreement.
For the same reason, no further action by the NRC is required in
connection with the performance of the Reimbursement Agreement so long as such
performance does not constitute "exercising directly or indirectly any control
over the licenses of the BVPS, Unit 2". Amendment, paragraph 2. We believe
that the words "control over the licenses" must be limited in construction to
mean such control as would be related to the licensed activities of the
licensees, i.e., control over the authorizations and obligations of the
licensees under the license. The NRC is authorized to issue licenses and
control licensed activities, and would therefore also have jurisdiction to
prohibit activities of non-licensees which are in contravention of NRC law and
regulations. It would not have jurisdiction over non-licensees with respect to
activities which do not affect NRC's overall responsibilities to protect the
health and safety of the public and the common defense and security.
Based on an examination of pertinent NRC documents, we believe that the
Amendment language restricts only activities related to the license and the
protection of public health and safety. The language in the Amendment is
derived from the Commission's December 12 Order/3/ which in turn referenced and
adopted the NRC staff's position and reasoning in its document SECY-85-367. The
underpinning of the NRC position, as stated in SECY-85-367, is its perception of
the sale of the Undivided Interest as "simply a step in a transaction involving
the refinancing of capital, and where the investor owner only serves in a
passive role with no authority or control over the nuclear facility, the Staff
-------------------------------------------------
can perceive of no regulatory purpose which would be served by an interpretation
of Section 101 of the Atomic Energy Act, which requires the licensing of such
financial investors. . . ." (emphasis added).
In arriving at its determination that the lessors need not be licensed,
the NRC drew a parallel between the sale-leaseback transaction and a transaction
involving a secured creditor. NRC's "Creditor Regulations", 10 C.F.R. (S)
50.81, provide that a creditor secured by mortgage, pledge or other
-----------------------
/3/ The Commission's Order used the phrase "control over the licensee" while
the instant Amendment refers to "control over the license". As discussed
above, we believe that control over the licensee means, in context, control
over licensed activity, and therefore that the Commission's Order and the
Amendment contain the identical substantive proscription.
<PAGE>
5
lien upon a nuclear facility need not be a licensee if the secured creditor
exercises its rights in compliance with and subject to NRC law and regulations
and the restrictions applicable to the facility licensee. One such regulation
mandates a license condition which prohibits a licensee from transferring any
rights under its license, ". . . directly or indirectly, through transfer of
control of the license to any person . . ." without NRC approval. 10 C.F.R.
(S) 50.54(c). Taken together, sections 50.54(c) and 50.81 prohibit a licensee
from transferring its rights under a license, or control of the license, to an
unlicensed secured creditor, and prohibit the unlicensed secured creditor from
taking possession of its secured interest in a nuclear facility or otherwise
exercising control over the activities authorized or required by the license.
The Amendment specifically states that "[f]or purposes of this condition
[limiting the lessor from exercising control over the licenses,] the limitations
in 10 C.F.R. 50.81 . . . are fully applicable to the lessor . . ." It is thus
reasonable to conclude that, if the lessor does not take possession of the
Undivided Interest and is in compliance with the provisions of 10 C.F.R. (S)
50.81, the existence and the exercise of the provisions in the Reimbursement
Agreement are not inconsistent with the Amendment's prohibition of "exercising
directly or indirectly any control over the licenses." The LOC Bank, the
Administrating Banks and the Participating Banks have even less ability to
exercise control over the license during normal performance of the transaction;
and thus, unless the Banks at some point in the future obtain and take
possession of a secured interest in the facility, there is no need for further
licensing. Under present conditions, no other action by the NRC is required in
connection with the performance of the Reimbursement Agreement.
No other filing with the NRC is required in connection with the execution
and delivery of the Reimbursement Agreement. With respect to performance, no
other filing is required unless (a) the performance entails exercise of a
condition in such a manner as to exercise "directly or indirectly control over
the licenses," as discussed above, or (b) a filing is necessary to satisfy the
notification requirements in the Amendment. Those requirements are that the
lessee (licensee) must "notify the NRC in writing prior to any change in: (i)
the terms or conditions of any lease agreements executed as part of this
transaction, (ii) the BVPS Operating Agreement, (iii) the existing property
insurance coverage for the BVPS, Unit 2, and (iv) any action by the lessor or
others that may have an adverse effect on the safe operation of the facility."
<PAGE>
6
3. Actions Required to Maintain Non-licensee Status
Unless the LOC Bank, Administrating Banks or Participating Banks seek to
engage in an activity which the NRC deems to be exercising control over the
licenses, no action is necessary under the Amendment as it now exists to
maintain their status as non-licensees. In the event a person or the NRC should
question or challenge the continued right of the LOC Bank, the Administrating
Bank and the Participating Banks to maintain their non-licensed status, the
Banks may wish to take actions in their defense. We are unaware of any existing
facts or circumstances which the NRC would deem to be exercising control over
the licenses.
4. License and Reporting Obligations of the LOC Bank, the Administrating
Banks and the Participating Banks
The Amendment includes the condition that the "lessor and anyone else who
may acquire an interest under these transactions are prohibited from exercising
directly or indirectly any control over the licenses of the BVPS, Unit 2," and
therefore concludes that the sale-leaseback transactions "shall have no effect
on the license for the Beaver Valley facility throughout the term of the
license." The SECY-85-367 staff recommendation adopted by the Commission's
December 12, 1985 Order further states:
[W]here as here, the sale of the facility is simply a step in a
transaction involving only the refinancing of capital, and where the
investor owner only serves in a passive role with no authority or control
over the nuclear facility, the Staff can perceive of no regulatory purpose
which would be served by an interpretation of Section 101 of the Atomic
Energy Act [the source of the NRC's licensing authority], which requires
the licensing of such financial investors . . .
The effect of this analysis, the NRC Order, and the Amendment is that the
LOC Bank, the Administrating Banks and the Participating Banks are not required
to become licensees during the Lease Term and therefore will incur no obligation
as licensees during that period. By the same token, we believe that the Company
as lessee of the Undivided Interest from the Owner Trustee, will remain during
the Lease Term the relevant licensee under Facility Operating License No. NPF-73
subject to all applicable license obligations with respect to the management and
operation of BVPS Unit 2. Such licensee obligations include the costs and
responsibilities of decommissioning the facility.
<PAGE>
7
In addition, it is our opinion that the LOC Bank, the Administrating Banks
and the Participating Banks have no reporting obligations during the Lease Term
under any nuclear-related law or regulation. With one exception, such reporting
obligations are limited to licensees or holders of construction permits for
nuclear facilities. The exception is Section 206 of the Energy Reorganization
Act of 1974, 42 U.S.C. (S) 5846, which provides that each director and
"responsible officer" of any firm "constructing, owning, operating, or supplying
the components of any facility or activity which is licensed or otherwise
regulated" by the NRC, "who obtains information reasonably indicating that such
facility or activity or basic components supplied to such facility" fails to
comply with nuclear laws or regulations relating to substantial safety hazards
or contains a defect that could create a substantial safety hazard, shall
immediately notify the NRC of the failure to comply or the defect. Although the
literal language of Section 206 would encompass even unlicensed owners of
nuclear facilities, the NRC regulations implementing this provision (10 C.F.R.
Part 21) make clear that its reporting requirements extend only to licensees and
to firms (including directors and responsible officers thereof) that construct,
or supply basic components to, licensed facilities. 10 C.F.R. (S) 21.2. Just
as the NRC Order in this case reflects the Commission's understanding that the
language of Section 101 of the Atomic Energy Act does not require licensing of
the passive investor owner for its ownership interest in a nuclear facility,
Part 21 of the NRC Regulations reflects the Commission's understanding that the
reporting requirements established by Section 206 were not intended to reach
passive investors or lenders and make sense only if applied to those persons
actually involved in the management, operation or construction of a nuclear
facility or in the supply of basic components for such facilities. Accordingly,
it is our opinion that neither Section 206 nor its implementing regulations
would impose any reporting requirements on the LOC Bank, the Administrating
Banks or the Participating Banks during the Lease Term.
5. The Price-Anderson Act
Section 170 of the Price-Anderson Act, in its present form, requires
"licensees" of nuclear facilities to maintain financial protection in specified
amounts against "public liability" for "nuclear incidents" (as that term is
defined in the Price-Anderson Act, 42 U.S.C. (S) 2014(q)), which protection
includes mandatory insurance coverage, retroactive premium assessments, and
surcharges. 42 U.S.C. (S) 2210(a), (b), & (o)(1)(E). The Price-Anderson Act
also protects all "persons indemnified" against public liability for nuclear
incidents beyond the sum of the amount covered by the required financial
protection (including surcharges) and the limits of indemnification provided by
the NRC, 42 U.S.C. (S) 2210(e), but does not preclude Congress from enacting
revenue measures applicable to NRC licensees to fund actions for
<PAGE>
8
full compensation of all public liability claims, 42 U.S.C. (S) 2210(e)(3). The
Act defines the term "person indemnified" to include both persons who are
required to maintain financial protection, i.e., licensees, and "any other
person who may be liable for public liability." 42 U.S.C. (S) 2014(t). The
term "public liability," in turn, is defined to mean "any legal liability
---
arising out of or resulting from a nuclear incident or precautionary evacuation"
(emphasis added), except for workers' compensation claims of persons employed at
the site where the incident occurs, claims arising out of an act of war, and
claims relating to loss of, or damage to, or loss of use of property located at
the site of and used in connection with the activity where the incident occurs.
42 U.S.C. (S) 2014(w).
In light of the Amendment holding that the Company remains the licensee of
the BVPS, Unit 2 during the Lease Term, in our opinion the LOC Bank, the
Administrating Banks and the Participating Banks will have no obligation under
the Price-Anderson Act or its implementing regulations to maintain financial
protection during the Lease Term. In addition, the terms of the Act described
above extend full financial protection to the Banks against public liability for
nuclear incidents.
* * *
In summary, it is our opinion that: (1) the Amendment is valid and binding
subject only to reconsideration at the initiative of the NRC or some other
person under Sections 2.202, 2.204 or 2.206 of the NRC's Rules of Practice; (2)
no further action by the NRC is required in connection with the execution,
delivery and performance by the Company of the Reimbursement Agreement so long
as the conditions of the Amendment are adhered to, and no further filing with
the NRC is required except as required by the conditions of the Amendment; (3)
no further action by the NRC is required to maintain the non-licensee status of
the LOC Bank, the Administrating Banks and the Participating Banks; (4) under
the terms of the NRC Order and under a proper reading of Section 101 of the
Atomic Energy Act and its implementing regulations in their present form, the
LOC Bank, the Administrating Banks and the Participating Banks do not have any
license or reporting obligations during the Lease Term under any nuclear-related
law or regulation; and (5) the Price-Anderson Act in its present form protects
the LOC Bank, the Administrating Banks and the Participating Banks against
financial exposure from any liability for nuclear incidents and does not require
the Banks to maintain financial protection during the Lease Term against
liability for such nuclear incidents.
The information set forth herein is as of the date of this letter, and we
disclaim any undertaking to advise you of changes which thereafter may
<PAGE>
9
be brought to our attention. This opinion is being delivered to you in
connection with the transactions described herein and without our prior written
consent may not be relied upon for any other purpose, or with respect to any
other transactions, or by persons other than yourselves, your successors, and
your assigns.
Sincerely,
SHAW, PITTMAN, POTTS &
TROWBRIDGE
By
---------------------------
<PAGE>
EXHIBIT G
FORM OF OPINION OF SPECIAL NEW YORK COUNSEL FOR
THE LOC BANK AND THE ADMINISTRATING BANKS
[Date of Issuance of the
Letters of Credit]
To the Persons listed on Schedule A
hereto
Duquesne Light Company
Ladies and Gentlemen:
We have acted as special New York counsel to Swiss Bank Corporation,
acting through its New York Branch (the "LOC Bank"), in connection with the
preparation, execution and delivery of the Reimbursement Agreement, dated as of
October 1, 1994 (the "Reimbursement Agreement"), among Duquesne Light Company
(the "Company"), the LOC Bank, Union Bank and Swiss Bank Corporation, New York
Branch, as the administrating banks (the "Administrating Banks"), and the
Participating Banks named therein, and the issuance by the LOC Bank of its
Irrevocable Transferable Letters of Credit Nos. S546733, S546734, S546735,
S546736, S546737, S546738 and S546739, each dated October ___, 1994 (the
"Letters of Credit"). Capitalized terms used herein, unless otherwise defined,
shall have the meanings set forth in the Reimbursement Agreement.
As such counsel, we have examined the originals, or copies identified to
our satisfaction, of the Reimbursement Agreement and the Letters of Credit and
such other certificates, documents, agreements and instruments as we have deemed
necessary as a basis for the opinions hereinafter expressed. As to questions of
fact material to such opinions, we have relied, without independent
investigation, on such records, certificates, documents, agreements and
instruments.
Our opinions expressed below are limited to the law of the State of New
York and the Federal law of the United States of America, and we do not
<PAGE>
2
express any opinion herein concerning any other law. With respect to matters
dependent on Swiss law, we have, with your permission, assumed the correctness
of, have made no investigation of the matters covered by, and our opinion is in
all respects subject to the conditions and qualifications set forth in, the
opinion dated the date hereof of Oskar Morikofer, Swiss counsel to Swiss Bank
Corporation, a copy of which is attached hereto. Further, we express no opinion
as to the applicability of, or any party's compliance with, the Federal
securities laws or any state securities or "blue sky" laws.
Based upon and subject to the foregoing, and subject to the exceptions,
qualifications and assumptions set forth herein, we are of the opinion that:
1. The LOC Bank is duly licensed by the Superintendent of Banks of
the State of New York as a New York branch of Swiss Bank Corporation, in
accordance with the provisions of Article V of the Banking Law of the
State of New York (the "New York Banking Law"). The LOC Bank has the
power and authority under Article V of the New York Banking Law to issue
the Letters of Credit.
2. Each of the Letters of Credit has been duly issued, executed and
delivered and constitutes the valid and legally binding obligation of the
LOC Bank, enforceable against the LOC Bank in accordance with its terms,
except as such enforcement may be limited by (a) applicable bankruptcy,
composition, receivership, conservatorship, insolvency, reorganization,
moratorium, liquidation, readjustment of debt or similar laws affecting
the enforcement of the rights of creditors generally as such laws may be
applied in the event of any bankruptcy, composition, receivership,
conservatorship, insolvency, reorganization, moratorium, liquidation,
readjustment of debt or similar proceeding relating to the LOC Bank or its
assets, and (b) general principles of equity (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
3. Upon proper and timely presentation to the LOC Bank of a draft
and other documents in strict conformity with a Letter of Credit, the LOC
Bank would be obligated to honor the draft in accordance with the terms of
such Letter of Credit, notwithstanding any bankruptcy, insolvency,
reorganization, moratorium, liquidation, readjustment of debt or similar
proceeding relating to the Company or its assets. We point out, however,
that bankruptcy courts are courts of equity and that, in the exercise of
their equity powers, courts have in the past in certain circumstances
temporarily restrained and preliminarily enjoined payments under letters
of credit. However, in our opinion, any such proceeding would not, in and
of itself, be the proper basis for a court to enjoin permanently such
payment.
<PAGE>
3
4. In the event that a final, conclusive and enforceable judgment
granting recovery of a sum of money (other than a judgment for taxes, a
fine, or other penalty) is rendered by a Swiss court against Swiss Bank
Corporation based on any Letter of Credit, the courts of the State of New
York would recognize such judgment pursuant to Section 5303 of the New
York Civil Practice Law and Rules, except as provided in Section 5304 of
the New York Civil Practice Law and Rules.
5. The execution, delivery and performance by the LOC Bank of the
Letters of Credit do not violate any law, rule or regulation applicable to
the LOC Bank, except for such violations if any as do not adversely affect
(a) the enforceability of each Letter of Credit against the LOC Bank in
accordance with its terms or (b) the obligation of the LOC Bank to honor
any draft in accordance with the terms of a Letter of Credit upon proper
and timely presentation thereof, together with other documents, to the LOC
Bank in strict conformity with such Letter of Credit.
6. The Courts of the State of New York may properly exercise
personal jurisdiction over the LOC Bank in an action or proceeding arising
out of a default in the performance by the LOC Bank of its obligations
under a Letter of Credit, and such personal jurisdiction in respect of the
LOC Bank would continue notwithstanding the failure of the LOC Bank to
maintain an office in the State of New York.
Very truly yours,
PKS:GDP:sjg
<PAGE>
SCHEDULE A
Mission Funding Gamma
c/o Mission First Financial
18101 Von Karman, Suite 800
Irvine, California 92715-1046
Palo Verde Leasing Corporation
One First National Plaza, Suite 0502
Chicago, Illinois 60670
Beaver Valley Leasing Corporation
c/o Mellon Financial Services
Room 151-4444
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Resources Capital Financing Corporation
The Legal Center
One Riverfront Plaza, 9th Floor
Newark, New Jersey 07102
PNC Commercial Corp.
c/o PNC Leasing Corp.
Two PNC Plaza, 13th Floor
620 Liberty Avenue
Pittsburgh, Pennsylvania 15265
Beaver Valley Two Omega Limited Partnership
c/o Dechert, Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
Beaver Valley Two Omega, Inc.
c/o Dechert, Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
<PAGE>
2
NationsBanc Leasing Corporation
(f/k/a Sovran Leasing Corporation)
100 North Tryon Street
NC1007-12-01
Charlotte, North Carolina 28255
Beaver Valley Two Tau Limited Partnership
c/o Dechert, Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
Beaver Valley Two Tau, Inc.
c/o Dechert, Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
NationsBanc Leasing Corporation
(f/k/a Commerce Union Bank)
100 North Tryon Street
NC1007-12-01
Charlotte, North Carolina 28255
<PAGE>
EXHIBIT H
FORM OF OPINION OF SWISS COUNSEL FOR THE LOC BANK
TO EACH OF THE PERSONS
LISTED IN SCHEDULE A
ATTACHED HERETO
Dear Sirs:
I am a Legal Adviser and a First Vice President of Swiss Bank Corporation (the
"Bank") and I am a member in good standing of the Bar of the Canton of Thurgau,
Switzerland. With respect to the Reimbursement Agreement (the "Reimbursement
Agreement"), between the Bank's New York Branch (the "Branch") as LOC Bank,
Duquesne Light Company, Union Bank and the Branch, as Administrating Banks, and
the Participating Banks named therein, pursuant to which the Branch has issued
Letters of Credit Nos. S546733, S546734, S546735, S546736, S546737, S546738 and
S546739 (the "Letters of Credit"), I have examined or have had examined
originals or copies of such documents, corporate records and other instruments
as I have deemed necessary or advisable for purposes of this opinion. In
rendering this opinion I have relied as to certain matters on information
obtained from public records, officers of the Bank and other sources believed by
me to be responsible and have assumed that the signatures on all documents
examined by me are genuine, an assumption which I have not independently
verified.
Based upon the foregoing, I am of the opinion that:
1. The Bank is a banking corporation duly organized and validly existing
under the laws of Switzerland and the Bank has the corporate power
under Swiss law to execute, deliver and perform the Letters of
Credit. The Bank is a private corporation not affiliated with the
Swiss government and is subject to the jurisdiction of Swiss courts
on the same basis as other private corporations.
2. Each Letter of Credit has been duly authorized by the Bank and,
assuming that each Letter of Credit constitutes the legal, valid and
binding obligation of the Bank, acting through the Branch, in
accordance with New York law, it will, when duly executed and
delivered by the Branch, constitute the legal, valid and binding
obligation of the Bank enforceable against the Bank acting through
the Branch in accordance with its terms.
<PAGE>
2
3. Each Letter of Credit is enforceable in accordance with its terms
against the Bank's head office in Switzerland if the Branch defaults
in its obligations under such Letter of Credit or the Bank ceases to
have a presence in New York.
4. The choice of the law of the State of New York to govern the Letters
of Credit is valid under the laws of Switzerland and a court in
Switzerland would uphold such choice of law in a suit or other
proceeding on such Letter of Credit brought in a court of
Switzerland, provided that the application of such law to the case
would not result in a contravention of Swiss public policy.
5. Any final and conclusive judgement for a fixed and definite sum
obtained against the Branch in any competent U.S. Federal or State
court having jurisdiction over the Branch in respect of any suit,
action or proceeding against the Branch for the enforcement of any
Letter of Credit will, upon request, be declared valid and
enforceable against the Bank by the competent courts at the legal
domicile of the Bank in Basel, Switzerland, without relitigation of
the matters adjudicated, provided that its contents are not contrary
to, and the judgement has not been rendered in violation of, Swiss
public policy and provided that due process was not denied and the
same subject matter was not first brought or earlier adjudicated in
another court.
6. The opinion expressed in paragraphs 2 and 3 are subject to the
following qualification: such enforcement may be limited by
bankruptcy, insolvency, liquidation, reorganization, moratorium or
other similar laws affecting the rights of creditors against the Bank
generally, from time to time in effect, as the same would apply in
the event of the bankruptcy, insolvency, liquidation or
reorganization of, or other similar occurrence with respect to, the
Bank or in the event of a moratorium or similar occurrence affecting
the Bank.
7. With respect to paragraphs 4 and 5 of this opinion it can be stated
as a general rule that judgements of U.S. Federal courts and courts
of the State of New York rendered in application of the law of the
State of New York are enforceable in Switzerland and, with the
exception of judgements awarding treble or punitive damages or
<PAGE>
3
judgements rendered against a defendant domiciled outside the U.S.A.
upon whom service of process or of pleadings was not made by way of
legal assistance by the local authorities, I know of no reason why
such judgements would be a violation of Swiss public policy or the
rules of due process of law prevailing in Switzerland.
8. The obligations of the Bank under the Letters of Credit rank pari
passu with all deposits and other unsecured obligations of the Bank,
except that the bankruptcy law of Switzerland provides for a number
of priorities, the most material of which are (a) employment wage
claims, (b) social security claims and (c) the claims of "savings
depositors" in the amount of up to 10,000.-- Swiss Francs per
depositor.
9. No license, consent or approval of, or registration with, any
governmental department, agency, commission or regulatory authority
of Switzerland is required in connection with the execution, delivery
or performance of the Letters of Credit by the Bank, acting through
the Branch, to make each Letter of Credit fully enforceable in
accordance with its respective terms.
10. No stamp duty or similar tax is currently payable to any governmental
authority in Switzerland in respect of the issuance, execution,
delivery or effectiveness of the Letters of Credit, and the Bank is
not required to make any deduction or withholding from any payment it
may make thereunder.
I express no opinion as to any matters governed by any laws other than the laws
of Switzerland.
This opinion may not be used or relied upon by or published or communicated to
any party other than the addressees hereof for any purpose whatsoever without my
prior written approval in each instance.
Very truly yours,
O. Morikofer
Legal Adviser
<PAGE>
SCHEDULE A
Mission Funding Gamma
c/o Mission First Financial
18101 Von Karman, Suite 800
Irvine, California 92715-1046
Attention: Manager of Finance
Palo Verde Leasing Corporation
One First National Plaza, Suite 0502
Chicago, Illinois 60670
Attention: William Kusack
Beaver Valley Leasing Corporation
c/o Mellon Financial Services
Room 151-4444
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Attention: Ms. Mary E. Shancey
Resources Capital Financing Corporation
The Legal Center
One Riverfront Plaza, 9th Floor
Newark, New Jersey 07102
Attention: Eileen A. Moran, Chairman of the Board
PNC Commercial Corp.
c/o PNC Leasing Corp.
Two PNC Plaza, 13th Floor
620 Liberty Avenue
Pittsburgh, Pennsylvania 15265
Attention: Ms. Karen Kirsch, Vice President
<PAGE>
2
Beaver Valley Two Omega Limited Partnership
c/o Dechert, Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
Attention: Judson J. Wambold, Esq.
Beaver Valley Two Omega, Inc.
c/o Dechert, Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
Attention: Judson J. Wambold, Esq.
NationsBanc Leasing Corporation
(f/k/a Sovran Leasing Corporation)
100 North Tryon Street
NC1007-12-01
Charlotte, North Carolina 28255
Attention: Ms. Rhonda Shafer
Beaver Valley Two Tau Limited Partnership
c/o Dechert, Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
Attention: Judson J. Wambold, Esq.
Beaver Valley Two Tau, Inc.
c/o Dechert, Price & Rhoads
4000 Bell Atlantic Tower
1717 Arch Street
Philadelphia, Pennsylvania 19103
Attention: Judson J. Wambold, Esq.
<PAGE>
3
NationsBanc Leasing Corporation
(f/k/a Commerce Union Bank)
100 North Tryon Street
NC1007-12-01
Charlotte, North Carolina 28255
Attention: Ms. Rhonda Shafer
<PAGE>
EXHIBIT I
FORM OF ASSIGNMENT AGREEMENT
Dated _________________, 19__
Reference is made to the Reimbursement Agreement, dated as of October 1,
1994 (said Agreement, as it may hereafter be amended or otherwise modified from
time to time, being the "Agreement"; unless otherwise defined herein terms
defined in the Agreement are used herein with the same meaning), among Duquesne
Light Company (the "Company"), Swiss Bank Corporation, New York Branch ("Swiss
Bank Corporation"), as LOC Bank (the "LOC Bank"), Union Bank and Swiss Bank
Corporation, as Administrating Banks, and the Participating Banks named therein
and from time to time parties thereto. Pursuant to the Agreement,
______________ (the "Assignor") has acquired a participation from the LOC Bank
in and to each Letter of Credit.
The Assignor and ________________ (the "Assignee") agree as follows:
1. The Assignor hereby sells and assigns, without recourse, to the
Assignee, and the Assignee hereby purchases and assumes from the Assignor,
without recourse to the Assignor, that portion set forth in Section 1(c) of
Schedule 1 hereto (the "Assigned Interest") of the Assignor's rights and
obligations under the Agreement, including, without limitation, the
participation acquired by the Assignor pursuant to Section 5 of the Agreement in
respect of unreimbursed amounts owing from time to time to the LOC Bank and
unreimbursed amounts outstanding on the Effective Date. Such Assigned Interest
represents the percentage interest specified in Section 2(b) of Schedule 1 of
all outstanding rights and obligations of the Participating Banks under the
Agreement, and, after giving effect to such sale and assignment, the Assignee's
and Assignor's Participation Percentages will be as set forth in Sections 2(b)
and 2(c), respectively, of Schedule 1. The effective date of this sale and
assignment shall be the date specified in Section 3 of Schedule 1 (the
"Effective Date").
2. On the Effective Date, the Assignee will pay to the Assignor, in same
day funds, at such address and account as the Assignor shall advise the
Assignee, an amount equal to (1) the aggregate amount of unreimbursed letter of
credit payments outstanding (as set forth in Section 1 of Schedule 1) times (2)
the Assigned Interest. From and after the Effective Date, the
<PAGE>
2
Assignor agrees that the Assignee shall be entitled to all rights, powers and
privileges of the Assignor under the Agreement to the extent of the Assigned
Interest, including without limitation (i) the right to receive all payments in
respect of the Assigned Interest for the period from and after the Effective
Date, whether on account of reimbursements, principal, interest, fees,
indemnities in respect of claims arising after the Effective Date, increased
costs, additional amounts or otherwise; (ii) the right to vote and to instruct
the Administrating Banks and the LOC Bank under the Agreement based on the
Assigned Interest; (iii) the right to set-off and to appropriate and apply
deposits of the Company as set forth in the Agreement; and (iv) the right to
receive notices, requests, demands and other communications. The Assignor
agrees that it will promptly remit to the Assignee any amount received by it in
respect of the Assigned Interest (whether from the Company, the Administrating
Banks or otherwise) in the same funds in which such amount is received by the
Assignor.
3. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Agreement, the
Transaction Documents, the Financing Documents or the Refinancing Documents or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Agreement, the Transaction Documents, the Financing Documents, the
Refinancing Documents or any other instrument or document furnished pursuant
thereto; and (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of the Company or the
performance or observance by the Company of any of its obligations under the
Agreement or under the Transaction Documents, Financing Documents or Refinancing
Documents to which it is, or is to be, a party, or any other instrument or
document furnished pursuant thereto.
4. The Assignee (i) confirms that it has received a copy of the
Agreement, together with copies of the financial statements referred to in
Section 10(g) thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment; (ii) agrees that it will, independently and without reliance upon
the Administrating Banks, the LOC Bank, the Assignor or any other Participating
Bank and based on such documents and information as it shall deem appropriate at
the time, continue to make its own credit decisions in taking or not taking
action under the Agreement; (iii) appoints and authorizes the Administrating
Banks to take such action as agents on its behalf and to exercise such powers
under the Agreement as are delegated to the
<PAGE>
3
Administrating Banks by the terms thereof, together with such powers as are
reasonably incidental thereto; and (iv) agrees that it will perform in
accordance with its terms all of the obligations which by the terms of the
Agreement are required to be performed by it as a Participating Bank.
5. Following the execution of this Assignment, it will be delivered to
Union Bank, as Administrating Bank, for acceptance. Upon such acceptance and
receipt of the consents of the LOC Bank and the Company required pursuant to
Section 23(b) of the Agreement (which shall be evidenced by the LOC Bank's and
the Company's execution of this Assignment on the appropriate spaces on Schedule
1), as of the Effective Date, (i) the Assignee shall be a party to the Agreement
and, to the extent provided in this Assignment, have the rights and obligations
of a Participating Bank thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment, relinquish its rights and be released from its
obligations under the Agreement.
6. Upon such acceptance and consent, from and after the Effective Date,
each Administrating Bank and the LOC Bank shall make all payments under the
Agreement in respect of the interest assigned hereby (including, without
limitation, all payments of principal, interest and fees with respect thereto)
to the Assignee at its address set forth on Schedule 1 hereto. The Assignor and
Assignee shall make all appropriate adjustments in payments under the Agreement
for periods prior to the Effective Date directly between themselves.
7. This Assignment shall be governed by, and construed in accordance
with, the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be
executed by their respective officers thereunto duly authorized, as of the date
first above written, such execution being made on Schedule 1 hereto.
<PAGE>
4
Schedule 1
to
Participation Assignment
Dated ____________, 19__
Section 1.
----------
(a) Total Unreimbursed
Payments: $__________
(b) Assigned Interest:/1/ __________%
Section 2.
----------
(a) Assignor's Participation
Percentage (immediately
prior to the effectiveness
of this Assignment) ___________%
(b) Assignee's Participation
Percentage/2/ (upon the
effectiveness of this
Assignment) ___________%
(c) Assignor's Participation
Percentage/2/ (upon
the effectiveness of
this Assignment) ___________%
Section 3.
----------
Effective Date: __________, 19__
[NAME OF ASSIGNOR]
By:______________________________
Title:
----------------------
/1/ Specify percentage to no more than 8 decimal points.
/2/ The sum of the percentages set forth in Section 2(b) and (c) shall equal
the percentage set forth in Section 2(a).
<PAGE>
5
[NAME OF ASSIGNEE]
By:______________________________
Title:
Address for Notice:
[Address]
Telephone:__________________
Telex:_______________________
Telecopy:___________________
Attention:___________________
Account for Payment:
[Address]
Telephone:__________________
Telex:_______________________
Telecopy:___________________
Attention:___________________
Account No.:________________
Consented to this ___ day
of ______________, 19___
SWISS BANK CORPORATION,
NEW YORK BRANCH,
as LOC Bank
By:__________________________
Title:
Consented to this ___ day
of ______________, 19___
DUQUESNE LIGHT COMPANY
By:__________________________
Title:
<PAGE>
6
Accepted this ___ day
of _____________, 19___
UNION BANK,
as Administrating Bank
By:__________________________
Title:
<PAGE>
EXHIBIT 12.1
Duquesne Light Company and Subsidiary
Calculation of Ratio of Earnings to Fixed Charges
(Thousands of Dollars)
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
FIXED CHARGES:
Interest on long-term debt $ 94,646 $102,938 $119,179 $127,606 $135,850
Other interest 1,095 2,387 1,749 1,773 4,939
Amortization of debt discount, premium and
expense-net 6,381 5,541 4,223 3,892 4,039
Portion of lease payments representing an
interest factor 44,839 45,925 60,721 64,189 64,586
-------- -------- -------- -------- --------
Total Fixed Charges $146,961 $156,791 $185,872 $197,460 $209,414
-------- -------- -------- -------- --------
EARNINGS:
Income from continuing operations $147,449 $144,787 $149,768 $143,133 $135,456
Income taxes 87,897 75,042 107,999 101,073 84,478
Fixed charges as above 146,961 156,791 185,872 197,460 209,414
-------- -------- -------- -------- --------
Total Earnings $382,307 $376,620 $443,639 $441,666 $429,348
-------- -------- -------- -------- --------
RATIO OF EARNINGS TO FIXED CHARGES 2.60 2.40 2.39 2.24 2.05
======== ======== ======== ======== ========
</TABLE>
Duquesne's share of the fixed charges of an unaffiliated coal supplier, which
amounted to approximately $3.7 million for the year ended December 31,
1994, has been excluded from the ratio.
<PAGE>
DUQUESNE LIGHT COMPANY EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement Nos.
33-52782, 33-63602, 33-53563 and 33-53563-01 of Duquesne Light Company on Form
S-3 of our report dated January 31, 1995, appearing in the Annual Report on Form
10-K of Duquesne Light Company for the year ended December 31, 1994.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
March 28, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> UT
<CIK> 0000030573
<NAME> DUQUESNE LIGHT CO
<MULTIPLIER> 1000
<CURRENCY> 0
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> $3,068,519
<OTHER-PROPERTY-AND-INVEST> $74,269
<TOTAL-CURRENT-ASSETS> $252,760
<TOTAL-DEFERRED-CHARGES> $710,763
<OTHER-ASSETS> $43,556
<TOTAL-ASSETS> $4,149,867
<COMMON> 0
<CAPITAL-SURPLUS-PAID-IN> $823,193
<RETAINED-EARNINGS> $292,319
<TOTAL-COMMON-STOCKHOLDERS-EQ> $1,115,512
0
$95,345
<LONG-TERM-DEBT-NET> $1,368,930
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> $59,599
0
<CAPITAL-LEASE-OBLIGATIONS> $41,106
<LEASES-CURRENT> $26,092
<OTHER-ITEMS-CAPITAL-AND-LIAB> $1,443,283
<TOT-CAPITALIZATION-AND-LIAB> $4,149,867
<GROSS-OPERATING-REVENUE> $1,180,284
<INCOME-TAX-EXPENSE> $94,446
<OTHER-OPERATING-EXPENSES> $845,944
<TOTAL-OPERATING-EXPENSES> $940,390
<OPERATING-INCOME-LOSS> $239,894
<OTHER-INCOME-NET> $8,609
<INCOME-BEFORE-INTEREST-EXPEN> $248,503
<TOTAL-INTEREST-EXPENSE> $101,054
<NET-INCOME> $147,449
$6,046
<EARNINGS-AVAILABLE-FOR-COMM> $141,403
<COMMON-STOCK-DIVIDENDS> $144,000
<TOTAL-INTEREST-ON-BONDS> $101,027
<CASH-FLOW-OPERATIONS> $351,144
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
EXHIBIT 99.1
EXECUTIVE COMPENSATION OF CERTAIN
DUQUESNE LIGHT COMPANY EXECUTIVE
OFFICERS FOR 1994 AND SECURITY OWNERSHIP
OF DUQUESNE LIGHT COMPANY DIRECTORS
AND EXECUTIVE OFFICERS AS OF FEBRUARY 16, 1995
REPORT OF THE COMPENSATION COMMITTEE OF THE
BOARD OF DIRECTORS ON EXECUTIVE COMPENSATION
All components of executive officer compensation were approved by the Board
of Directors based on the recommendations of the Compensation Committee, which
is composed entirely of non-employee directors.
It is anticipated that in 1995, as in 1994, all compensation to executives
will be fully tax deductible. It is the present intention of the Committee to
seek to ensure that all compensation payable to executives that is otherwise tax
deductible will continue to be tax deductible; however, the Committee reserves
the right to take whatever action with respect to the compensation of executive
officers that it deems appropriate and in the best interest of the Company and
DQE stockholders. The Committee will finalize its intention when final tax
regulations are issued under Section 162(m) of the Internal Revenue Code.
The primary objective of the Compensation Committee is to ensure that
Duquesne Light Company's (Duquesne's) executive compensation programs and
strategies are designed and administered to attract, retain and motivate the
executive talent required to achieve Duquesne's overall mission of creating and
enhancing value for DQE stockholders, customers and employees, as well as for
the community in which it operates.
The Compensation Committee's actions are governed by a long-standing
philosophy of developing and administering executive compensation programs that
encourage a high level of operational excellence and financial performance to
maximize stockholder value and customer satisfaction.
The Committee also strives to simultaneously foster community participation
and support quality leadership initiatives and innovative methodologies that
will effectively manage Duquesne's human resources and capital assets.
Throughout the development and administration of Duquesne's strategic
compensation plans, the Committee has adhered to a results-based approach by
linking a significant percentage of total compensation to meeting performance
objectives. The three variable components of executive compensation (base
salary, cash incentives and stock options) are based on performance.
<PAGE>
The Committee has purposely placed an emphasis on the "at risk" elements of
compensation for Duquesne's executives. Duquesne's awards under these incentive
programs are tied to corporate and individual performance. The accomplishment
of goals and objectives is at the center of the Committee's decision to make
awards under these incentive programs. The Committee exercises a degree of
discretion in administering these incentive plans which the Committee believes
encourages the executives to continually focus on building long-term stockholder
value.
An independent outside consultant with significant industry expertise has
determined that a greater percentage of Duquesne's executive officers' total
compensation is variable and placed at risk, when benchmarked against a
comparative industry panel of electric utility companies of similar operating
revenue size.
The three components of Duquesne's executive compensation program are base
salary, annual cash and stock-option incentives and long-term stock options.
The Company has entered into employment agreements with Messrs. von Schack,
Marshall, and Schwass and Ms. Green pursuant to which the minimum annual base
salary is specified. All stock options are granted under the Long-Term
Incentive Plan and are performance based.
Annually, the Committee reviews and determines base salary levels, annual
incentive compensation, and long-term performance-based stock option vesting,
with vesting decisions intended to encourage long-term results that increase
stockholder value.
Executive officers may or may not earn, on the basis of performance, cash
in the form of adjustments to base salary and annual cash incentives. Executive
officers also have the opportunity to earn annual performance stock options
under the Long-Term Incentive Plan as described under the caption "Annual
Incentives." Finally, they have the opportunity to also earn Long-Term
Incentive Plan performance-based stock options under a three-year grant.
The base salaries of executive officers are competitively benchmarked
against a comparative industry panel of electric utility companies of similar
revenue and operating characteristics. The Committee's goal is to target base
salaries at the average of the comparative industry panel.
In addition to the industry panel comparison, the Committee considered 1993
results in the areas of customer service levels, cost-effective management and
operational performance (including, for example, generating plant performance
and system reliability) in determining whether a base salary increase would be
granted to the executive officers in 1994. The named executive officers, other
than Mr. von Schack and Mr. Beck, received increases in base salary in 1994.
The executive officers have the opportunity to earn annual cash and stock
option performance awards by meeting short-term operating and financial goals.
Individual objectives are established for each executive officer in consultation
with the CEO and
2
<PAGE>
approved by the Compensation Committee. The Committee reviews the specific
results for each executive officer and the corporate performance with the Board
of Directors during the following year. The Board of Directors, upon the
recommendation of the Compensation Committee, approves the amount of annual
performance awards granted to each executive officer based on the achievement
of corporate and individual objectives.
Annual performance awards are granted only if a pre-determined corporate
financial performance threshold is met. The threshold recommended by the
Compensation Committee and approved by the Board of Directors for 1993 related
to DQE's earnings per share. This goal was met in 1993.
Each executive officer must also meet his or her individual annual
objectives. Specific objectives established in 1993 and considered by the
Committee in 1994 in determining the annual performance compensation awards
earned by the executive officers supported one or more of five major corporate
objectives, including maximizing long-term stockholder value, providing quality
service and superior customer satisfaction, managing assets cost effectively,
maintaining excellent operational performance and providing leadership in the
community. Assessment of operational performance was based, for example, upon
such measures as generating plant availability and system reliability.
In the aggregate, cash awards for annual incentives do not exceed 40% of
base salary for the Chief Executive Officer and 30% of base salary for all other
executive officers. Annual cash incentive awards for executives range from
0-40% of base salary depending upon the degree to which performance objectives
are met. See the Summary Compensation Table for the annual cash incentive
compensation awards earned by the executive officers for 1993 and paid in 1994.
The number of performance stock options awarded annually to executive
officers is determined by use of a cash incentive performance multiplier. The
size of the multiplier is based on the amount of increase in earnings per share
of DQE Common Stock. In 1994, the Committee awarded annual performance options
in the amount of 44,815 to Mr. von Schack; 15,119 to Mr. Marshall; 16,058 to Mr.
Schwass; 13,931 to Ms. Green; and 9,319 to Mr. Beck. Additional options were
not earned because not all of the established performance objectives were
achieved (see footnote (3) to the Summary Compensation Table). The grant
relative to these vested stock options was disclosed in the option grant table
included in the Duquesne Light Company Statement for 10-K for 1994. Fifty
percent of the annual stock options awarded in 1994 vest upon award. An
executive must wait one year before being able to exercise the remaining 50%.
Long-Term Incentive Plan performance-based stock options awarded in 1994
were granted to executive officers in 1991 under the provisions of a three-year
plan recommended by the Compensation Committee and approved by the Board of
Directors. Three-year strategies were developed by each executive officer and
annual milestones designed to enhance the general well-being of Duquesne were
established for each executive officer by the CEO and approved by the
Compensation Committee. The long-term strategies are
3
<PAGE>
designed to support the long-term corporate objectives of maximizing
stockholder value, providing quality service and superior customer
satisfaction, managing assets cost effectively, maintaining excellent
operational performance and providing leadership in the community. Through a
performance-based vesting schedule, each executive officer had the opportunity
to earn a percentage of the three-year grant annually. The Compensation
Committee reviewed the performance results and determined the amount of the
award with the approval of the Board of Directors. The vesting opportunity was
up to 30% in the first year, up to 60% in the second year, and up to 100% in
the third year. With respect to third-year vesting for the 1991 Long-Term
Incentive Plan based on achievement of their long-term strategies, Messrs.
von Schack and Schwass, Ms. Green and Mr. Beck received 40% vesting and
Mr. Marshall received 44% vesting. A new three-year plan was established by
the Compensation Committee in 1994. The new grants shown in the table
entitled, "Option/SAR Grants in Last Fiscal Year," have the same vesting limits
and rewards are determined by results.
As with all executive officers, the Committee reviews the CEO's prior
year's performance when evaluating whether or not a prospective performance
increase is recommended with respect to his base salary and whether awards are
made under the annual cash and stock-option incentive programs and for the long-
term incentive performance-based stock option vesting.
The CEO's performance is evaluated on the basis of the overall performance
of Duquesne, the performance of the other members of his management team and, as
discussed in more detail below, his leadership in developing and implementing
operating and strategic plans to further Duquesne's long-term corporate
objectives. Within the parameters of the specific compensation programs
previously discussed, the Committee has the flexibility to exercise a degree of
discretion in evaluating the CEO's total performance.
The Committee believes that emphasis should be placed on the variable
compensation portion (i.e., incentive cash and stock options) of the CEO's total
compensation (see previous discussion on pages 1 through 4). Both the Committee
and the Board believe that this strengthens the relationship between corporate
performance and ultimate total compensation for the CEO, thus maximizing
stockholder value. The Committee, emphasizing the at-risk compensation aspect
of Mr. von Schack's total compensation, has not given him an increase in base
salary since 1992. His current base salary level is below the average of the
comparative industry panel.
Under the leadership of the CEO, the management team continued to achieve
excellent results with respect to Duquesne's long-term corporate objectives. In
1994 DQE and Duquesne continued to demonstrate a solid track record of financial
and operational performance. DQE's earnings per share increased 26 cents, and
DQE's Common Stock dividends increased eight cents annually. DQE's common stock
has had a total return which consistently exceeded both the Standard & Poor's
500 and S&P Electric Companies over the same period. A full report on DQE's
financial performance
4
<PAGE>
can be found in the 1994 Annual Report to Stockholders. These results are
consistent with DQE's stockholder objective to achieve measurable and
meaningful increases in the value of our stockholders' investment.
Customers continue to rate Duquesne's quality of service significantly
higher than the national utility average, according to independent surveys.
Duquesne's customers also continued to experience service reliability among the
top 25% of U.S. utilities. Customer rates were reduced on average 8% in April
of last year. Duquesne's customer service and marketing activities received
outstanding national recognition during 1994, including two national Edison
Electric Institute marketing awards for innovative residential and commercial
marketing activities, four Edison Electric Institute/American Gas Association
"Eagle" awards for outstanding and innovative customer service programs and one
Electric Power Research Institute ("EPRI") "Lighting the Way" Award for
application of EPRI technology.
Duquesne continues to be widely recognized as an environmental leader.
Some examples of recent environmental accomplishments include successfully
meeting all of the objectives and goals of Duquesne's Environmental Strategic
Plan; completing a comprehensive environmental training program attended by all
Duquesne employees (believed to be a first of its kind); developing an
innovative environmental nitrogen oxide emission control system; and
establishing a Company-wide pollution prevention program to plan, document and
verify Duquesne's continuing efforts to effectively control pollution. Duquesne
remains fully committed to being an environmentally clean utility and an
innovative and forward-thinking environmental leader into the future.
The CEO also has taken a strong leadership role in community affairs,
including active participation on boards and committees of various organizations
which focus resources on the most pressing community problems and which serve to
improve the quality of life for people who live and work in Duquesne's service
territory. These activities and those in the environmental area relate directly
to Duquesne's community objective to be a community leader in improving the
quality of life in our service territory. The objective recognizes that our
future success is clearly linked to the economic health and vitality of the
region we serve.
We believe that our existing compensation philosophy has been effective in
attracting and retaining the management talent necessary to ensure a desirable
and consistent performance for stockholders and customers alike.
G. Christian Lantzsch, Chairman
Doreen E. Boyce
Robert P. Bozzone
Sigo Falk
5
<PAGE>
Compensation
The following Summary Compensation Table sets forth certain information as
to cash and noncash compensation earned and either paid to, or accrued for the
benefit of, the Chairman of the Board and Chief Executive Officer and the four
highest paid executive officers of Duquesne for service during the periods
indicated. Messrs. von Schack, Marshall and Schwass are executive officers of
DQE and Duquesne Light. The titles listed are those held for Duquesne, and the
amounts shown are for services to Duquesne. Total compensation amounts are
shown in the DQE Proxy Statement for 1994. The information is incorporated here
by reference. Ms. Green and Mr. Beck are executive officers of Duquesne Light
only, and the amounts shown are for services in those capacities.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------------ ---------------------------------------
Awards Payouts
----------------------------- --------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Securities
Other Annual Restricted Underlying All Other
Compen- Stock Performance LTIP Compen-
Name and Salary Bonus sation Award(s) Options/SARs Payouts sation
Principal Position Year ($) ($)(1) ($)(2) ($) (#)(3) ($) ($)(2)
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
W. W. von Schack 1994 393,360 0 155,272 0 155,000 0 4,014
COB and CEO 1993 440,000 154,880 355,847 0 59,860 0 4,497
1992 440,000 224,733 45,020 0 55,120 0 4,364
D. D. Marshall 1994 171,638 0 6,997 0 52,813 0 4,033
President and COO 1993 185,000 52,250 26,687 0 21,203 0 4,497
1992 175,000 48,125 6,098 0 27,974 0 4,364
G. L. Schwass 1994 171,638 0 19,073 0 52,813 0 3,967
Senior Vice Pres. 1993 185,000 57,000 39,395 0 26,091 0 4,497
and CFO 1992 172,500 51,750 9,878 0 17,845 0 4,364
D. L. Green 1994 166,333 0 16,319 0 35,469 0 4,482
Senior Vice Pres. - 1993 160,500 49,500 34,480 0 13,931 0 4,497
Administration 1992 153,000 41,311 0 0 15,828 0 4,364
R. D. Beck 1994 146,400 0 711 0 33,725 0 4,355
Vice President - 1993 146,400 32,208 0 0 12,707 0 4,293
Marketing & 1992 146,268 31,581 0 0 14,850 0 4,275
Customer Services
</TABLE>
(1) No incentive compensation is shown for 1994 since the annual review of
corporate and individual performance for 1994, which will determine such
compensation, has not occurred. The amount of any such compensation is
determined annually in each year based upon the prior year's performance
and either paid or deferred (via an eligible participant's prior election)
in the following year. The amounts shown for 1992 and 1993 are the awards
earned in those years but established and paid or deferred in the
subsequent years.
(2) Amounts of Other Annual Compensation are connected to the funding of
service obligations for non-qualified pension benefits due to tax law
changes and to ERISA requirements. Amounts of All Other Compensation shown
are Duquesne Light match contributions during 1992, 1993 and 1994 under the
Duquesne Light Company 401(k) Retirement Savings Plan for Management
Employees.
(3) Includes total number of stock options granted during the fiscal year, with
or without tandem SARs,
6
<PAGE>
and stock for stock (reload) options on option exercises, as applicable,
whether vested or not. See table titled Option/SAR Grants in Last Fiscal
Year. The stock options are subject to vesting (exercisability) based on
Company and individual performance and achievement of specified goals and
objectives. Of the original amount of 1992 stock options granted, Messrs.
von Schack, Marshall, and Schwass, Ms. Green and Mr. Beck have lost 12,435;
4,698; 3,569; 4,432; and 6,138 stock options, respectively. Of the original
amount of 1993 stock options granted, Messrs. von Schack, Marshall and Mr.
Beck have lost 6,107; 939; and 3,388 stock options, respectively.
Supplemental Tables
The following tables provide information with respect to options to
purchase DQE Common Stock and tandem stock appreciation rights in 1994 under the
Plan.
Option grants in 1994 to executives were structured to align their
compensation with the creation of value for common stockholders. For example,
should DQE stock rise 50% in value over the ten-year option term (from $29.5625
per share to $44.34 per share), stockholder value would increase an estimated
$772,948,043, while the value of the grants to the individuals listed below
would increase an estimated .56% ($4,384,977) of the total gain realized by all
stockholders.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e) (f)
% of Total
Number of Options/
Securities SARs
Underlying Granted to
Options/ Employees Exercise or Grant Date
SARs in Fiscal Base Price Expiration Present
Name Granted (#) Year ($/Sh)(3) Date Value ($)(4)
--------------- ----------- ----------- --------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
W. W. von Schack 55,000(1) 12.6% 32.00 03/21/04 195,800*
100,000(2) 22.9% 30.50 08/29/04 348,000*
D. D. Marshall 17,813(1) 4.0% 32.00 03/21/04 63,414*
35,000(2) 8.0% 30.50 08/29/04 121,800*
G. L. Schwass 17,813(1) 4.0% 32.00 03/21/04 63,414*
35,000(2) 8.0% 30.50 08/29/04 121,800*
D. L. Green 15,469(1) 3.5% 32.00 03/21/04 55,070*
20,000(2) 4.5% 30.50 08/29/04 69,600*
R. D. Beck 13,725(1) 3.1% 32.00 03/21/04 48,861*
20,000(2) 4.5% 30.50 08/29/04 69,600*
</TABLE>
* The actual value, if any, an executive may realize will depend on the
difference between the actual stock price and the exercise price on the
date the option is exercised. There is no assurance that the value
ultimately realized by an executive, if any, will be at or near the value
estimated.
(1) The performance stock options with tandem stock appreciation rights granted
during 1994 are not presently exercisable. The Compensation Committee will
determine the number of stock option/stock appreciation rights that will
vest in 1995 based on 1994 performance. Once the number is
7
<PAGE>
determined, 50% of the award vests immediately and the remaining 50% vests
one year later. Vesting will be accelerated on the occurrence of a change
in control as provided in the Plan. These grants included tandem stock
appreciation rights but not dividend equivalents.
(2) These grants represent performance stock options with dividend equivalents.
Awards are made over a three-year period and are determined on the basis of
individual achievement of strategic goals and objectives.
(3) The exercise price of the options is the fair market value of DQE Common
Stock on the date such options were granted. The exercise price may be
payable in cash or previously owned shares of DQE Common Stock.
(4) The grant date present value shown in column (f) gives the theoretical
value of the options listed in column (b) on the grant dates using the
Black-Scholes option pricing model, modified to account for the payment of
dividends. The theoretical value of the options expiring on March 21, 2004
($32.00 exercise price) and August 29, 2004 ($30.50 exercise price) was
calculated assuming an option life of ten years; a periodic risk-free rate
of return equal to the yield of the U.S. Treasury note having a similar
maturity date as the option expiration date, as reported on the grant date
(6.43% and 7.20%, respectively); a quarterly dividend of $0.42 as of the
option grant date, with an expected growth rate of 4.5% per year as
estimated by "Value Line"; and an expected stock price volatility over the
same length of time as the option life, as reported on the grant date
(17.87% and 17.79% per month, respectively). No adjustments to the grant
date present values have been made with respect to exercise restrictions,
cancellation, or early exercise.
Aggregated Option/SAR Exercises in Last Fiscal Year
and Fiscal Year-End Option/SAR Values
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of Securities Value of Unexercised
Underlying Unexercised in-the-Money
Number of Options/SARs at Options/SARs at
Securities Fiscal Year-End (#)(4)(5) Year-End ($)(6)
Underlying Value -------------------------- -------------------
Options/SARs Realized Exercisable/ Exercisable/
Name Exercised (#) ($)(3) Unexercisable Unexercisable
--------------- ------------ ------- -------------------------- --------------------
<S> <C> <C> <C> <C>
W. W. von Schack 24,790 (1) 227,434 190,805 / 69,301 708,353 / 86,297
D. D. Marshall 12,360 (2) 72,749 56,184 / 22,105 212,402 / 26,690
G. L. Schwass 0 0 67,173 / 23,759 226,910 / 29,040
D. L. Green 0 0 60,902 / 19,229 348,959 / 22,062
R. D. Beck 0 0 39,219 / 14,053 118,794 / 16,934
</TABLE>
_____________________
(1) Stock option exercised for stock by tendering cash.
(2) Stock appreciation rights exercised for cash.
(3) Represents the difference between the exercise price of the options or SARs
and the fair market value of DQE Common Stock on the date of exercise.
8
<PAGE>
(4) The numbers set forth do not include options/SARs previously granted
(including those granted in 1994) but not yet earned. The number to be
earned will be based on individual performance and could range from zero to
the numbers listed below for the named executives, respectively: 155,000;
52,813; 52,813; 35,469; and 33,725. The exercise price of these options is
in excess of the fair market value of the underlying DQE Common Stock.
These options may be earned by the executive over future periods from one
to three years as established with each option grant.
(5) In 1994 SARs were added to the stock-for-stock (reload) options granted in
1993.
(6) Represents the difference between the exercise price of the options or SARs
and the fair market value of DQE Common Stock at December 30, 1994.
Retirement Plan
The following table illustrates the estimated annual benefits payable upon
retirement at age 65 to management employees in the specified earnings
classifications and years of service shown:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
Highest Years of Service at Normal Retirement on January 1, 1995
Consecutive ------------------------------------------------------------------------------------------------
Five-Year
Average
Compensation 10 15 20 25 30 35 or More
-------------- ----------- ---------- -------- --------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
$100,000 $ 16,183 $ 24,274 $ 32,365 $ 40,457 $ 46,693 $ 51,693
$125,000 $ 20,683 $ 31,024 $ 41,365 $ 51,707 $ 59,593 $ 65,843
$150,000 $ 25,183 $ 37,774 $ 50,365 $ 62,957 $ 72,493 $ 79,993
$175,000 $ 29,683 $ 44,524 $ 59,365 $ 74,207 $ 85,393 $ 94,143
$200,000 $ 34,183 $ 51,274 $ 68,365 $ 85,457 $ 98,293 $108,293
$225,000 $ 38,683 $ 58,024 $ 77,365 $ 96,707 $111,193 $122,443
$250,000 $ 43,183 $ 64,774 $ 86,365 $107,957 $124,093 $136,593
$300,000 $ 52,183 $ 78,274 $104,365 $130,457 $149,893 $164,893
$400,000 $ 70,183 $105,274 $140,365 $175,457 $201,493 $221,493
$500,000 $ 88,183 $132,274 $176,365 $220,457 $253,093 $278,093
$600,000 $106,183 $159,274 $212,365 $265,457 $304,693 $334,693
$700,000 $124,183 $186,274 $248,365 $310,457 $356,293 $391,293
</TABLE>
Compensation utilized for pension formula purposes includes salary and
bonus reported in columns (c) and (d) of the Summary Compensation Table. An
employee who has at least five years of service has a vested interest in the
retirement plan. Benefits are received by an employee upon retirement, which
may be as early as age 55. Benefits are reduced by reason of retirement prior
to age 60 or by reason of the operation of certain options under which benefits
are payable to survivors upon the death of the employee. Pension amounts set
forth in the above table reflect the integration with social security of the
tax-qualified retirement plans. Retirement benefits are not subject to any
other offset or reduction based on the amount of any other benefits.
The executive officers named in the Summary Compensation Table had the
following whole years of credited service and five-year covered compensation
with Duquesne and its affiliates (including additional service credits and
compensation recognized under supplemental pension arrangements) as of January
1, 1995: Mr. von Schack - 28 years,
9
<PAGE>
current five-year covered compensation $585,579; Mr. Marshall - 19 years,
current five-year covered compensation $211,817; Mr. Schwass - 18 years, current
five-year covered compensation $220,458; Ms. Green - 13 years, current five-year
covered compensation $189,484; Mr. Beck - 32 years, current five-year covered
compensation $172,805.
Employment Agreements
DQE and Duquesne Light Company entered into a four-year employment
agreement with Mr. von Schack and three-year agreements with Mr. Marshall and
Mr. Schwass. Duquesne Light Company also entered into a three year agreement
with Ms. Green. Each agreement is subject to automatic one-year renewals unless
prior written notice of termination is given by the executive or the Company.
The agreements provide, among other things, that each executive serve in
his or her present position at an annual base salary of at least $440,000 for
Mr. von Schack; at least $190,000 for each of Messrs. Marshall and Schwass; and
at least $165,000 for Ms. Green, subject to periodic review, and for the
participation of each in executive compensation and other employee benefit plans
of the companies.
If any of the executives is discharged other than for cause or resigns for
good reason, then, in addition to any amounts earned but not paid as of the date
of termination, he or she would receive in a cash lump sum the balance of his or
her base salary for the remaining term of the agreement, a bonus amount of the
remaining term of the agreement calculated at a rate equivalent to his or her
prior year's bonus and the actuarial equivalent of the additional pension he or
she would have accrued had his or her service for pension purposes continued
until the expiration of the agreement. In addition, the executive would be
entitled to immediate vesting (or the redemption in cash) of all of his or her
stock-based awards. Mr. von Schack's agreement also provides (1) for continued
payment of base salary and bonus amounts for the remaining term of the agreement
if his employment is terminated due to death or disability and (2) for him to be
made whole for the payment of any such federal excise taxes, interest or
penalties in the event that any payments would subject him to such federal
excise tax or interest or penalties with respect to such excise tax.
10
<PAGE>
Beneficial Ownership of Stock
The following list shows all equity securities of DQE (Common Stock only)
and its principal subsidiary, Duquesne Light (Preferred and Preference Stock
only), beneficially owned by all directors and executive officers of Duquesne
Light as a group (20 persons) as of February 16, 1995, including shares owned by
officers and directors jointly with other persons:
<TABLE>
<CAPTION>
Shares Shares
Beneficially Outstanding
Title of Class Owned February 16, 1995
<S> <C> <C>
Common Stock...... 57,706 52,892,694
Preference Stock.. 3,076 841,052
Preferred Stock... 0 1,505,629
</TABLE>
The directors and executive officers as a group did not own beneficially in
excess of 1% of any class of equity securities of DQE or Duquesne Light as of
February 16, 1995.
The following list shows all equity securities of DQE and Duquesne Light
beneficially owned, directly or indirectly, by each director and by each
executive officer named in the Summary Compensation Table as of February 16,
1995:
<TABLE>
<CAPTION>
Shares of Duquesne
Shares of Nature of Light Co. Preference
Common Stock Ownership (1) Stock, Plan Series A (6)
------------- ---------------- ------------------------
<S> <C> <C> <C>
Daniel Berg............ 390 VP, IP
1,100 Joint, SVP, SIP
Doreen E. Boyce........ 899 VP, IP
Robert P. Bozzone...... 500 VP, IP
Sigo Falk.............. 1,244 VP, IP
1,000 (2) SVP, SIP
William H. Knoell...... 1,000 VP, IP
690 (3) SVP, SIP
G. Christian Lantzsch.. 1,127 Joint, SVP, SIP
Robert Mehrabian....... 1,000 (4) SVP, SIP
Thomas J. Murrin....... 500 Joint, SVP, SIP
Robert B. Pease........ 759 VP, IP
108 Joint, SVP, SIP
Eric W. Springer....... 1,436 VP, IP
Wesley W. von Schack... 23,380 (5) VP, IP 406
David D. Marshall...... 5,736 (5) Joint, SVP, SIP 406
Gary L. Schwass........ 6,499 (5) VP, IP 404
Dianna L. Green........ 1,615 (5) VP, IP 406
Roger D. Beck.......... 588 (5) Joint, SVP, SIP 393
</TABLE>
(1) The term "Joint" means owned jointly with the person's spouse. The
initials "VP" and "IP" mean sole voting power and sole investment power,
respectively, and the initials "SVP" and "SIP" mean shared voting power and
shared investment power, respectively.
(2) These shares are held by a trust in which Mr. Falk is an income beneficiary
but not a trustee.
11
<PAGE>
(3) These shares are held by a trust in which Mr. Knoell is a trustee and the
income beneficiary.
(4) These shares are held by a Keogh trust in which Dr. Mehrabian is the sole
trustee; he and his spouse are the beneficiaries.
(5) The amounts shown as owned by Messrs. von Schack, Marshall and Schwass, Ms.
Green and Mr. Beck do not include shares of DQE Common Stock which they
have the right to acquire within 60 days of February 16, 1995 through the
exercise of stock options granted under the Long-Term Incentive Plan in the
following amounts: 190,805; 47,188; 58,763; 60,902; and 24,659,
respectively, and all executive officers as a group: 382,317 shares.
(6) The preference shares are held by the ESOP trustee for Duquesne's 401(k)
Plan on behalf of the executive officers, who have voting but not
investment power. The preference shares are convertible share-for-share
into DQE Common Stock or cash on retirement, termination of employment,
hardship, death or disability.
Compliance with SEC Reporting Requirements
Under Section 16(a) of the Securities Exchange Act of 1934, as amended,
Duquesne's directors, executive officers, and any persons holding more than ten
percent of the Company's Stock are required to report initial ownership of the
Company's Stock and any subsequent changes in ownership to the Securities and
Exchange Commission ("SEC"). Specific due dates have been established by the
SEC and Duquesne is required to disclose in this Statement any failure to file
by these dates. Based upon the copies of Section 16(a) reports which Duquesne
received from such persons for their 1994 fiscal year transactions and the
written representations from such persons that no annual Form 5 reports were
required to be filed for them for the 1994 fiscal year, Duquesne believes that
there has been compliance with all Section 16(a) filing requirements except that
the initial filing of James Cross, who became an executive officer during the
year, was 13 days late. Mr. Cross had no ownership of Duquesne Light stock at
the time of his election.
Directors' Fees and Plans
Directors who are not officers receive an annual retainer, last set in
1990, of $15,000 payable in twelve monthly installments and a fee of $1,000 for
each Board and committee meeting attended. Directors who are officers of the
Company receive no fees for their services as directors.
Each director under the age of 72 who is not an officer may elect under a
directors' deferred compensation plan to defer a percentage of his or her
director's remuneration until after termination of service as a director.
Deferred compensation may be received in one to ten annual installments
commencing, with certain exceptions, on the 15th day of January of the year
designated by the participant. Interest accrues quarterly on all deferred
compensation at a rate equal to a specified bank's prime lending rate. Daniel
Berg, G. Christian Lantzsch and Robert Mehrabian elected to participate in the
Plan for 1994.
12
<PAGE>
A directors' retirement plan is in place to assure that compensation
arrangements for outside directors are adequate to attract and retain highly
qualified individuals. Under the plan, an eligible director will receive
monthly benefits equal to the monthly retainer in effect at the time of
retirement from the Board for a period equal to the total months of service on
the DQE and Duquesne Light Boards but no longer than 120 months. Payment of
benefits commences, unless deferred, on the first day of the month following
retirement.
As part of its overall program to promote charitable giving, the Company
has established a directors' Charitable Giving Program funded by Company-owned
life insurance policies on the directors. Directors are paired, and upon the
death of the second of the two directors, the Company will donate up to $500,000
each to one or more qualifying charitable organizations recommended by each of
the two directors and reviewed and approved by the Board's Employment and
Community Relations Committee. The Company subsequently will be reimbursed by
the life insurance proceeds. A director must have service of 60 months or more
in order to qualify for the full donation amount, with service of less than 60
months qualifying for an incremental donation. The program does not result in
any material cost to the Company.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee are Dr. Boyce and Messrs.
Bozzone, Falk and Lantzsch. No member of the Compensation Committee was at any
time during 1994 or at any other time an officer or employee of the Company.
No executive officer of the Company served on the Board of Directors or
Compensation Committee of any entity which has one or more executive officers
serving as a member of the Company's Board of Directors or Compensation
Committee.
13
<PAGE>
EXHIBIT 99.2
Managing
For The Competitive
Marketplace
New Competitive
Paradigm
Transformational
Restructuring
Increased
Competition
[LOGO OF DQE]
1994
----
Annual Report
-------------
to
--
Shareholders
------------
Traditional
Business
<PAGE>
DQE FINANCIAL AND OPERATING HIGHLIGHTS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------
Change Change
From From
1994 1993 1993 1992 1992
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Peak Demand 2,535 MW 1.4% 2,499 MW 8.3% 2,308 MW
Duquesne Customer Sales
(millions) 12,122 KWH 2.3% 11,851 KWH 2.4% 11,569 KWH
Operating Revenues (billions) $1.236 3.0% $1.200 3.1% $1.164
Net Income (millions) $156.8 8.9% $144.0 1.8% $141.5
Year-End Shares Outstanding
(millions) 52.3 -1.3% 53.0 -- 53.0
Return on Average Common Equity 12.5% 4.2% 12.0% -3.2% 12.4%
Long-Term Debt (billions) $1.378 -2.8% $1.417 0.3% $1.413
Interest (millions) $104.0 -5.9% $110.5 -10.1% $122.9
Preferred and Preference Dividends
of Subsidiaries (millions) $6.0 -32.6% $8.9 -5.3% $9.4
Net Operating Cash Flow
(millions)(A) $372.9 -3.1% $384.9 -3.1% $397.4
Capital Expenditures and
Other Investments (millions) $187.8 -4.3% $196.3 45.6% $134.8
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
</TABLE>
MW: Megawatt. A measure of the generating capacity of utility plants, equal to
------------------------------------------------------------------------------
1,000 kilowatts.
----------------
KWH: Kilowatt-hour. A measure of the quantity of electricity consumed in one
----------------------------------------------------------------------------
hour, equivalent to 1,000 watts consumed for one hour.
------------------------------------------------------
(A): Excludes working capital and other--net changes.
-----------------------------------------------------
CONTENTS
On the Cover
The pace of change in the electric utility industry continues to accelerate.
After decades of operating as "traditional" utilities with exclusive
franchises, the industry is entering a period of far-reaching restructuring to
meet the challenges of competition. Emerging from that restructuring will be a
new competitive paradigm--a profoundly different way in which energy companies
like DQE will operate their businesses in the competitive marketplace.
Chairman's Message 2
Wesley W. von Schack discusses how DQE is strategically--and flexibly--
positioned to meet new challenges as the new competitive paradigm emerges.
Managing for the Competitive Marketplace 4
Anticipating and meeting the needs of the customer is fundamental to any
successful business. When your business environment is experiencing rapid
change, as is the energy industry, you must rise above the swirl to find better,
more efficient solutions for your customers. Our people are maintaining high
levels of customer satisfaction as we continue to focus internally on
performance improvement and cost control. The stories of five satisfied
customers demonstrate how we are successfully managing our company for the
competitive marketplace.
1994 Financial Information 9
The company continues to effectively manage its financial position through
continued growth of its diversified operations while maintaining competitive
costs of production in its utility operations. Effective cost controls are in
place while we continue to reduce interest and other charges and maintain a
strong cash flow.
Board of Directors 45
Officers 46
Shareholder Reference Guide Inside Back Cover
<PAGE>
[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
DQE Earnings
------------
Per Share
---------
(Dollars per Share)
-------------------
Year Dollars
<S> <C>
1990 $2.24
1991 $2.50
1992 $2.67
1993 $2.72
1994 $2.98
</TABLE>
Earnings per share have increased eight straight years.
[BAR GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
DQE Annualized
--------------
Dividends Per Share
-------------------
(Dollars per Share)
-------------------
Year Dollars
<S> <C>
1990 $1.44
1991 $1.52
1992 $1.60
1993 $1.68
1994 $1.76
</TABLE>
Dividend growth has been in the top quartile of the industry.
CORPORATE PROFILE
-------------------------------------------------------------------------------
DQE is an energy services holding company nationally and regionally recognized
for excellence, quality, integrity and value.
Mission Statement
Our primary focus is to efficiently and effectively satisfy the needs and
requirements of our customers through the commitment and personal involvement of
all employees. DQE will be a profitable diversified entity, dedicated to
supplying low cost, safe and reliable electric energy and pursuing prudent
diversification opportunities related to the core business that benefit our
customers, shareholders and communities.
Subsidiaries
Duquesne Light Company
----------------------
Duquesne Light Company, whose origin dates to 1880, is the principal subsidiary
of DQE. Duquesne Light is engaged in the production, transmission, distribution
and sale of electric energy. Its service territory is approximately 800 square
miles in southwestern Pennsylvania, with a population of 1.5 million. In
addition to serving more than 580,000 customers in Allegheny and Beaver
counties, the company sells electricity to other utilities.
Duquesne Enterprises
--------------------
Duquesne Enterprises owns Allegheny Development Corporation and Property
Ventures, Ltd., and has substantial equity interest in Chester Environmental,
Inc. These companies are involved in initiatives related to the core business,
including energy and utility services, environmental services, power quality,
and real estate.
Montauk
-------
Montauk makes both short- and long-term investments and raises capital for its
own purposes and for Duquesne Enterprises.
1994 Results
. Earnings per share were $2.98, an increase of 9.6% over 1993 and our eighth
consecutive yearly increase.
. Duquesne Enterprises and Montauk contributed 32 cents to earnings per share
in 1994, an increase of 146% over the previous year.
. Sales to Duquesne Light's customers were up 2.3% in 1994. The company had a
system peak demand of 2,535 megawatts, its highest ever.
COMMON STOCK TRENDS
<TABLE>
<CAPTION>
Five-Year
Compound
Growth
1994 1993 1992 1991 1990 1989 Rate
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings Per Share $ 2.98 $ 2.72 $ 2.67 $ 2.50 $ 2.24 $ 2.03 8.0%
Dividends Paid Per
Share $ 1.68 $ 1.60 $ 1.52 $ 1.44 $ 1.36 $ 1.28 5.6%
Book Value at
Year-End $24.41 $23.21 $22.12 $21.00 $20.07 $19.27 4.8%
Market Price Per Share
High $34 1-2 $37 $32 3-8 $31 $25 1-4 $23 7-8 7.6%
Low $27 5-8 $31 3-8 $26 7-8 $23 5-8 $20 3-8 $17 3-8 9.7%
Year-End $29 5-8 $34 1-2 $32 1-4 $30 5-8 $24 7-8 $23 7-8 4.4%
</TABLE>
1
<PAGE>
To Our Shareholders
Competition in the electric utility business made a lot of news during the past
year. But the reality of competition was not news to DQE shareholders. The
changing environment for utilities has been a constant theme in my letters to
shareholders for nine years. That's how long we have been preparing ourselves
for competitive markets. Our first major step in meeting marketplace demands
---------------------------------------------------
came with the highly successful Duquesne Plan in 1986. The front cover of our
-----------------------------------------------------------------------------
annual report that year said: "To become more efficient, more competitive, more
--------------------------------------------------------------------------------
market-driven, more customer-oriented and more profitable, we are determined to
-------------------------------------------------------------------------------
evolve and change."
--------------------
In 1989, we restructured our traditional business organization with
the formation of DQE as a holding company. As we indicated at the time, our
goal was to create a more flexible and adaptable structure, one that would
enable us to seek opportunities and be proactive in an increasingly
competitive environment. Since then we have continued to see remarkable
change in our business, and the flexibility of DQE has enabled us to add
substantial value.
This year, the solid progress of the various businesses of DQE is
yielding significant contributions to the overall value of the company. The
core business represented by Duquesne Light Company is stable, while new
business opportunities associated with Montauk and Duquesne Enterprises
continue to grow in importance. Last year their contribution grew to more
than 10 percent of the company's earnings, as earnings per share increased
for the eighth consecutive year.
The pace of change for the traditional electric utility industry is
accelerating. Various scenarios for market forces to replace regulation are
being discussed across the country and in our own state of Pennsylvania,
but the public policy that will be implemented to resolve these issues is
far from evident. As a matter of good public policy, we believe we need at
--------------------------------------------------------
least two things from federal and state regulators: 1) a clear vision of
------------------------------------------------------------------------
how all customers of the industry can best benefit from competition, and 2)
---------------------------------------------------------------------------
a transition plan that is fair to customers and shareholders and does not
-------------------------------------------------------------------------
suddenly change long-established ground rules.
----------------------------------------------
We support a regulatory vision that allows all of our retail customers
to benefit from the lower prices that inevitably will result from vigorous
wholesale competition. The first step toward this goal is access to the
transmission network at non-discriminatory price and service levels. This
cost-based service must be comparable to what transmission owners provide
for themselves in order to ensure economically efficient investment
decisions will be made for future generation options.
In addition, prudent investments that were made by regulated companies
under their clear legal obligation to provide service will have to be
recognized as legitimate system costs. These costs should be shared by all
electricity users, regardless of future sources of competitively priced
power. As retail customers gain more choice in their competitive purchasing
options, electric utility responsibilities will shift from an absolute
obligation to service any request for power to an obligation only to
deliver available power at competitively determined prices. Any investments
in new generation plants, whether by utility or non-utility developers,
would be supported by market determined prices regardless of the ultimate
costs of these new power sources.
The flexibility offered by DQE and the changes being made in Duquesne
---------------------------------------------------------------------
Light will help keep us positioned for such a future. Duquesne Light's
-----------------------------------------------------
strategy to succeed in a competitive marketplace is characterized by three
elements. First, the quality of our service continues to deliver
significant value to customers. This is evident in system performance,
2
<PAGE>
[BOX WITH REVERSE TYPE APPEARS HERE]
"Despite the uncertainty created by change in the industry, all of our people
------------------------------------------------------------------------------
have continued in their dedication to providing our customers with the highest
------------------------------------------------------------------------------
level of satisfaction. These are strengths that we can continue to count on."
------------------------------------------------------------------------------
where Duquesne Light's service reliability is the best in the state, and in
the feedback our people receive from customers, who give the company
extremely high customer satisfaction ratings. Second, we are continuing to
restructure Duquesne Light. Over the past five years, we have implemented
quality management initiatives, such as benchmarking and reengineering, to
improve the competitiveness of production and delivery costs. Our
---
competitive cost of production has resulted in increased sales to the
---------------------------------------------------------------------
wholesale power market. Twenty-one percent of our total sales are to other
--------------------------------------------------------------------------
utilities. We currently are petitioning the Federal Energy Regulatory
----------
Commission to open access to the regional transmission system, and believe
this will further help us to sell energy into wholesale markets. Third, we
also have developed innovative pricing flexibility to attract new
industrial customers and to maintain our competitiveness with large
industrial customers who add incremental load.
Montauk, a financial services company, has continued to grow with
-----------------------------------------------------------------
selective investments and projects that are related to our core business.
-------------------------------------------------------------------------
Our strategy has been to develop an investment portfolio that provides
excellent returns, geographical diversity, and a mix of assets. We have
pursued selective investments and focused only on opportunities where we
have direct knowledge and experience. We remain committed to this
investment philosophy.
Duquesne Enterprises owns a majority interest in Chester Environ-
-----------------------------------------------------------------
mental, a leader in the water quality management industry. Last year
----------------------------------------------------------
Chester won new contracts to provide consulting and engineering services to
major municipal and industrial clients in the People's Republic of China,
Mexico and Taiwan. We expect that demand for these services will continue
to increase. In early 1995, we also saw our investment in International
Power Machines enhanced by its merger with Exide Electronics. We now are a
major shareholder of Exide Electronics, a dominant player in the power
management and protection industry.
Over the last ten years, we have systematically assembled a strong
------------------------------------------------------------------
management team. Many of these individuals come from industries other than
--------------------------------------------------------------------------
our own and bring fresh ideas to the challenge of competitive markets.
----------------------------------------------------------------------
Despite the uncertainty created by change in the industry, all of our
people have continued in their dedication to providing our customers with
the highest level of satisfaction. These are strengths that we can continue
to count on.
Thank you, our shareholders, for your confidence and support.
On behalf of the Board of Directors,
/s/ Wesley W. von Schack
Wesley W. von Schack
--------------------
Chairman and Chief Executive Officer
February 17, 1995
3
<PAGE>
Managing For The Competitive Marketplace
Anticipating and meeting customer needs is fundamental to any successful
business. When your business environment is experiencing rapid change, as is the
energy industry, you must rise above the swirl to find better, more efficient
solutions for your customers. DQE serves diverse markets, both traditional and
emerging. In 1994, our principal subsidiary, Duquesne Light, maintained high
levels of customer satisfaction as its people continued to focus internally on
performance improvement and cost control. Our other subsidiaries proved their
worth in their markets. The following stories of five satisfied customers
demonstrate how we are successfully managing for the competitive marketplace.
[BOX WITH REVERSE TYPE AND PHOTO OF PETER R. GILEZAN APPEARS HERE]
"Chester Environmental's excellent work has led us to use them time and again
------------------------------------------------------------------------------
to design and engineer our wastewater treatment plants. These plants employ the
-------------------------------------------------------------------------------
latest technology and have a superb compliance record. Some are `firsts' in our
-------------------------------------------------------------------------------
industry." Peter R. Gilezan, Director, Environmental and Energy Affairs,
-------------------------------------------------------------------------
Chrysler Corporation.
---------------------
Peter Gilezan's challenge to Chester Environmental was a major one. Chrysler
de Mexico planned to build a new Dodge Ram assembly plant in the desert
southwest of Monterrey, at Saltillo. The size of the plant and the limited
availability of water meant that Chester was asked to design and build one of
the world's largest zero-discharge water and wastewater treatment facilities.
This task was made more formidable by a six-month schedule for completion.
Chrysler was confident Chester would be up to the challenge because it had
earned the company's preferred supplier rating five out of the six previous
years and a Quality Excellence Award given to less than 3% of Chrysler's
suppliers. That award is a key measure of demonstrated commitment to excellence
in a supplier's products and services.
Chester delivered again at the Saltillo plant--successfully fulfilling the
largest contract in its 80-year history--by designing and overseeing
construction of a totally integrated system. The Chester solution maximizes use
of wastewater, supplemented by makeup water from a private well. Drinking and
industrial process water is chemically and biologically treated, filtered by
advanced membrane systems, and then reused in production facilities. Sanitary
wastewater similarly is recycled for irrigating the grounds around the plant.
Chrysler is just one of a long list of Fortune 500 companies to which Chester
provides environmental engineering and scientific consulting services. Its
growing list of international clients features projects in Australia, Poland,
Taiwan and China.
We acquired a controlling interest in Chester Environmental in 1993. Chester's
activities are closely related to our core business. Our association with
Chester is a sound investment in a growing company, and it reinforces our own
long-term commitment to the environment.
Environmental management and control is a subject we know well. Our
environmental record and expertise are competitive advantages, especially as
other energy companies attempt to come to grips with compliance deadlines for
new environmental regulations.
Because of Duquesne Light's pioneering efforts in pollution control
technology, the average sulfur dioxide (SO\\2\\) emission rate for our
Pennsylvania coal-burning units already is lower than the Clean Air Act requires
to meet its 1995 and 2000 standards. With more than
4
<PAGE>
[BOX WITH REVERSE TYPE AND PHOTO OF MATTHEW W. BOTSFORD, JR. APPEARS HERE]
"The key to any successful relationship begins with the word `we.' `We are in
--------------------------------------------------------------------------------
this together' summarizes the WorldClass belief that close and open cooperation,
--------------------------------------------------------------------------------
working toward utilizing today's extraordinary technical advances in pursuing
-----------------------------------------------------------------------------
win/win solutions, defines the parameters of a dynamic partnership. WorldClass
------------------------------------------------------------------------------
shares such a partnership with Duquesne Light."--Matthew W. Botsford, Jr., Chief
--------------------------------------------------------------------------------
Executive Officer, WorldClass Processing, Inc.
----------------------------------------------
$600 million already invested in clean air, we have relatively small capital
requirements to meet additional SO\\2\\ and nitrogen oxide standards, while
other energy providers across the country are facing much more significant
expenditures.
Our commitment to the environment takes many forms.
. A comprehensive, systematic, environmental strategic plan that addresses
compliance, training, issues management, stewardship and communications.
. Environmental awareness training for all Duquesne Light people that connects
practically to their lives and to the more than 300 environmental regulations
that govern the company's day-to-day operations.
. A variety of stewardship programs, including collaborative efforts with the
Western Pennsylvania Conservancy, American Forests, the Audubon Society, the
Pennsylvania Environmental Council, the National Tree Trust, Allegheny County,
and the American Legion. These and other programs educate elementary students,
high school students, Boy Scouts and Girl Scouts about the importance of
environmental preservation; foster the collection of recyclable materials;
improve land use through environmental planning and wildlife habitat
development; and help small businesses comply with new environmental
regulations. Various of these activities have received special commendations
from Allegheny County and the Pennsylvania Legislature.
. The Three Rivers Environmental Awards, which pay tribute to individuals and
organizations in western Pennsylvania that demonstrate environmental excellence,
leadership and accomplishment. This recognition encourages others in the
community to emulate these achievements.
With all of our customers, we strive to build the type of partnership Matt
Botsford describes. Whether helping a major customer like WorldClass Processing
to expand its operations, introducing food service providers to a new, more
efficient electrotechnology, or helping local hospitals reduce their medical
waste disposal costs through another new electrotechnology, we are committed to
helping our customers improve their competitiveness through increased use of
electricity.
The WorldClass Processing story began in the early 1990s, when a group of
investors was seeking a location for a steel processing plant. Our economic
development team provided potential site locations and assisted in securing low-
cost state funding to finance infrastructure improvements. We also provided
competitively priced power through our special economic development rider,
designed to encourage business expansion and job creation. The plant has been a
successful processer of hot-rolled steel coils for major steel producers and
their customers.
A decade earlier, steel manufacturing and processing represented 30% of the
record 13.6 billion kilowatt-hours (KWH) of electricity we sold to retail
customers. With the shakeout of the local steel industry, that share declined to
just 15% of the 11 billion KWH sold in 1985, an unprecedented
5
<PAGE>
[BOX WITH REVERSE TYPE AND PHOTO OF MILTON A. WASHINGTON APPEARS HERE]
"It's so easy to take electrical power for granted. But if you flip the switch
-------------------------------------------------------------------------------
to start production and nothing happens, then the loss of power means more than
-------------------------------------------------------------------------------
a machine not working. It means income is lost. One of Duquesne Light's
-----------------------------------------------------------------------
strengths is its quality production of power, which helps to create world
-------------------------------------------------------------------------
competitive businesses."
-------------------------
-Milton A. Washington,
----------------------
Chairman,
---------
SSM Industries, Inc.
--------------------
drop of almost 60% in just four years. Pittsburgh in the 1990s features a more
diverse economy, based on small manufacturing, financial and medical services,
advanced technology enterprises and a world-class university system. However,
steel remains an important contributor to the local economy--13% of our 1994
sales of 12.1 billion KWH.
In 1994, WorldClass announced plans to build the first new steel mill in this
area since World War II. The $440 million mini-mill, scheduled for construction
in four phases over the next three years, will enable WorldClass to produce a
variety of specialized steels and offer a wider range of services to larger
mills.
The reliability of our power, and our commitment to deliver it at a
competitive price, were critical components in the WorldClass decision to
expand. We recognize that in today's economy, many of our customers face intense
competition worldwide. One of our major goals with these customers is to
structure their rates in a way that enables them to compete in global markets.
We're also helping businesses of all sizes by providing electric options to
increase their efficiency and competitiveness. For example, we introduced local
food service providers to the benefits of the flash bake oven. This new
technology uses a combination of intense visible light and infrared energy to
cook foods almost instantly from the outside in and the inside out. Restaurants,
convenience stores, supermarkets and movie theaters now can serve a wider range
of foods better, faster and more profitably.
New electrotechnologies also can reduce disposal costs for infectious medical
waste from hospitals and other facilities. Safely sterilizing this waste on-site
reduces the cost to bury the material in special landfills. For the past two
years, we have cosponsored educational symposiums that introduced hospital
administrators to this technology. In conjunction with a national utility
research group, we plan to open a demonstration site at a local hospital in mid-
1995.
As chairman of one of the top ten sheet metal producers in the United States,
Milt Washington values the reliable electric service we provide. It enables SSM
Industries to use innovative technology to fabricate a wide range of products
from diverse metals.
We take great pride in our record of reliability. In fact, independent surveys
show that we have the highest level of service reliability in Pennsylvania.
Our commitment to reliability was tested in 1994. In January, a record-setting
freeze put electric power in short supply throughout most of the northeastern
United States and many utilities imposed rolling blackouts. In June, a heat wave
pushed customer demand to a new all-time system high--2,535 megawatts. In both
cases, we delivered safe and reliable electric energy. Pennsylvania Public
Utility Commissioner John Hanger gave Duquesne Light's January performance high
praise, saying it was "at the top of all utilities in the state."
That performance is a result of the dedication and the skill of line workers,
customer service representatives, and the people in our System Operations and
Distribution Operations centers. The people in our
6
<PAGE>
[BOX WITH REVERSE TYPE AND PHOTO OF BETTY PICKETT APPEARS HERE]
"I've lived in Pittsburgh for 17 years and I've never had to call Duquesne Light
--------------------------------------------------------------------------------
concerning my electricity. I think that's quite a record for reliability and
----------------------------------------------------------------------------
efficient customer service."
----------------------------
- Betty Pickett,
----------------
Duquesne Light
--------------
residential customer.
---------------------
power stations play a particularly important role in providing reliable power to
both local customers, like SSM Industries, and to utility companies in other
parts of the country.
Our available capacity is one of our key assets and an important competitive
advantage for the future. Our generating stations--the source of that power--
performed well in 1994. Beaver Valley Power Station achieved the highest
combined capacity factor--a key production measure--in the history of the
station. Cheswick Power Station achieved its highest capacity factor in 24 years
of operation.
Reliable energy is a major consideration for companies planning an expansion
or selecting a location for a new plant. With increased computerization, more
and more customers want added protection to ensure an uninterrupted flow of
power.
For that reason, we made a strategic investment several years ago in
International Power Machines, a world-wide supplier of power protection for
computer applications, telecommunications systems and industrial process
control. That investment will be enhanced by IPM's merger with Exide
Electronics. Exide is the largest company in the world dedicated exclusively to
developing, manufacturing and servicing a full line of power management and
power protection systems. Its customers include AT&T, IBM, the Federal Aviation
Administration and the Department of Defense.
As both a homeowner and a regional executive director of The National
Conference of Christians and Jews, Betty Pickett appreciates not having to worry
about her electric service. She can remember only three times when her home was
without electricity during 17 years. Each outage was brief and storm-related.
There are several good reasons why Betty never had to call us.
. Our customers have the most reliable electric service in Pennsylvania; 99.99
percent have full power at any given time.
. Our distribution system's remote switching devices isolate problems and
allow us to resolve most service interruptions within 15 minutes.
. Most service interruptions requiring an "in-the-field" response are resolved
within two hours.
Reliability is just one facet of our strong customer satisfaction record.
. Customers who do need to call us (we received more than one million calls in
1994) are connected with a service representative within 13 seconds, on average.
. Our billing accuracy is 99.95 percent. That's an average of one billing
error every seven customer lifetimes.
. The average time required to connect a new residential service is now 24
hours.
Independent surveys continue to prove that customers are very satisfied. They
give us particularly high ratings for reliability, courteous employees and
accurate billings.
We are taking significant steps behind the scenes to streamline our internal
processes to further improve service and cut costs. Increased use of
microprocessors, first introduced in 1985 for meter reading, is improving
productivity in a number of functions. Expansion of the multicrafting concept
for our field workers--consolidating job descriptions and training our people
to handle a wider number of assignments--is helping
7
<PAGE>
[BOX WITH REVERSE TYPE AND PHOTO OF ROBERT LAWYER APPEARS HERE]
"The Smart Comfort Program has helped my wife and me so much, especially since
--------------------------------------------------------------------------------
we're on a fixed income. It's cut our bill by more than a third, and it's made
------------------------------------------------------------------------------
us more conscious of how we use electricity."
---------------------------------------------
--Robert Lawyer,
----------------
Duquesne Light
--------------
residential customer.
---------------------
us build a more flexible and responsive workforce. A new way of scheduling
substation maintenance is reducing operating costs while maintaining
reliability.
Our companywide focus on customer satisfaction, quality service and cost
reduction is driving continuous improvement in operations, positioning us to
be even more competitive in a changing marketplace.
Robert Lawyer and his wife, Mary Lou, have had to make a number of adjustments
since illness forced him to retire early from his job as a machine shop
supervisor. Robert called to inquire about our award-winning Smart Comfort
program, which helps customers in need take better control of their electric
costs by developing more efficient energy-use habits.
Traditional residential conservation programs focus on the house's outer
shell. We've turned that approach inside out. Rather than looking only at
heating, windows and insulation, we explore electric use from the customer's
perspective. How does the household use lights and appliances?
The core of the program is an in-person analysis of the customer's monthly
bill. Working with the Lawyers, we were able to pinpoint several areas in their
trailer home where high usage could be reduced. Major improvements included
placing an insulation wrap on their electric water heater, lowering the hot-
water temperature to 120 degrees, replacing their old, inefficient refrigerator,
and replacing incandescent recessed lights in the kitchen with more efficient
compact fluorescent lamps.
Robert thinks so highly of Smart Comfort that he's told many of his friends
about it. He even competes with a friend who has achieved similar benefits from
the program. They compare bills each month to see who has been the most
efficient.
Smart Comfort has helped thousands of customers. The payback period for
program expenses is nearly half the industry's seven-year standard. Smart
Comfort has been recognized by the U.S. Department of Energy, the Pennsylvania
Governor's Energy Office and the Edison Electric Institute for its innovative
program design and delivery.
Additional programs and activities to benefit the communities we serve are
logical outgrowths of Smart Comfort and other services for customers with
special needs. With service ties to the Pittsburgh area dating back nearly 115
years, we are a committed community partner.
Education is a top priority because it will help ensure that the workforce of
the future has the skills and knowledge necessary for the 21st century. We have
particularly close ties with seven local school districts through our "Partners
in Education" program. In addition to providing cultural experiences for
children, the partnership program has been instrumental in increasing
involvement of students--particularly minorities and females--in math and
science.
We are proud of our voluntary service to the community and we strongly
encourage our people to get involved. Last year, our people collectively
contributed almost 100,000 hours of volunteer services, helping a wide variety
of community, health, environmental and human services organizations.
8
<PAGE>
DQE 1994 Financial Information
Company Report on Financial Statements
The Company is responsible for the financial information and representations
contained in the financial statements and other sections of this annual report
to shareholders. The Company believes that the consolidated financial
statements have been prepared in conformity with generally accepted accounting
principles that are appropriate in the circumstances to reflect, in all
material respects, the substance of events and transactions that should be
included in the statements and that the other information in the annual report
to shareholders is consistent with those statements. In preparing the financial
statements, the Company makes informed judgments and estimates based on
currently available information about the effects of certain events and
transactions. The Company maintains a system of internal accounting control
designed to provide reasonable assurance that the Company's assets are
safeguarded and that transactions are executed and recorded in accordance with
established procedures. There are limits inherent in any system of internal
control and such limits are based on recognition that the cost of such a system
should not exceed the benefits derived. The system of internal accounting
control is supported by written policies and guidelines and is supplemented by
a staff of internal auditors. The Company believes that the internal accounting
control system provides reasonable assurance that its assets are safeguarded
and the financial information is reliable.
/s/ Wesley W. von Schack
Wesley W. von Schack
Chairman of the Board, President
and Chief Executive Officer
/s/ Gary L. Schwass
Gary L. Schwass
Executive Vice President,
Chief Financial Officer and Treasurer
Contents
Glossary of Terms
10
Management's Discussion
and Analysis
Results of Operations
---------------------
11
Capital Resources
-----------------
and Liquidity
-------------
14
Generating Units
----------------
15
Outlook
-------
16
Report of
Independent Accountants
20
Statement of Consolidated
Income
21
Consolidated Balance Sheet
22
Statement of Consolidated
Cash Flows
24
Notes to Consolidated
Financial Statements
25
Selected Financial Data
43
Selected Operating Data
44
9
<PAGE>
Glossary of Terms
Following are explanations of certain financial and operating terms used in our
-------------------------------------------------------------------------------
report and unique in our core business.
---------------------------------------
Allowance for Funds Used During Construction (AFC)
--------------------------------------------------------------------------------
AFC is an amount recorded on the books of a utility during the period of
construction of utility assets. The amount represents the estimated cost of
both debt and equity used to finance the construction.
Construction Work In Progress (CWIP)
--------------------------------------------------------------------------------
This amount represents utility assets in the process of construction but not
yet placed in service. The amount is shown on the consolidated balance sheet
as a component of property, plant and equipment.
Deferred Energy Costs
--------------------------------------------------------------------------------
In conjunction with the Energy Cost Rate Adjustment Clause, the Company records
deferred energy costs to offset differences between actual energy costs and the
level of energy costs currently recovered from electric utility customers.
Demand
--------------------------------------------------------------------------------
The amount of electricity delivered to consumers at any instant or averaged
over a period of time.
Energy Cost Rate Adjustment Clause (ECR)
--------------------------------------------------------------------------------
The Company recovers through the ECR, to the extent that such amounts are not
included in base rates, the cost of nuclear fuel, fossil fuel and purchased
power costs and passes to its customers the profits from short-term power sales
to other utilities.
Equivalent Availability Factor
--------------------------------------------------------------------------------
The percent of generating capacity available for service, whether operated
or not.
Federal Energy Regulatory Commission (FERC)
--------------------------------------------------------------------------------
FERC is an independent five-member commission within the U.S. Department of
Energy. Among its many responsibilities, FERC sets rates and charges for the
wholesale transportation and sale of natural gas and electricity, and the
licensing of hydroelectric power projects.
Kilowatt (KW)
--------------------------------------------------------------------------------
A kilowatt is a unit of power or capacity. A kilowatt hour (KWH) is a unit of
energy or kilowatts times the length of time the kilowatts are used. For
example, a 100-watt bulb has a demand of .1 KW and, if burned continuously,
will consume 1 KWH in ten hours. One thousand KWs is a megawatt (MW). One
thousand KWHs is a megawatt hour (MWH).
Nuclear Decommissioning Costs
--------------------------------------------------------------------------------
Decommissioning costs are expenses to be incurred in connection with the
entombment, decontamination, dismantlement, removal and disposal of the
structures, systems and components of a nuclear power plant that has
permanently ceased the production of electric energy.
Peak Demand
--------------------------------------------------------------------------------
Peak demand is the amount of electricity required during periods of highest
usage. Peak periods fluctuate by season and generally occur in the morning
hours in winter and in late afternoon during the summer.
Pennsylvania Public Utility Commission (PUC)
--------------------------------------------------------------------------------
The Pennsylvania governmental body that regulates all utilities (electric, gas,
telephone, water, etc.), which is made up of five members nominated by the
governor and confirmed by the senate.
Regulatory Asset
--------------------------------------------------------------------------------
Costs that the Company would otherwise have charged to expense which are
capitalized or deferred because these costs are currently being recovered or
because it is probable that the PUC and FERC will allow recovery of these costs
through the ratemaking process.
Retail Access
--------------------------------------------------------------------------------
The ability of end-use consumers to individually contract for electrical energy
from competing generation suppliers.
Scrubbed Capacity
--------------------------------------------------------------------------------
Fossil fuel fired generating capacity equipped with sulphur dioxide (SO//2//)
emission reducing equipment.
10
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Corporate Structure
-------------------
DQE is an energy services holding company. Its subsidiaries are Duquesne Light
Company (Duquesne), Duquesne Enterprises (DE) and Montauk. DQE and its
subsidiaries are collectively referred to as the Company.
Duquesne, the principal subsidiary, is an electric utility engaged in the
production, transmission, distribution and sale of electric energy. DE is
involved in initiatives related to the core business; these include providing
all the energy services for the Pittsburgh International Airport, providing
environmental consulting and engineering services, providing power quality
management, and investing in real estate. Montauk makes both short- and
long-term investments and raises capital for DE and for its own purposes.
Results of Operations
---------------------
Operating Revenues
--------------------------------------------------------------------------------
The Company sells electricity to approximately 580,000 ultimate customers
within its service territory of approximately 800 square miles in
Southwestern Pennsylvania and, on a short-term basis, to other utilities.
Customer operating revenues result from the Company's sales of electricity to
---------------------------
ultimate customers and are based on rates authorized by the Pennsylvania Public
Utility Commission (PUC). These rates are cost-based and are designed to
recover the Company's energy and other operating expenses and investment in
utility assets and to provide a return on the investment. Short-term sales to
other utilities are regulated by the Federal Energy Regulatory Commission
(FERC) and are made at market rates.
Phase-in deferred revenues represent the deferral and subsequent recovery of
--------------------------
revenues resulting from a $232 million rate increase granted in early 1988. The
PUC required the Company to phase this increase in during a six-year period,
which ended in April 1994. During this phase-in period, the rate increase was
recognized in operating revenues.
------------------
The Company's non-KWH revenues comprise other operating revenues in the
------------------------
Statement of Consolidated Income of DQE.
Components of Change in Operating Revenues from the Prior Year
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993
(Amounts in Millions of Dollars)
--------------------------------------------------------------------------------
<S> <C> <C>
Revenues from Sales of Electricity:
Revenues from ultimate customers $ 0.7 $ 31.9
Revenues from other utilities 7.6 (21.8)
--------------------------------------------------------------------------------
Total Revenues from Sales of Electricity 8.3 10.1
--------------------------------------------------------------------------------
Other Operating Revenues 26.9 26.5
--------------------------------------------------------------------------------
Total Operating Revenues $35.2 $ 36.6
================================================================================
</TABLE>
[Bar Graph appears here]
Electric Utility Customer Sales
1994 vs. 1993
(Millions of KWH)
<TABLE>
<S> <C>
Residential -11.2
Commercial +72.8
Industrial +209.8
</TABLE>
Customer sales were higher due to the strengthening economy.
Revenues from sales of electricity to ultimate customers, including phase-in
--------
deferrals, fluctuate as a result of changes in sales volume and changes in fuel
---------
and other energy costs. Generally, the Company is permitted to recover (to the
extent that such amounts are not included in base rates) these fuel and other
energy costs from its customers through an energy cost rate adjustment clause
(ECR), subject to PUC review. This revenue adjustment includes a credit to the
Company's customers for profits from short-term sales to other utilities.
Revenues from sales of electricity to ultimate customers increased in 1994
compared to 1993 as a result of higher sales to commercial and industrial
customers. Commercial and industrial sales volume increased 1.3 percent and 6.9
percent, respectively, benefiting from the improving economy, as well as slight
growth in the numbers of customers. Industrial sales volume also increased as a
result of our marketing efforts and fewer customer production facility outages.
Compared to 1992, the significantly hotter summer in 1993 resulted in higher
residential and commercial sales volume. The credit to the Company's customers
for profits from short-term sales to other utilities was $16.6 million in 1994,
$12.1 million in 1993 and $19.1 million in 1992. These fluctuations primarily
resulted from changes in sales volume to other utilities.
11
<PAGE>
The overall level of business activity in the Company's service territory and
weather conditions are expected to continue to be the primary factors affecting
sales of electricity to ultimate customers in the near term. The Company's
electric sales may also be affected in the long term by increased competition
in the electric utility industry. (See "Competition" discussion on page 16.)
Revenues from other utilities result from sales of electricity to other
-----------------------------
utilities. Fluctuations in electricity sales to other utilities are generally
related to the Company's customer energy requirements, the energy market and
transmission conditions and the availability of the Company's generating
stations. Because of reduced generating station availability, the Company had
fewer off-system sales in 1993 than in 1994 or 1992. Future levels of
off-system sales of electricity will be affected by the outcome of the
Company's FERC filings requesting firm transmission access. (See "Transmission
Access" discussion on page 17.)
Other operating revenues increased in 1994 and 1993 compared to the prior year
------------------------
primarily due to growth in environmental service revenues. The increase
reflects the acquisition of a 70 percent controlling interest in Chester
Environmental, Inc. (Chester) on August 17, 1993. Chester's revenues have been
reflected in other operating revenues since that date.
------------------------
Operating Expenses
--------------------------------------------------------------------------------
Fuel and purchased power expense fluctuations result from changes in the cost
------------------------
of fuel, the mix between coal and nuclear generation, the total KWHs sold and
generating station availability. Because of the ECR, changes in fuel and
purchased power cost normally do not impact earnings.
Components of Change in Fuel and Purchased Power Expense from the Prior Year
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993
(Amounts in Millions of Dollars)
--------------------------------------------------------------------------------
<S> <C> <C>
Average unit cost of fuel $(3.4) $ (1.8)
Generation mix (5.5) 9.1
Generation volume 7.4 (13.4)
Purchased power 7.7 4.6
--------------------------------------------------------------------------------
Total Energy Expense $ 6.2 $ (1.5)
================================================================================
</TABLE>
[Bar Graph appears here]
Electric Utility Customer Revenues
(Millions of Dollars)
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994
<S> <C> <C> <C> <C> <C>
Residential 381.9 413.3 385.7 405.1 401.2
Commercial 839.1 892.2 848.0 887.1 873.6
Industrial 1061.5 1106.4 1054.6 1086.5 1087.2
</TABLE>
Revenue mix remains balanced.
[Bar Graph appears here]
Electric Utility Operating and Maintenance Expense
(Millions of Dollars)
<TABLE>
<CAPTION>
Year Dollars
<S> <C>
1990 365.6
1991 373.0
1992 358.5
1993 365.0
1994 358.4
</TABLE>
Reflects ongoing cost-control efforts. (Excludes one-time lease termination
charge in 1993.)
The average unit cost of coal declined slightly in 1994, after remaining
relatively constant during 1993. Meanwhile, the average unit cost of nuclear
fuel has declined continually during the past three years.
Generation mix impacts fuel expense as the Company's nuclear fuel cost per KWH
is less than its fossil fuel cost per KWH. During 1993, compared to 1994 and
1992, the Company had more scheduled nuclear station refueling outages,
resulting in less nuclear generation and more fuel expense.
Generation volume during 1994 increased 3.4 percent compared to 1993 due to
fewer generating station outages. During 1993, generation decreased 5.6 percent
from 1992.
Purchased power volume increased in 1994 compared to 1993 because of the timing
of generating station outages. Purchased power volume increased in 1993 compared
to 1992 primarily due to the performance of the Perry plant. (See "Perry Unit 1"
discussion on page 15.)
Other operating expenses decreased slightly in 1994 compared to 1993 despite a
---------------
$25.0 million increase in operating expenses at Chester, the result of a full
year's ownership in 1994. This increase was offset by the continuation of the
Company's cost reduction program and by the 1993 recording of a $15.2 million
long-term power sale write-off and a $12.8 million property subleasing charge.
These 1993 charges, along with the Chester acquisition, accounted for the
increase in 1993 compared to 1992.
Maintenance expense fluctuations primarily result from the timing of scheduled
-----------
generating station outages, the timing of scheduled transmission and
distribution line maintenance and the effect of storms on overhead lines and
transformers. Incremental maintenance expense
12
<PAGE>
incurred for scheduled refueling outages at the Company's nuclear units is
deferred for amortization over the period (generally 18 months) between
scheduled outages. During 1994 and 1993, amortization of deferred nuclear
refueling outage expense increased, reflecting the higher costs of more recent
refueling outages. Offsetting this increase in 1994 was a decrease in
transmission and distribution line maintenance expense. Also increasing
maintenance expense in 1993 was the Company's change, as of January 1, 1993, in
-----------
its method of accounting for maintenance costs during major fossil generating
station outages. Prior to 1993, maintenance costs incurred for scheduled major
outages at fossil generating stations were charged to expense as the costs were
incurred. Under the new accounting policy, the Company accrues, over the period
between outages, anticipated expenses for scheduled major fossil station
outages. (Maintenance costs incurred for non-major scheduled outages and for
forced outages continue to be charged to expense as the costs are incurred.)
This method was adopted to match more accurately the maintenance costs with the
revenue produced during the periods between scheduled major fossil generating
station outages.
Depreciation and amortization expense includes, in addition to depreciation of
-----------------------------
plant and equipment, nuclear decommissioning accruals, amortization of
regulatory tax receivables and amortization of an extraordinary property loss.
Depreciation and amortization expense increased in 1994 and 1993 compared to the
-----------------------------
prior year due to increases in depreciable property, nuclear decommissioning
expense and leveraged lease amortization. The 1993 increase also results from
amortization of regulatory tax receivables which began January 1, 1993,
concurrent with the adoption of Statement of Financial Accounting Standards No.
-----------------------------------------------
109 (SFAS No. 109). During 1994, the Company completed an extensive review of
------------------
its depreciation rates and submitted an informational filing to the PUC. As a
result of this study, beginning in 1995 the Company's composite depreciation
rate increased from 3.0 percent to 3.5 percent. It is anticipated that annual
depreciation expense will increase by approximately $25 million in 1995 compared
to the 1994 level. The Company is not currently seeking a rate increase to cover
these additional costs.
Taxes other than income taxes were lower in 1993 compared to 1994 and 1992,
-----------------------------
primarily as a result of a favorable resolution of certain property tax
assessments. In 1993, the Company recorded, on the basis of these revised
assessments, the expected refunds for overpayments in prior years.
[Bar Graph appears here]
Ratio of Earnings to Fixed Charges
<TABLE>
<CAPTION>
Year Dollars
<S> <C>
1990 1.89
1991 2.09
1992 2.23
1993 2.28
1994 2.59
</TABLE>
Credit quality continues to improve.
[Bar Graph appears here]
Interest Expense and Other Charges
(Millions of Dollars)
<TABLE>
<CAPTION>
Year Dollars
<S> <C>
1990 157.3
1991 141.7
1992 132.3
1993 119.4
1994 110.0
</TABLE>
Financial restructuring has reduced interest expense by more than 30% over the
last 5 years.
Other Income
--------------------------------------------------------------------------------
Other income increased in 1994 compared to 1993 as a result of leasing
------------
activities in 1994 and a full year's income from investments made during 1993.
Other income decreased in 1993 compared to 1992 due to lower deferred revenue
------------
carrying costs, as the deferred revenue balance upon which carrying charges were
earned declined.
Interest and Other Charges
--------------------------------------------------------------------------------
Interest expense reductions in 1994 and 1993 were achieved through refinancing
----------------
first mortgage bonds and certain tax exempt pollution control notes and through
retiring debt. Interest expense is expected to decline further in 1995.
----------------
Preferred and preference dividends of subsidiaries continue to decrease as a
--------------------------------------------------
result of the retirement of several outstanding issues. During 1994, the Company
retired $39.9 million of preferred and preference stock.
Income Taxes
--------------------------------------------------------------------------------
Income tax expense was lower in 1993, compared to 1994 and 1992, because of a
----------
favorable settlement (related to Duquesne's 1988 federal income tax return and
the Company's 1989 consolidated federal income tax return) with the Internal
Revenue Service. The remaining fluctuations result from a 1 percent increase in
the corporate federal income tax rate in 1993 and changes in taxable income.
During 1994 the statutory Pennsylvania income tax rate was reduced from 12.25
percent to 9.99 percent; this reduction is to be phased in over four years. This
change resulted in a net decrease of $87.2 million in deferred tax liabilities
and a corresponding reduction in the regulatory receivable.
13
<PAGE>
For its electric utility operations, the Company recognizes a regulatory asset
for the deferred tax liabilities that are expected to be recovered from
customers through rates.
With respect to the financial statement presentation of SFAS No. 109, the
------------
Company reflects the amortization of the regulatory tax receivable resulting
from reversals of deferred taxes as depreciation and amortization expense.
-----------------------------
Changes in the regulatory tax receivable as a result of a change in tax rates
are reflected in the statement of consolidated income on the tax rate
--------
adjustment--regulatory tax receivable line. Reversals of accumulated deferred
------------------------------------- --------------------
income taxes are included in income tax expense.
------------ ----------
[Bar Graph appears here]
Capital Resources and Liquidity
-------------------------------
Net Cash Flow from Operations
(Millions of Dollars)
<TABLE>
<CAPTION>
Year Dollars
<S> <C>
1990 278.6
1991 345.3
1992 397.4
1993 384.9
1994 372.9
</TABLE>
Net cash flow excludes working capital and other--net changes
[Bar Graph appears here]
Net Income
(Millions of Dollars)
<TABLE>
<CAPTION>
Year Dollars
<S> <C>
1990 121.7
1991 133.6
1992 141.5
1993 144.0
1994 156.8
</TABLE>
Net income increased 9% in 1994.
Capital Expenditures and Investing
-------------------------------------------------------------------------------
During 1994, the Company spent approximately $94.3 million for utility
construction. The Company spent approximately $100.6 million in 1993 and
$112.4 million in 1992 for utility construction. These amounts were expended to
improve and/or expand its production, transmission and distribution systems.
Utility construction programs of the Company focus on the need to serve new
customers, to provide for the replacement of utility property and to modify
facilities consistent with the most current environmental and safety
regulations. The Company estimates that it will spend approximately $80 million
for utility construction annually in 1995, 1996 and 1997. These amounts exclude
AFC, nuclear fuel, expenditures for possible early replacement of steam
generators at the Beaver Valley Power Station and expenditures for the
refurbishment of the cold-reserved units. (See Notes F and J to the
consolidated financial statements.) The Company currently has no plans for
construction of new base load generating plants. The Company expects that funds
generated from operations will continue to be sufficient to finance a large part
of its capital needs.
In addition to utility construction, the Company's long-term investments are
focused in four principal areas: real estate investments, energy-related
investments, leasing investments and environmental services investments. The
level of investing activities stayed relatively constant in 1994 after
increasing in 1993 compared to 1992. Lease investments in 1994 were $52.3
million, of which $18.8 million were energy-related. Real estate investments in
1994 were $48.9 million, including $22.1 million in affordable housing, and, on
a net basis, other investments decreased $7.7 million. In 1993, the Company
invested $59.1 million in real estate, including $35.4 million in affordable
housing, and $24.7 million in leasing and other investments. Also during 1993,
the Company acquired a controlling interest in Chester for $11.9 million. The
Company's 1992 investments were primarily in energy-related leases.
Financing
-------------------------------------------------------------------------------
The Company plans to meet its current obligations and debt maturities through
1999 with funds generated from operations and through new financings. At
December 31, 1994, the Company was in compliance with all of its debt covenants.
During 1993, the Company refinanced $734.2 million of long-term debt. In 1994,
the Company continued to reduce its cost of capital by refinancing and retiring
securities.
During 1994, all of the outstanding shares of $2.10 and $7.50 preference stock
were redeemed for approximately $37.7 million. The Company also retired $2.2
million of $7.20 preferred stock. In May 1994, the Company filed a shelf
registration statement for the issuance of up to $150 million of Duquesne
Capital L.P. Cumulative Monthly Income Preferred Securities. These preferred
securities have not been issued.
During 1994, the Company also issued $114.1 million of its pollution control
obligations to replace a like amount of higher cost pollution control
obligations. The new pollution control obligations bear variable interest rates
and mature October 1, 2029.
The Company maintains two extendible revolving credit agreements, including a
$100 million arrangement expiring August 1995, and a $150 million arrangement
expiring October, 1995. Both arrangements contain two-year repayment periods for
any amounts outstanding at the expiration of the revolving credit periods. At
December 31, 1994, the Company had borrowed $60 million under the agreements.
14
<PAGE>
Sale of Accounts Receivable
-------------------------------------------------------------------------------
The Company and an unaffiliated corporation have an agreement that entitles the
Company to sell and the corporation to purchase, on an ongoing basis, up to $50
million of accounts receivable. The Company had no receivables sold at
December 31, 1994. The accounts receivable sales agreement, which expires in
June 1995, is one of many sources of funds available to the Company. Upon
expiration of this facility, the Company expects to extend the agreement or to
replace the facility with a similar one.
[Bar graph appears here]
Average Cost of Generation
--------------------------
(Cents Per KWH)
<TABLE>
<CAPTION>
Year Cents
<S> <C>
1990 2.52
1991 2.48
1992 2.14
1993 2.27
1994 2.23
</TABLE>
Marginal cost of production continues to improve.
Nuclear Fuel Leasing
-------------------------------------------------------------------------------
The Company finances its acquisitions of nuclear fuel through a leasing
arrangement under which it may finance up to $75 million of nuclear fuel. As of
December 31, 1994, the amount of nuclear fuel financed by the Company under
this arrangement totaled approximately $52 million. The Company plans to
continue leasing nuclear fuel to fulfill its requirements at least through
September 1996, the remaining term of the current leasing arrangement.
Dividends
-------------------------------------------------------------------------------
The Company has paid dividends on common stock continuously since 1953. The
quarterly dividends paid have increased by an average annual rate of 5.6 percent
over the past five years, even though the Company has maintained a more
conservative payout ratio than the electric utility industry in general. The
Company expects that funds generated from operations will continue to be
sufficient to meet sinking fund and long-term debt maturities and to pay
dividends. The Company's need and the availability of funds will be influenced
by the economic activity within the Company's utility service territory, by
competitive and environmental legislation and by regulatory matters experienced
by the electric utility industry generally.
Dividends may be paid on DQE common stock to the extent permitted by law and as
declared by the board of directors. However, in Duquesne's Restated Articles of
-----------------
incorporation, provisions relating to preferred and preference stock may
restrict the payment of Duquesne's common dividends. No dividends or
distributions may be made on Duquesne's common stock if Duquesne has not paid
dividends or sinking fund obligations on its preferred or preference stock.
Further, the aggregate amount of Duquesne's common stock dividend payments or
distributions may not exceed certain percentages of net income if the ratio of
common shareholders' equity to total capitalization is less than specified
percentages. As all of Duquesne's common stock is owned by DQE, to the extent
that Duquesne cannot pay common dividends, DQE may not be able to pay dividends
to its common shareholders. No part of the retained earnings of DQE or any of
its subsidiaries was restricted at December 31, 1994.
Generating Units
----------------
Generating Performance
-------------------------------------------------------------------------------
The Company wholly owns and operates two generating units. In addition, the
Company has an ownership or leasehold interest in nine jointly owned units, two
of which the Company operates. Of the four units the Company operates, three
achieved record performance during 1994.
The Beaver Valley Power Station achieved the highest combined (Units 1 and 2)
capacity factor (87.7 percent) in the history of the station. The Cheswick Power
Station achieved the highest capacity factor (78.7 percent) in its 24-year
history. Capacity factor is a key production measure. It is the ratio of the
power actually generated by a facility to the facility's rated capacity during
that period of time. It is also a key indicator of how well the stations are
operated based on their design capabilities.
Perry Unit 1
-------------------------------------------------------------------------------
The Company has a 13.74 percent ownership interest in Perry Unit 1, a nuclear
generating unit located in Ohio and operated by The Cleveland Electric
Illuminating Company (CEI). During 1993, the unit had an equivalent
availability factor of 39 percent. This performance resulted from several
outages. As a result of the length of these outages, the PUC imposed a penalty
for incremental replacement power costs. The 1994 equivalent availability factor
was 44 percent. This performance resulted from an extended outage (190 days)
for refueling and
15
<PAGE>
maintenance. From the end of the outage in August 1994 thorugh the balance of
1994, Perry operated at full capacity except for short durations of reduced
power for testing and minor on-line maintenance activities.
CEI has prevoiusly submitted to the Nuclear Regulatory Commission an action
plan, called the Perry Course of Action (PCA), designed by CEI to "correct
identified management, technical, and programmatic deficiencies" at the plant
over roughly a three-year period, and to "correct the downward trending
performance" of Perry. CEI management represents to us that the PCA is on
schedule and will be an effective program to insure that Perry is in conformance
with industry standards for boiling water reactors. Based on actual costs and
estimates obtained from CEI through January 1995, the total costs to bring the
plant into compliance, including the costs associated with implementing the PCA,
are more than the costs originally projected by CEI. The Company cannot predict
the ultimate cost, timing or effectiveness of the PCA, and is continuing to
closely monitor the situation.
Outlook
-------
Competition
-------------------------------------------------------------------------------
Regulatory developments in the electric utility industry are placing increasing
competitive pressures on electric utilities. The electric utility industry is
expected to continue to undergo significant changes for the remainder of the
decade. These changes most likely will include increasing competition in the
generation and sale of electricity, increasing energy flows resulting from open
transmission access and non-regulated generation and transmission projects
outside the traditional service areas. The Company, like the industry in
general, is continuing to assess the impact of these competitive forces on its
future operations.
Electric Utility Industry Developments: The National Energy Policy Act of 1992
-------------------------------------- --------------------------------------
(energy act) was designed, among other things, to foster competition. Among
other provisions, the energy act amends the Public Utility Holding Company Act
----------------------------------
of 1935 (1935 act) and the Federal Power Act. Amendments to the 1935 act create
------- -----------------
a new class of independent power producers known as Exempt Wholesale Generators
(EWGs), which are exempt from the corporate structure regulations of the 1935
act. EWGs, which may include independent power producers as well as affiliates
of electric utilities, do not require Securities and Exchange Commission
approval or regulation. In addition, brokers and marketers, without owning or
operating any generation or transmission facilities, are being permitted to
enter into the business of buying and selling electric capacity and energy.
Amendments to the Federal Power Act create the potential for utilities and other
-----------------
power producers to gain increased access to transmission systems of other
utilities in order to facilitate sales to other utilities. The amendments permit
the FERC to order utilities to transmit power over their lines for use by other
suppliers and to enlarge or construct additional transmission capacity to
provide these services. The Company is currently pursuing expanded transmission
access under these amendments. (See discussion in "Transmission Access" on page
17.)
The energy efficiency title of the energy act requires states to consider
adopting integrated resource planning, which allows utility investments in
conservation and other demand side management techniques to be at least as
profitable as supply investments. The energy act also establishes new efficiency
standards in industrial and commercial equipment and lighting and requires
states to establish commercial and residential building codes with energy
efficiency standards. Additionally, the energy act requires utilities to
consider energy efficiency programs in their integrated resource planning.
These new regulations also permit industrial and large commercial customers to
own and operate facilities to generate their own electric energy requirements
and, if such facilities are qualifying facilities, to require the displaced
electric utility to purchase the output of such facilities. Customers may also
have the option of substituting fuels, such as the use of natural gas, oil or
wood for heating and/or cooling purposes rather than electric energy or of
relocating their facilities to a lower cost environment.
16
<PAGE>
The PUC is currently conducting an investigation into electric power
competition. The Company has been advocating increased transmission access in
the wholesale power market as the necessary first step toward enabling our
customers to benefit from competition.
The Company's Response: Emerging competition, federal deregulation of wholesale
----------------------
energy sales, and prospective retail access initiatives require the Company to
reexamine its approach to doing business. Growth in energy sales, competitive
rate pressures, and the Company's commitment to provide reliable, quality
service to its customers influence short- and long-term corporate goals. The
Company's current business plan recognizes the need to encourage economic
growth and stability in the service territory and surrounding region. The
Company's efforts continue to focus on achievement of business growth through
the application of marketing and economic development programs to achieve
energy-efficient growth in its sales of utility services.
The Company has a diverse customer mix with less than 22 percent of total sales
of electricity derived from industrial customers as compared to an electric
utility industry average of approximately 34 percent. The Company's rates for
energy intensive industrial and commercial customers are competitively priced
and its rate structure allows some flexibility in setting rates to attract new
business. In addition, Company-sponsored programs help customers manage their
electricity consumption and control their costs.
Although management believes the Company's system is well positioned, as a
clean, low cost producer, to compete both within and outside of its service
territory, efforts continue to further reduce costs and increase effectiveness
and productivity. We will aggressively address these factors to position the
Company to overcome the challenges they may create and take advantage of the
opportunities increased competition will bring.
Transmission Access: In March 1994, the Company submitted, pursuant to the
-------------------
Federal Power Act, a "good faith" request for transmission service with the
-----------------
Allegheny Power System (APS) and Pennsylvania-New Jersey-Maryland
Interconnection Association (PJM Companies). The request is based on 20-year
firm service with flexible delivery points for 300 megawatts of transfer
capability over the transmission network that extends from Western Pennsylvania
to the East Coast. Because of a lack of progress on pricing and other issues, on
August 5 and September 16, 1994, the Company filed with the FERC applications
for transmission service from the PJM Companies and APS, respectively. The
applications are authorized under Section 211 of the Federal Power Act, which
-----------------
requires electric utilities to provide firm wholesale transmission service.
Generating Units Held for Future Use: In 1986, the PUC approved the Company's
------------------------------------
request to remove the Phillips and most of the Brunot Island (BI) power stations
from service and place them in cold reserve. The Company expects to recover its
net investment in these plants through future electricity sales. Phillips and BI
represent licensed, certified, clean sources of electricity that will be
necessary to meet expanding opportunities in the power markets. The Company
believes that anticipated growth in peak demand for electricity within its
service territory will require additional peaking generation. The Company looks
to BI to meet this need. The Phillips power plant is an important component in
the Company's strategy to identify and serve opportunities for providing bulk
power service. With recent legislation promoting wider transmission access to
bulk power markets and with the opportunity to package a sale of power from
Phillips with the support of the Company's system, the Phillips plant could be
made a highly reliable, cost-competitive alternative for most purchasers. In
summary, the Company believes its investment in these cold-reserved plants will
be necessary in order to meet future business needs. If business opportunities
do not develop as expected, the Company will consider the sale of these assets.
In the event that market demand, transmission access or rate recovery do not
support the utilization or sale of the plants, the Company may have to write off
part or all of their costs. At December 31, 1994, the Company's net investment
in Phillips and BI was $93.0 million and $42.0 million, respectively.
17
<PAGE>
Environmental Matters
--------------------------------------------------------------------------------
The Comprehensive Environmental Response, Compensation and Liability Act of 1980
--------------------------------------------------------------------------------
(Superfund) and the Superfund Amendments and Reauthorization Act of 1986
----------------------------------------------------
established a variety of informational and environmental action programs. The
United States Environmental Protection Agency (EPA) has informed the Company of
its involvement or potential involvement in three hazardous waste sites. If the
Company is ultimately determined to be a responsible party with respect to these
sites, it could be liable for all or a portion of the cleanup costs. However, in
each case, other solvent, potentially responsible parties that may bear all or
part of any liability are also involved. In addition, the Company believes that
available defenses, along with other factors (including overall limited
involvement and low estimated remediation costs for one site) will limit any
potential liability that the Company may have for cleanup costs. The Company
believes that it is adequately reserved for all known liabilities and costs and,
accordingly, that these matters will not have a materially adverse effect on its
financial position or results of operations.
In 1990, Congress approved amendments to the Clean Air Act. Among other
-------------
innovations, this legislation established the Emission Allowance Trading System.
These allowances are issued by the EPA to fossil-fired stations with generating
capability of more than 25 megawatts that were in existence as of the passage of
the 1990 amendments. Allowances are part of a market-based approach to sulfur
dioxide (SO//2//) reduction. Emission allowances can also be obtained through
purchases on the open market or directly from other sources. Excess allowances
may be banked for future use or sold on the open market to other parties for
their use in offsetting emissions.
The legislation requires significant additional reductions of SO//2// and oxides
of nitrogen (NO//X//) by the year 2000. The Company continues to work with the
operators of its jointly owned stations to implement cost-effective compliance
strategies to meet these requirements. NO//X// reductions under Title IV of the
Clean Air Act amendments were required at the Cheswick station and the work to
-------------
achieve the reductions was completed in 1993. The ozone attainment provisions
of Title I of the Clean Air Act amendments also required NO//X// reductions by
----------------------------
1995 at the Company's Elrama plant and at the jointly owned Mansfield plant. The
Company will achieve such reductions with low NO//X// burner technology. The
Company has 662 megawatts of nuclear capacity, 1,187 megawatts of scrubbed
capacity, including 300 megawatts at the currently cold-reserved Phillips plant,
and 757 megawatts of capacity that meets the 1995 standards of the Clean Air Act
-------------
amendments through the use of low sulfur coal. Through the year
2000, the Company is planning a combination of compliance methods that include
fuel switching; increased use of, and improvements in, scrubbed capacity; flue
gas conditioning; low NO//X// burner technology; and the purchase of emission
allowances. The Company currently estimates that additional capital costs to
comply with Clean Air Act requirements through the year 2000 will be
-------------
approximately $20 million. This estimate is subject to the finalization of
federal and state regulations.
The Company is closely monitoring other potential air quality programs and air
emission control requirements that could be imposed in the future, including
additional NO//X// control requirements that could be imposed on fossil fuel
plants by the Ozone Transport Commission. As these potential programs are in
various stages of discussion and consideration, it is impossible to make
reasonable estimates of the potential costs and impacts, if any.
In 1992, the Pennsylvania Department of Environmental Resources (DER) issued
Residual Waste Management Regulations governing the generation and management of
non-hazardous waste. The Company is currently conducting tests and developing
compliance strategies. Capital compliance costs for these DER regulations are
estimated, on the basis of information currently available, at $5 million in
1995. The expected additional capital cost of compliance for these DER
regulations through 2000 is estimated, based on current information, to be
approximately $25 million; this estimate is subject to the results of continuing
ground water assessments and DER final approval of compliance plans.
18
<PAGE>
Under the Nuclear Waste Policy Act of 1982, which establishes a policy for
--------------------------------
handling and disposing of spent nuclear fuel and requires the establishment of a
final repository to accept spent fuel, contracts for jointly owned nuclear
plants have been entered into with the United States Department of Energy (DOE)
for permanent disposal of spent nuclear fuel and high-level radioactive waste.
The DOE has indicated that the repository will not be available for acceptance
of spent fuel before 2010. Existing on-site spent fuel storage capacities at
Beaver Valley Unit 1, Beaver Valley Unit 2 and Perry are expected to be
sufficient until 2017, 2011, and 2009, respectively. During 1994, the Company
increased the storage capacity at Beaver Valley Unit 1 by equipping the spent
fuel pool with high density fuel storage racks.
Retirement Plan Measurement Assumptions
--------------------------------------------------------------------------------
The Company increased the discount rate used to determine the projected benefit
obligation on the Company's retirement plans at December 31, 1994, to 8.0
percent. The assumed change in future compensation levels was also increased to
reflect current market and economic conditions.
The effects of these changes on the Company's retirement plan obligations are
reflected in the amounts shown in Note N to the consolidated financial
statements. The resulting decrease in related expenses for subsequent years is
not expected to be material.
Investment in International Power Machines Corporation (IPM)
--------------------------------------------------------------------------------
The Company had a $2.8 million investment, reflected in the Consolidated Balance
Sheet of DQE as Other Long-Term Investments at December 31, 1994, in IPM
---------------------------
convertible preferred stock. On February 8, 1995, IPM was acquired by Exide
Electronics Group, Inc. (Exide). The Company is now a major shareholder of
Exide, the world's largest independent developer, manufacturer and servicer of
power protection and power management systems. This acquisition resulted in a
first quarter 1995 pre-tax gain for the Company of approximately $7.2 million,
or eight cents per share.
Other
--------------------------------------------------------------------------------
The Company is subject to the accounting and reporting requirements of the
Securities and Exchange Commission. In addition, the Company's utility
operations are subject to the regulation of the PUC and the FERC. As a result,
the consolidated financial statements contain regulatory assets and liabilities
in accordance with Statement of Financial Accounting Standards No. 71,
---------------------------------------------------
Accounting For the Effects of Certain Types of Regulation (SFAS No. 71) and
-----------------------------------------------------------------------
reflect the effects of the ratemaking process. In accordance with SFAS No. 71,
------------
the Company's financial statements reflect regulatory assets and costs based on
current cost-based ratemaking regulations. The regulatory assets represent
probable future revenue to the Company because provisions for these costs are
currently included, or are expected to be included, in charges to utility
customers through the ratemaking process.
The Company's electric utility operations currently satisfy the criteria of
SFAS No. 71. However, a company's utility operations or a portion of such
-----------
operations can cease to meet these criteria for various reasons including a
change in regulation. Should the Company cease to meet the SFAS No. 71 criteria,
-----------
it would be required to write-off any regulatory assets and liabilities for
those operations that no longer meet these requirements.
19
<PAGE>
Report of Independent Certified Public Accountants
--------------------------------------------------
To the Directors and Shareholders of DQE:
----------------------------------------
We have audited the accompanying consolidated balance sheets of DQE and its
subsidiaries as of December 31, 1994 and 1993, and the related consolidated
statements of income, retained earnings, and cash flows for each of the three
years in the period ended December 31, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of DQE and its subsidiaries as of
December 31, 1994 and 1993, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1994 in
conformity with generally accepted accounting principles.
As discussed in Note A to the consolidated financial statements, effective
January 1, 1993, the Company changed its method of accounting for income taxes
to conform with Statement of Financial Accounting Standards No. 109, and the
Company changed its method of accounting for maintenance costs during scheduled
major fossil station outages.
/s/ Deloitte & Touche LLP
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
January 31, 1995
--------------------------------------------------------------------------------
Report of the Audit Committee of the Board of Directors of DQE
--------------------------------------------------------------
The Audit Committee, composed entirely of non-employee directors, meets
regularly with the independent public accountants and the internal auditors to
discuss results of their audit work, their evaluation of the adequacy of the
internal accounting controls and the quality of financial reporting.
In fulfilling its responsibilities in 1994, the Audit Committee recommended to
the Board of Directors, subject to shareholder approval, the selection of the
Company's independent public accountants. The Audit Committee reviewed the
overall scope and details of the independent public accountants' and internal
auditors' respective audit plans and reviewed and approved the independent
public accountants' general audit fees and non-audit services.
Audit Committee meetings are designed to facilitate open communications with
internal auditors and independent public accountants. To ensure auditor
independence, both the independent public accountants and the internal auditors
have full and free access to the Audit Committee.
The Audit Committee of the Board of Directors of DQE
20
<PAGE>
<TABLE>
<CAPTION>
Statement of Consolidated Income
--------------------------------------------------------------------------------------------------
(Thousands of Dollars, Except Per Share Amounts)
-----------------------------------------------
Year Ended December 31,
-----------------------------------------------
1994 1993 1992
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Revenues
------------------
Sales of Electricity:
Customers $1,115,987 $1,186,779 $1,152,835
Phase-in deferrals (28,810) (100,315) (98,201)
Utilities 58,295 50,669 72,440
----------------------------------------------------------------------------------------------------
Total Sales of Electricity 1,145,472 1,137,133 1,127,074
Other 90,157 63,322 36,748
----------------------------------------------------------------------------------------------------
Total Operating Revenues 1,235,629 1,200,455 1,163,822
----------------------------------------------------------------------------------------------------
Operating Expenses
------------------
Fuel and purchased power 243,905 237,731 239,230
Other operating 342,220 346,685 289,775
Maintenance 79,488 80,292 79,146
Depreciation and amortization 160,531 152,282 128,730
Taxes other than income taxes 89,474 73,126 85,733
----------------------------------------------------------------------------------------------------
Total Operating Expenses 915,618 890,116 822,614
----------------------------------------------------------------------------------------------------
Operating Income
Operating Income 320,011 310,339 341,208
----------------------------------------------------------------------------------------------------
Other Income 43,486 28,102 41,533
----------------------------------------------------------------------------------------------------
Interest and Other Charges
--------------------------
Interest expense 104,008 110,470 122,872
Preferred and preference dividends of subsidiaries 5,994 8,936 9,411
----------------------------------------------------------------------------------------------------
Total Interest and Other Charges 110,002 119,406 132,283
----------------------------------------------------------------------------------------------------
Income Before Income Taxes 253,495 219,035 250,458
----------------------------------------------------------------------------------------------------
Income Taxes
------------
Tax rate adjustment--regulatory tax receivable 87,200 -- --
Income taxes 9,479 77,628 108,940
----------------------------------------------------------------------------------------------------
Total Income Taxes 96,679 77,628 108,940
----------------------------------------------------------------------------------------------------
Income Before Cumulative Effect on Prior Years
of Changes in Accounting Principles 156,816 141,407 141,518
Adoption of SFAS No. 109--income taxes -- 8,000 --
Accounting for maintenance costs--net -- (5,425) --
----------------------------------------------------------------------------------------------------
Net Income
----------
Net Income $ 156,816 $ 143,982 $ 141,518
====================================================================================================
Average Number of Common Shares
Outstanding (000) 52,697 52,979 52,913
====================================================================================================
Earnings Per Share
------------------
Earnings Per Share of Common Stock:
Income Before Cumulative Effect on Prior Years
of Changes in Accounting Principles $2.98 $2.67 $2.67
Adoption of SFAS No. 109--income taxes -- .15 --
Accounting for maintenance costs--net -- (.10) --
----------------------------------------------------------------------------------------------------
Earnings Per Share of Common Stock $2.98 $2.72 $2.67
====================================================================================================
Dividends Declared
------------------
Dividends Declared Per Share of Common Stock $1.70 $1.62 $1.54
====================================================================================================
</TABLE>
See notes to consolidated financial statements.
21
<PAGE>
Consolidated Balance Sheet
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets (Thousands of Dollars)
----------------------------
As of December 31,
----------------------------
1994 1993
------------------------------------------------------------------------------
<S> <C> <C>
Current Assets:
Cash and temporary cash investments $ 50,058 $ 32,234
------------------------------------------------------------------------------
Receivables:
Electric customer accounts receivable 96,157 107,342
Other utility receivables 26,008 28,807
Other receivables 53,766 56,576
Less: Allowance for uncollectible accounts (15,822) (13,688)
------------------------------------------------------------------------------
Receivables less allowance for uncollectible
accounts 160,109 179,037
Less: Receivables sold _ (9,000)
------------------------------------------------------------------------------
Total Receivables 160,109 170,037
Materials and supplies (at average cost):
Coal 30,484 26,793
Operating and construction 58,262 64,885
------------------------------------------------------------------------------
Total Materials and Supplies 88,746 91,678
------------------------------------------------------------------------------
Other current assets 36,156 10,455
------------------------------------------------------------------------------
Total Current Assets 335,069 304,404
------------------------------------------------------------------------------
Long-Term Investments:
Partnership investments 77,163 39,418
Leveraged lease investments 50,322 48,102
Leasehold investments 33,542 _
Other 35,191) 38,111)
------------------------------------------------------------------------------
Total Long-Term Investments 196,218 125,631
------------------------------------------------------------------------------
Property, Plant and Equipment:
Electric plant in service 4,196,690 4,102,979
Construction work in progress 52,199 60,103
Property held under capital leases 162,732 177,800
Property held for future use 216,738 216,863
Other 81,165 63,405
------------------------------------------------------------------------------
Total 4,709,524 4,621,150
------------------------------------------------------------------------------
Less accumulated depreciation and amortization (1,569,983) (1,452,910)
------------------------------------------------------------------------------
Property, Plant and Equipment_Net 3,139,541 3,168,240
------------------------------------------------------------------------------
Other Non-Current Assets:
Regulatory assets 710,763 909,405
Other 45,414 42,698
------------------------------------------------------------------------------
Total Other Non-Current Assets 756,177 952,103
------------------------------------------------------------------------------
Total Assets $4,427,005 $4,550,378
==============================================================================
</TABLE>
See notes to consolidated financial statements.
22
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------
(Thousands of Dollars)
Liabilities and ---------------------------
Capitalization As of December 31,
------------------------------------------------------------------------------
1994 1993
------------------------------------------------------------------------------
<S> <C> <C>
Current Liabilities:
Notes payable $ 60,115 $ 36,267
Current maturities and sinking fund requirements 85,986 45,741
Accounts payable 83,854 88,309
Accrued liabilities 64,894 70,967
Dividends declared 26,484 26,699
Other current liabilities 5,722 14,029
------------------------------------------------------------------------------
Total Current Liabilities 327,055 282,012
------------------------------------------------------------------------------
Non-Current Liabilities:
Deferred income taxes-net 969,948 1,169,148
Deferred investment tax credits 123,591 129,574
Capital lease obligations 41,106 55,733
Other 215,639 133,202
------------------------------------------------------------------------------
Total Non-Current Liabilities 1,350,284 1,487,657
------------------------------------------------------------------------------
------------------------------------------------------------------------------
Commitments and Contingencies (Notes B through N)
------------------------------------------------------------------------------
Capitalization:
Long-Term Debt 1,377,611 1,416,998
------------------------------------------------------------------------------
Preferred and Preference Stock of Subsidiaries:
Non-redeemable preferred stock 90,340 92,523
Non-redeemable preference stock 29,857 59,339
Deferred employee stock ownership plan
(ESOP) benefit (24,852) (27,126)
Redeemable preference stock _) 8,392)
------------------------------------------------------------------------------
Total Preferred and Preference Stock of Subsidiaries 95,345 133,128
------------------------------------------------------------------------------
Common Shareholders' Equity:
Common stock - no par value (authorized - 125,000,000
shares: issued - 73,119,436 shares) 1,001,973 1,001,259
Retained earnings 622,072 554,604
Treasury stock (at cost) (20,813,698 and
20,107,209 shares) (347,335) (325,280)
------------------------------------------------------------------------------
Total Common Shareholders' Equity 1,276,710 1,230,583
------------------------------------------------------------------------------
Total Capitalization 1,276,710 1,230,583
------------------------------------------------------------------------------
Total Liabilities and Capitalization $4,427,005 $4,550,378
------------------------------------------------------------------------------
</TABLE>
23
<PAGE>
Statement of Consolidated Cash Flows
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Thousands of Dollars)
--------------------------------
Year Ended December 31,
Cash Flows From --------------------------------
Operating Activities 1994 1993 1992
----------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income $ 156,816 $143,982 $141,518
Principal non-cash charges (credits) to net income:
Depreciation and amortization 160,531 152,282 128,730
Capital lease and nuclear fuel amortization 36,320 32,019 49,001
Deferred income taxes and investment tax
credits - net (8,136) (41,930) (2,319)
Allowance for equity funds used during construction (1,295) (869) (2,598)
Deferred revenues and carrying charges recovered 28,621 99,375 83,056
Changes in working capital other than cash (31,891) (111,677) 48,670
Other - net 28,661 26,167 2,487
----------------------------------------------------------------------------------
Net Cash Provided From Operating Activities 369,627 299,349 448,545
----------------------------------------------------------------------------------
Cash Flows Used By
Investing Activities
Investments:
Capital expenditures (121,085) (124,376) (113,215)
Long-term investments (66,698) (5,178) (21,632)
Other - net (12,321) (5,178) (12,632)
Net Cash Used By Investing Activities (223,411) (201,510) (147,430)
------------------------------------------------------------------------------
Cash Flows Used In
Financing Activities
Sale of bonds 114,110 740,500 312,925
Increase in notes payable 32,530 36,267 _
Dividends on common stock (89,348) (86,089) (81,491)
Reductions of long-term obligations:
Preferred and preference stock (39,958) (187) (24,158)
Long-term debt (114,835) (735,048) (394,951)
Other obligations (33,522) (27,751) (43,686)
Beaver Valley Unit 2 sale/leaseback premium _ _ (36,371)
Premium on reacquired debt (5,033) (31,702) (18,127)
Other - net 7,664 623 (2,719)
----------------------------------------------------------------------------------
Net Cash Used In Financing Activities (151,699) (103,387) (288,578)
----------------------------------------------------------------------------------
Net increase (decrease) in cash and temporary cash
investments 17,824 (5,548) 12,537
Cash and temporary cash investments at beginning
of year 32,234 37,782 25,245
----------------------------------------------------------------------------------
Cash and temporary cash investments at end of year $ 50,058 $ 32,234 $ 37,782
==================================================================================
Supplemental Cash Flow Information
Cash Paid During
the Year
Interest (net of amount capitalized) $105,900 $124,174 $125,305
----------------------------------------------------------------------------------
Income taxes $111,614 $133,303 $112,859
----------------------------------------------------------------------------------
Non-Cash Investing
and Financing
Activities
Capital lease obligations recorded $ 16,909 $ 11,811 $ 17,089
==================================================================================
</TABLE>
See notes to consolidated financial statements.
24
<PAGE>
Statement of Consolidated Retained Earnings
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Thousands of Dollars)
-----------------------------
1994 1993 1992
------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $554,604 $496,711 $436,684
Net income 156,816 143,982 141,518
Dividends declared (89,348) (86,089) (81,491)
------------------------------------------------------------------------------
Balance at end of year $622,072 $554,604 $496,711
==============================================================================
</TABLE>
See notes to consolidated financial statements.
Notes to Consolidated Financial Statements
A. Summary of Significant
Accounting
Policies
Consolidation
------------------------------------------------------------------------------
The consolidated financial statements of DQE include the accounts of its
subsidiaries: Duquesne Light Company (Duquesne), Duquesne Enterprises (DE) and
Montauk. DQE and its subsidiaries are collectively referred to as the Company.
All material intercompany balances and transactions have been eliminated in the
preparation of the Consolidated Financial Statements of DQE.
On August 17, 1993, DE acquired a 70 percent controlling interest in Chester
Environmental, Inc. (Chester) for approximately $12 million. The acquisition was
accounted for under the purchase method of accounting and Chester's results of
operations have been included in the Company's consolidated financial statements
since that date.
Basis of Accounting
------------------------------------------------------------------------------
The Company is subject to the accounting and reporting requirements of the
Securities and Exchange Commission (SEC). In addition, the Company's utility
operations are subject to the regulation of the Pennsylvania Public Utility
Commission (PUC) and the Federal Energy Regulatory Commission (FERC). As a
result, the consolidated financial statements contain regulatory assets and
liabilities in accordance with Statement of Financial Accounting Standards No.
-----------------------------------------------
71, Accounting for the Effects of Certain Types of Regulation (SFAS No. 71) and
--
reflect the effects of the ratemaking process. Such effects concern mainly the
time at which various items enter into the determination of net income in
accordance with the principle of matching costs and revenues. (See Note F.)
Revenues
------------------------------------------------------------------------------
Meters are read monthly and customers are billed on the same basis. Revenues
are recorded in the accounting periods for which they are billed, with the
exception of energy cost recovery revenues. (See following section on ``Energy
Cost Rate Adjustment Clause.'') Deferred revenues are associated with the
Company's 1987 rate case. (See Note F.)
Energy Cost Rate Adjustment Clause (ECR)
------------------------------------------------------------------------------
Through the ECR, the Company recovers (to the extent that such amounts are
not included in base rates) nuclear fuel, fossil fuel and purchased power
expenses and, also through the ECR, passes to its customers the profits from
short-term power sales to other utilities (collectively, ECR energy costs).
Nuclear fuel expense is recorded on the basis of the quantity of electric
energy generated and includes such costs as the fee, imposed by the United
States Department of Energy (DOE), for future disposal and ultimate storage and
disposition of spent nuclear fuel. Fossil fuel expense includes the costs of
coal, natural gas and fuel oil used in the generation of electricity.
On the Company's statement of consolidated income, these energy cost
recovery revenues are included as a component of operating revenues. For ECR
purposes, the Company defers fuel and other energy expenses for recovery, or
refunding, in subsequent years. The deferrals reflect the difference between
the amount that the Company is currently collecting from customers and its
actual ECR energy costs. The PUC annually reviews the Company's ECR energy
costs for the fiscal year April through March, compares them to previously
projected ECR energy costs and adjusts the ECR for over- or under-recoveries
and for two PUC-established coal cost standards. (See Note F.)
25
<PAGE>
Over or under-recoveries from customers are recorded in the Consolidated
Balance Sheet of DQE as payable to, or receivable from, customers. At December
31, 1994, $5.9 million was receivable from customers and shown as other current
assets. At December 31, 1993, $10.1 million was payable to customers and shown
as other current liabilities.
Maintenance
------------------------------------------------------------------------------
Incremental maintenance expense incurred for refueling outages at the Company's
nuclear units is deferred for amortization over the period (generally eighteen
months) between scheduled outages. The Company changed, as of January 1, 1993,
its method of accounting for maintenance costs during scheduled major fossil
generating station outages. Prior to that time, maintenance costs incurred for
scheduled major outages at fossil generating stations were charged to expense as
these costs were incurred. Under the new accounting policy, the Company accrues,
over the periods between outages, anticipated expenses for scheduled major
fossil generating station outages. (Maintenance costs incurred for non-major
scheduled outages and for forced outages continue to be charged to expense as
such costs are incurred.) This method was adopted to match more accurately the
maintenance costs and the revenue produced during the periods between scheduled
major fossil generating station outages.
The cumulative effect (approximately $5.4 million, net of income taxes of
approximately $3.9 million) of the change on prior years was included in net
income in 1993. The effect of the change in 1993 was to reduce income, before
the cumulative effect of changes in accounting principles, by approximately $2.4
million or $.05 per share and to reduce net income, after the cumulative effect
of changes in accounting principles, by approximately $7.8 million or $.15 per
share. The effect of the scheduled major fossil station outage accrual in 1994
was to reduce net income by approximately $0.7 million, or $.01 per share.
Depreciation and Amortization
------------------------------------------------------------------------------
Depreciation of property, plant and equipment, including plant-related
intangibles, is recorded on a straight-line basis over the estimated useful
lives of properties. Amortization of other intangibles is recorded on a straight
line basis over a five-year period. Depreciation and amortization of other
properties are calculated on various bases.
The Company records decommissioning costs under the category of depreciation and
amortization expense and accrues a liability, equal to that amount, for nuclear
decommissioning expense. Such nuclear decommissioning funds are deposited in
external, segregated trust accounts. The funds are invested in a portfolio
consisting of municipal bonds, certificates of deposit, and U.S. government
securities. Trust fund earnings increase the fund balance and the recorded
liability. The market value of the aggregate trust fund balances at December 31,
1994 totaled $19.2 million. On the Company's consolidated balance sheet, the
decommissioning trusts have been reflected in long-term investments, and the
related liability has been recorded as other liabilities.
Income Taxes
------------------------------------------------------------------------------
On January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, Accounting for Income Taxes (SFAS No. 109). Implementation of
SFAS No. 109 involved a change in accounting principle. The cumulative $8
million effect on prior years was reported in 1993 as an increase in net income.
SFAS No. 109 requires that the liability method be used in computing deferred
taxes on all differences between book and tax bases of assets. These book tax
differences occur when events and transactions recognized for financial
reporting purposes are not recognized in the same period for tax purposes. SFAS
No. 109 also requires that a deferred tax liability or asset be adjusted in the
period of enactment for the effect of changes in tax laws or rates. During 1994
the statutory Pennsylvania income tax rate was reduced from 12.25 percent to
9.99 percent; this reduction is to be phased in over four years. This resulted
in a net decrease of $87.2 million for deferred tax liabilities.
For its utility operations, the Company recognizes a regulatory asset for the
deferred tax liabilities that are expected to be recovered from customers
through rates. (See Notes F and H).
26
<PAGE>
With respect to the financial statement presentation of SFAS No. 109, the
Company reflects the amortization of the regulatory tax receivable resulting
from reversals of deferred taxes as depreciation and amortization expense.
Changes in the regulatory tax receivable as a result of a change in tax rates
are reflected in the statement of consolidated income on the tax rate
adjustment_regulatory tax receivable line. Reversals of accumulated deferred
income taxes are included in income tax expense.
When applied to reduce the Company's income tax liability, investment tax
credits related to utility property generally were deferred. Such credits are
subsequently reflected, over the lives of the related assets, as reductions to
tax expense.
Property, Plant and Equipment
------------------------------------------------------------------------------
The asset values of the Company's utility properties are stated at original
construction cost, which includes related payroll taxes, pensions, and other
fringe benefits, as well as administrative and general costs. Also included in
original construction cost is an allowance for funds used during construction
(AFC), which represents the estimated cost of debt and equity funds used to
finance construction. The amount of AFC that is capitalized will vary according
to changes in the cost of capital and in the level of construction work in
progress (CWIP). On a current basis, the Company does not realize cash from the
allowance for funds used during construction. The Company does realize cash,
during the service life of the plant, through increased revenues reflecting a
higher rate base (upon which a return is earned) and increased depreciation.
The AFC rates applied to CWIP were 9.0 percent in 1994, 9.6 percent in 1993,
and 10.3 percent in 1992.
Additions to, and replacements of, property units are charged to plant
accounts. Maintenance, repairs and replacement of minor items of property are
recorded as expenses when they are incurred. The costs of utility properties
that are retired (plus removal costs and less any salvage value) are charged to
the accumulated provision for depreciation.
Substantially all of the Company's utility properties are subject to first
mortgage liens, and to junior liens.
Temporary Cash Investments
------------------------------------------------------------------------------
Temporary cash investments are short-term, highly liquid investments with
original maturities of three or fewer months. They are stated at market, which
approximates cost. The Company considers temporary cash investments to be cash
equivalents.
Reclassifications
------------------------------------------------------------------------------
The 1993 and 1992 financial statements have been reclassified to conform with
accounting presentations adopted during 1994.
B. Receivables
An arrangement between the Company and an unaffiliated corporation entitles the
Company to periodically sell up to $50 million of its accounts receivable. The
Company sold receivables from time to time throughout 1994 but had no
receivables sold at December 31, 1994. At December 31, 1993, the Company had
sold $7.1 million of electric customer accounts receivable and $1.9 million of
other utility receivables. The sales agreement includes a limited recourse
obligation under which the Company could be required to repurchase certain of
the receivables. The arrangement expires on June 27, 1995.
C. Changes in
Working Capital
Other Than Cash
Changes in Working Capital Other Than Cash
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993(a) 1992
(Amounts in Thousands of Dollars)
------------------------------------------------------------------------------
<S> <C> <C> <C>
Receivables $(09,928) $(103,188) $(64,088)
Materials and supplies 2,932 13,635 (4,151)
Other current assets (25,701) 4,631 7,140
Accounts payable (4,455) (7,961) (8,818)
Other current liabilities (14,595) (18,794) (9,589)
------------------------------------------------------------------------------
Total $(31,891) $(111,677) $48,670
==============================================================================
</TABLE>
(a) Net of the effects from the purchase of Chester
27
<PAGE>
D. Long-Term
Investments
The Company's partnership investments are primarily in affordable housing
limited partnerships. The Company's investments in affordable housing were $57.5
million at December 31, 1994 and $35.4 million at December 31, 1993. The Company
also has a partnership investment at December 31, 1994 of $15.7 million in a
waste-to-energy facility.
The Company is the lessor in five leveraged lease arrangements involving
manufacturing equipment, mining equipment, rail equipment and natural gas
processing equipment. These leases expire in various years beginning 2001
through 2012. The residual value of the equipment, which belongs to the Company
after the leases expire, is estimated to approximate 14 percent of the original
cost. The Company's aggregate equity investment represents 22 percent of the
aggregate original cost of the property and is secured by guarantees of each
lessee's parent or affiliate. The remaining 78 percent was financed by non-
recourse debt provided by lenders who have been granted, as their sole remedy in
the event of default by the lessees, an assignment of rentals due under the
leases and a security interest in the leased property. This debt amounted to
$139 million and $144 million at December 31, 1994 and 1993, respectively.
Net Leveraged Lease Investments at December 31
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1994 1993
(Amounts in Thousands of Dollars)
------------------------------------------------------------------------------
<S> <C> <C>
Rentals receivable (net of principal and
interest on the non-recourse debt) $50,010 $52,016
Estimated residual value of leased assets 26,470 26,470
Less: Unearned income (26,158) (30,384)
------------------------------------------------------------------------------
Leveraged lease investments 50,322 48,102
Less: Deferred taxes arising from
leveraged leases (34,174) (22,845)
------------------------------------------------------------------------------
Net Leveraged Lease Investments $16,148 $25,257
==============================================================================
</TABLE>
The Company's leasehold investments are in computers, vehicles and equipment.
The Company's other investments are primarily in assets of a nuclear
decommissioning trust and marketable securities. In accordance with Statement of
Financial Accounting Standards No. 115, Accounting for Certain Investments in
Debt and Equity Securities (SFAS No. 115), these investments are classified as
available-for-sale and are stated at market value. The amounts of unrealized
holding gains at December 31, 1994 are not material.
E. Property, Plant
and Equipment
In addition to its wholly owned generating units, Duquesne, together with
other electric utilities, has an ownership or leasehold interest in certain
jointly owned units. The Company is required to pay its share of the
construction and operating costs of the units. The Company's share of the
operating expenses of the units is included in the statement of consolidated
income.
The Company has a 13.74 percent ownership interest in Perry Unit 1, a nuclear
generating unit operated by Centerior Energy. During 1993, the unit had an
equivalent availability factor of 39 percent. This performance resulted from
several outages related to mechanical failures. As a result of the length of
these outages, the PUC imposed a penalty for incremental replacement power
costs. The 1994 availability was 39 percent. This performance resulted from
several outages As a result of the length of these outages, the PUC imposed a
penalty for incremental replacement power costs. The 1994 equivalent
availability factor was 44 percent. This performance resulted from an extended
outage in August 1994 through the balance of 1994, Perry operated at full
capacity except for short durations of reduced power for testing and minor
on-line maintenance activities.
CEI has previously submitted to the Nuclear REgulatory Commission an action
plan, called the Perry Course of Action (PCA), designed by CEI to ``correct
identified management, technical, and programmatic deficiencies'' at the plant
over roughly a three-year period, and to ``correct the downward trending
performance'' of Perry. CEI management represents to us that
28
<PAGE>
the PCA is on schedule and will be an effective program to insure that Perry is
in conformance with industry standards for boiling bring the plant back
to a performance level that meets industry standards for boiling water reactors.
The Company cannot predict the ultimate cost, timing or effectiveness of the
PCA, and is continuing to closely monitor the situation.
Generating Units at December 31, 1994
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------
Net
Percentage Utility Fuel
Unit Interest Megawatts Plant Source
(Millions of Dollars)
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cheswick 100.0 570 $ 120.8 Coal
Elrama (a) 100.0 487 97.3 Coal
Ft. Martin 1 50.0 276 38.2 Coal
Eastlake 5 31.2 186 44.6 Coal
Sammis 7 31.2 187 54.4 Coal
Bruce Mansfield 1 (a) 29.3 228 69.1 Coal
Bruce Mansfield 2 (a) 8.0 62 18.0 Coal
Bruce Mansfield 3 (a) 13.74 110 48.9 Coal
Beaver Valley 1 (b) 47.5 385 253.5 Nuclear
Beaver Valley 2 (c)(d) 13.74 113 14.8 Nuclear
Beaver Valley Common Facilities 165.6
Perry 1 (e) 13.74 164 591.7 Nuclear
Brunot Island 100.0 66 7.5 Fuel Oil
------------------------------------------------------------------------------------------------------------
Total 2,834 1,524.4
Cold-reserved units:
Brunot Island 100.0 240 44.9 Fuel Oil
Phillips (a) 100.0 300 78.6 Coal
------------------------------------------------------------------------------------------------------------
Total Generating Units 3,374 $1,647.9
============================================================================================================
</TABLE>
(a) The unit is equipped with flue gas desulfurization equipment.
(b) The NRC has granted a license to operate through January 2016.
(c) On October 2, 1987 the Company sold its 13.74 percent interest in
Beaver Valley Unit 2 and leased it back; the sale was exclusive of
transmission and common facilities. Amounts shown represent facilities
not sold and subsequent leasehold improvements.
(d) The NRC has granted a license to operate through May 2027.
(e) The NRC has granted a license to operate through March 2026.
F. Rate Matters
1987 Rate Case
------------------------------------------------------------------------------
In March 1988, the PUC adopted a rate order that increased the
Company's utility revenues by $232 million annually. This rate increase was
phased-in from April 1988 through April 1994. Deficiencies in current revenues
which resulted from the phase-in plan were included in the consolidated income
statement as deferred revenues. Deferred revenues were recorded on the balance
sheet as a regulatory asset. As customers were billed for deficiencies related
to prior periods, this regulatory asset was reduced. As designed, the phase-in
plan provided for carrying charges (at the after-tax AFC rate) on revenues
deferred for future recovery. The Company recovered previously deferred revenues
and carrying charges of approximately $315 million during the phase-in period
which concluded in April of 1994.
At this time, the Company has no pending base rate case and has no immediate
plans to file a base rate case.
Regulatory Assets
------------------------------------------------------------------------------
As a result of the 1987 Rate Case, and the continued application of SFAS No. 71,
the Company records regulatory assets on its consolidated balance sheet. The
regulatory assets represent probable future revenue to the Company because
provisions for these costs are currently included, or are expected to be
included, in charges to utility customers through the ratemaking process.
Management will continue to evaluate significant changes in the regulatory and
competitive environment to assess the Company's overall consistency with the
criteria of SFAS No. 71.
29
<PAGE>
Regulatory Assets at December 31
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
1994 1993
(Amounts in Thousands of Dollars)
----------------------------------------------------------------------------------------
<S> <C> <C>
Regulatory tax receivable (Note H) $428,043 $569,555
Unamortized debt costs (Note K)(a) 103,454 104,076
Deferred rate synchronization costs (see below) 51,149 51,149
Beaver Valley Unit 2 sale/leaseback premium (Note I)(b) 33,414 34,903
Deferred employee costs (c) 31,012 32,408
Extraordinary property loss (see below) 22,394 35,781
Deferred nuclear maintenance outage costs (Note A) 11,406 15,256
DOE decontamination and decommissioning receivable (Note J) 10,932 12,251
Deferred coal costs (see below) 10,677 16,156
Phase-in plan deferrals (see above) __ 28,621
Other 8,282 9,249
----------------------------------------------------------------------------------------
Total Regulatory Assets $710,763 $909,405
========================================================================================
</TABLE>
(a) The premiums paid to reacquire debt prior to scheduled maturity dates
are deferred for amortization over the life of the debt issued to
finance the reacquisitions.
(b) The premium paid to refinance the Beaver Valley Unit 2 lease was
deferred for amortization over the life of
the lease.
(c) Includes amounts for recovery of accrued compensated absences and
accrued claims for workers' compensation.
Deferred Rate Synchronization Costs
------------------------------------------------------------------------------
In the 1987 Rate Case, the PUC approved the Company's petition to defer
initial operating and other costs of Perry Unit 1 and Beaver Valley Unit 2. The
Company deferred the costs incurred from November 17, 1987, when the units went
into commercial operation, until March 25, 1988, when a rate order was issued.
In its order, the PUC deferred ruling on whether these costs would be
recoverable from ratepayers. The Company is not earning a return on the
deferred costs.
The Company believes that these deferred costs are recoverable. In 1990, the
PUC permitted another Pennsylvania utility recovery of such costs over a
10-year period.
Extraordinary Property Loss
------------------------------------------------------------------------------
The Company abandoned its interest in the partially-constructed Perry Unit 2
in 1986 and subsequently disposed of its interest in 1992. In the 1987 Rate
Case, the PUC approved recovery, over a 10-year period, of the Company's
original $155 million investment in Perry Unit 2. The Company is not earning a
return on the as yet unrecovered portion (approximately $23.9 million at
December 31, 1994) of its investment in the unit.
Deferred Coal Costs
------------------------------------------------------------------------------
The PUC has established two market price coal cost standards for the
Company's interests in mines that supply coal to its generating stations. One
applies only to coal delivered at the Mansfield plant. The other, the
system-wide coal cost standard, applies to coal delivered to the remainder of
the Company's system. Both standards are updated monthly to reflect prevailing
market prices for similar coal. The PUC has directed the Company to defer
recovery of the delivered cost of coal to the extent that such cost exceeds
generally prevailing market prices, as determined by the PUC, for similar coal.
The PUC allows deferred amounts to be recovered from customers when the
delivered costs of coal fall below such PUC-determined prevailing market prices.
In 1990, the PUC approved a joint petition for settlement that clarified
certain aspects of the system-wide coal cost standard and gave the Company
options to extend the standard through March 2000. In December 1991, the
Company exercised the first of two options that extended the standard through
March 1996. The unrecovered cost of coal used at Mansfield amounted to $7.3
million and $7.4 million and the unrecovered cost of coal used throughout the
system amounted to $3.4 million and $8.8 million at December 31, 1994 and 1993,
respectively.
The Company believes that all deferred coal costs will be recovered.
30
<PAGE>
Warwick Mine Costs
------------------------------------------------------------------------------
The 1990 joint petition for settlement (See preceding section on deferred coal
costs.) also recognized costs at the Company's Warwick Mine, which had been on
standby since 1988, and allowed for recovery of such costs, including the costs
of ultimately closing the mine. In 1990, Duquesne entered into an agreement
under which an unaffiliated company will operate the mine until March 2000 and
sell the coal produced. Production began in late 1990. The mine reached a full
production rate in early 1991. The Warwick Mine coal reserves include both high
and low sulfur coal; the Company's contract is for medium to high sulfur (1.3
percent-2.5 percent) coal. More than 60 percent of the coal mined at Warwick
currently is used by the Company. The Company receives a royalty on sales of
Warwick coal in the open market. In the past year, the Warwick Mine supplied
slightly less than one-fifth of the coal used in the production of electricity
at the Company's wholly owned and jointly owned plants.
Costs at the Warwick Mine and the Company's investment in the mine are expected
to be recovered through the cost of coal in the ECR. Recovery is subject to the
system-wide coal cost standard. The Company also has an opportunity to earn a
return on its investment in the mine through the cost of coal during the period
of the system-wide coal cost standard, including extensions. At December 31,
1994, the Company's net investment in the mine was $18.9 million. The estimated
liability, including final site reclamation, mine water treatment and certain
labor liabilities, for mine closing is $33 million and the Company has recorded
a liability in the consolidated balance sheet of approximately $12.8 million
toward these costs.
Property Held for Future Use
------------------------------------------------------------------------------
In 1986, the PUC approved the Company's request to remove the Phillips and most
of the Brunot Island (BI) power stations from service and place them in cold
reserve. The Company expects to recover its net investment in these plants
through future electricity sales. Phillips and BI represent licensed, certified,
clean sources of electricity that will be necessary to meet expanding
opportunities in the bulk power markets. The Company believes that anticipated
growth in peak load demand for electricity within its service territory will
require additional peaking generation. The Company looks to BI to meet this
need. The Phillips power plant is an important component in the Company's
strategy to identify and serve opportunities for providing bulk power service.
With recent legislation permitting wider transmission access to bulk power
markets and with the opportunity to package a sale of power from Phillips with
the support of the Company's system, the Phillips plant can be made a highly
reliable, cost-competitive alternative for most purchasers. In summary, the
Company believes its investment in these cold-reserved plants will be necessary
in order to meet future business needs. If business opportunities do not develop
as expected, the Company will consider the sale of these assets. In the event
that market demand, transmission access or rate recovery do not support the
utilization or sale of the plants, the Company may have to write off part or all
of their costs. At December 31, 1994, the Company's net investment in
Phillips and BI was $93.0 million and $42.0 million, respectively.
G. Short Term
Borrowing and
Revolving Credit
Arrangements
At December 31, 1994, the Company had two extendible revolving credit agreements
including a $100 million arrangement expiring August 1995, and a $150 million
arrangement expiring October 1995. Interest rates vary, in accordance with the
option selected at the time of each borrowing. Various borrowing options are
available under the credit agreements including prime, federal funds, Eurodollar
or certificate of deposit rates. Commitment fees are based on the unborrowed
amount of the commitments. Both arrangements contain two year repayment periods
for any amounts outstanding at the expiration of the revolving credit periods.
There were no short-term borrowings during 1992. During 1994 and 1993, the
maximum short-term bank and commercial paper borrowings outstanding were $60
million and $36 million; the average daily short-term borrowings outstanding
were $36.8 million and $9.9 million; and the weighted average daily interest
rates applied to such borrowings were 5.17 percent and 3.91 percent,
respectively. At December 31, 1994 and 1993, short-term borrowings were
$60 million and $36 million.
31
<PAGE>
H. Income Taxes
----------------------------------------------------------------------------
The annual federal corporate income tax returns have been audited by the
Internal Revenue Service (IRS) for the tax years through 1989. Returns filed
for the tax years 1990 to date remain subject to IRS review. The Company does
not believe that final settlement of the federal income tax returns for these
years will have a materially adverse effect on its financial position or
results of operations. The effects of the 1993 adoption of SFAS No. 109 are
discussed in Note A. Implementation of the standard involved a change in
accounting principle. The cumulative effect of $8 million on prior years was
reported in 1993 as an increase in net income. The SFAS No. 109 impact on 1993
income before cumulative effect of changes in accounting principles is
immaterial.
<TABLE>
<CAPTION>
Deferred Tax Liabilities
------------------------------------------------------------------------------------------
1994 1993
(Amounts in Thousands of Dollars)
------------------------------------------------------------------------------------------
<S> <C> <C>
At December 31, deferred tax assets (liabilities) were:
Investment tax credits unamortized $ 43,257 $ 45,351
Gain on sale/leaseback of Beaver Valley Unit 2 64,124 67,119
Tax benefit _ leasehold investment 61,667 --
Other 63,058 57,690
-------------------------------------------------------------------------------------------
Deferred tax assets 243,106 170,160
-------------------------------------------------------------------------------------------
Property depreciation (773,291) (855,560)
Regulatory asset (149,815) (199,344)
Loss on reacquired debt unamortized (38,066) (40,933)
Other (240,882) (243,471)
-------------------------------------------------------------------------------------------
Deferred tax liabilities (1,213,054) (1,339,308)
-------------------------------------------------------------------------------------------
Net Deferred Tax Liabilities $ (969,948) $(1,169,148)
===========================================================================================
</TABLE>
<TABLE>
<CAPTION>
Income Taxes
-------------------------------------------------------------------------------------------
1994 1993 1992
(Amounts in Thousands of Dollars)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Currently payable: Federal $ 79,908 $ 82,803 $ 80,400
State 33,407 36,755 30,858
Deferred _ net: Federal (28,914) (27,017) 7,023
State (73,227) (8,907) (3,373)
Investment tax credits deferred _ net (5,982) (6,006) (5,968)
-------------------------------------------------------------------------------------------
Income Taxes $ 9,479 $ 77,628 $108,940
===========================================================================================
</TABLE>
Total income taxes differ from the amount computed by applying the statutory
federal income tax rate to income before income taxes, preferred and preference
dividends of subsidiaries and before the cumulative effect of changes in
accounting principles.
<TABLE>
<CAPTION>
Income Tax Expense Reconciliation
-------------------------------------------------------------------------------------------
1994 1993 1992
(Amounts in Thousands of Dollars)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Computed federal income tax at statutory rate $ 90,821 $ 79,790 $88,355
Increase (decrease) in taxes resulting from:
Tax audit settlement -- (15,000) --
State income taxes, net of federal income tax benefit (25,883) 18,101 18,140
Amortization of deferred investment tax credits (5,982) (6,006) (5,969)
Adjustment to regulatory receivable, net of federal tax 56,680 -- --
Revenue requirement adjustment to regulatory taxes (12,178) -- --
Other (309) 743 8,414
-------------------------------------------------------------------------------------------
Total Income Tax Expense $ 96,679 $ 77,628 $108,940
===========================================================================================
</TABLE>
32
<PAGE>
<TABLE>
<CAPTION>
Sources of Deferred Tax Expense
-------------------------------------------------------------------------------------------
1992
(Amounts in Thousands of Dollars)
-------------------------------------------------------------------------------------------
<S> <C>
Sources of income taxes deferred and the related tax effects were:
Excess of tax depreciation $ 25,188
Deferred revenues recovered for book purposes (30,702)
Allowance for uncollectible accounts 9,760
Fuel costs (10,820)
Loss on early retirement of debt 20,999
Other _ net (10,775)
-------------------------------------------------------------------------------------------
Total Deferred Income Tax Expense $ 3,650
===========================================================================================
</TABLE>
I. Leases
The Company leases nuclear fuel, a portion of a nuclear generating plant,
certain office buildings, computer equipment and other property and equipment.
<TABLE>
<CAPTION>
Capital Leases at December 31
-------------------------------------------------------------------------------------------
1993 1992
(Amounts in Thousands of Dollars)
-------------------------------------------------------------------------------------------
<S> <C> <C>
Nuclear fuel $139,763 $136,755
Electric plant 22,969 41,045
-------------------------------------------------------------------------------------------
Total 162,732 177,800
Less accumulated amortization (91,376) (84,717)
-------------------------------------------------------------------------------------------
Property Held Under Capital Leases _ Net (a) $ 71,356 $093,083
===========================================================================================
</TABLE>
(a) Includes $3,201 in 1994 and $3,492 in 1993 of capital leases with
associated obligations retired.
In 1987, the Company sold its 13.74 percent interest in Beaver Valley Unit 2;
the sale was exclusive of transmission and common facilities. The total sales
price of $537.9 million was the appraised value of the Company's interest in the
property. The Company leased back its interest in the unit for a term of 29.5
years. The lease provides for semiannual payments and is accounted for as an
operating lease. The Company is responsible under the terms of the lease for all
costs of its interest in the unit. In December 1992, the Company participated in
the refinancing of collateralized lease bonds to take advantage of lower
interest rates and reduce the annual lease payments. The bonds were originally
issued in 1987 for the purpose of partially financing the lease of Beaver Valley
Unit 2. In accordance with the Beaver Valley Unit 2 lease agreement, the Company
paid the premiums of approximately $36.4 million as a supplemental deferred rent
payment to the lessors. This amount was deferred and is being amortized over the
remaining lease term. At December 31, 1994, the deferred balance was
approximately $33.4 million.
Leased nuclear fuel is amortized as the fuel is burned. The amortization of
all other leased property is based on rental payments made. Payments for
capital and operating leases are charged to operating expenses on the statement
of consolidated income.
<TABLE>
<CAPTION>
Summary of Rental Payments
-------------------------------------------------------------------------------------------
1994 1993 1992
(Amounts in Thousands of Dollars)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating leases $56,437 $57,398 $ 64,986
Amortization of capital leases 33,596 28,758 43,119
Interest on capital leases 4,996 5,382 7,880
-------------------------------------------------------------------------------------------
Total Rental Payments $95,029 $91,538 $115,985
===========================================================================================
</TABLE>
33
<PAGE>
Future minimum lease payments for capital leases are related principally to the
estimated use of nuclear fuel financed through leasing arrangements and building
leases. Minimum payments for operating leases are related principally to Beaver
Valley Unit 2 and certain of the corporate offices.
<TABLE>
<CAPTION>
Future Minimum Lease Payments
-------------------------------------------------------------------------------------------
Operating Leases Capital Leases
Year Ended December 31, (Amounts in Thousands of Dollars)
-------------------------------------------------------------------------------------------
<S> <C> <C>
1995 $ 57,391 $ 30,781
1996 57,202 15,305
1997 57,031 12,622
1998 56,921 6,078
1999 56,528 3,733
2000 and thereafter 950,385 23,736
-------------------------------------------------------------------------------------------
Total Minimum Lease Payments $1,235,458 92,255
-------------------------------------------------------------------------------------------
Less amount representing interest (25,065)
-------------------------------------------------------------------------------------------
Present value of minimum lease payments for capital leases $ 67,190 (a)
===========================================================================================
</TABLE>
(a) Includes current obligations of $26.1 million at December 31, 1994.
Future payments due to the Company, as of December 31, 1994, under subleases
of certain corporate office space are approximately $1.2 million in 1995, $3.8
million in 1996 and $30 million thereafter.
J. Commitments and
Contingencies
Construction
------------------------------------------------------------------------------
The Company estimates that it will spend approximately $80 million annually on
construction during 1995, 1996 and 1997. These amounts exclude AFC, nuclear
fuel, expenditures for possible early replacement of steam generators at the
Beaver Valley Station (See ``Nuclear Litigation'' on page 35.) and expenditures
for the refurbishment of the cold-reserved units. (See ``Property Held For
Future Use'' on page 31.)
Nuclear-Related Matters
------------------------------------------------------------------------------
The Company operates two nuclear units and has an ownership interest in a third.
The operation of a nuclear facility involves special risks, potential
liabilities and specific regulatory and safety requirements. Specific
information about risk management and potential liabilities is discussed below.
Nuclear Decommissioning. The PUC ruled that recovery of the decommissioning
costs for Beaver Valley Unit 1 could begin in 1977, and that recovery for
Beaver Valley Unit 2 and Perry Unit 1 could begin in 1988. The Company expects
to decommission Beaver Valley Unit 2 and Perry Unit 1 following the end of
their operating lives, a date that currently coincides with the expiration of
each plant's operating license. Upon expiration of the Beaver Valley Unit 1
operating license, the unit will be placed in safe storage until the expiration
of the Beaver Valley Unit 2 operating license, at which time the units may be
decommissioned together.
Based upon site specific studies finalized in 1992 for Beaver Valley Unit 2,
and in 1994 for Beaver Valley Unit 1 and Perry Unit 1, the Company's share of
the total estimated decommissioning costs, including removal and
decontamination costs, currently being used to determine the Company's cost of
service, are $122 million for Beaver Valley Unit 1, $35 million for Beaver
Valley Unit 2, and $67 million for Perry Unit 1.
In conjunction with an August 18, 1994 PUC Accounting Order, the Company has
increased the annual contribution to its decommissioning trusts by
approximately $2 million to bring the total annual funding to approximately $4
million per year. The Company plans to continue making periodic reevaluations
of estimated decommissioning costs, to provide additional
funding from time to time, and to seek regulatory approval for recognition
of these increased funding levels.
34
<PAGE>
Nuclear Insurance. All of the companies with an interest in the Beaver Valley
Power Station maintain the maximum available nuclear insurance for the $5.9
billion total investment in Beaver Valley Units 1 and 2. The insurance program
provides $2.8 billion for property damage, decommissioning, and decontamination
liabilities. Similar property insurance is held by the joint owners of the Perry
Plant for their $5.5 billion total investment in Perry Unit 1. The Company would
be responsible for its share of any damages in excess of insurance coverage. In
addition, if the property damage reserves of Nuclear Electric Insurance Limited
(NEIL), an industry mutual, are inadequate to cover claims arising from an
incident at any United States nuclear site covered by that insurer, the Company
could be assessed retrospective premiums totaling a maximum of $6.5 million.
The Price-Anderson Amendments to the Atomic Energy Act limit public liability
from a single incident at a nuclear plant to $8.9 billion. The Company has
purchased $200 million of insurance, the maximum amount available, which
provides the first level of financial protection.
Additional protection of $8.3 billion would be provided by an assessment of up
to $75.5 million per incident on each nuclear unit in the United States. The
Company's maximum total assessment, $56.6 million, which is based upon its
ownership interests in nuclear generating stations, would be limited to a
maximum of $7.5 million per incident per year. A further surcharge of
5 percent could be levied if the total amount of public claims exceeded the
funds provided under the assessment program. Additionally, a state premium tax
(typically 3 percent) would be charged on the assessment and surcharge. Finally,
the United States Congress could impose other revenue-raising measures on the
nuclear industry if funds prove insufficient to pay claims.
The Company carries extra expense insurance; coverage includes the incremental
cost of any replacement power purchased (in addition to costs that would have
been incurred had the units been operating) and other incidental expense after
the occurrence of certain types of accidents at its nuclear units. The amounts
of the coverage are 100 percent of the estimated extra expense per week during
the 52-week period starting 21 weeks after an accident and 80 percent of such
estimate per week for the following 104 weeks. The amount and duration of actual
extra expense could substantially exceed insurance coverage.
Nuclear Litigation. In 1991, Pennsylvania Power Company, Ohio Edison Company,
Cleveland Electric Illuminating Company, Toledo Edison Company and the Company
were joined in the litigation against Westinghouse Electric Corporation
(Westinghouse) in the United States District Court for the Western District of
Pennsylvania. In the suit, the owners allege that six steam generators supplied
by Westinghouse for Beaver Valley Units 1 and 2 contain serious design defects
in particular defects causing tube corrosion and cracking.
Steam generator maintenance costs have increased as a result of these defects
and are likely to continue increasing. The condition of the steam generators is
being monitored closely. Replacement of the Beaver Valley Unit 1 steam generator
defective components may occur as early as 1997. While the Company has not yet
completed a detailed, site-specific study, replacement cost per unit is
estimated to be approximately $125 million. Other utilities with similar units
have replaced steam generators at comparable costs. To date, twelve additional
lawsuits have been brought by other utility companies around the country against
Westinghouse for similar problems with Westinghouse steam generators. A jury
trial began September 12, 1994 in Federal District Court in Western
Pennsylvania.
On October 24, 1994, the Court dismissed four of the five claims against
Westinghouse, leaving only the fraud claim. On December 6, 1994, the jury
rendered a verdict in favor of Westinghouse on the fraud count. On January 5,
1995, the owners of the Beaver Valley plant appealed the decision to the United
States Court of Appeals for the Third Circuit. The Company cannot predict the
outcome of this litigation; however, the Company does not believe that
resolution will have a materially adverse effect on its financial position or
results of operations. The Company's percentage interests (ownership and
leasehold) in Beaver Valley Unit 1 and in Beaver Valley Unit 2 are 47.5 percent
and 13.74 percent, respectively. The remainder of Beaver Valley Unit 1 is owned
by Ohio Edison Company and Pennsylvania Power Company.
35
<PAGE>
The remaining interest in Beaver Valley Unit 2 is held by Ohio Edison Company,
Cleveland Electric Illuminating Company and Toledo Edison Company. The Company
operates both units on behalf of these owners.
Spent Nuclear Fuel Disposal. Under the Nuclear Waste Policy Act of 1982, which
establishes a policy for handling and disposing of spent nuclear fuel and
requires the establishment of a final repository to accept spent fuel, contracts
for jointly owned nuclear plants have been entered into with the Department of
Energy (DOE) for permanent disposal of spent nuclear fuel and high-level
radioactive waste. The DOE has indicated that the repository will not be
available for acceptance of spent fuel before 2010. Existing on-site spent fuel
storage capacities at Beaver Valley 1, Beaver Valley 2 and Perry are expected to
be sufficient until 2014, 2010, and 2009, respectively. During 1994, the Company
increased the storage capacity at Beaver Valley 1 by equipping the spent fuel
pool with high density fuel storage racks.
Uranium Enrichment Decontamination and Decommissioning Fund. Nuclear reactor
licensees in the United States are assessed annually for the decontamination and
decommissioning of DOE enrichment facilities. Assessments are based on the
amount of uranium a utility had processed for enrichment prior to enactment of
the National Energy Policy Act of 1992 (energy act) and are to be paid by such
utilities over a 15-year period. At December 31, 1994, the Company's liability
for contributions is approximately $9.9 million. Contributions when made are
recovered through the ECR.
Guarantees
------------------------------------------------------------------------------
The Company and the other co-owners have guaranteed certain debt and lease
obligations related to a coal supply contract for the Bruce Mansfield plant. At
December 31, 1994, the Company's share of these guarantees was $30.3 million.
The prices paid for the coal by the companies under this contract are expected
to be sufficient to meet debt and lease obligations to be satisfied in the year
2000. (See Note F.) The minimum future payments to be made by Duquesne solely in
relation to these obligations are $6.6 million in 1995, $6.2 million in 1996,
$5.9 million in 1997, $5.6 million in 1998, $5.3 million in 1999, and $4.2
million in 2000. The Company's total payments for coal purchased under the
contract were $23.3 million in 1994, $26.5 million in 1993 and $25.2 million in
1992.
Residual Waste Management Regulations
------------------------------------------------------------------------------
In 1992, the Pennsylvania Department of Environmental Resources (DER) issued
Residual Waste Management Regulations governing the generation and management of
non-hazardous waste. The Company is currently conducting tests and developing
compliance strategies. Capital compliance costs are estimated, on the basis of
information currently available, at $5 million in 1995. The expected additional
capital cost of compliance through 2000 is estimated based on current
information to be approximately $25 million; this estimate is subject to the
results of continuing ground water assessments and DER final approval of
compliance plans.
Other
------------------------------------------------------------------------------
The Company is involved in various other legal proceedings and environmental
matters. The Company believes that such proceedings and matters, in total, will
not have a materially adverse effect on its financial position or results of
operations.
K. Long-Term Debt
During 1992, the Company began issuing secured debt under a new first collateral
trust indenture. This indenture will ultimately replace Duquesne's 1947 first
mortgage bond indenture. First collateral trust bonds totaling $695 million with
an average interest rate of 6.58 percent were issued in 1993.
The pollution control notes arise from the sale of bonds by public authorities
for the purposes of financing construction of pollution control facilities at
the Company's plants or refunding previously issued bonds.
The Company is obligated to pay the principal and interest on the bonds. For
certain of the
pollution control notes, there is an annual commitment fee for an irrevocable
letter of credit.
36
<PAGE>
Under certain circumstances, the letter of credit is available for the
payment of interest on, or redemption of, a portion of the notes. In late 1994,
pollution control notes totaling $114.1million with an average interest rate of
10.34 percent were refinanced at lower adjustable interest rates.
<TABLE>
<CAPTION>
Long-Term Debt at December 31
------------------------------------------------------------------------------------------------------------
Principal Outstanding
Interest (Amounts In Thousands of Dollars)
Rate Maturity 1994 1993
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
First collateral trust bonds (a) 4.75%-8.75% 1996-2025 $0,950,400 $0,950,400
First mortgage bonds (b) 8.25% 1995 -- 49,000
Pollution control notes (c) (d) 2003-2030 417,051 416,266
Sinking fund debentures (e) 5% 2010 5,817 6,042
Miscellaneous 8,833 509
Less unamortized debt discount
and premium -- net (4,490) (5,219)
------------------------------------------------------------------------------------------------------------
Total Long-Term Debt $1,377,611 $1,416,998
============================================================================================================
</TABLE>
(a) Excludes $9.6 million related to sinking fund requirements on the
underlying first mortgage bonds.
(b) Excludes $49.0 million related to a current maturity on June 1, 1995.
(c) Excludes $0.9 million related to sinking fund requirements on the
underlying first mortgage bonds.
(d) The pollution control notes have adjustable interest rates. The interest
rates at year-end averaged 4.3% in 1994 and 2.6% in 1993.
(e) As of January 1995, the sinking fund requirement for 1995 had been met
and the requirements for 1996 had been partially satisfied.
At December 31, 1994, sinking fund requirements and maturities of long-term debt
outstanding for the next five years were: $10.5 million and $49.1 million in
1995; $11.0 million and $50.1 million in 1996; $10.7 million and $50.0 million
in 1997; $9.9 million and $75.0 million in 1998; and $9.9 million and $75.0
million in 1999.
Sinking fund requirements relate primarily to the first mortgage bonds and
may be satisfied by cash or the certification of property additions equal to
166O percent of the bonds required to be redeemed. During 1994, annual sinking
fund requirements of $.5 million were satisfied by cash and $10.9 million by
certification of property additions.
Total interest costs incurred were $110.7 million in 1994, $118.1 million in
1993 and $133.9 million in 1992. Of these amounts, $2.0 million in 1994, $2.0
million in 1993 and $4.7 million in 1992 were capitalized as AFC. Debt discount
or premium and related issuance expenses are amortized over the lives of the
applicable issues.
In 1992, the Company was involved in the issuance of $419.0 million of
collateralized lease bonds, which were originally issued by an unaffiliated
corporation for the purpose of partially financing the lease of Beaver Valley
Unit 2. The Company is also associated with a letter of credit securing the
lessors' equity interest in the unit and certain tax benefits. During 1994, the
Company's Beaver Valley Unit 2 lease arrangement was amended to reflect an
increase in federal income tax rates. At the same time, the associated letter
of credit securing the lessor's equity interest in the unit was increased from
$188 million to $194 million and the term of the letter of credit was extended
to 1999. If certain specified events occur, the letter of credit could be drawn
down by the owners, the leases could terminate and the bonds would become
direct obligations of the Company. At December 31, 1994 and 1993, the Company
was in compliance with all of its debt covenants.
At December 31, 1994, the fair value of the Company's long-term debt,
including current maturities and sinking fund requirements, estimated on the
basis of quoted market prices for the same or similar issues or current rates
offered to the Company for debt of the same remaining maturities, was $1,353.3
million. The principal amount included in the Company's balance sheet is
$1,441.6 million.
37
<PAGE>
L. Preferred and
Preference Stock of
Subsidiaries
Holders of Duquesne's preferred stock are entitled to cumulative quarterly
dividends. If four quarterly dividends on any series of preferred stock are in
arrears, holders of the preferred stock are entitled to elect a majority of
Duquesne's board of directors until all dividends have been paid. At December
31, 1994, Duquesne had made all preferred stock dividend payments. Holders of
Duquesne's preference stock are entitled to receive cumulative quarterly
dividends if dividends on all series of preferred stock are paid. If six
quarterly dividends on any series of preference stock are in arrears, holders of
the preference stock are entitled to elect two of Duquesne's directors until all
dividends have been paid. At December 31, 1994, the Company had made all
dividend payments.
Outstanding preferred and preference stock is generally callable, on notice
of not less than thirty days, at stated prices plus accrued dividends. On
January 14, 1994, Duquesne called for redemption all of its outstanding shares
of $2.10 and $7.50 preference stock. None of the remaining preferred or
preference stock issues has mandatory purchase requirements.
<TABLE>
<CAPTION>
Preferred and Preference Stock of Subsidiaries at December 31
----------------------------------------------------------------------------------------------------------
(Shares and Amounts in Thousands)
----------------------------------------------------------
Call Price 1994 1993 1992
Per Share ---------------- ---------------- ----------------
Shares Amount Shares Amount Shares Amount
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Preferred Stock Series: (a)
3.75% (b) (c) $ 51.00 148 $ 7,407 148 $ 7,407 148 $ 7,407
4.00% (b) (c) 51.50 550 27,486 550 27,486 550 27,486
4.10% (b) (c) 51.75 120 6,012 120 6,012 120 6,012
4.15% (b) (c) 51.73 132 6,643 132 6,643 132 6,643
4.20% (b) (c) 51.71 100 5,021 100 5,021 10 5,021
$2.10 (b) (c) 51.84 159 8,039 159 8,039 159 8,039
$7.20 (c) (d) 101.00 298 29,732 319 31,915 319 31,915
----------------------------------------------------------------------------------------------------------
Total Preferred Stock 1,507 90,340 1,528 92,523 1,528 92,523
----------------------------------------------------------------------------------------------------------
Preference Stock Series: (f)
$2.10 (c) (g) -- -- -- 1,175 29,383 1,175 29,383
----------------------------------------------------------------------------------------------------------
$7.50 (d) (e) -- -- -- 84 8,392 86 8,579
Plan Series A (c) (h) 37.46 841 29,857 844 29,956 845 29,995
----------------------------------------------------------------------------------------------------------
Total Preference Stock 841 29,857 2,103 67,731 2,106 67,957
----------------------------------------------------------------------------------------------------------
Deferred ESOP benefit (24,852) (27,126) (28,471)
----------------------------------------------------------------------------------------------------------
Total Preferred and
Preference Stock $ 95,345 $133,128 $132,009
==========================================================================================================
</TABLE>
(a) Preferred stock: 4,000,000 authorized shares; $50 par value;
cumulative
(b) $50 per share involuntary liquidation value $1 par value; cumulative
(c) Non-redeemable
(d) $100 per share involuntary liquidation value involuntary liquidation value
(e) Redeemable
(f) Preference stock: 8,000,000 authorized shares;
(g) $25 per share involuntary liquidation value
(h) $35.50 per share
In December 1991, the Company established an Employee Stock Ownership Plan
(ESOP) to provide matching contributions for a 401(k) Retirement Savings Plan
for Management Employees. (See Note N.) The Company issued and sold 845,070
shares of preference stock, plan series A to the trustee of the ESOP. As
consideration for the stock, the Company received a note valued at $30 million
from the trustee. The preference stock has an annual dividend rate of $2.80 per
share, and each share of the preference stock is exchangeable for one share of
DQE common stock. At December 31, 1994, $24.9 million of preference stock issued
in connection with the establishment of the ESOP had been offset, for financial
statement
38
<PAGE>
purposes, by the recognition of a deferred ESOP benefit. Dividends on the
preference stock and cash contributions from the Company will be used to repay
the ESOP note. The Company made cash contributions of approximately $2.3
million for 1994, $2.1 million for 1993, and $4.9 million for 1992. These cash
contributions were the difference between the ESOP debt service and the amount
of dividends on ESOP shares (approximately $2.4 million in 1994,
$2.3 million in 1993 and $2.5 million in 1992). As shares of preference
stock are allocated to the accounts of participants in the ESOP, the Company
recognizes compensation expense, and the amount of the deferred compensation
benefit is amortized. The Company recognized compensation expense related to
the 401(k) plan of $1.8 million in 1994, $1.7 million in 1993, and $1.5 million
in 1992.
M. Common Stock
The Company or its predecessor, Duquesne, has continuously paid dividends on
common stock since 1953. The quarterly dividend declared in the fourth quarter
of 1994 was increased to $.44 per share. This annualized dividend of $1.76 per
share was increased from $1.68 per share in 1993. The annualized dividend per
share was $1.60 in 1992 and $1.52 in 1991.
An amendment to the Restated Articles of DQE changing the Company's Common Stock
from stock with a par value of $1.00 per share to stock having no par value, was
approved by stockholders at the Annual Meeting of Stockholders of DQE on April
20, 1994.
Dividends may be paid on DQE common stock to the extent permitted by law and
as declared by the board of directors. However, in Duquesne's Restated Articles
of incorporation, provisions relating to preferred and preference stock may
restrict the payment of Duquesne's common dividends. No dividends or
distributions may be made on Duquesne's common stock if Duquesne has not paid
dividends or sinking fund obligations on its preferred or preference stock.
Further, the aggregate amount of Duquesne's common stock dividend payments or
distributions may not exceed certain percentages of net income if the ratio of
common shareholders' equity to total capitalization is less than specified
percentages. As all of Duquesne's common stock is owned by DQE, to the extent
that Duquesne cannot pay common dividends, DQE may not be able to pay dividends
to its common shareholders. No part of the retained earnings of DQE or any of
its subsidiaries was restricted at December 31, 1994.
<TABLE>
<CAPTION>
Changes in the Number of Shares of Common Stock Outstanding
----------------------------------------------------------------------------------------------------------
1994 1993 1992
(Amounts in Thousands of Shares)
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Outstanding as of January 1 53,012 52,950 52,905
Reissuance from treasury stock 77 62 45
Repurchase of common stock (783) -- --
----------------------------------------------------------------------------------------------------------
Outstanding as of December 31 52,306 53,012 52,950
==========================================================================================================
</TABLE>
N. Employee Benefits
Retirement Plans
---------------------------------------------------------------------------
The Company maintains retirement plans to provide pensions for all full-time
employees. Upon retirement, an employee receives a monthly pension based on his
or her length of service and compensation. The cost of funding the pension plan
is determined by the unit credit actuarial cost method. The Company's policy is
to record this cost as an expense and to fund the pension plans by an amount
that is at least equal to the minimum funding requirements of the Employee
Retirement Income Security Act (ERISA) but not to exceed the maximum tax
deductible amount for the year. Pension costs charged to expense or construction
were $8.9 million for 1994, $9.8 million for 1993 and $11.4 million for 1992.
39
<PAGE>
<TABLE>
<CAPTION>
Funded Status of the Retirement Plans and Amounts Recognized on the
Consolidated Balance Sheet of DQE at December 31
---------------------------------------------------------------------------------------------------------
1994 1993
(Amounts in Thousands of Dollars)
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefits rendered to date:
Vested benefits $314,933 $321,249
Non-vested benefits 17,282 16,826
---------------------------------------------------------------------------------------------------------
Accumulated benefit obligations based on
compensation to date 332,215 338,075
Additional benefits based on estimated future salary levels 59,318 74,718
---------------------------------------------------------------------------------------------------------
Projected benefit obligation 391,533 412,793
Fair market value of plan assets 412,724 434,384
---------------------------------------------------------------------------------------------------------
Projected benefit obligation under plan assets $ 21,191 $ 21,591
---------------------------------------------------------------------------------------------------------
Unrecognized net gain $ 95,691 $ 80,411
Unrecognized prior service cost (30,365) (21,449)
Unrecognized net transition liability (17,477) (19,289)
Net pension liability per balance sheet (26,658) (18,082)
---------------------------------------------------------------------------------------------------------
Total $ 21,191 $ 21,591
=========================================================================================================
Assumed rate of return on plan assets 8.00% 8.00%
---------------------------------------------------------------------------------------------------------
Discount rate used to determine projected benefit
obligation 8.00% 7.00%
---------------------------------------------------------------------------------------------------------
Assumed change in compensation levels 5.50% 5.25%
---------------------------------------------------------------------------------------------------------
Pension assets consist primarily of common stocks, United States obligations and corporate
debt securities.
</TABLE>
<TABLE>
<CAPTION>
Components of Net Pension Cost
---------------------------------------------------------------------------------------------------------
1994 1994 1993
(Amounts in Thousands of Dollars)
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost (Benefits earned during the year) $ 12,482 $ 11,657 $ 11,397
Interest on projected benefit obligation 28,221 27,423 26,390
Return on plan assets 1,967 (41,725) (26,736)
Net amortization and deferrals (33,783) 12,454 325
---------------------------------------------------------------------------------------------------------
Net Pension Cost $ 8,887 $ 9,809 $ 11,376
=========================================================================================================
</TABLE>
Retirement Savings Plan and Other Benefit Options
-------------------------------------------------------------------------------
The Company sponsors separate 401(k) retirement plans for its union-represented,
International Brotherhood of Electrical Workers (IBEW), employees and its
management employees.
The 401(k) Retirement Savings Plan for Management Employees provides that the
Company will match employee contributions to a 401(k) account up to a maximum of
6 percent of his or her eligible salary. The Company match consists of a $.25
base match per eligible contribution dollar and an additional $.25 incentive
match per eligible contribution dollar, if Board-approved targets are achieved.
The 1994 incentive target was accomplished. The Company is funding its matching
contributions to the 401(k) Retirement Savings Plan for Management Employees
with payments to an ESOP established in December 1991. (See Note L.)
40
<PAGE>
The 401(k) Retirement Savings Plan for IBEW Represented Employees provides that
beginning in 1995, the Company will match employee contributions to a 401(k)
account up to a maximum of 4 percent of his or her eligible salary. The Company
match consists of a $.25 base match per eligible contribution dollar and an
additional $.25 incentive match per eligible contribution dollar, if certain
Non-Occupational Illness and Injury targets are met.
DQE shareholders have approved a long-term incentive plan through which the
Company may grant management employees options to purchase, during the years
1987 through 2003, up to a total of five million shares of DQE common stock at
prices equal to the fair market value of such stock on the dates the options
were granted. At December 31, 1994, approximately 2.3 million of these shares
were available for future grants.
As of December 31, 1994, 1993 and 1992, respectively, active grants totaled
1,412,000; 1,175,000; and 848,000 shares. Exercise prices of these options
ranged from $12.3125 to $34.625 at December 31, 1994 and December 31, 1993 and
from $12.3125 to $28.75 at December 31, 1992. Expiration dates of these grants
ranged from 1997 to 2004 at December 31, 1994; from 1997 to 2003 at December 31,
1993; and from 1997 to 2002 at December 31, 1992. As of December 31, 1994, 1993
and 1992, respectively, stock appreciation rights (SARs) had been granted in
connection with 793,000; 795,000; and 623,000 of the options outstanding. During
1994, 836,000 SARs were exercised; 226,000 options were exercised at prices
ranging from $12.3125 to $28.375; and 187,000 options lapsed. During 1993,
748,000 SARs were exercised; 151,000 options were exercised at prices ranging
from $12.3125 to $28.375; and 152,000 options lapsed. During 1992, 108,000 SARs
were exercised; 50,000 options were exercised at prices ranging from $12.3125 to
$26.375; and 59,000 options lapsed. Of the active grants at December 31, 1994,
1993 and 1992, respectively, 612,000; 578,000; and 232,000 were not exercisable.
Other Postretirement Benefits
--------------------------------------------------------------------------------
In addition to pension benefits, the Company provides certain health care
benefits and life insurance for some retired employees. Substantially all of the
Company's full-time employees may, upon attaining the age of 55 and meeting
certain service requirements, become eligible for the same benefits available to
retired employees. Participating retirees make contributions, which are adjusted
annually, to the health care plan. The life insurance plan is non-contributory.
Company-provided health care benefits terminate when covered individuals become
eligible for Medicare benefits or reach age 65, whichever comes first. The
Company funds actual expenditures for obligations under the plans on a "pay-as-
you-go basis." The Company has the right to modify or terminate the plans. As of
January 1, 1993, the Company adopted Statement of Financial Accounting Standards
No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions,
which requires the actuarially determined costs of the aforementioned
postretirement benefits to be accrued over the period from the date of hire
until the date the employee becomes fully eligible for benefits. The Company has
adopted the new standard prospectively and has elected to amortize the
transition liability over 20 years.
<TABLE>
<CAPTION>
Components of Postretirement Cost
---------------------------------------------------------------------------------------------------------
1994 1993
(Amounts in Thousands of Dollars)
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Service cost (Benefits earned during the period) $1,631 $1,779
Interest cost on accumulated benefit obligation 2,294 2,497
Amortization of the transition obligation over twenty years 1,700 1,700
---------------------------------------------------------------------------------------------------------
Total Postretirement Cost $5,625 $5,976
=========================================================================================================
</TABLE>
The accumulated postretirement benefit obligation comprises the present value of
the estimated future benefits payable to current retirees and a pro rata portion
of estimated benefits payable to active employees after retirement.
41
<PAGE>
<TABLE>
<CAPTION>
Funded Status of Postretirement Plan and Amounts Recognized on the
Consolidated Balance Sheet of DQE at December 31
---------------------------------------------------------------------------------------------------------
1994 1993
(Amounts in Thousands of Dollars)
---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefits:
Retirees $ 6,292 $ 4,830
Fully eligible active plan participants 3,074 3,482
Other active plan participants 20,543 24,170
---------------------------------------------------------------------------------------------------------
Accumulated postretirement benefit obligation 29,909 32,482
Fair market value of plan assets -- --
---------------------------------------------------------------------------------------------------------
Accumulated benefit obligation in excess of plan assets $(29,909) $(32,482)
=========================================================================================================
Unrecognized net loss $ 9,481 $ (122)
Unrecognized prior service cost -- 4,383
Unrecognized net transition liability (30,598) (32,296)
Postretirement liability per balance sheet (8,792) (4,447)
---------------------------------------------------------------------------------------------------------
Total $(29,909) $(32,482)
=========================================================================================================
Discount rate used to determine projected benefit obligation 8.00% 7.00%
---------------------------------------------------------------------------------------------------------
Health care cost trend rates:
For year beginning January 1 8.60% 10.50%
Ultimate rate 6.50% 5.50%
Year ultimate rate is reached 1999 1999
---------------------------------------------------------------------------------------------------------
Effect of a one percent increase in health care cost trend rates:
On accumulated projected benefit obligation $ 3,137 $ 4,000
On aggregate of annual service and interest costs $ 465 $ 600
---------------------------------------------------------------------------------------------------------
</TABLE>
O. Quarterly
Financial
Information
(Unaudited)
<TABLE>
<CAPTION>
Summary of Selected Quarterly Financial Data (thousands of dollars,
except per share amounts)
---------------------------------------------------------------------------------------------------------
[The quarterly data reflect seasonal weather variations in the Company's service territory.]
---------------------------------------------------------------------------------------------------------
1994 First Quarter Second Quarter Third Quarter Fourth Quarter
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating Revenues $309,993 $296,574 $338,288 $290,774
Operating Income 81,969 72,042 101,159 64,841
Net Income 37,296 33,029 48,592 37,899
Earnings Per Share .70 .63 .92 .73
Stock Price:
High 34 1/2 32 7/8 31 30 1/4
Low 30 3/4 28 5/8 27 5/8 27 3/4
---------------------------------------------------------------------------------------------------------
1993 (a)(b)
---------------------------------------------------------------------------------------------------------
Operating Revenues $285,082 $281,798 $334,848 $298,727
Operating Income 76,376 76,792 86,504 70,667
Income Before Cumulative Effect on Prior
Years of Changes in Accounting Principles 31,839 33,017 48,294 28,257
Net Income 34,414 33,017 48,294 28,257
Earnings Per Share .65 .62 .91 .54
Stock Price:
High 36 3/8 36 37 36 7/8
Low 31 3/8 32 3/4 34 5/8 32
=========================================================================================================
</TABLE>
(a) Fourth quarter 1993 results included the effects of a $15.2 million charge
for the write-off of the Company's investment in an abandoned transmission
line project and a $14.6 million reduction of taxes other than income as a
result of a favorable resolution of tax assessments.
(b) Restated to conform with presentations adopted during 1994.
42
<PAGE>
<TABLE>
<CAPTION>
Selected Financial Data
---------------------------------------------------------------------------------------------------------
Amounts in Thousands of Dollars 1994 1993 1992 1991 1990 1989
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Selected Income Statement Items
Operating Revenues:
Customers $1,115,987 $1,186,779 $1,152,835 $1,184,779 $1,050,702 $ 954,570
Phase-in deferrals (28,810) (100,315) (98,201) (78,344) 10,784) 96,287)
Utilities 58,295 50,669 72,440 58,903 48,543 49,949
Other 90,157 63,322 36,748 37,715 30,504 24,682
---------------------------------------------------------------------------------------------------------
Total Operating Revenues 1,235,629 1,200,455 1,163,822 1,203,053 1,140,533 1,125,488
---------------------------------------------------------------------------------------------------------
Operating Expenses:
Fuel and purchased power 243,905 237,731 239,230 254,019 228,993 221,928
Other operating & maintenance 421,708 426,977 368,921 393,100 390,231 373,658
Depreciation and amortization 160,531 152,282 128,730 119,264 122,250 119,376
Taxes other than income taxes 89,474 73,126 85,733 95,176 81,255 92,919
---------------------------------------------------------------------------------------------------------
Total Operating Expenses 915,618 890,116 822,614 861,559 822,729 807,881
---------------------------------------------------------------------------------------------------------
Operating Income 320,011 310,339 341,208 341,494 317,804 317,607
Other Income 43,486 28,102 41,533 35,566 45,976 35,823
Interest and Other Charges 110,002 119,406 132,283 141,654 157,313 165,009
Income Taxes 96,679 77,628 108,940 101,841 84,795 75,419
Changes in Accounting Principles -- 2,575 -- -- -- --
---------------------------------------------------------------------------------------------------------
Net Income $1,156,816 $ 143,982 $ 141,518 $ 133,565 $ 121,672 $ 113,002
=========================================================================================================
Earnings Per Share $2.98 $2.72 $2.67 $2.50 $2.24 $2.03
=========================================================================================================
Selected Balance Sheet Items
Property, plant & equipment--net $3,139,541 $3,168,240 $3,036,509 $3,052,834 $3,048,388 $3,057,079
Total assets $4,427,005 $4,550,378 $3,778,335 $3,851,318 $3,833,842 $3,832,638
Capitalization:
Common shareholders' equity $1,276,710 $1,230,583 $1,171,460 $1,111,121 $1,079,141 $1,066,190
Preferred and preference stock 95,345 133,128 132,009 137,343 189,093 219,991
Long-term debt 1,377,611 1,416,998 1,413,001 1,420,726 1,501,295 1,540,329
---------------------------------------------------------------------------------------------------------
Total Capitalization $2,749,666 $2,780,709 $2,716,470 $2,669,190 $2,769,529 $2,826,510
=========================================================================================================
Capitalization Ratios
Common shareholders' equity 46.4% 44.2% 43.1% 41.6% 39.0% 37.7%
Preferred and preference stock 3.5% 4.8% 4.9% 5.2% 6.8% 7.8%
Long-term debt 50.1% 51.0% 52.0% 53.2% 54.2% 54.5%
---------------------------------------------------------------------------------------------------------
Total Capitalization 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
=========================================================================================================
Ratio of Earnings to Fixed Charges
(pre-tax) 2.59% 2.28% 2.23% 2.09% 1.89% 1.78%
Selected Common Stock Information
Shares Outstanding (In thousands):
Year-end 52,306 53,012 52,950 52,905 53,759 55,340
Average 52,697 52,979 52,913 53,391 54,432 55,790
Dividends declared (In thousands) $89,348 $86,089 $81,491 $78,040 $74,972 $72,397
Dividends paid per share $1.68 $1.60 $1.52 $1.44 $1.36 $1.28
Dividend payout ratio 56.4% 58.8% 56.9% 57.6% 60.7% 63.1%
Price earnings ratio at year-end 9.9% 12.7% 12.1% 12.3% 11.1% 11.8%
Dividend yield at year-end 5.7% 4.6% 5.0% 5.0% 5.8% 5.7%
Return on average common equity 12.5% 12.0% 12.4% 12.2% 11.3% 10.6%
=========================================================================================================
</TABLE>
43
<PAGE>
<TABLE>
<CAPTION>
Selected Operating Data
---------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989
---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------------------
Sales of Electricity:
Average annual residential
kilowatt-hour use 6,170 6,201 5,901 6,331 5,953 6,060
---------------------------------------------------------------------------------------------------------
Electric energy sales billed
(millions of KWH):
Residential 3,219 3,231 3,069 3,285 3,078 3,119
Commercial 5,563 5,490 5,358 5,450 5,236 5,145
Industrial 3,256 3,046 3,059 3,042 3,296 3,221
Miscellaneous 84 84 83 84 84 84
---------------------------------------------------------------------------------------------------------
Total Sales to Customers 12,122 11,851 11,569 11,861 11,694 11,569
---------------------------------------------------------------------------------------------------------
Sales to other utilities 3,212 2,821 4,060 2,979 1,830 2,100
---------------------------------------------------------------------------------------------------------
Total Sales 15,334 14,672 15,629 14,840 13,524 13,669
=========================================================================================================
Percentage Change in Energy Sales:
Residential (0.4) 5.3 (6.6) 6.7 (1.3) (1.2)
Commercial 1.3 2.5 (1.7) 4.1 1.8 1.8
Industrial 6.9 (0.4) 0.6 (7.7) 2.3 (2.5)
Miscellaneous -- 1.2 (1.2) -- -- (7.7)
---------------------------------------------------------------------------------------------------------
Total Sales to Customers 2.3 2.4 (2.5) 1.4 1.1 (0.3)
=========================================================================================================
Sales to other utilities 13.9 (30.5) 36.3 62.8 (12.9) (22.7)
---------------------------------------------------------------------------------------------------------
Total Sales 4.5 (6.1) 5.3 9.7 (1.1) (4.5)
=========================================================================================================
Energy Supply and Production Data:
Energy supply (millions of KWH):
Net generation--system plants
(net of Company use and losses) 14,678 14,056 15,074 14,220 13,266 13,455
Purchased and net inadvertent power 656 616 555 620 258 214
---------------------------------------------------------------------------------------------------------
Total Energy Supply 15,334 14,672 15,629 14,840 13,524 13,669
=========================================================================================================
Generating capability (MW) 2,834 2,834 2,834 2,835 2,835 2,835
Peak demand (MW) 2,535 2,499 2,308 2,402 2,379 2,381
Cost of fuel per million BTU 137.23(cent)143.65(cent)140.15(cent) 153.70(cent)149.62(cent)143.87(cent)
BTU per kilowatt-hour generated 10,478 10,437 10,370 10,414 10,444 10,411
Average cost of generation
per kilowatt-hour 2.23(cent) 2.33(cent) 2.19(cent) 2.44(cent) 2.51(cent) 2.35(cent)
---------------------------------------------------------------------------------------------------------
Number of Customers--End of Year:
Residential 522,588 522,353 521,152 520,016 518,322 516,801
Commercial 53,617 52,910 52,839 52,617 52,330 51,950
Industrial 2,027 1,995 1,987 2,004 2,026 2,023
Other 1,881 1,866 1,833 1,891 1,847 1,818
---------------------------------------------------------------------------------------------------------
Total Customers 580,113 579,124 577,811 576,528 574,525 572,592
=========================================================================================================
</TABLE>
44
<PAGE>
Board of Directors (All terms 3 years)
Daniel Berg
65. Term expires 1997 (1, 6). Institute Professor, Rensselaer Polytechnic
Institute. Directorships include Hy-Tech Machine, Inc. (specialty parts),
Joachim Machinery Co., Inc. (distributor of machine tools), and Chester
Environmental, Inc. (environmental engineering).
Doreen E. Boyce
60. Term expires 1995 (2, 5). President of the Buhl Foundation (support of
educational and community programs). Directorships include Microbac
Laboratories, Inc. and Dollar Bank, Federal Savings Bank. Trustee of Franklin
& Marshall College.
Robert P. Bozzone
61. Term expires 1997 (1, 2). Vice Chairman of Allegheny Ludlum Corporation
(specialty metals production). Directorships include Allegheny Ludlum
Corporation; Chairman, Pittsburgh branch of the Federal Reserve Bank of
Cleveland. Trustee of Rensselaer Polytechnic Institute.
Sigo Falk
60. Term expires 1996 (2, 3, 4). Management of personal investments. Chairman of
Maurice Falk Medical Fund and Vice Chairman of Chatham College Board of
Trustees. Directorships include the Historical Society of Western Pennsylvania
and the Allegheny Land Trust.
William H. Knoell
70. Term expires 1997 (3, 4, 6). Retired Chairman and Chief Executive Officer of
Cyclops Industries, Inc. (basic and specialty steels and fabricated steel
products; industrial and commercial construction). Directorships include Cabot
Oil and Gas Corporation. Life trustee of Carnegie Mellon University.
G. Christian Lantzsch
70. Term expires 1995 (2, 3). Retired Vice Chairman and Treasurer, Mellon Bank
Corporation (bank holding company); retired Vice Chairman and Chief Financial
Officer, Mellon Bank, N.A. (commercial banking and trust services).
Directorships include Koger Equity, Inc. (real estate investment trust).
Robert Mehrabian
53. Term expires 1995 (1, 5). President, Carnegie Mellon University; Dean,
College of Engineering, University of California at Santa Barbara, 1983-90.
Directorships include PPG Industries, Inc. (producer of glass, chemicals,
coatings and resins), Mellon Bank Corporation and Mellon Bank, N.A.
Thomas J. Murrin
65. Term expires 1997 (3, 6). Dean, A.J. Palumbo School of Business
Administration, Duquesne University; former Deputy Secretary of U.S. Dept. of
Commerce; former President, Westinghouse Electric Corporation Energy and
Advanced Technology Group. Directorships include Motorola, Inc. (manufacturer of
electronic equipment and components). Member of the Executive Committee of the
U.S. Council on Competitiveness and Chairman of the District Export Council.
Robert B. Pease
69. Term expires 1996 (1, 5). Senior Vice President, National Development
Corporation (real estate); Executive Director, Allegheny Conference on Community
Development, 1968-91. Directorships include the Port Authority of Allegheny
County and the Regional Industrial Development Corporation of Southwestern
Pennsylvania.
Eric W. Springer
65. Term expires 1996 (1, 4). Partner of Horty, Springer and Mattern, P.C.
(attorneys-at-law). Directorships include Presbyterian University Hospital.
Immediate past president of the Allegheny County Bar Association.
Wesley W. von Schack
50. Term expires 1996 (3, 4, 5, 6). Chairman, President and Chief Executive
Officer of DQE; Chairman and Chief Executive Officer of Duquesne Light.
Directorships include Mellon Bank Corporation, RMI Titanium Co. (producer of
titanium metal products), the Pittsburgh branch of the Federal Reserve Bank of
Cleveland, the Regional Industrial Development Corporation of Southwestern
Pennsylvania, the Pennsylvania Business Roundtable, and the Pittsburgh Cultural
Trust.
DQE/Duquesne Light Committees:
1. Audit
2. Compensation
3. Finance
4. Nominating
Duquesne Light Committees:
5. Employment and Community Relations
6. Nuclear Review
45
<PAGE>
DQE Officers
Wesley W. von Schack, 50. Chairman of the Board, President and Chief Executive
Officer. Joined the company in 1984. Previously held senior executive positions
in finance and administration with other utility and communications
companies. Directorships included in listing on page 45.
-------------------------------------------------------------------------------
Gary L. Schwass, 49. Executive Vice President, Chief Financial Officer and
Treasurer. Previously served in a variety of senior executive positions in
finance and management with Consumers Power Company. Joined the company in 1985.
Directorships include Chairman, Western Pennsylvania Development Credit
Corporation (promotes small business through lending activities), and Vice
President and Treasurer, Holy Family Foundation (supports families in crisis).
-------------------------------------------------------------------------------
David D. Marshall, 42. Executive Vice President. Previously held senior
executive positions in finance at Central Vermont Public Service. Joined the
company in 1985. Directorships include the Technology Development and Education
Corporation (economic development) and the World Affairs Council (broadens local
awareness of global issues).
-------------------------------------------------------------------------------
James D. Mitchell, 43. Vice President. Previously held senior financial
positions with Duquesne Light and U.S. West, Inc. Joined the Company in 1988.
Directorships include Three Rivers Youth (helps troubled teenagers).
-------------------------------------------------------------------------------
Diane S. Eismont, 50
Secretary
Raymond H. Panza, 44
Controller
Morgan K. O'Brien, 34
Assistant Controller
Victor A. Roque, 48
General Counsel
Jack Saxer, Jr., 51
Assistant Treasurer
Joan S. Senchyshyn, 56
Assistant Secretary
Duquesne Light Company
Wesley W.
von Schack, 50
Chairman of the Board
and Chief Executive Officer
David D. Marshall, 42
President and
Chief Operating Officer
Gary L. Schwass, 49
Senior Vice President
and Chief Financial Officer
James E. Cross, 48
Senior Vice President, Nuclear
Dianna L. Green, 48
Senior Vice President,
Administration
Roger D. Beck, 58
Vice President, Marketing
and Customer Services
Gary R.
Brandenberger, 57
Vice President,
Power Supply
William J. DeLeo, 44
Vice President, Corporate
Performance and
Information Services
Donald J. Clayton, 40
Treasurer
Diane S. Eismont, 50
Secretary
Raymond H. Panza, 44
Controller
Victor A. Roque, 48
General Counsel
Jack Saxer, Jr., 51
Assistant Vice President,
Administration
Sally K. Wade, 41
Assistant Vice President,
Human Resources
William F. Fields, 44
Assistant Treasurer
Morgan K. O'Brien, 34
Assistant Controller
Joan S. Senchyshyn, 56
Assistant Secretary
Duquesne Enterprises
James D. Mitchell, 43
President
Kerry N. Diehl, 39
Vice President
Thomas A. Hurkmans, 29
Vice President
Anthony J. Villiotti, 48
Vice President,
Treasurer and Controller
H. Donald Morine, 57
President, Allegheny
Development Corporation
and Property Ventures, Ltd.
Montauk
Gary L. Schwass, 49
President
Donald J. Clayton, 40
Vice President
Lydia E. York, 35
Vice President
William F. Fields, 44
Treasurer
James E. Wilson, 29
Controller
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Shareholder
Reference Guide
Common Stock
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Trading Symbol: DQE
Stock Exchanges Listed and Traded: New York, Philadelphia, Chicago
Number of Common Shareholders of Record at Year End: 79,024.
Annual Meeting
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Shareholders are cordially invited to attend our Annual Meeting of Shareholders
at 11 a.m. (local time), April 19, 1995, at the Manchester Craftsmen's Guild
Auditorium, 1815 Metropolitan St., Pittsburgh, PA 15233.
Direct Deposit of Dividends
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Your DQE quarterly dividend payments can be deposited automatically into a
personal checking or savings account. Call us toll-free for more information.
ELECTRI-STOCK Dividend Reinvestment and Stock Purchase Plan
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More than 40 percent of our shareholders acquire additional shares of DQE common
stock through reinvestment of their dividends and contributions of voluntary
cash. Call us toll-free to learn more about the following ELECTRI-STOCK
services:
. Purchase and sale of plan shares at nominal commissions.
. Deposit of certificates to your reinvestment account for sale or safekeeping.
. Participation in an automatic cash contributions program that allows you to
make regular voluntary cash contributions by having funds automatically
withdrawn from your bank account.
. Reregistration of your shares.
. Creation of new accounts at no charge.
. Replacement of a lost or stolen reinvestment plan sale check.
Direct Purchase of DQE Stock
-------------------------------------------------------------------------------
DQE offers non-shareholders the ability to purchase stock directly from the
company. Call us for more information.
Dividend Tax Status
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The company estimates that all of the common stock dividends paid in 1994 are
taxable as dividend income. This estimate is subject to audit by the Internal
Revenue Service.
Shareholder Services/Assistance
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By telephone, representatives are available from 7:30 a.m. to 4:30 p.m., Eastern
time.
1-800-247-0400 (toll-free)
393-6167 in Pittsburgh
FAX: 1-412-393-6087
These representatives can handle inquiries relating to . . .
Stock Transfers
Dividend Reinvestment
Dividend Payments
Change of Address Notification
Missing Stock Certificates
Direct Deposit of Dividends
Written inquiries should be directed to:
DQE
Shareholder Relations
Box 68
Pittsburgh, PA 15230-0068
Stock transfers should be sent to the Bank of Boston, addressed as follows:
Bank of Boston
Transfer Processing
150 Royall Street 45-01-05
Canton, MA 02021
Telephone: 1-617-575-3120
Form 10-K
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If you hold or are a beneficial owner of our stock as of February 16, 1995, the
record date for the 1995 Annual Meeting, we will send you, free upon request, a
copy of DQE's Annual Report on Form 10-K, as filed with the Securities and
Exchange Commission for 1994. Requests must be made in writing to:
Secretary
DQE
Box 68
Pittsburgh, PA 15230-0068
Financial Community Inquiries
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Analysts, investment managers, and brokers should direct their inquiries to 412-
393-4133. Written inquiries should be sent to:
Investor Relations Department
DQE
Box 68
Pittsburgh, PA 15230-0068
FAX: 1-412-393-6448
Reg. U.S. Pat. & Tm. Off.
DQE and its affiliated companies are
Equal Opportunity Employers.
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[LOGO OF DQE]
[RECYCLED LOGO] The 1994 DQE Annual Report was printed entirely on recycled
paper and is 100 percent recyclable.
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